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TMI Blog2011 (2) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... tified in declining to consider the additional evidence comprising of the opinion of the laboratory of the Government examiner and also the affidavit of the author of the diary, though the documents had direct bearing on the issue - Decided against the assessee - I.T.A. No.22 of 2008 - - - Dated:- 28-2-2011 - MR. JUSTICE ADARSH KUMAR GOEL, MR. JUSTICE AJAY KUMAR MITTAL, JJ. Mr. Yogesh Putney, Sr.Standing Counsel for the appellant. Ms. Radhika Suri, Advocate for the respondent. ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, the Act ) against the order of the Income Tax Appellate Tribunal, Chandigarh in IT/SS No.37/Chandi/2005 and C.O. 71/Chandi/ 2005 for the block period ending on 14.9.1999 claiming following substantial questions of law:- 1. Whether the Ld. Tribunal is right in holding at page 68 of the order that the office note dated 21.05.2001 which was appended to 158BC order dated 21.5.2001 and is part of the said order, does not constitute a satisfaction note within the parameter of Section 158 BD of the Income Tax Act, 1961 in respect of the person who has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he would arrange meetings between them. If the transaction matured, he would get his commission and if he got commission, he made entries in the diary. The entries in the diary seized represented commission received in transactions between parties mentioned in the diary in code form which could be identified. In his case, block assessment was completed on 21.5.2001 and on the said date, an office note was appended to the assessment order to the effect that undisclosed income of persons other than searched persons was disclosed, as under:- The issue of entries depicting advancing of loans by various persons as figuring in A-1/and other related documents has been examined in detail on the basis of details, almost all the persons and concerns are identifiable except in the case of three accounts mentioned above. No real names relating to the family of Shri Nand Lal Garg and his sons could be identified and discovered. Therefore, cognizance of these entries on protective basis has been taken in the case of the assessee keeping in view the fact that block search assessment of Shri Nand Lal Garg and his sons are pending with Hon ble Settlement Commission. As regards entries of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned explained by dalal are identifiable. The mere identity of the parties recorded in Annexure A-1 by itself does not imbibe those transactions with the nature of undisclosed since there is no collateral finding that the respective parties have not accounted for such transactions in their books of account. It has been vehemently canvassed that subsequently the ACIT, Yamuna Nagar by way of his communication dated 28.12.2001 has confronted the said entries to the assessee in response to which the assessee, by way of his communication dated 7-1-2002 has denied the said entries. It is further contended by the Revenue that the requisite verification exercise has been carried out by the Assessing Officer before issuance of notice u/s 158BD of the Act on 15.3.2002. Be that as it may, it is sufficient for us to deduce here that in order to arrive at the satisfaction contemplated u/s 158BD in this case the necessary investigation and culling out of the facts and information was required to precede the recording of the satisfaction on 21.5.2001. The material and information which came to the knowledge of the Assessing Officer subsequent to the date of recording of satisfaction i.e. 21.5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which notice u/s 158BD has been issued in the instant case. As noted earlier the jurisdiction permitting the ACIT, Yamuna Nagar to exercise jurisdiction and perform functions of Assessing Officer in regard to the assessee was by way of an order dated 13.12.2001. This order is common order containing 133 names wherein item No.30 has been explained as that of the assessee. We have also reproduced the said entry at para 29 of our order elsewhere. The status of the assessee is mentioned therein as a firm whereas admittedly the assessee in question is an individual who has a proprietory concern by the name of M/s Dasondhi Ram Kishan Chand. Coupled with the fact the notice u/s 158BD dated 15.3.2002 does not even specify the status of the assessee, it only shows a casual approach in which the jurisdiction u/s 158BD has been sought to be assumed. Therefore, on the parity of reasoning which prevailed with the Hon ble Supreme Court, we find it expedient to hold in the instant case that the impugned notice does not comply with the requirement of Section 158BD of the Act. Thus proceedings initiated thereupon stand vitiated. 38. Considering the entire facts and on the basis of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th any tax liability under Chapter XIV-B of the Act. 50. Much has been argued by the either parties regarding the manner of maintaining of Annexure A-1 by Dalal. The Revenue has contended that the said annexure was maintained in the shape of a ledger and as a record of broking transactions and is maintained in the regular course of business and can be equated to be a book of account. The assessee contends that the said Diary cannot be equated to a book of account of any business. We do not find it necessary to go into this controversy as it does not help much to decide the question on hand. What is of relevance is to decide the evidentiary value and correctness of the Annexure which we have already addressed in the earlier paragraphs. Similarly, much has been argued by the either parties on the decision of the Hon ble Supreme Court in the case of V.C. Shukla and others (Supra). The assessee has attempted to draw support from it and CIT (Appeals) has also relied on it whereas according to the Revenue the said decision is inapplicable to the facts of the present case. We have carefully perused the said decision. The Hon ble Supreme Court was dealing with the case of the prosecuti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciple that we have found useful to resolve the controversy before us has been discussed by using elsewhere in our order. 51. We may also refer to the manner in which the evidence in the shape of Annexure A-1 has been considered by the assessing authority of dalal from whose possession such evidence has been seized in the course of assessing finalized u/s 158BC of the Act. We may also mention here that initially the order u/s 158BC was passed by ACIT, Yamuna Nagar in the case of dalal on 21.5.2001 which was reviewed by the CIT u/s 263 vide order dated 31.12.2003 and was quashed. Subsequently, the assessment u/s 158BC read with Section 263 of the Act has been finalized by ACIT, Yamuna Nagar on 31.3.2004. We have perused both the assessments and find no dissimilarity in the two Annexure A-1 has been accorded by the Assessing Officer as explained by dalal which we have already narrated in the earlier portion of our order. In the course of such assessment proceedings, the Assessing Officer, by way of office note No.4 recorded as under: The assessee has shown its receipts from Dalali business at Rs.42115/- and Rs.32720/- for the assessment years 1999-2k and 2000-2001 respectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal evidence collected by the Department after completion of assessment in the case of the assessee which was collected in the course of assessment of a third party. After an exhaustive exposition of rival contentions, case laws and provisions of Chapter XIVB of the Act, the Tribunal concluded that it was not permissible for it to admit additional evidence. The following portion of the order of the Tribunal is worthy of notice: 3.4- We may also make a reference here to the provisions of section 158BC of the Act relating to block assessment, whereunder the issue of notice u/s 148 is dispensed with for the purpose of proceedings under Chapter XIV-B and the assessee is also prevented from revised return. Further, under the provisions of section 158BF, penalties for concealment under the provision of Section 271(1)(c) cannot be imposed in respect of undisclosed income determined in block assessment. Having regard to the said provisions, in case of admission of proposed evidence the Tribunal will have to restore the matter to A.O. for the reasons mentioned by learned DR i.e. to enable the assessee to meet the new facts as now found by Assessing Officer. Such a course of action will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng such report of the Assessing Officer. 5. We have heard learned counsel for the parties. 6. Learned counsel for the revenue submitted that office note dated 21.5.2001 by itself constituted satisfaction under Section 158BD of the Act for proceeding against the assessee on the basis of material found during the search. Recording of satisfaction did not require investigation, as such satisfaction was only to see prima facie case for proceeding further. The Tribunal erred in holding that the notice under Section 158BD issued by ACIT, Yamunanagar was not valid, as such notice had to be issued by the Assessing Officer of the assessee. The ACIT, Yamunanagar himself had been given jurisdiction to make assessment in respect of the assessee vide order dated 31.12.2001. The satisfaction could not be held to be beyond limitation on the ground that vide note dated 15.3.2002, the Assessing Officer of the assessee also recorded a note ignoring the fact that the said note was in continuation of satisfaction already recorded. Even if note dated 15.3.2002 is ignored, note recorded on 21.5.2001 itself amounted to satisfaction under Section 158BD of the Act. Finding of the Tribunal in setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 165/CHANDI/96 and also for the reason that the revenue had not given any reason for not producing any reason earlier. Reliance has been placed on following judgments:- 1. Manish Maheshwari v. ACIT anr. (2007) 289 ITR 341 (SC). to submit that satisfaction under Section 158 BD is a condition precedent for proceeding against a person other than the searched persons. 2. CIT v. Dawn View Farms (P) Ltd. (2009) 224 CTR (Del), Subhas Chandra Bhaniramka v. ACIT (2010) 320 ITR 349 (Cal) and Amity Hotels (P) Ltd. Ors. v. CIT ors. (2005) 272 ITR 75 (Del) and Chhugamal Rajpal v. S.P. Chaliha ors. (1971) 79 ITR 603 (SC) to submit that in absence of specific recording of satisfaction that undisclosed income belonged to the assessee on the basis of material found during search and the same being forwarded to the Assessing Officer of assessee, the block assessment was without jurisdiction. 3. Om Parkash Jindal anr. v. Union of India ors. (1976) 104 ITR 389 (P H), CIT v. Sunil Bhala (2011) 50 DTR 238 (Del), Additional CIT v. Miss Lata Mangeshkar (1974) 97 ITR 696 (Bom) and Chandradhar Goswami ors. v. Gauhati Bank Ltd. AIR 1967 SC 1058. to submit that the word information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amunagar had been conferred jurisdiction to make assessment in the case of the assessee on 31.12.2001 prior to passing of the order of assessment and before recording the note dated 15.3.2002. The said note obviously was in continuation of earlier note dated 21.5.2001. Notice issued by the said authority could not be treated as invalid. Question 2 stands answered accordingly in favour of the revenue. 11. As regards question 4, the Tribunal has not adopted sound approach in dealing with the matter and its findings are, thus, vitiated by error of law. Section 292C of the Act, which though introduced later by Finance Act, 2007 with effect from 1.10.1975, was made applicable for the period in question provides that presumption could be raised as to correctness of the material found during search. The said section has not beentaken into consideration by the Tribunal. It cannot be held, as submitted by learned counsel for the assessee, that if there was code language used in the diary, no inference could be drawn. No doubt entries by itself were not enough to proceed against the assessee, if the entries were explained and corroborated by the author thereof. However, in case the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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