Anjali Construction, Baroda V. The CIT-III, Baroda

ITSSA 121/AHD/2006

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9393 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-03-2010
• Assessment Year: misc
• Appeal Filed On: 19-05-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Keywords: Search and seizure; Document seized; Principle of natural justice; Rule of consistency; Block assessment; Bogus loan; Documents seized
• Section: 142(1); 131; 263; 132

Judgement Text

IT.(SS) A.NO.121/AHD/2006 1 IN THE INCOME_TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI T. K. SHARMA AND SHRI D.C.AGRAWAL. IT (SS) A. NO.121/AHD/2006 (BLOCK PERIOD 1-4-1995 TO 19-12-2001) ANJALI CONSTRUCTION, ASHWAMEGH-II, SAMRAJYA COMPLEX, AKOTA, MUNJMAHUDA RD BARODA. VS THE COMMISSIONER OF INCOME TAX-III 2 ND FLOOR, AAYAKAR BHAVAN ANNEXE, RACE COURSE CIRCLE, BARODA-390 007. (APPELLANT) (RESPONDENT) PAN: AADFA 3099 A APPELLANT BY : SHRI S.N.SOPARKAR WITH SHRI P.M. MEHTA. RESPONDENT BY : SHRI RAJEEV AGARWAL, CIT(DR) ( (( ( )/ )/)/ )/ ORDER PER: SHRI D.C. AGRAWAL A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. C.I.T. PASSED U/S. 263 ON 21-3-2006. THE LD. CIT IN H IS ORDER U/S. 263(1), HAD SET ASIDE THE BLOCK ASSESSMENT ORDER PASSED BY THE A.O. ON 30-1-2004 AND DIRECTED THE AO TO PASS A FRESH BLOCK ASSESSMENT ORDER. IN THIS REGARD THE ASSESSEE HAS RAISED SEVERAL GROUN DS IN THE ORIGINAL GROUNDS OF APPEAL AS UNDER :- IT.(SS) A.NO.121/AHD/2006 2 1. THE LD. COMMISSIONER OF INCOME TAX-III, BARODA HAS ERRED IN LAW AND IN FACTS IN SETTING ASIDE THE ASSESSMENT ORDER DT.30.01.2004 FOR THE BLOCK PERIOD 1.4.1995 TO 19.12.2001 MADE BY THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, BARODA U/S. 263 OF THE I.T. ACT VIDE HIS ORDER DT.17.3.2006 HOLDING THAT THE SAID ORDER IOS ERRONEOUS AS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE IMPUGNED ORDER OF THE LD. CIT-III, BARODA IS IN COMPLETE DISREGARD OF AVAILABLE MATERIAL ON RECORDS AND SUBMISSIONS AND, THEREFORE, DESERVES TO BE ANNULLED. 2. THE LD. CIT-III, BARODA HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE LD. AO IN MAKING THE ASSESSMENT FOR THE BLOCK PERIOD 1-4-95 TO 19-12-01 U/S. 158BC R.W.S. 158BG DATED 30.1.04 HAS IGNORED TO CONSIDER THE VARIOUS MATERIAL INCLUDING THE SEIZED MATERIAL IN RESPECT OF WHICH RELEVANT ENQUIRIES ARE NOT MADE BY THE LD. AO. IN HOLDING SO, THE LD. CIT-III, BARODA H AS COMPLETELY DISREGARDED THE AVAILABLE MATERIAL AND SUBMISSION ON RECORD AND HAS WRONGLY HELD THAT THE ORDER PASSED IS ERRONEOUS AND IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THEREFORE, HE BE DIRECTED TO CONSIDER THE AVAILABLE MATERIAL AND SUBMISSION OF THE APPELLANT AND HOLD THAT THE IMPUGNED ORDER PASSED BY THE LD. AO IS NOT ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3. THE LD. CIT-III, BARODA HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE LD. AO. IN MAKING THE ASSESSMENT FOR THE BLOCK PERIOD 1-4-95 TO 19-12-01 U/S. 158BC R.W.S. 158BG DATED 30-01-04 HAS FAILED TO DISCLOSE THE DETERMINATION OF INCOME AT RS.11,79,770/-, AS AGAINST THE ADMISSION OF THE APPELLANT BASED ON ENTRIES RECORDED IN THE SEIZED DOCUMENTS, WHICH IS CONTRARY TO THE MATERIAL AVAILABLE AND ACCORDINGLY, HE BE DIRECTED TO HOLD THAT THE TRANSACTION AS RECORDED ON VARIOUS SEIZED MATERIAL DISCUSSED HEREINABOVE IS DULY CONSIDERED IN THE ASSESSMENT AND THAT NO PREJUDICE IS CAUSED TO THE REVENUE AND THAT THE ORDER IS NOT ERRONEOUS JUSTIFYING THE REVISION U/S. 263. IT.(SS) A.NO.121/AHD/2006 3 4. THE LD. CIT-III, BARODA HAS ERRED IN LAW AND IN F ACTS IN HOLDING THAT THE LD. AO IN MAKING THE ASSESSMENT FOR THE BLOCK PERIOD 1-4-95 TO 19-12-01 U/S. 158BC R. W. S. 158BG DATED 30-01-04 HAS IGNORED TO CONSIDER THE TAXABILITY OF TRANSACTION AS RECORDED ON VARIOUS SEIZED MATERIAL FOUND FROM THE BUSINESS PREMISES OF THE GROUP WHICH IS CONTRARY TO THE MATERIAL AVAILABLE AND ACCORDINGLY, HE BE DIRECTED TO HOLD THAT THE TRANSACTION AS RECORDED ON VARIOUS SEIZED MATERIAL DISCUSSED HEREINABOVE IS DULY CONSIDERED IN THE ASSESSMENT AND THAT NO PREJUDICE IS CAUSED TO THE REVENUE AND THAT THE ORDER IS NOT ERRONEOUS JUSTIFYING THE REVISION U/S. 263. 2. THEREAFTER, THE FOLLOWING ADDITIONAL GROUNDS WERE RAISED :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT-III, BARODA HAS GROSSLY ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT BECAUSE THE ISSUES RAISED IN THE ORDER PASSED U/S. 263 OF THE ACT HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER WHILE PASSING THE ORDER DATED 30-01-2004 U/S. 158 BC R.W. S. 158BG OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT-III BARODA HAS GROSSLY ERRED IN ASSUMING JURISDICTION U/S. 263 WHEN BOTH THE CONDITIONS PRESCRIBED IN THE PROVISIONS OF SECTION 263 THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS EITHER ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENU E ARE NOT SATISFIED. 3. THE FACTS OF THE CASE ARE THAT A SEARCH OPERATION U/ S. 132 OF THE INCOME TAX ACT WAS ORGANIZED BY THE DEPARTMENT ON 20-1 2-2001 AGAINST JAYRAJ GROUP OF CASES COVERING RESIDENTIAL AS W ELL AS BUSINESS PREMISES OF THE ASSESSEE GROUP ALSO. ON THE BASIS OF SEIZED MATERIAL ASSESSEE WAS REQUIRED TO FILE RETURN OF UNDISCLOSED INCOME. IN RESPONSE TO NOTICE ISSUED U/S. 158BC, ASSESSEE FILED A RETUR N ON 26-8- IT.(SS) A.NO.121/AHD/2006 4 2003 ON A TOTAL UNDISCLOSED INCOME OF RS.11,79,770/-. TH E A.O. ISSUED NOTICE U/S. 143(2) ON 26-8-2003 ITSELF AND FINALLY ACCE PTED THE RETURN OF UNDISCLOSED INCOME VIDE HIS ORDER DATED 31.-01-2004. IT IS THIS ORDER WHICH HAS BECOME THE SUBJECT MATTER OR REVISION BY THE COMMISSIONER OF INCOME TAX. 4. THE LD. CIT ISSUED FOLLOWING SHOW CAUSE NOTICE TO TH E ASSESSEE. OFFICE OF THE COMMISSIONER OF INCOME TAX-III 2 ND FLOOR, AAYAKLAR BHAVAN ANNEXE, RACE COURSE CIRCLE, BA RODA. ------------------------------------------- ---------------------------- NO.BRD/CIT-III/263/2005-06. DATE: 23-02-2006. M/S. ANJALI CONSTRUCTION ASHWAMEGH-II, SAMRAJYA COMPLEX, AKOTA, MUNJMAHUDA ROAD, BARODA. SIR, SUB:- PROCEEDINGS U/S.263 OF THE INCOME TAX ACT IN RESPECT OF ORDER U/S. 158BC R.W.S 158BG OF THE ACT DT.30.1.2004 NOTICE U/S. 263(1) OF THE ACT ---- THE RECORD OF THE PROCEEDINGS U/S. 158BC R.W.S. 158BG RESULTING IN PASSING OF ORDER ON 30.1.2004 BY THE THEN DCIT., CENTRAL CIRCLE-1, BARODA (THE ASSESSING OFFICER) WERE CALL ED FOR AND EXAMINED. 2. IT IS FOUND THAT THE ORDER PASSED BY THE A.O. ACCEPTI NG THE RETURN DECLARING UNDISCLOSED INCOME OF RS.11,79,770/- IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE IT.(SS) A.NO.121/AHD/2006 5 REVENUE. THE A.O. HAS NOT LOOKED INTO THE EXTENT OF ON-MONEY PAYMENTS ON THE SALE OF UNITS IN THE BUILDING PROJECT S AS EVIDENT FROM SEVERAL DOCUMENTS FOUND AND SEIZED IN THE COURSE OF SEARCH CONDUCTED IN DECEMBER,2001 AND JANUARY,2002. IT MAY BE MENTIONED THAT SHRI JAYESH DAVE IN HIS STATEMENTS AT TH E TIME OF SEARCH HAD ADMITTED NET ON MONEY RECEIPTS OF RS.1,02,00, 000/- FOR THE WHOLE GROUP AND GIVEN PROJECT-WISE BREAK-UP O F THIS AMOUNT ON THE BASIS OF WHICH RS.13.37 LAKHS IS ATTRIBUTA BLE TO YOU. BESIDES, SOME OF THE BUYERS OF THE UNITS, SUCH AS SHR I JITENDRA C. PATEL IN HIS STATEMENT U/S. 131 DATED 29. 1.2002 AND SHRI DILIP ASHOK THAKKAR IN HIS STATEMENT U/S. 131 DATE D 7.3.2002 HAD ADMITTED THE PAYMENT OF ON-MONEY IN RE SPECT OF UNITS PURCHASED BY YOUR AISHWARYA PROJECT. THE PERUSAL OF DIFFERENT ENTRIES REGARDING ON-MONEY RECEIPTS INDICATE THAT AT LEAST 40% OF THE DECLARED PRICE WAS RECEIVED AS ON-MONEY . DESPITE THESE OVERWHELMING EVIDENCES, ON-MONEY INCOME WA S NOT FULLY AND EVIDENTLY INCLUDED IN THE UNDISCLOSED I NCOME OFFERED IN THE RETURN FILED U/S. 158BC. BUT THE ASSESSIN G OFFICER DID NOT MAKE ANY ADDITION IN THIS REGARD. 3. THE ORDER OF THE ASSESSING OFFICER IS THUS ERRONEOUS I N SO FAR AS IT IS PREJUDICED TO THE INTERESTS OF THE REVENUE WITHIN THE MEANING OF SECTION 263(1) OF THE ACT. IT IS ACCORDINGLY PROPOSED TO BE MODIFIED AND ENHANCED OR TO BE CANCELLED WITH A DIRECTION TO PASS A FRESH ORDER U/S. 158BC. 4. YOU ARE HEREBY GIVEN AN OPPORTUNITY OF BEING HE ARD ON 6- 3-2006 AT 10.30 A.M. IN MY OFFICE ON 2 ND FLOOR, AAYAKAR BHAVAN ANNEXE, RACE COURSE CIRCLE, BARODA IN ACCORDANCE WITH SEC. 263(1) OF THE ACT. IN CASE OF NON-COMPLIANCE THE MATTER WILL BE DECIDED ON MERITS. 5. IN RESPONSE TO ABOVE SHOW CAUSE NOTICE ASSESSEE FIRM FURNI SHED FOLLOWING EXPLANATION :- IT.(SS) A.NO.121/AHD/2006 6 ANJALI CONSTRUCTIONS ASHWAMEGH-II, SAMRAJYA COMPLEX, AKOTA-MUJMA HUDA ROAD, AKOTA, VADODARA. DATE: 08-03-2006. THE HONBLE COMMISSIONER OF INCOME-TAX-III AAYAKAR BHAVAN, BARODA. RESPECTED SIR, SUB :- PROCEEDINGS U/S. 163 IN RESPECT OF ORDER U/S. 158 BC R.W.S. 158BG OF THE I.T. ACT DATED 30-01-2004. REF:- LETTER NO.BRD/CIT-III/263/13/HEM/2005-06 DA TED 22-02- 2006 ---- KINDLY REFER TO THE CAPTIONED SUBJECT AND IN RESPONSE TO THE REFERRED TO LETTER, WE BEG TO SUBMIT AS UNDER :- THE ASSESSEE IS IN RECEIPT OF NOTICE U/S.263 FOR REVISING TH E ORDER SO FAR THE SAME IS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE IN RELATION TO THE ASSESSMENT ORDER PASSED U/S. 158BC R.W .S. 158BG ON 30-01-04 WITH RESPECT TO THE VARIOUS ISSUES, WHICH ARE PR ESUMED TO BE ERRONEOUSLY HELD IN THE ASSESSMENT TO THAT EXTENT PREJUD ICIAL TO THE INTEREST OF THE REVENUE. YOUR ASSESSEE HUMBLY SUBMITS THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS ALL THE RELEVANT PARTICULARS/DETAILS/RECOR DS CALLED FOR FROM TIME TO TIME BY THE LD. AO WERE FURNISHED WHICH, INTE R ALIA, INCLUDE THE FOLLOWING :- A) THE BOOKS OF ACCOUNTS AND THE MATERIAL IN RELATION T O EITHER SEIZED OR AVAILABLE WITH THE ASSESSEE. B) THE VARIOUS STATEMENTS RECORDED IN THE COURSE OF SEARCH PROCEEDINGS U/S. 132(4) AND IN RESPONSE TO SUMMONS U/S. IT.(SS) A.NO.121/AHD/2006 7 131 AND ALSO THE STATEMENTS RECORDED IN THE COURSE OF ASSESSMENT PROCEEDINGS. C) THE DETAILS FURNISHED IN THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME. THIS BEING SO, TO THE BEST OF THE KNOWLEDGE OF THE ASSESSE E, ALL THE ISSUES RAISED IN THE IMPUGNED NOTICE, THE ASSESSEE HAS GIVEN PROPER EXPLANATION AND SUFFICIENT MATERIAL ON CONSIDERATION O F WHICH THE ORDER HAS BEEN PASSED AND FOR THE REFERENCE OF YOUR HONOUR, THE SAME IS FURNISHED AS UNDER : INCOME FROM ON MONEY RECEIPTS OF AIOSHWARYA PROJE CT. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DURING THE BLOCK PERIOD, IT HAS UNDERTAKEN THE BUSINE SS OF CONSTRUCTION OF AISHWARYA RESIDENTIAL COMPLEX. IN THE COURSE OF SEARCH , SOME DOCUMENTS INDICATED COLLECTION OF ON MONEY TO AN EXTEN T OF RS.11,79,770/- WAS FOUND AND ON THE BASIS OF SUCH EVIDENCE S, THE ASSESSEE HAS DECLARED AN UNDISCLOSED INCOME OF RS.11,79,770/- IN TERMS OF PROVISIONS OF CHAPTER XIVB . THE ASSESSEE SUBMITS TO YOUR KIND HONOUR THAT THE ASSESSMENT MADE IN THE CASE OF THE ASSESSEE IS OF UNDISCLOSED INCOME WHICH IS TO BE DETERMINED ON THE BASIS OF SOME EVIDENCE OR MATERIAL FO UND AS A RESULT OF SEARCH AND IN THE COURSE OF SEARCH, THE MATERIA L OR EVIDENCE FOUND AS A RESULT OF SEARCH AND IN THE COURSE OF SEARCH, THE MATERIAL OR EVIDENCE FOUND WAS IN RESPECT OF THE FLATS AS PER THE STAT EMENT OF SHRI JITENDRA PATEL AND SHRI DILIP THAKKAR WAS TAKEN AS RE FERRED IN THE NOTICE. SINCE THE UNDISCLOSED INCOME REPRESENTED BY THESE EVIDENCES IS ALREADY INCLUDED IN THE ASSESSMENT, IT IS TO BE HELD T HAT THE ASSESSMENT IS RIGHTLY MADE. IT IS FURTHER SUBMITTED THAT THE ASSESSMENT OF UNDISCLOSED INCOME BASED ON EVIDENCES IN RESPECT OF ONE OR TWO TRANSACTIONS CA NNOT BE APPLIED TO ALL OTHER TRANSACTIONS IN ABSENCE OF SPECIFIC EV IDENCE AVAILABLE AND THUS, REVISION AS PROPOSED IS UNDESIRED. THANKING YOU, YOURS FAITHFULLY, FOR ANJALI CONMSTRUCTIONS SD/- PARTNER IT.(SS) A.NO.121/AHD/2006 8 6. THE LD. CIT WAS NOT SATISFIED AND ACCORDINGLY SET ASIDE THE ORDER OF THE A.O. FOR BEING MADE DE NOVO. THE ITEMS ON WHI CH LD. CIT HAS SET ASIDE THE ORDER OF AO (AS PER HIS ORDER U/S. 263) A RE AS UNDER :- (I) IN THE LETTER DT.28.3.2002 ASSESSEE SPECIFICALLY ADMIT TED ON MONEY INCOME OF RS.16,27,000/- OUT OF TOTAL ON MONEY OF RS.1,24,14,930/- DECLARED FOR THE WHOLE GROUP. SPECIFI C ENTRIES WERE FOUND IN THE SEIZED RECORDS REGARDING COLLECTION O F ON MONEY IN RESPECT OF SEVERAL FLATS MENTIONED IN THE SEIZ ED DOCUMENTS. (II) ASSESSEE DID NOT CLARIFY/SPECIFY HOW THE WORKING OF ON MONEY ARRIVED AT RS.11,79,770/- WAS DONE AS AGAINST RS.16,27,0 00/- ADMITTED EARLIER IN ITS LETTER DT.28.3.2002. (III) AS PER SEIZED DOCUMENT ANNEXUREA 40/1 DT.19.12. 01 SEIZED FROM THE BUSINESS PREMISES OF THE ASSESSEE AND PAGE-18 THEREOF, IT WAS NOTICED THAT SHRI HARESH SANGHVI PAID R S.15 LACS BY CHEQUE WHERE UPON RS.15 LACS WAS RETURNED TO HIM IN CA SH. THERE IS NO EXPLANATION HOW THE CASH RETURNED TO SANGH VI WAS ACCOUNTED FOR IN THE BOOKS OF THE ASSESSEE WHEN CHEQUE RECEIVED FROM SHRI SANGHVI WAS ACCOUNTED FOR AS THE PAYM ENT OF LOAN. (IV) PAGE-75 OF ANNEXURE A-40 SHOWS COLLECTION FROM U NITS NO.B-802, B-903, A-1003, C-1001 AND A-403 BY SHRI SANGHVI. T HE AO FAILED TO CO-RELATE THIS COLLECTION WITH THE SALE PROCEED S OF THESE UNITS DECLARED IN THE BOOKS SO AS TO DETERMINE ON MONE Y COMPONENT. (V) ANNEXURE-41 IS A FILE CONTAINING VARIOUS AGREEM ENTS MADE BY SHRI JAYESH DAVE, REGARDING SETTLEMENTS OF DISPUTES FOR IT.(SS) A.NO.121/AHD/2006 9 PAYMENT. THE A.O. FAILED TO DETERMINE THE FINDINGS O F FACTS OF THESE AGREEMENTS. PAGES 37-38 OF ANNEXURE A-48 SHOWED DETAILED WORKING OF SALE PROCEEDS OF FLAT NO.A-903 AND A 101 OF AISHWARYA PROJECTS. ON THE BASIS OF THESE PAPERS SHRI JIT ENDRA C. PATEL HAD ADMITTED UNDISCLOSED INCOME OF RS.6.11 LACS. TH IS AMOUNT WAS NOT FOUND ENTERED IN THE REGULAR BOOKS. TH E A.O. FAILED TO CONSIDER THIS IN THE BLOCK ASSESSMENT. ANNEXURE A-3/1 DT.20.12.01,PAGES 107 TO 109 CONTAIN ENTRIES OF PAYMEN TS TO M/S. KIRAN CONSTRUCTION WHICH WERE NOT RECONCILED AND VER IFIED BY THE A.O. WITH THE REGULAR BOOKS. (VI) PAGE 12 TO 67 OF ANNEXURE A-3/3 SHOW CASH DEPOSI TS IN CASE OF M/S. KIRAN CONSTRUCTION WHO IS A CONTRACTOR FOR THE ASSESSE E. (VII) PAGES 91 TO 94 OF ANNEXURE A-3/4 SHOWED DETAI LS OF CONSTRUCTION WORK OF THE ASSESSEE UPTO 31-3-2001 WHICH WAS N OT VERIFIED BY THE A.O. WITH THE REGULAR BOOKS. (VIII) PAGE 96 TO 98 OF ANNEXURE A-3/4 SHOWED DETAI LS OF THE SALES OF THE UNITS OF AISHWARYA PROJECT MADE THROUGH KSHITIJ C O-OPERATIVE HOUSING SOCIETY FOR RS.12.44 CRORES WHICH WAS APPARENTLY N OT LOOKED INTO BY THE A.O. ( IX) PAGES 42 TO 50 OF ANNEXURE 3/9 RELATED TO BOOKIN G IN AISHWARYA PROJECT AND THEIR CANCELLATION. THE AO FAILED TO EXAM INE THE FINANCIAL IMPLICATIONS OF THESE TRANSACTIONS. (X) PAGE 4 OF ANNEXURE A/25 SHOWED AREA-WISE DETAILS OF UNITS OF AISHWARYA PROJECT. 7. THUS, ACCORDING TO THE LD. CIT., A.O. FAILED TO NOT ICE SEVERAL EVIDENCES AVAILABLE IN THE SEIZED RECORDS. HE FAILED TO I NVOKE OTHER PROVISIONS OF THE ACT, IN ADDITION TO PROVISIONS OF CHAP TER XIVB. THE ORDER OF THE A.O. DID NOT SHOW THAT HE HAD APPLIED H IS MIND. THE LD. IT.(SS) A.NO.121/AHD/2006 10 CIT HELD THAT IT IS SETTLED LAW THAT FAILURE TO MAKE RELEVANT INQUIRIES AND ACCEPTANCE OF THE ASSESSEES CLAIM WITHOUT ANY SUPPORTIN G MATERIAL AND WITHOUT APPLICATION OF MIND IN ALL PERSP ECTIVE RENDERS THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF RE VENUE. THE LD. CIT RELIED ON THE FOLLOWING AUTHORITIES IN SUPPORT OF HI S PROPOSITION :- (I) MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR-83 (SC) . (II) RAMPYARI DEVI SARAOGI VS. CIT 67 ITR-84 (SC) (III) SMT. TARA DEVI AGGARWAL VS. CIT 88 ITR 323(SC) (IV) CIT VS. BHAGWANDAS 272 ITR 367 (ALL) (V) JAGDISH KUMAR GULATI VS. CIT 269 ITR 71 (ALL) (VI) GEE VEE ENTERPRISES VS. ADDL.CIT 99 ITR-375, 386 (DEL.) (VII) DAYAL & CO. VS. CIT 220 ITR-456, 459 (CAL.) (VIII) CIT VS. PUSHPA DEVI 173 ITR-445 (PAT.) 8. HE ACCORDINGLY CANCELLED THE ORDER OF THE A.O. AND DI RECTED THE PRESENT AO TO MAKE FRESH ASSESSMENT U/S. 158BC IN ACCORDAN CE WITH LAW. 9. AGAINST THE ABOVE ORDER OF LD. CIT, THE LD. A.R. SUBMITTED THAT ON SIMILAR SET OF FACTS THE TRIBUNAL HAS CANCELLED THE OR DER OF CIT IN THE CASES OF SHRI JAYESH DAVE, M/S. JAYRAJ ESTATE PVT. LTD. , AND M/S. HINDUSTAN EARTHMOVERS PVT. LTD. ALL THESE CASES INCLUDING THE CASE OF THE ASSESSEE ARE GROUP CASES WHERE SEARCH AND SEIZURE OPERATI ONS WERE ORGANIZED SIMULTANEOUSLY. ALL THE ASSESSES HAD FILED RETURN OF INCOME AFTER THOROUGHLY CONSIDERING THE SEIZED DOCUMENT S AND LD. A.O. HAD ACCEPTED THE RETURNED INCOME AFTER CONSIDERING ALL T HE ASPECTS, DOCUMENTS AND REPLY OF THE ASSESSEE. THE LD. CIT HAD CA NCELLED THE IT.(SS) A.NO.121/AHD/2006 11 BLOCK ASSESSMENTS OF ALL THE 3 OTHER ASSESSES OF THE SAME GROUP . ALL THE 3 ASSESSEES HAD GONE TO THE TRIBUNAL AND THE TRIBUNA L HAVE CANCELLED THE ORDER OF LD. CITA HOLDING THAT AO HAD CO NSIDERED ALL THE ASPECTS OF THE MATTER AND THEREFORE, THERE WAS NO ERROR WHICH COULD BE SAID TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. 10. THE LD. AR SUBMITTED THAT IN THE CASE OF M/S. HINDU STAN EARTHMOVERS PVT. LTD., BLOCK ASSESSMENT ORDER U/S/158BC R.W.S. 158BG WAS PASSED ON 30.1.2004 BY DY. CIT CENTRAL CIRCLE -1, BARODA. THE LD. CIT HAD ISSUED NOTICE U/S. 263 DT 22.2.2006. A FTER CONSIDERING THE REPLY OF THE ASSESSEE, THE LD. CIT-III BARODA PASSED AN ORDER U/S. 263 ON16.3.2006 CANCELING THE ORDER OF THE A.O. DT.3 0-01-2004 AND DIRECTING A.O. TO PASS FRESH ASSESSMENT. THE TRIBUNAL VIDE ITS ORDER DATED 14.12.2006 IN IT(SS)A.120/AHD/2006 IN THAT CASE CANCELLED THE ORDER OF LD. CIT AND UPHELD ORDER OF LD. A.O. 11. IN M/S. JAYRAJ ESTATE PVT. LTD., LD. A.R. SUBMITTE D, THAT BLOCK ASSESSMENT ORDER U/S. 158BC R.W.S. 158BG WAS PASSED ON 30-01 - 2004. THE LD. CIT-III, BARODA ISSUED SHOW CAUSE NOTICE U/ S. 263 DT. 22.2.2006. REJECTING THE REPLY OF THE ASSESSEE, THE LD. CIT VIDE HIS ORDER DATED 16.03.2006 SET ASIDE THE ASSESSMENT FOR BEING MADE DE- NOVO. THAT ASSESSEE APPEALED TO THE TRIBUNAL WHICH VIDE ITS ORDER IN IT.(SS).A.NO.119/AHD/2006 DATED 19-12-2008 CANCELLED THE ORDER OF THE LD. CIT AND RESTORED THE ORDER OF LD. A.O. 12. SIMILARLY, LD. AR SUBMITTED THAT IN THE CASE OF SH RI JAYESH DAVE,. BLOCK ASSESSMENT ORDER U/S. 158BC WAS PASSED ON 30-01 -2004 BY THE DY. C.I.T.,CENTRAL CIRCLE-1, BARODA. AGAINST T HIS LD. CIT ISSUED SHOW CAUSE NOTICE U/S. 263 ON 22-2-2006 AND AFTER REJECTI NG THE REPLY IT.(SS) A.NO.121/AHD/2006 12 OF THE ASSESSEE CANCELLED THE ORDER OF THE A.O. VIDE HIS ORDER DT. 17- 03-2006. THAT ASSESSEE APPEALED TO THE TRIBUNAL WHICH VI DE ITS ORDER IN IT(SS) A.NO.122/AHD/2006 DT. 9-10-2009 CANCELLED T HE ORDER OF THE LD. CIT AND RESTORED THE ORDER OF THE A.O. 13. THE LD. AR SUBMITTED THAT IN ALL THE 3 SISTER CONCER NS WHERE SEARCH WAS SIMULTANEOUSLY CARRIED OUT AND ORDER U/S. 158BC WAS PASSED ON THE SAME DATE, LD. CIT HAD ISSUED SIMILAR SHOW CA USE NOTICE TO ALL THE 3 ASSESSEE AS IN THE CASE OF THE PRESENT ASSESSEE. SIMILAR ORDERS WERE PASSED BY LD. CIT IN ALL THE ABOVE 3 CASES H OLDING THAT A.O. HAD NOT CARRIED OUT INQUIRIES BUT TRIBUNAL HAVE HELD THAT NECESSARY INQUIRIES HAD ALREADY BEEN CARRIED OUT AND TH EREAFTER BLOCK ASSESSMENT ORDERS HAS BEEN PASSED. SINCE THE SAME DECISION ON SIMILAR FACTS HAVE BEEN TAKEN BY THE TRIBUNAL THERE W AS NO REASON TO TAKE DIFFERENT VIEW IN THE CASE OF THE PRESENT ASSESSEE. 14. THE LD. A.R. THEN SUBMITTED THAT SHOW CAUSE NOTICE I SSUED BY LD. CIT IN ALL THE 3 ABOVE CASES WERE SIMILAR AS IN THE CASE OF PRESENT ASSESSEE. THE CHARGE THAT A.O. HAD NOT CARRIED OUT INQUIR IES WAS ALSO SAME BUT THE TRIBUNAL HELD THAT ALL THE NECESSARY INQUI RIES HAD BEEN DONE BY WAY OF ISSUANCE OF NOTICE U/S.142 AND REPLY FIL ED BY THE ASSESSEE IN RESPONSE THERETO. ALL THE PAPERS FOUND DURING THE SEARCH WERE EXPLAINED BY THE THREE ASSESSES AS ALSO BY THIS ASSESSEE. THEREFORE, THERE WAS NOTHING WHICH WAS REQUIRED TO BE INQUIRED INTO AS THERE WAS NO FRESH MATERIAL AVAILABLE WITH THE DEPART MENT. ONCE ALL THE DOCUMENTS FOUND AND SEIZED IN THE SEARCH ARE EXPLAIN ED BY THE ASSESSEE AND THERE BEING NO FRESH MATERIAL WITH THE DEPA RTMENT THEN THERE WAS NO QUESTION OF HOLDING ANY FURTHER INQUIRIE S. ONCE THERE IS NO SCOPE OF CARRYING OUT FURTHER INQUIRIES THE ORDER OF THE A.O. COULD IT.(SS) A.NO.121/AHD/2006 13 NOT BE SET ASIDE HOLDING THAT IT IS ERRONEOUS ON THE GR OUND THAT NECESSARY INQUIRIES HAVE NOT BEEN CARRIED OUT. FURTHER , TAKING A CONSISTENT VIEW THE DECISION IN THE CASE OF THE PRESENT ASSESSE E SHOULD NOT BE DIFFERENT. 15. ON MERITS OF THE CASE, THE LD. A.R. SUBMITTED T HAT IN THE NOTICE ISSUED BY THE LD. CIT THE ONLY ISSUE RAISED BY LD. CIT WAS TH AT AS AGAINST DISCLOSURE OF RS.13.37 LAKHS BEING THE ON-MONEY ATTRIBUTABLE TO T HE PRESENT ASSESSEE AS PER STATEMENT U/S. 131 GIVEN BY SHRI DILIPBHAI ASHOK TH AKKAR AND JITENDRA C. PATEL, ASSESSEE HAD FILED BLOCK RETURN ONLY ON AN UNDISCLO SED INCOME OF RS.11,79,770/-. THEREFORE, ALL OTHER ITEMS CONSIDERING WHICH ORDER U/S. 263 HAS BEEN PASSED BY LD. CIT COULD NOT, IN LAW, BECOME THIS BASIS FOR OR DER U/S. 263 AS NO SHOW CAUSE NOTICE SPECIFIC TO THESE ITEMS HAS BEEN GIVEN TO TH E ASSESSEE. THE INCOME DECLARED IN BLOCK ASSESSMENT AT RS.11,79,770/- HAS BEEN EXPLAINED BY THE ASSESSEE DURING THE COURSE OF BLOCK ASSESSMENT PROC EEDINGS. IN FACT, THERE HAS BEEN VARIATION IN THE DECLARED INCOME IN THE BLOCK RETURNS AS COMPARED TO WHAT HAS BEEN STATED IN THE STATEMENT U/S. 131. THE STAT EMENT WAS GIVEN BY SHRI JITENDRA C. PATEL AND SHRI DILIP ASHOK THAKKAR WITH OUT LOOKING INTO THE SEIZED MATERIAL AND DOCUMENTS AND THE REGULAR BOOKS OF ACC OUNTS WHEREAS BLOCK RETURN WAS FILED AFTER LOOKING INTO THE SEIZED MATERIAL AN D BOOKS OF ACCOUNTS. ACCORDINGLY, THERE HAS BEEN VARIATION IN THE FINAL UNDISCLOSED INCOME DECLARED IN THE RETURN. HE SUBMITTED THAT BREAK-UP OF DISCLOSUR E IN RESPECT OF WHOLE GROUP VIDE ITS LETTER DT.28-03-2002 AS PER DOCUMENTS NO.2 7 & 28 ANNEXED IN THE ASSESSEES PAPER BOOK WAS AS UNDER :- NAME OF THE COMPANY. GROSS ON-MONEY. JAYRAJ ESTATE PVT. LTD. 25,80,000 ANJALI CONSTRUCTION 16,27,000 HINDUSTAN EARTH MOVERS PVT..LTD. 82,07,930 UNEXPLAINED CASH LOAN/DEPOSIT. 2,55,00,000 ----------------- 3,.49,14,930 IT.(SS) A.NO.121/AHD/2006 14 LESS:- UNEXPLAINED EXPENSE OF ASHWAMEGH-1. 22,14,93 0 ----------------- TOTAL. 3,27,00,000 ========== THEREFORE, IT IS IN FACT RS.16.27 LAKHS BEING THE G ROSS ON-MONEY SO DECLARED VIDE ABOVE REFERRED LETTER DT.28.3.2002 ADDRESSED TO DDI T (INV.) UNIT-1, BARODA. HOWEVER, AT THE TIME OF FILING OF THE RETURN CHANGE S HAVE BEEN MADE DEPENDING UPON TO WHOM DOCUMENT BELONGED. IN THE CASE OF HIND USTAN EARTH MOVERS PVT. LTD., DISCLOSURE AS PER LETTER DT.28.03.2002 WAS RS .82.07 LACS WHEREAS IN THE RETURN OF INCOME THE DISCLOSURE OF RS.2.25 CRORES W AS MADE. IN THE CASE OF JAYRAJ ESTATE DISCLOSURE AS PER ABOVE LETTER DT.28.3.2002 WAS RS. 25.80 LAKHS WHEREAS IN THE BLOCK RETURN FILED IT WAS RS. 28.59 LAKHS. IN THE CASE OF SHRI JAYESH DAVE THERE WAS NO ORIGINAL DISCLOSURE AND ACCORDINGLY, N O INCOME WAS DECLARED IN THE BLOCK RETURN. 16. THE LD. AR SUBMITTED THAT ALL THE DOCUMENTS AS REFERRED TO BY LD. CIT IN HIS ORDER U/S. 263 HAS BEEN EXPLAINED BY THE ASSESS EE IN THE DETAILED REPLY SUBMITTED IN RESPONSE TO NOTICE U/S.142(1) VIDE ITS LETTER OF 30-6-2003. HE DREW OUR ATTENTION TO PAGES 124 TO 162 OF HIS PAPER BOOK WHICH CONTAINED THE EXPLANATIONS OF ALL THE DOCUMENTS. THESE EXPLANATIO NS WERE ON THE RECORD OF THE A.O. WHEN HE PASSED THE ORDER U/S. 158BC. THEREFORE , THERE IS NOTHING WHICH WAS FURTHER REQUIRED TO BE EXAMINED OR INQUIRED INT O BY THE A.O. 17. AGAINST THIS LD. DR SUBMITTED THAT IT IS NOT A CASE OF THE SAME ASSESSEE AND THEREFORE, PRINCIPLE OF CONSISTENCY WILL NOT BE APPLICABLE. FACTS OF THE EACH CASE ARE DIFFERENT AND THEREFORE, DIFFERENT DECISIO N IS WARRANTED. IF THERE IS AN ERROR IN THE ORDER OF THE A.O. THEN CIT IS COMPETEN T TO ACQUIRE JURISDICTION TO SET ASIDE HIS CASE. WHERE INQUIRIES ARE NOT DONE, THE C IT CAN SET ASIDE THE AOS ORDER U/S.263. HE REFERRED TO THE DECISIONS QUOTED BY LD. CIT IN HIS ORDER. HE SUBMITTED THAT ASSESSEE HAS STILL NOT EXPLAINED WHY BLOCK RETURN WAS FILED AT RS.11,79,770/-, EVEN THOUGH DISCLOSURE AS PER LETTE R DT.28.3.2002 IS IT.(SS) A.NO.121/AHD/2006 15 RS.16,27,000/-. IN FACT NOTICE U/S. 142 (1) WAS ISS UED PRIOR TO FILING OF THE BLOCK RETURN AND THEREFORE, IT COULD NOT BE SAID THAT A.O . HAS CARRIED OUT INQUIRIES AFTER FILING THE BLOCK RETURN. HE SUBMITTED THAT BLOCK RE TURN WAS FILED ON 26-8-2003 WHEREAS REPLY BY THE ASSESSEE IN RESPONSE TO NOTICE U/S. 142(1) DT.2.6.2003 WAS FILED ON 30-6-2003. IN THAT REPLY THERE IS NO MENTI ON OF FINAL DISCLOSURE WHICH HAS BEEN SEPARATELY GIVEN TO A.O. MUCH BEFORE FILING OF THE BLOCK RETURN I.E. VIDE LETTER DT.28.03.2002 THE A.O. HAS NOT RAISED ANY QUERY AFT ER RECEIPT OF REPLY FROM THE ASSESSEE ON 30-6-2003. HE DID NOT RECONCILE HOW THE DISCLOSURE HAS BEEN REDUCED IN THE BLOCK OF RETURN AS THERE IS NO WORKI NG OF ANY INCOME. THE A.O. DID NOT SATISFY HIMSELF ABOUT SUCH RECONCILIATION. IF T HERE IS NO APPLICATION OF MIND BY THE A.O. IN THE RETURN FILED BY THE ASSESSEE, THEN CIT WOULD BE JUSTIFIED IN TAKING ACTION U/S. 263. FURTHER, WHEN SO MUCH OF MATERIAL WAS AVAILABLE WHICH WAS NOT CONSIDERED BY AO AND ASSESSEE DID NOT EXPLAIN THAT MATERIAL IN THE BLOCK ASSESSMENT PROCEEDINGS, OR WHERE NO CASH-FLOW STAT EMENT OF ON-MONEY WAS FILED, THEN CIT WOULD BE JUSTIFIED IN TAKING ACTION U/S. 263. THE LD. DR SUBMITTED THAT TRANSACTIONS RELATING TO THE ASSESSEE WITH OTH ER GROUP CONCERN AND STATEMENT GIVEN BY SHRI JAYESH DAVE AND SHRI DILIP ASHOK THAKKAR AND JITENDRA C. PATEL ARE NOT CONSIDERED. SIMILARLY OTHER DOCUME NTS SHOWING RECEIPT OF ON- MONEY ARE IGNORED BY THE A.O. THEREFORE CIT WOULD B E JUSTIFIED IN CANCELING THE ORDER OF THE A.O. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THE TRIBUNAL HAS TA KEN VIEW ON A SIMILAR SET OF FACTS THAT THERE IS NO ERROR IN THE ORDER OF A.O. I N THE CASE OF HINDUSTAN EARTH MOVERS PVT. LTD., THE LD. CIT ISSUED SHOW CAUSE NOT ICE WHERE ALSO LD. CIT HAD RAISED THE ISSUE THAT ADMISSION OF RECEIPT OF ON-MO NEY BY SHRI JAYESH DAVE AT RS.100 LACS IN HINDUSTAN EARTH MOVERS PVT. LTD., WA S NOT CONSIDERED BY THE A.O. THE RELEVANT PORTION FROM THAT SHOW CAUSE NOTICE IS SUED TO M/S. HINDUSTAN EARTH- MOVERS PVT. LTD., ON 22-02-2006 IS REPRODUCED AS UN DER :- IN THE STATEMENT RECORDED AT THE TIME OF SEARCH, S HRI JAYESH J. DAVE HAD STATED THAT INTEREST ON CASH LOANS RECORDED ON PAGE S 12 TO 18 OF ANNEXURE IT.(SS) A.NO.121/AHD/2006 16 A-40 AND ON PAGE-75 OF ANNEXURE A-2 WAS PAID OUT OF ON-MONEY COLLECTED, INTER ALIA, FROM ASHWAMEGH-1, ASHWAMEGH- II (SHOPS) AND SAMRAJYA PROJECTS OF THE COMPANY (ANSWER TO QUESTIO N NO.44). HE HAD FURTHER ADMITTED THAT HE HAD RECEIVED ON-MONEY FROM THE BUYERS OF SAMRAJYA PROJECT AND ASHWAMEGH-I & II PROJECTS AND HAD EARNED RS.100 LACS NET AFTER INCURRING EXPENSES AND OVER AND ABOV E THE AMOUNT DISCLOSED UNDER VDIS. BUT NO ADDITION WAS MADE ON T HIS ACCOUNT. IN THAT CASE, BLOCK RETURN WAS FILED ON AN UNDISCLO SED INCOME OF RS.2.25 CRORES WHEREAS BLOCK ASSESSMENT WAS FRAMED ON AN INCOME OF RS.2.47 CRORES. IT SEEMS THAT THERE WAS NO SPECIFIC RECONCILIATION IN THE BL OCK ASSESSMENT ORDER IN RESPECT OF WHAT LD. CIT MENTIONED IN THE SHOW CAUSE NOTICE DT. 22-2-2006 BUT THE TRIBUNAL FINALLY HELD THAT THERE IS NO ERROR IN THE ORDER OF THE A.O. FOR THE SAKE OF CONVENIENCE WE REPRODUCE RELEVANT PORTION FROM THE ORDER OF THE TRIBUNAL DATED 14-12-2007 AS UNDER :- WE ALSO NOTED FROM THE COPY OF THE ASSESSMENT ORDE R THAT THE ASSESSEE HAS RETURNED THE INCOME SHOWING THE UNDISCLOSED INC OME AT RS.2.25 CRORES. THE ASSESSEE HAS FILED THE PROJECT-WISE TOT AL RECEIPTS AS PER HIS BOOKS OF ACCOUNTS. THE ON-MONEY RECEIPT HAS BEE N WORKED OUT ON SUCH RECEIPTS AND THE A.O. ESTIMATED THE NET INCOME EARN ED ON THE ON-MONEY RECEIPT BY THE ASSESSEE. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES (2002) 258 ITR-654 (G UJ.) HAS HELD THAT ONLY PROFITS EMBEDDED IN THE SALE PROCEEDS CAN BE TAXED. THE ISSUE RELATING TO THE ESTIMATE OF PROFIT HAS BEEN TRAVELED TO THE TRI BUNAL. THE CIT(A) HAS DULY CONSIDERED THIS ISSUE. EXPLANATION(C) OF SECTI ON 263 DEBARS THE CIT TO INVOKE THE PROVISIONS OF SECTION 263 IN RESPECT OF MATTERS AS HAS BEEN CONSIDERED AND DECIDED IN APPEAL. IN VIEW OF THESE CLEAR-CUT PROVISIONS, IN OUR OPINION, THE CIT DID NOT HAVE JURISDICTION TO R AISE POINT NOS.2,4 AND 5 AS HAVE BEEN STATED IN THE SHOW CAUSE NOTICE RELATI NG TO THE ON-MONEY RECEIPTS AND THE INCOME DERIVED THERE-FROM BY THE ASSESSEE AS THESE IT.(SS) A.NO.121/AHD/2006 17 ISSUES HAVE BEEN DULY CONSIDERED BY THE APPELLATE A UTHORITY AND THE ORDER OF THE ASSESSING OFFICER GOT MERGED WITH THE ORDER OF THE CIT(A) ON THESE ISSUES.. A PERUSAL OF THE ORDERS PASSED BY THE CITA INDICATE THAT THE ASSESSMENT ORDERS PASSED BY THE A.O. U/S. 158BC HAVE BEEN SET ASIDE ON THE GROUND THAT THE DESIRED ENQUIRIES HAVE NOT BEEN MADE. THIS , IN OUR CONSIDERED OPINION CANNOT BE A SUFFICIENT GROUND FOR SETTING A SIDE OF THE ASSESSMENTS. WHILE MAKING THE ASSESSMENT ORDER, IT IS THE SATISF ACTION OF THE A.O. WHO MADE ENQUIRY AND IT SHOULD BE THE TOUCHSTONE TO BAS E THE VALIDITY OF THE ASSESSMENT ORDER PASSED BY HIM. THE CIT CANNOT SUBS TITUTE HIS SUBJECTIVE VIEW IN PLACE OF THE FINDINGS OF THE ASSESSING OFFI CER UNTIL AND UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABL E IN LAW. NO COGENT MATERIAL EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE BY T HE LD. DR WHICH MAY PROVE THAT THE DECISION TAKEN BY THE ASSESSING OFFI CER NOT TO MAKE THE ADDITION ON BOTH THE ISSUES IN THE CASE OF THE ASSE SSEE WAS UNSUSTAINABLE IN LAW. WE DO NOT AGREE WITH THE SUBMISSION OF THE LD. DR THAT NO PREJUDICE IS CAUSED TO THE ASSESSEE AS THE ASSESSME NT ORDER HAS BEEN SET ASIDE ON BOTH THE ISSUES TO BE MADE DE NOVO AND THE ASSESSEE WILL HAVE ANOTHER CHANCE TO AGITATE THESE ISSUES AGAIN. IF THE ACTION OF THE CIT IS ILLEGAL, THE ORDER PASSED BY CITA CANNOT BE SUST AINED. ALL THE SUBSEQUENT ACTIONS CARRIED OUT ON THE ILLEGAL ORDER ARE VOID. WE HAVE GONE THROUGH THE VARIOUS CASE LAWS CITED FROM BOTH THE S IDES, BUT SINCE WE FIND THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR-83, WHEREIN THEIR LORDSHIPS HAVE HELD AS UN DER :- THE PRE-REQUISITE TO THE EXERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION263 IS THAT THE ORDER OF THE AO IS ERR ONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE CO MMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDE R OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IS PREJ UDICIAL TO THE INTERESTS OF THE REVENUE,. IF ONE OF THEM IS ABSENT - IF THE ORD ER OF THE ASSESSING IT.(SS) A.NO.121/AHD/2006 18 OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1). THERE CAN BE NO DOUBT THA T THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAK E OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER, BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATIO N OF MIND. THE PHRASE PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFF ICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF THE ORDER OF THE ASSESS ING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. FOR EXAMPLE, IF THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PE RMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORD ER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. WHERE A SUM NOT EARNED BY A P ERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING THE ORDER PA SSED BY THE ASSESSING OFFICER ACCEPTING THE SAME WITHOUT APPLICATION OF M IND AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THE PROVISIONS OF LAW LAID DOWN IN OTHER DECISIONS AS RELIED BY LD. AR IS SIMILAR TO THE PROVISIONS OF LAW AS HAS BEEN LAID D OWN BY THE HONBLE SUPREME COURT. SOME OF THE CASES RELATE TO THE POWE RS OF THE CIT TO REVISE THE ASSESSMENT ORDER ON THE ISSUES WHICH HAV E BEEN DULY CONSIDERED AND DECIDED IN APPEAL. THE HONBLE GUJAR AT HIGH COURT HAS HELD IN SUCH CASES THAT THE CIT DOES NOT HAVE POWER TO INVOKE JURISDICTION U/S. 263 OF THE ACT, AS THE ORDER OF AO GOT MERGED WITH THE ORDER OF THE APPELLATE AUTHORITY. THE RELEVANT CASES ARE CIT VS. MEHSANA DISTRICT CO- OPERATIVE MILK PRODUCERS UNION LTD. (2003) 263 ITR 645 (GUJ.). THE REST OF THE DECISIONS CITED HAVE DULY APPLIED THE DECISI ON OF THE HONBLE IT.(SS) A.NO.121/AHD/2006 19 SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD., VS. CIT (2000) 243 ITR-83 (SC). THUS, IN OUR OPINION, THERE IS NO ERROR IN THE ASSESSMENT ORDER PASSED BY THE AO. THE CIT BY PASSING THE IMPU GNED ORDER HAS TRIED TO IMPOSE HIS VIEW ON THE ASSESSING OFFICER EVEN ON THE ISSUES FOR WHICH THE ASSESSING OFFICER WAS NOT COMPETENT TO MAKE ASS ESSMENT UNDER SECTION 158BC (C) WHICH IS NOT PERMISSIBLE UNDER TH E LAW. IT ALSO SPEAKS OF NON APPLICATION OF THE MIND BY THE CIT (A) AND ISSU ING OF NOTICE FOR INVOKING PROVISIONS OF SECTION 263 MERELY IN A MECH ANICAL MANNER. WE ARE, THEREFORE, OF THE VIEW THAT THE ORDER PASSED B Y THE CIT U/S. 263 IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY WE ANNUL THE ORD ER PASSED BY THE CIT U/S. 263 OF THE ACT. 19. IN THE CASE OF HINDUSTAN EARTHMOVERS PVT. LTD., DISCLOSURE AS PER LETTER DT.28.3.2002 WAS RS.82.07 LACS WHEREAS IN THE BLOCK RETURN FILED AT RS.2.25 CRORES AND THE ISSUE OF ON-MONEY OF RS.100 LACS WAS RAISED BY THE LD. CIT IN THE NOTICE U/S. 263. CONSIDERING ALL THE ABOVE ASPECTS ORDER OF THE AO ACCEPTING DISCLOSURE OF RS.2.25 CRORES WAS NOT FOUND ERRONEOU S AS NOTED ABOVE. 20. IN THE CASE OF M/S. JAYRAJ ESTATE PVT. LTD., LE TTER DT.28.3.2002 FROM THE ASSESSEE GROUP INDICATED GROSS ON-MONEY RECEIVED RS .25.80 LACS. BLOCK RETURN WAS FILED ON 26-8-2003 SHOWING UNDISCLOSED INCOME O F RS.28.59 LACS AND BLOCK ASSESSMENT WAS MADE ACCEPTING THE ABOVE DISCLOSURE. THE LD. CIT IN HIS NOTICE U/SD. 263 ALLEGED THAT ON-MONEY OF RS.100 LACS AND NET PROFIT WORKED OUT AT 80% AT RS.1.12 CRORES WAS NOT CONSIDERED BY THE A.O. F OR THE SAKE OF CONVENIENCE WE REPRODUCE PARAGRAPHS 3, 5 AND 5.1 FROM THAT NOTI CE AS UNDER :- 3. THE ASSESSING OFFICER HAS NOT EXAMINED THE BEAR ING OF THE ENTRIES OF UNACCOUNTED TRANSACTIONS IN SEVERAL; DOCUMENTS I NCLUDING PAGES 12 TO 18 OF ANNEXURE A-40 SEIZED FROM YOUR BUSINESS PREMI SES AND PAGE-75 OF ANNEXURE A-2 SEIZED FROM THE RESIDENCE OF SHRI ANIL J. DAVE. IN ANSWER TO QUESTION NO.44 OF THE STATEMENT RECORDED ON 31.12.2 001, SHRI JAYESH J. IT.(SS) A.NO.121/AHD/2006 20 DAVE HAD STATED THAT INTEREST ON UNACCOUNTED LOANS WAS PAID FROM ON- MONEY COLLECTED FROM YOUR CONCORD PROJECT. IN ANS WER OF QUESTION NO.45, HE HAD STATED THAT ON-MONEY OF RS.100 LACS WAS EARN ED WHICH WAS NET OF EXPENSES AND OVER AND ABOVE THE AMOUNT DISCLOSED UN DER VDIS. BUT NO ON-MONEY WAS DISCLOSED IN THE RETURN FILED U/S. 158 BC. DESPITE THIS AND DESPITE THERE BEING OVERWHELMING EVIDENCE OF ON-MON EY COLLECTION IN DIFFERENT DOCUMENTS SEIZED, THE ASSESSING OFFICER D ID NOT ADD ANY AMOUNT IN THIS REGARD. 5. IN HIS ORDER, THE ASSESSING OFFICER HAS REFERRED TO UNACCOUNTED EXPENSES OF RS./3.46 CRORES AS PER PAGE-72 OF ANNEX URE A-3/4. THE CONCERNS TO WHOM THE PAYMENTS WERE CLAIMED HAVE BEE N CONFIRMED TO BE FICTITIOUS AND THEY HAVE ALSO CONFIRMED THE FICTITI OUS NATURE OF EXPENSES INCURRED IN THEIR NAME. BUT THE ASSESSING OFFICER H AS WORKED OUT SUCH EXPENSES AT RS.2.32 CRORES ONLY ON THE BASIS OF YOU R SUBMISSIONS WITHOUT ANY VERIFICATION. EVEN THAT WAS NOT DISALLOWED. INS TEAD OF DISALLOWING THE BOGUS EXPENSES OF RS.3.46 CRORES, HE HAS OBSERVED T HAT THOUGH THE ASSESSEE HAD BOOKED VARIOUS EXPENSES, IT HAD NOT CL AIMED CERTAIN OTHER EXPENSES, WHICH OBVIOUSLY REFERS TOP THE CLAIM OF U NACCOUNTED INTEREST OF RS.1,17,88,210/- MADE FOR THE FIRST TIME IN THE COU RSE OF PROCEEDINGS U/S. 158BC. HE HAS NOT CONSIDERED THE FACT THAT BOGUS EX PENSES WERE APPROPRIATED AND UNACCOUNTED INTEREST PAID, IF ANY, WAS OUT OF ON-MONEY RECEIPTS WHICH HE HAS NOT ADDED. WITH THE AFORESAID OBSERVATIONS, THE ASSESSING OFFICER HAS PROCEEDED TO APPLY NET PROFIT RATE OF 8% OF GROSS RECEIPTS. THUS, INSTEAD OF ADDING ON-MONEY RECEIPTS AND DISALLOWING THE EXPENSES OF BOGUS NATURE PROVED ANMD ADMITTED AS SU CH, HE HAS RESTRICTED THE ESTIMATE OF NET PROFIT TO 8% WHICH D OES NOT AT ALL TAKE INTO ACCOUNT ON-MONEY RECEIPTS AND BOGUS EXPENSES. 5.1. IT IS CONSPICUOUS THAT, EVEN THE UNDISCLOSED I NCOME SO WORKED OUT AT RS.1,12,48,642/- HAS NOT BEEN ASSESSED AS UNDISC LOSED INCOME IN YOUR HANDS ON A STRANGE AND MISCONCEIVED LOGIC THAT THE RETURN FOR UNDISCLOSED INCOME FILED IN THE CASE OF HINDUSTAN EARTH MOVERS PVT. LTD., INCORPORATED IT.(SS) A.NO.121/AHD/2006 21 THE UNDISCLOSED INCOME EARNED BY OTHER SISTER CONCE RNS INCLUDING YOU. THUS HE HAS COMMITTED PATENT ERROR OF EXCLUDING THE UNDISCLOSED INCOME OF RS.1,12,48,642/- COMPUTED BY HIMSELF IN YOUR CAS E WHICH IS WITHOUT ANY PLAUSIBLE BASIS. 21. CONSIDERING ALL THESE ASPECTS THE TRIBUNAL VIDE ITS ORDER DATED 29-12-2008 ANNULLED ORDER OF THE LD. CIT HOLDING THAT NECESSAR Y INQUIRIES WERE CARRIED OUT BY THE A.O. AND IF CIT DOES NOT AGREE WITH A VIEW TAKE N BY THE A.O. THEN ORDER OF THE LD. A.O. CANNOT BE SET ASIDE BY HOLDING IT AS E RRONEOUS. 22. IN THE CASE OF SHRI JAYESH J. DAVE, THERE WAS N O SPECIFIC DISCLOSURE IN HIS NAME VIDE LETTER DT.28-3-2002. THE BLOCK RETURN WAS FILED AT RS. NIL INCOME WHICH WAS SO ACCEPTED BY THE A.O. VIDE HIS ORDER DT.30-01 -2004. THE LD. CIT IN A NOTICE ISSUED U/S. 263 RAISED THE ISSUE OF DISCLOSU RE AS WELL AS NOT LOOKING INTO CERTAIN DOCUMENTS AND CANCELLED THE ORDER OF THE A. O. THE TRIBUNAL FOLLOWING THE ORDER IN THE CASE OF HINDUSTAN EARTH MOVERS PVT. LT D., AND JAYRAJ ESTATE PVT. LTD., QUASHED THE REVISION PROCEEDINGS. 23. WE ALSO FOUND THAT ANNEXURE TO THE NOTICE U/S. 142(1) ISSUED BY THE A.O. ON 2-6-2003 CONTAIN SIMILAR QUESTIONS TO ALL THE FO UR ASSESSES AND IN RESPONSE TO THAT REPLY DT.30-06-2003 WAS FILED AS A COMMON REP LY FOR ALL THE FOUR ASSESSES CONTAINING EXPLANATION OF THE DOCUMENTS SEIZED FROM THE GROUP. THIS REPLY WAS CONSIDERED AS AN EXPLANATION TO THE DOCUMENTS WHICH WAS APPARENTLY ACCEPTED BY THE A.O. DURING THE COURSE OF BLOCK ASSESSMENT P ROCEEDINGS. EVEN THOUGH SUCH REPLY WAS PRIOR TO FILING OF BLOCK RETURN AND THERE WAS APPARENTLY NO FURTHER EXPLANATION OR NO FURTHER INQUIRIES AFTER FILING O F THE BLOCK RETURN BUT. ONCE THE REPLY SO FILED BY THE ASSESSEE GROUP WAS CONSIDERED AS ADEQUATE INQUIRY BY THE TRIBUNAL IN THE CASE OF 3 ASSESSEES THEN THERE IS N O REASON TO HOLD IN THE CASE OF PRESENT ASSESSEE THAT REPLY FILED PRIOR TO FILING O F BLOCK RETURN IS TO BE IGNORED AND THEN TO HOLD THAT NO INQUIRY WAS DONE BY THE A.O. D URING BLOCK ASSESSMENT PROCEEDINGS. SUCH FINDING CANNOT BE GIVEN ONCE A VI EW HAS BEEN TAKEN BY THE IT.(SS) A.NO.121/AHD/2006 22 TRIBUNAL IN THE CASE OF THREE ASSESSES OF THE GROUP . IN OUR CONSIDERED VIEW THIS REPLY IS AN EXPLANATION TO VARIOUS DOCUMENTS AND TH ERE IS NO MATERIAL CONTRADICTING THE ABOVE EXPLANATION FURNISHED BY TH E ASSESSEE. ONCE VARIATION IN DISCLOSURE OF UNDISCLOSED INCOME IN THE BLOCK RETUR N AS COMPARED TO THE DISCLOSURE VIDE LETTER DT.28-3-2002 IS ACCEPTED BY THE TRIBUNAL IN THE CASE OF OTHER TWO ASSESSES NAMELY JAYRAJ ESTATE PVT. LTD., AND HINDUSTAN EARTH MOVERS PVT. LTD., THEN THERE IS NO REASON TO HOLD THAT VAR IATION IN DISCLOSURE IN THE CASE OF THE PRESENT ASSESSEE COULD NOT BE ACCEPTED UNLESS L D. CIT SHOULD HAVE HIMSELF CARRIED OUT INQUIRIES AND BROUGHT INTO THE SHOW CAU SE NOTICE AND IN HIS ORDER THAT DISCLOSURE SO MADE IN THE BLOCK RETURN IS INCORRECT . ACCORDINGLY, FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF OTHER THREE AS SESSES OF THE SAME GROUP, WE CANCEL THE ORDER OF LD. CIT IN THE PRESENT CASE ALS O. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 9 /04 /2010. SD/- SD/- (T. K. SHARMA) (D.C. AGRAWAL) ACCOUNTANT MEMBER. JUDICIAL MEM BER. AHMEDABAD. DATED: 09/04 /2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. IT.(SS) A.NO.121/AHD/2006 23