Kapil Dev, V. JCIT, Spl. Range-11,

ITA 2259/DEL/2002

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58908 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 20-12-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 24-05-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Gift; Income from undisclosed sources; Block assessment
• Section: 143(3); 131; 68; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO. 2259/DEL/2002 ASSTT. YR: 1997-98 KAPIL DEV VS. JCIT SPL. RANGE, 39, SUNDER NAGAR, NEW DELHI. NEW DELHI. PAN/GIR NO. K-55 (APPELLANT) ( RESPONDENT ) APPELLANT BY : SHRI K. SAMPATH ADV. RESPONDENT BY : SHRI SUDESH GARG CIT DR. O R D E R PER R.P. TOLANI, J.M : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER D ATED 22-3-2002 RELATING TO A.Y. 1997-98. REVISED GROUND OF APPEAL IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS. 83,00,000/- MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS I N RESPECT OF INCOME FROM ALLEGED UNDISCLOSED SOURCES ON THE BASI S OF THE CREDIT ENTRIES SUPPOSEDLY IN THE NAME OF THE APPELL ANT FOUND MENTIONED IN THE SEIZED NOTE BOOKS/ DIARIES OF ONE SHRI RAMNIK CHAWDA TREATING THE SAME AS UNEXPLAINED DEPOSITS OF THE ASSESSEE. IN SO DOING THE AUTHORITIES BELOW COMPLET ELY IGNORED THE SUBMISSIONS MADE BY THE APPELLANT AND THE FACTS PRESENTED IN SUPPORT OF HIS PLEA. 2. VIDE APPLICATION DATED 13-12-2011, THE ASSESSEE HAS PRAYED FOR ADMISSION OF FOLLOWING ADDITIONAL GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE AUTHORITIES BELOW ERRED IN CONSIDERING THE ITEM ARISING OUT OF THE SEARCH PROCEEDINGS OF THE THIRD PARTY IN THE NORMAL ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 2 ASSESSMENT OF THE APPELLANT AND THAT THE RELEVANT M ATERIAL HAVING BEEN FRETTED OUT DURING SEARCH U/S 132 OF TH E ACT SUCH COULD ONLY BEAR CONSIDERATION U/S 158BD OF THE ACT AND NOT HAVING BEEN DONE SO RENDERS THE ADDITION AB INITIO ILLEGAL AND VOID. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE AUTHORITIES ERRED IN ADDING GIFT OF RS. 2,0 0,000/- AS INCOME. THE ADDITION BEING ERRONEOUS AND UNCALLED F OR MUST BE DELETED. 3. APROPOS ADDITIONAL GROUNDS, LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THESE ARE PURELY LEGAL IN NATURE AND REQUIRE NO VE RIFICATION OF FRESH FACTS. RELIANCE IS PLACED ON HONBLE SUPREME COURT JUDGMEN T IN THE CASE OF NTPC; 229 ITR 383, FOR THEIR ADMISSION. 4. LD. DR OPPOSES THE ADMISSION OF ADDITIONAL GROUN DS AND CONTENDS THAT THE ASSESSEE HAS RAISED THE ADDITIONAL GROUNDS AFTER NINE YEARS WITHOUT GIVING ANY PLAUSIBLE REASONS FOR DELAY. 5. LD. COUNSEL FOR THE ASSESSEE, IN REPLY, CONTENDS THAT THE FIRST LEGAL ADDITIONAL GROUND IN QUESTION GOES TO THE ROOT OF ISSUE ABOUT THE ASSESSABILITY OF THIS AMOUNT U/S 143(3). A LEGAL GR OUND, WHICH CHALLENGES THE VALIDITY OF ASSESSABILITY CAN BE RAISED AT ANY TIME DURING THE APPELLATE PROCEEDINGS, AS HELD BY HONBLE SUPREME COURT IN TH E CASE OF NTPC (SUPRA). THE JUDGMENT DOES NOT PRESCRIBE ANY TIME FRAME FOR RAISING SUCH LEGAL GROUND, WHICH GOES TO THE ROOT OF THE PROCE EDINGS. IN VIEW OF HONBLE SUPREME COURT JUDGMENT, ITAT MAY BE PLEASED TO ADMI T THIS ADDITIONAL GROUND. ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 3 5.1. APROPOS SECOND GROUND, IT IS PLEADED THAT THE SAME WAS RAISED BEFORE CIT(A) ALSO, BUT HAS NOT BEEN DECIDED BY CIT(A). A SSESSEE INADVERTENTLY FAILED TO RAISE THIS GROUND IN THE MEMO OF APPEAL BEFORE ITAT. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADDL. GROUND NO. 1, A S RAISED BY THE ASSESSEE, IS PURELY LEGAL IN NATURE AND GOES TO THE ROOT ABOU T ASSESSABILITY OF THE IMPUGNED AMOUNT, BASED ON SEARCH MATERIAL, U/S 143( 3). THE SAME IS PURELY LEGAL IN NATURE AND DOES NOT REQUIRE VERIFICATION O F NEW FACTS OR MATERIAL. RESPECTFULLY FOLLOWING HONBLE SUPREME COURT JUDGME NT IN THE CASE OF NTPC (SUPRA), WE ADMIT THE SAME. 6.1. APROPOS GROUND NO. 2, THE SAME REQUIRES VERIFI CATION OF FACTS. BESIDES FROM THE LETTER DATED 15-3-2002, FILED ON THE PAPER BOOK, IT CLEARLY EMERGES THAT THE ASSESSEE HAD ACCEPTED THIS ADDITION BEFORE AO. THIS BEING SO, ASSESSEE CANNOT BE SAID TO BE AGGRIEVED ON THIS GRO UND. IN VIEW THEREOF, WE DO NOT ADMIT ADDITIONAL GROUND NO. 2. THUS, WE ADM IT ADDITIONAL GROUND NO. 1 OF THE ASSESSEE AND REJECT THE ADMISSION OF ADDL. GROUND NO. 2. 7. REVERTING BACK TO THE FACTS OF THE CASE: THE ASS ESSEE IS A FAMOUS CRICKETER AND DERIVES INCOME FROM ACTIVITIES OF CRI CKETING PROFESSION MODELING, CONSULTANCY AND OTHER SOURCES. ASSESSEE F ILED HIS RETURN OF INCOME ON 31-10-1997. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, AO RECEIVED INFORMATION FROM DIT (INV.), NEW DELHI, INDICATING THAT DURING THE SEARCH OPERATIONS CARRIED OUT U/S 158 BC IN THE PREMISES OF ONE SHRI RAMNIK CHAWDA OF MUMBAI, SOME DOCUMENTS, CONCERNING THE A SSESSEE WERE SEIZED. CONSEQUENTLY, AO ISSUED A LETTER TO ASSESSEE AND AF TER CONSIDERING HIS ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 4 EXPLANATION, CONFIRMED THE ADDITION OF RS. 83 LACS, BY FOLLOWING OBSERVATIONS: AN INFORMATION WAS RECEIVED FROM DIT INVESTIGATIO N, NEW DELHI THAT A SEARCH WAS CONDUCTED AT THE RESIDENCE OF SH. RAMNIK CHAWDA AT BOMBAY. IN ONE OF THE DIARIES SEIZ ED FROM THE PREMISES OF SH. RAMNIK CHAWDA DETAILED ACCOUNTS OF THE RECEIPTS FROM SH. KAPIL DEV WERE ENTERED. DURING TH E COURSE OF SEARCH THE STATEMENT OF SH. RAMNIK CHAWDA WAS RECOR DED AND HE STATED ON OATH THAT HE RECEIVED A SUM OF RS. 83 ,00,000/- A CASH FROM SH. KAPIL DEV DURING THE FINANCIAL YEAR 9 6-97, BESIDES A SUM OF RS. 50 LACS BY CHEQUE/ DRAFT. IN RESPECT OF THE AMOUNT OF RS. 83 LACS RECEIVED FROM SH. KAPIL DEV, SH. RAMNIK CHAWDA STATED ON 6-10-97 THAT THIS AMOUNT WAS PAID BY SH. KAPIL DEV AS HIS SHARE OF JOINT VENTURE INVESTMENT. HE STATED THAT TWO CHEQUES OF RS. 25 LACS EACH WERE ALSO RECE IVED BY HIM WHICH WERE SHOWN TO BE AS LOANS RECEIVED FROM M/S D EV YOGI DEVELOPERS WHEREIN SH. KAPIL DEV IS A PARTNER. THE STATEMENT OF SH. KAPIL DEV WAS RECORDED BY THE ADIT INVESTIGA TION, DELHI WHEREIN HE DENIED THE PAYMENT OF ANY CASH TO SH. RAMNIK CHAWDA. HE , HOWEVER, AGREED THAT HE PAID RS . 50 LACS TO M/S DEV YOGI DEVELOPERS. SH. KAPIL DEV DENIED TH AT HE WAS AWARE OF ANY SUCH FIRM KNOWN AS SHASTRI JI CONSTRUC TION. VIDE THIS OFFICE LETTER DATED 10-03-2000 ADDRESSED TO SH . KAPIL DEV HE WAS REQUIRED TO EXPLAIN THE FOLLOWING: DURING THE YEAR UNDER CONSIDERATION, YOU ARE A PARTNER WITH THE FIRM M/S DEV YOGI DEVELOPERS. AS PER THE RETURN OF INCOME FILED BY YOU, YOU HAVE SHOWN INVESTMENT OF RS. 50 LACS IN THE SAID FIRM. HOWEVER, AN INFORMATION HAS BEEN RECEIVED FROM DIT(INV.), BOMBAY THAT DURING THE COURSE OF SEARCH AT THE RESIDENCE OF SH. RAMNIK CHAWDA AT 204, KASHI BHAWAN, DIXIT ROAD, VILLE PARLE, BOMBAY ON 4/5 TH SEPT. 1997, CERTAIN INCRIMINATING DIARIES/ NOTE BOOKS HAVE BEEN FOUND AND SEIZED. THE SAME INDICATE THAT YOU HAVE ENTERED INTO AN AGREEMENT FOR PARTNERSHIP WITH SH. RAMNIK CHAWDA AND MRS. MEENA CHAWDA IN THE FIRM M/S ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 5 DEV YOGI DEVELOPERS ON 27 TH NOVEMBER 1996. THE PARTNERSHIP HAS BEEN MADE EFFECTIVE FROM IST DAY OF SEPT. 1996. THE SEIZED DIARY SHOWS THE AMOUNTS RECEIVED IN CASH AND CHEQUES UNDER THE NAME SH. KAPIL DEV. SH. RAMNIK CHAWDA, DURING THE COURSE OF INTERROGATION HAS STATED THAT THE AMOUNTS REPRESENT THE RECEIPTS FROM SH. KAPIL DEVNIKHANJ. HE HAS FURTHER STATED THAT HE RECEIVED TOTAL AMOUNT S OF RS. 1.33 CRORES FROM YOU DURING THE FINANCIAL YEAR 1996-97 AS UNDER: DATE AMOUNT IN LACS MODE OF PAYMENT 19 TH AUGUST 3 CASH 21 ST AUG. 5 CASH 3 SEPT. 8 CASH 30 AUG. 2 CASH 30 AUG. 25 CHEQUE 28 OCT. 5 CASH 6 NOV. 1 CASH 7 NOV. 1 CASH 16 NOV. 1 CASH 20 NOV. 15 CASH 22 NOV. 10 CASH 5 NOV. 25 DRAFT 23 NOV. 25 CASH 26 NOV. 4 CASH 5 DEC. 3 CASH YOU ARE REQUESTED TO PRODUCE EVIDENCE OF THE AFORES AID INVESTMENTS MADE BY YOU. SUMMONS U/S 131 OF THE I.T . ACT FOR YOUR PERSONAL ATTENDANCE IS ENCLOSED. SHRI KAPIL DEV COULD NOT APPEAR PERSONALLY AS HE WA S AWAY FROM DELHI ON NATIONAL DUTY AS COACH OF THE INDIAN NATIONAL CRICKET TEAM. HIS AR FURNISHED THE INFORMATION THAT SHRI KAPIL DEV AS A PARTNER IN M/S DEV YOGI DEVELOPERS INVESTE D RS. 50 LACS. HOWEVER, HE HAS SUBSEQUENTLY WITHDRAWN FROM T HE PARTNERSHIP AND HAS NO ASSOCIATION WITH THE SAID SH . RAMNIK CHAWDA AS ON DATE. AGAIN VIDE HIS LETTER DATED 23-0 3-2000 HE REITERATED THAT BEING UNCOMFORTABLE IN THE PARTNERS HIP OF SH. RAMNIK CHAWDA, SHRI KAPIL DEV DECIDED TO WITHDRAWN FROM THERE AND DEV YOGI DEVELOPERS ISSUED TWO CHEQUES O F RS. 25 ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 6 LACS EACH DATED 20-04-97 TOWARDS THE INVESTMENT MAD E BY HIM. THE DETAILS OF THE CHEQUES ARE AS UNDER: 30-04-97 084056 STATE BANK OF HYDERABAD 25 LACS -DO- 084057 STATE BANK OF MUMBAI 25 LACS UNFORTUNATELY THE CHEQUES BOUNCED TWICE AND THE SAM E REMAIN UNPAID AS ON DATE. IT HAS BEEN STATED THAT THESE DE VELOPMENTS TOOK PLACE IN THE MONTH OF APRIL, 1997 AND SH. RAMN IK CHAWDA WAS SEARCHED IN THE MONTH OF SEPTEMBER, 1997. THE A R OF THE ASSESSEE HAS STATED THAT SINCE THE ASSESSEE HAS ALR EADY WITHDRAWN FROM THE PARTNERSHIP AND WAS NOT HAVING A NY DEALING WHATSOEVER WITH THE SAID PERSON, HE HAS NOT PAID AN Y AMOUNT BEYOND RS. 50 LACS. THE CONTENTION OF THE ASSESSEE HAS BEEN CAREFULLY C ONSIDERED BUT THE SAME DOES NOT CARRY ANY WEIGHT IN VIEW OF THE FACT THAT SH. RAMNIK CHAWDA HAS NOTED DOWN THE RECEIPTS FROM VARIOUS PERSONS ON DIFFERENT PAGES AND DRAFTS SENT BY THE A SSESSEE ARE ENTERED ON THE DATES MENTIONED THEREIN THEN WHY NOT THE AMOUNTS PAID IN CASH AND ENTERED ON THE SAME PAGE O N DIFFERENT DATES, BE NOTE TREATED AS THE INVESTMENT OF THE ASS ESSEE. SINCE SH. KAPIL DEV HAS NOT BEEN ABLE TO EXPLAIN THE SOUR CE OF THIS INVESTMENT, A SUM OF RS. 83 LACS IS TREATED AS HIS INVESTMENT FROM UNDISCLOSED SOURCES. IT MAY HOWEVER, BE STATED THAT THESE CASH CREDITS HAVE ALSO BEEN ADDED IN THE BLOCK ASST T. OF SH. RAMNIK CHAWDA ON SUBSTANTIVE BASIS THE ADDITION IN THE HANDS OF THE ASSESSEE IS BEING MADE ON PROTECTIVE BASIS. 7.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL ON THE ISSUE IN QUESTION. ASSESSEE MADE FOLLOWING SUBMISSIONS: (I) NAME OF THE APPELLANT APPEARS ONLY IN A DIARY/NOTE BOOK OF SH. RAMNIK CHAWDA AND NO CORROBORATIVE EVIDENCE FOR THE AUTHENTICITY OF SUCH ENTRY WAS FOUND FROM ANY OTHER MATERIAL SEI ZED AT THE TIME OF SEARCH ON SH. CHAWDA OR FROM HIS BOOKS IN SUPPO RT OF HIS CLAIM OF HAVING RECEIVED SUCH MONIES FROM THE APPELLANT. ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 7 (II) THE ADDITION ON SUBSTANTIVE BASIS MADE IN THE HANDS OF SH. RAMNIK CHAWDA FOR UNEXPLAINED CASH CREDITS APPEARING IN HI S DIARY/ NOTE BOOK HAS NOT BEEN DELETED FROM HIS ASSESSMENT AND S O CANNOT CONTINUE TO BE TAXED IN THE HANDS OF THE APPELLANT AS WELL AS SH. RAMNIK CHAWDA. THIS IS IN KEEPING WITH THE WORDS OF THE LD. CIT(A) AS STATED IN CLAUSE 5 OF HIS ORDER IF A DDITION IS DELETED IN THE CASE OF SH. RAMNIK CHAWDA, THE SAME WILL BE INCLUDED IN THE INCOME OF THE APPELLANT (III) THE ADDITION MADE BY THE AO IN THE HANDS OF THE APP ELLANT IN RESPECT OF SOME CASH RECEIPTS APPEARING IN THE BOOK S OF SH. RAMNIK CHAWDA, SHOULD HAVE BEEN TAXABLE ONLY IN THE HANDS OF SH. RAMNIK CHAWDA U/S 68 AND NO QUESTION FOR MAKING THE ASSESSMENT ON PROTECTIVE BASIS SHOULD HAVE ARISEN. U/S 68, THE ONUS IS ON THE PERSON IN WHOSE BOOKS CASH CREDITS ARE FO UND, TO PROVE THAT THE CREDITS ARE NOT HIS INCOME AND IN CASE OF UNSATISFACTORY EXPLANATIONS, ADDITIONS SHOULD BE MADE IN HIS HANDS ITSELF. (IV) THE APPELLANT IS NOT RESPONSIBLE FOR ENTRIES IN THE BOOKS OF THE SAID SH. RAMNIK CHAWDA WHICH ARE UNCORROBORATED BY ANY E VIDENCE AND WHICH HAVE NO CORRESPONDING ENTRIES IN THE BOOK S OF THE APPELLANT. (V) SUCH ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE BY THE CIT(A) CANNOT BE UPHELD AS THERE IS NO CORROBORATIV E EVIDENCE/ ENTRIES OF SUCH INVESTMENT IN THE BOOKS OF M/S DEV YOGI DEVELOPERS FOR SUCH SUPPOSED INVESTMENTS BY THE APP ELLANT. (VI) DESPITE A SEARCH BEING CARRIED OUT ON THE APPELLANT HIMSELF, NO EVIDENCE/ MATERIAL CONTRADICTING THE APPELLANT STAT EMENT MADE AT ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 8 THE TIME OF SUMMONS U/S 131 AND BEFORE THE ADIT (IN V.), DELHI WAS FOUND. 7.2. CIT(A), HOWEVER, CONFIRMED THE ADDITION MADE B Y AO WITH FOLLOWING OBSERVATIONS: I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT AND EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT HAS NOT BROUGHT ANY NEW MATERIAL BEFO RE ME TO REBUT THE ARGUMENT OF THE AO THAT IF THE CHEQUE PAY MENTS RECORDED IN THE ACCOUNTS OF THE APPELLANT ARE TREAT ED AS GENUINE, THEN WHY THE CASH DEPOSITS WHICH APPEAR IN THE SAME ACCOUNT ON THE SAME PAGE AND DURING THE SAME PERIOD SHOULD NOT BE TREAT ED AS GENUINE. THE APPELLANT CANNOT TREAT A PART OF THE DOCUMENT AS CORRECT AND REJECT THE OTHER PART AS BO GUS. AFTER ALL IT IS NOT DENIED THAT THE APPELLANT HAD ENTERED INT O BUSINESS TRANSACTIONS WITH RAMNIK CHAWDA. IF HE MADE INVEST MENTS OF RS. 50 LAKHS BY CHEQUES THEN IT CAN BE LEGITIMATELY INFERRED THAT HE MADE THE CASH INVESTMENT OF RS. 83 LAKHS ALSO. A S REGARDS LD. COUNSELS PLEA THAT NO EVIDENCE OF THESE INVESTMENT WAS FOUND DURING THE COURSE OF SEARCH AT THE APPELLANTS PREM ISE, I DO NOT FIND ANY MERIT IN THE PLEA. RAMNIK CHAWDAWAS SEARC H IN 1997 AND THE APPELLANT WAS SEARCH IN 2000. AFTER A TIME GAP OF FOUR YEARS, IT CANNOT BE EXPECTED THAT THE APPELLANT WOU LD BE PRESERVING THE EVIDENCE ABOUT THESE TRANSACTIONS WI TH SH. CHAWDA WHICH HE HAD ALREADY DISOWNED. THE QUESTION AS TO WHY SH. RAMNIK SHOULD BE MAKING SOME CORRECT AND SO ME FALSE ENTRIES IN HIS DIARY AGAINST THE NAME OF THE APPELL ANT, WHO IS A CELEBRITY AND IF HE HAS REALLY DONE SO, WHY THE APP ELLANT HAS NOT TAKEN ANY LEGAL ACTION FOR FALSELY IMPLICATING HIS NAME, REMAINS UNANSWERED. THUS, THE APPELLANT HAS FAILED TO GIVE A SATISFACTORY EXPLANATION ABOUT THE SOURCE OF HIS INVESTMENT OF R S. 83,00,000/-. UNDER THE CIRCUMSTANCES, THE INVESTMEN T IS DEEMED TO BE THE INCOME OF THE APPELLANT FOR THE YEAR UNDE R CONSIDERATION. THE ADDITION MADE BY THE AO ON PROTE CTIVE BASIS IS CONFIRMED. IF THE ADDITION IS DELETED IN THE CAS E OF SH. RAMNIK, THE SAME WILL BE INCLUDED IN THE INCOME OF THE APPELLANT ON SUBSTANTIVE BASIS. THIS GROUND OF APPE AL IS DISMISSED. ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 9 8. AGGRIEVED, ASSESSEE IS BEFORE US. 9. LD. COUNSEL FOR THE ASSESSEE FIRSTLY ADVERTS TO THE ADDITIONAL GROUND ON THE VALIDITY OF PROTECTIVE ADDITION OF RS. 83 LACS DURING ASSESSMENT U/S 143(3), RELYING ON PURPORTED INFORMATION RECEIVED B Y DIT(INV.), DELHI, IN RESPECT OF BLOCK ASSESSMENT MADE ON SHRI RAMNIK CH AWDA (RC) CONSEQUENT TO SEARCH IN THE PREMISES ON 4/5 SEPT. 1 997 U/S 158BC BY DCIT (INV.), MUMBAI. ONE RELEVANT SUB-PARA OF THE BLOCK ASSESSMENT ORDER, PASSED TO DCIT (INV.) CIR. 22(1), MUMBAI), IN THE CASE OF RC, IS REFERRED [(PAGE 5 END OF PARA 6] : IT HAS ALREADY BEEN STATED IN FOREGOING PARAS THAT DIFFERENT ENTRIES SHOWING CASH RECEIPTS FROM DIFFERENT PERSON S RECEIVED IN DIFFERENT SEIZED BOOKS MATCH WITH EACH OTHER. SO FA R AS THE CHEQUE PAYMENT TO THE ASSESSEE, WHICH ARE RECORDED ALONG WITH CASH PAYMENTS IN THE SEIZED BOOKS THEY ARE ACCEPTED AS GENUINE AND CORRECT BY S/SHRI BARAD, KAPIL DEV, NATTOOBHAI ETC. IT IS ALSO AMPLY CLEAR FROM CASH BOOK A-2 AS TO HOW THE C ASH RECEIVED FROM DIFFERENT PARTIES WAS UTILIZED BY THE ASSESSEE. CONSIDERING ALL THE ABOVE CIRCUMSTANCES, IT CAN REA SONABLY CONCLUDED THAT SEIZED BOOKS REPRESENT TRUE STATE OF AFFAIRS OF THE ASSESSEE AND ALSO EXPLAINS THE SOURCE OF CASH PAID TO DIFFERENT PERSONS. HOWEVER, SHRI BARAD, KAPIL DEV, PAPAD AND NATTOOBHAI DENIED OF ANY CASH PAYMENT TO THE ASSESS EE. THUS, THE CASH ALLEGEDLY RECEIVED FROM THESE PERSONS AND FROM OTHERS INCLUDING THOSE, WHOSE IDENTITY COULD NOT BE ESTABL ISHED HAS TO BE ASSESSED AS UNACCOUNTED INCOME IN THE HANDS OF T HE ASSESSEE ON SUBSTANTIVE BASIS, SINCE THESE CREDITS ARE FOUND IN THE BOOKS OF THE ASSESSEE WHICH ARE CONSIDERED AS REGULAR BOO KS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. 9.1. THE PROVISIONS OF ASSESSMENT PROCEDURE CONSEQ UENT TO SEARCH CARRIED OUT U/S 132 OF THE I.T. ACT, 1961 WERE AMENDED W.E. F. AFTER 1-7-1995 AND THEY UNDER WENT A MAJOR LEGISLATIVE CHANGE IN PROCE DURE AND ITEMS OF ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 10 ASSESSABILITY BY CHAPTER XIV-B INSERTED AS SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES. THE RELEVANT PROVISION S OF CHAPTER XIV-B INCORPORATED ON THE STATUTE BOOK W.E.F. 1-7-1995, A RE AS UNDER: ASSESSMENT OF UNDISCLOSED INCOME AS A RESULT OF SEA RCH. 158BA(1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, WHERE AFTER THE 30 TH DAY OF JUNE, 1995 A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF A CCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SEC TION 132A IN THE CASE OF ANY PERSONS, THEN, THE ASSESSING OFF ICER SHALL PROCEED TO ASSESS THE UNDISCLOSED INCOME IN ACCORDA NCE WITH THE PROVISIONS OF THIS CHAPTER. (2) THE TOTAL UNDISCLOSED INCOME RELATING TO THE BL OCK PERIOD SHALL BE CHARGED TO TAX, AT THE RATE SPECIFIED IN S ECTION 113, AS INCOME OF THE BLOCK PERIOD IRRESPECTIVE OF THE PREV IOUS YEAR OR YEARS TO WHICH SUCH INCOME RELATES AND IRRESPECTIVE OF THE FACT WHETHER REGULAR ASSESSMENT FOR ANY ONE OR MORE OF T HE RELEVANT ASSESSMENT YEARS IS PENDING OR NOT. [EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT (A) THE ASSESSMENT MADE UNDER THIS CHAPTER SHALL BE IN ADDITION TO THE REGULAR ASSESSMENT IN RESPECT OF EA CH PREVIOUS YEAR INCLUDED IN THE BLOCK PERIOD; (B) THE TOTAL UNDISCLOSED INCOME RELATING TO THE BLOCK PERIOD SHALL NOT INCLUDE THE INCOME ASSESSED IN ANY REGULA R ASSESSMENT AS INCOME OF SUCH BLOCK PERIOD; (C) THE INCOME ASSESSED IN THIS CHAPTER SHALL NOT BE IN CLUDED IN THE REGULAR ASSESSMENT OF ANY PREVIOUS YEAR INCL UDED IN THE BLOCK PERIOD.] . 158BD. WHERE THE ASSESSING OFFICER IS SATISFIED THA T ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THA N THE ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 11 PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER S ECTION 132 OR WHOSE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS WERE REQUISITIONED UNDER SECTION 132A, THEN, THE BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS SEIZED OR REQ UISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVIN G JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESS ING OFFICER SHALL PROCEED UNDER SECTION 158BC AGAINST SUCH OTHE R PERSON AND THE PROVISIONS OF THIS CHAPTER SHALL APPLY ACCO RDINGLY. 9.2. THUS, AFTER 1-7-1995, IF SOME MATERIAL IS FOUN D DURING THE COURSE OF SEARCH PROCEEDING U/S 132 OF THE I.T. ACT, CARRIED ON X INDICATING THAT IT REFLECTS UNDISCLOSED INCOME OF ANOTHER PERSON Y, IN THAT EVENTUALITY THE INCOME-TAX ACT NOW PRESCRIBES A MANDATORY PROCEDURE . IN THESE CIRCUMSTANCES, THE AO OF THE SEARCHED PERSON X ( RC) WAS UNDER STATUTORY OBLIGATION TO RECORD A SATISFACTION THAT THE SEIZED MATERIAL REFLECTS UNDISCLOSED INCOME AND HAND OVER SUCH MATERIAL TO THE YS AO (ASSESSEE) , WHO IN TURN COULD HAVE ISSUED NOTICE U/S 158BD ON T HE ASSESSEE AND THE ASSESSMENTS FOR A BLOCK OF SIX YEARS COULD HAVE BEE N FRAMED IN THE HANDS OF ASSESSEE QUA THE INCRIMINATING MATERIAL SEIZED FROM THE SAID RC U/S 158BD. IN ASSESSEES CASE, NEITHER THERE IS SATISFA CTION RECORDED BY THE AO OF RC NOR THE ASSESSEES AO HAS ADOPTED THE PRESC RIBED MANDATORY PROCEDURE FOR ISSUANCE OF NOTICE U/S 158BD AND FRAM ED THE ASSESSMENT U/S 158-BD THEREON. THUS, THE ADDITION IN RESPECT OF S EIZED MATERIAL COULD HAVE BEEN MADE ONLY BY FOLLOWING THE MANDATORY PROCEDURE OF SEC. 158BD IN THE HANDS OF THE ASSESSEE AND NOT BY WAY OF PROCEEDING S UNDERTAKEN U/S 143(3). 9.3. LD. COUNSEL REFERRED TO THE ASSESSMENT ORDER U /S 158BC DATED 30-9- 1999 PASSED IN THE CASE OF RC, PLACED ON PAGE 4 OF THE PAPER BOOK. THE PERSON, FROM WHOM THE ALLEGED INCRIMINATING MATERIA L WAS SEIZED HAS BEEN ASSESSED BY WAY OF A BLOCK ASSESSMENT U/S 158BC. TH E CONSEQUENT ADDITION EMERGING FROM THIS SEARCH MATERIAL IN THE HANDS OF A THIRD PARTY I.E. ASSESSEE ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 12 WAS MANDATARILY TO BE COMPLETED U/S 158BD. THIS SP ECIFIC PROCEDURE OF BLOCK ASSESSMENT PROCEEDINGS IS ENACTED ON THE STAT UTE BOOK WITH A CLEAR NON-OBSTINATE CLAUSE OF SEC. 158BA(1): 158BA(1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, WHERE AFTER THE 30 TH DAY OF JUNE, 1995 A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF A CCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SEC TION 132A IN THE CASE OF ANY PERSON, THEN, THE ASSESSING OFFI CER SHALL PROCEED TO ASSESS THE UNDISCLOSED INCOME IN ACCORDA NCE WITH THE PROVISIONS OF THIS CHAPTER. 9.4. LD. COUNSEL THUS PLEADS THAT RCS AO, MUMBAI H AS CLEARLY REFERRED TO AND CONSIDERED THE IMPUGNED SEARCH MATERIAL AND MA DE THIS VERY ADDITION IN RCS BLOCK ASSESSMENT ORDER. IN THESE CIRCUMSTANCE S, THIS ADDITION, WHICH IS BASED ON A SEARCH MATERIAL, COULD HAVE BEEN CONSIDE RED ONLY BY WAY OF BLOCK ASSESSMENT U/S 158BC AND NOT U/S 143(3). REL IANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS FOR THE PROPOSITI ON THAT WHEN A SPECIAL PROCEDURE OF ASSESSMENT IS PRESCRIBED, THE SAME IS TO BE MANDATORILY FOLLOWED. (I) CIT VS. RAVI KANT JAIN (2001) 250 ITR 141. (DEL ;.) BLOCK ASSESSMENT UNDER CHAPTER XIV-B OF THE INCOME -TAX ACT, 1961, IS NOT INTENDED TO BE A SUBSTITUTE FOR R EGULAR ASSESSMENT. ITS SCOPE AND AMBIT IS LIMITED TO MATER IALS UNEARTHED DURING SEARCH. IT IS IN ADDITION TO THE R EGULAR ASSESSMENT ALREADY DONE OR TO BE DONE. THE ASSESSME NT FOR THE BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF EVIDE NCE FOUND AS A RESULT OF SEARCH OF REQUISITION OF BOOKS OF ACCOU NTS OR DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION A S ARE AVAILABLE WITH THE ASSESSING OFFICER. EVIDENCE FOUN D AS A RESULT OF SEARCH IS CLEARLY RELATABLE TO SECTIONS 132 AND 132A. ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 13 (II) CIT VS. DR. M.K.E. MENON (2001) 248 ITR 310 (B OM.) IN CONCLUSION WE WOULD ALSO LIKE TO MENTION THAT C HAPTER XIV-B LAYS DOWN A SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES AND PROVIDES FOR ASSESSMENT OF UNDISCLOSED IN COME AS A RESULT OF SEARCH. UNDER SECTION 158BB READ WITH SEC TION 158BC, WHAT IS ASSESSED IS THE UNDISCLOSED INCOME OF THE B LOCK PERIOD AND NOT THE TOTAL INCOME OR LOSS OF THE PREVIOUS YE AR REQUIRED TO BE ASSESSED UNDER REGULAR ASSESSMENT VIDE SECTION 1 43(3). THIS EXERCISE UNDER SECTION 143(3) FOR REGULAR ASSESSMEN T STANDS ON A DIFFERENT FOOTING IN CONTRAST TO THE EXERCISE UNDER TAKEN BY THE ASSESSING OFFICER UNDER CHAPTER XIV-B WHERE THE ASS ESSING OFFICER AHS TO ASSESS ONLY THE UNDISCLOSED INCOME. THEREFORE, THE SCOPE OF REGULAR ASSESSMENT IS QUITE DIFFERENT FROM THE SCOPE OF ASSESSMENT UNDER CHAPTER XIV-B. THE REGULAR ASSE SSMENT IS TO ENSURE THAT THE ASSESSEE HAD NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDERPAI D THE TAX IN ANY MANNER WHEREAS WHAT IS ASSESSED UNDER CHAPTER X IV-B IS ONLY THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD AN D NOT THE INCOME OR LOSS OF THE PREVIOUS YEAR WHICH IS ONLY D ONE IN NORMAL REGULAR ASSESSMENT UNDER SECTION 143(3). IN A LARGE NUMBER OF CASES WE FIND THAT THE ABOVE DISTINCTION IS NOT KEPT IN MIND BY THE ASSESSING OFFICER. IT IS FOR THIS REAS ON THAT WE HAVE SPELT OUT THE DIFFERENCE BETWEEN THE REGULAR A SSESSMENT AND THE BLOCK ASSESSMENT UNDER CHAPTER XIV-B OF THE INCOME- TAX ACT. (III) N.R. PAPER & BOARD LTD. & OTHERS VS. DCIT (19 98) 234 ITR 733 (GUJ.) CHAPTER XIV-B OF THE INCOME-TAX ACT, 1961, LAYS DO WN A SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES AN D PROVIDES FOR ASSESSMENT OF UNDISCLOSED INCOME AS A RESULT OF SEARCH. UNDER SECTION 158BB(1), READ WITH SECTION 158BC OF THE INCOME-TAX ACT, 1961, WHAT IS ASSESSED IS THE UNDIS CLOSED INCOME OF THE BLOCK PERIOD AND NOT THE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR REQUIRED TO BE ASSESSED IN THE NO RMAL REGULAR ASSESSMENT UNDER SECTION 143(3). THIS EXERCISE UNDE R SECTION 143(2) AND (3) FOR REGULAR ASSESSMENT STANDS IN CON TRAST TO THE EXERCISE OF THE ASSESSING OFFICER UNDER SECTION158B B READ WITH ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 14 SECTION 158BC(B), WHERE HE HAS TO ASSES ONLY THE UN DISCLOSED INCOME OF THE BLOCK PERIOD ON THE BASIS OF THE EVID ENCED FOUND AND MATERIAL AVAILABLE AS A RESULT OF SEARCH CONDUC TED UNDER SECTION 132 OF THE ACT. THE REGULAR ASSESSMENT IS T O ASSESS THE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR WHERE A R ETURN IS FILED UNDER SECTION 139 AND THE ASSESSING OFFICER CONSIDE RS IT NECESSARY OR EXPEDIENT UNDER SECTION 143(2) TO ENSU RE THAT THE ASSESSEE HAD NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDERPAID TAX IN ANY MANN ER. (IV) MANISH MAHESHWARI VS. ACIT & ANOTHER (2007) 28 9 ITR 341 (SC). 9.5. THUS THE AO, MUMBAI IN THE CASE OF RC HAVING REFERRED TO AND RELIED ON THIS MATERIAL, IN CASE IT REFLECTED ASSE SSEES UNDISCLOSED INCOME HE SHOULD HAVE HANDED OVER THE MATERIAL TO ASSESSEES AO BY WAY OF STATUTORY MANDATE U/S 158BD AND THEREAFTER BLOCK ASSESSMENT WAS TO BE FRAMED IN CONFORMITY WITH THE PROCEDURE PRESCRIBED U/S 158BD. 9.6. THE DEPARTMENT HAS GLOSSED OVER THIS STATUTORY MANDATE AND ADOPTED AN UNTENABLE PROCEDURE OF ASSESSING THE ALLEGED DIS COVERY OF INCOME BASED ON A SEARCH U/S 132, WHICH DESERVES TO BE QUASHED. 9.7. RCS AO HAS RATHER RECORDED A FINDING, THAT SE IZED MATERIAL REPRESENTED UNDISCLOSED INCOME OF RCS UNEXPLAINED CASH CREDITS AND FURTHER GAVE A FINDING THAT THE ASSESSEE HAS DENIED IT DURING HIS BLOCK ASSESSMENT PROCEEDINGS. HE HAS NOT GIVEN ANY INDICA TION TO FRAME A PROTECTIVE ASSESSMENT IN THE HANDS OF ASSESSEE. THU S, THE ADDITION U/S 143(3) MADE BY AO IN RESPECT OF VERY SAME SEARCH MATERIAL , DULY CONSIDERED U/S 158-BC, IS CONTRARY TO LAW AND DESERVES TO BE QUAS HED. 9.8. LD. COUNSEL FURTHER CONTENDS THAT THERE IS NO PROVISION FOR PROTECTIVE ASSESSMENT IN SEARCH ASSESSMENT PROCEEDINGS. IT IS SO BECAUSE THE ASSESSMENT IS BASED ON THE SEARCH WHERE THE PHYSICA L EVIDENCE IS FOUND AND ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 15 THE ADDITIONS CANNOT BE MADE BEYOND THE SEARCH MATE RIAL. THE AO HAS TO GIVE A FINDING OF FACT THAT THE ALLEGED INCOME REFL ECTED BY SEARCH MATERIAL BELONGS TO THE SEARCHED PERSON OR ANY OTHER PERSON AND PROCEED ACCORDINGLY U/S 158BC OR 158BD. THESE BEING SPECIAL PROVISIONS OF ASSESSMENT, BASED ON RECOVERY OF POSITIVE PHYSICAL EVIDENCE, LAW DOES NOT PERMIT AO TO DEVIATE THEREFROM AND INFERENCES CANNOT BE DRAWN A ND PROTECTIVE ASSESSMENT CANNOT BE MADE EITHER IN BLOCK ASSESSMEN T OR REGULAR ASSESSMENT. 9.9. ON MERITS, LD. COUNSEL FOR THE ASSESSEE CONTEN DS THAT: (I) THE SEARCH WAS CONDUCTED IN THE PREMISES OF RC AN D THE ADDITIONS HAVE BEEN MADE IN HIS HANDS U/S 158BC BY HIS AO. INSTEAD OF FOLLOWING THE STATUTORY PROCEDURE, BASED ON SPECIAL PROVISIONS PRESCRIBED BY THE ACT, ASSESSEES AO HAS MADE A PROTECTIVE ASSESSMENT BASED ON UNTENABLE INFERENCES . THE CIT(A) BEING AN APPELLATE AUTHORITY OUGHT TO HAVE DECIDED THE ISSUE ABOUT ASSESSABILITY IN ONE HAND. INSTEAD OF UPHOLDING THE AOS ORDER AND GIVING A SURPRISING DIRECTION THAT IN CASE THE ADDI TIONS ARE UPHELD IN THE HANDS OF SHRI RAMNIK CHAWDA THE SAME MAY BE DELETED IN ASSESSEES CASE, CIT(A) HAS FAILED TO EXERCISE HIS JURISDICTION. THE APPELLATE AUTHORITY HAS TO DECIDE TO WHOM THE INCOM E BELONGS AND NOT TO CARRY FORWARD THE PROTECTIVE FINDING. RELIAN CE IS PLACED ON HONBLE ALLAHABAD HIGH COURT JUDGMENT IN THE CASE O F SMT. HEMLATA AGARWAL VS. CIT (1967) 64 ITR 428 (ALL.) TO THIS EFFECT. (II) THEREFORE, THE ASSESSEES FATE CANNOT BE MECHANICAL LY LINKED WITH A THIRD PARTY PROCEEDINGS, WHICH ARE NOT IN CONTROL OF THE ASSESSEE. (III) THE ASSESSEE RETIRED FROM THE SAID FIRM M/S DEV YOG I DEVELOPERS W.E.F. 20-4-1997, HIS CAPITAL OF RS. 50 LACS PURPOR TEDLY RETURNED BY SHRI RAMNIK CHAWDA BY TWO CHEQUES. THE UNCOMFORT ABLE ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 16 RELATIONS BETWEEN THEM ARE REVEALED BY THE FACT THA T CHEQUES ISSUED BY RC BOUNCED AND ASSESSEE IS YET TO RECE IVE THE CAPITAL ITSELF. THE SEARCH TOOK PLACE IN THE PREMISES OF R C ON 4/5 SEPT. 1997 I.E. SUBSEQUENT TO THE ASSESSEES WITHDRAWAL F ROM THE SAID FIRM. DIARY FOUND FROM THE PREMISES OF RC WAS MAI NTAINED BY HIM IN HIS OWN HAND-WRITING AND ADDED IN HIS BLOCK ASSESSMENT U/S 158BC. IT IS EVIDENT FROM THE RECORD THAT RELAT IONSHIP BETWEEN RC AND ASSESSEE HAD TURNED SOUR, THEREFORE, A POS T RETIREMENT STATEMENT GIVEN BY RC ESTRANGED PARTNER, CANNOT BIND THE ASSESSEE WITHOUT ANY CORROBORATIVE EVIDENCE. THE AS SESSEE CANNOT BE HELD ANSWERABLE OR RESPONSIBLE FOR ENTRIES IN TH E BOOKS OF SHRI RAMNIK CHAWDA, MORE SO WHEN VERY SAME ADDITIONS ARE MADE IN HIS BLOCK ASSESSMENT. (IV) THE ASSESSEES PREMISES WERE SUBSEQUENTLY SEARCHED INDEPENDENTLY AND NO MATERIAL IN RESPECT OF ALLEGE D CASH ENTRIES IN RCS DIARY, WHAT-SO-EVER WERE FOUND FROM THE ASSESS EES PREMISES. THUS, EXCEPT SHRI RAMNIK CHAWDAS SO CALL ED OWN DIARY, NOT A SHRED OF EVIDENCE HAS BEEN FOUND EITH ER FROM THE ASSESSEES PREMISES OR FROM THE PREMISES OF SHRI RA MNIK CHAWDA, WHICH COULD CORROBORATE THAT THE ASSESSEE IN ANY WA Y MADE ALLEGED CASH PAYMENTS TO RC. (V) THE STATUTORY PRESUMPTION U/S 132(4A) CANNOT BE RAI SED AGAINST ASSESSEE AS IT ARISES ONLY AGAINST RC CONSEQUENT TO SEARCH IN HIS PREMISES. THE SAME, AT BEST, U/S 132(4A) CAN BE RAI SED AGAINST RC AND NOT THE ASSESSEE. (VI) CIT(A) IN PARA 5 HAS CONFIRMED THE ADDITION BY DRAW ING FOLLOWING INFERENCES: ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 17 (A) IF THE ASSESSEE MADE INVESTMENT OF RS. 50 LACS BY C HEQUE, IT CAN LEGITIMATELY BE INFERRED THAT HE ALSO MADE CASH INVESTMENT OF RS. 83 LACS. (B) SHRI KAPIL DEV (ASSESSEE) HAS NOT TAKEN ANY LEGAL A CTION AGAINST SHRI RAMNIK CHAWDA FOR IMPLICATING HIS NAME QUA THE ADDITIONS. . (C) IN THE CIRCUMSTANCES, THE INVESTMENT IS DEEMED TO B E INCOME OF THE ASSESSEE ON PROTECTIVE BASIS. 9.10. LD. COUNSEL THUS CONTENDS THAT THE ADDITION I S ONLY BASED ON ASSUMPTIONS THAT I) AS THE ASSESSEE MADE PAYMENT THROUGH CHEQUE, THEREFORE, HE WOULD HAVE MADE THE CASH PAYMENTS ALS O; II) BECAUSE LEGAL ACTION IS NOT TAKEN BY ASSESSEE AGAINST RC, THERE FORE, A PRESUMPTION AROSE THAT THE INCOME BELONGED TO THE ASSESSEE; AND III) THE ADDITION IS MADE ON DEEMED BASIS AS PROTECTIVE ADDITION WITHOUT ELABOR ATING THE SURROUNDING CIRCUMSTANCES. 9.11. LD. COUNSEL VEHEMENTLY ARGUES THAT THE ENTIRE PREMISE OF ADDITION IS UNJUSTIFIED, ARBITRARY AND WITHOUT ANY CORROBORATIV E EVIDENCE, AS: A. THERE CANNOT BE A VALID PRESUMPTION THAT BECAUSE A SSESSEE GAVE CHEQUES FOR PAYMENT OF CAPITAL, THEREFORE, CASH PA YMENTS WILL ALSO BE THERE. B. THE ASSESSEE INSTEAD OF ENTERING DISPUTES WITH RC RATHER WITHDREW FROM FIRM AND DID NOT CHOOSE TO TAKE LEGAL ACTION A S ASSESSEE WAS A CELEBRITY AND ADVERSE MEDIA PUBLICITY WOULD HAVE HA RMED HIS STATURE. BESIDES, ASSESSEE WAS CAPABLE OF DEFENDING HIMSELF IN INCOME-TAX PROCEEDINGS. ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 18 C. LAW DOES NOT PERMIT JETTISONING THE MANDATORY PROCE DURE OF BLOCK ASSESSMENT AND CONVENIENTLY MAKING UNTENABLE ADDITI ONS IN REGULAR ASSESSMENT U/S 143(3). 9.12. DIARY HAS BEEN SEIZED NOT DURING THE CONTINUI TY OF THE PARTNERSHIP FIRM M/S DEV YOGI DEVELOPERS BUT AFTER ASSESSEES WITHD RAWAL OF PARTICIPATING FROM THE SAID FIRM. THE DIARY HAS BEEN WRITTEN BY RC, HIS AO HAS PREFERRED TO MAKE THIS ADDITION BY WAY OF BLOCK ASSESSMENT IN HIS HANDS. NO ADDITION IS CONTEMPLATED BY AO IN THE HANDS OF THE SAID PART NERSHIP FIRM M/S DEV YOGI DEVELOPERS OR ASSESSEE. IF ASSESSEE HAD GIVEN ANY CASH AMOUNT TO PARTNERSHIP FIRM, THEN THE FIRM SHOULD HAVE ACQUIRE D SOME ASSETS OR MAINTAINED SOME RECORD. THE IMPUGNED PROTECTIVE ADD ITION BASED ON ASSUMPTIONS, PRESUMPTIONS, SURMISES AND CONJECTURE S AND AGAINST THE PROCEDURE PRESCRIBED BY LAW, DESERVES TO BE DELETE D. 10. LD. DR, ON THE OTHER HAND, CONTENDS THAT PROVIS IONS OF CHAPTER XIV-B DO NOT PROHIBIT THE USE OF MATERIAL FOUND DURING TH E COURSE OF SEARCH OF ANY OTHER PERSON IN REGULAR ASSESSMENT. IF THE AO INDEP ENDENTLY COMES IN POSSESSION OF SOME MATERIAL INDICATING THAT IT PERT AINED TO OTHER PERSON, THE SAME CAN BE USED IN HIS ASSESSMENT. IN THIS CASE, A O CAME IN POSSESSION OF MATERIAL FROM DIT (INV.), DELHI, PROVIDED BY INVEST IGATION WING. THE MATERIAL CAME THROUGH NON SEARCHING OFFICER I.E. AD I (INV.), DELHI, AND NOT FROM THE AO OF THE RC. THIS BEING A MATERIAL EVID ENCE CAN BE VALIDLY USED BY THE AO IN REGULAR ASSESSMENT PROCEEDINGS WHICH W ERE ALIVE AND GOING ON IN THE CASE OF ASSESSEE. IN THE CASE OF SHRI RAMNIK CHAWDA THE ASSESSMENT WAS COMPLETED ON 30-9-1999 WHEREAS IN THE CASE OF T HE ASSESSEE THE SAME HAS BEEN COMPLETED ON 30-3-2002. 10.1. ON MERITS, IT IS PLEADED THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS CONFRONTED WITH THE STATE MENTS OF RC I.E. ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 19 MATERIAL PROPOSED BY THE AO TO BE RELIED ON. ASSESS EE, EXCEPT DENYING IT DID NOT ASK FOR CROSS-EXAMINATION OF SHRI RAMNIK CH AWDA. THIS PROVES THE CASE OF THE REVENUE THAT THE CASH ENTRIES RECORDED ALONG WITH CHEQUES IN THE BOOKS OF SHRI RAMNIK CHAWDA BELONGED TO ASSESSEE. A SSESSEE HAS ACCEPTED HAVING BUSINESS CONNECTION WITH SHRI RAMNIK CHAWDA AND BOTH WERE PARTNERS IN THE FIRM. SHRI RAMNIK CHAWDA GAVE THE S TATEMENT IN THE CAPACITY OF PARTNER OF THE FIRM AND HAD A LEGAL CAPACITY TO BIND THE FIRM. THEREFORE, IT CANNOT BE HELD TO BE STATEMENT OF A THIRD PARTY. OR DERS OF LOWER AUTHORITIES ARE RELIED ON. 11. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H THE ENTIRE MATERIAL AVAILABLE ON RECORD. COMING TO THE ASSESSEES ADDIT IONAL GROUND, CHALLENGING THE IMPUGNED ADDITION IN RESPECT OF SEARCHED MATERI AL U/S 143(3), FOLLOWING POINTS EMERGE: (I) IN THE RCS ASSESSMENT ORDER PASSED U/S 158BC DATED 30-9-1999, THERE IS REFERENCE TO THE SEARCH MATERIAL AT VARIOU S PLACES. DURING THE COURSE OF HIS BLOCK ASSESSMENT PROCEEDINGS, AS SESSEE WAS CALLED ON BY DIT(INV.), MUMBAI TO EXPLAIN THE DIARY MAINTAINED BY RC. THE ASSESSEE EXPLAINED THAT THE DIARY WAS NOT IN HIS HANDWRITING; HE HAD NO CONCERN WITH THIS PAPER AND HIS ASSOCIATION WITH M/S DEV YOGI DEVELOPERS WAS ONLY IN RESPECT OF TWO AMOUNTS- (A) RS. 25 LACS BY CHEQUE DATED 30-8-1996; AND (B) RS. 25 LACS BY DD DATED 5-11-1997. (II) HE HAD NOT GIVEN ANY CASH AMOUNT TO RC, THEIR REL ATIONS SOURED AND HE WITHDREW FROM THE FIRM M/S DEV YOGI DEVELOPE RS; HIS CAPITAL WAS PURPORTED TO BE RETURNED BY TWO CHEQUES , WHICH ALSO ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 20 BOUNCED. THUS, ASSESSEE CLEARED HIS POSITION BEFORE AO ENTRUSTED WITH RCS BLOCK ASSESSMENT. (III) ON HIS EXPLANATION, RCS AO IN BLOCK ASSESSMENT PRO CEEDINGS U/S 158BC WAS SATISFIED AND THE ADDITION WAS MADE IN T HE HANDS OF RC. THUS THE DIT(INV.) MUMBAI HAS HAD NO SATISFACTI ON THAT IMPUGNED DIARY REPRESENTED UNDISCLOSED INCOME OF T HE ASSESSEE AND THEREFORE, NO REFERENCE WAS MADE BY HIM TO AO, DELHI FOR INITIATING BLOCK ASSESSMENT PROCEEDINGS U/S 158BD IN THE CASE OF ASSESSEE. (IV) THE IMPUGNED DIARY BEING A SEIZED MATERIAL WAS EXA MINED IN THE RCS BLOCK ASSESSMENT AND CASH CREDITS WERE ADDED A S UNDISCLOSED INCOME IN THE HANDS OF RC. THE EXAMINATION OF SEIZE D DIARY AND ADDITION IN THE HANDS OF RC IS NOT DISPUTED BY T HE DEPARTMENT. THE ASSESSEE WAS HEARD DURING THE COURSE OF 158BC P ROCEEDINGS OF RC. 11.1. THE MAIN QUESTION WHICH THUS ARISES BEFORE US IS IF IT ALL THE SEIZED MATERIAL REPRESENTED UNDISCLOSED INCOME OF THE ASS ESSEE, WHETHER THE PROCEDURE PRESCRIBED BY SEC. 158BD WAS TO BE MANDAT ORILY FOLLOWED AND HAVING FAILED TO DO SO, WHETHER THE MATERIAL COULD BE USED BY AO IN REGULAR ASSESSMENT U/S 143(3), BY GOING BEYOND I) CHAPTER XIV-B; AND II) FINDINGS GIVEN BY DCIT(INV.), MUMBAI. . 11.2. THE LEGISLATURE W.E.F. 1-7-1995 ENACTED A SPE CIAL PROCEDURE FOR ASSESSMENT OF UNDISCLOSED INCOME ON THE BASIS OF SE IZED MATERIAL FOUND DURING THE COURSE OF SEARCH. PROCEDURE WAS DEVISED FIRSTLY TO IMPOSE A TAX OF 60% AS AGAINST THE REGULAR RATE OF TAX AND SECONDLY TO ENABLE THE AO TO MAKE BLOCK ASSESSMENT IN RESPECT OF 6 YEARS IN SUBSTITUT ION OF THE REGULAR ASSESSMENT PROCEEDINGS. CHAPTER XIV-B IS NAMED AS SPECIAL PROCEDURE ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 21 FOR ASSESSMENT OF UNDISCLOSED INCOME AS A RESULT OF SEARCH. SECTION 158BA(1) IS PRECEDED BY NON-OBSTINATE CLAUSE NOT WITHSTANDING ANYTHING CONTAINED IN ANY PROVISIONS OF THIS ACT. A PLAIN R EADING OF THESE PROVISIONS REVEALS THAT IN CASE THE AO HAVING JURISDICTION ON THE SEARCHED PERSON FINDS THAT SOME SEIZED MATERIAL INDICATES UNDISCLOSED IN COME OF ANY OTHER PERSON, IN THAT CASE HE SHOULD FORWARD A REFERENCE U/S 158B D AFTER RECORDING A PROPER SATISFACTION AND BEFORE COMPLETION OF BLOCK ASSESSMENT. THEREAFTER THE OTHER PERSONS AO IS REQUIRED TO PROCEED ACCOR DING TO SEC. 158BD READ WITH SEC. 158BC. WITH THIS OVER-RIDING PROVISION ON THE STATUTE, IN OUR CONSIDERED VIEW, THE ADDITION, IF AT ALL COULD HAVE BEEN CONSIDERED IN THE HANDS OF ASSESSEE U/S 158BD AND NOT REGULAR ASSESSM ENT U/S 143(3). THE PROCEDURE PRESCRIBED IS MANDATORY, BESIDES IT IS EX PLICIT FROM THE BLOCK ASSESSMENT ORDER OF RC THAT HIS AO, DID NOT CARRY A SATISFACTION THAT THE DIARY IN ANY WAY REPRESENTED UNDISCLOSED INCOME OF THE ASSESSEE. IT HAS BEEN OBSERVED IN RCS BLOCK ASSESSMENT THAT KAPIL DEV HAS DENIED THE CASH ENTRIES IN DIARY AND THEREFORE AFTER CONSIDERING TH E EVIDENCE, FACTS AND CIRCUMSTANCES, THE ADDITION WAS MADE IN THE HANDS O F RC. THUS, THREE IMPORTANT FACTORS EMERGE FROM THE BLOCK ASSESSMENT ORDER OF RC: (I) ASSESSEES EXPLANATION WAS CONSIDERED DURING BLOCK ASSESSMENT PROCEEDINGS AND IT WAS HELD THAT THE SEIZED MATERIA L REPRESENTED UNDISCLOSED INCOME OF RC AND NOT THE ASSESSEE. (II) NO INDICATION IS GIVEN THAT THE CASH ENTRIES IN DIA RY MAY ALSO AMOUNT TO KAPIL DEVS INCOME. (III) NO SATISFACTION U/S 158BD WAS COMMUNICATED TO THE A SSESSEES AO. 11.3. IN VIEW OF THESE OBSERVATIONS, WE ARE INCLINE D TO HOLD THAT IF THE DEPARTMENT PROPOSED TO MAKE AN ASSESSMENT BASED ON SEARCHED MATERIAL, ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 22 THEN THE COURSE AVAILABLE TO IT WAS TO PROCEED AS P ER THE PROVISIONS OF CHAPTER XIV-B I.E. SEC. 158BD READ WITH SEC. 158BC OF THE ACT AND NOT U/S 143(3). 11.4. HONBLE DELHI HIGH COURT IN THE CASE OF R.K. JAIN (SUPRA) HAS OBSERVED THAT IN CASE OF SEARCH MATERIAL, THE SAME IS TO BE ASSESSED BY WAY OF BLOCK ASSESSMENT UNDER CHAPTER XIV-B. SIMILAR VI EW IS ECHOED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF DR. M.K. E . MENON AND BY HONBLE GUJARAT HIGH COURT IN N.R. PAPER & BOARD LT D. & OTHERS (SUPRA). A SIMILAR VIEW HAS BEEN UPHELD BY HONBLE SUPREME COU RT IN THE CASE OF MANISH MAHESHWARI (SUPRA). IN VIEW OF ABOVE, WE AR E OF THE VIEW THAT THE IMPUGNED ADDITION OF RS. 83 LACS CANNOT BE MADE IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS BY TAKING RECOURSE TO SEC. 143(3). THUS, THE ADDITIONAL GROUND OF THE ASSESSEE IS ALLOWED. 11.5. THE APPEAL IS VERY OLD, FILED WAY BACK IN 200 2. THEREFORE, WE WOULD LIKE TO DECIDE THE MERITS OF THE ADDITION. IT EMER GES FROM RECORD THAT: (I) ASSESSEES STAND WAS EXAMINED IN THE COURSE OF BLO CK ASSESSMENT OF RC, THERE ALSO HE DENIED HAVING ANY CONNECTION W ITH THE DIARIES CASH ENTRIES MADE IN THE HANDWRITING OF RC. (II) DURING THE COURSE OF SEARCH IN RCS PREMISES AND IN SUBSEQUENT SEARCH OF THE ASSESSEES PREMISES, NO CORROBORATIVE INCRIMINATING EVIDENCE WAS FOUND TO SUGGEST SUCH CASH PAYMENTS OR ASSETS OF SAID FIRM M/S DEV YOGI DEVELOPERS. . (III) LOWER AUTHORITIES HAVE SOLELY RELIED ON VARIOUS U NCORROBORATED EVIDENCE INCLUDING THE FACT THAT IN THE DIARY TWO CHEUQE ENTRIES MATCH WITH ASSESSEES RECORD IN RESPECT OF HIS CAPI TAL CONTRIBUTION IN THE FIRM M/S DEV YOGI DEVELOPERS, THEREFORE, IT IS TO BE INFERRED ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 23 THAT ALL THE CASH ENTRIES MENTIONED IN RCS SEIZED DIARY BELONGED TO THE ASSESSEE. HAD THE PAPER BEEN IN THE HANDWRITING OF ASSESSEE, THIS PRESUMPTION COULD HAVE SOME RELEVANCE, BUT WIT H STARK REALITY OF THE DIARY BEING WRITTEN IN THE HAND OF RC AND FOUND IN HIS PREMISES DURING THE COURSE OF SEARCH; IN OUR VIEW, SUCH INFERENCES ARE SHAKY AND HAVE NO LEGS TO STAND EXCEPT CREATING A SUSPICION. (IV) THE STATUTORY PRESUMPTION U/S 132(4A) HAS BEEN RAIS ED AGAINST RC AND ADDITION CONFIRMED IN HIS HANDS BY BLOCK ASSESS MENT U/S 158BD. (V) THE ASSESSEE HAD WITHDRAWN FROM THE FIRM M/S DEV YO GI DEVELOPERS IN APRIL 1997 AND RC WAS SEARCH ON 4/5 S EPT. 1997. ASSESSEE ON ALL FORUMS CONTENDED THAT HE WAS NOT CO MFORTABLE WITH THE PARTNERSHIP, WHICH IS CORROBORATED BY THE FACT THAT CHEQUES ISSUED BY RC BOUNCED. ON MEASURES OF PREPONDERANCE OF PROBABILITIES ALSO THE STATEMENT OF RC WHICH IS NOT EVEN BELIEVED BY HIS AO, CANNOT IMPLICATE THE ASSESSEE WITHOUT TH ERE BEING A CORROBORATIVE EVIDENCE. THERE CANNOT BE A PROTECTIV E ASSESSMENT ON THE BASIS OF ABOVE ASSUMPTIONS AND FACTS WITH A BALD DIRECTION THAT IF THE ADDITION IS NOT MADE IN THE HANDS OF RC , THE SAME SHOULD BE ADDED IN THE HANDS OF THE ASSESSEE. (VI) ON FRAMING OF PROTECTIVE ASSESSMENT U/S 143(3) ALSO THE ARGUMENT OF LD. COUNSEL MERITS CREDENCE. THE SPECIAL PROVISI ONS OF THE ACT PRESCRIBE AN ASSESSMENT BASED ON SEARCHED MATERIAL ITSELF AND VESTS POWER IN AO TO INITIATE PROCEEDINGS U/S 158BD READ WITH SEC. 158BC IN THE HANDS OF OTHER PERSONS. THUS, THE AO H AS TO RECORD SATISFACTION EITHER TO THE EFFECT THAT THE SEIZED M ATERIAL BELONGED TO THE SEARCHED PERSON OR THE OTHER PERSON. ITA 2259/DEL/2002 KAPIL DEV VS. JCIT 24 11.6. IN THE LIGHT OF FOREGOINGS, WE DELETE THE ADD ITION OF RS. 83 LACS ON MERITS ALSO. 11.7. ABOUT THE ADDITION OF RS. 2 LACS, WE HAVE DEN IED TO ADMIT THE ADDITIONAL GROUND AND CONFIRM THE ADDITION AS MENTI ONED ABOVE. 12. IN VIEW OF THESE FACTS, THE ASSESSEES APPEAL I S PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 22-03-2012. SD/- SD/- ( K.G. BANSAL ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22-03-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT.