POWER FULIMPEX P. LTD, MUMBAI V. ITO WD 7(1)(2), MUMBAI

ITA 2776/MUM/2009

• Counselvise Citation: 277619914 RSA 2009
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-07-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 01-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D EVI SINGH
• Assessee Lawyers: MATHURIA
• Keywords: Bogus purchase; Search and seizure; Tangible material; Difference of opinion; Block assessment; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80HHC; 147; 68; 148; 132

Judgement Text

1 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C BEFORE SHRI D. MANMOHAN, V.P. AND SHRI R.K. PANDA, A.M. ITA NO. 2776/MUM/2009 ITA NO. 2777/MUM/2009 ASSESSMENT YEARS 1999-2000 & 2000-01 M/S POWERFUL IMPEX PVT. LTD., C/O NOBLE HYGIENCE PVT. LTD., SWAROOP ARCADE, 4 TH FLOOR, SAHAR ROAD, ANDHERI (E), MUMBAI 400 099. PAN AABCP 6131 F VS. ITO WARD 7(1)(2), 623 AAYAKAR BHAWAN, M.K. MARG, MUMBAI.20 APPELLANT RESPONDENT APPELLANT BY : SHRI M.S. MATHURIA RESPONDENT BY : SHRI DEVI SINGH DATE OF HEARING : 13.07.2011 DATE OF PRONOUNCEMENT : 05.10.2011 ORDER PER R.K. PANDA A.M. THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE SEPARATE ORDERS DATED 10.02.2009 OF THE LD. CIT(A)- VII, MUMBAI RELATING TO A.YRS. 1999-2000 & 2000-01RESPECTIVELY. SINCE IDENT ICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN BOTH THESE APPEALS, THEREF ORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. 2 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. ITA NO. 2776/MUM/2009 (BY THE ASSESSEE FOR A.Y. 199 9-2000) 2. IN GROUNDS OF APPEAL NO. 1 & 2 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN UPHOLDING THE REASSESSMENT PROCEE DINGS INITIATED BY THE A.O. 2.1. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF EXPORT OF DIAMON DS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.12.1999 DECLARING TOTAL INCO ME OF ` 1,68,410/-. THE RETURN WAS PROCESSED U/S 143(1) AND INTIMATION WAS SENT TO THE ASSESSEE. SUBSEQUENTLY, THE A.O. ISSUED NOTICE U/S 148 AFTER RE-OPENING THE ASSESSMENT U/S 147 BY RECORDING THE FOLLOWING REASONS:- A SEARCH ACTION WAS CONDUCTED UNDER SECTION 132 OF THE I.T. ACT, 1961 IN THE ASSESSEES CASE ON 14.03.2000. IN THE BLOCK ASSESSMENT ORDER UNDER SECTION 158BC CONSEQUENT TO SEARCH, IT WAS HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION UNDER SE CTION 80HHC OF THE I.T. ACT AS THE ENTIRE PURCHASES WERE BOGUS AND THE EXPORT SALES WERE ALSO BOGUS. FOR THE ASSESSMENT YEAR 1999-2000 AND 2000-01 THE ASSESSEE HAS FILED RETURNS OF INCOME DECLARING INCOME OF ` 1,64,410/- AND ` 40,370/- RESPECTIVELY. IN BOTH THESE YEARS THE ASSESSEE HAS SHOWN PURCHASES OF DIAMONDS/JEWELLERY FROM SISTER CONCERNS BY THE NAMES OF M/S GALAXY EXPORTS, M/S KU NAL EXPORTS AND M/S PRIMA STAR EXPORTS. THESE PURCHASES WERE F OUND TO BE BOGUS. ACCORDINGLY, THE A.O. HAD REASON TO BELIEVE THAT I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AS SESSMENT YEARS 1999-2000 & 2000-01. THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 ARE INITIATED BY ISSUE OF NOTICE UNDER SECTION 148. 2.2 IN RESPONSE TO THE NOTICE ISSUED U/S 148, THE A SSESSEE REQUESTED THE A.O. TO TREAT THE ORIGINAL RETURN FILED AS RETURN F ILED IN RESPONSE TO NOTICE ISSUED U/S 148. THEREAFTER, THE A.O. ISSUED NOTICE U/S 143 (2) AND 142(1). THE ASSESSEE FILED OBJECTIONS TO THE RE-OPENING WHICH H AS BEEN REJECTED BY THE A.O. AFTER CONSIDERING THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE A.O. DETERMINED THE TOTAL INCOME AT ` 2,18,55,220/-. WHILE DOING SO, THE A.O. TREATED THE PURCHASE OF DIAMONDS FROM M/S GALAXY EX PORTS TO THE TUNE OF ` 66,78,000/-, M/S KUNAL EXPORTS TO THE TUNE OF ` 1,40,000/- AND FROM M/S 3 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. PRIME STAR EXPORTS TO THE TUNE OF ` 16,00,300/- AS BOGUS AND ACCORDINGLY CONSIDERED THE SAME AS UN-EXPLAINED EXPENDITURE U/S 69-C OF THE I.T. ACT. SINCE HE TREATED THE PURCHASES AS BOGUS, HE HELD TH AT THE ENTIRE SALE OF ` 1,30,097,024/- AS UN-ACCOUNTED INCOME OF THE ASSESS EE BEING UN-EXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT. THE A.O. FURTHE R MADE AN ADDITION OF ` 3,39,896/- AS INCOME FROM OTHER SOURCES AND DISAL LOWED THE DEDUCTION U/S 80HHC CLAIMED TO THE TUNE OF ` 63,50,720/- ON THE GROUND THAT ASSESSEE HAD NO GENUINE EXPORT TRANSACTION. 2.3 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E RE-OPENING OF THE ASSESSMENT U/S 147 OF THE ACT IS BAD IN LAW, VOID A B INITIO AND ILLEGAL. IT WAS SUBMITTED THAT ON THE VERY SAME GROUND A BLOCK ASSE SSMENT WAS FRAMED BY THE A.O. U/S 158BC, THE LD. CIT(A) DELETED THE ADDITION AND THE TRIBUNAL ALSO CONFIRMED THE DECISION OF THE LD. CIT(A). NOW THE A.O. HAS TAKEN OTHER ROUTE TO MAKE THE SAME ADDITION WHICH WAS ALREADY MADE IN TH E BLOCK ASSESSMENT PROCEEDINGS. IT WAS SUBMITTED THAT THE SEARCH WAS C ONDUCTED IN THE YEAR 2000 AND THE BLOCK ASSESSMENT WAS COMPLETED IN THE YEAR 2002. SINCE THE LAW IS VERY CLEAR THAT THE PROCEEDINGS U/S 158BC AS WELL A S THE PROCEEDINGS U/S 147 HAVE A COMMON OBJECT AND PURPOSE I.E. TO TAX THE UN DISCLOSED INCOME, THE A.O. CANNOT REOPEN THE ASSESSMENT U/S 147 IF SAME ISSUES WERE ALREADY CONSIDERED IN THE BLOCK ASSESSMENT. FOR THIS PROPOSITION, VAR IOUS DECISIONS WERE CITED BEFORE THE LD. CIT(A). 2.4 HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT NO CLAUSE IN THE PROVI SIONS OF SECTION 147 AS WELL AS 148 OF THE ACT PROHIBITS THE A.O. FROM RE-OPENIN G AN ASSESSMENT IF HE HAS GENUINE REASONS TO BELIEVE THAT INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT. WHAT IS REQUIRED FROM THE A.O. IS THAT BEFORE MAKING ANY ASSESSMENT, THE A.O. SHALL SERVE ON THE ASSESSEE A NOTICE U/S 148 AND WILL RECORD REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IF THESE CONDITIONS ARE FULFILLED, THE RE IS NO BAR ON THE A.O. FROM 4 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. TAKING AN ACTION U/S 147 OF THE ACT. HE NOTED THAT THE REASONS WERE DULY RECORDED BY THE A.O., A COPY OF THE REASONS SO RECO RDED WERE SUPPLIED TO THE ASSESSEE AND FINALLY THE A.O. AFTER RECEIPT OF THE OBJECTIONS RAISED BY THE ASSESSEE HAS REJECTED THE OBJECTION AND THEREAFTER PROCEEDED TO REASSESS THE INCOME WHICH HAS ESCAPED THE ASSESSMENT. AS REGARD S THE CONTENTION OF THE ASSESSEE THAT THE A.O. WANTED A SECOND ROUTE TO MAK E THE SAME ADDITION BY RE- OPENING THE CASE U/S 147 AFTER THE CIT(A) DELETED S IMILAR ADDITIONS IN THE BLOCK ASSESSMENT, THE LD. CIT(A) NOTED THAT SUCH ALLEGATI ON HAS NO STRENGTH. HE NOTED THAT THE SUBJECT MATTER OF THE APPEAL BEFORE THE LD. CIT(A) WAS BLOCK ASSESSMENT ORDER AND NOT A REGULAR ASSESSMENT ORDER OR A REASSESSMENT ORDER. HE FURTHER NOTED THAT IN THE BLOCK ASSESSMENT U/S 1 58 BC ONLY ONE ADDITION OF ` 63,50,720/- ON ACCOUNT OF BOGUS PURCHASE WAS THE S UBJECT MATTER. HOWEVER, IN THE RE-ASSESSMENT ORDER U/S 143(3)/147 THERE ARE VARIOUS OTHER ADDITIONS/DISALLOWANCES. THEREFORE, HE HELD THAT TH E CONTENTION OF THE ASSESSEE THAT THE ORDER PASSED U/S 158BC DTD. 14.03.2000 IS THE SAME AS THE ORDER U/S 143(3) R.W.S. 147 DTD. 28.03.2006 IS MISPLACED. HE ACCORDINGLY, REJECTED THE GROUND RAISED BY THE ASSESSEE. AGGRIEVED WITH SUC H ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PA GE 1 TO 7 OF THE PAPER BOOK SUBMITTED THAT THE RETURN OF INCOME U/S 139(1) OF THE ACT FOR THE A.Y. 1999-2000 WAS FILED BY THE ASSESSEE ON 31.12.1999. REFERRING TO PAPER BOOK PAGE NO. 18, HE SUBMITTED THAT THE SAME WAS PROCESS ED U/S 143(1) AND INTIMATION ISSUED ON 29.12.2000. 3.1 HE SUBMITTED THAT A SEARCH U/S 132 WAS CONDUCTE D ON 14.3.2000. REFERRING TO PAGE 19 TO 21 OF THE PAPER BOOK, HE SU BMITTED THAT IN THE ORDER PASSED U/S 158BC (C) R.W.S. 143(3), THE A.O. HAD TR EATED THE PURCHASE/EXPORT SALES AS BOGUS AND DISALLOWED THE CLAIM OF DEDUCTIO N U/S 80HHC OF THE ACT AMOUNTING TO ` 63,50,720/-. REFERRING TO PAGE 22 TO 29 OF THE PAP ER BOOK, HE DREW THE ATTENTION OF THE BENCH TO PARA 9 OF THE OR DER OF THE LD. CIT(A) WHERE 5 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. THE LD. CIT(A) HAS TREATED THE EXPORTS AS GENUINE B Y OBSERVING THAT THE SALES INVOICES AND BILLS ETC. ARE ATTESTED BY THE CUSTOMS OFFICIALS, THERE ARE AIRWAYS BILLS ISSUED BY THE AGENTS OF THE AIRLINES, THE PAR TICULARS OF ACTUAL CARRIAGE OF GOODS BY AIRLINES ARE ENDORSED ON THESE DOCUMENTS W HICH CONCLUSIVELY PROVE THE FACT OF EXPORT OF GOODS OUTSIDE INDIA. THE LD. CIT(A) IN THE SAID ORDER HAS HELD THAT CUSTOMS OFFICIALS ARE PART OF THE REVENUE DEPARTMENT OF THE GOVERNMENT AND THEIR ATTESTATION COULD NOT BE DOUBT ED UNLESS OTHERWISE PROVED BEYOND DOUBT. THE EXPORT PROCEEDS WERE REALI ZED THROUGH PROPER BANKING CHANNEL THROUGH CONVERTIBLE FOREIGN EXCHANG E AS CERTIFIED BY THEM IN THEIR CERTIFICATES. THUS, THE LD. CIT(A) HAS ALLOW ED THE CLAIM OF DEDUCTION U/S 80HHC BOTH IN LAW AND ON FACTS. 3.2 REFERRING TO PAGE 30 TO 32 OF THE PAPER BOOK, T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REVENUE HAS FILED AN AP PEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE LD. CIT(A). REFERRING TO PAGE 33 TO 73 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PARA 83 AT PAGE 72 OF THE PAPER BOOK AND SUBMITTED THAT THE TR IBUNAL IN AN ELABORATE ORDER PASSED HAS UPHELD THE ORDER OF THE LD. CIT(A) . HE SUBMITTED THAT THE DEPARTMENT HAS NOT GONE TO HIGH COURT AGAINST THE O RDER OF THE TRIBUNAL DISMISSING THE APPEAL FILED BY THE REVENUE. 3.3 REFERRING TO THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF METRO AUTO CORPORATION VS. ITO AND OTHERS REPORTED IN [2006] 286 ITR 618 (BOM) HE SUBMITTED THAT WHEN AN ADDITION MADE BY TH E A.O. WAS DELETED BY THE CIT(A) AND WAS APPEAL FILED BY THE DEPARTMENT BEFOR E THE TRIBUNAL AGAINST SUCH ORDER, DURING THE PENDENCY OF SUCH APPEAL, NO NOTICE U/S 148 COULD BE ISSUED AND THE NOTICE ISSUED WAS LIABLE TO BE QUASH ED. SINCE, IN THE INSTANT CASE WHEN THE NOTICE U/S.148 ISSUED ON 29.07.2004 THE MATTER WAS PENDING BEFORE THE TRIBUNAL (SINCE THE DATE OF ORDER OF TRI BUNAL IS 31.01.2005) THEREFORE, IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT, THE NOTICE ISSUED BY THE AO IS LIABLE TO BE QUASHED. 6 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. 3.4 REFERRING TO THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF ADOR TECHNOPARK LTD. V. DR. ZAKIR HUSSEIN, DY. CIT REPORTED IN 271 ITR 50 HE SUBMITTED THAT WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO FURNISH MATERIAL FACTS NECESSARY FOR ASSESSMENT AND WHEN NO REASONS COULD BE FOUND ALLEGING ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, NOTICE ISSUED U/S 148 IS LIABLE TO BE QUASHED. HE SUBMITTED THAT ALL RELEVANT DOCUMENTS NECESSARY FOR COMPLETION OF THE ASSESSMENT WERE FILED AS PER PAGE 2 TO 27 OF THE PA PER BOOK. REFERRING TO THE INDEX OF THE PAPER BOOK, HE SUBMITTED THAT THE ABOV E PAPER BOOK CONTAINS COPY OF PURCHASE BILLS FROM M/S GALAXY EXPORTS, M/S KUNA L EXPORT AND PRIME STAR EXPORTS, IT CONTAINS EXPORT INVOICES FOR EXPORT MAD E TO M/S STYLE PEARL GEM LTD., JAPAN, M/S SHAH IMEXPORT BVBA, BELGIUM ALONG WITH BANK ADVICE, LICENCE ISSUED BY JT. DIRECTOR GENERAL OF FOREIGN T RADE. THE ASSESSEE HAS ALSO FILED ASSESSMENT ORDER FOR LOCAL AND CENTRAL SALES TAX AND STOCK BOOK FOR THE A.Y. 1999-2000. HE SUBMITTED THAT THE ITAT HAD ALR EADY HELD THE TRANSACTIONS OF THE ASSESSEE AS GENUINE. SINCE THERE IS NO FAILU RE ON THE PART OF THE ASSESSEE TO FURNISH ALL MATERIAL FACTS NECESSARY FOR COMPLET ION OF ASSESSMENT, THEREFORE, IN VIEW OF THE ABOVE DECISION, THE REASSESSMENT PRO CEEDINGS ARE VOID. 3.5 REFERRING TO THE DECISION OF THE CO-ORDINATE BE NCH OF THE TRIBUNAL IN THE CASE OF WESTERN INDIA BAKERS (P.) LTD. VS. DCIT REP ORTED IN [2003] 87 ITD 607 (MUM), HE DREW THE ATTENTION OF THE BENCH TO THE FO LLOWING OBSERVATION OF THE TRIBUNAL:- CHAPTER XIV-B ENACTS A SPECIAL PROCEDURE TO DEAL WI TH THE SEARCH CASES. THE ASSESSMENT PURSUANT TO SEARCH CASES CAN NOT BE EQUATED WITH THE ORDINARY ASSESSMENT. THE PURPOSE OF SECTI ON 147 IS TO BRING TO TAX THE ESCAPED INCOME. SECTION 147 IS A DEVICE TO DETECT THE ESCAPED INCOME UNDER THE NORMAL ASSESSMENT PROCEDUR E. NORMAL ASSESSMENT IS BEING DONE ON THE BASIS OF MATERIAL A ND EVIDENCE AVAILABLE ON RECORD. IN THE NORMAL ASSESSMENT PROCE DURE, ASSESSING OFFICER SEES THE FACTS THROUGH THE RECORDS. IN THE SEARCH CASES FACTS GET EXPOSED DIRECTLY. IF YOU GO TO A DOCTOR, HE WIL L FIRST EXAMINE YOU THROUGH HIS STETHOSCOPE. IF DOUBT PERSISTS HE WILL ADVISE X-RAY ETC. 7 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. BUT ONCE SURGEON CUTS OPEN THE BODY, HE CAN SEE THE THINGS DIRECTLY. LIKEWISE IN THE SEARCH CASES, WHEN THINGS GET EXPOS ED TO THE REVENUE OFFICIAL, THERE IS NOTHING FURTHER LEFT TO SEE. CH ANCES OF ESCAPEMENT ARE NOT THERE. ESCAPEMENT IS POSSIBLE SO LONG THE OBJECT IS HIDDEN FROM THE EYES. ONCE YOU SEE TO IT, WHERE IS THE QU ESTION OF ESCAPEMENT? PROBABLY DUE TO THESE REASONS ONLY LEG ISLATURE, IN ITS WISDOM, NOT PUT THE BLOCK ASSESSMENTS WITHIN THE KE N OF REASSESSMENT PROCEEDINGS. 3.6 REFERRING TO THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF VISHWANATH PRASAD ASHOK KUMAR SARRAF V. CIT & OTHER S REPORTED IN [2010] 327 ITR 190 (ALL) HE SUBMITTED THAT REASSESSMENT FOR YEARS COMPRISED IN BLOCK PERIOD TO TAX SAME SUMS NOT PERMISSIBLE. REFERRING TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CARGO CLE ARING AGENCY (GUJARAT) V. JCIT REPORTED IN [2008] 307 ITR 1 (GUJ) HE SUBMITTE D THAT THE A.O. HAS NO JURISDICTION TO RE-OPEN A BLOCK ASSESSMENT BY ISSUI NG NOTICE U/S 148. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT (G OA BENCH) IN THE CASE OF SMT. MIRA ANANTA NAIK & ORS. V. DCIT (INVESTIGATION ) & ORS. REPORTED IN (2008) 15 DTR (BOM) 8, HE SUBMITTED THAT MERELY BECAUSE TH E BLOCK ASSESSMENT MADE U/S 158 BC HAS NOT BEEN UPHELD, IT CANNOT BE SAID THAT ASSESSEES INCOME HAS ESCAPED ASSESSMENT AND THEREFORE THE SAME CANNOT BE REASON ENOUGH TO INVOKE SECTION 147 MORE SO WHEN THE REASONS RECORDED FOR R EOPENING THE ASSESSMENTS MAKE NO REFERENCE TO THE BLOCK ASSESSMENT OR THE PR OCEEDINGS PURSUANT THERETO. REFERRING TO THE DECISION OF HONBLE KERAL A HIGH COURT IN THE CASE OF CIT VS. C. SIVANANDAN REPORTED IN (2011) 52 DTR (KE R) 428, HE SUBMITTED THAT ONCE THE A.O. PROCEEDS TO MAKE BLOCK ASSESSMENT U/S 158 BC BASED ON MATERIALS GATHERED DURING SEARCH U/S 132, HE CANNOT PROCEED TO MAKE ASSESSMENT U/S 147 ON THE BASIS OF THE SAME MATERIA L AFTER BLOCK ASSESSMENT IS CANCELLED BY THE FIRST APPELLATE AUTHORITY. THE A.O. HAS NO JURISDICTION TO ASSESS THE VERY SAME AMOUNT WHICH WAS CONSIDERED AN D GIVEN UP WHILE MAKING BLOCK ASSESSMENT. HE ALSO RELIED ON THE DECISION R EPORTED IN 105 TTJ 262. 3.7 REFERRING TO THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN [2010] 320 ITR 561(SC) HE SUBMITTED THAT 8 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. AFTER 1.4.89 THE A.O. HAS POWER TO REOPEN THE ASSES SMENT, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT TH ERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WI TH THE FORMATION OF THE BELIEF. IT CANNOT REOPEN THE ASSESSMENT ON MERE CHA NGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE A.O. HE ALSO RELIED ON THE DECISI ON OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PRASHANT S. JOSHI VS. ACI T REPORTED IN 324 ITR 154 AND VARIOUS OTHER DECISIONS. 4. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE ORIGINAL RETURN IN THIS CASE WAS FILED ON 31.12.1999 DECLARING TOTAL INCOME AT ` 1,68,410/-. THE ASSESSMENT WAS COMPLETED U/S 143(1), THERE WAS NO S CRUTINY ASSESSMENT AND NOTICE U/S 148 WAS ISSUED ON 29.7.2004. SINCE IN T HIS CASE THERE WAS NO SCRUTINY ASSESSMENT AND PROPER REASONS HAVE BEEN RE CORDED FOR RE-OPENING OF THE ASSESSMENT, THEREFORE, SUCH RE-OPENING IS VALID . FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. REPORTED IN 291 ITR 500 (SC) AND THE DECISION OF KOLKATA BENCH OF ITAT IN THE CASE OF SOM DATT BU ILDERS PVT. LTD. VS. DCIT REPORTED IN 98 ITD 78. REFERRING TO THE UNREPORTED DECISION OF THE HONBLE GUWAHATI HIGH COURT IN THE CASE OF M/S PEERCHAND RA TANLAL BAID (HUF) (A COPY OF WHICH IS FILED BY THE LD. D.R.) , HE SUBMIT TED THAT THE HON'BLE GUWAHATI HIGH COURT HAS DISSENTED FROM THE DECISION OF HONB LE GUJARAT HIGH COURT IN THE CASE OF CARGO CLEARING AGENCY (GUJARAT) (SUPRA) AND HELD THAT SECTION 147 DOES NOT APPLY TO BLOCK ASSESSMENT CANNOT BE ACCEPT ED IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SURESH N. GUPTA REPORTED IN 297 ITR 322 WHERE IT WAS HELD THAT THE OTHER PROVISIONS OF THE ACT WOULD BE APPLICABLE TO THE SCHEME UNDER CHAPTER XIV-B IF NO CONFLICT ARISES ABOVE SUCH APPLICATION. 4.1 THE LD. COUNSEL FOR THE ASSESSEE, IN HIS REJOIN DER, SUBMITTED THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SURESH N. GUPTA (SUPRA) 9 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. HAS BEEN DOUBTED AND REFERRED TO A LARGER BENCH IN VATICA TOWNSHIP REPORTED IN 314 ITR 338. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PURSUED 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. THE ONLY QUESTION TO BE DECIDED IN THE I MPUGNED GROUND IS AS TO WHETHER THE NOTICE ISSUED BY THE A.O. U/S.148 FOR T HE IMPUGNED ASSESSMENT YEAR IS VALID OR NOT IN VIEW OF THE BLOCK ASSESSMEN T PROCEEDINGS TAKEN PLACE FOR ASSESSING THE SAME INCOME. AT THE COST OF REPETITI ON, THE REASONS RECORDED BY THE A.O. AS PER PARA 2 & 3 OF THE ASSESSMENT ORDER ARE REPRODUCED AS UNDER:- A SEARCH ACTION WAS CONDUCTED UNDER SECTION 132 OF THE I.T. ACT, 1961 IN THE ASSESSEES CASE ON 14.03.2000. IN THE BLOCK ASSESSMENT ORDER UNDER SECTION 158BC CONSEQUENT TO SEARCH, IT WAS HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTIO N UNDER SECTION 80HHC OF THE I.T. ACT AS THE ENTIRE PURCHASES WERE BOGUS AND THE EXPORT SALES WERE ALSO BOGUS. FOR THE ASSESSMENT Y EAR 1999-2000 AND 2000-01 THE ASSESSEE HAS FILED RETURNS OF INCOM E DECLARING INCOME OF ` 1,64,410/- AND ` 40,370/- RESPECTIVELY. IN BOTH THESE YEARS THE ASSESSEE HAS SHOWN PURCHASES OF DIAMONDS/ JEWELLERY FROM SISTER CONCERNS BY THE NAMES OF M/S GALAXY EXPORTS, M/S KUNAL EXPORTS AND M/S PRIMA STAR EXPORTS. THESE PURCHASE S WERE FOUND TO BE BOGUS. ACCORDINGLY, THE A.O. HAD REASON TO BELIEVE THAT I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AS SESSMENT YEARS 1999-2000 & 2000-01. THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 ARE INITIATED BY ISSUE OF NOTICE UNDER SECTION 148. 5.1 WE FIND FROM THE COPY OF THE BLOCK ASSESSMENT O RDER DTD. 20.3.2002 FOR THE BLOCK PERIOD 1.4.90 TO 14.3.2000 (PAPER BOOK PA GE 19 TO 21) THAT THE A.O. WHILE DISALLOWING THE CLAIM OF DEDUCTION U/S 80HHC ` 63,50,720/- HAS HELD AS UNDER:- IN THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF PROOF OF THE PURCHASES AND EXPORT CLAIMS TO HAVE BEEN MADE IN THE BLOCK PERIOD. THE ASSESSEE SUBMITTED VIDE 10 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. LETTER DATED 28.03.2002 PHOTO COPIES OF PURCHASE AN D SALE BILLS AND ALSO SUBMITTED AS UNDER:- M/S GALAXY EXPORTS & M/S KUNAL EXPORTS WERE PARTNE RSHIP FIRMS IN WHICH APART FROM THE FAMILY OF MR. KAMAL J OHARI THE FAMILY OF MR. HARIOM SHARMA WAS ALSO PARTNER IN THE SAID FIRMS. DUE TO CERTAIN DISPUTES BETWEEN THEM, THEIR FIRMS WERE DISSOLVED IN AUG 1998. POWERFUL IMPEX PVT. LTD. IS A COMPANY OWNED BY THE FAMILY OF MR. KAMAL JOHARI AND SINCE T HE EXPORTS TO BE MADE WERE TO BELONG TO MR. KAMAL JOHARI FAMIL Y AND SINCE THERE WAS STOCK OF DIAMONDS IN THE ABOVE PARTNERSHI P FIRMS, THE SAME WAS PURCHASED FROM THEM INSTEAD OF PURCHASING FROM OUTSIDE. SIMILARLY PURCHASE FROM PRIME STAR EXPORTS WAS MADE , AS THE SAID COMPANY WAS DEALING IN LOCAL TRADE AND ALL EXP ORTS WERE BEING DONE THROUGH POWERFUL IMPEX PVT. LTD. WHICH H AD VARIOUS IMPORT/EXPORT CODE TO CARRY OUT EXPORTS. HOWEVER, THE ASSESSEE HAS NOT FURNISHED ANY INDEPEN DENT CONFIRMATION FROM THE ABOVE SELLERS. NOR HAS HE BE EN ABLE TO PRODUCE THE SAID SELLER FOR EXAMINATION. SIMILARLY, THE SO CALLED EXPORTS ARE ALSO NOT FREE FROM DOUBT AND THE ASSESS EE HAS NOT PRODUCED ANY FURTHER PROOF IN THIS REGARD. AS STATED EARLIER AS PER THE FINDINGS IN THE CASE O F SEARCH, THE ASSESSEE GROUP BASICALLY CONSISTS OF TWO PERSONS VI Z. SHRI KAMAL KUMAR JOHARI AND SHRI HARI OM SHARMA, WHO ARE C.AS. BY QUALIFICATION. THEY HAVE ONLY SHOWN PURCHASE AND S ALE OF DIAMONDS ON PAPER WITHOUT ANY ACTUAL PURCHASE/SALE. THE REM ITTANCES FROM ABROAD ARE NOTHING BUT HAWALA TRANSACTION FOR LAUND ERING OF BLACK MONEY OF ITS CLIENTS TO TAKE UNDUE ADVANTAGE OF VDI S 97 SCHEME AND TO ENABLE THEM TO CLAIM HUGE INCOMES UNDER VDIS 97 AND THEREAFTER TO CONVERT THE SAME INTO WHITE MONEY BY SHOWING CAP ITAL GAINS ON ACCOUNT OF SALE OF THE SAID DIAMONDS. AS STATED EARLIER THE ENTIRE PURCHASES ARE BOGUS. HENCE THE SALES ARE ALSO BOGUS. IN VIEW OF THE SAME, THE ASS ESSEES CLAIM OF ` 63,50,720 U/S 80HHC IN THE YEAR A.Y. 99-2000, IS NO T GENUINE AND THE SAME IS DISALLOWED AND ADDED IN ASSESSEE HANDS AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. 5.2 FROM THE ABOVE, IT IS CLEAR THAT THE AO IN THE BLOCK ASSESSMENT HAS DOUBTED THE GENUINENESS OF THE PURCHASES FROM THE P ARTIES MENTIONED IN THE 148 NOTICE AND ALSO DOUBLED THE SALES TREATING THE SAME AS BOGUS. 11 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. 5.3 WE FIND THE LD. CIT(A) IN HIS ORDER DTD. 25 TH JULY, 2000 WHILE DIRECTING THE A.O. TO DELETE THE DISALLOWANCE OF ` 63,50,720/- AT PARA 9 & 10 OF HIS ORDER (AT PAPER BOOK PAGE 27 & 28) HAS HELD AS UNDER:- THOUGH I HAVE ACCEPTED THE APPELLANTS LEGAL CONTEN TION REGARDING THE SCOPE OF BLOCK ASSESSMENT VIS--VIS THE COMPLET ED ASSESSMENT, I WOULD RECORD MY FINDINGS ON THE FACTUAL ASPECT AS W ELL. THE APPELLANT HAS FILED COPIES OF VARIOUS DOCUMENTS IN THE PAPER BOOK TO PROVE ITS CASE THAT THE EXPORT OF DIAMONDS WAS GENUINE. FROM THE DETAILS FILED I FIND THAT DURING THE PREVIOUS YEAR RELEVANT TO A. Y. 1999-2000, THERE WERE TWO EXPORT TRANSACTIONS, ONE WITH M/S STYLE PE ARL GEM LTD., JAPAN FOR $ 2,12,930.92 AND ANOTHER WITH M/S SHAH I MEXPORTS, BVBA, BELGIUM FOR $ 98,20.89. THE SALES INVOICES A ND SHIPPING BILLS IN BOTH THESE TRANSACTIONS ARE ATTESTED BY THE CUST OMS OFFICIALS. THERE ARE AIRWAYS BILLS ISSUED BY THE AGENTS OF THE AIRLINES. THE PARTICULARS OF ACTUAL CARRIAGE OF GOODS BY AIRLINES ARE ENDORSED ON THESE DOCUMENTS, WHICH CONCLUSIVELY PROVE THE FACT OF EXPORT OF GOODS OUTSIDE INDIA. CUSTOMS ARE PART OF THE REVENUE DEP ARTMENT OF THE GOVERNMENT AND THEIR ATTESTATION COULD NOT BE DOUBT ED UNLESS OTHERWISE PROVED BEYOND DOUBT. THE EXPORT PROCEEDS WERE REALIZED THROUGH BANKING CHANNEL BY VYASA BANK IN CONVERTIBL E FOREIGN EXCHANGE AS CERTIFIED BY THEM IN THEIR CERTIFICATES . THE A.O. HAS HELD THESE REMITTANCES AS HAWALA TRANSACTIONS. THIS IS A SERIOUS ALLEGATION UNDER EXCHANGE CONTROL REGULATIONS. IN THE ABSENCE OF ANY EVIDENCE TO PROVE THESE ALLEGATIONS, THE A.O. WAS NOT JUSTIF IED IN HIS CONCLUSION WHEN THE DOCUMENTARY EVIDENCE STATES OTHERWISE. IT IS FURTHER SEEN THAT THERE IS NO REASON TO DISBELIEVE THE BANK AS I T IS AN INDEPENDENT BODY. FURTHER, THE APPELLANT HAS RECEIVED IMPORT L ICENSES FROM THE OFFICE OF DIRECTOR GENERAL OF FOREIGN TRADE ON THE BASIS OF THESE EXPORTS. THEREFORE, IT IS NOT CORRECT TO ASSUME TH AT SUCH LICENSES WERE ISSUED WITHOUT VERIFYING THE GENUINENESS OF THE EXP ORTS BY THE ISSUING AUTHORITY. SECTION 114 OF THE INDIAN EVIDENCE ACT, 1872 PROVIDES FOR A LEGAL PRESUMPTION THAT THE OFFICIAL ACTS HAVE BEE N REGULARLY PERFORMED UNLESS THE CONTRARY IS PROVED. HENCE, TH E ACTS OF CUSTOM OFFICIALS AND THE OFFICIALS OF DGFT ARE TO BE TAKEN AS PROPERLY PERFORMED IN THE COURSE OF THEIR OFFICIAL DUTIES. THE PRESUMPTION ATTACHED TO THE OFFICIAL RECORDS CANNOT BE TAKEN AW AY MERELY BY ASSUMPTIONS OR SUGGESTION RAISING DOUBTS. CONSIDERI NG THE DOCUMENTARY EVIDENCE PLACED ON RECORD, IN MY VIEW, THE ACTUAL EXPORT OF DIAMONDS IS CLEARLY PROVED. ON THE OTHER HAND, T HE ASSESSING OFFICER HAS NOT PLACED ANY MATERIAL TO DISPROVE THE SAME. THE ONLY PLANK OF THE ASSESSING OFFICERS ARGUMENT IS THAT T HE CONCERNS FROM WHOM PURCHASES WERE MADE INDULGED IN BOGUS TRANSACT IONS. AS RIGHTLY POINTED OUT BY THE AR, THIS IS TOO GENERAL AND VAGUE AN OBSERVATION TO BE MADE THE BASIS FOR DISALLOWANCE O F THE APPELLANTS CLAIM FOR DEDUCTION U/S.80HHC OF I.T. ACT, 1961. BE THAT AS IT MAY, THE ISSUE HERE IS WHETHER EXPORTS WERE BOGUS SO AS TO WITHDRAW THE DEDUCTION U/S.80HHC AND ONCE THE EXPORT IS PROVED T O BE GENUINE, IT IS IMMATERIAL AS TO FROM WHOM THE GOODS WERE PURCHA SED, BECAUSE 12 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. WITHOUT PURCHASES THERE COULD BE NO ACTUAL EXPORTS. HENCE, THE ISSUE WHETHER PURCHASES WERE MADE FROM THE APPELLANTS SI STER CONCERNS OR SOMEONE ELSE, IS NOT MATERIAL. IN MY VIEW, THEREFOR E, THE ASSESSING OFFICERS RELIANCE ON THE FINDINGS IN THE CASE OF S ISTER CONCERNS OF THE APPELLANT DOES NOT GAIN IMPORTANCE, ONCE THE EXPORT OF GOODS BY THE APPELLANT IS PROVED TO BE GENUINE. IN VIEW OF THE ABOVE FACTS, I HOLD THAT THE DISALL OWANCE OF DEDUCTION U/S.80-HHC AMOUNTING TO ` 63,50,720/- IS NOT JUSTIFIED BOTH, IN LAW AND ON THE FACTS OF THE CASE. I, THERE FORE, DIRECT THE AO TO DELETE THE ADDITION OF ` .63,50,720/- FROM THE ASSESSED UNDISCLOSED INCOME. THE APPELLANT SUCCEEDS ON THIS GROUND AND R ELIEF OF ` 63,50,720/- IS ALLOWED. 5.4 WE FIND WHEN THE REVENUE FILED AN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE LD. CIT(A), THE TRIBUNAL DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDING AS UNDER : (PAGE 83 AND 84 OF THE ORDER OF THE TRIBUNAL AT PAPER BOOK PARA 72 & 73) NOW WE TAKE UP IT(SS)A NO. 604/M/2002 BEING REVENUE S APPEAL IN THE CASE OF POWERFUL IMPEX PVT. LTD. THE REVENUE HA S RAISED SEVERAL GROUNDS OF APPEAL BUT THEY ALL CONSTITUTE SINGLE IS SUE DISPUTING THE DELETION OF ADDITION OF UNDISCLOSED INCOME OF ` 63,50,720/- WHICH THE ASSESSING OFFICER MADE BY WITHDRAWING/DISALLOWING D EDUCTION U/S 80HHC BY TREATING THE ASSESSEES PURCHASES OF DIAM OND TO BE BOGUS AND IN TURN THE ASSESSEES EXPORTS OF DIAMOND TO BE NON-GENUINE. THE LD. D.R. HAS SUPPORTED THE ORDER OF ASSESSING O FFICER WHICH THE LD. A.R. OF ASSESSEE HAS SUPPORTED ORDER OF LD. CIT (A). WE HAVE CONSIDERED THE RIVAL CONTENTIONS AS ALSO T HE RELEVANT MATTER ON RECORD. FROM THE PERUSAL OF RECORD WE FI ND THAT IT WAS CONTENDED BY LD. AR OF ASSESSEE BEFORE LD. CIT(A) T HAT THE ASSESSING OFFICERS INFERENCE WAS BASED ON MERE SUSPICION/SUR MISES AND THERE WAS NO EVIDENCE ON RECORD TO SUBSTANTIATE THE SAME CITING 248 ITR 562 (GUJ) IT WAS CONTENDED BEFORE THE LD. CIT(A) TH AT THE ASSESSEE HAD DISCLOSED THE PARTICULARS OF INCOME OR EXPENDIT URE IN THE RETURNS/BOOKS OF ACCOUNT AND ON THE SAME MATERIAL A SSESSING OFFICER WANTED TO TAKE A DIFFERENT VIEW BUT SUCH INCOME COU LD NOT BE TREATED AS UNDISCLOSED INCOME , THE LD. CIT(A) NOTED THAT T HE ASSESSING OFFICER HAD NOT REFERRED TO ANY SPECIFIC OR .EVID ENCE FOUND DURING SEARCH TO JUSTIFY HIS ACTION. THE LD. CIT(A) HELD THAT IN THE ABSENCE OF ANY EVIDENCE THE ASSESSING OFFICERS FINDING TO THE EFFECT THAT FOREIGN REMITTANCES RECEIVED BY ASSESSEE WERE HAWALA TRANSA CTIONS WAS NOT TENABLE IN LAW AS NO ADDITION COULD BE MADE MERELY ON SUSPICION. HE ACCORDINGLY DELETED THE ADDITION AFORESAID ADDITION OF UNDISCLOSED INCOME. CONSIDERING ALL THE FACTS & CIRCUMSTANCES O F THE CASE AS ALSO 13 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. THE ELABORATE DISCUSSION MADE BY LD. CIT(A), WE FIN D THE IMPUGNED ORDER OF LD. CIT(A) IN DELETING THIS ADDITION OF UN DISCLOSED INCOME TO BE QUITE JUSTIFIED AND SO WE UPHOLD THE SAME. IN THE RESULT, REVENUES APPEAL BEING IT(SS)A NO. 604/M/2002 IS DISMISSED. 5.5 THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSES SEE THAT THE REVENUE HAS NOT CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE HIGH COURT COULD NOT BE CONTROVERTED BY THE LD. D.R. UNDER THESE CI RCUMSTANCES, IT IS TO BE SEEN AS TO WHETHER THE NOTICE ISSUED BY THE A.O. U/S 148 IS VALID OR NOT. WE FIND THE A.O. IN HIS REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR HAS AGAIN REFERRED TO THE BLOCK ASS ESSMENT ORDER WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 80HHC AS THE ENTIRE PURCHASE AND SALES ARE BOGUS IN A.Y. 199 9-2000 AND 2000-01. 5.6 WE FIND THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CARGO CLEARING AGENCY (GUJARAT) (SUPRA) AT PAGE 29 OF THE ORDER HA S HELD THAT ONCE THE ASSESSMENT HAS BEEN FRAMED U/S 158 BA IN RELATION T O UNDISCLOSED INCOME FOR THE BLOCK PERIOD AS A RESULT OF SEARCH THERE IS NO QUESTION OF THE A.O. ISSUING NOTICE U/S 148 OF THE ACT FOR REOPENING SUCH ASSESS MENT AS THE SAID CONCEPT IS ABHORRENT TO THE SPECIAL SCHEME OF ASSESSMENT OF UN DISCLOSED INCOME FOR BLOCK PERIOD. IT HAS BEEN EMPHASIZED IN THE SAID DECISIO N THAT THE FIRST PROVISO U/S 158BC(A) OF THE ACT SPECIFICALLY PROVIDES THAT NO N OTICE U/S 148 OF THE ACT IS REQUIRED TO BE ISSUED FOR THE PURPOSE OF PROCEEDING UNDER CHAPTER XIV-B OF THE ACT. 5.7 IT HAS BEEN HELD BY THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF METRO AUTO CORPORATION VS. ITO (286 ITR 618) THAT DURING THE PENDENCY OF PROCEEDING BEFORE THE TRIBUNAL, NOTICE U/S 148 COULD NOT HAVE BEEN ISSUED AND NOTICE IS LIABLE TO BE QUASHED. 5.8 WE FIND THE HONBLE KERALA HIGH COURT IN THE CA SE OF C. SIVANANDAN (SUPRA) HAS HELD AS UNDER (SHORT NOTE ):- 14 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. EVEN THOUGH BLOCK ASSESSMENT UNDER S.158BC AND ASSESSMENT UNDER S.147 CAN PROBABLY BE MADE FOR THE SAME PERIOD ON DIFFERENT BASIS, ASSESSMENTS COULD NOT BE SUCCES SIVELY MADE ONE AFTER ANOTHER FOR THE SAME PERIOD UNDER THESE PROVI SIONS BASED ON THE SAME MATERIALS. ONCE MATERIALS ARE GATHERED EIT HER DURING SEARCH UNDER S.132 OR DURING SURVEY UNDER S. 133A, IT IS UPTO THE AO TO MAKE BLOCK ASSESSMENT UNDER S. 158BC OR IF HE FE ELS THAT REASSESSMENT IS CALLED FOR UNDER S. 147, IT IS UPTO HIM TO ELECT BETWEEN THE TWO AND MAKE ASSESSMENT UNDER THE PROVI SION HE FINDS APPROPRIATE. HOWEVER, ONCE THE AO, AFTER CONDUCTING SEARCH AND BASED ON MATERIALS GATHERED DURING SEARCH UNDER S.1 32, PROCEEDS TO MAKE BLOCK ASSESSMENT UNDER S.158BC, THEN HE CANNOT , BASED ON THE SAME MATERIALS WHICH IN THIS CASE IS DEPOSIT AM OUNTS FOUND DURING SEARCH, PROCEED TO MAKE ASSESSMENT UNDER S. 147 AFTER BLOCK ASSESSMENT WAS CANCELLED BY THE FIRST APPELLATE AUT HORITY. THE AO OBVIOUSLY CANNOT GET OVER THE FINDINGS IN THE ORDER OF THE FIRST APPELLATE AUTHORITY AGAINST A BLOCK ASSESSMENT BY I NVOKING POWERS UNDER S. 147. DURING BLOCK ASSESSMENT, THE AO OBVIO USLY CONSIDERED AS TO WHETHER BANK DEPOSITS IN THE NAMES OF FAMILY MEMBERS OF THE ASSESSEE FOUND DURING SEARCH REPRESENT HIS UNDISCLO SED INCOME BUT ACCEPTED THE ASSESSEES CONTENTION THAT THE SAME BE LONG TO HIS FAMILY MEMBERS. RIGHTLY OR WRONGLY ONLY THE INTEREST FROM THESE DEPOSITS WERE ASSESSED AS PART OF UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. IN APPEAL, THE CIT(A) CANCELLED THE A SSESSMENT ON INTEREST INCOME. THE AO CANNOT AFTER CANCELLATION O F BLOCK ASSESSMENT BY THE CIT(A) PROCEED TO MAKE AN ASSESSM ENT FOR ASSESSING THE VERY SAME BANK DEPOSITS AS ESCAPED IN COME. THE AO HAS NO JURISDICTION TO ASSESS THE VERY SAME AMOUNT, WHICH WAS CONSIDERED AND GIVEN UP WHILE MAKING BLOCK ASSESSME NT. IT CANNOT BE ACCEPTED THAT DEPOSIT AMOUNTS WERE NOT CONSIDERE D IN BLOCK ASSESSMENT, BECAUSE WHEN INTEREST FROM THE SAME DEP OSITS WERE ASSESSED AS UNDISCLOSED INCOME OF THE BLOCK PERIOD, IT CAN BE LEGITIMATELY ASSUMED THAT THE OFFICER CONSIDERED TH E DEPOSIT AMOUNTS FOR ASSESSMENT BUT GAVE UP THE SAME. IN THIS CONTEX T, THE FINDINGS OF THE TRIBUNAL THAT REASSESSMENT UNDER S.147 IS A RES ULT OF CHANGE OF OPINION OF THE AO, CANNOT BE SAID TO BE ILLEGAL OR INCORRECT BECAUSE WHAT WAS NOT TREATED AS UNDISCLOSED INCOME IN BLOCK ASSESSMENT IS LATER TREATED AS ESCAPED INCOME IN ANOTHER ROUND OF ASSESSMENT UNDER A DIFFERENCE PROVISION OF THE ACT (S.147) WHI CH IS IMPERMISSIBLE. 5.9 WE FIND THE HONBLE SUPREME COURT IN THE CASE O F KELVINATOR OF INDIA LTD. 9SUPRA) AT PAGE 564 AND 565 HAS HELD AS UNDER:- ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO THE DIRECT TAX LAWS (AM ENDMENT) ACT, 1987, 15 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. REOPENING COULD BE DONE UNDER THE ABOVE TWO CONDITI ONS AND FULFILMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE ACT (WIT H EFFECT FROM 1ST APRIL, 1989), THEY ARE GIVEN A GO-BY AND ONLY ONE CONDITIO N HAS REMAINED, VIZ., THAT WHERE THE ASSESSING OFFICER HAS REASON TO BELIEVE T HAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSE SSMENT. THEREFORE, POST-1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BE LIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MI ND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO RE ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW ; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTA IN PRECONDITIONS AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTE NDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASS ESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPI NION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENC E, AFTER 1ST APRIL, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED TH ERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION O F THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF TH E ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPINION' IN SECTION 147 OF THE ACT. HOWEVER, ON RE CEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS ' REASON TO BELIEVE', PARLIAMENT REINTRODUCED THE SAID EXPRESSION AND DEL ETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE ASSESSING OFFICER. 5.10 THE VARIOUS OTHER DECISIONS RELIED ON BY THE L D. COUNSEL FOR THE ASSESSEE ALSO SUPPORTS HIS CASE. FROM THE VARIOUS DOCUMENTS PLACED IN THE PAPER BOOK WE FIND IT AS AN ATTEMPT ON THE PART OF REVENUE TO, SOMEHOW OR OTHER, RE-OPEN THE PROCEEDINGS AND MORE PARTICULARLY THE BLOCK ASS ESSMENT PROCEEDING WHICH THEY COULD NOT SUCCESSFULLY SUPPORT AND SUSTAIN RIG HT UP THE TRIBUNAL. IT IS AN ATTEMPT WHICH IS APPARENT FROM THE NOTICE AND, THER EFORE, THE REASONS WHICH ARE RELIED UPON BY THE REVENUE FAILED TO INDICATE A NY ESCAPEMENT OR 16 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. CONCEALMENT OF INCOME BY THE ASSESSEE OR SUPPRESSIO N OF ANY MATERIAL FACT BY HIM. THEY DO NOT MEET THE REQUIREMENT U/S 147 OF T HE ACT. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE RATIO OF VARIOUS DECISION S CITED (SUPRA) BY THE LD. COUNSEL FOR THE ASSESSEE, THE NOTICE ISSUED U/S 148 IN OUR OPINION, IS VOID AB INITIO. SINCE THE ASSESSEE SUCCEEDS ON THIS PRELIM INARY GROUND RAISED BY THE ASSESSEE, THE OTHER GROUNDS BEING ACADEMIC IN NATUR E ARE NOT DECIDED. 6. IN THE RESULT, THE ASSESSEE APPEAL FOR A.Y. 1999 -2000 IS ALLOWED. ITA 2777/M/2009 FOR A.Y. 2000-01 (BY ASSESSEE) 7. IN GROUNDS OF APPEAL NO. 1, THE ASSESSEE HAS CHA LLENGED THE ORDER OF THE LD. CIT(A) UPHOLDING THE REASSESSMENT PROCEEDING FO R THE IMPUGNED ASSESSMENT YEAR. 7.1 THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO T HE NOTICE ISSUED U/S 148 FOR THE IMPUGNED ASSESSMENT YEAR DREW THE ATTENTION OF THE BENCH TO THE REASONS RECORDED WHICH HAS BEEN MENTIONED IN THE ASSESSMENT ORDER AND WHICH READS AS UNDER: A SEARCH ACTION WAS CONDUCTED UNDER SECTION 132 OF THE I.T. ACT, 1961 IN THE ASSESSEES CASE ON 14.03.2000. IN THE BLOCK ASSESSMENT ORDER UNDER SECTION 158BC CONSEQUENT TO SEARCH, IT WAS HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION UNDER SECTIO N 80HHC OF THE I.T. ACT AS THE ENTIRE PURCHASES WERE BOGUS AND THE EXPO RT SALES WERE ALSO BOGUS. FOR THE ASSESSMENT YEAR 1999-2000 AND 2000- 01 THE ASSESSEE HAS FILED RETURNS OF INCOME DECLARING INCO ME OF ` 164,410/- AND ` 40,370/- RESPECTIVELY. IN BOTH THESE YEARS THE AS SESSEE HAS SHOWN PURCHASES OF DIAMONDS/JEWELLERY FROM SISTER C ONCERNS BY THE NAMES OF M/S GALAXY EXPORTS, M/S KUNAL EXPORTS AND M/S PRIME STAR EXPORTS. THESE PURCHASES WERE FOUND TO BE BOGUS. ACCORDINGLY, THE A.O. HAD REASON TO BELIEVE THAT I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AS SESSMENT YEARS 1999-2000 & 2000-01. THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 ARE INITIATED BY ISSUE OF NOTICE UNDER SECTION 148. 17 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. 7.2 HE SUBMITTED THAT DURING THE IMPUGNED A.Y., THE RE IS NO PURCHASE FROM THE ABOVE PARTIES THEREFORE, THE REASON ITSELF IS W RONG. REFERRING TO PAGE 1 TO 16 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO PAGE 11 WHERE THE DETAILS OF PURCHASES AND SALES ARE GIVEN. HE SUBMI TTED THAT THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR HAS MADE ONLY O NE PURCHASE OF ` 11,40,000/- FROM MR. VIJAY BHAV. SIMILARLY, THE AS SESSEE HAS SOLD DURING THE YEAR TO M/S GALAXY TRADING CO. ` 299,990.00, M/S PRIME STAR EXPORTS ` 1290195.00 AND M/S DAUJI & CO ` 9 LACS. HE SUBMITTED THAT M/S GALAXY TRADING CO. IS DIFFERENT FROM GALAXY EXPORTS. THER E IS NO PURCHASE FROM GALAXY EXPORTS OR M/S KUNAL EXPORTS OR FROM M/S PRIME STAR EXPORTS. THEREFORE, THE REASONS RECORDED IN THE NOTICE ISSUED U/S 148 ARE W RONG AND, THEREFORE, 148 PROCEEDING IS BAD IN LAW AND HENCE TO BE QUASHED. 8. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT SI NCE THE NOTICE HAS BEEN ISSUED WITHIN A PERIOD OF 4 YEARS FROM THE END OF T HE RELEVANT ASSESSMENT YEAR, THEREFORE, THE RE-ASSESSMENT PROCEEDINGS CANNOT BE HELD AS INVALID. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PURSUED 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. FROM THE COPY OF THE ASSESSMENT ORDER WH ERE THE REASONS ARE RECORDED, WE FIND THE A.O. RE-OPENED THE ASSESSMENT ON THE GROUND THAT PURCHASE OF DIAMONDS/JEWELLERY FROM THE SISTER CONC ERNS NAMELY M/S GALAXY EXPORTS, M/S KUNAL EXPORTS AND M/S PRIME STAR EXPOR TS WERE FOUND TO BE BOGUS, HENCE, HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. FROM THE DETAILS OF PURCHASE AND SALES GIVEN BY THE ASSESSEE AS PER PAPER BOOK 2 WE FIND THE ASSESSEE HAS MADE PURCHASE FROM VIJAY BHAV ONLY DURING THE YEAR AND THERE IS NO PURCHASE FROM ANY OF THE THREE PARTIES NAMELY M/S GALAXY EXPORTS, M/S KUNAL EXPORTS AND M/S PRIME STAR EXPOR TS AS MENTIONED IN THE NOTICE ISSUED U/S.148. A PERUSAL OF THE REASONS SHO WS THAT THE SAME IS JUST A REPETITION OF THE REASONS RECORDED FOR A.Y. 1999-20 00 AND THERE IS NO 18 ITA 2776 & 2777/ M/09, POWERFUL IMPEX P. LTD. APPLICATION OF MIND. THE REASONS RECORDED BY THE A .O. SUFFERS FROM DEFECT AND THE REASONS ITSELF ARE WRONG. IT HAS BEEN HELD IN A NUMBER OF DECISIONS THAT WHEN THERE IS NO REASON RECORDED OR THE REASONS REC ORDED ARE WRONG/ABSURD OR IRRELEVANT THE RE-ASSESSMENT PROCEEDINGS BASED ON S UCH NO REASON OR ABSURD OR IRRELEVANT REASON IS INVALID. SINCE IN THE INST ANT CASE, THE REASONS RECORDED BY THE A.O. ARE WRONG THEREFORE, THE NOTICE ITSELF IS INVALID. THEREFORE, THE SUBSEQUENT PROCEEDINGS ARE ALSO INVALID. ACCORDINGL Y, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE RE-ASSESS MENT PROCEEDINGS AND ACCORDINGLY THE SAME IS SET ASIDE AND THE GROUND RA ISED BY THE ASSESSEE IS ALLOWED. SINCE THE ASSESSEE SUCCEEDS ON THIS LEGAL GROUND, THE OTHER GROUNDS RAISED BY THE ASSESSEE BEING ACADEMIC IN NATURE ARE NOT DECIDED. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED ON 5 TH OCTOBER 2011. SD/- SD/- (D. MAN MOHAN) (R.K. PANDA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED 5.10.11. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED, MUMBAI 4. THE CIT CONCERNED, MUMBAI 5. THE DR BENCH, C 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI