Jeet Construction Co., Meerut V. ACIT, Meerut

ITSSA 26/DEL/2011

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 7970 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: misc
• Appeal Filed On: 01-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANT MISHRA
• Keywords: Unexplained expenditure; Business expenditure; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Question of law; Difference of opinion; Validity of assessment; Block assessment; Documents seized; Change of opinion; Reassessment proceedings
• Section: 44AD; 69C; 143(3); 69; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH D DELHI ] BEFORE SHRI R. P. TOLANI, JM & SHRI K. D. R ANJAN, AM I. T. [SS] APPEAL NO. 26 (DEL) OF 2011. BLOCK ASSESSMENT YEARS : 1997-98 TO 2003-04. M/S. JEET CONSTRUCTION COMPANY, ASSTT. COM MISSIONER OF INCOME-TAX, 314, A R V I N D P U R I, VS. C I R C L E : 2, M E E R U T C A N T T. M E E R U T. P A N / G I R NO. AAA FJ 6441 J. A N D I. T. [SS] APPEAL NO. 28 (DEL) OF 2011. BLOCK ASSESSMENT YEARS : 1997-98 TO 2003-04. ASSTT. COMMISSIONER OF INCOME-TAX, M/S. JEET C ONSTRUCTION COMPANY, C I R C L E : 2, VS. 314, A R V I N D P U R I, M E E R U T. M E E R U T C A N T T. P A N / G I R NO. AAA FJ 6441 J. ( APPELLANTS ) ( RESPONDENTS ) ASSESSEES BY : SHRI K. SAMPATH, ADV.; DEPARTMENT BY : SHRI JAYANT MISHRA [CIT] D. R.; O R D E R. PER K. D. RANJAN, AM : THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE FO R BLOCK ASSESSMENT YEARS 1997-98 TO 2003-04 ARISE OUT OF THE ORDER OF THE LD. CIT (APPE ALS), MEERUT. THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED, FOR THE SAKE OF CO NVENIENCE, BY THIS COMMON ORDER. 2 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN INI TIATING THE PROCEEDINGS U/S. 158-BD OF THE INCOME TAX ACT, 1961 AND COMPLETING THE ASSESSM ENT AT AN INCOME OF RS.4,85,04,776/-; 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN PAS SING ORDER U/S. 158-BD OF THE ACT IN TOTAL DISREGARD TO THE SPECIFIC DIRECTIONS OF THE H ONBLE ITAT; 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE AO, TO TH E UNDISCLOSED INCOME ON ACCOUNT OF ALLEGED UNDISCLOSED EXPENDITURE FOR THE BLOCK PERIO D AT RS.3,82,66,276/-. OBSERVATIONS MADE, INFERENCES DRAWN AND FINDING RECORDED IN THIS REGARD, ARE UNCALLED FOR, AND WITHOUT ANY BASIS BESIDES BEING ILLEGAL; 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION AS UNDISCLOSED INCOME ON ACCOUNT OF ALLEGED SUPPRESSION OF RECEIPT S AND INFLATION OF EXPENSES TO THE EXTENT OF RS.1 CRORE; 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN UPHOLDING CHARGE OF INTEREST UNDER SECTION 220(2) OF THE INCOME TAX ACT, 1961 WHICH IS PATENTLY ILLEGAL; 6. THAT THE APPEAL ORDER DATED 16-03-2011 AS PASSED BY THE LD. CIT (APPEALS) MEERUT IS ARBITRARY, ERRONEOUS AND UNLAWFUL SINCE T HE EVIDENCES AND SUBMISSIONS AVAILABLE ON RECORD HAVE NOT BEEN APPRECIATED IN TH E RIGHT PERSPECTIVE AND HENCE DESERVE TO BE QUASHED WITH DIRECTIONS FOR APPROPRIATE RELIE F. 3. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS :- 1. WHETHER THE LD. CIT (APPEALS) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.6,38,500/- IGNORING THE AOS HOLDING THAT THE SAID PAYMENT HAS BEEN MADE ON ACCOUNT OF COMMISSION ON ILLEGAL PAYMENTS; 2. IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE ORDER OF THE LD. CIT (APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER, RESTORED. 4. FIRST WE WILL TAKE UP ASSESSEE'S APPEAL IN I.T. [SS] APPEAL NO. 26 (DEL) OF 2011. THE FIRST ISSUE FOR CONSIDERATION RELATES TO INITIATION OF PR OCEEDINGS UNDER SECTION 158BD OF THE INCOME- TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] AND COMPLETION OF ASSESSMENT AT AN INCOME OF 3 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 RS.4,85,04,774/-. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTIO N. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE ACT WAS CONDUCTED ON 23/12/2002 IN THE N AME OF SHRI BALJEET SINGH BAKSHI, THE WORKING PARTNER IN M/S. JEET CONSTRUCTION COMPANY, HIS RESIDENTIAL PREMISES NO. 314-A, ARVIND PURI, SHARED WITH HIS BROTHER, SHRI BALDEV SINGH BA KSHI, PARTNER IN M/S. JEET CONSTRUCTION COMPANY AND BUSINESS PREMISES 209, WEST END ROAD, M EERUT AND ANOTHER SHARED BUSINESS PREMISE 187-A, ABU LANE, MEERUT. DURING THE COURSE OF SEARCH, SEVERAL INCRIMINATING MATERIALS, ALONG WITH SOME BOOKS OF ACCOUNTS PERTAINING TO M/S . JEET CONSTRUCTION COMPANY, WERE SEIZED FROM ALL THE BUSINESS PREMISES. SINCE THE INCRIMINA TING MATERIAL NEEDED VERIFICATION AND INVESTIGATION IN THE NAME OF M/S. JEET CONSTRUCTION COMPANY, THE ASSESSING OFFICER ISSUED NOTICE DATED 16/09/2004 UNDER SECTION 158BD OF THE ACT WHI CH WAS SERVED ON THE ASSESSEE ON 20/09/2004. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, THE FOLLOWING BOOKS OF ACCOUNTS AND PAPERS RELATED TO THE ASSESSEE FROM THE FOLLOWI NG PREMISES WERE FOUND AND SEIZED: (1) FROM 314, ARVINDPURI, MEERUT CANTT., RESIDEN CE OF PARTNER SHRI BALJEET SINGH BAKSHI, ANNEXURES A-1 TO A-25 WERE SEIZED, MOST OF WHICH WERE LOOSE PAPERS RELATED TO M/S. JEET CONSTRUCTION CO. INCLUD ING ONE REGISTER SEIZED AS ANNEXURE A-19; (2) 209, WEST END ROAD, RESIDENCE OF SHRI BALDEV SINGH , PARTNER, FOLLOWING ANNEXURE WERE SEIZED : (I) ANNEXURE A-1 TO A-4 - REGISTERS RELATED TO M/S. J EET CONSTRUCTION CO.; (II) ANNEXURE LP-1 - LOOSE PAPERS RELATED TO M/S. JEET CONSTRUCTION CO. (3) 187-A, ABU LANE, MEERUT, BUSINESS PREMISE OF M/S. J EET CONSTRUCTION CO. FOLLOWING ANNEXURES WERE SEIZED 5. THE ASSESSING OFFICER IN RESPECT OF ENTRIES REC ORDED IN THE SEIZED DOCUMENT OBSERVED AS BELOW: 4 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 (I) ANNEXURE A-1 : IT IS THE CASH BOOK FROM 1/04/2001 TO 31/03/200 2. THE CASH BOOKS IS NOT FULLY WRITTEN. THE OPEN ING BALANCE AS ON 1/04/2001 OPENING CASH BALANCE IS NOT MENTIONED. SOME ENTRIES ARE MADE UPTO 8/06/2001; ANNEXURE A-2: ARE THE COMPUTERIZED ACCOUNTS OF M/S. JEET CONSTR UCTION CO. THE OPENING CASH BALANCE ON 1/04/1997 IS SHOWN RS.1,96, 400/- AND CLOSING BALANCE ON 31/03/1998 RS.41,286/-. IT ALSO CONTAINS JOURNAL RE GISTER FROM 1/04/1997 TO 31/03/1998, PURCHASE REGISTER FROM 3/04/1997 TO 10/03/1998, BAN K ACCOUNTS AND ALL LEDGER ACCOUNTS; ANNEXURE A-3: LEDGER OF M/S. JEET CONSTRUCTION CO. FROM 1/04/200 1 TO 31/03/2002. ONLY SOME ENTRIES ARE MADE ON PAGE 33, 34, 46. THI S IS NOT COMPLETE. ANNEXURE A-4: COMPUTERIZED ACCOUNT BOOK OF M/S. JEET CONSTRUCTI ON CO. FROM 1/04/1999 TO 31/03/2000. THE OPENING CASH BALANCE ON 1/04/1999 IS RS.77,862/- AND CLOSING BALANCE ON 31/03/2000 IS RS.8,270/-. THIS BOOK ALSO CONTAINS THE BANK ACCOUNTS JOURNAL AND LEDGER ACCOUNTS; (II) ANNEXURE B-1 TO B-8: ONLY SOME LOOSE PAPERS RELATED TO M/S. JEET CONST RUCTION CO. THUS DURING SEARCH SOME BOOKS OF ACCOUNTS OF M/S. J EET CONSTRUCTION CO. WERE SEIZED BUT NONE OF THE SEIZED BOOKS OF ACCOUNT WERE COMPLETE I.E. EITHER THEY ARE NOT SUPPORTED BY BILLS OR VOUCHERS AS IN CASE OF ANNEXU RE 4 SEIZED FROM 187-A, ABU LANE, MEERUT FOR THE FINANCIAL YEAR 01/04/1999 TO 31/03/2 000 OR THEY DID NOT HAVE COMPLETE ENTRIES AS IN CASE OF ANNEXURE 1 SEIZED FROM SAME P REMISE, WHICH WAS A CASH BOOK FOR THE FINANCIAL YEAR 01/04/2001 TO 31/03/2002, BUT HAD LE SS THAN 20 PAGES WRITTEN IN IT. NO OTHER BOOKS OF ACCOUNTS AND RELEVANT VOUCHERS FOR A NY OTHER FINANCIAL YEAR WERE FOUND DURING THE COURSE OF SEARCH AND SEIZURE THAN THE ON ES MENTIONED ABOVE. 6. BESIDES THE INCOMPLETE BOOKS OF ACCOUNTS, THE OT HER ANNEXURE SEIZED WERE LOOSE PAPERS AND REGISTERS, WHICH CONTAINED HAPHAZARD ACCOUNTS A ND EXPENSES AND RECEIPTS RELATED TO M/S. JEET CONSTRUCTION COMPANY. THE LOOSE PAPERS WERE INTER- MIXED WITH WEIGHMENT SLIPS AND BILLS. THE 5 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 ASSESSEE WAS ASKED TO EXPLAIN THE ENTRIES RECORDED IN THE SEIZED MATERIAL.. THE ASSESSEE DID NOT TAKE COPIES OF THE SEIZED MATERIAL, THOUGH THE ATTE MPTS WERE MADE BY THE ASSESSING OFFICER TO PROVIDE THE COPIES TO HIM. THE ASSESSING OFFICER A SKED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS, BUT THE SAME WERE NOT PRODUCED. SHRI BA LJEET SINGH BAKSHI, DURING THE COURSE OF SEARCH STATED THAT THE OTHER BOOKS OF ACCOUNTS AND VOUCHERS WERE WITH HIS ACCOUNTANT, WHO HAS EXPIRED IN JULY, 2003. THE ASSESSEE COULD NOT TELL THE ADDRESS OF THE DECEASED ACCOUNTANTS FAMILY. THE ASSESSING OFFICER NOTED THAT THE ASSES SEE HAD NOT MADE ANY SPECIAL ATTEMPT BY FILING FIR ETC. TO PROCURE BOOKS OF ACCOUNTS. THEREFORE, THE CONTENTION OF THE ASSESSEE FOR NON- PRODUCTION OF BOOKS OF ACCOUNTS AND VOUCHERS WAS RE JECTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE E XPENSES DEBITED BY THE ASSESSEE IN THE TRADING AND PROFIT AND LOSS ACCOUNT FOR VARIOUS YEARS OF TH E BLOCK PERIOD COULD NOT BE VERIFIED. HE, THEREFORE, REJECTED THE BOOK RESULTS. THE ASSESSIN G OFFICER IN THE ABSENCE OF ANY CLINCHING EVIDENCE RELATING TO EXPENSES OR CASH-FLOW, HE APPL IED RATE OF 8 PER CENT IN ORDER TO ASCERTAIN THE INCOME FOR THE BLOCK PERIOD AND ESTIMATED THE INCOM E AT RS.51,44,968/-. THE ASSESSING OFFICER MADE THE ADDITION OF RS.51,44,968/- WITHOUT GIVING CREDIT TO THE INCOME ALREADY RETURNED/ ASSESSED. 7. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (APPEALS). THE LD. CIT (APPEALS) VIDE HIS ORDER DATED 13/08/2007 IN APPEAL NO. 360/2006-0 7 DELETED THE ADDITION OF RS.51,44,968/- ON THE GROUND THAT PROVISIONS OF SECTION 44AD WERE NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. MERE NON-VERIFICATION OF EXPENSES BECAUSE OF NON-AVAILABILITY OF THE VOUCHERS COULD NOT BY ITSELF BE A GROUND FOR MAKING AN ADDITION AND MORE SO, IN ANY CASE IN BLOCK ASSESSMENT. THERE WAS NOT EVEN A SINGLE PAPER IN THE ENTIRE SEIZED DO CUMENTS, WHICH COULD ESTABLISH THAT THE ASSESSEE HAD EITHER SUPPRESSED THE CONTRACT RECEIPT S OR HAS CLAIMED FICTITIOUS EXPENSES. ASSESSMENT FOR ASSESSMENT YEAR 1998-99 HAD BEEN COM PLETED UNDER SECTION 143(3) AFTER DETAILED SCRUTINY WHEREIN TRADING / BOOK RESULTS HAD BEEN AC CEPTED. THE AO HAD NOT FAILED TO ESTABLISH ANY INFLATION OF EXPENSES VIS--VIS SEIZED DOCUMENT , BUT HAD ALSO GROSSLY ERRED IN INVOKING SECTION 44AD OF THE ACT WHICH IN TERMS DID NOT APPL Y IN ASSESSEES CASE AS IT HAD MAINTAINED REGULAR BOOKS OF ACCOUNTS. THE LD. CIT (APPEALS) C ONFIRMED ONLY ONE ADDITION IN RESPECT OF ILLEGAL PAYMENTS OF COMMISSION AGGREGATING TO RS.5, 88,500/- IN ADDITION TO LEVY OF SURCHARGE, 6 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 CREDIT OF PRE-PAID TAXES ETC. AGGRIEVED BY THE ORD ER OF THE LD. CIT (APPEALS) THE ASSESSEE PREFERRED APPEAL AGAINST CONFIRMING THE ADDITION OF RS.5,88,500/- AND THE REVENUE PREFERRED APPEAL AGAINST THE ADDITIONS DELETED BY THE LD. CIT (A) IN RESPECT OF ESTIMATION OF INCOME OF RS.51,44,968/-, RS.1,10,000/- ON ACCOUNT OF INVESTM ENT, RS.50,000/- ON ACCOUNT OF PAYMENT MADE TO SHRI ABDUL GAFFOOR, THE TENANT, FOR GETTING THE SHOP VACATED AND RS.2,00,000/- SURRENDERED BY THE ASSESSEE IN THE BLOCK RETURN. 8. THE ITAT VIDE ORDER DATED 11 TH NOVEMBER, 2008 IN I. T. [SS] APPEAL NO. 160 (DEL) OF 2007 FOR BLOCK PERIOD 1997-98 TO 2003-04 DISMISSED THE REVENUES APPEAL IN RESPECT OF ALL THE ADDITIONS EXCEPT ESTIMATION OF INCOME OF RS.51,44,9 68/-. THE TRIBUNAL WHILE DECIDING THE ISSUE IN PARA 7 OF THE SAID ORDER HAD OBSERVED AS UNDER : - 7. REGARDING THIS ISSUE, IT HAD NOT BEEN DISPU TED THAT THE AO FAILED TO BRING ON RECORD ANY MATERIAL TO ESTABLISH ANY UNDISCLOSED IN COME THAT RELATED TO THE SEIZED PAPERS. IT WAS, THEREFORE, THAT THE LD. CIT (A) DE LETED THE ADDITION MADE. HOWEVER, HE FAILED TO TAKE INTO CONSIDERATION THE P ROVISIONS OF SECTION 158BB(1) OF THE ACT. NO COMPLIANCE TO THE PROVISIONS OF SEC TION 158BB OF THE ACT IS SHOWN TO HAVE BEEN MADE BY THE AO. SO WE DEEM IT APPROPR IATE TO REMIT THIS ISSUE TO THE AO TO RE-DECIDE THE SAME IN ACCORDANCE WITH THE PRO VISIONS OF SECTION 158BB(1) OF THE ACT. 9. AS REGARDS ASSESSEES APPEAL THE TRIBUNAL SET AS IDE THE MATTER BY OBSERVING AS UNDER:- 21. IN THIS REGARD, IT IS SEEN, THAT THE LD. CIT (A) HELD THAT THE SOURCE OF THE EXPENDITURE BEING NOT EXPLAINABLE, IT HAD TO BE CON SIDERED AS AN UNDISCLOSED INCOME, BEING AN EXPENDITURE INCURRED OUT OF THE UN DISCLOSED SOURCES AND THAT SECTION 158-B(B) DID NOT HELP THE ASSESSEE, HOWEVER , NO FINDING WAS GIVEN BY THE LD. CIT (A) AS TO WHETHER THE INCOME IN QUESTION WAS EA RNED BEFORE OR AFTER THE 7 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 INCURRENCE OF THE EXPENDITURE UNDER CONSIDERATION. IF IT WAS EARNED BEFORE INCURRING THE EXPENDITURE, THERE IS NO QUESTION OF UNDISCLOSED INCOME. ON THE OTHER HAND, IF IT WAS EARNED THEREAFTER, THEN SET OFF HAS TO BE GIVEN TO THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO BE RE- EXAMINED AND RE-DECIDED IN THE LIGHT OF THIS OBSERV ATION. 10. FROM THE DECISION OF THE ITAT IT IS CLEAR THAT THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIONS TO COMPUTE TH E INCOME UNDER SECTION 158BD (1) AND DECIDE THE ISSUE OF UN-EXPLAINED EXPENDITURE OF RS.5,88,50 0/- WITH THE SPECIFIC DIRECTIONS. HERE WE MAY LIKE TO MENTION THAT BEFORE THE ITAT IN THE FIRST R OUND OF PROCEEDINGS, THE ASSESSEE HAD NOT TAKEN ANY GROUND RELATING TO ASSUMPTION OF JURISDICTION U NDER SECTION 158BD OF THE ACT. 11. IN REMAND PROCEEDINGS THE ASSESSING OFFICER COM PLETED THE ASSESSMENT ON 31 ST DECEMBER, 2009 BY MAKING ADDITIONS ON ACCOUNT OF (I) UN-EXPLA INED EXPENDITURE RS.3,82,66,276/-; (II) SUPPRESSION OF RECEIPTS & INFLATION OF EXPENSES RS. 1,00,00,000/-; & (III) ILLEGAL PAYMENTS RS.6,38,500/-. THUS THE ASSESSING OFFICER ADDED RS. 4,89,476/- ON ACCOUNT OF UNDISCLOSED INCOME / ILLEGAL PAYMENT OUT OF WHICH HE ALLOWED CREDIT FOR THE AMOUNT DECLARED IN THE BLOCK RETURN AT RS.4,00,000/-. 12.1 BEFORE THE LD. CIT (APPEALS) THE ASSESSEE HAD TAKEN GROUND RELATING TO ASSUMPTION OF JURISDICTION THAT NO SEARCH WAS CONDUCTED IN THE CA SE OF THE ASSESSEE. 158BD PROCEEDINGS OF THE ACT WERE INITIATED ON THE BASIS OF DOCUMENTS SEIZED IN THE COURSE OF SEARCH CARRIED ON THIRD PERSON, M/S. SAVERA CREDITS P. LTD., 87-A, ABU LANE , MEERUT AND THAT TOO WITHOUT PROPER TRANSFER OF SEARCH RECORDS, AS REQUIRED UNDER LAW F ROM RECORDS OF THIRD PERSON, BY HIS ASSESSING OFFICER TO THE RECORDS OF THE ASSESSING OFFICER AND HENCE ASSESSMENT MADE IS LEGALLY IN-VALID. THE LD. CIT (APPEALS) AFTER CONSIDERING THE DETAILED SU BMISSIONS MADE BY THE ASSESSEE CONFIRMED THE ASSUMPTION OF JURISDICTION BY OBSERVING AS UNDER:- 8 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 6.4 DECISION AND REASONS THEREFOR : I HAVE CAREFULLY CONSIDERED THE AOS ORDER, ARS SU BMISSIONS, AOS REMAND REPORT, ARS REJOINDER AND THE RELEVANT PROVISIONS OF LAW. I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AO PASSED UNDER SECTI ON 158BD/253 DATED 31/12/2009 FOR THE FOLLOWING REASONS : I) THE SATISFACTION TO INITIATE PROCEEDINGS UNDER SECT ION 158BD WAS DULY RECORDED ON 16/9/2004 BY THE ACIT, CIRCLE : 2, MEER UT, A COPY OF WHICH HAS BEEN PLACED ON RECORD; II) THE PROCEEDINGS WERE INITIATED IN PURSUANCE OF A WA RRANT OF AUTHORIZATION UNDER SECTION 132 OF THE INCOME TAX ACT IN THE NAME OF SHRI BALJEET SINGH BAKSHI, PARTNER IN THE APPELLANT COMPANY; III) THERE IS NOTHING TO SUGGEST THAT PROPER TRANSFER OF DOCUMENTS SEIZED IN THE COURSE OF SEARCHES ON OTHER PERSONS DID NOT TAKE PL ACE. IN FACT, THE AO, IN HER ORDER, HAS DISCUSSED SUCH SEIZED DOCUMENTS; IV) THE ARS ASSERTION THAT THE AO TRAVELLED BEYOND THE ITATS DIRECTIONS ARE NOT RELEVANT TO THIS GROUND AND HAS BEEN SEPARATELY DEALT WITH REFERENCE TO GROUND NOS. 2 AND 3. FOR THE REASONS STATED ABOVE, GROUND NO. 1 IS DISMI SSED. 12.2 BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE SINCE THE INITIATION OF PROCEEDINGS HAD BEEN PLEADING IN VAIN FOR MAKING AV AILABLE TO IT THE BASIS WITH THE REASONS AS INVOKED BY THE AO TO INITIATE PROCEEDINGS UNDER SEC TION 158BD OF THE ACT. THE ASSESSING OFFICER IN THE FIRST ROUND OF PROCEEDINGS SUCCESSFULLY RESI STED THE REQUEST MADE BY THE ASSESSEE. THE REASONS FOR INITIATING OF 15-BD PROCEEDINGS WERE MA DE AVAILABLE FOR THE FIRST TIME BY THE ASSESSING OFFICER IN RESPONSE TO THE PRESSING INQUI SITIONS OF THE LD. CIT (APPEALS) ONLY IN THE SECOND ROUND OF THE APPELLATE PROCEEDINGS, BEING A JURISDICTIONAL ISSUE ON THE FACTS. THE LD. CIT (APPEALS) CONFRONTED THE ASSESSEE WITH THE REASONS AS FORWARDED BY THE AO AND AFTER CONSIDERING 9 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 THE REMAND REPORT ON THAT BEHALF FROM THE ASSESSING OFFICER, DECIDED THE ISSUE UPHOLDING THE ASSESSMENT MADE U/S 158BD OF THE ACT. 12.3 THE LD. AR OF THE ASSESSEE HAS FURTHER SUBMITT ED THAT NOTICE UNDER SECTION 158BD IS DATED 16/11/2003. THIS NOTICE ALSO CONTAINS DATE WRITTEN IN HAND AT ITS BOTTOM AS 20/9/04. IT WAS ALSO POINTED OUT THAT THE FIRST WRITTEN DATE WAS 20/11/2 003 WHICH HAS BEEN ALTERED TO 20/09/2004 THROUGH OVER-WRITING. THE DOCUMENT ITSELF HAD NOT BEEN MADE AVAILABLE TO THE ASSESSEE DESPITE TRIBUNALS CLEAR DIRECTIONS IN THAT BEHALF DURING T HE HEARING WHICH HAS IMPAIRED ASSESSEES INABILITY TO MAKE ADEQUATE SUBMISSIONS. IT WAS ALS O SUBMITTED THAT SATISFACTION NOTE DOES NOT CONTAIN ANY DATE AT ITS HEAD. THE CONCERNED ASSESS ING OFFICER HAS ENDORSED THE DATE BELOW HIS SIGNATURE AS 16/9/2004. THE UN-ANSWERED QUESTION O NCE AGAIN IS AS TO WHY THE ESTABLISHED OFFICIAL PROCEDURE OF TYPING THE DATE ON THE TOP OF THE MEMO HAS BEEN GIVEN A GO-BYE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT NOTICE UN DER SECTION 158BD WAS PREPARED FIRST. AT THE POINT OF TIME WHEN SUCH NOTICE WAS PREPARED ADMITTE DLY NO SATISFACTION WAS RECORDED. PERHAPS THERE WAS NO SATISFACTION NOTE FOR A VERY LONG TIME THEREAFTER. HE, THEREFORE, SUBMITTED THAT THERE COULD BE A POSSIBLE REASON FOR THE SATISFACTION NOT E NOT BEING MADE AVAILABLE TO THE ASSESSEE IN THE ORIGINAL ROUND OF PROCEEDINGS DESPITE PERSISTEN T DEMAND BY THE ASSESSEE. THE ASSESSEE WAS SEEKING REPEATEDLY THE SATISFACTION NOTE ALL THROUG H, BUT THE DEPARTMENT HAD BEEN STEAD FAST IN ITS ACTION OF NOT PROVIDING THE SATISFACTION NOTE UNTIL THE MATTER CAME TO BE HEARD IN THE SECOND ROUND OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT ( APPEALS). IT WAS ONLY AT THAT POINT OF TIME, AFTER KIND EFFORTS OF THE LD. CIT (APPEALS) THAT TH E ASSESSEE WAS ABLE TO OBTAIN A COPY OF THE SATISFACTION NOTE. 13. A BARE PERUSAL OF THE SATISFACTION NOTE WOULD R EVEAL THAT THE SATISFACTION NOTE CAME INTO EXISTENCE EXACTLY 10 MONTHS AFTER THE NOTICE UNDER SECTION 158BD OF THE ACT WAS ISSUED. THE ABSENCE OF DATE IN TYPE ON SATISFACTION NOTE AT ITS HEAD AND THE ENTRY OF THE DATE IN THE HAND OF THE AUTHORITY RECORDING SATISFACTION JUST BELOW HIS SIG NATURE ON 16 TH DAY OF RELEVANT MONTH COINCIDING WITH THE 16 TH DAY OF MONTH AS APPEARING IN TYPE ON THE FACE OF S ECTION 158BD NOTICE IS OMINOUSLY SIGNIFICANT THE QUESTION WOULD BAG AN ANSWER IS AS TO WHY AND BY WHOM INITIALLY THE DATE WAS RECORDED AS 20 TH NOVEMBER, 2003 ON NOTICE UNDER SECTION 158-BD. TH E NEXT QUESTION WOULD BE 10 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 AS TO THE NEED FOR OVER-WRITING THE DATE AS 20 TH SEPTEMBER, 2004 AND AS TO WHO HAD DONE IT. THE PROCEEDINGS UNDER SECTION 158-BD HAVING COMMENCED O N 20/11/2003, THEY COULD NOT BE ATTEMPTED TO BE RE-VALIDATED BY OVER-WRITING THE OR IGINAL DATE AS 20 TH SEPTEMBER, 2004 TO MATCH WITH THE SATISFACTION WHICH WAS RECORDED ON 16 TH SEPTEMBER, 2004. 14. THE LAW PROVIDES A NOTICE UNDER SECTION 158-BD OF THE ACT AS SEQUEL TO THE RECORDING OF SATISFACTION. THE SATISFACTION IS CRUCIAL TO THE I NITIATION OF PROCEEDINGS. A SATISFACTION CAN BE EITHER WAY VIZ. TO DO OR NOT TO DO. SATISFACTI ON TO DO IS BED-ROCK OF ANY PROCEEDINGS UNDER SECTION 158BD OF THE ACT. MERE NOTICE UNDER SECTI ON 158BD CANNOT SUBSIST WITHOUT A VALID SATISFACTION BACKING IT. THERE CAN BE NO VALID INI TIATION OF PROCEEDINGS WITHOUT THE FOUNDATION OF PRE-EXISTING SATISFACTION. A NOTICE DE-HORS THE SA TISFACTION IS NON-EST AND VOID IN LAW. THE SUBSEQUENT ATTEMPT TO FORTIFY SECTION 158BD NOTICE BY RECORDING SATISFACTION NOTE WOULD BE A MAKE-UP AND MAKE-BELIEF WHICH WOULD NOT NULLIFY THE ORIGINAL DEFECT, DEFICIENCY AND DELINQUENCY OF HAVING A NOTICE UNDER SECTION 158-BD WITHOUT A SATISFACTION NOTE. HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF MANISH MAHESHWARI VS. ACIT 289 ITR 341 (SC). LD. A.R. OF THE ASSESSEE FURTHER SUBMITTED THAT THE LD. CIT (A) HAD ALSO ERRED IN HOLDING THAT SINCE PROCEEDINGS HAD BEEN INITIATE D IN PURSUANT OF A WARRANT OF AUTHORIZATION UNDER SECTION 132 OF THE ACT IN THE NAME OF SHRI BA LJEET SINGH BAKSHI, THE PROCEEDINGS INITIATED IN THE CASE OF THE ASSESSEE U/S 158BD WERE VALID. THE FACT OF THE MATTER IS THAT REASONS AS COUCHED BY THE ASSESSING OFFICER MENTIONED NOT ONLY SHRI BALJEET SINGH BAKSHI, BUT ALSO REFERRED TO OTHER PERSONS VIZ. BALDEV SINGH AND SHRI PANKAJ NARANG. THE NOTICE, THEREFORE, CONTAINS MULTIPLE REFERENCES. IT IS ON THE BASIS OF SUCH MU LTIPLE REFERENCES THAT THE SATISFACTION WARRANTING ACTION UNDER SECTION 158BD EMANATES. THIS AGAIN IS AB-INITIO ILLEGAL AND UNTENABLE. THE PROVISIONS OF SECTION 158BC OF THE ACT DO NOT ENVIS AGE A CONJOINT AND CONSOLIDATED RECOURSE IN A CASE BASED ON DIVERSE AND DISTINCT SEARCH CASES WHI CH CAUSE VARYING DEGREES OF SATISFACTION. EACH CASE WOULD GIVE RISE TO A SEPARATE AND DISTINC T PROCEEDINGS UNDER SECTION 158-BD OF THE ACT. EACH ORIGINAL SEARCH CASE UNDER SECTION 158BC OF THE ACT WOULD RESULT INTO A SEPARATE BLOCK CASE UNDER SECTION 158BD DEPENDING ON THE QUALITY O F THE SEIZED MATERIAL AND SATISFACTION ARISING THEREFROM. THE ACT DOES NOT PROVIDE FOR CLUBBING O F REASONS FOR SATISFACTION AND FOR PASSING A CONSOLIDATED ORDER THEREAFTER. IN THE CASE OF ASSE SSEE THE MATERIAL OBTAINED ON SEIZURE OF THREE 11 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 SEPARATE AND DISTINCT ENTITIES HAS BEEN CONSOLIDATE D INTO ONE CAUSING THE EVALUATION OF A MIXED BELIEF AS TO THE NEED FOR A SOLICITATION BY THE ASS ESSING OFFICER OF A RETURN OF BLOCK PERIOD FOR APPRAISAL AND ASSESSMENT IN THE CASE OF ASSESSEE. PROCEEDINGS UNDER SECTION 158BC IN SOME ONES CASE IS AT THE ROOT OF THE PROCEEDINGS UNDER SECTION 158BD IN ANOTHERS CASE. OUT OF THE THREE CASES AS NAMED THERE HAS BEEN NO BLOCK ASSESS MENT UNDER SECTION 158BC IN THE CASES OF SHRI BALJEET SINGH AND SHRI PANKAJ NARANG. THE OCC ASION TO RECORD A SATISFACTION ARISES ONLY DURING THE PROCEEDINGS UNDER SECTION 158BC OF THE A CT. IN THE ABSENCE OF SUCH PROCEEDINGS THERE COULD BE NO OCCASION TO RECORD A SATISFACTION UNDER SECTION 158BD OF THE ACT IN SOME ONES CASE. YET THE SATISFACTION NOTE TAKES COGNIZANCE O F THE MATERIAL FOUND DURING THE COURSE OF SEARCH OF SHRI PANKAJ NARANG IN WHOSE CASE THERE IS REPORT EDLY NO ORDER UNDER SECTION 158-BC OF THE ACT. IN THE CASE OF SHRI BALDEV SINGH THERE WAS NO T EVEN A SEIZURE. THEREFORE, THE REASONS HAVE BEEN RECORDED ON THE MATERIAL, WHICH ARE BOTH RELEV ANT AND IRRELEVANT. THE EXTENT TO WHICH THE IRRELEVANT MATERIAL HAS INFLUENCED THE OPINION OF T HE AO AS ON FORMATION OF THE SATISFACTION AS RECORDS COULD NOT BE PREDICTED WITH ANY REASONABLE PRECISION. SUCH BEING A CASE THE WHOLE NOTE MUST BE CONSIDERED AS VITIATED, IRRELEVANT AND LEGA LLY USELESS. IN THIS WAY THE ENTIRE SATISFACTION NOTE AS RECORDED IS INCAPABLE OF USE AS LEGAL EVIDE NCE AGAINST THE ASSESSEE. 15. HE HAS FURTHER SUBMITTED THAT THE LD. CIT (APPE ALS) HAS OMITTED TO CONSIDER AND DEAL WITH THE PROVISIONS OF SECTION 158BD, WHICH REQUIRES THA T SATISFACTION SHOULD BE RECORDED IN THE CASE OF A PERSON IN WHOSE CASE PERTINENT DOCUMENT HAD BE EN SEIZED IN THE COURSE OF SEARCH EVEN BEFORE TRANSFERRING THE SEARCH DOCUMENT FROM THE SE IZED RECORDS FROM THE PERSON SEARCHED TO THE RECORD OF PERSON TO WHOM THEY RELATE AND IT IS WITH SUCH TRANSFER OF DOCUMENT THAT PROCEEDINGS UNDER SECTION 158BD GETS INITIATED. HOWEVER, THE I MPUGNED SATISFACTION HAS NOT BEEN RECORDED PRIOR TO SUCH TRANSFER OF DOCUMENTS, BUT HAS BEEN R ECORDED IN THE CASE OF ASSESSEE AFTER TRANSFER OF DOCUMENTS, AS IS EVIDENT FROM THE CONTENTS OF THE S ATISFACTION NOTE ITSELF WHICH HAS REFERENCE TO VARIOUS DOCUMENTS SEIZED IN THE COURSE OF SEARCH ON SEVERAL PERSONS AT DIFFERENT PLACES. THUS THE IMPUGNED SATISFACTION AS ALLEGED TO BE RECORDED BY THE LD. AO IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 158-BD. THE LD. AR OF THE AS SESSEE, THEREFORE, PLEADED THAT INITIATION OF PROCEEDINGS UNDER SECTION 158-BD ARE MISCONCEIVED, ERRONEOUS AND UN-SUSTAINABLE IN LAW AND, THEREFORE, THE WHOLE ASSESSMENT OUGHT TO BE DIRECTE D TO BE QUASHED. 12 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 ON THE OTHER HAND, THE LD. [CIT] - DR SUBMITTED THA T REASONS HAVE BEEN RECORDED BY THE ASSESSING OFFICER BEFORE INITIATION OF PROCEEDINGS UNDER SECT ION 158-BD. THE DIFFERENCE IN DATES IS A CORRECTIVE MISTAKE. FURTHER HE SUBMITTED THAT TRAN SFER OF DOCUMENT WAS NOT REQUIRED AS THE ASSESSING OFFICER WAS THE SAME IN THE CASE OF SEARC HED PERSON. THE ASSESSMENT IN THE CASE OF SHRI PANKAJ NARANG WAS MADE UNDER SECTION 158BC BASED ON THE SEIZED MATERIAL. THEREFORE, PROCEEDINGS INITIATED UNDER SECTION 158BD OF THE AC T CANNOT BE HELD TO BE BAD IN LAW. 16. THE LD. CIT DR FURTHER SUBMITTED THAT THE TRI BUNAL HAS RIGHTLY SET ASIDE THE ORDER WITH THE DIRECTIONS TO COMPLETE ASSESSMENT AS PER PROVIS IONS OF SECTION 158BC BASED ON THE SEIZED MATERIAL. RELIANCE WAS PLACED ON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF BHAVNA CHEMICALS LTD. VS. CIT (SUPRA). HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ASSAM TRAVELS SHIPPING SERVI CE (SUPRA) FOR THE PROPOSITION THAT APPELLATE TRIBUNAL HAS POWER TO REMAND MATTER TO THE ASSESSIN G OFFICER FOR INVESTIGATION OF DOCUMENT AND COMPLETION OF ASSESSMENT WHICH MAY RESULT IN ENHANC EMENT. 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE FIRST QUESTION TO BE DECIDED IS WHETHER THE GROUNDS OF ASSUMPTION OF JURISDICTION UNDER SECTION 158-BD WHICH WAS NOT TAKEN IN THE APPEAL BY THE ASS ESSEE IN THE FIRST ROUND OF APPELLATE PROCEEDINGS, CAN BE TAKEN WHEN THE MATTER IS REMAND ED BACK BY THE ITAT TO THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS. IN P. V. DOSHI VS. CIT 11 3 ITR 22 (GUJ.) REASSESSMENT PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE AND AN ADDITION WAS MADE TO HIS INCOME. BEFORE THE LD. AAC CONTENTION ABOUT VALIDITY OF NOTICE FOR REASSESSMEN T WAS GIVEN UP AND ON MERITS THE APPEAL WAS DISMISSED. ON FURTHER APPEAL, THE TRIBUNAL REMANDE D THE MATTER TO THE FILE OF THE INCOME-TAX OFFICER WITH THE DIRECTION TO RE-EXAMINE THE WITNES S AND COMPLETE THE ASSESSMENT. THE ASSESSING OFFICER ON REMAND COMPLETED ASSESSMENT AND AGAIN MA DE ADDITIONS. ON APPEAL, THE ASSESSEE RE- AGITATED POINT OF VALIDITY OF ASSESSMENT PROCEEDING S ON THE GROUND THAT THERE WAS MERE CHANGE OF OPINION. THE AAC FOUND THAT NO REASONS WERE RECORD ED BY THE ITO BEFORE ISSUING NOTICE FOR REASSESSMENT AND, THEREFORE, HELD THAT ITO HAD NO J URISDICTION TO REOPEN ASSESSMENT. ON APPEAL TO ITAT, THE TRIBUNAL HELD THAT IN RESTORING CASE TO T HE FILE OF ITO BY EARLIER ORDER, ONLY POINT LEFT OPEN WAS IN RESPECT OF ADDITION ON MERITS AND THAT LEGAL OR JURISDICTION ASPECT WHETHER 13 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 REASSESSMENT PROCEEDINGS WERE LEGALLY INITIATED WER E NOT KEPT OPEN. ON REFERENCE, IT WAS HELD BY THE HONBLE GUJARAT HIGH COURT THAT THE POINT RELA TING TO REASSESSMENT PROCEEDINGS WENT TO ROOT OF THE JURISDICTION AND WAS PURE QUESTION OF LAW. HONBLE HIGH COURT HELD THAT THE TRIBUNALS VIEW WAS CLEARLY ERRONEOUS THAT THE MATTER BECAME F INAL WHEN THE TRIBUNAL PASSED THE EARLIER REMAND ORDER SO THAT THE POINT OF JURISDICTION FINA LLY GOT SETTLED, WHICH COULD NOT BE AGITATED UNLESS THE ASSESSEE HAD COME IN THE REFERENCE TO TH E HONBLE HIGH COURT AT THAT STAGE. TRIBUNALS VIEW WAS ALSO INCORRECT THAT IN RESTORING THE CASE TO THE FILE OF THE INCOME TAX OFFICER BY THE EARLIER ORDER THE ONLY POINT LEFT OPEN WAS IN RESPE CT OF ADDITION ON MERITS AND THAT THE LEGAL OR JURISDICTION ASPECT WHETHER REASSESSMENT PROCEEDING S WERE LEGALLY INITIATED WAS NOT KEPT OPEN. EVEN THE TRIBUNALS VIEW WAS ERRONEOUS THAT EVEN TH OUGH THIS POINT WENT TO THE ROOT OF JURISDICTION AND WAS PURE QUESTION OF LAW, MERELY B ECAUSE THE POINT WAS INITIALLY RAISED AND NOT PRESSED, WHEN THE MATTER WAS TAKEN UP BEFORE THE AA C, IT COULD BE WAIVED AND IT COULD NOT BE RE- AGITATED. 18. IN VIEW OF DECISION OF HONBLE GUJARAT HIGH COU RT IT IS CLEAR THAT JURISDICTION POINT BEING A PURE QUESTION OF LAW CAN BE AGITATED IN THE REMAN D PROCEEDINGS AS IT GOES TO THE ROOT OF THE MATTER. IN THE CASE BEFORE US THE ASSESSING OFFICE R HAD NOT PROVIDED THE COPY OF SATISFACTION NOTE RECORDED BY THE ASSESSING OFFICER WHILE INITIATING PROCEEDINGS UNDER SECTION 158BD OF THE ACT. THE SATISFACTION NOTE WAS PROVIDED ON INTERFERENCE OF THE LD. CIT (APPEALS) IN THE SECOND ROUND OF APPELLATE PROCEEDINGS. AT THIS STAGE ONLY THE A SSESSEE CAME TO KNOW THE REASONS AS TO WHY PROCEEDINGS AGAINST IT WERE INITIATED UNDER SECTION 158-BD OF THE ACT AS NO SEARCH UNDER SECTION 132 OF THE ACT WAS CONDUCTED IN THE CASE OF THE ASS ESSEE. THEREFORE, IN OUR CONSIDERED OPINION, THE ASSESSEE IS JUSTIFIED IN TAKING THE GROUND AGIT ATING THE JURISDICTION UNDER SECTION 158BD IN THE SECOND ROUND OF ASSESSMENT PROCEEDINGS. 19. NOW COMING TO THE QUESTION WHETHER THE ASSESSIN G OFFICER COULD HAVE INITIATED PROCEEDINGS UNDER SECTION 158BD OF THE ACT WHEN NO ASSESSMENT PROCEEDINGS UNDER SECTION 158BD HAVE BEEN COMPLETED IN THE CASE OF SEARCHED A SSESSEES FROM WHOSE POSSESSION THE BOOKS OF ACCOUNT AND OTHER SEIZED MATERIAL BELONGING TO T HE ASSESSEE WAS FOUND AND SEIZED. UNDER SECTION 158BD WHERE THE ASSESSING OFFICER IS SATISF IED THAT ANY UNDISCLOSED INCOME WHICH 14 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 BELONGS TO ANY PERSON, OTHER THAN THE PERSON WITH R ESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 OR WHOSE BOOKS OF ACCOUNT OR OTHER DOCU MENTS OR ANY OTHER ASSET WERE REQUISITIONED UNDER SECTION 132-A, THEN, THE BOOKS OF ACCOUNT, OT HER DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED UND ER SECTION 158-BC AGAINST SUCH OTHER PERSON AND PROVISIONS OF CHAPTER XIV-B SHALL APPLY ACCORDI NGLY. THE LANGUAGE OF SECTION 158-BD IS PLAIN AND CLEAR. NOWHERE IN THE SECTION IT IS PROV IDED THAT PROCEEDINGS UNDER SECTION 158-BD WILL BE INITIATED ONLY IN A CASE WHERE ASSESSMENT U NDER SECTION 158BC IS MADE. INITIATION OF 158BD PROCEEDINGS IS INDEPENDENT OF THE ACTION TAKE N IN THE CASE OF SEARCHED PERSON. IT IS THE SATISFACTION OF THE ASSESSING OFFICER HAVING JURISD ICTION OVER SEARCHED PERSON TO CONVEY THE BOOKS OF ACCOUNTS OR ASSETS TO THE ASSESSING OFFICER HAVI NG JURISDICTION ON THE PERSON IN RESPECT OF WHOM THE BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS SEI ZED OR REQUISITIONED ARE FOUND IN THE POSSESSION OF SEARCHED PERSON. THE BOOKS OF ACCOUN TS OR DOCUMENTS OR ASSETS CAN BE CONVEYED AT ANY STAGE I.E. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS IN CASE OF SEARCHED PERSON OR BEFORE INITIATION OF PROCEEDINGS UNDER SECTION 158BC OF SE ARCHED PERSON OR AFTER COMPLETION OF ASSESSMENT IN THE CASE OF SEARCHED PERSON. THEREFO RE, COMPLETION OF ASSESSMENT UNDER SECTION 158BC IN THE CASE OF SEARCHED PERSON IS NOT CONDITI ON PRECEDENT FOR RECORDING OF THE SATISFACTION UNDER SECTION 158BD OF THE ACT. IN VIEW OF THE ABO VE DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE GROUND TAKEN BY THE ASSESSEE THAT SINCE NO ASSESSMENT UNDER SECTION 158BC HAS BEEN MADE IN THE CASE OF SEARCHED PERSON AND, THERE FORE, PROCEEDINGS INITIATED UNDER SECTION 158BD OF THE ACT ARE VOID AB INITIO, IS NOT THE COR RECT POSITION OF LAW. HENCE, THIS CONTENTION RAISED BY THE ASSESSEE, IS DISMISSED. 20. THE NEXT CONTENTION OF THE ASSESSEE IS THAT SAT ISFACTION NOTE HAS NOT BEEN RECORDED BEFORE ISSUE OF NOTICE U/S 158BD OF THE ACT. HE HAS BASED HIS CONTENTION ON OVER WRITINGS MADE IN HAND ON NOTICE DATED 16/11/2003 U/S 158BD. THE SATISFACT ION NOTE IS DATED 16/09/2004 WHEREAS ON TOP OF NOTICE U/S 158BD, THE TYPED DATE IS 16/11/2003 A ND THERE IS OVER WRITING ON DATE ON THE BOTTOM. AS PER ASSESSMENT ORDER DATED 29/09/2006, THE NOTICE UNDER SECTION 158BD DATED 16/09/2004 WAS SERVED ON THE ASSESSEE ON 20/09/2004 . THE REASONS/SATISFACTION FOR ISSUING NOTICE UNDER SECTION 158BD HAVE BEEN SIGNED BY THE ASSESSING OFFICER ON 16/09/2004. THEREFORE, 15 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 IT CANNOT BE SAID THAT NOTICE UNDER SECTION 158BD W AS PREPARED AFTER SET ASIDE OF THE ORDER BY THE ITAT. AS PER ORIGINAL ASSESSMENT ORDER THE NOTICE WAS SERVED ON THE ASSESSEE ON 20/09/2004. THEREFORE, THE DATE WRITTEN ON HAND AT THE BOTTOM A S 20/09/2004 REPRESENTS THE DATE OF SERVICE. THE DATE OF ISSUE OF NOTICE ON 16/11/2003, IN OUR C ONSIDERED OPINION, APPEARS TO BE TYPING MISTAKE AS THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS STATED THE DATE OF NOTICE UNDER SECTION 158BD AS 16/09/2004. THE DATE OF NOTICE ME NTIONED IN THE ASSESSMENT ORDER 16/09/2004 WAS NOT CHALLENGED IN THE FIRST ASSESSMENT PROCEEDI NGS. THEREFORE, THE DATE MENTIONED ON THE NOTICE UNDER SECTION 158BC 16/11/2003 IS A TYPOGRAP HIC MISTAKE. THE ASSESSEE HAD NOT FILED ANY OTHER EVIDENCE TO PROVE THAT NOTICE DATED 16/11/200 3 WAS SERVED ON THE ASSESSEE IN NOVEMBER, 2003. IN THE ABSENCE OF ANY SUCH MATERIAL, WE ARE UNABLE TO HOLD THAT THE NOTICE UNDER SECTION 158BD READ WITH S. 158BC WAS ISSUED ON 16/11/2003. THEREFORE, THIS CONTENTION OF THE ASSESSEE IS REJECTED. 21. THE NEXT CONTENTION IS THAT A COMBINED SATISFAC TION NOTE HAS BEEN PREPARED IN RESPECT OF MATERIAL FOUND AND SEIZED FROM DIFFERENT PERSONS. I N THE CASE OF ALL THE SEARCHED ASSESSEES THE ASSESSING OFFICER IS SAME. THE ASSESSING OFFICER IS ALSO THE SAME IN THE CASE OF THE ASSESSEE BEFORE US IN APPEAL. HENCE, THERE WAS NO NEED FOR CONVEYIN G MATERIAL BY THE ASSESSING OFFICER BELONGING TO THE ASSESSEE TO HIMSELF. HOWEVER, THE SATISFACT ION NOTE DATED 16/09/2004 HAS BEEN PREPARED BY THE ASSESSING OFFICER IN RESPECT OF SEIZED MATERIAL FOUND FROM THE PREMISES OF SHRI PANKAJ NARANG, SHRI BALJEET SINGH BAKSHI AND SHRI BALDEV SINGH. T HE CONTENTION OF THE ASSESSEE THAT THE COMBINED SATISFACTION NOTE RECORDED IN RESPECT OF T HREE DIFFERENT SEARCHED PERSONS IS BAD IN LAW. THE ASSESSING OFFICER SHOULD HAVE RECORDED SEPARATE SATISFACTION NOTES IN THE CASE OF EACH SEARCHED PARTY. AS ALREADY MENTIONED THAT THE ASSE SSING OFFICER IS SAME FOR ALL THE SEARCHED PERSONS, BECAUSE OF THIS REASON, A COMBINED SATISFA CTION NOTE HAS BEEN PREPARED. WHEN THE ASSESSING OFFICER IS THE SAME FOR ALL THE SEARCHED PERSONS, MAKING A SATISFACTION NOTE BASED ON MATERIAL FOUND FROM THE PREMISES OF DIFFERENT PERSO NS, WHICH WAS CONVEYED BY THE AUTHORIZED OFFICER TO THE ASSESSING OFFICER, PREPARATION OF CO MBINED SATISFACTION NOTE WILL NOT BE DETRIMENTAL TO THE INTEREST OF THE REVENUE. AT THE BEST IT COU LD BE TREATED AS AN IRREGULARITY AND NOT ILLEGALITY . WHAT IS TO BE SEEN IS WHETHER BEFORE ISSUE OF NOTIC E U/D 158BD SATISFACTION SHOULD BE RECORDED BY THE ASSESSING OFFICER WHICH HAS BEEN DONE IN THE CASE OF THE ASSESSEE. THEREFORE, ASSESSMENT 16 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 CANNOT BE ANNULLED ON THE BASIS OF COMBINED SATISFA CTION NOTE, RECORDED BY THE SAME ASSESSING OFFICER, HAVING JURISDICTION ON ALL THE SEARCHED PE RSONS INCLUDING THE ASSESSEE UNDER APPEAL. 22. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT (APPEALS) WAS JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE TH AT PROCEEDINGS INITIATED UNDER SECTION 158BD READ WITH SECTION 158BC WERE BAD IN LAW. 23.1 THE NEXT ISSUE FOR CONSIDERATION RELATES TO CO NFIRMING THE ADDITION OF RS.3,82,66,276/- ON ACCOUNT OF UNDISCLOSED EXPENDITURE AND CONFIRMIN G THE ADDITION OF RS.1,00,00,000/- ON ACCOUNT OF SUPPRESSION OF RECEIPTS AND INFLATION O F EXPENSES TO THE EXTENT OF RS.1,00,00,000/-. THE ASSESSING OFFICER IN THE REMAND ASSESSMENT PROC EEDINGS OBSERVED THAT DURING THE SEARCH, SOME BOOKS OF ACCOUNTS OF M/S. JEET CONSTRUCTION CO MPANY WERE SEIZED, BUT NONE OF THE BOOKS WERE COMPLETE I.E. EITHER THEY WERE NOT SUPPORTED B Y BILLS OR VOUCHERS OR THEY DID NOT HAVE COMPLETE ENTRIES. NO OTHER BOOKS OF ACCOUNTS AND R ELEVANT VOUCHERS FOR ANY OTHER FINANCIAL YEAR WERE FOUND DURING THE SEARCH, EXCEPT MENTIONED BY T HE ASSESSING OFFICER IN THE ASSESSMENT ORDER I.E. ANNEXURE A-1, A-2, A-3, A-4 AND B-1 TO B-6. A NNEXURE A-1 TO A-4 WERE SEIZED FROM THE PREMISES OF SHRI BALDEV SINGH, THE PARTNER OF THE A SSESSEE FIRM. THESE SEIZED PAPERS ARE IN RESPECT OF EXPENSES INCURRED BY THE ASSESSEE. THE ASSESSING OFFICER WORKED OUT THE TOTAL OF ANNEXURE A-1 AT RS.57,654/-. THE TOTAL OF EXPENSES IN RESPECT OF ANNEXURE A-2 IS AT RS.5,57,114/-. THE TOTAL OF ANNEXURE A-3 IS AT RS. 20,030/-. THE TOTAL OF ANNEXURE A-4 IS RS.21,527/-. THUS THE AMOUNT OF EXPENSES INCURRED B Y THE ASSESSEE AS PER ANNEXURES A-1 TO A-4 IS AT RS.6,56,305/-. 23.2 CERTAIN DOCUMENTS/RECORDS WERE SEIZED FROM TH E PREMISES OF M/S. JEET CONSTRUCTION COMPANY, THE ASSESSEE. ANNEXURE A-1 IS CASH BOOK F OR THE PERIOD 1/04/2001 TO 31 ST MARCH, 2002. THE TOTAL OF EXPENSES AS PER ANNEXURE A-1 [C ASH BOOK] IS RS.1,09,696/-. ANNEXURE A-2 IS CASH BOOK FOR THE PERIOD APRIL, 1997 TO MARCH, 1998 AND THE AMOUNT OF EXPENSES FOR THIS PERIOD IS RS.64,92,160/-. ANNEXURE A-3 IS LEDGER FOR THE PERIOD 1/04/2001 TO 31 ST MARCH 2002, WHICH 17 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 GIVES THE TOTAL OF RS.2,03,592/-. ANNEXURE A-4 IS CASH BOOK FOR THE PERIOD 1999-2000 GIVING THE DETAILS OF EXPENSES AT RS.1,46,62,222/-. ANNEXURES B-1 TO B-6 WERE SEIZED FROM THE PREMISES OF M/S. JEET CONSTRUCTION COMPANY. ANNEXURE B-1 GIVES THE DETAILS OF EXPENSES/PAYMENTS RECORDED ON VARIOUS DATES FOR THE PERIOD OCTOBER, N OVEMBER AND DECEMBER, 2002. ANNEXURE - B-2 GIVES THE DETAILS OF EXPENSES FOR THE MONTH OF JANUARY, APRIL, MAY, SEPTEMBER, OCTOBER, NOVEMBER AND DECEMBER, 2002. THE TOTAL OF THE EX PENSES AS PER ANNEXURE B-1 AND B-2 ARE OF RS.22,74,635/-. ANNEXURE B-5 CONTAINS THE DETAILS OF EXPENSES WITHOUT INDICATING ANY DATES. THE TOTAL OF SUCH EXPENSES IS AT RS.1,32,08,686/-. ANNEXURE B-6 IS IN RESPECT OF CONTRACTORS BILLS, LIC PAYMENTS, ESCOTEL BILLS, DEPOSIT SLIPS A ND BILLS FOR PAYMENT OF CEMENTS ETC. ANNEXURE- 16 CONTAINS THE DETAILS OF BALANCE DUE AND DATE. F OR MAJORITY OF THE ITEMS, THERE IS NO NARRATION. ANNEXURE-19 CONTAINS ALSO THE DETAILS OF PAYMENT, D ATE OF PAYMENT, BALANCE AMOUNT AND DATE AND NARRATION. ANNEXURE-19 IS IN RESPECT OF YEAR 1997- 98. ANNEXURES 20, 22, 24 CONTAINS THE DETAILS OF THE PAYMENTS AND BALANCE DUE. THE ASSESSING OFF ICER ON THE BASIS OF AMOUNTS RECORDED ON THE LOOSE SHEETS, LEDGER AND CASH BOOK TOTALED UP TO RS .5,98,44,202 DETAILED AS BELOW :- 1. ANNEXURES A-1 TO A-4 SEIZED FROM SHRI BALDEV S INGH RS.6,56,305/-; 2. ANNEXURES A-1 TO A-4 SEIZED FROM PREMISES OF JEET CONSTRUCTION CO. RS.2,14,68,030/-; 3. ANNEXURES B-1, B-2, B-5 & B-6 SEIZED FROM JEE T CONSTRUCTION CO. RS.2,10,37,869/-; AND 4. ANNEXURES 16, 17, 19, 20, 22, 23, 24 SEIZED F ROM SHRI BALJEET SINGH BAKSHI RS.1,01,00,086/- ; . TOTAL : RS.5,98,44,202/- 24. THE ASSESSING OFFICER ON THE BASIS OF ABOVE ASK ED THE ASSESSEE TO PRODUCE COMPLETE BOOKS OF ACCOUNTS WITH COMPLETE BILLS AND VOUCHERS IN ORD ER TO ASCERTAIN THE NATURE AND PURPOSE OF THE EXPENSES AND ALSO TO ENQUIRE ABOUT THE SOURCE OF PA YMENTS. IT WAS EXPLAINED BY THE ASSESSEE THAT THIS ASPECT HAD ALREADY BEEN CONSIDERED IN THE ORIGINAL BLOCK ASSESSMENT PROCEEDINGS AND, THEREFORE, EXAMINATION OF ENTRIES IS BEYOND THE DIR ECTIONS OF THE ITAT. EVEN OTHERWISE, THE EXPENSES INCURRED WERE DEDUCTIBLE AS BUSINESS INCOM E AND COULD NOT BE ADDED UNDER SECTION 69 OF THE ACT. THE ASSESSING OFFICER, HOWEVER, OBSERV ED THAT THE UNEXPLAINED EXPENDITURE MADE BY 18 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 THE ASSESSEE IS COVERED UNDER SECTION 69-C. THE AO FURTHER OBSERVED THAT ITAT HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE THE UNDISCLOSED INCOME OF THE ASSESSEE ON THE BASIS OF PROVISIONS OF SECTION 158BB(1). THE AO FURTHER NOTED THAT THE EV IDENCE GATHERED FROM THE SEIZED MATERIAL INDICATED THAT THE ASSESSEE HAD INCURRED TOTAL EXPE NSES OF RS.5,98,44,202/-. THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE SOURCE OF EXPENDITURE IN SPITE OF SEVERAL OPPORTUNITIES GIVEN TO IT. THE AO FURTHER NOTED THAT UNDER SECTION 158BB(2) PROVIS IONS OF SECTION 69C ARE APPLICABLE AND BURDEN IS ON THE ASSESSEE OF PROVING TO THE SATISFA CTION OF THE AO THAT ANY UNDISCLOSED INCOME HAD ALREADY BEEN DISCLOSED IN THE RETURN OF INCOME FILED BY HIM BEFORE COMMENCEMENT OF SEARCH OR OF REQUISITION AS THE CASE MAY BE. THE AO IN VI EW OF PROVISIONS OF SECTION 158BB(3) OBSERVED THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THAT VARIOUS TRANSACTIONS RECORDED IN THE SEIZED MATERIAL WERE ALREADY DISCLOSED IN ITS RETUR N OF INCOME FILED BEFORE THE SEARCH. THE ASSESSEE HAD NOT DISCHARGED ONUS DESPITE OF SEVERAL OPPORTUNITIES BEING GIVEN. AS REGARDS THE SECOND CONTENTION OF THE ASSESSEE THAT SECTION 69C DEALS ONLY WITH NON-DEDUCTIBLE, NON-BUSINESS EXPENDITURE, THE AO HAS HELD THAT SECTION CLEARLY M ENTIONS THAT ANY EXPENDITURE INCURRED BY THE ASSESSEE FOR WHICH THE ASSESSEE OFFERS NO EXPLANATI ON OR THE EXPLANATION OF WHICH IN THE OPINION OF THE AO IS NOT SATISFACTORY, THE PROVISIONS OF SE CTION 69C OF THE ACT WILL ATTRACTED. THE AO, THEREFORE, HELD THAT PROVISIONS OF SECTION 69C WERE APPLICABLE. THE AO FURTHER NOTED THAT OUT OF RS.5,98,44,202/- AN EXPENDITURE OF RS.2,15,77,726/- PERTAINING TO ANNEXURES A-1, A-2, A-3 AND A-4 WERE SEIZED FROM THE PREMISES OF THE ASSESSEE. THESE ANNEXURES WERE IN SHAPE OF CASH BOOK THOUGH NO EXPLANATION WAS OFFERED ABOUT THE ENTRIES CONTAINED IN THESE BOOKS, YET TAKING A REASONABLE VIEW THESE TRANSACTIONS MIGHT BE TAKEN T O BE IN RESPECT OF ASSESSEES BUSINESS FOR WHICH RETURNS WERE FILED IN THE PAST. REGARDING TH E OTHER TRANSACTIONS RECORDED IN THE VARIOUS OTHER DOCUMENTS AND AS SUMMARIZED AS ABOVE THERE WA S NO EVIDENCE WHATSOEVER TO SHOW THAT SUCH TRANSACTIONS WERE ALREADY DISCLOSED. THE AO, THEREFORE, OUT OF RS.5,98,44,202/- DEDUCTED THE AMOUNT OF RS.2,15,77,726/- AND ADDED THE BALANC E AMOUNT OF RS.3,82,66,276/-. 25. THE ASSESSING OFFICER FURTHER NOTED THAT FROM T HE PREMISES OF SHRI BALJEET SINGH BAKSHI, A BUNCH OF LOOSE PAPERS [ANNEXURE 1 PAGE NOS. 65 TO 67] RELATING TO M/S. JEET CONSTRUCTION CO. WAS SEIZED. THESE PAPERS ARE AN ACCOUNT OF LAKHOTI A, GHANTA GHAR AND PEAREY LAL HOSPITAL. ON PAGE 67 TOTAL AMOUNTS WORKED OUT IS AT RS.5,45,138/ -. IN ITS COMMISSION AT THE RATE OF 25 PER 19 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 CENT, RS.3 LAKHS AND PROFIT OF RS.3,60,000/- ARE AD DED TOTALING TO RS.12,05,138/- AND DEDUCTING THE INCOME TAX AND SALES TAX OF RS.5,000/- THE BALA NCE FIGURE IS RS.12,00,138/-. THE ENTRIES RELATE TO THE PERIOD FROM DECEMBER, 1998 TO JANUARY , 1999. THE VALUE OF CONTRACT WAS ABOUT RS. 12 LAKHS AND PROFIT OF RS.3,60,000/- AND COMMISSION OF RS.3 LAKHS. THIS COMMISSION AS PER DETAILS GIVEN IN THE DOCUMENTS ARE ILLEGAL PAYMENTS . ILLEGAL BUSINESS PAYMENT ARE NOT ALLOWABLE AS DEDUCTION. THE AO ON THE BASIS OF ENTRIES RECOR DED IN THE PAPER OBSERVED THAT PROFIT OF ASSESSEE IN THE PARTICULAR CONTRACT WAS ALMOST 55 P ER CENT, WHEREAS THE ASSESSEE WAS PAYING RS.5,000/- AS TAX. ON THE BASIS OF THIS THE ASSESS ING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE WAS NOT SHOWING THE TRUE INCOME TO THE DEP ARTMENT. THE AO THEREAFTER TOOK THE FIGURES OF GROSS RECEIPTS/EXPENSES AND NOT NET PROFIT FOR T HE PERIOD CONTAINED IN THE BLOCK. ON THE BASIS OF PROFIT WORKED OUT HE OBSERVED THAT THE ASSESSEE WAS SHOWING VERY LESS INCOME FROM CONTRACTUAL RECEIPTS AGAINST THE ACTUAL PROFITS WHI CH WERE CALCULATED AT 55 PER CENT. SHE FURTHER NOTED THAT IT WAS POSSIBLE THAT PROFITS FROM ONE CO NTRACT TO ANOTHER WILL VARY WITHIN A CERTAIN BANDWIDTH AND THE DIFFERENCE OF PROFIT PERCENTAGE C OULD NOT BE SO WIDE. IN OTHER WORDS THE PROFIT PERCENTAGE WILL BE IN THE RANGE OF 55%. 26. THE ASSESSING OFFICER FROM LOOSE PAPERS AND CAS H BOOK SEIZED FROM THE PREMISES OF SHRI BALJEET SINGH BAKSHI AND M/S. JEET CONSTRUCTION CO. NOTED THAT ASSESSEE HAD RECEIVED FOLLOWING AMOUNTS ON VARIOUS DATES DURING THE RELEVANT ASSES SMENT YEAR :- 1. ANNEXURE A-4 PERIOD. AMOUNT. [CASH BOOK OF JEET CONSTRUCTION CO.] 10/4/1 999 TO 27/03/2000 RS.37,50,000/- 2. ANNEXURE A-4 (LEDGER) -DO- 5/4/1999 TO 2 9/03/2000 RS.1,17,80,183/- 3. ANNEXURE 2 (CASH BOOK) -DO- 9/6/1997 TO 3 1/03/1998 RS.3,49,923/- 4. ANNEXURE 21 6/7/2002 RS.2,50,000/- (IN CURRENT ACCOUNT 937 OF JEET CONSTRUCTION CO.) LETTER WRITTEN TO NAGAR PRAMUKH RS.50 LA KHS. 20 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 DISCLOSING PAYMENT OF RS.50 LAKHS DUE TO THE ASSESSEE AND THAT THE WORK OF 60 LAKHS UNDER PROGRESS. 5. ANNEXURE 18 JANUARY, 2002 TO 24THJULY, 2002 RS.1,43,37,665/- [CONSTRUCTION WORK SHOWN ON DIFFERENT DATES]. 27. THE ASSESSING OFFICER ON THE BASIS OF ENTRIES R ECORDED ON ABOVE-MENTIONED ANNEXURES HELD THAT THE AMOUNT SHOWN ABOVE HAD ACCRUED TO ASSESSEE AS HIS INCOME IN RELEVANT ASSESSMENT YEARS. SINCE THE ASSESSEE HAD NOT PRODUCED BOOKS OF ACCOUN TS FOR VERIFICATION OF ENTRIES AND HAD NOT PRODUCED ANY OTHER EVIDENCE TO SUBSTANTIATE ITS CLA IM THAT THE RECEIPTS HAVE BEEN DULY REFLECTED IN TRADING AND PROFIT AND LOSS ACCOUNT OF THE ASSESSEE , THE ASSESSING OFFICER TREATED AMOUNT OF RS.3,54,67,771/-. SHE FURTHER NOTED THAT PROFITS OF THE ASSESSEES BUSINESS WERE AS HIGH AS 55 PER CENT AS DISCUSSED IN THE ASSESSMENT ORDER IN PARAGR APH 16. SHE CONCLUDED THAT THESE FACTS WERE INDICATIVE OF CONCEALMENT OF TRUE PROFITS. SINCE T HE ASSESSEE HAD CHOSEN NOT TO GIVE ANY EXPLANATION AS TO HOW THESE RECEIPTS HAD BEEN ACCOU NTED FOR AND AS PER PROVISIONS OF SECTION 158BB(3) THE BURDEN WAS ON THE ASSESSEE TO PROVE TH AT ANY UNDISCLOSED INCOME HAD ALREADY BEEN DISCLOSED IN THE RETURN OF INCOME AND THAT ONUS HAD NOT BEEN DISCHARGED BY THE ASSESSEE. THEREFORE, THE AO CONCLUDED THAT THE AMOUNT OF RS.3 ,54,67,771/- WOULD NOT HAVE BEEN RECORDED FOR THE PURPOSE OF PAYING THE TAXES. HOWEVER, SHE MADE ADDITION OF RS. 1,00,00,000/-. ACCORDING TO HER ADOPTION OF RS.1,00,00,000/- FOR T HE BLOCK PERIOD 1997-98 TO 2002-03 WAS AN ESTIMATION OF REASONABLE UNACCOUNTED INCOME. 28.1 BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED THAT INFERENCE DRAWN BY THE AO WAS MISCONCEIVED AND INCORRECT SINCE THE ASSESSEE HAD O FFERED VALID AND PLAUSIBLE EXPLANATION BOTH IN ORIGINAL AS WELL AS IN SET ASIDE PROCEEDINGS. ALL THE SEIZED MATERIAL WHICH HAD BEEN MADE BASIS FOR ADDITION IN THE IMPUGNED ASSESSMENT HAD ALREADY BEEN CONSIDERED. THE AO HAD EXAMINED THE NATURE OF ENTRIES IN THE COURSE OF ORIGINAL ASS ESSMENT PROCEEDINGS. THEREFORE, THE ADDITIONS MADE BY THE AO ARE TOTALLY UNTENABLE AND UNSUSTAINA BLE. THE DETAILS AND THE YEAR-WISE BREAK-UP 21 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 OF THE TOTAL EXPENDITURE AGGREGATING TO RS.5,98,44, 202/- HAS BEEN PROVIDED TO THE ASSESSING OFFICER. HOWEVER, OUT OF THIS EXPENSES TO THE EXTE NT OF RS.2,15,77,726/- STATED TO BE AS PER ENTRIES OF SEIZED ANNEXURES A-1, A-2, A-3 AND A-4 W HICH ARE CASH BOOK AND LEDGER OF ASSESSEE FIRM AND HAD BEEN HELD NOT TO CONSTITUTE UNDISCLOSE D INCOME ON A REASONABLE VIEW OF THE MATTER. THE ASSESSEE IS UNABLE TO UNDERSTAND THE RATIONALE OF SUCH REASONABLENESS. IT WAS CONTENDED THAT THE EXPENDITURE WAS COVERED BY THE EXPENSES DEBITED IN THE AUDITED PROFIT AND LOSS ACCOUNT AND DID NOT FALL IN THE DEFINITION OF UNDISCLOSED INCOM E. THE OTHER EXPENSES TO THE EXTENT OF RS.3,82,66,276/- HAVE BEEN DIFFERENTLY TREATED AND ASSESSED AS UNDISCLOSED INCOME ON MERE PRESUMPTION BASIS THOUGH THE SAME STOOD ON SAME FOO TINGS AND COULD NOT BE TREATED DIFFERENTLY FROM THE OTHER EXPENSES OF RS.2,15,77,726/-. IT WA S ALSO SUBMITTED THAT ADDITION CANNOT BE MADE IN BLOCK ASSESSMENT AS UNDISCLOSED INCOME ON THE BA SIS OF STRAY NOTINGS ON SEIZED LOOSE PAPERS UNLESS THERE WAS SOME OTHER INDEPENDENT SUPPORTING MATERIAL IN SUPPORT THEREOF. HE PLACED RELIANCE ON THE DECISION OF THE ITAT IN THE CASE OF S. K. GUPTA VS. DCIT 63 TTJ (DEL.) 532 AND BANSAL STRIPS P. LTD. & OTHERS VS. ACIT 100 TTJ (DE L.) 665. IN THE CASE OF ASSESSEE THERE IS NO INDEPENDENT MATERIAL WHATSOEVER TO SUPPORT THE AOS PRESUMPTIVE STAND THAT THESE EXPENSES WERE NOT THOSE WHICH WERE RECORDED IN THE BOOKS OF ACCOUNTS, BUT WERE ADDITIONAL EXPENSES WHICH HAVE BEEN INCURRED OUTSIDE THE BOOKS OF ACCOU NTS FROM THE UNDISCLOSED SOURCES. THE AO HAD NOT ATTEMPTED TO CO-RELATE SUCH EXPENSES WITH T HE AUDITED PROFIT AND LOSS STATEMENT AND SEIZED BOOKS OF ACCOUNTS TO THE EXTENT AVAILABLE EV EN ON TEST CHECK BASIS. AS LONG AS THE EXPENSES AS PER SEIZED PAPERS ARE LESS THAN THE EXP ENSES RECORDED IN THE BOOKS OF ACCOUNTS, AS PER AUDITED PROFIT AND LOSS ACCOUNT, THE LOGICAL AND RE ASONABLE PRESUMPTION IS THAT THESE EXPENSES REPRESENT THE EXPENSES RECORDED IN THE BOOKS OF ACC OUNTS AND NOT OTHERWISE. AS REGARDS APPLICABILITY OF SECTION 69C IS CONCERNED THAT THE PROVISIONS ARE APPLICABLE AFTER THE AMENDMENT WITH EFFECT FROM 1/04/1999 WHEREAS THE ASSESSEES B LOCK PERIOD COVERS FROM 1/4/1996. THEREFORE, THE VERY APPLICATION OF SECTION 69C IS I N DISPUTE. SECTION 69C IS APPLICABLE ONLY WHEN EXPENDITURE HAS BEEN FOUND TO HAVE BEEN INCURRED OU TSIDE THE BOOKS OF ACCOUNTS WHEREAS IN ASSESSEES CASE THERE WAS NO POSITIVE MATERIAL TO E STABLISH THAT THE IMPUGNED EXPENSES WHICH WERE DEDUCTIBLE AS BUSINESS EXPENSES HAVE BEEN INCU RRED OUTSIDE THE BOOKS OF ACCOUNTS OF UNDISCLOSED INCOME. THE ASSESSEE, THEREFORE, REQUE STED TO DELETE THE ADDITION. 22 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 28.2 AS REGARDS THE ADDITION OF RS. ONE CRORE, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE AO HAS ALLEGED THAT THE ASSESSEE HAS RECEIVED AN AM OUNT OF RS.3,54,67,771/-. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE REASONS GIVEN ARE TOTAL LY ARBITRARY, PRESUMPTIVE AND FLIMSY WITHOUT ANY SUPPORTIVE MATERIAL. THE ENTRIES RECORDED IN T HE SEIZED BOOKS OF ACCOUNTS WHICH ARE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE DO NOT FALL IN TH E AMBIT AND SCOPE OF UNDISCLOSED INCOME. THERE IS NO RATIONALE OR LOGIC TO TREAT OUT OF TOTA L RECEIPTS OF RS.3,54,67,771/- AN AMOUNT OF RS. ONE CRORE AS UNDISCLOSED INCOME AND PART THEREOF TO THE EXTENT OF RS.2,54,67,771/- AS DISCLOSED INCOME. REFERENCE TO SEIZED ANNEXURE A-21 AND A-18 DO NOT THEMSELVES ESTABLISH IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE THAT THEY CONSTITUTE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. THERE WAS NO MATERIAL WHATSOEVER TO SUPPORT AOS INFERENCE ABOUT SUPPRESSION OF RECEIPTS AND INFLATION OF EXPENSES IN THE REGULAR B OOKS OF ACCOUNTS. MOREOVER, THE RECORDED ENTRIES IN THE BOOKS OF ACCOUNTS FALL OUTSIDE THE S COPE OF BLOCK ASSESSMENT PROCEEDINGS. EVEN OTHERWISE SUCH EVENTUALITY CAN AT MOST CONSTITUTE A GROUND FOR INITIATING ACTION UNDER SECTION 148 OF THE ACT, BUT IT COULD NOT BE A GROUND FOR MAKING AN ADDITION IN THE BLOCK ASSESSMENT AS UNDISCLOSED INCOME. THE ASSESSEE ALSO EXPLAINED TH E NATURE OF EXPENSES IN THE FIRST APPELLATE PROCEEDINGS. 29. THE LD. CIT (APPEALS) ON CONSIDERATION OF FACTS HAS OBSERVED THAT THE AO HAS ANALYSED EACH PIECE OF SEIZED PAPER AND ARRIVED AT A FIGURE OF TOTAL EXPENDITURE OF RS.5, 98,44,202/- DURING THE BLOCK PERIOD. THE ASSESSEE COULD NOT PRODUCE C OMPLETE BOOKS OF ACCOUNTS AND RELATE THE EXPENDITURE TO THE BOOKS. THE AO HAS FOUND THAT AN NEXURE A-1 TO A-4 WERE IN THE SHAPE OF CASH BOOK WHEREIN EXPENDITURE OF RS.2,15,77,726/- WAS RE FLECTED. THE LD. CIT (A), THEREFORE, UPHELD THE STAND OF THE AO THAT AMOUNT OF RS.2,15,77,726/- WAS TO BE REDUCED AS THE SAME WAS SHOWN IN THE BOOKS OF ACCOUNTS AND THE BALANCE WAS RIGHTLY A DDED AS UNEXPLAINED EXPENDITURE IN TERMS OF SECTION 69C. THE LD. CIT (A), HOWEVER, CORRECTED T HE ARITHMETICAL ERROR IN ARRIVING AT THE FIGURE OF RS.3,82,66,726/- IN PLACE OF RS.3,78,66,276/-. SOME OTHER MISTAKES WERE ALSO RECTIFIED BY HIM. AS REGARDS CONFIRMING THE ADDITION OF RS. ONE CRORE, THE LD. CIT (A) OBSERVED THAT THE AO WAS RIGHT IN HER OBSERVATION THAT BURDEN WAS ON THE ASSESSEE TO PROVE THAT RECEIPTS WERE DISCLOSED IN ANY RETURN OF INCOME FOR THE BLOCK PERIOD. THE ASSESSEE FAILED TO CO-RELATE THE RECEIPTS IN THE BOOKS OF ACCOUNT. THE AO STILL GIVING DUE CONSIDER ATION TO THE RECEIPTS HAD MADE ADDITION OF RS. 23 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 ONE CRORE ONLY SINCE THE ASSESSEE HAD NOT DISCHARGE D ITS ONUS TO CO-RELATE THE INCOME. THE LD. CIT (A) UPHELD THE ADDITION OF RS. ONE CRORE. THE LD. CIT (A) ALSO REJECTED THE CONTENTION OF ASSESSEE THAT SELF-SERVING AUDIT REPORTS LOOSE THEI R MEANING IN ASSESSMENT UNDER SECTION 158-BD. THE ONUS WAS ON THE ASSESSEE TO CO-RELATE THE FACTS EMANATING FROM SEIZED PAPERS TO THE AUDITED STATEMENT WHICH HAS NOT BEEN DONE. THE LD. CIT (A) ACCORDINGLY UPHELD THE ADDITION. 30. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMI TTED THAT TWO DIRECTIONS WERE GIVEN BY THE ITAT. THE ASSESSMENT UNDER SECTION 158-BD IS TO BE MADE IN RESPECT OF UNDISCLOSED INCOME AS DEFINED UNDER SECTION 158-B(B) OF THE ACT READ WITH SECTION 158-BB(1) OF THE ACT. THE LD. AR OF THE ASSESSEE HAS FURTHER SUBMITTED THAT THE CASH BO OK, LEDGER AND OTHER SEIZED MATERIAL CONTAIN THE DETAILS OF EXPENDITURE ALREADY ACCOUNTED FOR IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, NO ADDITION CAN BE MADE TO THE EXTENT OF THE EXPENDITU RE OR LOWER THAN THE EXPENDITURE RECORDED IN THE BOOKS OF ACCOUNTS. THERE ARE MANY EXPENSES REC ORDED ON THE LOOSE PAPERS WHERE DATES ARE NOT GIVEN AND, THEREFORE NO ADDITION COULD BE MADE IN THE BLOCK PERIOD. FURTHER THE ASSESSING OFFICER HAD NOT MADE ADDITION YEAR-WISE WITHOUT ALL OCATING THE UNDISCLOSED INCOME TO RESPECTIVE YEARS. THE ASSESSEE HAS GIVEN EXPLANATION TO THE E NTRIES RECORDED IN ANNEXURES. THEREFORE, ADDITION HAS BEEN MADE BY THE AO AND CONFIRMED BY T HE LD. CIT (A) WITHOUT CO-RELATING TO THE EXPENDITURE TO THE BOOKS OF ACCOUNTS BY STATING THA T THE EXPENSES WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. ON THE OTHER HAND, THE LD. SR. DR SUPP ORTED THE ORDER OF THE LD. CIT (APPEALS) AND THE ASSESSING OFFICER ON THE ISSUE. 31. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE ORIGINAL ASSESSMENT THE ASSESSING OFFICER HAS EXAMI NED THE SEIZED DOCUMENTS AND HAD COME TO THE CONCLUSION THAT THERE WAS NO CLINCHING EVIDENCE REL ATING TO EXPENSES OR CASH FLOW. BECAUSE OF THIS REASON, THE ASSESSING OFFICER APPLIED RATE OF 8 PER CENT UNDER SECTION 44-AD ON THE TURNOVER ADMITTED BY THE ASSESSEE DURING THE BLOCK PERIOD OF ASSESSMENT YEAR 1997-98 TO 2003-04 TOTALING TO RS.6,43,12,141/-. WE ALSO FIND THAT IN ASSESSME NT YEAR 1997-98 THERE WAS LOSS OF RS.42,392/- AND IN ASSESSMENT YEAR 1998-99 THERE WAS PROFIT OF RS.25,239/-. THE ASSESSEE HAD ADMITTED INCOME VARYING FROM 4.28 PER CENT TO 6.62 PER CENT IN DIFFERENT YEARS. SINCE THE ASSESSING OFFICER HAD APPLIED 8 PER CENT OF NET PROFITS ON ADMITTED T URNOVER BY THE ASSESSEE IN RESPECT OF WHICH 24 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 ASSESSEE HAD ALREADY ADMITTED INCOMES IN DIFFERENT YEARS. BECAUSE OF THIS REASON THE ITAT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFIC ER WITH THE DIRECTIONS TO COMPLETE THE ASSESSMENT ON THE BASIS OF SEIZED MATERIAL UNDER SECTION 158BB OF THE ACT. SECTION 158B(B) DEFINES TERM UNDISCLOSED INCOME AND MEANS TO INCLUDE ANY MONE Y, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THINGS OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS OR TRANSACTION, WHERE SUCH MONEY, BULLION, JEWELLER Y, VALUABLE ARTICLE, THINGS, ENTRY IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENT OR TRANSACTION REPRES ENT WHOLLY OR PARTLY INCOME OR PROPERTY, WHICH HAS NOT BEEN OR WOULD HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT, WHIC H IS FOUND TO BE FALSE. FROM THE DEFINITION OF EXPRESSION UNDISCLOSED INCOME IT IS CLEAR THAT INCOME WHICH HAS NOT BEEN DISCLOSED OR WOULD NOT HAVE BEEN DISCLOSED WOULD BE UNDISCLOSED INCOME . SECTION 158BB(1) PROVIDES THE MODE OF COMPUTATION OF UNDISCLOSED INCOME. THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD SHALL BE THE AGGREGATE OF TOTAL INCOME OF THE PREVIOUS YEARS FAL LING WITHIN THE BLOCK PERIOD COMPUTED, IN ACCORDANCE WITH PROVISIONS OF THIS ACT, ON THE BASI S OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS AND SUCH OTHER MATERIAL OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATA BLE TO SUCH EVIDENCE, AS REDUCED BY THE AGGREGATE OF TOTAL INCOME OR AS THE CASE MAY BE, AS INCREASED BY AGGREGATE OF LOSSES OF SUCH PREVIOUS YEARS DETERMINED, - AS SPECIFIED IN CLAUSE (A) TO (F). THEREFORE, WHERE INCOME HAS BEEN ALREADY ASSESSED OR RETURN OF INCOME HAS BEEN FILED THAT INCOME CANNOT BE TAKEN AS UNDISCLOSED INCOME. WE HAVE ALSO GONE THROUGH THE CONTENTS OF ANNEXURES. IN RESPECT OF ANNEXURES A-1 TO A-4 SEIZED FROM SHRI BALDEV SINGH, THE PARTNER TOTA LING TO RS.6,56,305/- NO DATES HAVE BEEN MENTIONED. THEREFORE, IT IS DIFFICULT TO CO-RELATE THE EXPENSES OF RS.6,56,305/- TO THE BLOCK PERIOD. THE ASSESSING OFFICER HAS REDUCED THE TOTA L EXPENSES DETERMINED AT RS.5,98,44,202/- BY AN AMOUNT OF RS.2,15,77,726/- AS THEY ARE RECORDE D IN CASH BOOK. THE ASSESSING OFFICER ON THE BASIS OF BUNCH OF LOOSE PAPERS OF ANNEXURE 19 FOUND FROM THE PREMISES OF SHRI BALJEET SINGH BAKSHI, HAS WORKED OUT PROFIT OF 55 PER CENT AND H AS CONCLUDED THAT THE PROFIT WAS VERY HIGH. THE ASSESSEE IS ENGAGED IN CONSTRUCTION WORK WITH T HE MUNICIPAL CORPORATION, MEERUT. WE HAVE GONE THROUGH THE LETTER WRITTEN BY M/S. JEET CONSTR UCTION COMPANY TO NAGAR NIGAM, MEERUT THAT AN AMOUNT OF RS.50 LAKHS WAS DUE FROM THE NAGAR NIG AM AND OTHER WORK OF RS.60 LAKHS WAS UNDER PROGRESS. THE ASSESSEE MADE A REQUEST FOR PA YMENT OF RS.10 LAKHS. THE ASSESSEE HAD BEEN ADMITTING INCOME FROM CONTRACT BUSINESS AND HA S BEEN ASSESSED TO TAX IN RELEVANT 25 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 ASSESSMENT YEAR. THEREFORE, THE CONTENTION OF THE AO THAT RS.50 LAKHS WORK NOT DISCLOSED IS NOT BASED ON ANY MATERIAL FACT. AS A MATTER OF FACT, T HE ASSESSING OFFICER INSTEAD OF WORKING OUT UNDISCLOSED INCOME, AS PER THE PROVISIONS OF SECTIO N 158BB HAD TOTALED UP AMOUNT MENTIONED IN VARIOUS ANNEXURES, WHICH ACCORDING TO THE ASSESSEE ARE PART OF THE CONTRACT WORK DONE BY THE ASSESSEE. NO EVIDENCE WAS FOUND TO SUGGEST THAT TH E ASSESSEE HAD BEEN INDULGING IN THE CONSTRUCTION BUSINESS OUTSIDE THE BOOKS OF ACCOUNTS . MERELY BECAUSE THE ASSESSEE HAD NOT PRODUCED THE BOOKS OF ACCOUNTS, THE ASSESSING OFFIC ER HAS TREATED THE EXPENSES OF RS.3,82,66,276/- AS UNDISCLOSED INCOME. THE ASSESS ING OFFICER ON THE BASIS OF FIGURES MENTIONED IN VARIOUS ANNEXURES HAS TREATED INCOME OF RS.3,54, 67,771/- AS RECEIPTS AND HAD TAKEN RS. ONE CRORE AS INCOME WHEREAS THERE IS NO EVIDENCE WHICH SUGGEST THAT THE ASSESSEE HAD CARRIED OUT UNDISCLOSED WORK OF RS.3,54,67,771/-. THE ASSESSIN G OFFICER OUT OF THIS AMOUNT HAS TREATED DISCLOSED INCOME OF RS.2,54,67,771/-. 32. THE CONTENTION OF THE ASSESSEE HAD BEEN THROUGH -OUT THE ORIGINAL ASSESSMENT PROCEEDINGS AS WELL AS REMAND ASSESSMENT PROCEEDINGS THAT THE E XPENDITURE AS LONG AS IS EQUAL TO THE EXPENDITURE NO ADDITION WAS CALLED FOR. THE EXPENDI TURE IN EXCESS OF SUCH EXPENDITURE WOULD BE BROUGHT TO TAX. FROM THE ASSESSMENT ORDER, WE F IND THAT FROM ASSESSMENT YEARS 1997-98 TO 2003-04 GROSS RECEIPTS ARE AT RS.6,43,12,141/- AND THE EXPENSES FOR RELEVANT PERIOD ARE AT RS.6,31,75,133/-. THEREFORE, THE EXPENSES DETERMIN ED, AS PER VARIOUS SEIZED MATERIAL, AT RS.5,98,44,002/- IS LESS THAN THE EXPENDITURE SHOWN BY THE ASSESSEE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED BOG US EXPENSES TO THE EXTENT OF RS.3,82,66,276/-. IF THIS CONTENTION OF THE ASSESSING OFFICER IS ACCE PTED, IT WOULD RESULT IN TOTAL EXPENSES OF RS.10,14,41,409/- [RS.3,82,66,276 + RS.6,31,75,133/ -]. EVEN IF WE ASSUME FOR A MOMENT THAT THE ASSESSEE HAD RECEIVED UNDISCLOSED CONTRACT RECE IPTS TO THE EXTENT OF RS.3,54,67,771/- OUT OF WHICH RS. ONE CRORE HAS BEEN SUSTAINED. THE TOTAL R ECEIPTS WOULD BE RS.9,97,79,912/- (6,43,12,141+3,54,67,771) AS AGAINST THE EXPENDITU RE OF RS.10,14,41,409/-. THIS WOULD RESULT INTO LOSS. LET US ASSUME THAT THE ASSESSEE WAS IN DULGING IN BUSINESS OUT SIDE THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAD WORKED OUT UNDIS CLOSED RECEIPTS OF RS 3,54,67,771/- AND UNACCOUNTED EXPENDITURE OF RS 3,78,66,276/- IN THIS SITUATION ALSO NET RESULT IS LOSS. HENCE NO ADDITION CAN BE MADE. THE ASSESSEE IN THE COURSE O F ORIGINAL ASSESSMENT PROCEEDINGS AS WELL AS 26 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 IN THE COURSE OF REMAND ASSESSMENT PROCEEDINGS HAD EXPLAINED THE ENTRIES RECORDED IN VARIOUS ANNEXURES. THE ASSESSING OFFICER PREFERRED TO REJE CT THE EXPLANATION AND HAD ARRIVED AT FINDINGS THAT THE ASSESSEE WAS EARNING AS HIGH AS 55 PER CEN T, WHICH IN OUR CONSIDERED OPINION, CANNOT BE IN THE CASE OF A CIVIL CONTRACTOR. THE ASSESSING O FFICER HAS TAKEN THE VARIOUS FIGURES BY WAY OF CASH RECEIPTS OR RECEIPTS FROM VARIOUS PERSONS INCL UDING NAGAR NIGAM AND THE BALANCE SHOWN AS OUTSTANDING AS INCOME OF THE ASSESSEE. THE TOTALIN G OF THE ENTRIES RECORDED IN VARIOUS PAPERS WHICH THE EARLIER ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS HAD FOUND THAT THERE WAS NO CLINCHING EVIDENCE OF UNDISCLOSED INCOME. T HE LD. CIT (APPEALS) ALSO ENDORSED THE VIEW. THEREFORE, MAKING ADDITION OF UNVERIFIED FIG URES, WHICH ACCORDING TO THE ASSESSEE, RELATES TO THE BUSINESS OF THE ASSESSEE, IS NOT JUSTIFIED. NO EVIDENCE DURING THE COURSE OF SEARCH WAS FOUND THAT THE ASSESSEE HAD EARNED ANY UNDISCLOSED INCOME. SIMILARLY, THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAD BOOKED BOGUS EXPEN DITURE IN VARIOUS ASSESSMENT YEARS. THE ASSESSING OFFICER HAD ALSO NOT DETERMINED THE UNDIS CLOSED INCOME ASSESSMENT YEAR-WISE. IN FACT ON THE BASIS OF ENTRIES FOUND RECORDED IN THE SEIZE D MATERIAL, INCOME CANNOT BE DETERMINED ON YEAR TO YEAR BASIS. HAD IT BEEN SO, THE EARLIER AS SESSING OFFICER WOULD HAVE NOT RECORDED A FINDING OF FACT THAT THERE WAS NO CLINCHING EVIDENCE OF CON CEALMENT OF INCOME. MERELY BECAUSE THE ITAT HAD SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSIN G OFFICER, THE TOTALS OF ALL THE ENTRIES WHETHER RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OR WITHOU T ANY DATE WOULD CONSTITUTE INCOME OF THE ASSESSEE THAT TOO UNDISCLOSED INCOME. MOREOVER, IT IS A SETTLED LAW THAT THE ASSESSEE CANNOT BE PUT TO A MORE ADVERSE SITUATION THAN WHAT HE WAS. THE ASSESSEE APPROACHED THE TRIBUNAL BEING DISSATISFIED WITH THE ESTIMATION OF INCOME AT THE R ATE OF 8 PER CENT ON DISCLOSED TURNOVER OF RS.6,43,12,141/- AMOUNTING TO RS.51,44,968/-. THE TRIBUNAL SET ASIDE THE MATTER WITH THE DIRECTIONS TO COMPLETE THE ASSESSMENT UNDER SECTION 158BD BASED ON SEIZED MATERIAL. THE ASSESSING OFFICER BY DETERMINING THE TAXABLE INCOME OF RS.4,82,66,276/- AS AGAINST THE ADDITION OF RS.51,44,968/- HAS PUT THE ASSESSEE IN MORE ADVE RSE SITUATION, WHICH IS NOT PERMITTED IN LAW. THEREFORE, IN OUR CONSIDERED OPINION, THE ADDITION CANNOT BE MADE UNDER SECTION 158BB OF THE ACT MERELY ON PRESUMPTION THAT ASSESSEE HAD EARNED UNDISCLOSED INCOME AND HAD INCURRED EXPENSES OUTSIDE THE BOOKS OF ACCOUNT. THEREFORE, WE DELETE THE ADDITION OF RS. ONE CRORE AND ALSO RS.3,82,66,276/-. 27 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 33. AS REGARDS ILLEGAL ADDITION OF RS.6,38,500/-, T HE ADDITION WAS MADE BY THE AO ON THE GROUND THAT PAYMENTS WERE ILLEGAL AND WERE NOT ALLO WABLE. IT WAS SUBMITTED BY THE ASSESSEE THAT ADDITION HAS BEEN MADE TOTALLY ARBITRARILY. THE EN TRIES BEAR THE NARRATION OF COMMISSION AND COMMISSION EXPENSES PER SAY DO NOT BEAR ANY ILLEGAL ITY AND CONSTITUTE DEDUCTIBLE EXPENSES. THERE WAS NO MATERIAL TO SUPPORT THE AOS FINDING T HAT THE IMPUGNED NOTINGS IN THE SEIZED PAPERS CONSTITUTE EXPENSES ACTUALLY INCURRED BY THE ASSESS EE OUTSIDE THE BOOKS OF ACCOUNTS. PROVISO TO SECTION 69C HAS COME INTO OPERATION ONLY SINCE 1/04 /1999 AND THE AO HAS NOT CONFRONTED ANY MATERIAL TO SUPPORT THAT THE IMPUGNED ITEMS RELATE TO PERIOD AFTER 1/4/1999. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT ADDITION HAS BEEN M ADE ON THE BASIS OF NARRATIONS RECORDED AS COMMISSION IN SOME OF ASSESSEES DOCUMENTS. HONBL E ITAT HAS SET ASIDE THE ISSUE TO BE DECIDED BY THE AO IN THE LIGHT OF ITS DIRECTIONS TO SEE WHETHER INCOME IN QUESTION WAS EARNED BEFORE OR AFTER THE EXPENDITURE WAS INCURRED. IF I T WAS EARNED BEFORE INCURRING THE EXPENDITURE, THERE WAS NO QUESTION OF UNDISCLOSED INCOME. ON TH E OTHER HAND, IF IT WAS EARNED THEREAFTER THEN SET OFF WAS TO BE GIVEN TO THE ASSESSEE. THE AO HA D NOT GIVEN ANY FINDING IN TERMS OF DIRECTIONS OF THE ITAT AS TO WHETHER THE EXPENDITURE HAS BEEN INCURRED PRIOR TO EARNING OF INCOME OR AFTER EARNING OF THE INCOME. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT EXPENSES WERE NOT INCURRED AT ONE GO AT SINGLE POINT OF TIME, BUT HAS BEEN INCURRED IN SMALL SUMS FROM TIME TO TIME THROUGHOUT THE BLOCK PERIOD COVERING MORE THAN SIX YEARS OUT OF FUNDS AVAILABLE WITH THE ASSESSEE IN THE FORM OF PARTNERS CAPITAL FROM THE VERY BEGI NNING AND CONTRACT PAYMENT RECEIPTS PERIODICALLY TIME TO TIME FOR THE ENTIRE BLOCK PERI OD OF SIX YEARS AS PER BOOKS OF ACCOUNTS. SUCH EXPENSED HAVE BEEN INCURRED OUT OF ACCOUNTED AND DI SCLOSED FUNDS AVAILABLE WITH THE ASSESSEE AND NOT OUT OF ANY UNDISCLOSED INCOME; HENCE NO ADD ITION COULD BE MADE IN THE LIGHT OF DIRECTIONS GIVEN BY THE ITAT. THE LD. CIT (A) OBSE RVED THAT NEITHER THE AO NOR THE ASSESSEE HAVE DONE THEIR JOBS TOWARDS GIVING THE EFFECT TO T HE ORDER OF THE ITAT. LEGALITY OR ILLEGALITY OF THE PAYMENT WAS NO LONGER THE ISSUE IN TERMS OF DI RECTIONS OF THE ITAT. THE LD. CIT (A), THEREFORE, HELD THAT SUM OF RS.6,38,500/- STOOD FAC TORED IN WHILE ARRIVING AT THE FIGURE OF RS.3,78,66,276/- WHICH HAS BEEN ADDED AS UNDISCLOSE D INCOME AND CONFIRMED BY THE LD. CIT (APPEALS). IT IS NOWHERE MENTIONED THAT THE PAYMEN TS WERE MADE TO SOME OFFICIALS FOR OBTAINING SOME FAVOUR BY THE ASSESSEE DURING THE COURSE OF CO NDUCT OF HIS BUSINESS. THEREFORE, THE SAME CANNOT BE TREATED AS ILLEGAL, AS RIGHTLY OBSERVED B Y THE LD. CIT (APPEALS). THE ASSESSING OFFICER HAD NOT CARRIED OUT EXERCISE, AS DIRECTED BY THE TR IBUNAL. IT IS ALSO NOT CLEAR FROM THE ASSESSMENT 28 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 ORDER AND THE MATERIAL PLACED ON RECORD THAT AS ON WHICH DATE SUCH EXPENSES WERE INCURRED, THE CONTENTION OF THE ASSESSEE HAS BEEN THAT THE ASSESS EE HAD INCURRED EXPENDITURE DURING THE COURSE OF BUSINESS. THERE IS NO MATERIAL ON RECORD TO PRO VE THAT THE SAID EXPENDITURE WAS INCURRED AFTER 1/04/1999 WHEN PROVISO TO SECTION 69-C OF THE ACT W AS INSERTED IN THE STATUTE. IN THE ABSENCE OF ANY SUCH EVIDENCE TO PROVE THAT THE COMMISSION WAS IN THE NATURE OF ILLEGAL AND THE YEAR TO WHICH THE SAME RELATE, ADDITION UNDER SECTION 69-C CANNOT BE MADE. WE, THEREFORE, CONFIRM THE DELETION OF ADDITION BY THE LD. CIT (A) THOUGH FOR DIFFERENT REASONS. 34. THE NEXT ISSUE FOR CONSIDERATION RELATES TO CHA RGING OF INTEREST UNDER SECTION 220(2) OF THE ACT. AS REGARDS CHARGING OF INTEREST UNDER SECTION 220(2) THE LD. AR OF THE ASSESSEE SUBMITTED THAT INTEREST UNDER SECTION 220(2) IS CHARGEABLE IN RELATION TO POST ASSESSMENT PERIOD ONLY. IN THE CASE OF ASSESSEE INTEREST OF RS.1,19,17,624/- HAD B EEN CHARGED UNDER SECTION 220(2) VIDE DEMAND NOTICE WHICH FORMED PART AND PARCEL OF BLOCK ASSESS MENT. THEREFORE, CHARGING OF INTEREST WAS PATENTLY ERRONEOUS. THE LD. CIT (A) HOWEVER, RELYI NG ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF INDRA RANI VS. CIT 237 ITR 20 HELD THAT INTEREST WAS CHARGEABLE FROM THE DATE OF ORIGINAL ORDER OF THE AO IF THE ASSESSMENT WAS SET ASIDE PARTLY. THE LD. CIT (A), THEREFORE, UPHELD THE CHARGING OF INTEREST UNDER SE CTION 220(2) OF THE ACT. SINCE WE HAVE DELETED THE ADDITION, INTEREST UNDER SECTION 220(2) WILL NOT BE LEVIABLE. HOWEVER, THE INTEREST WILL BE LEVIABLE IN RESPECT OF ADDITIONS SUSTAINED BY TH E ITAT, IN THE FIRST ROUND OF APPELLATE PROCEEDINGS. 35. IN THE RESULT, THE ASSESSEES GROUNDS ARE ALLOW ED ON MERITS AND SINCE THE LEGAL GROUND IS DISMISSED, THE APPEAL IS TO BE TREATED AS PARTLY AL LOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 31 ST OCTOBER, 2011. SD/- SD/- [ R. P. TOLANI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER 29 I. T. [SS] APPEAL NOS. 26 & 28 (DEL) OF 2011 DATED : 31 ST OCTOBER, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANTS. 2. RESPONDENTS. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.