Shri Vijaykumar Devichand Nibjiya, Pune V. DCIT, Circle-5, Pune

ITA 1745/PUN/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1060 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-06-2015
• Assessment Year: misc
• Appeal Filed On: 12-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAZAR AKRAM P SINGH
• Assessee Lawyers: K SRINIVASAN; VIKAY KUMAR D NIBJIYA
• Keywords: Unexplained cash credit; Unexplained expenditure; Search and seizure; Principle of natural justice; Peak credit; Block assessment
• Section: 69C; 68; 148

Judgement Text

] IQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE ! ' BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO.1745/PN/2013 #$ / BLOCK PERIOD 1996-97 TO 2002-03 SHRI VIJAYKUMAR DEVICHAND NIBJIYA, OFFICE NO.304/305/306, D-WING, 3 RD FLOOR, BUSINESS COURT, MUKUNDNAGAR, PUNE 411037 PAN NO.AANPN8491R . / APPELLANT V/S DCIT, CIRCLE-5, PUNE . / RESPONDENT / ITA NO.1746/PN/2013 #$ / BLOCK PERIOD 1996-97 TO 2002-03 SHRI B.D. NIBJIYA, PROP. OF KAMAL ENTERPRISES, 526/71, MAHATMA PHULE PETH OPP. SONMARG THEATRE, TIMBET MARKET, PUNE 411 042 PAN NO.AAJPN5611K . / APPELLANT V/S DCIT, CIRCLE-5, PUNE . / RESPONDENT / ITA NO.1787/PN/2013 #$ / BLOCK PERIOD 1996-97 TO 2002-03 SHRI DEVICHAND B. JAIN, 526/71, MAHATMA PHULE PETH OPP. SONMARG THEATRE, TIMBET MARKET, PUNE 411 042 PAN NO.ABBPJ 1405C . / APPELLANT 2 ITA NO.1745, 1746 & 1787/PN/2013 V/S DCIT, CIRCLE-5, PUNE . / RESPONDENT / APPELLANT BY : SHRI K. SRINIVASAN & SHRI VIKAY KUMAR D. NIBJIYA / DEPARTMENT BY : SHRI MAZAR AKRAM P. SINGH % / ORDER PER R.K. PANDA, AM : THE ABOVE 3 APPEALS FILED BY THE RESPECTIVE ASSESSEES A RE DIRECTED AGAINST THE SEPARATE ORDERS DATED 26-07-2013 OF THE CIT(A)- III, PUNE RELATING TO BLOCK PERIOD 1996-97 TO 2002-03. S INCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE RESPECTIVE ASSESSEES, THEREFORE, FOR THE SAKE OF CONVENIENCE, THESE WERE HEARD TOGETHER AN D ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP ITA NO.1745/PN/2013 IN THE CASE OF SHRI VIJAY KUMAR DEVICHAND NIBJIYA AS THE LEAD CASE. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS AS A BUILDER. IN RESPONSE TO NOTICE U/S.158BD T HE ASSESSEE FILED THE BLOCK RETURN IN FORM NO.2B ON 10-04-2006 DECLAR ING NIL UNDISCLOSED INCOME. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO CALLED FOR THE DETAILS OF TRANSACTIONS MADE BY THE ASSESSEE IN RESPECT OF M/S. MAHESHWARI FINANCIERS, ADONI (ANDHRA PRAD ESH) AND RAJASHREE ENTERPRISES. THE ASSESSEE IN HIS REPLY STAT ED THAT THE / DATE OF HEARING : 30.06.2015 / DATE OF PRONOUNCEMENT:22.07.2015 3 ITA NO.1745, 1746 & 1787/PN/2013 LOANS AND INTEREST PAYMENT ARE GENUINE AND ARE REFLECTED IN REGULAR BOOKS OF ACCOUNT AND SHOULD NOT BE TREATED AS UNDISCLOS ED INCOME U/S.68 AND UNEXPLAINED EXPENDITURE U/S.69. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT A SEARCH AND SEIZURE ACTION U/S.132 OF THE I.T. AC T WAS CARRIED OUT ON 12-10-2001 IN THE CASE OF M/S. RAJASHREE ENTER PRISES, PROPRIETOR SHRI RAMANLAL SHAH AND M/S. MAHESHWARI FINANCIE RS, PROPRIETOR SHRI MAHENDRA SHAH AT ADONI, ANDHRA PRADESH. IT WAS FOUND THAT SHRI RAMANLAL SHAH WAS THE MAIN PERSON WHO HA D GENERATED UNACCOUNTED CASH FROM VARIOUS BUSINESS ACTIVIT IES WHICH WAS DEPOSITED IN 1980 BY OPENING MANY BANK ACCOUNTS IN THE NAME OF DIFFERENT HUFS AND KARTAS WHO WERE FAMILY MEMBERS AND CONCERNS. THIS PROCESS OF DEPOSIT OF CASH IN HUF ACCOUN TS CONTINUED TILL 1997-1998. HE ALSO WANTED TO ACCOMMODATE OTHER PER SONS BY PROVIDING MANY LENDING LIST OF MEMBERS. TO BRING BACK THE UNACCOUNTED CASH BELONGING TO SHRI RAMANLAL SHAH AS WELL AS OTHER BUSINESSMEN AT PUNE INTO THE REGULAR BOOKS OF ACCOUNTS, SHRI MAHENDRA SHAH AND SHRI RAMANLAL SHAH OPENED 2 FINANCIAL CONCERNS AT ADONI BY OPENING BANK ACCOUNTS AT BANK OF INDIA, BHAVANI PETH, PUNE (ACCOUNT NO.1740 AND 1728). THE MODUS OPERANDI WAS TO DEPOSIT CASH INTO THESE BANK ACCOUNTS AND TO IMMEDIATELY THEREAFTER ISSUE CHEQUES IN FAVOUR OF PUNE BAS ED BUSINESSMEN AND TO CHARGE INTEREST @18% FROM THESE CON CERNS. WHEN THE MONEY WAS RECEIVED BACK FROM THE BUSINESSMEN AT PUNE BY CHEQUE, THE CASH WAS WITHDRAWN FROM THESE BANK ACCOUNT S. BEFORE THE INCOME-TAX AUTHORITIES SHRI RAMANLAL SHAH HAD CLAIMED T HAT THE 2 FINANCIAL CONCERNS WERE BASED AT ADONI AND SOME OF THE ACTIVITIES WERE CARRIED OUT AT PUNE. THE CASH WAS WITHDRAWN FROM THE BANK 4 ITA NO.1745, 1746 & 1787/PN/2013 ACCOUNTS OF THE FINANCIAL CONCERNS AT ADONI AND BROUGHT T O PUNE PHYSICALLY. HOWEVER, ON EXAMINATION OF THE STATEMENTS REC ORDED OF THE ACCOUNTANT OF SHRI RAMANLAL SHAH AND HIS OWN STATEME NT AND AFTER FURTHER ENQUIRIES THE AO OF SHRI RAMANLAL SHAH CAME TO A FINDING THAT THE ENTIRE MODUS OPERANDI WAS OPERATED BY THE PERSONS RECEIVING LOAN ENTRIES FROM THESE FINANCIAL CONCERNS. THE AS SESSEE WAS ONE OF THE PERSONS WHO ALLEGEDLY RECEIVED THE FICTITIO US LOAN AMOUNTS OF RS.22 LAKHS SPREAD OVER 3 ASSESSMENT YEARS. 4. THE AO OBSERVED THAT IN THE CASH BOOK OF M/S. MAHES HWARI FINANCIERS (SEA-12 SEIZED ON 11-10-2001) IT WAS FOUND THAT THERE ARE TWO FIGURES OF BALANCE OF CASH IN HAND, DRAWN AT THE END O F EACH DATE, FROM PAGE NO.21 DATED 24-05-1999 TO PAGE 142 DATED 30 -03-2000. THE FIRST BALANCE WAS DRAWN IN THE REGULAR COURSE. THE S ECOND BALANCE OF CASH IN HAND WAS DRAWN AFTER CERTAIN CASH EXP ENSES WERE DEBITED AT A LATER DATE IN THE CASH BOOK. DUE TO CERTA IN DISCREPANCIES THE ACCOUNTANT OF THE FIRM, IN WHOSE HAND WRITING THESE TR ANSACTIONS WERE WRITTEN, WAS RECORDED. AS PER THE SAID STATEMENT THE AO OBSERVED THAT THE PERSONS WHO HAVE RECEIVED CHEQUES OF LOAN ENTRIES ARE MAINLY PROMOTERS AND BUILDERS OR PERSONS INVOLVED IN THE BUSINESS WHERE THERE IS AMPLE SCOPE OF GENERATION OF UNAC COUNTED MONEY LIKE TIMBER, BUILDING MATERIALS, FINANCE COMPANIES ETC. T HESE PERSONS HAVE UNACCOUNTED CASH AVAILABLE WITH THEM. IT IS BROUGHT BACK TO THEIR BOOKS OF ACCOUNTS THROUGH THESE FINANCE C ONCERNS. THEREFORE, IT CAN ONLY BE POSSIBLE IF THESE PERSONS ARE EIT HER CLOSELY RELATED TO SHAH SANGHVI GROUP OR THERE WERE SOME SORT OF BUSINESS UNDERSTANDING OR PARTNERSHIP WITH SHAH GROUP SO THAT T HERE IS NO PROBLEM IN THE RECOVERY OF LOAN OR THE INTEREST AMOUNT. THE TWO FINANCE CONCERNS, I.E. M/S. MAHESHWARI FINANCIES AND M/S. 5 ITA NO.1745, 1746 & 1787/PN/2013 RAJASHREE ENTERPRISES HAVE GIVEN THE LOAN ENTRIES TO PU NE PARTIES AND TO GIVE A COLOUR OF REAL TRANSACTION, INTEREST WAS CHARGED ON THESE LOANS AND FROM THIS INTEREST RECEIVED INTEREST PAYMENTS W ERE SHOWN TO HAVE BEEN MADE TO FAMILY AND FRIENDLY HUFS. RELYING O N THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF SU MATI DAYAL VS. CIT REPORTED IN 214 ITR 801 AND THE DECISION IN THE CASE OF CIT VS. DURGA PRASAD MORE REPORTED IN 82 ITR 540 THE AO C AME TO THE CONCLUSION THAT THE LOAN AMOUNT OF RS.22 LAKHS GIVEN BY M/ S. MAHESHWARI FINANCIERS AND M/S. RAJASHREE ENTERPRISES TO THE ASSESSEE WAS THE ASSESSEES OWN MONEY WHICH WAS ROUT ED THROUGH THE CONCERNS OF M/S. MAHESHWARI FINANCIERS IN THE GARB O F LOAN. THE AO ACCORDINGLY TREATED THE AMOUNT OF RS.22 LAKHS SHOWN BY THE ASSESSEE AS LOAN RECEIVED FROM M/S. MAHESHWARI FINANCIERS, ADONI A S UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD B EING UNEXPLAINED CASH CREDIT U/S.68 OF THE I.T. ACT. SIMILARLY, HE ALSO DISALLOWED THE YEAR-WISE INTEREST PAID ON SUCH LOAN TOTALING TO RS.7,03,485/- AS UNEXPLAINED EXPENDITURE U/S.69 OF THE I.T. ACT. THUS, THE AO DETERMINED THE UNDISCLOSED INCOME OF THE ASS ESSEE FOR THE PERIOD AT RS.29,03,485/-. 5. BEFORE CIT(A) THE ASSESSEE CHALLENGED THE VALIDITY OF NOT ICE ISSUED U/S.158BD ON THE GROUND THAT THE REQUISITE CONDI TIONS FOR SUCH NOTICE WERE NOT SATISFIED. IT WAS ARGUED THAT THE SATISFACTION NOTE RECORDED BY THE AO OF M/S. MAHESHWARI FINANCIERS IS GENERAL IN NATURE MENTIONING PUNE BASED CONCERNS/PARTIES WITHOUT S PECIFIC NAMES AND ALLEGING THAT LOANS WERE OBTAINED BY THESE PAR TIES BY CHEQUE FOR WHICH THEY HAVE PAID CASH TO M/S. MAHESHWAR I FINANCIERS. IT WAS FURTHER ARGUED THAT THE NOTICE ISSUE D U/S.158BD IS BAD IN LAW BEING ISSUED BEYOND A REASONABLE TIME OF THE DATE OF 6 ITA NO.1745, 1746 & 1787/PN/2013 COMPLETION OF THE ASSESSMENT OF THE SEARCHED PERSON. WIT HOUT PREJUDICE TO THE ABOVE THE ASSESSEE FURTHER ARGUED TH AT THE LOAN OF RS.22 LAKHS WAS ACCEPTED BY CROSSED ACCOUNT PAYEE CHE QUES FROM M/S. MAHESHWARI FINANCIERS AND IS FROM A PERSON DULY IDEN TIFIED BY THE DEPARTMENT. THE AO OF THE SEARCHED PERSON IN THE SATISFACTION NOTE IN PARA 8 THEREOF HAS CLEARLY ACCEPTED THAT THERE IS NO DIRECT EVIDENCE THAT THE ASSESSEE HAD PAID CASH FOR OBTAINING T HIS LOAN FROM M/S. MAHESHWARI FINANCIER. THE ASSESSEE HAS ALSO PAID INT EREST ON THE LOAN TO THE LENDERS FROM TIME TO TIME BY CROSSED AC COUNT PAYEE CHEQUES AND HAS ALSO REPAID THE ENTIRE LOAN AMOUNT BY CROSSED ACCOUNT PAYEE CHEQUE. RELYING ON VARIOUS DECISIONS IT W AS ARGUED THAT THE ADDITION MADE U/S.68 AS WELL AS U/S.69C IS UNWARR ANTED AND ILLEGAL. 6. IT WAS ALSO STATED THAT THE SATISFACTION U/S.158BD OF THE ACT OF THE SEARCHED PERSON IS SUSPECT, NOT IN GOOD FAITH AND UN -CREDITWORTHY BECAUSE THE SUCCESSOR AO OF THE SEARCHED PERSON, AFTER THE MATTER WAS SET ASIDE BY THE CIT U/S.263, HAS GIVEN A FINDING THAT THE PEAK CREDITS OF THE CASH INTRODUCED IN THE BANK ACCOUNT MAIN TAINED WITH BANK OF INDIA, BHAVANI PETH BRANCH, PUNE FOR ENABLING THE S EARCHED PERSON TO ISSUE CHEQUES FOR THE LOANS GIVEN THROUGH THA T ACCOUNT IS THE UNDISCLOSED INCOME OF THE SEARCHED PERSON. THEREFOR E, WHEN THE UNEXPLAINED CASH SO INTRODUCED IS THE UNDISCLOSED INCOME O F THE SEARCHED PERSON, I.E. M/S. MAHESHWARI FINANCIERS, THE SAME AMOUNT CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE AS UNDISC LOSED INCOME. IT WAS ACCORDINGLY ARGUED THAT BOTH FACTUALLY AND LEGALL Y THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. 7 ITA NO.1745, 1746 & 1787/PN/2013 7. HOWEVER, THE LD.CIT(A) WAS NOT SATISFIED WITH THE ARGUME NTS ADVANCED BY THE ASSESSEE. HE CALLED FOR A REMAND REPO RT FROM THE AO. AFTER CONSIDERING THE REMAND REPORT OF THE AO AND SU BMISSION OF THE ASSESSEE TO SUCH REMAND REPORT THE LD.CIT(A) UPHELD THE ADDITION MADE BY THE AO. WHILE DOING SO, SHE OBSERVED ON PERUSAL OF THE SATISFACTION NOTE OF THE AO OF M/S. MAHESHWARI FINANCIERS, W HICH WAS ENCLOSED BY WAY OF A COVERING LETTER, THAT THE SAME CLEARLY SHOWS THAT LOAN TRANSACTIONS AMOUNTING TO RS.22 LAKHS WERE SHO WN IN THE BOOKS OF ACCOUNT OF M/S. MAHESHWARI FINANCIERS AGAINST WH OM SEARCH AND SEIZURE WAS CONDUCTED ON 12-02-2001. THE COVERING LETTER IS ACCOMPANIED BY A SATISFACTION NOTE INTO 10 PAGE S WHICH DETAILS THE BOOKS OF ACCOUNTS, DOCUMENTS, BANK PASSBOOK S ETC., THAT WERE SEIZED AND VERIFIED DURING THE COURSE OF SEARCH AND THE ENQUIRIE S THAT WERE CONDUCTED POST SEARCH. THEREFORE, THE SATISFA CTION OF THE AO WHO HAS JURISDICTION OVER THE SEARCHED PERSON IS FOU ND TO BE CLEARLY RECORDED THAT THE UNDISCLOSED INCOME FOUND IN THE BOOKS BELONGING TO THE ASSESSEE. THE EXTRACT OF THE BOOKS OF ACCOUNT INCLUDING THE LOAN AMOUNTS AND INTEREST THEREON HAVE BEE N DULY REPRODUCED IN THE SATISFACTION NOTE AND THEREFORE THE RE QUIREMENT OF SECTION 158BD THAT THE BOOKS OF ACCOUNTS, OTHER DOCUME NTS OR ASSETS SEIZED OR REQUISITIONED THEREOF TO BE HANDED OVER TO TH E AO HAVING JURISDICTION OVER SUCH OTHER PERSONS HAS BEEN MADE. TH E ASSESSEE HAS ALREADY BEEN PROVIDED A COPY OF SATISFACTION NOTE W HICH CONTAINS THE DETAILED WORKING OF THE LOAN ENTRIES AND THE INTEREST THEREON AS FOUND IN THE BOOKS OF M/S. MAHESHWARI FINANCIERS. THEREFOR E, THE ARGUMENT OF THE ASSESSEE THAT NO DOCUMENTS, PAPERS AN D OTHER EVIDENCE HAVE BEEN ACTUALLY HANDED OVER TO HIS AO BY T HE AO OF THE SEARCHED PERSON IS A FRIVOLOUS GROUND. 8 ITA NO.1745, 1746 & 1787/PN/2013 8. AS REGARDS THE ARGUMENT OF THE ASSESSEE THAT THE N OTICE ISSUED U/S.158BD IS BAD IN LAW BEING ISSUED BEYOND A REASONABLE T IME FROM THE DATE OF COMPLETION OF THE ASSESSMENT OF THE SEARCHED PERSON IS CONCERNED, THE LD.CIT(A) FOLLOWING VARIOUS DECISIONS HELD THAT THERE IS NO UNREASONABLE DELAY IN NOTICE ISSUED U/S.158BD. THE DEL AY OF 18- 19 MONTHS IN ISSUANCE OF NOTICE U/S.158BD FROM THE DATE O F SATISFACTION RECORDED BY THE AO OF THE SEARCHED PERSON CANNOT BE HELD TO BE UNREASONABLE PARTICULARLY WHEN THE SECTION DO ES NOT PROVIDE ANY TIME LIMIT FOR ISSUANCE OF SUCH NOTICE. 9. SO FAR AS THE ARGUMENT OF THE ASSESSEE ON MERIT IS CO NCERNED SHE ALSO DISMISSED THE SAME ON THE GROUND THAT THE LOAN AMOUNT THOUGH ADVANCED BY WAY OF CHEQUE BY M/S. MAHESHWARI F INANCIERS HAS ITS ORIGIN IN THE CASH AND SINCE THE CASH HAS BEEN P ROVED BY THE AO OF THE SEARCHED PERSON AS NOT BELONGING TO HIM CAN B E CERTAINLY INFERRED TO BE BELONGING TO THE ASSESSEE. SHE ACCORDINGL Y HELD THAT THE AO IS CORRECT IN LAW IN ASSESSING THE LOAN OF AMOUNT OF RS.22 LAKHS U/S.68 AND THE INTEREST THEREON AS UNEXPLAINED EXP ENDITURE U/S.69C IN ABSENCE OF ANY EVIDENCE PRODUCED BY THE ASSE SSEE THAT THE CASH DOES NOT BELONG TO HIM. SHE ACCORDINGLY UPHELD THE ACTION OF THE AO. 10. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE A SSESSMENT FRAMED BY A.O. U/S 158BD OF THE ACT AND CONFIRMED BY CIT (A) M AY BE HELD AS BAD IN LAW, INVALID , AND MAYBE QUASHED AS NULLITY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IT MAY BE HELD THAT THE A.O. HAS ASSUMED JURISDICTION U/S.158BD WITHOUT FOLLOWING DU E PROCESS OF LAW, BEYOND REASONABLE TIME AND VIOLATING PRINCIPLES OF NATURAL JUSTICE AND THEREFORE BAD IN LAW AND BE CANCELLED. 9 ITA NO.1745, 1746 & 1787/PN/2013 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IT MA Y BE HELD THAT A.O. AND CIT(A) HAVE FAILED TO FOLLOW THE BINDING JUDICI AL PRECEDENTS AND THE REMARKS MAY BE QUASHED. 4. WITHOUT PREJUDICE TO THE ABOVE GROUNDS ON THE FA CTS AND CIRCUMSTANCES OF THE CASE, THE A.O. ERRED IN BRINGING TO TAX AMOUNTS TOTALING RS. 29,03,485 U/S.68, 69C OF THE ACT AND CI T(A) CONFIRMED WITHOUT APPRECIATING EVIDENCE ON RECORD, LEGAL POSIT ION AND EXPLANATION FURNISHED BEFORE HIM AND SAME MAY BE DELETED , CANCEL LED OR APPROPRIATE RELIEF GRANTED TO THE ASSESSEE. 5. THE APPELLANT CRAVES LEAVE TO ADD/AMEND /ALTER/M ODIFY OR RAISE ADDITIONAL GROUNDS OF APPEAL AND TO PROVIDE ADDITION AL EVIDENCE IF FOUND NECESSARY, AT THE TIME OF HEARING. 11. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E SEARCH IN THE CASE OF M/S. MAHESHWARI FINANCIERS AND M/S. RAJASHR EE ENTERPRISES TOOK PLACE ON 11-10-2001 AND THE BLOCK ASS ESSMENTS IN THESE CASES WERE COMPLETED ON 24-12-2003 BY MAKING CE RTAIN ADDITIONS IN THE HANDS OF THE SEARCHED PERSON. SUBSEQUE NTLY, THE LD.CIT SET ASIDE THE ORDERS U/S.263 ON 23-03-2006. SUB SEQUENT TO THE ORDER PASSED U/S.263 THE AO COMPLETED THE ASSESSM ENT OF THE SEARCHED PERSONS ON 29-12-2006 BY MAKING ADDITION U/S.6 9A AMOUNTING TO RS.1,63,77,713/- AS MONEY LENT TO THIRD PARTIE S. HE SUBMITTED THAT THE ASSESSEE IN THE INSTANT CASE RECEIVE D NOTICE U/S.158BD ON 10-02-2006 ON THE BASIS OF A LETTER DATED 06-04-2004 WITH SATISFACTION NOTE WHICH WAS UNDATED. THE ASSESSEE FILE D THE BLOCK RETURNS ON 10-04-2006 AND THE ASSESSMENT WAS C OMPLETED ON 28-02-2008. HE SUBMITTED THAT THERE IS NO QUESTION OF ASSESSING THE ASSESSEE WHEN THE 263 ORDER WAS IN FORCE IN CASE OF TH E SEARCHED PERSON. THE SATISFACTION NOTE WAS RECEIVED BY THE ASSES SEE ON 07-12- 2007 ALONG WITH THE SHOW CAUSE NOTICE. HE SUBMITTED THA T THE SATISFACTION NOTE IS UNDATED AND IS MUCH LATE AFTER ORIGINA L ASSESSMENT ON 24-12-2003. THUS, THERE IS A GAP OF ABO UT 4 YEARS. HE SUBMITTED THAT TILL TODAY NO DETAILS OF MATERIALS TRANSFE RRED IS 10 ITA NO.1745, 1746 & 1787/PN/2013 SHOWN AND IT IS ADMITTED THAT THERE IS NO SEIZED MATERIAL WHICH ARE INCRIMINATING AND DISCLOSE UNDISCLOSED INCOME. REFERRING TO TH E DECISION OF THE BANGALORE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF Y. SUBBARAJU & CO. VS. ACIT REPORTED IN 91 ITD 118 AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWAR I VS. ACIT REPORTED IN 289 ITR 341 HE SUBMITTED THAT THE PR IMARY REQUIREMENT FOR ACTION U/S.158BD IS NOT FULFILLED. THE OBSERVA TION OF THE CIT(A) IN PARA 4.2 ARE CONTRARY TO LEGAL REQUIREMENT S IN VIEW OF THE ABOVE 2 DECISIONS. REFERRING TO THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA KNITWEARS REPORTED IN 362 ITR 673 HE SUBMITTED THAT THE HONBLE SUPREME COU RT HAS HELD THAT THOUGH THERE IS NO TIME LIMIT FOR RECORDING SATISFACTIO N NOTE, HOWEVER, IT CAN BE DONE TILL SEIZED MATERIALS ARE HANDED OV ER AND HAVE NOT DISPENSED WITH REQUIREMENT OF EXISTENCE OF INCRI MINATING SEIZED MATERIAL AND THEIR HANDING OVER TO THE CONCERNED AO HAVING JURISDICTION. HE ACCORDINGLY SUBMITTED THAT THE NOTICE ISS UED U/S.158BD IS BAD IN LAW BECAUSE (A) THERE IS NO INCRIMINATI NG SEIZED MATERIAL RELATING TO ASSESSEES UNDISCLOSED INCOME, (B) NO MA TERIAL HAS BEEN HANDED OVER TO THE AO AND CONSEQUENTLY TO ASSESSEE TILL DATE, (C) THE ISSUE OF NOTICE U/S.158BD WITHOUT SEIZED MATE RIAL IS BAD IN LAW AND CANNOT BE DONE ON BASIS OF PRESUMPTIONS AND ASSUMPTIONS AS IT IS SPECIAL PROVISION FOR ASSESSMENT OF CE RTAIN TYPES OF CASES AND (D) STATEMENTS RECORDED ARE NO MATERIAL FOR PURPOSE OF 158BD. 12. SO FAR AS THE MERIT OF THE CASE IS CONCERNED HE SUBM ITTED THAT THERE IS NO EVIDENCE OF DEPOSIT OF CASH BY THE ASSESSEE IN BANK ACCOUNT OF M/S. MAHESHWARI FINANCIERS. THE ENTRIES WERE RECORDED IN THE BOOKS OF M/S. MAHESHWARI FINANCIERS BEFORE THE SEA RCH TOOK 11 ITA NO.1745, 1746 & 1787/PN/2013 PLACE. THE ASSESSEE HAS DISCHARGED THE ONUS AND THERE IS NO MAT ERIAL BEFORE THE REVENUE THAT ASSESSEE HAS DEPOSITED CASH IN THE BANK ACCOUNT OF M/S. MAHESHWARI FINANCIERS. THEREFORE, THE APPLICATION OF PROVISIONS OF SECTION 68 ARE NOT APPLICABLE TO THE FACTS OF THE CASE. 13. HE ALSO RELIED ON THE FOLLOWING CASES: 1. MANISH MAHESWARI VS. ACIT & ANOTHER REPORTED IN 289 ITR 341 (SC) 2. CIT VS. ALKA BHANDARI REPORTED IN (2015) 92 CCH 0027 (DEL.) 3. CIT VS. LATE RAJPAL BHATIA REPORTED IN 333 ITR 3 15 4. CIT VS. UTTAMCHAND JAIN REPORTED IN 320 ITR 554 5. CIT VS. MANOJ BANSAL REPORTED IN (2015) 92 CCH 0 005 (DEL.) 6. NIVEDITA M. MAKWANA VS. P.M. SHUKLA REPORTED IN (2008) 11 DTR (GUJ.) 225 7. CIT VS. BHARAT BHUSHAN JAIN REPORTED IN (2015) 9 2 CCH 0004 (DEL.) 14. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIN D IN THE INSTANT CASE A SEARCH AND SEIZURE ACTION TOOK PLACE IN THE CASE OF M/S. RAJASHREE ENTERPRISES, PROPRIETOR SHRI RAMANLAL SHAH AND M/S. MAHESHWARI FINANCIERS, PROPRIETOR SHRI MAHENDRA SHAH ON 1 2-10- 2001. THE BLOCK ASSESSMENTS IN THE CASE OF THE ABOVE S EARCHED PERSONS WERE COMPLETED ON 24-12-2003. THE SATISFACTION U/S.158BD HAS BEEN RECORDED BY THE AO OF THE SEARCHED PERSON O N 06-04-2004 AND THE NOTICES HAS BEEN ISSUED TO THE ASSESSEE U/S.15 8BD ON 10- 02-2006, I.E. AFTER A GAP OF OVER 23 MONTHS WITH REFERENCE TO THE DATE OF RECORDING OF SATISFACTION. FURTHER, THE LOAN OF RS.22 LAKH S TAKEN BY THE ASSESSEE FROM THE SEARCHED PERSON HAS BEEN RECOR DED IN THE 12 ITA NO.1745, 1746 & 1787/PN/2013 BOOKS OF ACCOUNT OF THE SEARCHED PERSONS PRIOR TO THE DATE OF SEARCH. NO OTHER INCRIMINATING MATERIAL WAS FOUND EXCEPT THE SAID ENTRIES IN THE BOOKS OF ACCOUNT PRIOR TO THE DATE OF SEARCH AND THE STATEMENT OF ONE MR. M. SRINIVASULU, ACCOUNTANT OF THE SEARCHED PERSONS . UNDER THESE CIRCUMSTANCES THE QUESTION THAT ARISES IS AS TO W HETHER THE NOTICE ISSUED U/S.158BD TO THE ASSESSEE IS VALID AND WHET HER THE ADDITION MADE BY THE AO IN THE HANDS OF THE ASSESSEE U/ S.68 AND 69C IS SUSTAINABLE. 16. FROM THE DETAILS FURNISHED BY THE ASSESSEE IN THE PAP ER BOOK AS WELL AS THE PERUSAL OF THE ORDERS OF THE AUTHORITIES BE LOW, WE FIND THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.22 LAKHS, I.E. R .5 LAKHS DURING A.Y. 1998-99, RS.2 LAKHS IN A.Y. 2000-01 AND RS.15 LAKH S IN A.Y. 2001-02 FROM M/S. MAHESHWARI FINANCIERS BY ACCOUNT PA YEE CHEQUES AND THESE WERE ENTERED IN THE BOOKS OF ACCOUN T OF M/S. MAHESWARI FINANCIERS PRIOR TO THE DATE OF SEARCH. THERE IS NO PROOF WITH THE DEPARTMENT THAT MONEY WAS GIVEN BY THE ASSE SSEE TO M/S. MAHESHWARI FINANCIERS FOR OBTAINING THE CHEQUES OR THAT A FTER THE LOANS WERE OBTAINED CASH WAS WITHDRAWN AND GIVEN TO M/S . MAHESWARI FINANCIERS. MERELY ON THE BASIS OF STATEMENT O F THE ACCOUNTANT AND WITHOUT ANY CORROBORATIVE EVIDENCE THE ADDITION MADE BY THE AO IN A BLOCK ASSESSMENT PASSED U/S.158BD R.W.S. 158BC WHICH HAS BEEN UPHELD BY THE CIT(A), IN OUR OPINION, IS NOT CORRECT AND PROPER. IT IS FURTHER TO BE NOTED HERE TH AT THE BLOCK ASSESSMENT ORDER PASSED IN THE CASE OF THE SEARCHED P ERSON HAS BEEN SET ASIDE BY THE CIT U/S.263 ON 23-03-2006. SUBSEQUEN T TO THE ORDER PASSED U/S.263 THE AO COMPLETED THE ASSESSMENT OF THE SEARCHED PERSONS ON 29-12-2006 BY MAKING ADDITION U/S.6 9A AMOUNTING TO RS.1,63,77,713/- AS MONEY LENT TO THIRD PART IES, A 13 ITA NO.1745, 1746 & 1787/PN/2013 STATEMENT MADE BY THE LD. COUNSEL FOR THE ASSESSEE AT THE BAR AND NOT CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIV E. THEREFORE, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE AS SESSEE THAT WHEN THE ORDER PASSED U/S.263 IS IN FORCE IN CASE O F THE SEARCHED PERSON, THERE WAS NO QUESTION OF MAKING ADDITION IN THE HANDS OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, W E ARE OF THE CONSIDERED OPINION THAT THE CIT(A) WAS NOT JUSTIFIED IN SUST AINING THE ADDITION OF RS.22 LAKHS AS UNDISCLOSED INCOME OF THE ASSESS EE FOR THE BLOCK PERIOD. SINCE THE LOAN AMOUNT HAS BEEN TREATED AS GENUINE, THEREFORE, THE DISALLOWANCE OF INTEREST U/S.69C BY THE AO A ND UPHELD BY THE CIT(A) ALSO IS NOT WARRANTED. ACCORDINGLY, THE DISA LLOWANCE OF SUCH INTEREST ON SUCH LOAN BY THE AO U/S.69C AND UPHEL D BY THE CIT(A) IS DIRECTED TO BE DELETED. 17. EVEN OTHERWISE ALSO, IT IS A FACT THAT NO INCRIMINATING M ATERIAL BELONGING TO THE ASSESSEE WERE FOUND FROM THE PREMISES O F THE SEARCHED PERSON. THE SATISFACTION NOTE WAS MAINLY BASED ON THE BASIS OF ENTRIES MADE IN THE REGULAR BOOKS OF ACCOUNT AND THE STATEMENT OF THE ACCOUNTANT. 18. WE FIND THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. LATE RAJPAL BHATIA REPORTED IN 333 ITR 315 HAS HELD THA T PROCEEDINGS INITIATED AGAINST THE ASSESSEE U/S.158BD ON THE BASIS OF THE STATEMENT RECORDED DURING SEARCH ARE NOT VALID AS THE STATEMENT IS NEITHER DOCUMENT NOR ASSET. IT HAS FURTHER BEEN HELD T HAT INITIATION OF PROCEEDINGS U/S.158BD BY THE AO AGAINST THE ASSESSEE WITHOUT RECORDING THE REQUISITE SATISFACTION WAS ILLEGAL. THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT AT PARA NOS. 11 T O 13 ARE AS UNDER : 14 ITA NO.1745, 1746 & 1787/PN/2013 11. IT CLEARLY EMERGES FROM THE READING OF THIS PROVISION THAT BEFORE INVOKING THE PROVISIONS OF S. 158BD OF THE ACT, THE AO OF THE PERSON SEARCHED 'UNDER S. 132(1) MUST SATISFY HIMSELF THAT SOME UNDISCLOSED INCOME BELONGS TO A PERSON OTHER THAN THE PERSONS WITH RESPECT TO WHOM SEARCH WAS MADE UNDER S. 132(1) OF THE ACT. SUCH SATISFA CTION MUST BE BASED ON THE MATERIAL FOUND IN THE COURSE OF SEARCH. I N THE ABSENCE OF ANY SUCH SATISFACTION (WHICH IS TO BE RECORDED IN WRITING) THE CONCERNED AO DOES NOT GET ANY JURISDICTION TO ASSESS THAT OTHER PERSON BY INVOKING THE S. 158BD OF THE ACT. FURTHER, THE SATISFACTION OF THE AO HAS TO BE IN RESPECT OF THE FOLLOWING ASPECTS : (I) THERE SHOULD BE 'UNDISCLOSED INCOME' WITHIN THE MEANING OF S. 158B(B) REFERABLE TO THE ASSETS OR BOOKS/DOCUMENTS FOUN D SEIZED/ REQUISITIONED; (II) THERE SHOULD A FINDING BY THE AO THAT THERE WA S UNDISCLOSED INCOME IN SUCH ASSETS OR BOOKS OF ACCOUNT OR DOCUMENTS OF THE SEARCHED PERSON; (III) AND THAT SUCH UNDISCLOSED INCOME BELONGED TO THE PERSON OTHER THAN THE ONE SEARCHED. 12. IN THE PRESENT CASE, ADMITTEDLY, DURING THE SEARCH CARRIED OUT AT THE PREMISES OF MR. AND MRS. CHARLA, NO BOOKS OF ACCOUN TS OR OTHER DOCUMENTS OR OTHER ASSETS PERTAINING TO THE ASSESSEES HEREIN WER E FOUND OR SEIZED. THE ENTIRE FOUNDATION OF THE BLOCK ASSESSMENT UNDER S. 158BD OF THE ACT, INSOFAR ASSESSEES ARE CONCERNED, WAS THE STATEMENT OF SMT. S URKSHA CHARLA RECORDED DURING THE COURSE OF SEARCH. 13. THE TRIBUNAL HAS HELD THAT THIS STATEMENT COULD NOT BE TREATED 'BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR ASSETS' WHICH ONLY COULD BE THE BASIS FOR INVOKING THE PROVISION OF S. 158BD OF THE ACT. ADMITTEDLY, STATEMENT OF MRS. CHARLA IS NEITHER 'BOOKS OF ACCOUNTS' NOR 'ASSETS'. THE QUESTION, THEREFORE, IS AS TO WHETHER THIS STATEMENT CAN BE TREATED AS 'OTHER D OCUMENTS'. PRIMA FACIE, IT IS DIFFICULT TO ACCEPT THIS PROPOSITION. STATEMENT WAS NOT THE DOCUMENT WHICH WAS FOUND DURING SEARCH. IN FACT THIS WAS THE DOCUMENT WHICH CAME TO BE CREATED DURING THE SEARCH AS THE S TATEMENT WAS RECORDED AT THE TIME OF SEARCH. THEREFORE, IT CANNOT BE SAID TH AT THE STATEMENT WAS 'SEIZED' DURING THE SEARCH AND THUS, WOULD NOT QUALI FY THE EXPRESSION 'DOCUMENT' HAVING BEEN SEIZED DURING THE SEARCH. IN SUCH A SCENARIO, PROPER COURSE OF ACTION WAS REASSESSMENT UNDER S.147 R.W S . 148 OF THE ACT. 19. THE BANGALORE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF Y. SUBBARAJU & CO. AND OTHERS VS. ACIT REPORTED IN 91 ITD 118 HAS HELD THAT IN A CASE WHERE NOT AN IOTA OF EVIDENCE WAS FOU ND DURING SEARCH REGARDING UNDISCLOSED INCOME OF ANY OTHER PERSON, THERE IS NO QUESTION OF ASSESSMENT OF SUCH OTHER PERSONS U/S.158BD ON THE BASIS OF REAPPRAISAL OF FACTS ALREADY IN POSSESSION OF THE DEPARTMENT. 15 ITA NO.1745, 1746 & 1787/PN/2013 20. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAN OJ BANSAL REPORTED IN 92 CCH 0005 HAS HELD THAT IN ABSENC E OF SATISFACTION NOTE OF AO OF SEARCHED PERSON THAT ANY UND ISCLOSED INCOME BELONGED TO ANY PERSON, OTHER THAN THE PERSON S EARCHED, ORDER PASSED U/S.158BD CANNOT BE HELD TO BE VALID. 21. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. B HARAT BHUSHAN JAIN REPORTED IN 92 CCH 0004 HAS HELD THAT REVENUE HAS T O BE VIGILANT IN ISSUING NOTICE TO THIRD PARTIES U/S.158BD IMMED IATELY AFTER COMPLETION OF ASSESSMENT OF SEARCHED PERSON. WHER E THE SATISFACTION NOTE WAS RECORDED MORE THAN A YEAR AFTER C OMPLETION OF ASSESSMENT OF THE SEARCHED PERSON NOTICES ISSUED WERE RIGHTLY HELD TO BE NOT ISSUED IN CONFORMITY WITH REQUIREMENT OF SECTION 158 BD. THE RELEVANT OBSERVATION OF HONBLE HIGH COURT AT PARA 6 OF THE ORDER READS AS UNDER : 6. HAVING REGARD TO THE INTENT OF THE SUPREME COUR T IN PARA 44 OF THE CALCUTTA KNITWEARS (SUPRA), WHERE IT WAS INDICATED THA T THE REVENUE HAS TO BE VIGILANT IN ISSUING NOTICE TO THE THIRD PARTY U NDER SECTION 158 BD, IMMEDIATELY AFTER THE COMPLETION OF ASSESSMENT OF THE SE ARCHED PERSON, THIS COURT IS OF THE OPINION THAT A DELAY RANGING BET WEEN 10 MONTHS OF 1 YEARS CANNOT BE CONSIDERED CONTEMPORANEOUS TO ASSESSME NT PROCEEDINGS. WE ARE OF THE OPINION THAT NOTICES WERE NOT ISSUED IN CONFORMITY WITH THE REQUIREMENTS OF SECTION 158BD, A ND WERE UNDULY DELAYED. THE APPEALS OF THE REVENUE ACCORDINGLY FAIL AND ARE DISMISSED. 22. SINCE IN THE INSTANT CASE THE BLOCK ASSESSMENT OF THE SEARCHED PERSONS WERE COMPLETED ON 24-12-2003 AND SINCE THE NO TICE U/S.158BD WAS ISSUED ON 10-02-2006, I.E. AFTER A GAP OF 26 MONTHS, THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH C OURT IN THE CASE OF BHARAT BHUSHAN JAIN (SUPRA) THE NOTICES ISSU ED U/S.158BD ARE NOT IN CONFORMITY WITH THE REQUIREMENTS OF S ECTION 158BD WHICH WERE UNDULY DELAYED. THEREFORE, ON THIS ASPE CT ALSO, THE NOTICE ISSUED U/S.158BD HAS TO BE HELD AS INVALID AND VOID. 16 ITA NO.1745, 1746 & 1787/PN/2013 THUS, BOTH FACTUALLY AND LEGALLY THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE. THE ORDER OF THE CIT(A) IS ACCORDINGLY SET AS IDE AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. ITA NO.1746/PN/2013 AND 1787/PN/2013 : 23. IDENTICAL ISSUES ARE INVOLVED IN THE ABOVE APPEALS. FAC TS BEING SIMILAR, THEREFORE, FOLLOWING THE RATIO IN ITA NO.1745/PN/201 3 THE ABOVE 2 APPEALS FILED BY THE RESPECTIVE ASSESSEES ARE ALSO ALLOWED. 24. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE RESPEC TIVE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-07-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) ! / JUDICIAL MEMBER / ACCOUNTANT MEMBER IQ.KS PUNE ; ! DATED : 22 ND JULY, 2015. LRH'K %&'!()*+( / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # # $ ( ) / THE CIT(A)-III, PUNE 4. # # $ / THE CIT-III, PUNE 5. '() **+, , # +, , IQ.KS / DR, ITAT, A PUNE; 6. )./ 0 / GUARD FILE. %, - / BY ORDER , ' * //TRUE COPY// ' * //TRUE COPY// 123 *4 +5 / SR. PRIVATE SECRETARY # +,, IQ.KS / ITAT, PUNE