Ram Ratan Modi, Kolkata V. DCIT, CC-XXVIII, Kolkata

ITSSA 10/KOL/2002

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7887 (ITAT-KOLKATA)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 30-08-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH AIBOR JOYEL SAWKRIE
• Assessee Lawyers: AJOY KUMAR GUPTA
• Keywords: Revision of order; Opportunity of being heard; Question of law; Difference of opinion; Block assessment; Change of opinion; Set aside
• Section: 158BC; 73; 13; 153; 22; 131; 263; 132; 10

Judgement Text

1 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI P. M. JAGTAP, VICE PRESIDENT & SHRI A . T. VARKEY, JUDICIAL MEMBER ] I.T(SS).A. NO. 10/KOL/2002 BLOCK PERIOD : 01.04.1986 TO 27.08.1996 RAM RATAN MODI (PAN: VS . ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-XXVIII, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 13.08.2021 DATE OF PRONOUNCEMENT 27.08.2021 FOR THE APPELLANT SHRI AJOY KUMAR GUPTA, AR FOR THE RESPONDENT SHRI DINESH AIBOR JOYEL SAWKRIE, CIT, DR ORDER PER SHRI A.T. VARKEY, JM : THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE ASSESSING OFFICER ( HEREINAFTER REFERRED TO AS THE AO) DATED 27.03.2005 FOR THE BLOCK PERIOD FROM 01.04.1986 TO 27.08.1996, WHICH A PPEAL NEEDS TO BE ADJUDICATED PURSUANT TO THE ORDER OF HONBLE CALCUTTA HIGH COU RT DATED 11.03.2020. 2. THIS OLD APPEAL HAS A HISTORY. BRIEF FACTS OF TH E CASE IS THAT IN THIS CASE A SEARCH WAS CONDUCTED IN 1996 BY THE INCOME TAX DEPA RTMENT ON THE GROUP OF M/S. SHAW WALLACE CO. ( HEREINAFTER REFERRED TO AS THE SWC) AND ALONG WITH THAT A SEARCH WAS ALSO CONDUCTED AGAINST THE ASSESS EE. BASED ON THE SEARCH, THE AO FRAMED THE ORIGINAL BLOCK ASSESSMENT U/S. 158BC OF THE INCOME-TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) ON 27.02.1998 FOR THE BLOCK PERIOD FROM FY 1986-87 TO 27.08.1996 ( HEREINAFTER REFERRED TO AS THE ORIGINAL BLOCK ASSESSMENT ORDER OF 1998) WHEREIN THE AO ADDED ON PROTECTIVE BASIS RS.11.86 CR. ON THE GROUND THAT THE ASSESSEE HAD WITHDRAWN CASH FROM TW O (2) BANK ACCOUNTS OF M/S. PRAGATI ENGINEERING LTD. ( HEREINAFTER REFERRED TO AS THE PRAGATI) AND M/S. KALO ENGINEERING WORKS LTD. ( HEREINAFTER REFERRED TO AS THE KALO) AS UNDISCLOSED INCOME OF THE ASSESSEE ( REFER PAGES 44 TO 60 OF PAPER BOOK ). 2 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 3. THIS ORIGINAL BLOCK ASSESSMENT ORDER OF 1998 WAS CHALLENGED BY THE ASSESSEE BEFORE THE TRIBUNAL AND VIDE ORDER DATED 0 8.10.1999 ( HEREINAFTER REFERRED TO AS THE FIRST TRIBUNAL ORDER OF 1999) THE TRIBUNAL WAS PLE ASED TO SET ASIDE THE IMPUGNED BLOCK ASSESSMENT ORDER I.E. THE ORIGINAL B LOCK ASSESSMENT ORDER OF 1998 AND DIRECTED THE AO TO EXAMINE THE FACTS OF THE CA SE ONCE MORE AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND ALSO TO TAKE INTO CONSIDERATION FURTHER DEVELOPMENTS IN THE BLOCK ASSESSMENT ( OF SWC ) AND THEREAFTER TO COME UP WITH A FRESH ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE ( REFER PAGE 65 OF PAPER BOOK ) AND SINCE THIS OPERATIVE PORTION OF THE ORDER IS IM PORTANT TO DECIDE THE LEGAL ISSUE WHICH HAS BEEN RAISED, WE REPRODUCE PARA 3 OF THE S AID ORDER ( FIRST TRIBUNAL ORDER OF 1999 ) AS UNDER: 3. IT HAS BEEN LEARNT THAT THE TRIBUNAL HAS SET AS IDE THE BLOCK ASSESSMENT ORDER IN THE CASE OF SWC AND HAS DIRECTED THE AO TO REASSESS THE SAME IN THE LIGHT OF AN ORDER PASSED BY THE CALCUTTA HIGH COURT IN THE WRIT PETITION FILED BY SWC IN W.P. NO. 11982/7/1999 RELATING TO THE BLOCK ASSESSMENT A ND ALSO REGULAR ASSESSMENTS FOR THE RELEVANT PERIOD. SINCE THE ASSESSMENT IN WHICH THE ADDITION OF RS.1186 LAKHS HAS BEEN MADE IN A SUBSTANTIVE MANNER ITSELF STANDS SET ASIDE FOR REFRAMING PURPOSE, IN FITNESS OF THINGS, THE ADDITION OF THE AMOUNT IN THE HANDS OF THE PRESENT ASSESSEE ALSO ON A PROTECTIVE BASIS SHOULD REQUIRE A FRESH EXAMINATION . WE THEREFORE, SET ASIDE THE IMPUGNED BLOCK ASSESSMENT AND DIRECT THE AO TO EXAMINE THE FACTS OF THE CASE ONCE MORE AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, AND ALSO TO TAKE INTO CONSIDERATION THE FURT HER DEVELOPMENTS IN THE BLOCK ASSESSMENT AND THEREAFTER TO COME UP WITH A FRESH A SSESSMENT ORDER IN THE CASE OF THE ASSESSEE. (EMPHASIS GIVEN BY US) 4. PURSUANT TO THE FIRST TRIBUNAL ORDER OF 1999, TH E AO GAVE EFFECT TO THE ORDER OF THE TRIBUNAL VIDE ORDER DATED 17.03.2002 ( HEREINAFTER REFERRED TO AS THE SECOND/BLOCK REASSESSMENT ORDER OF 2002) ( REFER PAGES 67 TO 80 OF PAPER BOOK ) WHEREIN THE AO MADE SUBSTANTIVE ADDITION OF RS.12.41 CR. AS UNDISCLOSED INCOME ON THE GROUND OF CREDIT ENTRIES/CHEQUE DEPOS ITED IN TWO (2) BANK ACCOUNTS OF M/S. PRAGATI AND M/S. KALO. HERE IT HAS TO BE TAKEN NOTE THAT IN THE SECOND ROUND THE AO MADE ADDITION OF RS.12.41 CR. ON A SUB STANTIVE BASIS AND NOT PROTECTIVE BASIS AS DONE IN THE ORIGINAL BLOCK ASSE SSMENT ORDER OF 1998 AND THE UNDISCLOSED INCOME ALSO GOT ALTERED FROM RS.11.86 C R TO RS.12.41 CR. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THIS TRIBUNAL AND THE TRIBUNAL WAS PLEASED TO CONFIRM THE ACTION OF THE A O VIDE ORDER DATED 31.03.2005 3 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 ( HEREINAFTER REFERRED TO AS SECOND TRIBUNAL ORDER OF 2005) ( REFER PAGE 196 TO 213 OF PAPER BOOK ) AND THEREBY THE ADDITION OF RS.12.41 CR. WAS CONF IRMED. 6. AGGRIEVED BY THE AFORESAID ORDER OF THE TRIBUNAL DATED 31.03.2005 ( THE SECOND TRIBUNAL ORDER OF 2005 ) THE ASSESSEE PREFERRED AN APPEAL BEFORE THE HONBLE CALCUTTA HIGH COURT; AND THE HONBLE HIGH C OURT ADMITTED THE APPEAL BY FRAMING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW B Y ORDER DATED 22.06.2005 (REFER PAGES 217 TO 219 OF PAPER BOOK). THE SUBSTANTIAL Q UESTIONS OF LAW READS AS UNDER:- I) WHETHER IN A REMAND PROCEEDINGS, THE ASSESSING OFFICER HAS ANY JURISDICTION AND/OR AUTHORITY TO RAISE A DISPUTE ON A FACTUAL PO SITION ADMITTED IN THE ORIGINAL ASSESSMENT? II) WHETHER IN THE FRESH BLOCK ASSESSMENT ORDER PAS SED PURSUANT TO THE ORDER DATED OCTOBER 8, 1999 OF THE TRIBUNAL, THE ASSESSING OFFI CER WAS COMPETENT TO MAKE ANY NEW ADDITION ON A NEW GROUND WHICH WAS NOT SUBJECT MATT ER OF CONTROVERSY IN THE ORIGINAL BLOCK ASSESSMENT ORDER IN RESPECT OF WHICH THE SAID ORDER DATED OCTOBER 8, 1999 WAS PASSED? III) WHETHER AND IN ANY EVENT, THE TRIBUNAL WAS JUS TIFIED IN LAW IN UPHOLDING THE ADDITION OF RS.12.41 LAKHS IN THE HANDS OF THE APPE LLANT AND ITS PURPORTED FINDINGS IN THAT BEHALF HAVE BEEN ARRIVED AT BY IGNORING THE RELEVAN T MATERIALS (SUCH AS, FINDINGS OF THE INCOME TAX DEPARTMENT INCLUDING ITS INVESTIGATION W ING) AND/OR BY TAKING INTO CONSIDERATION IRRELEVANT AND/OR EXTRANEOUS MATERIAL S AND/OR ARE OTHERWISE ARBITRARY, UNREASONABLE AND PERVERSE? 7. THEREAFTER, THE HONBLE CALCUTTA HIGH COURT DISP OSED OF THE APPEAL BY ITS ORDER DATED 11.03.2020 BY SETTING ASIDE THE ORDER O F THE TRIBUNAL (SECOND TRIBUNAL ORDER OF 2005) DATED 31.03.2005 AND DIRECTED THE TR IBUNAL TO RE-DETERMINE THE APPEAL AS EXPEDITIOUSLY AS POSSIBLE BY HEARING THE PARTIES. THE ORDER OF THE HONBLE CALCUTTA HIGH COURT IS REPRODUCED AS UNDER: THE COURT : BY AN ORDER OF THE TRIBUNAL DATED 8TH OCTOBER, 1999, THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED BY SETTING ASIDE THE IM PUGNED BLOCK ASSESSMENT AND DIRECTING THE ASSESSING OFFICER TO EXAMINE THE FACT S OF THE CASE ONCE MORE AFTER HEARING THE ASSESSEE, TAKING INTO ACCOUNT FURTHER DEVELOPMENTS IN THE BLOCK ASSESSMENT AND MAKE A FRESH ASSESSMENT ORDER. RS.1186 LAKHS WERE ADDED TO THE ACCOUNT TO THE ASSE SSEE ON A PROTECTIVE BASIS. THIS PROTECTIVE ADDITION WAS MADE IN CONNEC TION WITH A BLOCK ASSESSMENT ORDER MADE IN THE CASE OF SHAW WALLACE & CO. LTD. ( SWC) WHERE THESE ADDITIONS WERE MADE IN A SUBSTANTIVE MANNER. ACCORDING TO T HE TRIBUNAL, SINCE THIS SUBSTANTIVE ADDITION HAD BEEN SET ASIDE AND REMANDE D, THE CASE OF THE ASSESSEE REQUIRED A RE-LOOK. THIS REMAND WAS THUS VERY LIMITED . THE MATTER WAS REMITTED TO THE ASSESSING OFFICER. FROM THE ORDER OF THE ASSESSING OFFICER DATED 27TH MARCH, 2002, AN APPEAL WAS PREFERRED BEFORE THE TRIBUNAL. 4 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 WE FIND FROM THE IMPUGNED ORDER OF THE TRIBUNAL DA TED 31ST MARCH, 2005 THAT IT HAS NOT CONFINED ITSELF TO THIS NARROW ISSU E BUT HAS MADE CONSIDERATION OF ISSUES WHICH WERE NOT REMANDED TO IT. THE FOLLOWING GROUNDS WERE TAKEN :- (I) THAT THE A.O. WAS WRONG IN MAKING ADDITION IN REASS ESSMENT ON THE NEW ISSUE, WHICH WAS NOT SUBJECT TO THE SET ASIDE ASSES SMENT BY THE ITAT IN APPEAL NO. 17(SS)A NO. 54/CAL/98 DATED 8.10.99. AS SUCH, NEW A DDITION OF RS.12,41,80,000/- (MENTIONED IN COURSE OF HEARING AS RS.12,41,00,000/ - IN REASSESSMENT IS BAD IN LAW AND NOT PERMISSIBLE AS PER LAW, NEED TO BE DETECTED . (II) THAT THE A.O. WAS WRONG IN CHANGING THE FINDINGS GI VEN BY HIS PREDECESSOR IN THE ORIGINAL ASSESSMENT. NO FRESH MATERIAL OR EV IDENCE, AS SUCH CHANGE IN OPINION AND FINDING FROM THE ORIGINAL ASSESSMENT, I S NOT PERMISSIBLE. AS SUCH, THE ADDITION MADE BASED ON CHANGE OF OPINION AND FINDIN G IS WRONG AND NEED TO BE DELETED. (III) THAT THE A.O. WAS WRONG IN MAKING ADDITION OF RS.12 ,41,00,000/- WHEREAS SOURCES OF DEPOSIT IN TWO BANK A/C. WERE FROM SWC A ND ITS SUBSIDIES, WHICH IS CLEAR CUT FINDING OF A.O. IN THE ORIGINAL ASSESSMEN T. IGNORING THE FINDINGS OF ADIT (INV) & HIS PREDECESSOR IN ASSESSMENT AND DOCUMENT SUBMITTED AT THE TIME OF REASSESSMENT PROCEEDING, WITHOUT ANY BASIS, IS NEED TO BE DELETED. (IV) THE A.O. ONE SIDE HE MADE ADDITION AND OTHER SIDE H E HIMSELF GIVES FINDING THAT SWCL, HAD SIPHONED OFF IN CASH THROUGH DUBIOUS METHODS IN LEAGUE WITH SEVERAL PERSON. THIS SHOWS THAT THE MONEY DOES NOT BELONG TO THE ASSESSEE AND BELONGS TO SWCL AND SOURCES OF DEPOSIT IN TWO BANK A/CS. STANDS WELL EXPLAINED. AS SUCH, ADDITION NEED TO BE DELETED. WE FIND ALSO FROM THE IMPUGNED ORDER OF THE TRIBUNA L DATED 31ST MARCH, 2005 THAT THE TRIBUNAL HAS NOT ADDRESSED THESE ISSUES IN THE MANNER THAT THEY SHOULD HAVE BEEN DEALT WITH IN ACCORDANCE WITH THE EARLIER ORDER OF THE TRIBUNAL DATED 8TH OCTOBER, 1999. FOR THOSE REASONS, WE SET ASIDE THE IMPUGNED ORDER OF THE TRIBUNAL DATED 31ST MARCH, 2005. AS FIFTEEN YEARS HAVE ELAPSED, WE DIRECT THE TRIBUNAL TO REDETERMINE THE APPEAL AS EXPEDITIOUSLY AS POSSIBLE BY HEARING THE PARTIES AND BY A REASONED ORDER PREFERABLY WITHIN FOUR MONTHS OF COMMUNICATION OF T HIS ORDER. THE APPEAL (ITA NO.170 OF 2005) IS, ACCORDINGLY, DI SPOSED OF. (EMPHASIS GIVEN BY US) 8. THUS, THE APPEAL OF THE ASSESSEE IS RESTORED BAC K TO THE TRIBUNAL FOR RE- DETERMINATION AFTER HEARING BOTH THE PARTIES. THER EFORE, WE HAVE TO ADJUDICATE THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL IN SECOND ROUND SINCE THE APPEAL HAS BEEN RESTORED BACK TO THE FILE OF TH E TRIBUNAL AFTER SETTING ASIDE THE SECOND TRIBUNAL ORDER OF 2005. THE GROUNDS OF APPE AL RAISED BY THE ASSESSEE IN THE SECOND ROUND READ AS UNDER: I) THAT THE A.O. WAS WRONG IN MAKING ADDITION IN REASS ESSMENT ON THE NEW ISSUE, WHICH WAS NOT SUBJECT TO THE SET ASIDE ASSES SMENT BY THE ITAT IN APPEAL NO. 17(SS)A NO. 54/CAL/98 DATED 8.10.99. AS SUCH, NEW A DDITION OF RS.12,41,80,000/- 5 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 (MENTIONED IN COURSE OF HEARING AS RS.12,41,00,000/ - IN REASSESSMENT IS BAD IN LAW AND NOT PERMISSIBLE AS PER LAW, NEED TO BE DETECTED . II) THAT THE A.O. WAS WRONG IN CHANGING THE FINDINGS GI VEN BY HIS PREDECESSOR IN THE ORIGINAL ASSESSMENT. NO FRESH MATERIAL OR EV IDENCE, AS SUCH CHANGE IN OPINION AND FINDING FROM THE ORIGINAL ASSESSMENT, I S NOT PERMISSIBLE. AS SUCH, THE ADDITION MADE BASED ON CHANGE OF OPINION AND FINDIN G IS WRONG AND NEED TO BE DELETED. III) THAT THE A.O. WAS WRONG IN MAKING ADDITION OF RS.12 ,41,00,000/- WHEREAS SOURCES OF DEPOSIT IN TWO BANK A/C. WERE FROM SWC A ND ITS SUBSIDIES, WHICH IS CLEAR CUT FINDING OF A.O. IN THE ORIGINAL ASSESSMEN T. IGNORING THE FINDINGS OF ADIT (INV) & HIS PREDECESSOR IN ASSESSMENT AND DOCUMENT SUBMITTED AT THE TIME OF REASSESSMENT PROCEEDING, WITHOUT ANY BASIS, IS NEED TO BE DELETED. IV) THE A.O. ONE SIDE HE MADE ADDITION AND OTHER SIDE H E HIMSELF GIVES FINDING THAT SWCL, HAD SIPHONED OFF IN CASH THROUGH DUBIOUS METHODS IN LEAGUE WITH SEVERAL PERSON. THIS SHOWS THAT THE MONEY DOES NOT BELONG TO THE ASSESSEE AND BELONGS TO SWCL AND SOURCES OF DEPOSIT IN TWO BANK A/CS. STANDS WELL EXPLAINED. AS SUCH, ADDITION NEED TO BE DELETED. 9. THE GROUND NO. 1 IS A LEGAL ISSUE WHEREIN THE AS SESSEE CHALLENGES THAT THE AO WAS WRONG IN MAKING THE ADDITION IN THE SECOND R EASSESSMENT ORDER OF 2002 ON A NEW ISSUE WHICH WAS NOT SUBJECT MATTER TO THE SET ASIDE ASSESSMENT BY THE TRIBUNAL VIDE ORDER DATED 08.10.1999 ( FIRST TRIBUNAL ORDER OF 1999 ). THEREFORE, ACCORDING TO THE ASSESSEE, THE AO ERRED ON FOUR (4) COUNTS I.E. (I) THAT THE AO ERRED IN ORDERING ADDITION ON A SUBSTANTIVE BASIS WHEREAS IN THE ORIGINAL BLOCK ASSESSMENT ORDER OF 1998, THE ADDITIONS MADE WAS ON LY ON PROTECTIVE BASIS BECAUSE SUBSTANTIVE ADDITION WAS MADE IN THE HANDS OF M/S. SWC (II) THAT AO ERRED IN MAKING NEW ADDITION OF RS.12.41 CR. IN RE ASSESSMENT IN PLACE OF RS.11.86 CR. WHEN IT WAS ALREADY TAXED IN THE HANDS OF M/S. SWC (III) THAT THE AO ERRED IN ADDING THE CREDIT ENTRIES IN TWO BANK ACCOUNTS IN R EASSESSMENT (M/S. KALO & M/S. PRAGATI) WHEREAS THE AO IN THE ORIGINAL BLOCK ASSES SMENT OF 1998 MADE ADDITION OF CASH WITHDRAWAL FROM THESE TWO BANK ACCOUNTS AND TAXED THE ENTIRE CREDITS IN THE HANDS OF M/S. SWC (IV) THAT IN ANY CASE, THE AO ERRED IN MAKING THE ADDITION OF RS. 12.41 CRORES IN THE HANDS OF ASSESSEE WHEN THE NATURE AND SOURCE OF CREDIT ENTRIES ARE PROVED TO BE FROM M/S. SWC OR ITS SUBSI DIARIES AND CONSEQUENTLY ADDITION WAS SUBSTANTIALLY MADE IN THE HANDS OF M/S . SWC. THEREFORE, ACCORDING TO THE ASSESSEE/LD AR, WHEN THE AO IN THE ORIGINAL BLOCK ASSESSMENT ORDER OF 1998 MADE ADDITIONS ONLY ON PROTECTIVE BASIS IN THE HANDS OF ASSESSEE BECAUSE 6 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 SUBSTANTIVE ADDITION WAS MADE IN THE HANDS OF M/S. SWC, THE AO ERRED IN MAKING SUBSTANTIVE ADDITION FOR THE AFORE-CITED FAULTS, CO NSEQUENTLY THE AOS SECOND/BLOCK REASSESSMENT ORDER OF 2002 IS BAD IN L AW AND THEREFORE THE AOS ACTION WAS NOT PERMISSIBLE AS PER LAW AND FACTS; AN D, THEREFORE, IT NEEDS TO BE DELETED IN-TOTO. PER CONTRA, THE LD. CIT, DR VEHEME NTLY OPPOSED THE SUBMISSION OF THE LD. AR AND CONTENDED THAT THE FIRST TRIBUNAL ORDER OF 1999 GIVES THE SECOND AO THE LIBERTY TO FRAME FRESH BLOCK ASSESSME NT AGAINST THE ASSESSEE AND THE SECOND AO TAKING NOTE THAT NO SUBSTANTIVE ADDIT ION HAS BEEN MADE IN THE HANDS OF M/S. SWC, HAS RIGHTLY FRAMED THE SUBSTANTIVE ADD ITION OF RS.12.41 CR. WHICH ACTION OF SECOND AO DOES NOT REQUIRE ANY INTERFEREN CE FROM OUR SIDE. 10. HAVING HEARD BOTH PARTIES IN DETAIL ON TWO OCC ASIONS I.E. ON 10.08.2021 AND ON 13.08.2021 AND HAVING PERUSED THE RECORD CAR EFULLY, WE NOTE THE FACTS IN BRIEF ARE THAT A SEARCH U/S. 132 OF THE ACT WAS CON DUCTED IN THE ASSESSEES PREMISES ALONG WITH THE SEARCH OF SHAW WALLACE GROUP; AND TH E AO IN THE ORIGINAL ASSESSMENT FOUND THAT SHRI NEMI CHAND JAIN ( HEREINAFTER REFERRED TO AS SHRI N. C. JAIN) AND SHRI P. L. MITTAL WHO WERE BENAMIDARS OF THE ASSESSEE WHICH FACT HAS BEEN ACCEPTED/ADMITTED BY THE ASSESSEE. THE AO FOU ND THAT THE ASSESSEE HAD INCORPORATED ELEVEN (11) COMPANIES ( REFER PAGES 46 AND 47 OF PAPER BOOK ), SIX (6) OUT OF WHICH WAS TAKEN OVER BY M/S. SWC ( REFER PAGE 70-71 OF PAPER BOOK ). ACCORDING TO AO, THE ASSESSEE HAD OPENED TWO (2) BA NK ACCOUNTS IN THE NAME OF M/S. KALO AND M/S. PRAGATI FROM 27.05.1994 TO 02.09 .1995 ( FIFTEEN (15) MONTHS ) AND IN THAT BANK ACCOUNTS RS. 12.41 CR. WAS DEPOSI TED FROM THE BANK ACCOUNT OF SHRI N. C. JAIN AND SHRI P. L. MITTAL AND THEY AND OTHER INTERMEDIARIES IN TURN RECEIVED APPROX RS.89.02 CR. FROM M/S. SWC ( REFER PAGE 76 PAPER BOOK AND PAGE 10 OF IMPUGNED SECOND/BLOCK REASSESSMENT ORDER OF 2 002 ) AND THEREAFTER SIPHONED OFF THROUGH BANK ACCOUNT OF M/S. KALO AND M/S. PRAGATI AS CASH WITHDRAWAL TO THE TUNE OF RS.11.86 CR. . ACCORDING TO AO, IN THE BANK ACCOUNT OF M/S. PRAGATI THE FOLLOWING DEPOSITS WERE CREDITED: 7 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 I) M/S PRAGATI ENGINEERING COMPANY N. C. JAIN (A/C NO. 4882 SYNDICATE BANK BRABOURNE RD., BRANCH, CALCUTTA) RS.345 LAKHS P. L. MITTAL (A/C NO. 4915 SYNDICATE BANK BRABOURNE RD., BRANCH, CALCUTTA) RS.235 LAKHS M/S DUNLOP INDIA LTD. RS.200 LAKHS II) M/S KALO ENGINEERING WORKS N. C. JAIN (A/C NO. 4882 SYNDICATE BANK BRABOURNE RD., BRANCH, CALCUTTA) RS.230 LAKHS P. L. MITTAL (A/C NO. 4915 SYNDICATE BANK BRABOURNE RD., BRANCH, CALCUTTA) RS.422 LAKHS M/S DUNLOP INDIA LTD. RS.275 LAKHS 11. AND THEREAFTER, THE ASSESSEE HAD WITHDRAWN NET AMOUNT OF RS.11.86 CR. WHICH HE COULD NOT EXPLAIN PROPERLY. THEREFORE, ACC ORDING TO FIRST AO, EVEN THOUGH THE ASSESSEE HAD FILED THE RETURN OF INCOME PURSUANT TO NOTICE U/S. 158BC OF THE ACT AND REFLECTED AN AMOUNT OF RS.2,02,52,50 0/- WHICH WAS SHOWN AS HIS UNDISCLOSED INCOME [ RS.170.03 LACS (SHARE CAPITAL) + RS.18.50 LACS (INC OME FROM SHARE TRANSACTIONS) + RS.15 LACS (FROM COMMISSION) TOTAL RS.203.52 LACS ], THE AMOUNT SHOWN BY THE ASSESSEE AS UNDISCLOSED INCOME HAS NO NEXUS WITH THE BANK DEPOSITS IN M/S. KALO AND M/S. PRAGATI; AND FURTHER ACCORDING TO HIM, THOUGH THE AMOUNT DEPOSITED IN THESE TWO (2) BANK ACCOUNTS ARE FROM M/S. SWC WHICH WAS DEPOSITED THROUGH BANK ACCOUNTS OF SHRI N. C. JAIN AND SHRI P. L. MITTAL BY CHEQUE ( BOTH BEING BENAMIDERS OF THE ASSESSEE ) AND SINCE ASSESSEE HAS ADMITTED OF OPERATING BOTH BANK ACCOUNTS OF M/S. KALO AND M/S. PRAGATI, ACCORDING TO THE FIRST AO, THE AMOUNT WHICH WAS CREDITED IN BANK ACCOUNTS OF M/S. KALO AND M/S. PRAGATI WAS FROM M/S. SWC AND SINCE THE AMOUNT OF R S.11.86 CR. WAS WITHDRAWN BY THE ASSESSEE FROM THESE TWO (2) BANK ACCOUNTS, T HE FIRST AO ADDED IT IN THE HANDS OF THE ASSESSEE ON A PROTECTIVE BASIS RS.11. 86 CR. (FIRST BLOCK ASSESSMENT ORDER OF 1998). 8 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 12. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE TRIBUNAL AND THE TRIBUNAL WAS PLEASED TO SET ASIDE THE ORIGINAL BLOC K ASSESSMENT ORDER OF 1998 PASSED BY THE AO DATED 27.02.1998 BECAUSE THE TRIBU NAL HAD ALREADY SET ASIDE THE BLOCK ASSESSMENT IN THE CASE OF M/S. SWC GROUP BACK TO AO FOR FRESH ASSESSMENT PURSUANT TO THE ORDER OF THE HONBLE CALCUTTA HIGH COURT IN WP NO.11982/7/1999. THUS, IT IS NOTED THAT THE TRIBUNAL IN THE FIRST RO UND TAKING INTO CONSIDERATION THE FACT THAT SINCE THE SUBSTANTIVE ADDITION OF RS.11.8 6 CR. HAS BEEN MADE IN THE HANDS OF THE M/S. SWC, THE PROTECTIVE ASSESSMENT MADE IN THE HANDS OF THE ASSESSEE ALSO SHOULD BE SET ASIDE BACK TO THE AO FOR FRESH ASSESS MENT. ACCORDINGLY, THE TRIBUNAL AFTER SETTING ASIDE THE FIRST ORIGINAL BLO CK ASSESSMENT ORDER OF 1998, AND DIRECTED THE AO TO EXAMINE THE FACTS OF THE CASE ON CE MORE AND AFTER GIVING OPPORTUNITY TO THE ASSESSEE AND AFTER TAKING INTO C ONSIDERATION FURTHER DEVELOPMENTS IN THE BLOCK ASSESSMENT (OF M/S. SWC) TO FRAME FRESH ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE. 13. THEREAFTER, IN THE SECOND ROUND, PURSUANT TO TH E REMAND, IT IS IMPORTANT TO NOTE THAT SECOND AO GAVE NOTICE TO THE ASSESSEE U/S . 143(2)/142(1) OF THE ACT WHEREIN THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE AMOUNT OF RS.11.86 CR. BEING THE NET CASH WITHDRAWAL FROM THE BANK ACCOUNT S OF M/S. KALO AND M/S. PRAGATI WHICH BANK ACCOUNTS ARE OWNED UP BY THE ASS ESSEE SHOULD NOT BE ASSESSED AS HIS UNDISCLOSED INCOME ON PROTECTIVE BASIS ( REFER PAGE 73 OF PAPER BOOK, PAGE 7 OF THE IMPUGNED SECOND BLOCK/REASSESSMENT ORDER OF 2002 ). THEREAFTER, THE SECOND AO TAKING NOTE OF THE ASSESSEES OBJECTION W HICH HAS BEEN REPRODUCED BY HIM IN THE IMPUGNED ORDER HAS NOTED THAT NO SUBSTAN TIVE ASSESSMENT OF THE AMOUNT OF RS.11.86 CR. AS SUCH HAS BEEN MADE IN THE BLOCK ASSESSMENT OF M/S. SWC. THEREFORE, HE WAS OF THE OPINION THAT THE MATTER RE QUIRES FURTHER EXAMINATION. THEREAFTER, HE NOTED THAT IN THE TWO (2) BANK ACCOU NTS OF M/S. KALO AND M/S. PRAGATI THERE WAS CHEQUE DEPOSIT TOTALING RS.575 LA KHS FROM SHRI N. C. JAIN AND RS.657 LAKHS FROM MR. P. L. MITTAL. THEREAFTER THE AO NOTED THAT BOTH THESE PERSONS WERE MERE NAME LENDERS OF THE ASSESSEE AND THE PERSON BEHIND BOTH OF THEM WERE THE ASSESSEE HIMSELF. THUS, HE HELD THAT SHRI N. C. JAIN AND SHRI P. L. 9 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 MITTAL (SHARE BROKERS) WERE BENAMIDERS OF THE ASSES SEE AND BOTH THEIR BANK ACCOUNT NOS. 4882 AND 4915 IN THEIR RESPECTIVE NAME S IN SYNDICATE BANK, BRABOURNE ROAD BRANCH WERE IN FACT OPERATED AND TRA NSACTED BY THE ASSESSEE. THEREAFTER, THE AO NOTED AFTER PERUSAL OF THE BLOC K ASSESSMENT OF M/S. SWC THAT M/S. SWC HAD INVESTED RS.89.02 CR. THROUGH ITS SUBS IDIARIES FOR ACQUISITION OF SIX (6) GUWAHATI BASED COMPANIES AND THE MONEY WAS GIV EN TO SHRI N. C. JAIN AND SHRI P. L. MITTAL. ( REFER 77 OF PB, INTERNAL PG 10 OF THE IMPUGNED SECO ND REASSESSMENT ORDER OF 2002 ). THEREAFTER THE SECOND AO NOTES THAT THE BANK ACCOUNTS OF M/S KALO & M/S PRAGATI ( BANK ACCOUNT OF 4973 AND 4974 SYNDICATE BANK, BRABOURNE ROAD, BRANCH ) ARE DIFFERENT FROM THAT OF THE BANK ACCOUNT IN TH E SAME BRANCH IN THE NAME OF SHRI N. C. JAIN( ACCOUNT NO. 4882 ) AND SHRI P. L. MITTAL ( ACCOUNT NO.4915 ). AND THEREAFTER THE AO OBSERVES THAT SINCE THE AS SESSEE HAS OWNED UP THESE TWO (2) BANK ACCOUNTS (M/S KALO & M/S PRAGATI) AND THOUGH THE CREDITS IN THESE TWO (2) BANK ACCOUNTS (M/S. K ALO AND M/S. PRAGATI) ARE FROM SHRI N. C. JAIN AND SHRI P. L. MITTAL, AND EVEN TH OUGH THE ASSESSEE HAS ASSERTED THAT THE DEPOSITS IN THE ACCOUNTS OF SHRI N. C. JAI N AND SHRI P. L. MITTAL WAS FROM M/S. SWC, THIS FACT WAS NOT ESTABLISHED. THEREAFTE R, ACCORDING TO AO THE ASSESSEE WAS GIVEN AN OPPORTUNITY OF BEING HEARD AND PURSUAN T TO WHICH THE ASSESSEE FILED WRITTEN SUBMISSION WHICH IS FOUND PLACED AT PAGES 1 39 TO 153 DATED 25.03.2002 AND ANNEXURES FROM PAGE 154 TO 182 [ I.E, BANK STATEMENT OF M/S. KALO OF SYNDICATE BANK AS WELL AS OF M/S. PRAGATI AND THE B ANK STATEMENTS SHRI N. C. JAIN AND SHRI P. L. MITTAL AND THE ANNUAL REPORT OF M/S. SWC WHEREIN THE NAMES OF ITS SUBSIDIARIES ARE GIVEN] , WHEREIN THE ASSESSEE CONTENDED WITH SUPPORTING RE LEVANT BANK STATEMENT THAT THE ENTIRE AMOUNT CAME IN THE B ANK ACCOUNTS OF SHRI N. C. JAIN AND SHRI P. L. MITTAL FROM M/S. SWC AND ITS SUBSIDI ARIES. AND THEREAFTER, MONEY THROUGH CHEQUES WAS TRANSFERRED FROM THE BANK ACCOU NT OF SHRI N. C. JAIN AND SHRI P. L. MITTAL TO THE BANK ACCOUNT OF M/S. KALO AND M /S. PRAGATI WHICH WAS LATER WITHDRAWN BY THE ASSESSEE AS PER THE DIRECTION OF M /S. SWC. HOWEVER, THIS ASSERTION OF THE ASSESSEE SUPPORTED BY BANK STATEME NT WAS NOT ACCEPTED BY THE AO. HE HELD IN HIS OWN WORDS AT PAGE 77 OF PAPER BOOK/P AGE 11 OF THE IMPUGNED SECOND REASSESSMENT ORDER OF 2002, THE ASSESSEE HAS REFERRED TO THE STATEMENT OF 10 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 THE ASSESSEE RECORDED U/S. 131 ON 18.02.1998 AND AS SESSEE HAS GIVEN A CHART IN SUPPORT OF THE CONTENTION THAT THE MONEY CAME TO TH E BANK ACCOUNT OF M/S. KALO AND M/S. PRAGATI FROM M/S. SWC AND ITS SUBSIDIARIES . BUT THE SAME DOES NOT SHOW WHETHER THE MONEY CAME FROM M/S. SWC AND SUBSIDIARI ES AND THE SAME MONEY WAS GIVEN TO THE TWO (2) CONCERNS NAMELY M/S. KALO AND M/S. PRAGATI . HERE, THE EXPRESSIONS USED BY THE SECOND AO TO DENY THE CLAIM OF THE ASSESSEE THAT MONEY CAME TO THE BANK ACCOUNTS OF SHRI N. C. JAIN AND SH RI P. L. MITTAL FROM M/S. SWC NEED TO BE NOTED. THE AO HAS BROUGHT IN THE SAME MONEY THEORY AND BRUSHED ASIDE THE RELEVANT BANK STATEMENT, FLOW-CHARTS AND STATEMENT RECORDED BY INVESTIGATION TEAM IMMEDIATELY AFTER SEARCH U/S. 13 1 OF THE ACT WHICH WE WILL DEAL IN DETAIL (INFRA). 14. WITHOUT PREJUDICE TO THIS OBSERVATION, CONTINU ING FURTHER WE NOTE THAT, ACCORDING TO THE SECOND AO, THE ASSESSEE HAS NOT BE EN ABLE TO PROVE THAT THE CREDITS IN THE TWO BANK ACCOUNTS OF SHRI N. C. JAIN AND SHRI P. L. MITTAL ARE FROM M/S. SWC. AND SINCE BOTH THESE PERSONS ARE BENAMIDE RS OF THE ASSESSEE, THEREFORE, ACCORDING TO AO, THE CHEQUE DEPOSITED IN TWO BANK ACCOUNTS OF M/S. KALO AND M/S. PRAGATI CANNOT BE SAID TO BE FROM M/S . SWC AND THEREFORE, THE AMOUNT CREDITED IN M/S. KALO AND M/S. PRAGATI TO TH E TUNE OF RS.12.41 CR. NEEDS TO BE TREATED AS UNEXPLAINED AND SO HE TREATED IT AS U NDISCLOSED INCOME OF THE ASSESSEE. AND IT IS INTERESTING TO NOTE THAT THE AO OBSERVES AT THIS JUNCTURE I.E. THIS FINDING OF HIS IS WITHOUT PREJUDICE TO ANY ISSUE IN ANY OTHER CASE. THEREAFTER, THE AO NOTED THAT THE CASH WITHDRAWALS FROM THE ACC OUNTS ARE APPLICATION OF INCOME AND AS SUCH ADDITION OF THE SAME ON PROTECTI VE BASIS WAS NOT WARRANTED. MOREOVER, ACCORDING TO HIM, IN THE CASE OF M/S. SWC , IT IS SEEN FROM THE BLOCK ASSESSMENT ORDER THAT THERE WAS NO SUBSTANTIVE ASSE SSMENT OF THE AMOUNT OF RS.11.86 CR. AS SUCH IN THE HANDS OF M/S. SWC. THER EFORE, HE WAS PLEASED TO ADD THE AMOUNT OF RS.12.41 CR. ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID SECOND BLOCK REASSESSMEN T ORDER OF 2002, THE ASSESSEE PREFERRED AN APPEAL BEFORE THIS TRIBUNAL AND THE TR IBUNAL ( SECOND TRIBUNAL ORDER OF 2005 ) CONFIRMED THE ACTION OF THE AO BY ORDER DATED 31 .03.2005 ( REFER PAGE 196 TO 11 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 213 OF PAPER BOOK ) WHICH ORDER OF THE TRIBUNAL HAS BEEN INTERDICTED BY THE HONBLE HIGH COURT. THE HONBLE HIGH COURT HAS SET ASIDE TH E TRIBUNAL SECOND ORDER DATED 31.03.2005 AND THE APPEAL WAS RESTORED BACK T O THE TRIBUNAL AND IT WAS DIRECTED TO RE-DETERMINE THE APPEAL BY OBSERVING IN TER-ALIA THAT THE TRIBUNAL HAS NOT ADDRESSED THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MANNER THAT THEY COULD HAVE BEEN DEALT WITH IN ACCORDANCE WITH THE E ARLIER ORDER OF THE TRIBUNAL DATED 08.10.1999. IN THE AFORESAID BACK GROUND OF THE CASE, WHEN WE EXAMINE THE LEGAL ISSUE THAT HAS BEEN RAISED BEFORE US THAT SIN CE THE AO IN THE ORIGINAL BLOCK ASSESSMENT ORDER OF 1998 HAS ONLY MADE PROTECTIVE A DDITION OF RS.11.86 CR. IN THE HANDS OF THE ASSESSEE, WHETHER THE AO IN THE SECOND IMPUGNED BLOCK/REASSESSMENT ORDER OF 2002 (ORDER DATED 17.03.2002) IN THE LIGHT OF THE SPECIFIC DIRECTION OF THE TRIBUNALS ORDER OF 1999 (LIMITED REMAND), WHETHER THE SECOND AO CAN MAKE THE ADDITION ON SUBSTANTIVE BASIS ON A DIFFERENT SUBJEC T MATTER I.E. WHEN IN THE FIRST ROUND THE AO MADE THE ADDITION ON THE CASH WITHDRA WALS OF RS.11.86 CR. PROTECTIVELY IN THE HANDS OF THE ASSESSEE SINCE SUB STANTIVE ADDITION WAS MADE IN THE HANDS OF M/S. SWC; AND IN THE LIGHT OF THE LIMI TED REMAND ORDERED BY THE TRIBUNAL, WHETHER IN THE SECOND ROUND THE AO COULD HAVE MADE THE SUBSTANTIVE ADDITION OF RS.12.41 CR. BY TAKING NOTE OF THE CRE DIT ENTRIES IN THE BANK ACCOUNT OF M/S. KALO AND M/S. PRAGATI WHEN THE SAME WAS ALREAD Y ADDED ON SUBSTANTIVE BASIS IN THE HANDS OF M/S. SWC. WHEN WE ADJUDICATE THIS LEGAL ISSUE, FIRST WE HAVE TO SEE CAREFULLY THE DIRECTION OF THE TRIBUNAL IN THE FIRST TRIBUNAL ORDER DATED 08.10.1999 WHEREIN THE TRIBUNAL VIDE PARA 3 OF ITS ORDER HAS HELD AS UNDER: 3. IT HAS BEEN LEARNT THAT THE TRIBUNAL HAS SET AS IDE THE BLOCK ASSESSMENT ORDER IN THE CASE OF SWC AND HAS DIRECTED THE AO TO REASSESS THE SAME IN THE LIGHT OF AN ORDER PASSED BY THE CALCUTTA HIGH COURT IN THE WRIT PETITION FILED BY SWC IN WP NO. 11982/7/1999 RELATING TO THE BLOCK ASSESSMENT A ND ALSO REGULAR ASSESSMENTS FOR THE RELEVANT PERIOD . SINCE THE ASSESSMENT IN WHICH THE ADDITION OF RS .11.86 LAKHS HAS BEEN MADE IN A SUBSTANTIVE MANNER, ITSELF STAND S SET ASIDE FOR REFRAMING PURPOSE, IN FITNESS OF THINGS, THE ADDITION OF THE AMOUNT IN THE HANDS OF THE PRESENT ASSESSEE ALSO ON A PROTECTIVE BASIS SHOULD REQUIRE A FRESH EXAMINATION. WE THEREFORE, SET ASIDE THE IMPUGNED BLOCK ASSESSMENT AND DIRECT THE AO TO EXAMINE THE FACTS OF THE CASE ONCE MORE AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY OF BEIN G HEARD AND ALSO TO TAKE INTO CONSIDERATION THE FURTH ER DEVELOPMENTS IN THE BLOCK ASSESSMENT AND THEREAFTER TO COME UP WITH A FRESH ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE.[EMPHASIS GIVEN BY US] 12 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 15. FROM A CAREFUL READING OF THE ABOVE ORDER OF TH E FIRST TRIBUNAL ORDER OF 1999 IT IS NOTED THAT WHILE SETTING ASIDE THE ASSESSEES ORIGINAL BLOCK ASSESSMENT OF 1998 BACK TO THE AO, IT WAS DIRECTED THAT THE AO HA S TO EXAMINE THE FACTS OF THE CASE ONCE MORE AFTER ALLOWING THE ASSESSEE AN OPPOR TUNITY OF BEING HEARD AND ALSO TO TAKE INTO CONSIDERATION THE FURTHER DEVELOPMENTS IN THE BLOCK ASSESSMENTS AND THEREAFTER TO COME UP WITH A FRESH ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE. 16. HOWEVER, IT IS IMPORTANT TO TAKE NOTE THAT THE AFORESAID DIRECTION OF THE TRIBUNAL IS IN THE BACK GROUND THAT THE AO IN THE O RIGINAL BLOCK ASSESSMENT OF 1998 HAS MADE SUBSTANTIVE ADDITION OF RS. 11.86 CRO RE IN THE HANDS OF M/S. SWC AND SINCE THE CASE OF M/S SWC HAS BEEN REMANDED BAC K TO AO FOR REFRAMING THE BLOCK ASSESSMENT AND OTHER ASSESSMENTS, IN THE FITNESS OF THINGS , THE ADDITION OF THE ASSESSEE WHICH WAS MADE ON A PROTECTIVE BASIS REQUI RED FRESH EXAMINATION. SO, WE NOTE THAT THE TRIBUNAL IN THE FIRST ROUND TOOK N OTE OF THE FACT THAT IN THE CASE OF M/S. SWC PURSUANT TO THE ORDER OF THE HONBLE HIGH COURTS ORDER, THE BLOCK ASSESSMENT/REGULAR ASSESSMENTS IN THE CASE OF M/S. SWC HAS BEEN SET ASIDE FOR FRESH REASSESSMENT; AND SINCE THE SUBSTANTIVE ASSES SMENT OF RS. 11.86 CRORE WAS MADE IN THE HANDS OF M/S. SWC HAS BEEN RESTORED BAC K TO THE FILE OF AO FOR FRESH ASSESSMENT, AS A COROLLARY THE ASSESSEES CASE WAS ALSO SET ASIDE BACK TO THE AO FOR FRESH ASSESSMENT WITH A DIRECTION TO TAKE INTO CONS IDERATION FURTHER DEVELOPMENTS IN THE BLOCK ASSESSMENT OF M/S. SWC. MEANING THEREB Y THAT SINCE THE SUBSTANTIVE ADDITION OF RS.11.86 CR. MADE IN THE HANDS OF M/S. SWC HAS ALREADY BEEN SET ASIDE BACK TO AO FOR FRESH BLOCK/REGULAR ASSESSMENT, THE SECOND AO WHILE REASSESSING THE ASSESSEE HAS TO LOOK FOR ANY FURTHER DEVELOPMEN T IN THE RE-ASSESSMENT OF M/S. SWC THEN THAT FACT HAS TO BE CONSIDERED WHILE MAKIN G THE FRESH ASSESSMENT OF THE ASSESSEE. SO, FIRST OF ALL, WE HAVE TO EXAMINE WHET HER THERE WAS ANY FURTHER DEVELOPMENT IN THE CASE OF M/S. SWC. THIS QUESTION HAS BEEN ANSWERED BY THE SECOND AO IN THE IMPUGNED ORDER OF 2002. ( SECOND BLOCK REASSESSMENT/ IMPUGNED ORDER OF 2002 ). AT PAGE 8 OF THE IMPUGNED ORDER OF 2002( REFER P AGE 74 OF PB) IN HIS OWN WORDS THE SET ASIDE BLOCK ASSESSMENT IN THE CASE OF SWCL HAS ALREADY BEEN COMPLETED ON 30.03.2000 AND THE FINDINGS IN THE ORIGINAL BLOCK ASSESSMENT IN RESPECT OF THE ABOVE MATTER AS DISCUSSED ABOVE REMAINS UNALTERED . 13 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 THE AO FOUND THAT PURSUANT TO THE TRIBUNAL REMAND I N THE CASE OF M/S SWC, THE SECOND AO HAS FRAMED THE REASSESSMENT IN THE CASE O F M/S SWC ON 30.03.2000 AND THE FINDING IN THE ORIGINAL BLOCK ASSESSMENT OF M/S. SWC REMAINS UNALTERED MEANING THEREBY NO ADDITION OR DEDUCTION/DELETION H AS BEEN MADE IN THE ADDITION MADE IN THE HANDS OF M/S. SWC AND THE ORDER PASSED IN THE ORIGINAL ASSESSMENT IN THE CASE OF M/S. SWC HAS BEEN FOLLOWED/REITERATED I N THE SECOND BLOCK ASSESSMENT ORDER DATED 30.03.2000. THEREFORE, IT IS CLEAR THAT NOT EVEN ONE RUPEE ADDITION OR ONE RUPEE DELETION HAS BEEN MADE BY THE AO IN REASS ESSMENT OF BLOCK PERIOD OF M/S. SWC. IN SUCH A SCENARIO, THE TRIBUNALS DIREC TION TO THE AO NEED TO BE CAREFULLY APPRECIATED I.E. TO TAKE INTO CONSIDERATION THE FURTHER DEVELOPMENTS IN THE BLOCK ASSESSMENT (IT IS IMPLIED THAT IT IS OF M /S. SWC) AND THEREAFTER TO COME UP WITH THE FRESH ASSESSMENT ORDER IN THE CASE OF T HE ASSESSEE . THUS WHEN WE APPRECIATE THE DIRECTION OF THE TRIBUNAL IN THE FIR ST ORDER OF 1999 WE NOTE THAT AO WAS DIRECTED WHILE FRAMING THE FRESH ASSESSMENT ORD ER OF ASSESSEE TO TAKE INTO CONSIDERATION FURTHER DEVELOPMENT IN THE CASE OF M/ S SWC IN WHOSE HANDS THE SUBSTANTIVE ASSESSMENT OF RS. 11.86 CRORES WAS MADE BY THE AO IN THE ORIGINAL ROUND OF BLOCK ASSESSMENT. HOWEVER WE NOTE THAT THE SECOND AO HIMSELF HAS ADMITTED THAT THERE IS NO ALTERATION IN THE HANDS O F M/S. SWC MEANING THAT NO ADDITION/DEDUCTION I.E. IN OTHER WORDS NO FURTHER DEVELOPMENT IN THE H ANDS OF M/S SWC IN THE SECOND ROUND . SO, NECESSARY COROLLARY IS THAT WHEN IN THE REASS ESSMENT ORDER OF M/S SWC NO CHANGES/DEVELOPMENTS IS THERE, THEN AS PER THE SPECIFIC DIRECTION OF FIRST TRIBUNAL ORDER OF 1999, THE AO I N THE SECOND ROUND COULD NOT HAVE DISTURBED THE FINDING RENDERED IN THE ORIGINAL BLOCK ASSESSMENT ORDER PASSED BY HIS PREDECESSOR AO IN 1998 IN ASSESSEES CASE, B ECAUSE THAT WOULD TANTAMOUNT TO THE SECOND AO REVIEW HIS OWN ORDER WHICH POWER H E/AO DOES NOT ENJOY. THAT IS THE PRECISE REASON WHY THE HONBLE HIGH COURT HA S MADE A SPECIFIC OBSERVATION IN THIS CONTEXT, WHILE DIRECTING THIS TRIBUNAL TO R E-DETERMINE THIS APPEAL BY OBSERVING THIS REMAND WAS THUS VERY LIMITED. IN THE AFORESAID BACKDROP THEREFORE, THE AOS ORDER IN THE ORIGINAL ASSESSMEN T DATED 27.02.1998 WHEREIN HE MADE ONLY PROTECTIVE ASSESSMENT TO THE TUNE OF RS. 11.86 CR. COULD NOT HAVE BEEN DISTURBED BY THE SECOND AO BECAUSE THERE IS NO CHAN GE ( FURTHER DEVELOPMENT ) IN 14 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 THE FINDINGS RECORDED IN THE SECOND/BLOCK REASSESS MENT ORDER OF M/S. SWC DATED 30.03.2000 ( PAGE 74 OF THE PB AND PAGE 8 OF IMPUGNED ORDER ). SO, AOS IMPUGNED ORDER OF 2002 IS VITIATED FOR HAVING EXCEE DED THE SPECIFIC DIRECTION GIVEN BY THE TRIBUNAL, WHICH IS IMPERMISSIBLE AND T HEREFORE IS BAD IN LAW. 17. FURTHER, WE NOTE THAT THE AO STATES THAT THERE WAS NO SUBSTANTIVE ASSESSMENT OF THE AMOUNT OF RS.11.86 CR. IN THE HAN DS OF M/S. SWC. THIS FINDING OF SECOND AO CANNOT BE COUNTENANCED FOR THE FOLLOWI NG REASONS: FIRSTLY, THIS FINDING IS CONTRARY TO THE AOS ORIGINAL ASSESSMENT ORDER BECAUSE IN THE FIRST ROUND, THE PROTECTIVE ASSESSMENT WAS MADE IN THE HA NDS OF THE ASSESSEE BECAUSE SUBSTANTIVE ASSESSMENT WAS MADE IN THE HANDS OF M/S . SWC AND, SECONDLY, THE TRIBUNAL IN ITS FIRST ORDER OF 1999 (DATED 08.10.19 99) HAS CATEGORICALLY MADE A FINDING OF FACT IN ITS OWN WORDS IT HAS BEEN LEARNT THAT THE TRIBUNAL HAS SET ASIDE THE BLOCK ASSESSMENT ORDER IN THE CASE OF SWC AND H AS DIRECTED THE AO TO REASSESS THE SAME IN THE LIGHT OF AN ORDER PASSED BY THE CALCUTTA HI GH COURT IN THE WRIT PETITION FILED BY SWC IN WP NO. 11982/7/1999 R ELATING TO THE BLOCK ASSESSMENT AND ALSO REGULAR ASSESSMENTS FOR THE REL EVANT PERIOD. SINCE THE ASSESSMENT IN WHICH THE ADDITION OF RS. 11.86 LAKHS HAS BEEN MADE IN A SUBSTANTIVE MANNER ITSELF STANDS SET ASIDE FOR RE-F RAMING PURPOSE , IN FITNESS OF THINGS, THE ADDITION OF THE AMOUNT IN THE HANDS OF THE PRESENT ASSESSEE ALSO ON PROTECTIVE BASIS SHOULD REQUIRE A FRESH EXAMINATION . WE THEREFORE, SET ASIDE THE IMPUGNED BLOCK ASSESSMENT AND DIRECT THE AO TO EXAM INE THE FACTS OF THE CASE ONCE FORE AFTER ALLOWING THE ASSESSEE AN OPPORTUNIT Y OF BEING HEARD, AND ALSO TO TAKE INTO CONSIDERATION THE FURTHER DEVELOPMENTS IN THE BLOCK ASSESSMENT AND THEREAFTER TO COME UP WITH A FRESH ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE . THIS FINDING OF FACT AS FOUND BY THE FIRST TRIBUNAL ORDER OF 1999 THAT SUBSTANTIVE ASSESSMENT OF RS.11.86 CR. HAS BEEN MADE IN THE HAN DS OF M/S. SWC AND PROTECTIVE ASSESSMENT OF IT IS MADE IN THE HAND OF ASSESSEE HAS NOT BEEN CHALLENGED BY THE REVENUE/AO BEFORE THE HONBLE HIGH COURT OR ANY APPLICATION/MISCELLANEOUS APPLICATION WAS FILED BY THE REVENUE/AO BEFORE THIS TRIBUNAL TO RECTIFY IF ANY MISTAKE OF FACT/LAW EXIS TED, SO IT BECOMES FINAL. THIRDLY, EVEN THE SECOND AO ON ONE HAND SAYS THAT IN THE SET ASIDE PROCEEDING OF M/S. 15 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 SWC REASSESSMENT WAS FRAMED WITHOUT ANY ALTERATION. SO, THE QUESTION IS THAT IF THERE WAS NO SUBSTANTIVE ASSESSMENT/ADDITION OF RS. 11.86 CRORES IN THE HANDS OF M/S SWC IN THE SECOND BLOCK ASSESSMENT OF M/S. SWC THEN THE SAME AMOUNT WOULD HAVE BEEN REDUCED TO THAT EXTENT, FROM THE SE COND/BLOCK REASSESSMENT ORDER OF 30.03.2000 IN THE CASE OF M/S. SWC WHICH IS NOT THE CASE OF THE SECOND AO AND SO THE FINDING OF AO IS PER SE CONTRADICTORY AN D IN THIS CONTEXT THE LD. A.R. EXPLAINED THAT IN THE CASE OF M/S SWC IN THE FIRST ROUND THE AO NOTED THAT M/S SWC HAS DEPOSITED RS. 89.2 CRORES TO TAKE OVER SIX (6) GAUHATI COMPANIES AND HAD DEPOSITED MONEY IN THE ACCOUNTS OF SHRI N. C. J AIN & SHRI P. K. MITTAL AND INTERMEMEDIERS; MEANING THEREBY THAT MONEY TRANSFER RED BY M/S SWC TO SHRI N. C. JAIN & SHRI P. K. MITTAL AND THEN TRANSFERRED TO M/S KALO AND M/S PRAGATI WHICH WERE BENAMIDARS/ENTITIES HAVE BEEN TAXED SUBS TANTIVELY IN THE HANDS OF M/S SWC AND ACCORDING TO HIM, THIS FACT IS EVIDENT FROM A PERUSAL OF THE IMPUGNED ORDER AT PAGE 11/77 OF PAPER BOOK THE SECOND AO HAS NOTED THAT BESIDES, IN THE CASE OF SWCL IN THAT CASE ON THE BASIS OF IN VESTIGATIONS IT WAS REVEALED THAT THE FUND OF SWCL TO THE TUNE OF RS.89 .02 CRORES OUT OF ICDSS OF RS.219.77 CRORES UTILIZED FOR ACQUISITION OF SIX GA UHATI BASED COMPANIES WAS HELD TO BE FOR NON-BUSINESS PURPOSE AS THE MONEY WAS SIP HONED OFF IN CASH THROUGH DUBIOUS METHODS IN LEAGUE WITH SEVERAL PERSONS INCL UDING THE ASSESSEE AND ACCORDINGLY INTEREST ON ICDS TOTALING RS.67.65 CRO RES WAS DISALLOWED . FROM THE AFORESAID FINDING OF SECOND AO, WE NOTE THAT WH ILE HE PERUSED THE BLOCK ASSESSMENT ORDER OF M/S. SWC HE FOUND THAT RS. 89. 02 CR. WAS GIVEN BY IT (M/S. SWC) TO ACQUIRE SIX (6) GAUHATI COMPANIES WHICH WAS FROM ICDS OF RS.219.77 CR. AND SINCE THE MONEY (RS.89.02 CR.) WAS UTILIZED FOR NON-BUSINESS PURPOSE, THE AO DISALLOWED INTEREST EXPENDITURES TO THE TUNE OF RS.67.65 CR. IN THE CASE OF M/S. SWC. FROM THIS DISCUSSION WE NOTE THAT IN THE BLOC K ASSESSMENT ORDER OF M/S SWC IT WAS FOUND THAT M/S SWC HAD TRANSFERRED THROU GH SEVERAL PERSONS/ENTITIES INCLUDING THE ASSESSEE RS 89.02 CRORES FOR ACQUIRIN G SIX(6) GAUHATI BASED COMPANIES AND THIS AMOUNT (RS.89.02 CR.) WAS FROM W AS FROM ICDS OF RS.219.77 CR. AND THEREFORE THE AO IN THE CASE OF M/S SWC DIS ALLOWED THE INTEREST EXPENDITURE TO THE TUNE OF RS 67.65 CRORES ON THE R EASON THAT AMOUNT OF RS 89.02 16 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 CRORES WAS UTILIZED FOR NON-BUSINESS PURPOSE AND WE NOTE THAT FOR THESE PRECISE REASONS THAT NO SUBSTANTIAL ADDITION WAS MADE IN TH E HANDS OF THE ASSESSEE BECAUSE THE ENTIRE MONEY WHICH HAS COME TO THE KITTY OF ASS ESSEE EITHER AS CREDIT ENTRY OR WITHDRAWAL ARE FROM/FOR M/S SWC. FOR THIS REASON ON LY THE FIRST AO MADE ADDITION ON THE ASSESSEE ONLY ON PROTECTIVE BASIS. ANOTHER REASON TO SAY THAT THE AMOUNT CREDITED/WITHDRAWN BY THE ASSESSEE FROM M/S KALO AND M/S PRAGATI WAS ADDED SUBSTANTIALLY IN THE HANDS OF M/S SWC IS THAT AOS ORDER (FIRST/ORIGINAL BLOCK ASSESSMENT OF 1998) OF MAKING PROTECTIVE ASSE SSMENT IN THE HANDS OF ASSESSEE HAS NOT BEEN QUESTIONED BY THE CIT/PCIT BY EXERCISING POWER U/S 263 OF THE ACT AFTER THE ORIGINAL ASSESSMENT ORDER WAS PAS SED BY FIRST AO AS EARLY AS ON 27.02.1998. AND IT IS COMMON KNOWLEDGE THAT AFTER SEARCH U/S. 132 OF THE ACT TAKE PLACE, THE ADIT (INV) FILES HIS INVESTIGATION REPORT TAKING INTO ACCOUNT, THE SEIZED MATERIAL FROM ALL THE SEARCHED PERSONS/ENTIT IES WHICH THROWS LIGHT ON THE DISCOVERY OF THE UNEARTHED UNDISCLOSED INCOME OF SE ARCHED PERSONS/ENTITIES AND IF THE AO DEVIATES FROM CRUCIAL ASPECTS/FACTS THE LD. PR. CIT/CIT WOULD BE EXPECTED TO HAVE STEPPED INTO BY EXERCISING HIS REVISIONAL J URISDICTION U/S 263 OF THE ACT, WHICH HAS NOT HAPPENED IN THIS CASE. SO THE FIRST AOS ACTION OF ONLY MAKING PROTECTIVE ASSESSMENT OF RS. 11.86 CRORE IS MORE PR OBABLE IN THE OVERALL FACTS OF THE CASE AND IN ALL PROBABILITY THEREFORE, THE SAME WAS ADDED ON A SUBSTANTIVE BASIS IN THE HANDS OF M/S SWC WHICH FACT COULD NOT HAVE B EEN DISTURBED IN THE FACTS DISCUSSED (SUPRA). IN SUCH A FACTUAL BACKGROUND THE REFORE, THE SECOND AO COULD NOT HAVE REVIEWED THE ORDER OF HIS PREDECESSOR AO W HICH POWER HE DOES NOT ENJOY. THE ACTION OF THE SECOND AO TO HOLD IN THE I MPUGNED ORDER THAT NO SUBSTANTIVE ADDITION WAS MADE IN THE HANDS OF M/S. SWC FOR RS.11.86 CR. IS CLEARLY REVIEWING THE ORDER OF THE FIRST AO AND THA T ACTION AO CANNOT DO, BUT ONLY THE CIT/PCIT U/S 263 OF THE ACT AS PER THE SCHEME O F THE ACT IS EMPOWERED TO DO; AND THIS FINDING THAT NO SUBSTANTIVE ADDITION OF RS . 11.86 CRORE WAS MADE IN THE HANDS OF M/S SWC IS CONTRADICTING AS NOTED SUPRA WH EN IN THE SAME BREATH THE SECOND AO NOTES THAT IN THE SECOND BLOCK RE-ASSESSM ENT ORDER OF M/S SWC NOTHING WAS ALTERED MEANING STATUS QUO ANTE I.E. AS IT IS WITHOUT ANY CHANGE IN THE CASE OF ASSESSMENT OF M/S SWC IS CONCERNED. SO THE SAID OBSERVATION OF SECOND 17 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 AO CANNOT BE COUNTENANCED AND NEEDS TO BE IGNORED O N THE INFIRMITIES POINTED OUT SUPRA. THEREFORE, FOR THE AFORESAID REASONS WE AR E OF THE CONSIDERED OPINION THAT THE SECOND AO COULD NOT HAVE MADE SUBSTANTIVE ADDIT ION THAT TOO ON THE CREDITS RECEIVED BY M/S. KALO AND M/S. PRAGATI OF RS.12.41 CR. THEREFORE, THE ASSESSEE SUCCEEDS ON THE LEGAL ISSUE RAISED AND, THEREFORE, WE HOLD THAT IN THE FACTS & CIRCUMSTANCES DISCUSSED SUPRA, THE SECOND AO DID NO T ENJOY THE JURISDICTION TO MAKE THE ADDITION SUBSTANTIVELY IN THE HANDS OF THE ASSESSEE TO THE TUNE OF RS.12.41 CR. WHICH IS BAD IN LAW AND THEREFORE IT H AS TO BE SET ASIDE. 18. BEFORE PARTING FOR COMPLETENESS, WE WOULD LIK E TO HAVE A LOOK AT THE MERITS OF THE ADDITION TO THE TUNE OF RS.12.41 CR. THE SEC OND AO IN THE IMPUGNED ORDER HAS MADE THE ADDITION ( SUBSTANTIALLY ) OF RS. 12.41 CRORES OF THE CREDIT ENTRIES IN TWO BANK ACCOUNTS I.E. M/S KALO & M/S PRAGATI. ACCO RDING TO SECOND AO, IN THESE TWO BANK ACCOUNTS OF THE ASSESSEE, THE CHEQUES ARE DEPOSITED FROM THE BANK ACCOUNTS OF SHRI N. C. JAIN & SHRI P. L. MITTAL WHO ARE BENAMIDARS OF THE ASSESSEE. BUT ACCORDING TO SECOND AO, THE CREDIT EN TRIES TO BANK ACCOUNT OF SHRI N. C. JAIN AND SHRI P. L. MITTAL HAS NOT BEEN ABLE TO BE PROVED BY THE ASSESSEE, EVEN THOUGH THE ASSESSEE HAD FILED BANK STATEMENT/C HART/STATEMENT RECORDED U/S 131 OF THE ACT IN 1998 EVIDENCING TRANSFER OF MONEY FROM M/S SWC & ITS SUBSIDIARIES TO BANK ACCOUNT OF SHRI N. C. JAIN & S HRI P. L. MITTAL AND THEN FROM THESE TWO ACCOUNTS TO THE BANK ACCOUNT OF M/S KALO & M/S PRAGATI. THIS FINDING THE AO HELD IN HIS OWN WORDS AT PAGE 77 OF PAPER BO OK/PAGE 11 OF THE IMPUGNED SECOND REASSESSMENT ORDER OF 2002, THE ASSESSEE HAS REFERRED TO THE STATEMENT OF THE ASSESSEE RECORDED U/S. 131 ON 18.02.1998 AND AS SESSEE HAS GIVEN A CHART IN SUPPORT OF THE CONTENTION THAT THE MONEY CAME TO TH E BANK ACCOUNT OF M/S. KALO AND M/S. PRAGATI FROM M/S. SWC AND ITS SUBSIDIARIES . BUT THE SAME DOES NOT SHOW WHETHER THE MONEY CAME FROM M/S. SWC AND SUBSIDIARI ES AND THE SAME MONEY WAS GIVEN TO THE TWO (2) CONCERNS NAMELY M/S. KALO AND M/S. PRAGATI . HERE, THE EXPRESSIONS USED BY THE SECOND AO TO DENY THE CLAIM OF THE ASSESSEE IS TO BE NOTED WHETHER THE MONEY CAME FROM M/S. SWC AND SUBSIDIARI ES AND THE SAME MONEY WAS GIVEN TO THE TWO (2) CONCERNS NAMELY M/S. KALO AND M/S. PRAGATI . MEANING EVEN THOUGH THE ASSESSEE PRODUCED THE RELEV ANT BANK STATEMENT, FLOW- 18 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 CHARTS AND STATEMENT RECORDED BY INVESTIGATION TEAM IMMEDIATELY AFTER SEARCH U/S. 131 OF THE ACT IN 1998, THE AO BRUSHED ASIDE THEM A LL ON THE SPECIOUS PLEA AS TO WHETHER THE MONEY CAME FROM M/S. SWC AND SUBSIDIARI ES AND THE SAME MONEY WAS GIVEN TO THE TWO (2) CONCERNS NAMELY M/S. KALO AND M/S. PRAGATI . BY EXPRESSING SUCH A DOUBT TO IGNORE THE SOURCE OF MONEY TO BANK ACCOUNTS OF SHRI N. C. JAIN & SHRI P. L. MITTAL AND FROM THESE BANK ACCOUNTS TO M/S KALO & M/S PRAGATI, THE AO HAS BROUGHT IN THE SAME MONEY THEORY, TO BRUSH ASIDE THE RELEVANT EVIDENCE/MATERIAL TO HOLD AGAINST THE ASSESSEE AND SOMEHOW SADDLE THE ADDITION. THUS THE SECOND AO ILLEGALLY OMITTED TO CONSIDER ON MERITS THE RELEVANT BANK STATEMENT, FLOW-CHARTS AND STATEMENT RECORDED BY IN VESTIGATION TEAM IMMEDIATELY AFTER SEARCH U/S. 131 OF THE ACT IN 1998 TO MAKE TH E ADDITION OF RS. 12.41 CRORES. WHEN WE EXAMINE THIS IMPUGNED ACTION OF THE AO, WE NOTE THAT PURSUANT TO HIS SHOW CAUSE NOTICE IN THIS REGARD, THE ASSESSEE HAD SUBMITTED A FLOW-CHART TO SHOW THAT MONEY CAME TO THE BANK ACCOUNTS OF M/S. KALO A ND M/S. PRAGATI FROM M/S. SWC THROUGH THE BANK ACCOUNTS OF SHRI N. C. JAIN & SHRI P. L. MITTAL. HOWEVER, THE AO WITHOUT POINTING OUT ANY INFIRMITY IN THE FL OW-CHART/AND THE STATEMENT OF THE ASSESSEE WHICH WAS RECORDED BY AO/INVESTIGATION WING U/S. 131 AS EARLY AS ON 18.02.1998 REGARDING TRANSFER OF MONEY FROM M/S SWC HAS SIMPLY REJECTED IT ON THE SPECIOUS PLEA THAT BUT THE SAME DOES NOT SHOW WHETHER THE MONEY CAME FROM M/S. SWC AND SUBSIDIARIES AND THE SAME MONEY WAS GI VEN TO THE TWO (2) CONCERNS NAMELY M/S. KALO AND M/S. PRAGATI THUS, WE FIND THAT THE SECOND AO DOES NOT ACCEPT THE VERACITY OF THE CLAIM BY NOT CROSS CHECK ING/VERIFYING IT WITH THE BANK STATEMENT FROM THE SYNDICATE BANK PERTAINING TO THE SE BANK ACCOUNTS, WHICH HE COULD HAVE EASILY DONE, BUT HAS SET UP THE ERRONEOU S THEORY AS TO WHETHER THE SAME MONEY HAS BEEN GIVEN TO TWO CONCERNS. HERE, WE WOULD LIK E TO POINT OUT THAT THE SAME MONEY CONCEPT THE SECOND AO HAS REASONED OUT TO JUSTIFY HIS NON- ACCEPTANCE OF THE CHART AND BANK STATEMENT IS PREPOSTEROUS WHI CH IS ERRONEOUS IN THE LEGAL SENSE AND CANNOT BE ACCEPTED. HERE, THE AO DOUBTS W HETHER THE SAME MONEY DEPOSITED IN BANK ACCOUNTS OF SHRI N. C. JAIN AND S HRI P. L. MITTAL WAS GIVEN TO TWO CONCERNS BANK ACCOUNTS OF M/S. KALO & M/S. PRA GATI. IT IS THEREFORE, NECESSARY TO EXAMINE FIRST THE NATURE OF PROPERTY W HICH A DEPOSITOR HAS IN THE 19 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 DEPOSIT. IN COMMON LANGUAGE IT IS USUAL TO SPEAK T HAT A DEPOSITOR OWNS MONEY IN DEPOSIT AND THIS MAY BE SUBSTANTIALLY TRUE IN THE E CONOMIC SENSE, BUT IN STRICT LEGAL SENSE SUCH A STATEMENT IS WHOLLY UNTRUE. HERE WE W OULD LIKE TO POINT OUT THAT CURRENCY OF SOVEREIGN WHEN IS IN POSSESSION OF A PE RSON, THAT PERSON IS THE OWNER OF IT AGAINST THE WHOLE WORLD OR RIGHT IN REM IN RESPECT OF THE PROPERTY IN THE CURRENCY/MONEY, HOWEVER, THE MOMENT IT (CURRENCY/MO NEY) IS DEPOSITED IN BANK ACCOUNT, THE PROPERTY IN THE MONEY PASSES TO THE DE POSITEE/BANK IN THIS CASE AND WHAT THE DEPOSITOR OWNS THEREAFTER IS DEBT, WHICH I S ALSO KNOWN AS OBLIGATION, CHOSE-IN-ACTION OR ACTIONABLE CLAIM. THE RIGHT IN REM WHICH THE DEPOSITOR HAS IN THE MONEY IS REPLACED BY A RIGHT IN PERSONUM AGAINS T THE DEPOSITEE. THE REASON IS THAT IN CASE OF MONEY, POSSESSION AND PROPERTY GO T OGETHER WITH EVERY CHANGE IN POSSESSION, PROPERTY IN MONEY PASSES FROM ONE PERSO N TO ANOTHER. MONEY, THEREFORE, CANNOT ORDINARILY BE FOLLOWED; AND EVEN IN EXCEPTIONAL CASES, WHICH THE COMMON LAW RECOGNIZES, IT COULD BE FOLLOWED ONLY SO LONG AS THE RELATION OF CREDITOR AND DEBTOR HAD NOT SUPERSEDED THE RIGHT IN REM. (REFER 1973 MPLJ 481 HONBLE JUSTICE G. P. SINGH ORDER IN SHRI BALKRISHA N MUCHHAL VS. CONTROLLER OF ESTATE DUTY). SO ONCE MONEY/CURRENCY IS DEPOSITED IN A BANK ACCOUNT, THE MONEY LOSES ITS IDENTITY AND MIXES WITH OTHER DEPOSIT IN THE BANK AND THE RIGHT IN REM WHICH THE DEPOSITOR HAS IN THE MONEY IS REPLACED BY A RIGHT IN PERSONUM AGAINST THE DEPOSITEE. SO THE SAME MONEY CONCEPT ADVANCED B Y THE SECOND AO TO IGNORE THE CHART/SEC. 131 STATEMENT/BANK STATEMENT IS ARBI TRARY AND WHIMSICAL AND UNDERMINES THE DUTY CASTED UPON THE AO TO ACT FAIRL Y AS A QUASI JUDICIAL AUTHORITY. SO, WE CANNOT COUNTENANCE SUCH AN ACTION OF THE SEC OND AO. 19. COMING BACK TO THE FACTS OF THIS CASE, WHEN THE SECOND AO SHOW-CAUSED TO THE ASSESSEE AS TO WHY THE ADDITION OF RS 12.41CROR ES SHOULD NOT BE MADE IN THE HANDS OF THE ASSESSEE, THE ASSESSEE HAD SUBMITTED A FLOW-CHART TO SHOW THAT MONEY CAME TO THE BANK ACCOUNTS OF M/S. KALO AND M/S. PRA GATI FROM M/S. SWC THROUGH THE BANK ACCOUNTS OF SHRI N. C. JAIN & SHRI P. L. M ITTAL. THIS FACT IS PROVED FROM THE BANK STATEMENT THAT ALL THE MONEY HAS COME THRO UGH CHEQUE INTO THESE TWO BANK ACCOUNTS I.E. OF SHRI N. C. JAIN AND SHRI P. L . MITTAL FROM M/S SWC OR ITS SUBSIDIARIES. SO ACCORDING TO ASSESSEE WHEN THIS FA CT IS CRYSTAL CLEAR, THEN QUESTION 20 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 OF ADDITION OF CREDIT ENTRIES IN THE ASSESSEES HAN D DOES NOT ARISE. THOUGH THE AO IGNORED IT BY RAISING THE FLIMSY/ERRONEOUS PLEA OF SAME MONEY THEORY WHICH WE DID NOT ACCEPT (SUPRA), NOW WE WILL EXAMINE THIS FA CT AS CLAIMED BY THE ASSESSEE TO PROVE THE SOURCE OF MONEY AS FROM M/S SWC. IN THIS CONTEXT, WE FIND THAT IN THE ORIGINAL BLOCK ASSESSMENT ORDER OF 1998 ( REFER PAGE 9 & 10/ 52 & 53 OF PAPER BOOK ) THE AO AFTER NOTING DOWN THAT IN THE BANK ACCOUNT OF M/S. KALO AND M/S. PRAGATI THE MONEY DEPOSITED ARE FROM M/S. SWC THROU GH SHRI P. L. MITTAL & SHRI N. C. JAIN ( BOTH BENAMIDARS OF ASSESSEE ) AND M/S. DUNLOP INDIA LTD. ( SUBSIDIARY OF M/S. SWC ) ALBEIT WHILE FRAMING A QUESTION WHEREIN THE AO HA S NOTED THE FOLLOWING FACTS AS UNDER: I) M/S PRAGATI ENGINEERING COMPANY N. C. JAIN (A/C NO. 4882 SYNDICATE BANK BRABOURNE RD., BRANCH, CALCUTTA) RS.345 LAKHS P. L. MITTAL (A/C NO. 4915 SYNDICATE BANK BRABOURNE RD., BRANCH, CALCUTTA) RS.235 LAKHS M/S DUNLOP INDIA LTD. RS.200 LAKHS II) M/S KALO ENGINEERING WORKS N. C. JAIN (A/C NO. 4882 SYNDICATE BANK BRABOURNE RD., BRANCH, CALCUTTA) RS.230 LAKHS P. L. MITTAL (A/C NO. 4915 SYNDICATE BANK BRABOURNE RD., BRANCH, CALCUTTA) RS.422 LAKHS M/S DUNLOP INDIA LTD. RS.275 LAKHS 20. AFTER TAKING NOTE OF THE ABOVE THE AO STATES IN HIS OWN WORDS THIS MONEY COMING THROUGH SHRI N. C. JAIN AND SHRI P. L. MITTA L HAS COME FROM SHAW WALLACE & COMPANY OR ITS SUBSIDIARIES AND THEREAFTER THE AO ASKS THE ASSESSEE TO PROVE THAT THE CREDIT ENTRIES IN THE TWO (2) BANK ACCOUNT S ARE FROM THE SALE PROCEEDS OF UNDISCLOSED SHARES AS CLAIMED BY THE ASSESSEE IN HI S DISCLOSURE STATEMENT. SO, THE CASE OF THE AO/DEPARTMENT IN THE ORIGINAL ASSESSMEN T WAS THAT THE MONEY/CREDIT IN SHRI N. C. JAIN & SHRI P. L. MITTA WAS FROM M/S. SH AW WALLACE COMPANY OR ITS SUBSIDIARIES. AND SINCE THE AMOUNT TRANSFERRED BY M /S. SHAW WALLACE COMPANY 21 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 AND ITS SUBSIDIARIES WERE TAXED IN THEIR HANDS ON S UBSTANTIVE BASIS, AND IN THE HANDS OF ASSESSEE PROTECTIVE ASSESSMENT WAS MADE IN RESPE CT OF CASH WITHDRAWAL FROM THESE TWO (2) BANK ACCOUNTS OF M/S. KALO AND M/S. P RAGATI TO THE TUNE OF RS.11.86 CR. 21. THEREAFTER, THE LD. AR DREW OUR ATTENTION TO PA GE 154 TO 182 OF PAPER BOOK TO CORROBORATE THE FACT THAT THE MONEY HAS BEEN TRA NSFERRED TO M/S. KALO AND M/S. PRAGATI ARE FROM SHRI N. C. JAINS ACCOUNT AND FROM SHRI P. L. MITTALS ACCOUNT. WE FIND THAT IT IS AN ADMITTED AND PROVED FACT WHIC H HAS BEEN ACCEPTED BY THE ASSESSEE THAT SHRI N. C. JAIN AND SHRI P. L. MITTAL ARE THE NAME LENDERS OF THE ASSESSEE; AND THAT ASSESSEE IS OPERATING BOTH THE B ANK ACCOUNTS. THERE IS NO QUARREL ON THIS ISSUE. NOW THE ONLY ISSUE WHICH HAS TO BE EXAMINED IS THE CREDIT ENTRY IN THE BANK ACCOUNTS OF SHRI N. C. JAIN AND SHRI P. L. MITTAL MAINTAINED AT SYNDICATE BANK, BRABOURNE ROAD BRANCH A/C NO. 4882 & 4915 RES PECTIVELY. WE FIND FROM PAGE 165 TO 172 OF PAPER BOOK, THE BANK STATEMENT O F SHRI P. L. MITTAL WHICH SHOWS THAT THE CREDIT ENTRIES ARE FROM THE FOLLOWI NG CREDITORS (I) M/S. HAYWARDS BRAWERIES LTD. (II) M/S. ALKNANDA MANUFACTURING & T RADING CO. P. LTD., (III) M/S. VIBHAVARI FINANCE & INVESTMENT CO. PVT. LTD., (IV) M/S. MALLESWARA FINANCE & INVESTMENT CO. P. LTD., (V) GULMOHAR ESTATES LTD., (VI) M/S. ALKNANDA MANUFACTURING & TRADING CO. P. LTD., (VII) M/S. VIB HAVARI FINANCE & INVESTMENT CO. PVT. LTD., (VIII) M/S. MALLESWARA FINANCE & IN VESTMENT CO. P. LTD (IX) M/S. SHAW WALLACE & COMPANY LTD., (X) M/S. KAMINI FINANC E & INVESTMENT COMPANY LIMITED, (XI) M/S NORTH EASTERN PUBLISHING & ADVERT ISING CO. LTD., (XII) M/S. UTTAM MACHINERY & SUPPLY CO. PVT. LTD. AND (XIII) M /S. SHAW WALLACE & CO. LTD. THE BANK ACCOUNT TRANSACTION OF SHRI N. C. JAIN WHI CH SHOWS THAT THE MONEY HAS COME FROM (I) M/S. HAYWARDS BREWERIES LTD., (II) M/ S. VIBHAVARI FINANCE & INVESTMENT CO. PVT. LTD., (III) M/S. KAMALA KAL LIM ITED, (IV) M/S. VIBHAVARI FINANCE & INVESTMENT CO. PVT. LTD., (V) M/S. ALKNAN DA MANUFACTURING & TRADING CO. P. LTD. AND (VI) M/S. MALLESWARA FINANCE & INV ESTMENT CO. P. LTD. NOW WE HAVE TO EXAMINE WHETHER THESE CREDITORS/ENTITIES AR E GROUP COMPANIES/SUBSIDIARY COMPANIES OF M/S SWC. FOR THAT LD. A.R. DREW OUR AT TENTION TO PAGE 176 OF PB WHICH IS THE COVER PAGE OF M/S SHAW WALLACE & COMPA NY LTD.S REPORT & 22 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 ACCOUNTS OF SUBSIDIARIES 1995-96, 1996-97 & 1997-98 . FURTHER OUR ATTENTION WAS DRAWN TO PAGE 177 TO 182 OF PB WHICH ARE THE LIST O F SHAREHOLDER COMPANIES OF M/S SWC. AND FROM A PERUSAL OF THE SAME, WE FIND THAT A LL THE CREDITORS WHO HAS DEPOSITED MONEY BY CHEQUE IN SHRI N. C. JAIN AND SH RI P. L. MITTALS IN THE AFORESAID BANK ACCOUNTS ARE FROM M/S SWC AND ITS S UBSIDIARIES. THEREFORE, THE ASSESSEE HAS SATISFACTORILY EXPLAINED THAT THE MONE Y HAS COME FROM THE COFFERS/BANK ACCOUNTS OF M/S. SWC AND ITS SUBSIDIAR IES. AND M/S SWC HAS FUNDED IT FROM RS 89.02 CRORES FROM ICDS OF RS 219.77 CROR ES, THEREFORE AO IN THE BLOCK ASSESSMENT OF M/S SWC HAS DISALLOWED INTEREST EXPEN DITURE OF RS 67.65 CRORES ALLEGING IT TO BE FOR NON-BUSINESS PURPOSE (REFER P AGES 11 &12 OF THE IMPUGNED ORDER/77-78 PB). IN THE LIGHT OF THE AFORESAID DISC USSION AND SINCE SUBSTANTIVE ADDITION MADE ORIGINALLY IN THE HANDS OF M/S SWC HA S BEEN REITERATED BY THE AO IN ITS REASSESSMENT ORDER DATED 30.03.2000, THE PRO TECTIVE ASSESSMENT WAS NOT WARRANTED IN THE HANDS OF ASSESSEE BECAUSE THE ASSE SSEE HAS BEEN ABLE TO DISCHARGE THE ONUS OF SHOWING THE NATURE AND SOURCE OF THE CR EDIT ENTRIES IN THE BANK ACCOUNTS OF M/S. KALO AND M/S. PRAGATI AS WELL AS IN THE BAN K ACCOUNTS OF SHRI N. C. JAIN AND SHRI P. L. MITTAL WHICH IN TURN ARE SOURCED FRO M M/S. SWC AND ITS SUBSIDIARIES; AND IT IS EVIDENT THAT THE SOURCE OF MONEY FOR M/S. SWC AND SUBSIDIARIES WAS IN TURN FROM ICDS AS DISCUSSED (SU PRA), WHICH PROMPTED THE AO TO DISALLOW IN THE HANDS OF M/S. SWC THE INTEREST E XPENDITURE TO THE TUNE OF RS 67.65 CRORES. THEREFORE, THE ADDITION TO THE TUNE O F RS 12.41 CRORES MADE IN RESPECT OF CREDIT ENTRIES IN THE BANK ACCOUNT OF M/S. KALO AND M/S. PRAGATI ARE UNJUSTIFIED AND, THEREFORE, DIRECTED TO BE DELETED. THUS, THE ASSESSEE SUCCEEDS ON THE LEGAL ISSUE AS WELL AS ON MERITS. 22. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27 TH AUGUST, 2021. SD/- SD/- (P. M. JAGTAP) (A. T. VARKEY) VICE PRESIDENT JUDICIAL MEMB ER DATED: 27TH AUGUST, 2021 23 IT(SS)A NO. 10/KOL/2002, RAM RATAN MODI, BP: 01.04.1986 TO 27.08.1996 JD, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- SHRI RAM RATTAN MODI, R. NO. 405, 4, SYN AGOGUE STREET, KOLKATA-700 001. 2. RESPONDENT ACIT, C.C. XXVIII, KOLKATA. 3. CIT, KOLKATA. 4. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY/DDO ITAT, KOLKATA BENCHES, KOLKATA