M/s Punnie BKO, Ludhiana V. ACIT, C-III, Ludhiana

ITSSA 1/CHANDI/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4001 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-09-2021
• Assessment Year: misc
• Appeal Filed On: 11-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANDEEP DAHIYA CIT
• Assessee Lawyers: PANKAJ BHALLA
• Keywords: Revision of order; Validity of assessment; Assessment record; Block assessment; Documents seized; Reassessment proceedings
• Section: 271(1)(c); 143(3); 143(2); 191; 158BC(c); 158BC; 113; 73; 13; 158BFA; 153; 158BD; 22; 32; 147; 145; 148; 6; 263; 63; 132; 144; 154; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B, CHANDIGARH BEFORE: SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI R.L. NEGI, JUDICIAL MEMBER . / ITSS(A) NO.1/CHD/2018 / BLOCK PERIOD: 01.04.1988 TO 08.01.1999 M/S PUNNIE BKO, 155, BHARAT NAGAR, LUDHIANA. THE A.C.I.T., CIRCLE-III, LUDHIANA. ./ PAN NO: AABFP3634Q /APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI PANKAJ BHALLA, CA # ! / REVENUE BY : SHRI SANDEEP DAHIYA, CIT ! & /DATE OF HEARING : 07.09.2021 ! & /DATE OF PRONOUNCEMENT: 30.09.2021 (HEARING THROUGH WEBEX) / ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : THE ABOVE APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-I, LUDHIANA [IN SHORT THE LD.CIT(A)] DATED 27.11.2017 RELATING TO BLOCK PERIOD 01.04.1988 TO 08.01.1999-, CONFIRMING ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 2 OF 38 THE LEVY OF PENALTY U/S 158BFA(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, LUDHIANA HAS ERRED IN LAW ARID ON FACTS OF THE CASE :- A) BY ARBITRARILY AND WRONGLY SUSTAINED THE PENALTY OF RS.9,00,000/- IMPOSED BY THE LD. ASSESSING OFFICER U/S 158BFA (2) OF THE INCOME TAX ACT, 1.961 . 2. THE ABOVE SAID ORDER IS BAD IN LAW S CONTRARY TO THE FACTS OF CASE. 3. THE ASSESSEE HAS ALSO RAISED FOLLOWING ADDITIONA L GROUNDS AND HAD SOUGHT ADMISSION OF THE SAME UNDER RULE 11 OF THE APPELLATE TRIBUNAL RULES, 1963: 1. THAT THE ASSESSMENT FRAMED AND PENALTY LEVIED I S VOID OBNITIO IN ABSENCE OF SATISFACTION NOTE OF THE A.O. OF SEARCHED PERSON PRIOR TO ISSUANCE OF NOTICE U/S 158 BD OF THE INCOME TAX ACT, 1961. 2. THAT THE ASSESSMENT FRAMED AND PENALTY LEVIED IS VOID OBNITIO IN ABSENCE OF SATISFACTION NOTE OF THE A.O. OF THE ASSESSEE PRIOR TO ISSUANCE OF NOTICE U/S 158BD OF T HE INCOME TAX ACT, 1961. 3. THAT THE NOTICE ISSUED U/S 158BD WAS WITHOUT JURISDICTION AND THUS THE ASSESSMENT FRAMED AND THE PENALTY LEVIED IS A NULLITY. 4. THAT THE ASSESSMENT FRAMED AND PENALTY LEVIED U/ S 158BD R.W.S. 143(3) WAS WITHOUT JURISDICTION AND TH US A NULLITY. 5. WITHOUT PREJUDICE TO ABOVE, THAT THE ASSESSMENT FRAMED AND PENALTY LEVIED IS ALSO INVALID IN ABSENC E OF VALID SATISFACTION NOTE, IF ANY REVEALING MENTAL AND ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 3 OF 38 DISPASSIONATE THOUGHT PROCESS OF THE A.O. IN ARRIVI NG AT CONCLUSION. 6. THAT THE ASSESSMENT FRAMED AND PENALTY LEVIED IS ILLEGAL AS THE ASSESSING OFFICER FAILS TO BRING ON RECORD T HE MATERIAL ON WHICH THE SATISFACTION HAS BEEN DRAWN. 4. VIS--VIS THE ADDITIONAL GROUNDS RAISED, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT HE WAS PRESSING ONL Y GROUND NO.1, 4 & 5 RAISED ABOVE. THE LD.COUNSEL FOR THE AS SESSEE CONTENDED THAT THEY WERE ALL LEGAL GROUNDS, AGAINST THE VALIDITY OF THE ORDER LEVYING PENALTY, BY CHALLENGI NG THE VALIDITY OF THE ORIGINAL ASSESSMENT PROCEEDINGS WHI CH GAVE RISE TO THE PENAL PROCEEDINGS. THAT ALL MATERIAL RELEVAN T FOR ADJUDICATION OF THE GROUNDS WERE AVAILABLE ON RECOR D AND DID NOT REQUIRE INVESTIGATION OF ANY FACTS. HE THEREFOR E PLEADED ADMISSION OF THE SAME AND RELIED ON THE DECISION O F THE HONBLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION VS CIT 229 ITR 383(SC) AND THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDU STRIES LTD. VS CIT 290 ITR 656 (P&H) IN THIS REGARD. 5. THE LD. DR VEHEMENTLY OBJECTED TO THE ADMISSION OF THE SAID GROUNDS STATING THAT IN THE QUANTUM PROCEEDING S THE ITAT HAD DEALT WITH THE ORDER PASSED BY THE AO AFTE R CONSIDERING IT TO BE VALID AND HAD ALLOWED CERTAIN RELIEF TO THE ASSESSEE. THAT IN NONE OF THE APPELLATE PROCEEDINGS THE ASSESSEE HAD EVER RAISED THE ISSUE OF VALIDITY OF T HE ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 4 OF 38 ASSESSMENT ORDER PASSED. THAT THE ORDER OF THE ITAT IN QUANTUM PROCEEDINGS HAD BECOME FINAL AND COULD NOT BE REVISITED NOW. 6. TO THIS LD.COUNSEL FOR THE ASSESSEE COUNTERED BY SAYING THAT IT HAS BEEN HELD IN A NUMBER OF DECISIONS BY C OURTS THAT THE ORIGINAL PROCEEDINGS COULD BE CHALLENGED IN CO- LATERAL PROCEEDINGS AND IN THIS REGARD HE DREW OUR ATTENTIO N TO THE FOLLOWING DECISIONS: 1) P.V. DOSHI VS. CIT (1978) 113 ITR 22, (PLACED AT COMPILATION OF CASE LAW(CCL) PAGE NOS.52 TO 58). 2) DCIT VS. BJD PAPER PRODUCT (2012) 17 TAXMANN.COM. 11 (CCL 14 TO 25). 3) VALIANT GLASSWORK PVT. LTD. VS. ACIT, ITA NO.1612/MUM/2013 (CCL 26 TO 51). 7. WE HAVE HEARD BOTH THE PARTIES. VIDE THE ADDITI ONAL GROUNDS SOUGHT TO BE ADMITTED FOR ADJUDICATION BY T HE LD.COUNSEL FOR THE ASSESSEE, THE ASSESSEE HAS CHALL ENGED THE VALIDITY OF THE ORDER PASSED LEVYING PENALTY U/S 15 8 BFA OF THE ACT ,ON THE BASIS THAT THE ASSESSMENT ORDER PASSED U/S 158BD OF THE ACT, OF WHICH THE PENALTY ORDER WAS AN OFF SHOOT, WAS ITSELF INVALID. 8. THE ADDITIONAL GROUNDS NO DOUBT ARE LEGAL GROU NDS AND CAN ADMITTEDLY BE ADJUDICATED ON THE BASIS OF THE MATERIAL ON RECORD. THE SAME THEREFORE NEED TO BE ADMITTED FOR ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 5 OF 38 ADJUDICATION AS PER THE DECISION OF THE HONBLE APE X COURT IN NATIONAL THERMAL POWER COPORATION (SUPRA). AS FOR T HE LD.DRS OBJECTION TO THE EFFECT THAT THE VALIDITY OF AN ASS ESSMENT ORDER WHICH HAS ATTAINED FINALITY CANNOT NOW BE RAISED IN COLLATERAL PROCEEDINGS, WE DO NOT FIND ANY MERIT IN THE SAME. THIS ISSUE IS NO LONGER RESINTEGRA HAVING BEEN DEALT IN VARIOU S DECISIONS AS POINTED OUT BY THE LD.COUNSEL FOR THE ASSESSEE BEFORE US CATEGORICALLY HOLDING THAT THE VALIDITY OF ORIGINAL PROCEEDINGS CAN BE RAISED IN COLLATERAL PROCEEDINGS. IT HAS BEE N SO HELD BASED ON THE PRINCIPLE THAT NEITHER THE RULE OF EST OPPEL NOR PRINCIPLE OF RESJUDICATA, THAT NEITHER CONSENT NOR WAIVER CAN CONFER JURISDICTION WHEN NONE EXISTS AND THAT FINAL ITY OR CONCLUSIVENESS COULD ARISE ONLY IN RESPECT OF ORDER S WHICH ARE COMPETENT ORDERS WITH JURISDICTION AND IF PROCEEDIN GS ARE NOT VALIDLY INITIATED THE ORDER WOULD BE VOID ORDER WHI CH COULD NEVER HAVE ANY FINALITY OR CONCLUSIVENESS. 9. IN THE CASE OF VALIANT GLASS WORKS (P) LTD.(SUPR A) THE ITAT HAS, AFTER REFERRING TO VARIOUS CASE LAWS HELD THAT THE PROPOSITION THAT IS COMING OUT IS THAT THE JURISDIC TION OR THE LEGALITY OF THE PROCEEDINGS CAN BE AGITATED IN A SU BSEQUENT PROCEEDING OR EVEN IN A COLLATERAL PROCEEDING OR EX ECUTION PROCEEDING ALSO. THE RELEVANT FINDINGS OF THE ITAT ARE AS UNDER: ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 6 OF 38 SO FAR AS THE ISSUE AS TO WHETHER THE ASSESSEE COU LD RAISE THE PLEA BEFORE THE AO DURING THE FRESH ASSESSMENT PROC EEDINGS U/S 153 A OF THE ACT PURSUANT TO THE DIRECTION OF THE LEARNED CIT GIVEN IN THE REVISION ORDER PASSED U/S 263 OF THE A CT REGARDING THE VALIDITY OF INITIATION OF THE REOPENING PROCEED INGS U/S 147 OF THE ACT IS CONCERNED, WE FIND THAT VARIOUS COURTS O F LAW HAVE BEEN UNANIMOUS ON THE PROPOSITION THAT JURISDICTION AL ASPECT OF AN ORDER PASSED IN A PRIMARY PROCEEDINGS CAN BE EXA MINED IN THE COLLATERAL PROCEEDINGS ALSO. THE VALIDITY OF AN ASSESSMENT ORDER CAN BE CHALLENGED DURING THE APPELLATE PROCEE DINGS PERTAINING TO EXAMINATION OF VALIDITY OF THE ORDER PASSED U/S 263 OF THE ACT. 11. IN A RECENT DECISION IN THE CASE OF THE CASE OF 'M/S WESTLIFE DEVELOPMENT LTD VS. PRINCIPAL COMMISSIONER OF INCOM E TAX' [ITA NO.688/MUM/2016 DECIDED VIDE ORDER DATED 10-06-2016 , THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS THOROUGHLY E XAMINED THE ISSUE AS TO WHETHER IF THE INITIATION OF THE PRIMAR Y PROCEEDINGS IS INVALID WITHOUT JURISDICTION BUT, THE SAME HAS NOT BEEN AGITATED BY WAY OF ANY APPEAL OR OTHERWISE AND THEREAFTER ON THE BASIS OF THOSE PRIMARY PROCEEDINGS, CERTAIN SECONDARY PRO CEEDINGS SUCH AS REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT OR REVISION OF THE ASSESSMENT U/S 263 OF THE ACT IS DO NE, IN SUCH CIRCUMSTANCES, WHETHER THE ASSESSEE HAS A RIGHT TO CHALLENGE THE VERY VALIDITY OF THE PRIMARY PROCEEDINGS IN AN APPEAL FILED AGAINST ANY ORDER PASSED IN SUCH SUBSEQUENT/COLLATE RAL PROCEEDINGS. THE TRIBUNAL HAS DISCUSSED VARIOUS CAS E LAWS IN THIS RESPECT. THE RELEVANT PART OF THE FINDINGS OF THE TRIBUNAL IS REPRODUCED HEREUNDER:- '3. DURING THE COURSE OF HEARING, THE LD. COUNSEL O F THE ASSESSEE INTER-ALIA STATED THAT IN THIS CASE THE IMPUGNED OR DER PASSED U/S 263 IS BAD IN LAW ON THE JURISDICTIONAL GROUND, THAT IS TO SAY THAT THE ORIGINAL ASSESSMENT ORDER PASSED U/S 143(3 ) DATED 2440-2013 WHICH HAS BEEN SOUGHT TO BE REVISED BY TH E ID.CIT WAS A NULLITY IN THE EYES OF LAW, AND THEREFORE AN ORDER, WHICH WAS A NULLITY IN THE EYES OF LAW HAD NO EXISTENCE I N THE EYES OF LAW AND, THEREFORE, THE SAME COULD NOT HAVE BEEN RE VISED BY THE LD.CIT, THEREBY GIVING FRESH LIFE TO THE PROCEEDING S WHICH HAD NO LEGAL EXISTENCE IN THE EYES OF LAW. IN THIS REGARD, IT HAS BEEN FURTHER EXPLAINED BY THE ID. COUNSEL THAT THE ORIGI NAL ASSESSMENT WAS FRAMED U/S 143(3) UPON AN ERSTWHILE COMPANY, VI Z. M/S 'WESTPOINT LEISUREPARKS PVT LTD' (HEREINAFTER CALLE D WLPL), WHICH HAD ALREADY GOT AMALGAMATED INTO ANOTHER COMP ANY NAMELY M/S 'WESTLIFE DEVELOPMENT LTD' (HEREINAFTER CALLED WDL) AND THEREFORE, ON THE DATE OF FRAMING OF THE ASSESS MENT ORDER, WLPL WAS NOT IN EXISTENCE. IT WAS FURTHER SUBMITTED THAT THIS ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 7 OF 38 FACT WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER; DESPITE THAT, THE ASSESSING OFFICER FRAMED THE ASSE SSMENT UPON A NON-EXISTING ENTITY. IT WAS SUBMITTED BY HIM THAT FRAMING OF AN ASSESSMENT UPON A COMPANY WHICH HAS ALREADY BEEN AMALGAMATED BY WAY OF AN ORDER OF THE HIGH COURT IS NULLITY IN THE EYES OF LAW AND IN SUPPORT OF HIS ARGUMENTS HE PLACED RELIANCE UPON THE FOLLOWING JUDGMENTS: 1. JUDGMENT OF DELHI HIGH COURT IN THE CASE OF SPIC E INFOTAINMENT LTD. VS. COMMISSIONER OF SERVICE TAX I N ITA 475 & 476 OF 2011, DATED 03.08.2011 2. CIT V. DIMENSION APPARELS P. LTD . [370 ITR 288 (DEL)] 3. I. K. AGENCIES P. LTD. V CIT [347 ITR 664 (CAL)] 4. CIT V EXPRESS NEWSPAPERS LTD. [40 ITR 38 (MAD)] 5. JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT V MICRA INDIA P. LTD. (2015) 57 TAXMANN.COM 163 (DEL) 6. ORDER OF THE TRIBUNAL MUMBAI BENCH, IN THE CASE OF INSTANT HOLDINGS LTD. ACIT IN ITA NO. 4593, 4748/MUM/2011 ORDER DATED 09.03.2016. 7. ORDER OF THE TRIBUNAL KOLKATA BENCH, IN THE CASE OF EMERALD COMPANY LTD IN ITA NO. 428/KO1/2015 ORDER DATED 13.01.2016 8. JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF CIT V INTEL TECHNO INDIA P. LTD. (2015) 57 TAXMANN.COM 15 9 (KAR) 9. ORDER OF THE TRIBUNAL KOLKATA BENCH, IN THE CASE OF GESTENER (INDIA) ACIT IN 1TA NO. 275/KO1/2007 ' 4. IT WAS FURTHER ARGUED BY HIM THAT THE IMPUGNED A SSESSMENT ORDER WAS NON EST IN THE EYES OF LAW AND, THEREFORE , THE SAME COULD NOT HAVE BEEN REVISED BY THE ID.CIT. IN THIS REGARD, HE RELIED UPON THE JUDGMENT OF HON'BLE DELHI HIGH IN CIT VS ESCORTS FARMS PVT LTD 180 ITR 80 (DEL) AND UPON THE DECISION OF THE CO- ORDINATE BENCH IN THE CASE OF KRISHNA KUMAR SARAF VS CIT ITA NO .4562/DE1/2011 DATED 24-09-32015 AND STEEL STRIPS L TD V ACIT 53 ITD 553 (CHD). HE THUS REQUESTED THAT THE I MPUGNED REVISION ORDER PASSED BY THE ID.CIT IS ILLEGAL ON T HIS PRIMARY JURISDICTIONAL GROUND ITSELF. 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE VEHEMENTLY OPPOSED THE ARGUMENTS OF THE ID. COUNSEL . IT ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 8 OF 38 WAS SUBMITTED BY THE ID. CIT-DR THAT EVEN IF THE OR IGINAL ASSESSMENT ORDER WAS FRAMED IN THE NAME OF AN ERSTW HILE COMPANY, THE SAME WAS ONLY A MERE IRREGULARITY AND THAT DOES NOT MAKE THE ASSESSMENT AS NULLITY IN THE EYES OF L AW. IT WAS SUBMITTED THAT SUCH LAPSES WERE PROTECTED U/S 292B OF THE ACT. 6. IN ADDITION TO THE ABOVE, IT WAS FURTHER SUBMITT ED BY HIM THAT THE ISSUE WITH REGARD TO ILLEGALITY IN THE ORIGINAL ASSESSMENT ORDER CANNOT BE RAISED HERE DURING THE PROCEEDINGS CHALLENGING THE ORDER U/S 263. IT WAS FURTHER SUBMITTED BY HIM THAT IN ANY CASE, THE LD.CIT HAD PROPER JURISDICTION TO MAKE RE VISION OF THE IMPUGNED ASSESSMENT ORDER. 7. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND ALSO GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AS WELL AS THE JUDGMENTS RELIED UPON BEFORE US. IN OUR VIEW, W E NEED TO DECIDE FOLLOWING ISSUES, BEFORE WE GO INTO ANY OTHE R ISSUES OR MERITS OF THE IMPUGNED ORDER: 1. WHETHER THE ASSESSEE CAN CHALLENGE THE VALIDITY OF AN ASSESSMENT ORDER DURING THE APPELLATE PROCEEDINGS P ERTAINING TO EXAMINATION OF VALIDITY OF ORDER PASSED U/S 263? 2. WHETHER THE IMPUGNED ASSESSMENT ORDER PASSED U/S 143(3) DATED 24-10-2013 WAS VALID IN THE EYES OF LAW OR A NULLITY AS HAS BEEN CLAIMED BY THE ASSESSEE? 3. IF THE IMPUGNED ASSESSMENT ORDER PASSED U/S 143( 3) WAS ILLEGAL OR NULLITY IN THE EYES OF LAW, THEN, WHETHE R THE CIT HAD A VALID JURISDICTION TO PASS THE IMPUGNED ORDER U/S 2 63 TO REVISE THE NON EST ASSESSMENT ORDER? IN OUR CONSIDERED VIEW, SINCE THESE ISSUES ARE JURI SDICTIONAL ISSUES AND GO TO THE ROOT OF THE MATTER, THEREFORE BEFORE DEALING WITH ANY OTHER ISSUE, WE SHALL FIRST DEAL WITH ALL ABOVE THREE ISSUES ONE BY ONE, AS UNDER: 8. CHALLENGING THE JURISDICTIONAL DEFECTS OF ASSESS MENT ORDER FOR ASSAILING THE JURISDICTIONAL VALIDITY OF THE REVISI ON ORDER PASSED U/S 263: THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION I S - WHETHER THE ASSESSEE CAN CHALLENGE THE JURISDICTIONAL VALIDITY OF ORDER PASSED U/S 143(3) IN THE APPELLATE PROCEEDINGS TAKE N UP FOR CHALLENGING THE ORDER PASSED U/S 263? IF WE ANALYSE THE NATURE OF BOTH OF THESE PROCEEDINGS, WHICH ARE UNDER CONSI DERATION BEFORE US, WE FIND THAT THE ORIGINAL ASSESSMENT PRO CEEDINGS CAN ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 9 OF 38 BE CLASSIFIED IN A WAY AS 'PRIMARY PROCEEDINGS'. TH ESE ARE, IN EFFECT, BASIC / FOUNDATIONAL PROCEEDINGS AND AKIN T O A PLATFORM UPON WHICH ANY SUBSEQUENT PROCEEDINGS CONNECTED THE REWITH CAN REST UPON. THE PROCEEDINGS INITIATED U/S 263 SE EKING TO REVISE THE ORIGINAL ASSESSMENT ORDER IS OFF SHOOT O F THE PRIMARY PROCEEDINGS AND THEREFORE, THESE MAY BE TERMED AS ' COLLATERAL PROCEEDINGS' IN THE LEGAL FRAMEWORK. THE ISSUE THAT ARISES HERE IS WHETHER ANY ILLEGALITY/INVALIDITY IN THE ORDER P ASSED IN THE 'PRIMARY PROCEEDINGS' CAN BE SET UP IN THE 'COLLATE RAL PROCEEDINGS' AND IF YES, THEN OF WHAT NATURE? 8.1. WE HAVE ANALYSED THIS ISSUE CAREFULLY. THERE I S NO DOUBT THAT AFTER PASSING OF THE ORIGINAL ASSESSMENT ORDER , THE PRIMARY (I.E. ORIGINAL PROCEEDINGS) HAD COME TO AN END AND ATTAINED FINALITY AND, THEREFORE, OUTCOME OF THE SAME CANNOT BE DISTURBED, AND THEREFORE, THE ORIGINAL ASSESSMENT ORDER FRAMED TO CONCLUDE THE PRIMARY PROCEEDINGS HAD ALSO ATTAINED FINALITY AND IT ALSO CANNOT BE DISTURBED AT THE INSTANCE OF THE ASSESSEE , EXCEPT AS PERMITTED UNDER THE LAW AND BY FOLLOWING THE DUE PR OCESS OF LAW. UNDER THESE CIRCUMSTANCES, IT CAN BE SAID THAT EFFECT OF THE ORIGINAL ASSESSMENT ORDER CANNOT BE ERASED OR MODIF IED SUBSEQUENTLY. IN OTHER WORDS, WHATEVER TAX LIABILIT Y HAD BEEN DETERMINED IN THE ORIGINAL ASSESSMENT ORDER THAT HA D ALREADY BECOME FINAL AND THAT CANNOT BE SOUGHT TO BE DISTUR BED BY THE ASSESSEE. BUT, THE ISSUE THAT ARISES HERE IS THAT I F THE ORIGINAL ASSESSMENT ORDER IS ILLEGAL IN TERMS OF ITS JURISDI CTION OR IF THE SAME IS NULL & VOID IN THE EYES OF LAW ON ANY JURIS DICTIONAL GROUNDS, THEN, WHETHER IT CAN GIVE RISE TO INITIATI ON OF FURTHER PROCEEDINGS AND WHETHER SUCH SUBSEQUENT PROCEEDINGS WOULD BE VALID UNDER THE LAW AS CONTAINED IN INCOME TAX ACT ? IT HAS BEEN VEHEMENTLY ARGUED BEFORE US THAT THE SUBSEQUEN T PROCEEDINGS (I.E. COLLATERAL PROCEEDINGS) DERIVE ST RENGTH ONLY FROM THE ORDER PASSED IN THE ORIGINAL PROCEEDINGS ( I.E. PRIMARY PROCEEDINGS). THUS, IF ORDER PASSED IN THE ORIGINAL PROCEEDINGS IS ITSELF ILLEGAL, THEN THAT CANNOT GIVE RISE TO VALID REVISION PROCEEDINGS. THEREFORE, AS PER LAW, THE VALIDITY OF THE ORDER PASSED IN THE PRIMARY (ORIGINAL) PROCEEDINGS SHOULD BE ALLOWED TO BE EXAMINED EVEN AT THE SUBSEQUENT STAGES, ONLY FOR THE LIMITED PURPOSE OF EXAMINING WHETHER THE COLLATERAL (SUBSEQUENT) PROCEEDINGS HAVE BEEN INITIATED ON A VALID LEGAL PL ATFORM OR NOT AND FOR EXAMINING THE VALIDITY OF ASSUMPTION OF JUR ISDICTION TO INITIATE THE COLLATERAL PROCEEDINGS. IF IT IS NOT S O ALLOWED, THEN, IT MAY SO HAPPEN THAT THOUGH ORDER PASSED IN THE ORIGI NAL PROCEEDINGS WAS ILLEGAL AND THUS ORDER PASSED IN TH E SUBSEQUENT PROCEEDINGS IN TURN WOULD ALSO BE ILLEGA L, BUT IN ABSENCE OF A REMEDY TO CONTEST THE SAME, IT MAY GIV E RISE TO AN 'ENFORCEABLE' TAX LIABILITY WITHOUT AUTHORITY OF LA W. THEREFORE, THE ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 10 OF 38 COURTS HAVE TAKEN THIS VIEW THAT JURISDICTIONAL ASP ECTS OF THE ORDER PASSED IN THE PRIMARY PROCEEDINGS CAN BE EXAM INED IN THE COLLATERAL PROCEEDINGS ALSO. THIS ISSUE IS NOT RES INTEGRA. THIS ISSUE HAS BEEN DECIDED IN MANY JUDGMENTS BY VARIOUS COURTS, AND SOME OF THEM HAVE BEEN DISCUSSED BY US IN FOLLO WINGS PARAGRAPHS. 8.2. IN A MATTER THAT CAME UP BEFORE HON'BLE SUPREM E COURT IN THE CASE OF KIRAN SINGH & ORS. V. CHAMAN PASWAN & ORS ., [1955] 1 5CR 117 THE FACTS WERE THAT THE APPELLANT IN THAT CASE HAD UNDERVALUED THE SUIT AT RS.2,950 AND LAID IT IN THE COURT OF THE SUBORDINATE JUDGE, MONGHYR FOR RECOVERY OF POSS ESSION OF THE SUIT LANDS AND MESNE PROFITS. THE SUIT WAS DISM ISSED AND ON APPEAL IT WAS CONFIRMED. IN THE SECOND APPEAL IN THE HIGH COURT THE REGISTRY RAISED THE OBJECTION AS TO VALUA TION UNDER SECTION 11 . THE VALUE OF THE APPEAL WAS FIXED AT RS.9,980. A CONTENTION THEN WAS RAISED BY THE PLAIN TIFF IN THE HIGH COURT THAT ON ACCOUNT OF THE VALUATION FIXED B Y THE HIGH COURT THE APPEAL AGAINST THE DECREE OF THE COURT OF THE SUBORDINATE JUDGE DID NOT LIE TO THE DISTRICT COURT , BUT TO THE HIGH COURT AND ON THAT ACCOUNT THE DECREE OF THE DI STRICT COURT WAS A NULLITY. ALTERNATIVELY, IT WAS CONTENDED THAT IT CAUSED PREJUDICE TO THE APPELLANT. IN CONSIDERING THAT CON TENTION AT PAGE 121, A FOUR JUDGE BENCH OF HON'BLE SUPREME COURT SP EAKING THROUGH VANKATARAMA AYYAR, J. HELD THAT: 'IT IS A FUNDAMENTAL PRINCIPLE WELL-ESTABLISHED THA T A DECREE PASSED BY A COURT WITHOUT JURISDICTION IS A NULLITY , AND THAT ITS INVALIDITY COULD BE SET UP WHENEVER AND WHEREVER IT IS SOUGHT TO BE ENFORCED OR RELIED UPON, EVEN AT THE STAGE OF EX ECUTION AND EVEN IN COLLATERAL PROCEEDINGS. A DEFECT OF JURISDI CTION, WHETHER IT IS PECUNIARY OR TERRITORIAL, OR WHETHER IT IS IN RE SPECT OF THE SUBJECT-MATTER OF THE ACTION, STRIKES AT THE VERY A UTHORITY OF THE COURT TO PASS ANY DECREE AND SUCH A DEFECT CANNOT B E CURED EVEN BY CONSENT OF PARTIES.' 8.3. THIS JUDGMENT WAS SUBSEQUENTLY FOLLOWED BY HON 'BLE SUPREME COURT IN THE LANDMARK CASE OF SUSHIL KUMAR MEHTA VS GOBIND RAM BOHRA , (1990) 1 SCC 193, WHEREIN AN ISSUE AROSE WHETHER A DECREE CAN BE CHALLENGED AT THE STAGE OF EXECUTION AND WHETHER A DECREE WHICH REMAINED UNCONTESTED OPE RATES AS RES-JUDICATA QUA THE PARTIES AFFECTED BY IT. HON'BL E APEX COURT, TAKING SUPPORT FROM AFORESAID JUDGMENT, OBSERVED AS UNDER: 'IN THE LIGHT OF THIS POSITION IN LAW THE QUESTION FOR DETERMINATION IS WHETHER THE IMPUGNED DECREE OF THE CIVIL COURT C AN BE ASSAILED BY THE APPELLANT IN EXECUTION. IT IS ALREA DY HELD THAT IT ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 11 OF 38 IS THE CONTROLLER UNDER THE ACT THAT HAS EXCLUSIVE JURISDICTION TO ORDER EJECTMENT OF A TENANT FROM A BUILDING IN THE URBAN AREA LEASED OUT BY THE LANDLORD. THEREBY THE CIVIL COURT INHERENTLY LACKS JURISDICTION TO ENTERTAIN THE SUIT AND PASS A DECREE OF EJECTMENT. THEREFORE, THOUGH THE DECREE WAS PASSED AND THE JURISDICTION OF THE COURT WAS GONE INTO IN ISSUE NO S. 4 AND 5 AT THE EX-PARTE TRIAL, THE DECREE THERE-UNDER IS A NUL LITY, AND DOES NOT BIND THE APPELLANT. THEREFORE, IT DOES NOT OPER ATE AS A RES JUDICATA. THE COURTS BELOW HAVE COMMITTED GRAVE ERR OR OF LAW IN HOLDING THAT THE DECREE IN THE SUIT OPERATED AS RES JUDICATA AND THE APPELLANT CANNOT RAISE THE SAME POINT ONCE AGAI N AT THE EXECUTION.' 8.4. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE SUPREME COURT BY FOLLOWING AFORESAID JUDGMENTS RECENTLY IN THE CA SE OF INDIAN BANK VS MANUAL GOVINDJI KHONA REPORTED IN 2015 (3) SCC 712. FURTHER, SIMILAR VIEW WAS EMPHASIZED BY HON'BLE BOM BAY HIGH COURT (GOA BENCH) IN THE CASE OF MAVANY BROTHERS VS CIT (TAX APPEAL NO 8 OF 2007) IN ITS ORDER DT 17TH APRIL, 2015 WHEREI N IT WAS HELD THAT AN ISSUE OF JURISDICTION CAN BE RAISE D AT ANY TIME EVEN IN APPEAL OR EXECUTION. 8.5. THE AFORESAID PRINCIPLES, ENUNCIATED BY THE AP EX COURT IN THE CASE OF KIRAN SINGH & ORS. V. CHAMAN PASWAN & ORS , SUPRA WERE REITERATED BY THE APEX COURT IN THE CASES OF SUPERINTENDENT OF TAXES VS ONKARMAL NATHMAL TRUST (AIR 1975 SC 2065) AND DASA MUNI REDDY V. APPA RAO (AIR 1974 SC 2089). IN THE FIRST OF THESE DECISIONS IT WAS PO INTED OUT THAT REVENUE STATUTES PROTECT THE PUBLIC ON THE ONE HAND AND CONFER POWER UPON THE STATE ON THE OTHER, AND THE FETTER O N THE JURISDICTION IS ONE MEANT TO PROTECT THE PUBLIC ON THE BROADER GROUND OF PUBLIC POLICY AND, THEREFORE, JURISDICTIO N TO ASSESS OR REASSESS A PERSON CAN NEVER BE WAIVED OR CREATED BY CONSENT. THIS DECISION SHOWS THAT THE BASIC PRINCIPLE RECOGN IZED IN KIRAN SINGH (SUPRA) IS APPLICABLE EVEN TO REVENUE STATUTE S SUCH AS THE INCOME TAX ACT . DASA MUNI REDDY (SUPRA) IS A JUDGMENT WHERE THE PRINCIPLE OF 'CORAM NON JUDICE' WAS APPLI ED TO RENT CONTROL LAW. IT WAS HELD THAT NEITHER THE RULE OF E STOPPEL NOR THE PRINCIPLE OF RES JUDICATA CAN CONFER THE COURT JURI SDICTION WHERE NONE EXISTS. HERE ALSO THE PRINCIPLE THAT WAS PUT I NTO OPERATION WAS THAT JURISDICTION CANNOT BE CONFERRED BY CONSEN T OR AGREEMENT WHERE IT DID NOT EXIST, NOR CAN THE LACK OF JURISDICTION BE WAIVED. 8.6. THESE JUDGMENTS WERE SUBSEQUENTLY NOTICED BY H ON'BLE GUJARAT HIGH COURT IN THE CASE OF P. V. DOSHI 113 I TR 22(GUJRAT). THIS CASE AROSE UNDER THE INCOME TAX ACT WITH REFERENCE TO THE ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 12 OF 38 PROVISIONS OF SECTION 147 DEALING WITH RE-ASSESSMENT. THE FACTS WERE THAT THE ASSESSMENT WAS SOUGHT TO BE REOPENED UNDER SECTION 147 AND NOTICE UNDER SECTION 148 WAS ISSUED. VALIDITY OF REOPENING WAS NOT CHALLENGED UPTO TRIBU NAL AND ADDITIONS WERE CHALLENGED ON MERITS ONLY. THE TRIBU NAL RESTORED THE MATTER TO THE ASSESSING OFFICER WITH SOME DIREC TIONS TO REEXAMINE THE ISSUE ON MERITS. WHEN THE MATTER CAME BACK TO THE ASSESSING OFFICER THE ASSESSEE SPECIFICALLY RAI SED THE POINT OF JURISDICTION TO REOPEN THE ASSESSMENT, CONTENDING T HAT THE NOTICE OF REOPENING WAS PROMPTED BY A MERE CHANGE OF OPINI ON. THE AO REJECTED PLEA OF THE ASSESSEE BUT THE AAC ACCEPTED THIS GROUND AND ALSO HELD THE REASSESSMENT TO BE BAD IN LAW ON JURISDICTIONAL GROUND. AGAINST THE ORDER OF THE AAC THE REVENUE WENT IN APPEAL BEFORE THE TRIBUNAL AND SPECIFICALLY RAISED THE PLEA THAT THE QUESTION OF JURISDICTION TO REOPEN TH E ASSESSMENT HAVING BEEN EXPRESSLY GIVEN UP BY THE ASSESSEE IN T HE APPEAL AGAINST THE REASSESSMENT ORDER IN THE FIRST ROUND, THE ASSESSEE WAS DEBARRED FROM RAISING THAT POINT AGAIN BEFORE T HE AAC AND THE AAC WAS EQUALLY WRONG IN PERMITTING THE ASSESSE E TO RAISE THAT POINT WHICH HAD BECOME FINAL IN THE FIRST ROUN D AND IN ADJUDICATING UPON THE SAME. THE PLEA OF THE REVENUE IMPRESSED THE TRIBUNAL WHICH TOOK THE VIEW THAT AFTER ITS EAR LIER ORDER IN THE FIRST ROUND OF PROCEEDINGS THE MATTER ATTAINED FINALITY WITH REGARD TO THE POINT OF JURISDICTION WHICH WAS GIVEN UP BEFORE THE AAC AND NOT AGITATED FURTHER AND THAT IN THE REMAND PROCEEDINGS WHAT WAS OPEN BEFORE THE ASSESSING OFFI CER WAS ONLY THE QUESTION WHETHER THE ADDITION WAS JUSTIFIE D ON MERITS AND THE POINT REGARDING THE JURISDICTIONAL ASPECT W AS NOT OPEN BEFORE THE ASSESSING OFFICER. ACCORDING TO THE TRIB UNAL, THE ASSESSEE HAVING RAISED THE POINT IN THE FIRST ROUND AND HAVING GIVEN IT UP COULD NOT REVIVE IT IN THE SECOND ROUND OF PROCEEDINGS WHERE THE ISSUE WAS LIMITED TO THE MERITS OF THE AD DITIONS. IN THIS VIEW, THE TRIBUNAL ACCEPTED THE REVENUES PLEA. THE ASSESSEE THEREAFTER CARRIED ORDER OF THE TRIBUNAL I N REFERENCE BEFORE THE GUJARAT HIGH COURT. THE HIGH COURT AFTER CONSIDERING VARIOUS JUDGMENTS OF THE SUPREME COURT ON THE POINT OF JURISDICTION TO REOPEN THE ASSESSMENT AND ALSO AFTE R SPECIFICALLY DISCUSSING THE JUDGMENT OF THE SUPREME COURT IN ONK ARMAL NATHMAL TRUST (SUPRA) AND DASA MUNI REDDY (SUPRA) H ELD THAT THE TRIBUNAL WAS IN ERROR IN HOLDING THAT THE QUEST ION OF JURISDICTION BECAME FINAL WHEN IT PASSED THE EARLIE R REMAND ORDER. IT WAS HELD THAT NEITHER THE QUESTION OF RES JUDICATA NOR THE RULE OF ESTOPPEL COULD BE INVOKED WHERE THE JUR ISDICTION OF AN AUTHORITY WAS UNDER CHALLENGE. ACCORDING TO HON'BLE GUJARAT HIGH COURT, THE RULE OF RES JUDICATA CANNOT BE INVO KED WHERE THE QUESTION INVOLVED IS THE COMPETENCE OF THE COURT TO ASSUME JURISDICTION, EITHER PECUNIARY OR TERRITORIAL OR OV ER THE SUBJECT ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 13 OF 38 MATTER OF THE DISPUTE. HON'BLE HIGH COURT FURTHER H ELD THAT SINCE NEITHER CONSENT NOR WAIVER CAN CONFER JURISDICTION UPON THE ASSESSING OFFICER WHERE IT DID NOT EXIST, NO IMPORT ANCE COULD BE ATTACHED TO THE FACT THAT THE ASSESSEE, IN THE FIRS T ROUND OF PROCEEDINGS, EXPRESSLY GAVE UP THE PLEA AGAINST THE ERRONEOUS ASSUMPTION OF JURISDICTION BY THE ASSESSING AUTHORI TY. ACCORDING TO THE HON'BLE COURT, THE 'FINALITY OR CONCLUSIVENE SS COULD ONLY ARISE IN RESPECT OF ORDERS WHICH ARE COMPETENT ORDE RS WITH JURISDICTION AND IF THE PROCEEDINGS OF REASSESSMENT ARE NOT VALIDLY INITIATED AT ALL, THE ORDER WOULD BE A VOID ORDER AS PER THE SETTLED LEGAL POSITION WHICH COULD NEVER HAVE ANY F INALITY OR CONCLUSIVENESS. IF THE ORIGINAL ORDER IS WITHOUT JU RISDICTION, IT WOULD BE ONLY A NULLITY CONFIRMED IN FURTHER APPEAL S'. IN THIS VIEW OF THE MATTER, HON'BLE HIGH COURT FINALLY ANSW ERED THE REFERENCE IN FAVOUR OF THE ASSESSEE. 8.7. IT IS FURTHER NOTED THAT MANY OF THESE JUDGMEN TS WERE DISCUSSED AND FOLLOWED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF INDIAN FARMERS FERTILIZERS CO-OPERAT IVE LTD VS KIT 105 LTD 33 (DEL), WHEREIN A SIMILAR ISSUE HAD ARISE N. IN THIS CASE, THE ISSUE RAISED BEFORE THE BENCH WAS WHETHER IT IS OPEN TO THE ASSESSEE, NOT HAVING APPEALED AGAINST THE RE ASSESSMENT ORDER, TO SET UP OR CANVASS ITS CORRECTNESS IN COLL ATERAL PROCEEDINGS TAKEN FOR RECTIFICATION THEREOF U/S 154 . THE BENCH MINUTELY ANALYSED LAW IN THIS REGARD AND APPLYING T HE PRINCIPLE OF 'CORAM NON JUDICE' AND FOLLOWING AFORESAID JUDGM ENTS OF THE SUPREME COURT, IT WAS HELD THAT IF AN ASSESSEE SEEK S TO CHALLENGE THE REASSESSMENT PROCEEDINGS AS BEING WIT HOUT JURISDICTION, WHEN ACTION FOR RECTIFICATION IS SOUG HT TO BE TAKEN ON THE ASSUMPTION OF THE VALIDITY OF THE REASSESSME NT ORDER, THEN THE ASSESSEE HAS TO STEP IN AND PROTECT ITS IN TERESTS AND THE LIBERTY TO QUESTION EVEN THE VALIDITY OF THE REASSE SSMENT PROCEEDINGS OUGHT TO BE GIVEN TO IT.......' (EMPHAS IS SUPPLIED) 8.8. SIMILAR VIEW WAS TAKEN IN ANOTHER DECISION OF THE T RIBUNAL IN THE CASE OF DHIRAJ SURI VS ACIT 98 LTD 87 (DEL). IN THE SAID CASE, APPEAL WAS FILED BY THE ASSESSEE BEFORE THE TRIBUNA L AGAINST THE LEVY OF PENALTY. IN THE APPEAL CHALLENGING THE PENALTY ORDER, THE ASSESSEE CHALLENGED THE VALIDITY OF BLOCK ASSES SMENT ORDER WHICH HAD DETERMINED THE TAX LIABILITY OF THE ASSES SEE ON THE BASIS OF WHICH PENALTY WAS LEVIED SUBSEQUENTLY. THE REVENUE OBJECTED WITH RESPECT TO THE GROUND OF THE ASSESSEE RAISING JURISDICTIONAL ISSUES OF ASSESSMENT PROCEEDINGS IN THE APPEAL AGAINST THE PENALTY ORDER. AFTER ANALYSING THE LEGA L POSITION, AS CLARIFIED BY HON'BLE GUJRAT HIGH COURT IN THE CASE OF P.V. DOSHI, SUPRA AND HON'BLE BOMBAY HIGH COURT IN THE CASE OF JAINARAVAN BABULAL VS CIT . 170 ITR 399, THE BENCH HELD AS THAT IF THE BLOCK ASSESSMENT ITSELF IS WITHOUT JURI SDICTION THEN ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 14 OF 38 THERE IS NO QUESTION OF LEVY OF ANY PENALTY U/S. 15 8BFA(2) AND THEREFORE IT IS OPEN TO THE ASSESSEE TO SET UP THE QUESTION OF VALIDITY OF THE ASSESSMENT IN THE APPEAL AGAINST TH E LEVY OF PENALTY. 8.9. WE ALSO DERIVE SUPPORT FROM ANOTHER JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INVENTORS INDUSTRIAL CORPORATION LTD VS CIT 194 ITR 548 (BOMBAY) WHEREIN IT WAS HELD THAT ASSESSEE WAS ENTITLED TO CHALLENGE THE JU RISDICTION OF THE AO TO INITIATE RE- ASSESSMENT PROCEEDINGS BEFOR E THE CIT(A) IN THE SECOND ROUND OF PROCEEDINGS, EVEN THOUGH HE HAD NOT RAISED IT IN EARLIER PROCEEDINGS BEFORE THE ASSESSI NG OFFICER OR IN THE EARLIER APPEAL. 8.10. THUS, ON THE BASIS OF AFORESAID DISCUSSION WE CAN SAFELY HOLD THAT AS PER LAW, THE ASSESSEE SHOULD BE PERMIT TED TO CHALLENGE THE VALIDITY OF ORDER PASSED U/S 263 ON T HE GROUND THAT THE IMPUGNED ASSESSMENT ORDER WAS NON EST AND WE HOLD ACCORDINGLY.' 10. THE DECISION OF THE ITAT IN THE CASE OF DHIRAJ SURI VS ACIT 98 ITD 87(DEL) IS WE FIND ON THE IDENTICAL FAC TS AS BEFORE US WHERE THE ORIGINAL ASSESSMENT ORDER PASSED IN BL OCK ASSESSMENT PROCEEDINGS WAS CHALLENGED IN APPEAL AGA INST LEVY OF PENALTY AND IT WAS HELD THAT IF THE BLOCK ASSES SMENT ITSELF WAS WITHOUT JURISDICTION ,NO PENALTY COULD BE LEVIE D. LD.DR WAS UNABLE TO POINT ANY DECISION TO THE CONTR ARY. IN VIEW OF THE ABOVE THEREFORE THE ADDITIONAL GROU NDS RAISED AND PRESSED BEFORE US I.E. GROUND NO.1,4 &5 ARE ADMITTED FOR ADJUDICATION. ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 15 OF 38 11. SINCE THE ADDITIONAL GROUNDS CHALLENGE THE VALI DITY OF THE PENALTY ORDER PASSED ITSELF, THE SAME WERE TAKEN UP FIRST FOR HEARING. 12. THE LD.COUNSEL FOR THE ASSESSEE BRIEFLY POINTED OUT THE FACTS OF THE CASE STATING THAT THE ASSESSEE IS A PA RTNERSHIP CONCERN AND IN CONSEQUENCE TO SEARCH ACTION U/S 1 32 OF THE ACT, CONDUCTED ON ONE OF THE PARTNERS, SHRI LAKHBIR SINGH AT 183-184-G, BRS NAGAR, LUDHIANA ON 08.01.1999, DURIN G THE COURSE OF WHICH CERTAIN INCRIMINATING DOCUMENTS PER TAINING TO THE ASSESSEE FIRM I.E. M/S PUNNIE B.K.O. WERE SEIZE D, PROCEEDINGS U/S 158BD OF THE ACT WERE INITIATED ON THE ASSESSEE. THAT TAKING INTO ACCOUNT THE CONTENTS OF DOCUMENTS FOUND AND SEIZED DURING SEARCH AND THE CONTENTIONS OF THE ASSESSEE, ASSESSMENT U/S 158BD OF THE ACT WAS COMPL ETED VIDE ORDER DATED 28.11.2001. THAT THE ASSESSEE HAD DECLARED UNDISCLOSED INCOME OF RS.7,50,000/- IN THE RETURN F ILED U/S 158BD WHICH WAS ASSESSED AT RS.70,13,557/- IN THE O RDER PASSED U/S 158BD OF THE ACT. THIS INCOME WAS COMPUT ED BY CALCULATING THE SALES OF THE ASSESSEE FIRM ON THE B ASIS OF THE DOCUMENTS SEIZED AND BY APPLYING THE GROSS PROFIT R ATE OF 23% ON THE SAME. ACCORDINGLY, AS THE ASSESSEE HAD CONCE ALED THIS INCOME, PENALTY PROCEEDINGS U/S 158BFA OF THE ACT W ERE INITIATED. THEREAFTER THE ASSESSEE WENT IN APPEAL A GAINST THE ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 16 OF 38 ASSESSMENT FRAMED, BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO. THE ASSESSEE FILED FURTHER APPEAL BEFORE THE HON'BLE ITAT WHO, VIDE THEIR ORDER DATED 09.01.2012 IN ITSS (A) NO.41/CHD/2003, DIRECTED THE APPLICATION OF NET PRO FIT RATE @ 7.85% ON THE SALES OUT OF THE BOOKS, FOR THE PURPO SE OF COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERI OD. IN ACCORDANCE WITH THE SAME THE UNDISCLOSED INCOME OF THE ASSESSEE WAS COMPUTED AT RS.21,88,988/- AS AGAINST RS.70,13,557/- ASSESSED. 13. DURING PENALTY PROCEEDINGS INITIATED U/S 158BFA OF THE ACT THE ASSESSEE WAS GIVEN OPPORTUNITY TO FILE ITS REPLY, AFTER CONSIDERING WHICH THE AO PROCEEDED TO LEVY PENALTY ON THE EXCESS UNDISCLOSED INCOME NOT RETURNED BY THE ASSES SEE @ 100% OF THE TAX SOUGHT TO BE EVADED ON THE SAME AND ACCORDINGLY, A PENALTY OF RS.9 LACS WAS LEVIED ON T HE ASSESSEE, CALCULATION OF WHICH IS AS UNDER: UNDISCLOSED INCOME AFTER THE APPEAL EFFECT TO THE ORDER OF HON'BLE ITAT RS.21,88,988/ - LESS:- UNDISCLOSED INCOME SHOWN BY THE ASSESSEE RS.7,50,000/- BALANCE UNDISCLOSED INCOME LIABLE FOR PENALTY RS.1 4,38,988/- TAX SOUGHT TO BE EVADED - 60% OF THE ABOVE RS. 8,63 ,393/- MINIMUM PENALTY LEVIABLE- 100% OF TAX SOUGHT TO BE EVADED MAXIMUM PENALTY LEVIABLE- 300% OF TAX RS.25,90,17 8/- ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 17 OF 38 SOUGHT TO BE EVADED KEEPING IN VIEW ALL THE FACTS ARID CIRCUMSTANCES OF THE CASE, THE ASSESSEE IS DIRECTED TO PAY AN AMOUNT OF RS. 9,00,0 007- AS PENALTY U/S 158BFA(2) OF THE INCOME TAX ACT, 1961. 14. AFTER APPRISING WITH THE FACTS AS ABOVE, THE L D.COUNSEL FOR THE ASSESSEE TOOK UP THE ADDITIONAL GROUNDS RAI SED BEFORE US AND STATED THAT HIS ARGUMENTS AND HIS CONTENTION S IN THE ADDITIONAL GROUNDS RAISED WAS TO THE EFFECT THAT TH E ASSESSMENT ORDER PASSED U/S 158BD OF THE ACT IN THE CASE OF THE ASSESSEE WAS VOID ABNITIO AND, THEREFORE, THE PENALTY ORDER PASSED IN CONSEQUENCE TO THE SAME ALSO DID NO T SURVIVE. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT IN T HE PRESENT CASE LEGALITY OF ASSESSMENT ORDER PASSED U/S 158BD OF THE ACT WAS BEING CHALLENGED BY HIM ON TWO GROUNDS: I) ON THE ABSENCE OF THE VALID SATISFACTION NOTE OF THE AO FOR ASSUMING JURISDICTION TO FRAME ASSESSMENT U/S 158BD OF THE ACT AND; II) ON THE ISSUE OF THE JURISDICTION OF THE AO TO FRAME ASSESSMENT. 15. TAKING UP THE ISSUE OF ABSENCE OF VALID SATISFA CTION THE LD.COUNSEL FOR THE ASSESSEE TOOK US TO PAPER BOOK P AGE NOS.72 TO 73 OF HIS PAPER BOOK AND POINTED OUT THAT THE SAME WAS THE SATISFACTION NOTE OF THE AO OF THE SEARCHED PERSON OBTAINED BY HIM FROM THE DEPARTMENT. HE POINTED OUT FROM THE SAME THAT IT WAS A TWO PAGES INCOMPLETE SATISFACTIO N NOTE WHICH WAS ALSO UNDATED AND UNSIGNED. IT WAS CONTEND ED THAT ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 18 OF 38 IT WAS NOT CLEAR THEREFROM AS TO WHEN THE SATISFACT ION HAD BEEN RECORDED WHETHER WITHIN TIME LEGALLY PERMISSIB LE TO DO SO, WHO HAD RECORDED THE SATISFACTION WHETHER IT WA S THE OFFICER WHO HAD JURISDICTION TO DO SO AND EVEN THE CONTENTS OF THE SATISFACTION NOTE WERE INCOMPLETE. HE CONTENDED THAT IT WAS EVIDENT THAT THE SATISFACTION HAD NOT BEEN RECO RDED TAKING A DISPASSIONATE VIEW ON THE MATERIAL AVAILABLE AND BEING UNDATED AND UNSIGNED, WAS NOT LEGALLY SUFFICIENT SA TISFACTION FOR ASSUMING JURISDICTION TO FRAME THE ASSESSMENT U /S 158BD OF THE ACT. IN THIS REGARD HE RELIED UPON THE DECIS ION IN THE CASE OF KATPADI TRADING PVT. LTD. VS. ACIT (2017) 8 3 TAXMANN.COM 83 (KOL.). 16. THE NEXT ISSUE RAISED BY HIM CHALLENGING THE VA LIDITY OF ASSESSMENT FRAMED WAS VIS--VIS JURISDICTION OF THE AO. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT WHILE TH E NOTICE TO FRAME ASSESSMENT U/S 158BD OF THE ACT WAS ISSUED BY THE DCIT (INVESTIGATION), CIRCLE-11(1), LUDHIANA, THE A SSESSMENT ORDER HAD BEEN PASSED BY THE ACIT, RANGE-IV, LUDHIA NA. HE DREW OUR ATTENTION TO THE RELEVANT DOCUMENTS PLACED AT PAPER BOOK PAGE NOS.74 AND 16 RESPECTIVELY. THE LD.COUNSE L FOR THE ASSESSEE CONTENDED THAT THERE WAS NO MENTION ANYWHE RE EITHER IN THE ASSESSMENT ORDER OF ANY ORDER HAVING BEEN P ASSED U/S 127 OF THE ACT FOR CHANGE OF JURISDICTION OF THE AO IN THE ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 19 OF 38 PRESENT CASE. HE, THEREFORE, CONTENDED THAT IN THE ABSENCE OF THE SAME THE ORDER PASSED IN THE PRESENT CASE WAS N OT VALID IN THE EYES OF LAW. HE RELIED UPON THE FOLLOWING CASE LAWS IN SUPPORT OF HIS CONTENTIONS: 1) D.S. BAHIYA & BROTHERS (HUF) VS. ITO (2001) 116 TAXMANN.COMM 178 (CHD). HE ALSO RELIED UPON FOLLOWING CASE LAWS: DILLIP KUMAR CHATTERJEE V. ASSISTANT COMMISSIONER O F INCOME TAX (OSD), BHUBANESWAR [2018] 97 TAXMANN.COM 283 (CUTTACK - TRIB.) 'WHERE ASSESSMENT PROCEEDINGS UNDER SECTION 143(2) WERE INITIATED BY ASSISTANT COMMISSIONER, CIRCLE -2(1), BHUBANESWAR BUT TAKEN OVER IN MIDDLE OF PROCEEDINGS BY ASSISTANT COMMISSIONER, (OSD), RANGE, 2 BHUBANESWAR AND COMPLETED BY HIM, SINCE THERE WAS NO ANY VALID TRAN SFER OF JURISDICTION AS REQUIRED UNDER SECTION 127, IMPUGNE D ASSESSMENT ORDER SO PASSED WAS UNJUSTIFIED' 17. HE FURTHER RELIED UPON THE DECISION OF THE HON' BLE APEX COURT IN THE CASE OF TAPAN KUMAR DUTTA VS. CIT, REP ORTED IN 92 TAXMANN.COM 67 FOR THE PROPOSITION THAT THE SATI SFACTION NOTE SHOULD REVEAL MENTAL AND DISPASSIONATE THOUGHT PROCESS OF THE AO IN ARRIVING AT THE CONCLUSION. 18. IN REBUTTAL, THE LD. DR POINTED OUT THAT THE AS SESSEES MATTER HAD GONE THROUGH SIX LEVELS OF SCRUTINY, THR EE TIMES IN THE QUANTUM PROCEEDINGS BEFORE THE AO, CIT(A) AND I TAT AND TWICE IN THE PENALTY PROCEEDINGS BEFORE THE AO AND CIT(A) AND SIXTH TIME NOW BEFORE US. HE CONTENDED THAT IT HAS BEEN 20 YEARS NOW SINCE THE SEARCH TOOK PLACE IN 1999 AND P ROCEEDINGS ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 20 OF 38 WERE INITIATED ON THE ASSESSEE AND IT IS ONLY AFTER THE LAPSE OF SO MUCH TIME AND SO MUCH OF SCRUTINY THAT THE ASSES SEE HAS NOW SOUGHT TO RAKE UP THIS ISSUE OF JURISDICTION, H AVING NEVER CHALLENGED THEM IN ALL THE THREE LEVELS RIGHT UP TO THE ITAT IN QUANTUM PROCEEDINGS, NOR IN PENALTY PROCEEDINGS BEF ORE THE AO OR EVEN THE CIT(A). HAVING SAID SO THE LD. DR PO INTED OUT THAT IT HAD TO BE KEPT IN MIND THAT THESE ARE VERY OLD ISSUES AND THE DOCUMENTS RELATING THERETO ARE ALSO VERY OL D BEING SOME 20 YEARS OR SO. HE THEREAFTER POINTED OUT THA T THE ASSESSEE HAS BEEN ABLE TO PROCURE TWO PAGES OF THE SATISFACTION NOTE AND, THEREFORE, IT IS DIFFICULT T O BELIEVE THAT THE THIRD PAGE WAS NEVER IN EXISTENCE AT ALL BUT IN FACT, HE CONTENDED, IT WAS ONLY MISSING FROM THE RECORDS. HE CONTENDED THAT THE CURRENT AO OF THE ASSESSEE HAD STATED ON OATH IN AN AFFIDAVIT, COPY OF WHICH WAS FILED BEFORE US, THAT THIRD PAGE IS ONLY MISSING AND NOT THAT IT WAS NEVER IN EXISTENCE AND THE SAME WAS EVIDENT FROM THE FACT THAT SUFFICIENT OPPO RTUNITY HAD BEEN GIVEN TO THE ASSESSEE FIRM CONFRONTING ALL DO CUMENTS IN POSSESSION OF THE DEPARTMENT AND THE ASSESSEE HAD N EVER IN THE PAST RAISED ANY SUCH OBJECTION AND THAT THE PRO CEEDINGS WERE INITIATED AFTER RECORDING NECESSARY SATISFACTI ON. OUR ATTENTION WAS DRAWN TO THE CONTENTS OF THE AFFIDAVI T PLACED BEFORE US AS ANNEXURE-D TO THE SUBMISSIONS FILED BY THE LD. DR DATED 16.03.2021 AS UNDER: ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 21 OF 38 ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 22 OF 38 19. THE LD. DR STATED THEREFORE THAT THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE THAT THE SATISFACTION OF THE AO WAS INCOMPLETE, UNDATED AND UNSIGNED NEEDED TO BE R EJECTED OUTRIGHTLY IN VIEW OF THE ABOVE. 20. AS FOR THE ARGUMENT VIS-A-VIS THE JURISDICTION OF THE AO, THE LD. DR CONTENDED THAT THE JURISDICTION HAD BEEN CHANGED ON ACCOUNT OF STRUCTURAL CHANGES MADE IN THE JURISD ICTION OF THE AO AT THAT POINT OF TIME. THE LD. DR HOWEVER E XPRESSED HIS INABILITY TO COME OUT WITH ANY SUCH DOCUMENTS. HE PLEADED BEFORE US THAT THIS CONTENTION OF THE ASSESSEE SHOU LD NOT BE ENTERTAINED AT ALL SINCE HE HAS RAISED THIS JURISDI CTION APPROVAL ISSUE AFTER 20 YEARS HAVING NEVER RAISED T HIS ISSUE ON FIVE OCCASIONS WHEN THE MATTER TRAVELLED IN THE QUA NTUM PROCEEDINGS FROM THE AO TO THE ITAT OR IN THE PENAL TY PROCEEDINGS FROM THE AO TO THE CIT(A). HE STATED TH AT IT WOULD NOT BE FAIR NOW TO HOLD THE ORDER PASSED IN BLOCK A SSESSMENT PROCEEDINGS TO BE VOID MERELY FOR THE REASON THAT A N ADMINISTRATIVE APPROVAL FOR TRANSFERRING THE CASE F ROM ONE AO TO ANOTHER COULD NOT BE LOCATED IN THE FILE THAT TO O ON THE ISSUE BEING RAISED AFTER 20 YEARS. SUBMISSIONS IN THIS REGARD WERE FILED IN WRITING BE FORE US AS UNDER: ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 23 OF 38 WRITTEN SUBMISSIONS BRIEF FACTS BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF SEARCH & SEIZURE OPERATIONS U/S 132 CARRIED OUT ON 08.01.1999 ON THE RESIDENTIAL PREMISES OF SH. LAKHB IR SINGH. LUDHIANA, SEVERAL INCRIMINATING DOCUMENTS PERTAINING TO THE ASSESSEE I.E. M/S PUNNIE BKO WERE FOUND AND SEIZED. ACCORDINGLY, THE ASSESSMENT PROCEEDINGS IN THE CASE OF THE APPELLANT ASSESSEE WERE INITIATED U/S 1 58BD OF THE ACT AND ASSESSMENT ORDER WAS PASSED ON 28.11.20 01. THE PENALTY PROCEEDINGS U/S 158BFA WAS INITIATED AN D NOTICE ISSUED & SERVED UPON THE ASSESSEE. THE ASSESSMENT ORDER PASSED U/S 158BD HAS GOT ITS FINALITY WITH THE ORDER OF THE HON'BLE ITAT, CHANDI GARH BENCH PASSED ON 09.01.2012 IN 1TSS NO. 41/CHD/2003. THEREAFTER, THE PENALTY PROCEEDINGS WERE TAKEN UP A ND PENALTY ORDER U/S 158BFA(2) WAS PASSED ON 29.08.201 2, WHICH WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD. CIT(A)- I, LUDHIANA. THIS APPEAL WAS DECIDED BY THE LD. CIT (A)-I, LUDHIANA VIDE ORDER DATED 27. 1 1 .20 17, WHICH IS NOW UNDER APPEAL. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE T HE HON'BLE ITAT, THE APPELLANT RAISED ADDITIONAL GROUN DS OF APPEAL, WHICH ARE CHALLENGED AND REQUESTED, NOT BE ADMITTED AT THIS STAGE, FOR THE DETAILED REASONS SUBMITTED B ELOW. 2. IN THE QUANTUM PROCEEDINGS IN ITSS NO. 41/CHD/20 03, THE HON'BLE ITAT HAD DEALT WITH THE ASSESSMENT ORDE R PASSED BY THE A.O. AND AFTER CONSIDERING THE SAID ORDER A VALID ORDER, CERTAIN RELIEF IN THE QUANTUM HAS BEEN ALLOWED TO T HE ASSESSEE. FURTHER, THE LEARNED COUNSEL IN THE WRITTEN SUBMISS IONS DATED 23.05.2019 MADE BEFORE THE HON'BLE ITAT, HAS NOT MA DE EVEN A SINGLE SENTENCE TO STATE THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS INVALID. ALL THESE ISSUES OF VALIDITY OF NOTICE U/S 158BD OF THE ACT AND THE JURISDICTION OF THE ASSESSING OFFICER HAVE TO BE CONTESTED BY THE ASSES SEE OR HIS A.R. IN THE ASSESSMENT PROCEEDINGS, WHICH THE ASSESSEE HAD NOT DONE AND BY THE DOCTRINE OF MERGER OF ORDER, THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT( APPEALS) HAVE NOW MERGED WITH THIS ORDER OF THE HON'BLE ITAT. THE ASSESSEE HAS NOT SUBMITTED A SINGLE ARGUMENT IN THE ENTIRE S ET OF SUBMISSION OF MORE THAN 300 PAGES, AS TO HOW THIS O RDER IS INVALID. ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 24 OF 38 2.1 IT IS REQUESTED THAT FIRSTLY THE ASSESSEE MAY KINDLY BE ASKED TO PROVE THAT THE ORDER OF THE HON'BLE ITAT PASSED ON 09.01.2012 IS INVALID. IT MAY KINDLY BE KEPT IN MIND THAT ORDER OF THE HON'BLE ITAT HAS NOT BEEN CH ALLENGED AT ANY FORUM BY THE ASSESSEE AND NOW IT HAS ATTAINED F INALITY. THE PLEA OF THE ASSESSEE BEFORE THE HON'BLE ITAT BE NCH TO ADJUDICATE ANOTHER ORDER OF THE SAME BENCH PASSED B Y A DIFFERENT SET OF HON'BLE MEMBERS, AFTER 9 YEARS OF THE SAID ORDER, IS TOTALLY INAPPROPRIATE. THAT ORDER HAS NOW ATTAINED FINALITY AND CANNOT BE REVISITED AND HENCE IT IS BE YOND DOUBT THAT THE ASSESSMENT PROCEEDINGS ARE VALID PROCEEDIN GS AND THE NOTICE ISSUED U/S 158BD IS A VALID NOTICE, AND THE SAME HAS STATED IN SO MANY WORDS BY THE FINAL FACT FINDING AUTHORITY. WITHOUT PREJUDICE TO THE ABOVE, THE SUBMISSIONS ARE BEING MADE ON THE ADDITIONAL GROUNDS OF APPEAL TAKEN BY T HE ASSESSEE, ALONGWITH THE OBSERVATION THAT THESE GROUNDS OF APPEAL WERE NOT TAKEN BY THE ASSESSEE IN THE PENALT Y PROCEEDINGS BEFORE THE A.O. AS WELL AS AT APPELLATE STAGE BEFORE THE LD. CIT (APPEALS) ALSO. SIMILARLY THESE GROUNDS WERE NOT TAKEN BY THE ASSESSEE IN THE APPELLATE PROCEEDI NGS FOR THE QUANTUM ADDITIONS. ADDITIONAL GROUND OF APPEAL NO. 1 THE ASSESSEE HAS STATED THAT THE COMPLETE SATISFACT ION NOTE OF THE A.O. IS NOW NOT AVAILABLE ON THE ASSESSMENT RECORDS AND ONLY 2 PAGES ARE ON RECORD, WHEREBY INCOMPLETE SATISFACTION IS THERE. BUT NONETHELESS, EVEN NOW, THE ASSESSEE HAS NOT SUB MITTED THAT THERE WAS NO SATISFACTION NOTE. IT IS CATEGORI CALLY SUBMITTED BY THE ASSESSING OFFICER THAT THERE IS A SATISFACTION NOTE DULY RECORDED AND IT WAS SO MENTIONED CLEARLY IN THE ASSESSMENT ORDER. HENCE, THE PLEA TAKEN BY THE ASSE SSEE THAT THE SATISFACTION NOTE OF THE A.O. IS ABSENT, I S FACTUALLY INCORRECT ONE. AN AFFIDAVIT SUBMITTED BY ASSESSING OFFICER AUTHENTICATING THE TWO PAGES OF THE SATISFACTION NO TE U/S 158BD IS ENCLOSED ALONG WITH THE COPY OF TWO PAGES CERTIFIED BY THE UNDERSIGNED AS EXISTING IN THE ASSESSMENT RE CORDS. ADDITIONAL GROUND OF APPEAL NO. 2 THE ASSESSEE HAS CONTENDED THAT THERE ARE TWO SATIS FACTION NOTES REQUIRED, ONE BY THE A.O. OF THE SEARCH PARTY AND THE OTHER BY THE ASSESSING OFFICER. ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 25 OF 38 THIS ISSUE HAS CLEARLY BEEN DECIDED BY THE APEX COU RT IN THE CASE OF M/S SUPER MALLS PVT. LTD. IN CIVIL APPEAL NOS. 2006 -07 OF 2020 (ARISING OUT OF SLP (C) NOS. 8449-50/2017] VIDE ORD ER DATED 05.03.2020, WHEREBY NEED FOR RECORDING OF TWO SATIS FACTION NOTES HAVE BEEN DONE AWAY IN A CASE WHERE THE ASSES SING OFFICER IS THE SAME IN THE CASE OF SEARCHED PARTY A ND THE ASSESSEE. THE ASSESSEE HAS NOT TAKEN A PLEA THAT TH ESE TWO A.O.S ARE NOT THE SAME IN THE INSTANT CASE, AND HEN CE THIS FACT IS NOT IN DISPUTE. THE ONLY CRITERIA WHICH HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IS THAT THERE MUST BE COM MENTS IN THE SATISFACTION NOTE THAT THE DOCUMENTS SEIZED BEL ONGS TO THE PERSON TO BE ASSESSED U/S 158BD OF THE ACT. ADDITIONAL GROUND OF APPEAL NO. 3 THE ASSESSEE HAS RAISED THAT THE NOTICE ISSUED U/S 158BD WAS WITHOUT JURISDICTION AND THUS THE ASSESSMENT FR AMED AND THE PENALTY LEVIED IS A NULLITY. THIS IS A VERY VAGUE ASSERTION MADE BY THE ASSESSEE THAT THE DCIT (INV. CIRCLE), LUDHIANA HAD NO JURISDICTION OV ER THE ASSESSEE'S CASE, SINCE SEARCH & SEIZURE OPERATION W AS NOT CARRIED OUT AT THE PREMISES OF THE ASSESSEE. IT IS JUST A LAME ASSERTION BY THE ASSESSEE, WHICH IS NOR DOCUMENTARILY EVIDENCED. HE HAS JUST PRONOUNCED THA T THE DC1T (LNV. CIRCLE), LUDHIANA HAD NO JURISDICTION OV ER THE CASE, BUT HAS NOT GIVEN ANY BASIS FOR THIS ASSERTION. FUR THER, HE DID NOT RAISE THIS ISSUE DURING THE ASSESSMENT PROCEEDI NGS OR AT THE APPELLATE STAGE AGAINST THE QUANTUM ORDER. THIS ISSUE WAS NOT EVEN RAISED DURING THE PENALTY PROCEEDINGS BEFORE THE A.O. AND THE LD. CIT (APPEALS). HE HAS NOW RAIS ED THIS PREPOSTEROUS ARGUMENT WITHOUT ANY EVIDENCE, ONLY BY MAKING A GENERAL AND VAGUE STATEMENT. FURTHER, THE ASSESSEE'S REFERENCE TO SECTION 124 IS TOTALLY IRRELEVANT IN VIEW OF THE ABOVE OBSERVATIONS. ADDITIONAL GROUND OF APPEAL NO. 4 THE ASSESSEE HAS AGAIN TAKEN TOTALLY INVALID AND VA GUE ARGUMENT. THE JURISDICTION OVER AN ASSESSEE CHANGES FROM TIME TO TIME AND FOR THIS PROPER JURISDICTION ORDER S ARE PASSED. ACCORDINGLY, THE ASSESSMENTS ARE COMPLETED BY THESE OFFICERS HAVING THE JURISDICTION OVER THE CASE ON THAT PARTI CULAR TIME. IT IS IN HUNDREDS OF ASSESSMENT/CASES THAT THE NOTICE INITIATING ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 26 OF 38 ASSESSMENT PROCEEDINGS ARE ISSUED BY DIFFERENT A.O. AND THE ASSESSMENTS ARE COMPLETED BY THE DIFFERENT A.O, HOL DING THE JURISDICTION OVER THE CASE AT THAT TIME. THE CASE LAWS CITED BY THE ASSESSEE ARE ON DIFFEREN T FACTS AND ARE NOT RELEVANT TO THIS CASE, AS MUCH AS THE PROCEEDINGS WERE INITIATED IN THOSE CASES WERE BY T HE A.O. NOT HAVING JURISDICTION OVER THE CASE. APART FROM THE LAME AND BLATANTLY VAGUE ASSERTION B Y THE ASSESSEE, HE COULD NOT FURNISH ANY DOCUMENTARY EVID ENCE SUPPORTING THESE ADDITIONAL GROUNDS OF APPEAL TAKEN . 3. IN VIEW OF THE FOREGOING IT IS PRAYED THAT THE A DDITIONAL GROUNDS OF APPEAL RAISED MAY KINDLY BE DISMISSED AN D APPEAL FILED BY THE ASSESSEE MAY BE DISMISSED. 21. WE HAVE CAREFULLY AND PATIENTLY HEARD BOTH THE PARTIES. THE CHALLENGE TO THE VALIDITY OF THE PENALTY ORDER, PASSED IN THE PRESENT CASE U/S 158BFA OF THE ACT, IS ON THE B ASIS THAT THE ASSESSMENT ORDER PASSED U/S 158BD OF THE ACT, O F WHICH THE PENALTY PROCEEDINGS WERE AN OFFSHOOT, WAS ITSEL F BAD IN LAW. IN SHORT, THE VALIDITY OF THE ORIGINAL PROCEED INGS, BASED ON WHICH THE PRESENT PENALTY ORDER HAS BEEN PASSED, HA S BEEN CHALLENGED BEFORE US. THE CHALLENGE TO THE VALIDITY OF THE ASSESSMENT ORDER IS ON THE GROUND OF ABSENCE OF VAL ID SATISFACTION OF THE AO OF THE SEARCHED PERSON FOR I NITIATING PROCEEDINGS U/S 158BD OF THE ACT, WHICH IS A NECESS ARY PREREQUISITE, AND ON THE ABSENCE OF VALID JURISDICT ION OF THE AO TO FRAME ASSESSMENT. 22. WE ARE NOT CONVINCED WITH THE CONTENTIONS OF TH E LD.COUNSEL FOR THE ASSESSEE. ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 27 OF 38 23. TO BEGIN WITH, TO HOLD AN ORDER INVALID IN COLL ATERAL PROCEEDINGS, HAVING NEVER BEEN SO CHALLENGED IN THE ORIGINAL PROCEEDINGS, THERE HAS TO BE CONVINCING AND COMPELL ING BASIS/REASONS TO HOLD SO, WITH NO OCCASION OR SCOPE FOR ANY DOUBT REGARDING THE BASIS OF CHALLENGE. THIS IS SO, CONSIDERING THAT IN THE ORIGINAL PROCEEDINGS THE VALIDITY OF TH E ORDER WAS NEVER CHALLENGED AND THE ORDER SURVIVES AS BEING ME RGED IN THE APPELLATE ORDER. AND IT IS ONLY IN SEPARATE, IN DEPENDENT COLLATERAL PROCEEDINGS THAT THE ORDER IS BEING SOUG HT TO BE DISLODGED AS INVALID. 24. HAVING SAID SO, IN THE FACTS OF THE PRESENT CAS E WE FIND THAT THE LD.COUNSEL FOR THE ASSESSEE HAS CHALLE NGED VALIDITY OF THE ORDER PASSED U/S 158BD OF THE ACT, BASED ON DOCUMENTS AVAILABLE OR ABSENT FROM THE RECORDS, WHICH DOCUMEN TS UNDOUBTEDLY ARE AT LEAST 20 YEARS OLD. WITH RESPECT TO THE ABSENCE OF A VALID SATISFACTION OF THE AO OF THE SE ARCHED PERSON FOR INITIATING PROCEEDINGS U/S 158BD OF THE ACT, HIS SUBMISSION IS THAT IT IS INCOMPLETE SATISFACTION WI TH THE FINAL PAGE MISSING. THAT, IT IS AN UNSIGNED INCOMPLETE SA TISFACTION NOTE, AND DOES NOT REVEAL A DISPASSIONATE VIEW OF T HE AO WHILE RECORDING THE SATISFACTION ON THE MATERIAL WITH HIM . WITH RESPECT TO THE JURISDICTION OF THE AO TO PASS ORDER HIS SUBMISSION IS THAT THERE WAS NOTHING ON RECORD TO P ROVE THE ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 28 OF 38 VALID TRANSFER OF JURISDICTION FROM THE AO WHO HAD ISSUED NOTICE U/S 158 BD OF THE ACT TO THE AO WHO HAD FIN ALLY PASSED THE ORDER, THEREFORE, DEMONSTRATING THE LACK OF JURISDICTION OF THE AO TO FRAME ASSESSMENT U/S 158B D OF THE ACT. 25. THE ASSESSEE, BY RAISING THESE ISSUES AFTER 20 YEARS, IS APPARENTLY SEEKING REPRIEVE ON THE BASIS OF INCOM PLETE DOCUMENTS OR DOCUMENTS NOT AVAILABLE ON RECORD, AF TER A LAPSE OF SUCH A LONG PERIOD OF TIME, WHICH IN OUR VIEW IS NOT CONVINCING ENOUGH TO DISLODGE AN ORDER AS BEING INV ALID. WE CANNOT ALLOW THE ASSESSEE TO DO SO WHEN THE PROBABI LITY OF DOCUMENTS GOING MISSING FROM THE FILE CANNOT BE DEN IED CONSIDERING THE LAPSE OF SUCH A LONG PERIOD OF TIM E OF 20 YEARS TO WHICH THE DOCUMENTS RELATE AND THE ASSESSEE NE VER HAVING RAISED THIS ISSUE ON ANY OF THE EARLIER OCCA SIONS IN APPEAL AVAILABLE TO IT WHEN THERE COULDNT HAVE BE EN SUCH POSSIBILITY. MOREOVER WE CANNOT ALSO IGNORE THE AFFIDAVIT OF THE AO, WHO HAS STATED ON OATH THAT THERE IS EVERY PROBABILITY THAT THIRD AND FINAL PAGE OF THE SATISFACTION NOTE, BRINGING COMPLETENESS TO IT, IS MISSING, BEING A 20 YEARS OL D RECORD AND ALSO POINTING OUT THE OBSERVATION OF THE JCIT, RANG EIV, LUDHIANA, ON THE ASSESSES APPLICATION BEFORE HIM U/ S 144A OF THE ACT, W.R.T. LACK OF SUFFICIENT OPPORTUNITY OF H EARING, THAT ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 29 OF 38 ALL RECORDS AND MATERIALS WERE SHOWN TO THE ASSESSE E DURING ASSESSMENT PROCEEDINGS. WHILE THE AO HAS STATED ON OATH IN THE AFFIDAVIT FILED BEFORE US THAT IT IS NOTED ON R ECORD THAT ALL DOCUMENTS WERE SHOWN TO THE ASSESSEE DURING ASSESSM ENT PROCEEDINGS, THE LD.COUNSEL FOR THE ASSESSEE HAS BE EN UNABLE TO BRING BEFORE US ANY EVIDENCE COMPELLINGLY PROVIN G THAT THE THIRD PAGE OF THE SATISFACTION NOTE WAS NEVER IN EX ISTENCE AT ALL. THEREFORE, AT THIS STAGE IN THE SIXTH OCCASION AVAILABLE WITH THE ASSESSEE, WE ARE UNABLE TO AGREE WITH THE LD.COUNSEL FOR THE ASSESSEE AND ARE NOT CONVINCED WITH HIS ARG UMENTS THAT THE ASSESSMENT ORDER BE HELD INVALID ON ACCOU NT OF A PURPORTEDLY INCOMPLETE SATISFACTION NOTE ,OR ON ACC OUNT OF ABSENCE OF DOCUMENT DEMONSTRATING VALID TRANSFER OF JURISDICTION TO THE AO PASSING THE ORDER. THE CONTE NTION OF THE LD. DR, THAT IN ALL PROBABILITY THE THIRD AND FINA L PAGE OF THE SATISFACTION NOTE HAS ACTUALLY GONE MISSING FROM TH E RECORDS SO ALSO THE DOCUMENT AUTHORIZING THE AO TO PASS THE ORDER, CANNOT BE OUTRIGHTLY REJECTED IN THE FACTS AND CIRC UMSTANCES OF THE CASE. 26. WE THEREFORE DO NOT FIND ANY MERIT IN THE GROUN DS RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE ORI GINAL PROCEEDINGS WHILE CONTENDING THE PRESENT PENALTY P ROCEEDINGS TO BE INVALID. ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 30 OF 38 THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IN GR OUND NOS.1, 4 AND 5 ACCORDINGLY ARE, THEREFORE, DISMISS ED BY US. 27. TAKING UP THE ORIGINAL GROUNDS RAISED BY THE L D.COUNSEL FOR THE ASSESSEE CHALLENGING THE LEVY OF PENALTY ON THE MERITS, IN THIS REGARD HE DREW OUR ATTENTION TO THE ASSESSM ENT ORDER PASSED U/S 158BD OF THE ACT, CIT(A) ORDER AND ITAT ORDER POINTING OUT THEREFROM THAT THE ADDITION IN THE PRE SENT CASE HAD BEEN MADE MERELY BY ESTIMATING THE GROSS PROFIT EARNED BY THE ASSESSEE ON THE UNDISCLOSED SALES @ 23% AS AGAI NST 6% RETURNED BY THE ASSESSEE WHICH ESTIMATION WAS UPHEL D BY THE LD.CIT(A) WHILE THE ITAT HAD DIRECTED THE SAME TO B E ESTIMATED AT NET PROFIT RATE OF 7.85% OF THE SALES. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT IT IS EV IDENT THAT THE UNDISCLOSED INCOME OF THE ASSESSEE ON WHICH PEN ALTY HAD BEEN INITIATED WAS AN ESTIMATED ADDITION AND NO PEN ALTY WAS LEVIABLE ON SUCH ESTIMATION. HE RELIED ON THE FOLLO WING CASE LAWS IN SUPPORT OF HIS CONTENTION THAT NO PENALTY W AS LEVIABLE ON ESTIMATED ADDITION; 1) SMT.BITOLI DEVI VS. ACIT(2009) 31 SOT 30 (LUCKNOW-URO), ORDER DATED 27.04.2007. 2) DR.HAKEEMM S.A. SYED SATHAR VS. ACIT, CC-II(5) (2009) 120 ITD 1 (CHENNAI ORDER DATED 14.07.2008. 3) CIT VS. SANGRUR VANASPATI MILLS LTD., 303 ITR 53 (P&H). ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 31 OF 38 4) CIT VS. RAVAIL SINGH & CO., 254 ITR 191 (P&H) 5) CIT VS. AERO TRADERS PVT. LTD., 322 ITR 316 (DEL). 6) ACIT VS. SHANTI KUMAR CHHABRA (2009) 32 SOT 21 (JAIPUR) ORDER DATED 26.10.2007. 7) CHANDRAKANT A. GANDHI VS. ACIT, CIRCLE-3 (2013) 40 TAXMANN.COM 432 (AHMEDABAD-TRIB. 8) CIT VS. DR.GIRIRAJ AGARWAL GIRI (2013) 33 TAXMANN.COM 536 (RAJASTHAN) ORDER DATED 16.03.2012. 9) BEENA RANI VS. DCIT (2011) 15 TAXMANN.COM 155 (DELHI)-G) ORDER DATED 31.05.2010. 28. THE LD. DR, ON THE OTHER HAND, POINTED OUT THAT IT WAS NOT A CASE OF MERE ESTIMATION BUT THE FACT WAS THAT THE ESTIMATION WAS ONLY WITH RESPECT TO THE PROFIT RATE TO BE APPLIED ON THE UNDISCLOSED/OUT OF THE BOOK SALES OF THE ASSESSEE FOR THE PURPOSE OF DETERMINING THE UNDISCL OSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. THE FA CT THAT THERE WAS UNDISCLOSED SALES OUT OF THE BOOKS, HAS B EEN CONFIRMED AND THE ESTIMATION WAS ONLY FOR THE PURPO SE OF DETERMINING THE INCOME THEREFROM AND, THEREFORE, TH E PENALTY RELATED TO THE UNDISCLOSED PROFITS OF THE ASSESSEE PERTAINING TO THE UNDISCLOSED SALES FOR THE BLOCK PERIOD WHICH HA D, THEREFORE, BEEN RIGHTLY LEVIED. 29. WE HAVE HEARD BOTH THE PARTIES. PENALTY IN THE PRESENT CASE HAS BEEN IMPOSED U/S 158BFA OF THE ACT, ON THE ADDITION MADE TO THE UNDISCLOSED INCOME RETURNED BY THE ASSE SSEE ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 32 OF 38 CONSEQUENT TO SEARCH ACTION UNDERTAKEN ON IT U/S 13 2 OF THE ACT. THE UNDISCLOSED INCOME RETURNED BY THE ASSESSE E RELATED TO PROFITS EARNED ON SALES OUTSIDE THE BOOKS OF THE ASSESSEE. THE ORDERS PASSED IN QUANTUM PROCEEDINGS BY THE AO, CIT(A) AND THE ITAT, COPIES OF WHICH WERE FILED BEFORE US IN PAPER BOOK, REVEAL THAT THE QUANTUM OF SALES OUTSIDE THE BOOKS AS DISCLOSED BY THE ASSESSEE WAS SIMILAR TO THAT WORKE D OUT BY THE AO. THE DIFFERENCE WAS ONLY ON ACCOUNT OF ESTIM ATION OF PROFITS, THE ASSESSEE HAVING ESTIMATED THE GP AT TH E RATE OF 6% OF SALES, THE AO INCREASING IT TO 23% ON THE BASIS OF AVERAGE GROSS PROFIT AS DISCLOSED BY THE ASSESSEE IN PRECE DING YEARS, REJECTING THE GROSS PROFIT RATES CALCULATED BY THE ASSESSEE FOR THE BLOCK PERIOD FINDING FLAWS IN THE MANNER OF CAL CULATION. THE CIT(A) UPHELD THE SAME. THE ITAT ON THE OTHER H AND HELD THAT APPLICATION OF NET PROFIT RATE WAS APPROPRIATE AND HELD AN ESTIMATION OF NET PROFIT @ 7.85% AS REASONABLE. 30. IT IS ABUNDANTLY CLEAR THAT THE ADDITION MADE TO THE UNDISCLOSED INCOME IS NOT ON ACCOUNT OF ANY POSITIV E CONCEALMENT BY THE ASSESSEE BUT MERELY A RESULT OF ESTIMATION. THE UNACCOUNTED SALES BASED ON DOCUMENT S FOUND DURING SEARCH HAVE BEEN DULY RETURNED BY THE ASSESS EE AND THE ADDITION MADE IS NOT ON ACCOUNT OF THE SAME. TH E ADDITION IS MERELY ON ACCOUNT OF ESTIMATION OF PROFITS ON TH E SAID SALES ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 33 OF 38 WHICH, AS IS EVIDENT FROM THE ORDERS IN QUANTUM PRO CEEDINGS, IS NOT BASED ON ANY MATERIAL FOUND DURING SEARCH. 31. THE DELHI BENCH OF THE ITAT IN THE CASE OF BEEN A RANI (SUPRA), RELIED UPON BY THE LD.COUNSEL FOR THE ASSE SSEE BEFORE US, WE FIND TOOK NOTE OF THE ANALYSIS OF THE PROVI SIONS OF SECTION 158BFA OF THE ACT BY THE HONBLE DELHI HIG H COURT IN CIT VS HARKARAN DAS VEDPAL (2009) 117 TAMAN 398,WHE REIN IT WAS HELD THAT FOR THE PURPOSES OF LEVY OF PENALTY U /S 158BFA OF THE ACT THE COMPUTATION OF UNDISCLOSED INCOME HA S TO BE BASED ON MATERIAL FOUND DURING SEARCH, AND DELETED PENALTY LEVIED ON ESTIMATED ADDITION OF PROFITS, IDENTICAL TO THAT IN THE CASE BEFORE US. THE RELEVANT FINDINGS ARE AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THIS WAS ONE OF THE CONTENTIONS RAISED BY THE ASSESSEE BEFORE THE AO THAT THERE IS NO EVIDENCE GATHERED DURING SEARCH TO ENABLE THE DEPARTMENT TO ESTIMATE GROSS PROFIT AT HIGHER RATE. ON P. 12 OF THE ASSESS MENT ORDER, THE AO HAS NOTED ABOUT THIS CONTENTION OF THE ASSESSEE RAISED BEFORE HIM AND IN SPITE OF THIS ALSO, IT IS NOT THE CASE OF THE AO THAT SOME EVIDENCE WAS GATHERED IN THE COURSE OF SE ARCH SUGGESTING SOME UNDISCLOSED INCOME BELONGING TO THE ASSESSEE. AS PER THE PROVISIONS OF S. 158BB(1), THE UNDISCLOS ED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD HAS TO BE COMPUTE D ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH AND R EQUISITION OF BOOKS OF ACCOUNTS AND OTHER DOCUMENTS AND SUCH OTHE R MATERIAL AND INFORMATION AS ARE AVAILABLE WITH THE AO AND RE LATABLE TO SUCH EVIDENCE. IN THE PRESENT CASE, WE DO NOT FIND ANY MENTION OF ANY EVIDENCE FOUND AS A RESULT OF SEARCH BASED O N WHICH ANY UNDISCLOSED INCOME CAN BE COMPUTED IN THE HANDS OF THE PRESENT ASSESSEE. THE BASIS OF ADDITION MADE BY THE AO IS T HE INFORMATION AVAILABLE WITH THE AO REGARDING UNDER R ECORDING OF PURCHASE CONSIDERATION BUT SUCH OTHER INFORMATION I S NOT ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 34 OF 38 RELATABLE TO ANY EVIDENCE FOUND IN THE COURSE OF SE ARCH AND HENCE IN OUR CONSIDERED OPINION SUCH AN ADDITION CA NNOT BE MADE IN THE COURSE OF BLOCK ASSESSMENT AND EVEN IF MADE, SUCH ADDITION CANNOT BE EQUATED WITH THE UNDISCLOSED INC OME. IT WAS HELD BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. HARKARAN DAS VED PAL (SUPRA) THAT A PRE CONDITION F OR IMPOSITION OF PENALTY UNDER S. 158BFA(2) IS THAT THERE MUST BE A DETERMINATION OF UNDISCLOSED INCOME BY THE AO UNDER CL. (C) OF S. 158BC OF THE SAID ACT AND IF THIS IS NOT SATISFIED, THEN THERE WOULD BE NO QUESTION OF IMPOSITION OF ANY PENALTY. THEREAFTER, IT IS OBSERVED BY HONBLE HIGH COURT OF DELHI IN PARA 22 OF THIS JUDGMENT THAT IN THAT CASE, THE COMPUTATION OF UNDI SCLOSED INCOME BY THE AO CANNOT BE CONSTRUED AS UNDISCLOSED INCOME DETERMINED BY THE AO UNDER CL. (C) OF S. 158BC. IT IS FURTHER OBSERVED BY THE HONBLE HIGH COURT OF DELHI THAT TH E TRIBUNAL HAS ALREADY RETURNED A FINDING THAT THERE IS NO EVI DENCE FOUND AS A RESULT OF SEARCH. IN THAT CASE ALSO, THE ASSES SMENT WAS MADE IN BLOCK ASSESSMENT BY ESTIMATING NET PROFIT @ 1 PER CENT AND IT WAS NOTED BY THE TRIBUNAL THAT THE SAME IS M ERE A GUESSWORK. IN THE PRESENT CASE ALSO, ADDITION HAS B EEN MADE TO THE INCOME OF THE ASSESSEE BY ESTIMATING THE GROSS PROFIT AT HIGHER RATE WITHOUT ANY REFERENCE TO ANY SEIZED MAT ERIAL FOUND IN THE COURSE OF SEARCH AND HENCE AS PER THIS JUDGM ENT OF HONBLE HIGH COURT OF DELHI, SUCH AN INCOME CANNOT BE TREATED AS UNDISCLOSED INCOME DETERMINED UNDER CL. (C) OF S . 158BC AND HENCE NO PENALTY UNDER S. 158BFA(2) CAN BE IMPOSED IN SUCH A CASE. THE RELEVANT PARAS I.E. PARAS 20-22 OF THIS J UDGMENT OF HONBLE HIGH COURT OF DELHI ARE REPRODUCED BELOW : '20. THE EXPRESSION UNDISCLOSED INCOME DETERMINED HAS TO BE UNDERSTOOD IN THE CONTEXT USED IN S. 158BFA(2). IT REFERS TO THE UNDISCLOSED INCOME DETERMINED BY THE AO UNDER CL. ( C) OF S. 158BC. SEC. 158BC PRESCRIBES THE PROCEDURE FOR BLOC K ASSESSMENT. CLAUSE (B) THEREOF STIPULATES AS UNDER : (B) THE AO SHALL PROCEED TO DETERMINE THE UNDISCLO SED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN S. 158B B AND THE PROVISIONS OF S. 142, SUB-SS. (2) AND (3) OF S. 143 , S. 144 AND S. 145 SHALL, SO FAR AS MAY BE, APPLY; THIS IS FOLLOWED BY CL. (C) WHICH READS AS UNDER : (C) THE AO, ON DETERMINATION OF THE UNDISCLOSED IN COME OF THE BLOCK PERIOD IN ACCORDANCE WITH THIS CHAPTER, SHALL PASS AN ORDER OF ASSESSMENT AND DETERMINE THE TAX PAYABLE BY HIM ON THE BASIS OF SUCH ASSESSMENT; ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 35 OF 38 THUS, DETERMINATION OF THE UNDISCLOSED INCOME HAS T O BE DONE IN THE MANNER LAID DOWN IN S. 158BB AND THE PROVISIONS OF S. 142, SUB-SS. (2) AND (3) OF S. 143, S. 144 AND S. 145 SH ALL, SO FAR AS MAY BE, APPLY. SEC. 158BB DEALS WITH COMPUTATION OF UNDISCLOSED IN COME OF THE BLOCK PERIOD. SEC. 158BB(1), SO MUCH AS IS RELEVANT FOR OUR PURPOSES, READS AS UNDER : 158BB. COMPUTATION OF UNDISCLOSED INCOME OF THE BL OCK PERIOD.(1) THE UNDISCLOSED INCOME OF THE BLOCK PER IOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS Y EARS FALLING WITHIN THE BLOCK PERIOD COMPUTED, IN ACCORDANCE WIT H THE PROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENCE FO UND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTH ER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAI LABLE WITH THE AO AND RELATABLE TO SUCH EVIDENCE, AS REDUCED B Y THE AGGREGATE OF THE TOTAL INCOME, OR AS THE CASE MAY B E, AS INCREASED BY THE AGGREGATE OF THE LOSSES OF SUCH PR EVIOUS YEARS, DETERMINED. THIS PROVISION CLEARLY STIPULATES THAT THE UNDISCLO SED INCOME OF THE BLOCK PERIOD HAS TO BE DETERMINED OR COMPUTED ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISIT ION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE AO AND RELATA BLE TO SUCH EVIDENCE. THIS COURT IN RAVI KANT JAINS CASE (SUP RA), AS INDICATED ABOVE, HAS ALREADY OBSERVED THAT THE PROC EDURE OF ASSESSMENT UNDER CHAPTER XIV-B IS A SPECIAL PROCEDU RE INTENDED TO PROVIDE A MODE OF ASSESSMENT OF UNDISCL OSED INCOME WHICH HAS BEEN DETECTED AS A RESULT OF SEARC H. THE PROCEDURE UNDER CHAPTER XIV-B IS NOT INTENDED AS A SUBSTITUTE TO REGULAR ASSESSMENT AND ITS SCOPE AND AMBIT IS LI MITED IN THAT SENSE TO MATERIALS UNEARTHED DURING THE SEARCH. AS POINTED OUT IN RAVI KANT JAINS CASE (SUPRA), THE ASSESSMENT FO R THE BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF EVIDENCE FO UND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION A S ARE AVAILABLE WITH THE AO AND RELATABLE TO SUCH EVIDENC E. IT IS, THEREFORE, CLEAR THAT THE UNDISCLOSED INCOME, WHICH IS TO BE DETERMINED UNDER CHAPTER XIV-B, HAS TO BE DETERMINE D ON THE BASIS OF EVIDENCE DISCOVERED DURING THE SEARCH. IT IS OBVIOUS THAT WHERE THE COMPUTATION OF UNDISCLOSED INCOME IS BASE D ON MATERIAL OTHER THAN WHAT WAS FOUND IN THE COURSE OF THE SEARCH, THE SAME COULD NOT BE TREATED AS UNDISCLOSED INCOME DETERMINED UNDER CL. (C) OF S. 158BC. ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 36 OF 38 21. GOING BACK TO S. 158BFA(2), THE AO HAS BEEN EMP OWERED TO IMPOSE PENALTY ON A PERSON WHEN THE UNDISCLOSED INC OME DETERMINED UNDER CL. (C) OF S. 158BC, IS IN EXCESS OF THE UNDISCLOSED INCOME RETURNED BY SUCH PERSON IN PURSU ANCE TO A NOTICE UNDER S. 158BD/158BC. IN OTHER WORDS, A PRE- CONDITION FOR THE IMPOSITION OF PENALTY UNDER S. 158BFA(2) IS THAT THERE MUST BE A DETERMINATION OF THE UNDISCLOSED INCOME B Y THE AO UNDER CL. (C) OF S. 158BC OF THE SAID ACT. IF THIS IS NOT SATISFIED, THEN THERE WOULD BE NO QUESTION OF IMPOSING ANY PEN ALTY. 22. IN THE PRESENT CASE, WE FIND THAT THE COMPUTATI ON OF UNDISCLOSED INCOME BY THE AO CANNOT BE CONSTRUED AS UNDISCLOSED INCOME DETERMINED BY THE AO UNDER CL. (C) OF S. 158BC. THE TRIBUNAL HAS ALREADY RETURNED A FINDING THAT THERE IS NO EVIDENCE FOUND AS A RESULT OF SEARCH, WHICH S UGGESTS THAT THE TRANSACTIONS FOR THE WHOLE YEAR OF 1999-2000 RE QUIRED ANY INVESTMENT IN THE FIRST INSTANCE. THE TRIBUNAL HAS ALSO FOUND AS A FACT THAT NO AMOUNT WAS FOUND TO HAVE BEEN INVEST ED BY THE ASSESSEE IN THE FIRST INSTANCE FOR THE TRANSACTIONS OF THE WHOLE YEAR. THE TRIBUNAL ALSO FOUND THAT EVEN THE ESTIMAT E OF 1 PER CENT NET PROFIT WAS MERE GUESSWORK. ON THE BASIS OF THESE FACTS IT IS APPARENT THAT THE UNDISCLOSED INCOME HAS BEEN COMPUTED MERELY ON THE BASIS OF THE SURRENDER MADE BY THE AS SESSEE IN THE COURSE OF THE BLOCK ASSESSMENT PROCEEDINGS. DE HORS THE SURRENDER, THERE IS NO EVIDENCE WHICH COULD HAVE BE EN SAID TO HAVE BEEN FOUND AS A RESULT OF THE SEARCH AND, THER EFORE, THE COMPUTATION OF UNDISCLOSED INCOME BY THE AO IN TH E BLOCK ASSESSMENT PROCEEDINGS CANNOT BE CONSTRUED AS A DETERMINATION OF UNDISCLOSED INCOME CONTEMPLATED UNDER S. 158BC(C) OR 158BB. THUS, EVEN DE HORS THE QUESTION OF APPLICABILITY OF THE DECISION IN SIR SHADI LAL SUGA R & GENERAL MILLS LTD.S CASE (SUPRA) AND WITHOUT CONSIDERING T HE PROVISIONS OF S. 271(1)(C) OF THE SAID ACT OR THE EFFECT OF TH E INSERTION OF THE EXPLANATION THEREIN, WHEN THERE IS A BONA FIDE SURR ENDER AND THE UNDISCLOSED INCOME IS COMPUTED MERELY ON THE BA SIS OF SUCH SURRENDER, NO PENALTY WOULD BE IMPOSABLE UNDER S. 1 58BFA(2) OF THE SAID ACT. THIS WOULD BE BECAUSE THERE IS NO DETERMINATION OF UNDISCLOSED INCOME BY THE ASSESS EE UNDER CL. (C) OF S. 158BC, WHICH IS THE REQUIREMENT FOR IMPOS ITION OF PENALTY. THE SUM AND SUBSTANCE OF ALL THIS IS THAT, HAD THERE BEEN NO SURRENDER, THE AO COULD NOT HAVE DETERMINED THE UNDISCLOSED INCOME IN AS MUCH AS THE TRIBUNAL HAS R ETURNED A FINDING OF FACT THAT THERE IS NO EVIDENCE RELATABLE TO THE SEARCH ON THE BASIS OF WHICH SUCH UNDISCLOSED INCOME COULD HAVE BEEN DETERMINED.' ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 37 OF 38 6. BY RESPECTFULLY FOLLOWING THIS JUDGMENT OF HONB LE HIGH COURT OF DELHI, WE HOLD THAT AFTER THE CONSIDERATION OF T HE FACTS OF THE PRESENT CASE AS PER WHICH, THE ADDITION IS NOT MADE ON THE BASIS OF ANY EVIDENCE FOUND IN THE COURSE OF SEARCH, THE PENALTY IMPOSED BY THE AO UNDER S. 158BFA(2) IS NOT SUSTAIN ABLE. REGARDING TWO CITATIONS GIVEN BY THE LEARNED DEPART MENTAL REPRESENTATIVE, WE FIND THAT AS PER THESE CITATIONS , NO JUDGMENT IS AVAILABLE IN THE RESPECTIVE JOURNALS I.E. TTJ AN D IN TAXMAN. 32. THE ISSUE IS SQUARELY COVERED BY THE AFORESAID DECISION FOLLOWING WHICH WE HOLD THAT IN THE FACTS OF THE PR ESENT CASE WHERE ADDITION TO UNDISCLOSED INCOME IS ON ACCOUNT OF MERE ESTIMATION/GUESSWORK ,IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 158BFA OF THE ACT. THE PENALTY SO LEVIED AMOUNTING TO RS. 9 LACS IS TH EREFORE DIRECTED TO BE DELETED. GROUNDS OF APPEAL NO.1&2 RAISED BY THE ASSESSEE ARE ALLOWED. 33. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED ORDER PRONOUNCED ON 30 TH SEPTEMBER, 2021. SD/- SD/- (R.L. NEGI) (ANNAPURNA GUPTA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED: 30 TH SEPTEMBER, 2021 * * ITSS(A) NO.1/CHD/2018 B.P.01.04.1988 TO 08.01.1999 PAGE 38 OF 38 (+! ,-.- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ( )/ THE CIT(A) 5. -01 2 , &2 , 34516 / DR, ITAT, CHANDIGARH 6. 157% / GUARD FILE (+ $ / BY ORDER, / ASSISTANT REGISTRAR