Sri K Lakshminarayan (HUF), Yanam, Kakinada V. The DCIT, Circle-1, Rajahmundry

ITSSA 29/VIZ/2002

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8343 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 9 year(s) 14 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-11-2010
• Assessment Year: misc
• Appeal Filed On: 28-03-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Keywords: Invalid notice; Peak credit; Source of fund; Block assessment
• Section: 40A(3); 27; 148; 132; 144

Judgement Text

ITA 29&52/02 K.L.NARAYANA, YAMAM IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 29 /VIZAG/ 20 02 BLOCK ASSESSMENT PERIOD : 1989 - 90 TO 29.1.1999 K. LAKSHMINARAYANA (HUF) YANAM VS. DCIT CIRCLE - 1 RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AABHK 6029G ITA NO.52/VIZAG/2002 BLOCK ASSESSMENT PERIOD : 1989 - 90 TO 29.1.1999 DCIT CIRCLE - 1 RAJAHMUNDRY VS. K. LAKSHMINARAYANA (HUF) YANAM (APPELL ANT) (RESPONDENT) IT(SS)A NO.61/VIZAG/2002 BLOCK ASSESSMENT PERIOD : 1989 - 90 TO 29.1.1999 DCIT CIRCLE - 1 RAJAHMUNDRY VS. K. LAKSHMINARAYANA YANAM (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(D R) ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE ASSESSEE AS WE LL AS THE REVENUE AGAINST THE RESPECTIVE ORDER OF THE CIT(A). SINCE THESE APPEALS WERE HEARD TOGETHER THESE ARE BEING DISPOSED OF THROUGH THIS C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THESE CROSS APPEALS ARE PREFERRED BY THE ASSESSE E AS WELL AS THE REVENUE AGAINST THE ORDER OF THE CIT(A). ITA 29&52/02 K.L.NARAYANA, YAMAM 2 3. THE FACTS IN BRIEF IN ALL THESE APPEALS ARE THAT THE SEARCH WAS CONDUCTED ON K. LAKSHMINARAYANA (INDIVIDUAL). BUT THE ASSESSMENT WAS FRAMED IN THE HANDS OF THE INDIVIDUAL AS WELL AS IN HUF KNOWN AS SHRI K. LAKSHMINARAYANA (HUF). ACCORDINGLY, BLOCK ASSESSME NTS WERE FRAMED IN BOTH HANDS U/S 158BC WHICH WAS CHALLENGED BY THE AS SESSEE BEFORE THE CIT(A). THE CIT(A) PARTLY GRANTED RELIEF TO BOTH T HE ASSESSEES AGAINST WHICH THE REVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL I N THE CASE OF HUF BUT IN THE CASE OF INDIVIDUAL, ONLY REVENUE IS IN APPEAL. THE APPEAL NO.29 OF 2002 AND 52 OF 2002 RELATE TO K. LAKSHMINARAYANA (HUF) A ND APPEAL NO.61 OF 2002 RELATES TO INDIVIDUAL. IN ITA NO.29/2002 CERTAIN A DDITIONAL GROUNDS ARE RAISED. SINCE THESE GROUNDS ARE LEGAL IN NATURE, W E ADMIT THE SAME AND EXTRACT THEM HEREUNDER FOR THE SAKE OF REFERENCE: ADDITIONAL GROUNDS OF APPEAL-I : 1. IN THE ABSENCE OF SEARCH WARRANT U/S 132 OF I.T . ACT IN THE NAME OF THE APPELLANT THE VERY INITIATION OF BLOCK ASSESSMENT PROCEEDINGS BY ISSUING NOTICE U/S 158BC OF I.T. ACT ARE VOID AB INITIO. 2. IN THE ABSENCE OF ANY SATISFACTION RECORDED TO THE EFFECT THAT UNDISCLOSED INCOME BELONGS TO APPELLANT, THE ASSESS ING OFFICER WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF CHAPTER XIV-B IN THE CASE OF APPELLANT. 3. WITHOUT PREJUDICE TO THE ABOVE CONTENTION IN TH E ALTERNATIVE IT IS ALSO CONTENDED THE ASSESSMENT MADE ON 27.3.2 001 I.E., AFTER COMPLETION OF TWO YEARS. FROM THE END OF JANUARY, 1999 DURING THE COURSE OF WHICH THE LAST SEARCH WAS EXECUTED, I S NOT WITHIN THE TIME ALLOWED BY SEC. 158 BE OF THE INCOME-TAX ACT A ND THEREFORE THE SAID ASSESSMENT IS NOT VALID AND VOID AB INITIO . ADDITIONAL GROUNDS-II : IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND WITH OUT PREJUDICE TO THE CONTENTION THAT THE NOTICE ISSUED U/S 158BC IS NOT VALID IN THE ABSENCE OF A WARRANT IN THE NAME OF TH E APPELLANT, THE SAID NOTICE EVEN IF IT IS TO BE CONSIDERED AS ISSUE D IN TERMS OF U/S 158BC OF THE ACT IS NOT A VALID NOTICE IN AS MUCH A S 15 DAYS CLEAR TIME TO FILE THE BLOCK RETURN WAS NOT GIVEN IN THE SAID NOTICE AND CONSEQUENTLY THE BLOCK ASSESSMENT PROCEEDINGS ARE W ITHOUT JURISDICTION AND VOID AB INITIO. ITA 29&52/02 K.L.NARAYANA, YAMAM 3 4. SINCE THESE ADDITIONAL GROUNDS GO TO THE ROOT OF THE CASE I.E. THE VALIDITY OF THE ASSESSMENT, WE PREFER TO ADJUDICATE THESE ADDITIONAL GROUNDS AT THE THRESHOLD. 5. IN SUPPORT OF HIS CONTENTION THAT SEARCH WAS NOT CONDUCTED UPON K. LAKSHMINARAYANA (HUF) I.E. THE ASSESSEE, ASSESSMENT U/S 158BC IS NOT PERMISSIBLE, HE INVITED OUR ATTENTION TO THE PANCHN AMA PREPARED ON 29.1.1999 DURING THE COURSE OF SEARCH AND IN THIS P ANCHNAMA, IT IS SPECIFICALLY MENTIONED THAT WARRANTS WERE ISSUED IN THE NAME OF K. LAKSHMINARAYANA. SINCE NO WARRANT WAS ISSUED IN TH E NAME OF THE ASSESSEE I.E. K. LAKSHMINARAYANA (HUF), BLOCK ASSES SMENT U/S 158BC CANNOT BE FRAMED. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT AT THE MOST IT CAN BE CONSIDERED TO BE AN ASSE SSMENT FRAMED U/S 158BD READ WITH SECTION 158BC OF THE I.T. ACT. BUT FOR ASSUMING A JURISDICTION U/S 158BD, THE ASSESSING OFFICER IS RE QUIRED TO RECORD THE SATISFACTION WITH RESPECT TO THE PARTICULAR EVIDENC E IN THE CASE OF K. LAKSHMINARAYANA (INDIVIDUAL) THAT THIS EVIDENCE BEL ONGS TO THE HUF AND THERE AFTER HE CAN ASK THE ASSESSEE TO SUBMIT A BLO CK RETURN U/S 158BC. BUT NOTHING IS PLACED ON RECORD TO SUBSTANTIATE THA T ASSESSING OFFICER, HAVING JURISDICTION OVER K. LAKSHMINARAYANA HAS EVE R RECORDED ANY SATISFACTION THAT THE INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH RELATE TO THE ASSESSEE I.E. K. LAKSHMINARAYA NA (HUF). 6. THE LD. COUNSEL FOR THE ASSESSEE FURTHER RAISED ONE MORE LEGAL GROUND THAT EVEN IF IT IS HELD THAT 158BD WAS PROPE RLY INVOKED AND THE PROCESS OF ASSESSMENT WAS PROPERLY INITIATED U/S 15 8BC, EVEN THEN THE BLOCK ASSESSMENT IS NOT VALID AS THE ASSESSING OFFI CER HAS NOT GIVEN A SUFFICIENT TIME IN THE NOTICE TO SUBMIT THE BLOCK R ETURN. IN THAT NOTICE, THE ASSESSING OFFICER HAS GIVEN A TIME LESS THAN 15 DAY S, WHEREAS THE EXPRESSION USED IN THE NOTICE WAS 15 DAYS OF THE SE RVICE OF THE NOTICE. IN THIS REGARD, HE PLACED A RELIANCE UPON THE JUDGEMEN T OF THE TRIBUNAL IN THE CASE OF RAVI PRAKASH AGARWAL (HUF) VS. ACIT 67 TTJ 234 (DEL) AND MANOJ AGGARWAL VS. DCIT 113 ITD 377 (SPECIAL BENCH ) IN WHICH IT HAS BEEN CATEGORICALLY HELD THAT NOTICE ISSUED U/S 158B C IS A JURISDICTIONAL ITA 29&52/02 K.L.NARAYANA, YAMAM 4 NOTICE AND ASSESSEE BE GIVEN CLEAR 15 DAYS TIME TO FILE THE BLOCK RETURNS. IF CLEAR 15 DAYS ARE NOT GIVEN IT WOULD RENDER THE PROCEEDINGS U/S 158BD WITHOUT JURISDICTION, INVALID AND VOID AB INITIO. THE LD. COUNSEL FOR THE ASSESSEE IN SUPPORT OF HIS CONTENTION HAS INVITED O UR ATTENTION TO THE NOTICE WHICH IS AVAILABLE AT PG.NO.56 OF THE COMPIL ATION IN WHICH THE ASSESSING OFFICER HAS GIVEN TIME TO THE ASSESSEE TO DELIVER THE RETURN IN THE PRESCRIBED FORMAT WITHIN 15 DAYS OF SERVICE OF THIS NOTICE, WHEREAS TIME PRESCRIBED AS PER THE PROVISIONS OF 158BC (CLA USE A) NOT BEING LESS THAN 15 DAYS. THEREFORE, THE TIME PRESCRIBED IN TH E ACT WAS NOT GIVEN TO THE ASSESSEE FOR FILING THE BLOCK RETURN AND AS SUC H THE ASSESSMENT FRAMED CONSEQUENT TO THE INVALID NOTICE IS ALSO NON -EST IN LAW BEING INVALID AND DESERVES TO BE QUASHED. 7. THE LD. D.R. ON THE OTHER HAND HAS ARGUED THAT T HE ASSESSING OFFICER OF K. LAKSHMINARAYANA AND K. LAKSHMINARAYAN A (HUF) I.E. THE ASSESSEE, IS THE SAME. DURING THE COURSE OF SEARCH , CERTAIN INCRIMINATING MATERIALS WERE FOUND AND ON EXAMINATION, IT WAS NOT ICED BY THE ASSESSING OFFICER THAT IT PERTAINS TO THE HUF. THEREFORE, HE ISSUED A NOTICE U/S 158BC TO THE ASSESSEE HUF THOUGH THE SEARCH WAS NOT CONDUCTED UPON THE HUF. THE REQUIREMENT OF RECORDING A SATISFACTI ON IS REQUIRED IN THOSE CASES WHERE THE SEARCH IS CONDUCTED ON ONE ASSESSEE AND THE INCRIMINATING MATERIAL FOUND DURING THE SEARCH PERT AINS TO SOME OTHER ASSESSEE UPON WHOM THE A.O. OF SEARCHED ASSESSEE HA S NO JURISDICTION AND IN THOSE CASES THE A.O. AFTER RECORDING HIS SAT ISFACTION SEND THE MATERIAL TO THE CONCERNED OFFICER UNDER WHOSE JURIS DICTION THE SAID ASSESSEE FALLS TO WHOM THE INCRIMINATING MATERIAL R ELATES ACCORDING TO THE FIRST ASSESSING OFFICER. BUT IN THOSE CASES, WHERE THE ASSESSING OFFICER IS SAME HAVING JURISDICTION OVER BOTH THE ASSESSEES I. E. (I) THE ASSESSEE UPON WHOM THE SEARCH IS CONDUCTED AND (II) ASSESSEE TO WHOM THE INCRIMINATING MATERIAL RELATES, SUCH FORMALITIES AR E NOT REQUIRED AND THE ASSESSING OFFICER IS COMPETENT ENOUGH TO ISSUE A NO TICE TO THE ASSESSEE TO WHOM THE INCRIMINATING MATERIAL RELATES U/S 158BC F OR FILING THE BLOCK RETURN. THEREFORE, THERE IS NO INFIRMITY IN ISSUIN G A NOTICE U/S 158BC UPON THE HUF. ITA 29&52/02 K.L.NARAYANA, YAMAM 5 8. WITH REGARD TO THE TIME LIMIT FOR FILING THE BLO CK RETURN GIVEN IN THE NOTICE ISSUED U/S 158BC UPON THE ASSESSEE, THE LD. D.R. HAS SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN CLEAR 15 DAYS TIME FOR FILING THE BLOCK RETURN AS IT WAS MENTIONED IN THE NOTICE THAT THE R ETURN BE DELIVERED IN THIS OFFICE WITHIN 15 DAYS OF SERVICE OF THIS NOTIC E. THEREFORE, NO INVALIDITY OR IRREGULARITY IS COMMITTED IN THE NOTICE. THE LD . D.R. FURTHER ARGUED IN THE ALTERNATIVE IF IN ANY CASE THE IRREGULARITY IS NOTICED IN THE NOTICE BY GIVING TIME OF 15 DAYS OF THE SERVICE OF THE NOTICE THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO RECTIFY THE DEFECT AND TO ISSUE A FRESH NOTICE AND THEREAFTER TO FRAME THE BLOCK ASSESSMENT. 9. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE ORDER OF THE AUTHORITIES BELOW RELEVANT TO THE PROVISIONS OF THE ACT AND THE JUDGEMENTS REFERRED TO BY THE PARTIES, WE FIND THAT UNDISPUTEDLY WARRANT OF AUTHORIZATION WAS ISSUED IN THE NAME OF THE INDIVIDUAL I.E. K. LAKSHMINARAYANA AND THESE FACTS ARE QUITE EVIDENT F ROM THE PANCHNAMA PREPARED AT THE TIME OF SEARCH I.E. ON 29.1.1999 AN D IS APPEARING AT PG.NO.1. NOTHING HAS BEEN PLACED ON RECORD BY THE REVENUE TO ESTABLISH THAT SEARCH WARRANT WAS ALSO ISSUED IN THE NAME OF THE ASSESSEE HUF. ADMITTEDLY, THE ASSESSEE INDIVIDUAL AND THE ASSESSE E HUF ARE DIFFERENT LEGAL ENTITIES ASSESSABLE UNDER INCOME-TAX ACT. IT IS ALSO A SETTLED POSITION OF LAW THAT WITHOUT ISSUING A WARRANT OR PREPARING PANCHNAMA IN THE NAME OF THE ASSESSEES, BLOCK ASSESSMENT U/S 158BC CANNOT BE FRAMED. UNDER CHAPTER XIVB, A SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES HAS BEEN PRESCRIBED. SECTION 158BC DEALS WITH THE PROC EDURE FOR BLOCK ASSESSMENT AND BLOCK ASSESSMENT ACCORDING TO THIS S ECTION CAN BE FRAMED WHERE ANY SEARCH HAS BEEN CONDUCTED U/S 132 OR BOOK S OF ACCOUNTS, OTHER DOCUMENTS OR ASSETS ARE REQUISITIONED U/S 132 A OF THE INCOME-TAX ACT (I.T. ACT) IN THE INSTANT CASE, THE BOOKS OF A CCOUNTS OR THE DOCUMENTS OR ASSETS ARE NOT REQUISITIONED U/S 132A OF THE ACT . IT IS A CASE OF SEARCH CONDUCTED U/S 132. THEREFORE, THE BLOCK ASSESSMENT U/S 158BC CAN ONLY BE FRAMED IN THE HANDS OF THOSE ASSESSEES UPON WHOM THE SEARCH WAS CONDUCTED U/S 132 OF THE I.T. ACT. ONE MORE PROVIS ION 158BD ALSO FALLS ITA 29&52/02 K.L.NARAYANA, YAMAM 6 UNDER THIS CHAPTER, WHICH DEALS WITH THOSE SITUATIO N WHERE THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH RELATE TO SOME OTHER PERSON. IN THAT SITUATION, THE ASSESSING OFF ICER HAVING A JURISDICTION OF A SEARCHED PERSON, FORMS A BELIEF THAT THE INCRI MINATING MATERIAL RELATE TO SOME THIRD PERSON AND THERE AFTER HE HAS TO RECO RD HIS SATISFACTION TO THIS EFFECT AND HAND OVER THE MATERIAL TO THE ASSES SING OFFICER OF THAT PERSON TO WHOM THE INCRIMINATING MATERIAL RELATES. THERE AFTER THAT ASSESSING OFFICER WOULD ISSUE A NOTICE TO THE ASSES SEE AND FRAME THE ASSESSMENT U/S 158BC. FOR THE SAKE OF REFERENCE, W E EXTRACT THE PROVISIONS OF SECTION 158BC AND 158BD AS UNDER:- PROCEDURE FOR BLOCK ASSESSMENT. 158BC. WHERE ANY SEARCH HAS BEEN CONDUCTED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS ARE REQUISITIONED UNDER SECTION 132A, IN THE CASE O F ANY PERSON, THEN,-- [(A) THE ASSESSING OFFICER SHALL (I) IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCO UNT OR OTHER DOCUMENTS OR ANY ASSETS REQUISITIONED AFTER THE 30 TH DAY OF JUNE, 1995, BUT BEFORE THE 1 ST DAY OF JANUARY, 1997, SERVE A NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITH IN SUCH TIME NOT BEING LESS THAN FIFTEEN DAYS. (II) IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACC OUNT OR OTHER DOCUMENTS OR ANY ASSETS REQUISITIONED ON OR AFTER T HE 1 ST DAY OF JANUARY, 1997, SERVE A NOTICE TO SUCH PERSON REQ UIRING HIM TO FURNISH WITHIN SUCH TIME NOT BEING LESS THAN FIFTEEN DAYS BUT NOT MORE THAN FORTY-FIVE DAYS. AS MAY BE SPECIFIED IN THE NOTICE A RETURN IN THE P RESCRIBED FORM AND VERIFIED IN THE SAME MANNER AS A RETURN UN DER CLAUSE (I) OF SUB-SECTION (1) OF SECTION 142, SETTI NG FORTH HIS TOTAL INCOME INCLUDING THE UNDISCLOSED INCOME FOR T HE BLOCK PERIOD: PROVIDED THAT NO NOTICE UNDER SECTION 148 IS REQUIRED TO BE ISSUED FOR THE PURPOSE OF PROCEEDING UNDER THIS CHA PTER: PROVIDED FURTHER THAT A PERSON WHO HAS FURNISHED A RETURN UNDER THIS CLAUSE SHALL NOT BE ENTITLED TO FILE A R EVISED RETURN;] ITA 29&52/02 K.L.NARAYANA, YAMAM 7 (B) THE ASSESSING OFFICER SHALL PROCEED TO DETERMIN E THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNE R LAID DOWN IN SECTION 158BB AND THE PROVISIONS OF SECTION 142, SUB-SECTIONS(2) AND (3) OF SECTION 143 [SECTION 144 AND SECTION 145] SHALL, SO FAR AS MAY BE, APPLY. (C) THE ASSESSING OFFICER, ON DETERMINATION OF THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN ACCORDANC E WITH THIS CHAPTER, SHALL PASS AN ORDER OF ASSESSMENT AND DETERMINE THE TAX PAYABLE BY HIM ON THE BASIS OF SU CH ASSESSMENT. (D) THE ASSETS SEIZED UNDER SECTION 132 OR REQUISIT IONED UNDER SECTION 132A SHALL BE DEALT WITH IN ACCORDANC E WITH THE PROVISIONS OF SECTION 132B.] UNDISCLOSED INCOME OF ANY OTHER PERSON. 158BD. WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UND ER SECTION 132 OR WHOSE BOOKS OF ACCOUNT OR OTHER DOCU MENTS OR ANY ASSETS WERE REQUISITIONED UNDER SECTION 132A , THEN, THE BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS SEI ZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED [UNDER SECTION 158B C] AGAINST SUCH OTHER PERSON AND THE PROVISIONS OF THI S CHAPTER SHALL APPLY ACCORDINGLY. 10. IN THE INSTANT CASE, ADMITTEDLY, THE SEARCH WAS ONLY CONDUCTED UPON K. LAKSHMINARAYANA (INDIVIDUAL) AND NOT UPON T HE ASSESSEE HUF. THEREFORE, IF THE ASSESSING OFFICER HAVING JURISDIC TION OVER THE INDIVIDUAL FORMS A BELIEF THAT THE INCRIMINATING MATERIAL PERT AINS TO THE HUF, HE SHOULD RECORD HIS SATISFACTION AND HAND OVER THE MA TERIAL TO THE ASSESSING OFFICER HAVING A JURISDICTION OF THE HUF TO COMPLET E THE BLOCK ASSESSMENT. THEREAFTER THE ASSESSING OFFICER OF THE ASSESSEE HU F WOULD ISSUE A NOTICE U/S 158BC AND FRAME THE ASSESSMENT AS PER PROCEDURE LAID DOWN U/S 158BC OF THE ACT. U/S 158BD, THERE IS NO PROVISION OF ISSUING A NOTICE TO THE ASSESSEE. SECTION 158BD IS AN ENABLING PROVISI ON WHICH ENABLE THE ASSESSING OFFICER HAVING A JURISDICTION OF THE ASSE SSEE SEARCHED TO HAND OVER THE INCRIMINATING MATERIAL IF IT RELATE TO SOM E OTHER PERSON AFTER RECORDING HIS SATISFACTION TO THE ASSESSING OFFICER HAVING JURISDICTION OVER ITA 29&52/02 K.L.NARAYANA, YAMAM 8 THAT PERSON. BUT IN THE INSTANT CASE, THE ASSESSIN G OFFICER IS SAME HAVING JURISDICTION OVER THE ASSESSEE INDIVIDUAL AND THE A SSESSEE HUF. THEREFORE, THAT FORMALITY OF HANDING OVER THE MATER IAL TO OTHER ASSESSING OFFICER IS NOT REQUIRED. BUT NOW THE QUESTION COME S WHETHER IN THIS TYPE OF SITUATION, ASSESSING OFFICER IS REQUIRED TO RECO RD A SATISFACTION OR NOT. THE HONBLE APEX COURT IN THE CASE OF MANISH MAHESH WARI VS. ACIT AND ANOTHER 289 ITR 341 HAS CATEGORICALLY HELD THAT FOR TAKING RECOURSE TO A BLOCK ASSESSMENT IN TERMS OF SECTION 158BD, CONDITI ONS PRECEDENT ARE THAT A.O. MUST RECORD HIS SATISFACTION THAT SOME UNDISCL OSED INCOME BELONGS TO A PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE U/S 132 AND THEN THE BOOKS OF ACCOUNTS OTHER DOCUME NTS AND ASSETS SEIZED OR REQUISITIONED ARE HANDED OVER TO THE A.O. HAVING JURISDICTION OVER SUCH OTHER PERSON, THEREAFTER THE A.O. HAS TO PROCEED U/S 158BC AGAINST SUCH OTHER PERSON. THE RELEVANT OBSERVATIO NS OF THE APEX COURT ARE EXTRACTED HEREUNDER: SEC. 158BD PROVIDES FOR TAKING RECOURSE TO A BLOCK ASSESSMENT IN TERMS OF S. 158BC IN RESPECT OF ANY OTHER PERSON, T HE CONDITIONS PRECEDENT WHEREFOR ARE: (I) SATISFACTION MUST BE RE CORDED BY THE AO THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER S. 132; (II) THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS SEIZED OR REQUISITIONE D HAD BEEN HANDED OVER TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON; AND (III) THE AO HAS PROCEEDED UNDER S. 158BC AGAINST SUCH OTHER PER SON. THE CONDITIONS PRECEDENT FOR INVOKING THE PROVISIONS OF S. 158BD, THUS, ARE REQUIRED TO BE SATISFIED BEFORE THE PROVISIONS OF CHAPTER XIV-B AR E APPLIED IN RELATION TO ANY PERSON OTHER THAN THE PERSON WHOSE PREMISES HAD BEEN SEARCHED OR WHOSE DOCUMENTS AND OTHER ASSETS HAD BEEN REQUISITI ONED UNDER S. 132A. 11. IN THE LIGHT OF ABOVE LEGAL PROPOSITIONS, WE HA VE EXAMINED THE FACTS OF THE CASE AND WE FIND THAT NOTHING HAS BEEN BROUGHT BEFORE US BY THE REVENUE THAT BEFORE ISSUING A NOTICE U/S 158BC UPON THE ASSESSEE HUF, THE ASSESSING OFFICER HAS EVER RECORDED ANY SA TISFACTION THAT THE PARTICULAR INCRIMINATING MATERIALS RELATE TO THE AS SESSEE HUF FOR WHICH HE INTEND TO FRAME A BLOCK ASSESSMENT AFTER ISSUING A NOTICE U/S 158BC OF THE ACT. ACCORDING TO THE AFORESAID JUDGEMENT OF THE A PEX COURT, THE ASSESSING OFFICER BEFORE ISSUING A NOTICE TO THIRD PERSON TO WHOM THE ITA 29&52/02 K.L.NARAYANA, YAMAM 9 INCRIMINATING MATERIAL RELATES IS REQUIRED TO RECOR D A SATISFACTION; OTHERWISE, THE SUBSEQUENT BLOCK ASSESSMENT WOULD BE COME INVALID. 12. WE HAVE ALSO EXAMINED THE ANOTHER ASPECT IN THI S CASE THAT THE TIME LIMIT FOR FILING THE BLOCK RETURN GIVEN IN THE NOTICE ISSUED U/S 158BC WAS WITHIN 15 DAYS FROM THE DATE OF THE NOTICE, WHE REAS ACCORDING TO THE PROVISIONS OF SECTION 158BC (A), THE ASSESSEE SHOUL D HAVE BEEN GIVEN THE TIME NOT BEING LESS THAN 15 DAYS FOR FILING THE RET URN. THE ISSUE OF TIME LIMIT GIVEN IN THE NOTICE U/S 158BC WAS ALSO EXAMIN ED BY THE SPECIAL BENCH OF THE TRIBUNAL COMPRISING OF 5 MEMBERS BENCH IN THE CASE OF MANOJ AGGARWAL VS. DCIT (SUPRA). THE TRIBUNAL HAS EXAMINED THE VARIOUS JUDGEMENTS OF THE TRIBUNAL ON THIS ISSUE AND THE SC OPE OF PROVISIONS OF SECTION 292B OF THE ACT AND THE TRIBUNAL HAS CATEGO RICALLY HELD THAT NOTICE U/S 158BC NOT GIVING 15 CLEAR DAYS TIME TO FILE BLO CK RETURN RENDERS THE PROCEEDINGS U/S 158BC WITHOUT JURISDICTION INVALID AND VOID AB INITIO. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: AN ALMOST SIMILAR ISSUE CROPPED UP IN A PROCEEDING UNDER S. 148 IN THE CASE OF WINTER CARE (P) LTD. IN WHICH THE ISSUE RAISED BEFORE THE HONBLE KARNATAKA HIGH COURT WAS WHETHER THE NOTICE ISSUED UNDER S. 148 GIVING LESS THAN 30 DAYS FOR FILING THE RETURN OF I NCOME IN CONTRAVENTION OF THE SPECIFIC PROVISION FOR GIVING NOT LESS THAN 30 DAYS TIME TO FILE THE RETURN WAS VALID IN LAW AND THE HONBLE HIGH COURT ANSWERED THE QUESTION IN FAVOUR OF THE ASSESSEE HOLDING THAT SUCH A NOTIC E WAS INVALID IN LAW IN ITS JUDGEMENT DT. 15 TH FEB., 1993, IN WRIT PETN. NO.33832 OF 1992 AND THI S DECISION IS REFERRED TO BY THE BANGALORE BENCH OF T HE TRIBUNAL IN THE CASES OF PRABHAT SAW MILLS & TIMBER MERCHANTS VS. ITO (19 94) 51 ITD 548 (BANG) AND H.G. NARAYAN VS. DY. CIT (1994) 50 ITD 4 56 (BANG) AND IT HAS BEEN HELD IN THESE CASES THAT THE PROCEEDINGS P URSUANT TO THE ISSUE OF SUCH A NOTICE ARE INVALID IN LAW AND SO THE REASSES SMENT WAS VOID AB INITIO AND WITHOUT JURISDICTION. THE HONBLE HIGH COURT R EPELLED THE CONTENTION OF THE REVENUE THAT THE DEFECT, IF ANY, WAS PROCEDU RAL IN NATURE AND SO CURABLE BY HOLDING THAT THE SAID DEFECT IS INCURABL E. IT WAS HELD THAT SUCH DEFECT GOES TO THE ROOT OF JURISDICTION AND SO THE NOTICE GIVING A TIME OF LESS THAN 30 DAYS FOR FILING THE RETURN OF INCOME U NDER S. 148 WAS INVALID IN LAW. IN VIEW OF THE FACT THAT S. 158BC(A)(I) IS IN PARI MATERIAL INSOFAR AS THE WORDS USED THEREIN ARE IDENTICAL, THE LOGIC BEH IND THE SAID DECISION WOULD APPLY ON ALL FOURS TO THE CASE ON HAND AND SO THE FORCE OF THIS DECISION HAS TO BE APPLIED HERETO AND AS THE NOTICE IN THIS CASE IS SIMILARLY WORDED AND GIVES A TIME OF LESS THAN 15 DAYS AS AGA INST THE STIPULATED TIME OF NOT LESS THAN 15 DAYS, THE SAID NOTICE SUFF ERS FROM AN INCURABLE DEFECT RENDERING ALL PROCEEDINGS EMANATING THEREFRO M INVALID AND VOID AB INITIO. IT MUST BE REMEMBERED THAT TO OVERCOME THE LEGAL HURDLE CAUSED ITA 29&52/02 K.L.NARAYANA, YAMAM 10 BY THE SAID DECISION, S. 148 ITSELF WAS AMENDED OMI TTING THE WORDS NOT BEING LESS THAN THIRTY DAYS. IT IS SIGNIFICANT TH AT ALL THESE EVENTS TOOK PLACE MUCH EARLIER TO THE INTRODUCTION OF CHAPTER X IV-B AND THE PARLIAMENT IN ALL ITS WISDOM YET THOUGHT IT FIT TO RETAIN A SIMILAR EXPRESSION IN S. 158BC(A)(I) EVEN AFTER BEING AWARE OF THE IMP LICATIONS OF THIS EXPRESSION AS LEGALLY INTERPRETED AND SO IT HAS TO BE PRESUMED THAT THE LEGISLATURE HAS INTRODUCED THIS PROVISION KNOWING F ULLY WELL THAT THEY DESIRE THAT A TIME OF NOT LESS THAN 15 DAYS HAS TO BE GIVE N. IN THE LIGHT OF THIS, THE ARGUMENT THAT THE WHOLE MATTER IS PROCEDURAL IN NATURE CANNOT BE TAKEN AS REFLECTING THE CORRECT LEGAL POSITION. IN THE CASE OF CIT VS. BRAITHWAITE & CO. LTD. (1993) 110 CTR (SC) 290: (19 93) 201 ITR 343 (SC) THE APEX COURT HAS EXPRESSED THE VIEW THAT THE TERM NOT LESS THAN MEANS THE SAME AS CLEAR AND HENCE UNLESS A CLEAR TIME OF FIFTEEN DAYS IS GIVEN AS ENVISAGED IN S. 158BC(A)(I), THE NOTICE IS RENDERED INVALID AND ALL FURTHER PROCEEDINGS PURSUANT THERETO ARE ALSO RENDE RED INVALID AND VOID. HENCE, THE ASSUMPTION OF THE JURISDICTION UNDER S. 158BD BY ISSUE OF THE IMPUGNED NOTICE IS NOT VALID IN LAW AND THE ORDER O F BLOCK ASSESSMENT MADE PURSUANT TO THE SAID NOTICE IS ALSO INVALID. AS THE NOTICE ITSELF IS NOT IN CONFORMITY WITH THE SPECIFIC PROVISION MADE IN T HIS BEHALF, WE DO NOT CONSIDER IT NECESSARY TO GO INTO THE OTHER ASPECTS LIKE NOT SPECIFYING THE DATE, NOT MENTIONING THE STATUS, AND NOT STATING TH E PURPOSE ETC. AS THE REASONING APPROVED BY THE HONBLE KARNATAKA HIGH CO URT HAS BEEN ACCEPTED BY THE GOVERNMENT AND THE LAW ITSELF WAS D ULY AMENDED, WE DO NOT FIND IT NECESSARY TO DISCUSS THE DECISIONS CITE D ON THIS ISSUE. HOWEVER, WE MAY MAKE A REFERENCE TO THE DECISION OF THE SPEC IAL BENCH OF TRIBUNAL IN THE CASE OF SMT. KRISHNA VERMA (SUPRA). IN THE CASE OF SMT. KRISHNA VERMA (SUPRA), THE NOTICE UNDER S. 158BC WAS ISSUED IN CASE OF A PERSON IN WHOSE CASE A SEARCH UNDER S. 132 HAD BEEN CONDUC TED. IT WAS THUS HELD THAT SUCH A NOTICE WAS A PROCEDURAL NOTICE ISS UED AFTER ACQUISITION OF JURISDICTION, WHICH IN SUCH CASES VESTS WITH AO IN TERMS OF S. 158BA OF THE ACT. THE CASE ON HAND IS ON A DIFFERENT FOOTING AS THE IMPUGNED ASSESSMENT IS IN THE CASE OF A PERSON OTHER THAN A PERSON WHO IS SUBJECTED TO SEARCH AND THE PROCEEDINGS ARE INITIAT ED UNDER S. 158BD OF THE ACT AND HENCE THE ISSUE OF NOTICE UNDER S. 158B C OF THE ACT ON THE ASSESSEE FIRM IS A JURISDICTIONAL NOTICE. THEREFOR E, THE CONTROVERSY COVERED BY US WITH REGARD TO S. 158BC (A)(I) IN THE PRESENT CASE IS FACTUALLY DIFFERENT THAN THAT WAS BEFORE THE SPECIA L BENCH OR TRIBUNAL IN THE CASE OF SMT. KRISHNA VERMA (SUPRA). 13. ON THIS ISSUE, NO OTHER JUDGEMENT CONTRARY TO T HE FINDING OF THE SPECIAL BENCH OF THE TRIBUNAL HAS BEEN PLACED BEFOR E US. THEREFORE, BEING A SUBORDINATE TO THE SPECIAL BENCH, WE ARE BOUND BY THE FINDINGS OF A SPECIAL BENCH GIVEN IN THE AFORESAID CASE. ADMITTE DLY, THE TIME FOR FILING THE RETURN WAS GIVEN AS WITHIN 15 DAYS FROM THE DA TE OF THE NOTICE IN THE NOTICE ISSUED U/S 158BC OF THE ACT. THEREFORE, A P ROPER TIME AS REQUIRED UNDER THE LAW WAS NOT GIVEN AND AS SUCH THE ASSESSI NG OFFICER DID NOT ASSUME A JURISDICTION TO FRAME THE ASSESSMENT OVER THE ASSESSEE AND THE ITA 29&52/02 K.L.NARAYANA, YAMAM 11 BLOCK ASSESSMENT FRAMED IN CONSEQUENT TO THE SAID N OTICE IS INVALID & VOID AB INITIO. THEREFORE, THE ASSESSMENT FRAMED IN THE HANDS OF THE ASSESSEE HUF IS INVALID ON BOTH THE ACCOUNTS I.E. (I) NON-RE CORDING OF SATISFACTION BY THE ASSESSING OFFICER IN THE CASE OF ASSESSEE INDIV IDUAL AND (II) PROPER TIME WAS NOT GIVEN IN THE NOTICE ISSUED U/S 158BC FOR FI LING THE BLOCK RETURN. FOR THE ABOVE SAID REASONS, WE SET ASIDE THE BLOCK ASSESSMENT AND THE ORDER OF THE CIT(A) PASSED IN THE CASE OF THE ASSES SEE HUF. SINCE WE HAVE ANNULLED THE BLOCK ASSESSMENT, WE FIND NO JUST IFICATION TO ADJUDICATE THE ISSUES RAISED ON MERIT IN THESE APPEALS. ITA NO.61 OF 2002: 14. THIS APPEAL IS PREFERRED BY THE REVENUE IN THE CASE OF ASSESSEE INDIVIDUAL AGAINST THE ORDER OF THE CIT(A) IN BLOCK ASSESSMENT ON VARIOUS GROUNDS. THOUGH THE ASSESSEE HAS NOT FILED ANY CRO SS APPEAL OR THE CROSS OBJECTIONS, YET HE HAS RAISED A LEGAL OBJECTION THA T THE BLOCK ASSESSMENT ORDER PASSED BY THE A.O. IS BARRED BY LIMITATION AS THE ASSESSMENT WAS FRAMED AFTER TWO YEARS FROM THE DATE OF THE SEARCH. AN OBJECTION WAS RAISED TO THE ADMISSION OF THIS PLEA OF THE ASSESSE E ON THE GROUND THAT THE ASSESSEE CANNOT CHALLENGE THE VALIDITY OF THE ASSES SMENT ORDER WITHOUT FILING ANY CROSS OBJECTIONS OR THE CROSS APPEALS. IN RESPONSE THERETO, IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE T HAT SECTION 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES (HEREINAFTER TO BE REFERRED AS RULES) ENTAIL THE ASSESSEE TO SUPPORT THE ORDER APPEALED A GAINST ON ANY OF THE GROUNDS DECIDED AGAINST HIM. THEREFORE, THE ASSESS EE CAN CHALLENGE THE VALIDITY OF THIS BLOCK ASSESSMENT IN THE REVENUES APPEAL WITHOUT FILING THE CROSS OBJECTIONS. IN SUPPORT OF HIS CONTENTION, HE HAS PLACED A RELIANCE UPON THE FOLLOWING ORDERS OF THE TRIBUNAL. 1. ITO VS. V.S. CHABBRA (1986) 25 TTJ (BOM) 101 2. DURGESHWARI INVESTMENTS (P) LTD. (2005) 93 TTJ (MUMBAI) 432 3. ITO VS. SMT. GURINDER KAUR (2006) 105 TTJ (DEL) 198 4. ARUNDHATI BALKRISHNA & ANR VS. CIT (1982) 138 I TR 245 (GUJ) 5. DCIT VS. TURQUOISE INVESTMENT & FINANCE LTD. (20 08) 299 ITR 143 ITA 29&52/02 K.L.NARAYANA, YAMAM 12 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE RELEVANT PROVISIONS OF THE ACT/RULES AND THE JUDGEM ENTS REFERRED TO BY THE ASSESSEES. NO DOUBT RULE 27 ENABLE THE ASSESSEE TO SUPPORT THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS DECIDED AGAI NST HIM, EVEN THOUGH HE MAY NOT HAVE FILED AN INDEPENDENT APPEAL OR CROS S OBJECTIONS. THE ACT HAS PROVIDED DIFFERENT ALTERNATIVES TO THE ASSESSEE S TO SEEK RELIEF AGAINST THE ORDER OF THE CIT(A). FIRST MODE IS BY FILING A N APPEAL AGAINST THE ORDER OF THE FIRST APPELLATE AUTHORITIES AND FOR FI LING APPEAL AGAINST THE ORDER OF THE CIT(A) THE TIME LIMIT AND THE TRIBUNAL FEES ARE PRESCRIBED. IF THE ASSESSEE FAILS TO FILE AN APPEAL FOR CERTAIN RE ASONS OR INITIALLY HE HAS NO INTENTION TO CHALLENGE THE ORDER OF THE CIT(A), HE CAN CHALLENGE THE SAME BY FILING A CROSS OBJECTION IN THE REVENUES APPEAL WITHIN 30 DAYS FROM THE RECEIPT OF NOTICE OF REVENUES APPEAL. FOR FILING THE CROSS OBJECTION, THE TRIBUNAL FEES IS NOT REQUIRED TO BE PAID. BESIDES THESE OPPORTUNITIES ONE MORE OPPORTUNITY IS ALSO GIVEN TO THE ASSESSEE TO C HALLENGE THE ORDER OF THE CIT(A) ON THOSE POINTS/GROUNDS WHICH WERE DECID ED AGAINST HIM THOUGH ULTIMATE RELIEF IS GRANTED TO HIM. THIS OPP ORTUNITY IS AVAILABLE UNDER RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES. NOW THE QUESTION ARISE UNDER WHAT CIRCUMSTANCES THE PROVISI ONS OF RULE 27 CAN BE RESORTED. WHETHER A NEW GROUND ASSAILING THE ASSES SMENT ORDER CAN BE RAISED BEFORE THE TRIBUNAL UNDER RULE 27 OF THE INC OME TAX APPELLATE TRIBUNAL RULES OR PROVISIONS OF RULE 27 CAN BE ONLY RESORTED WITH RESPECT TO ISSUES/GROUNDS WHERE THE CIT(A) HAS GIVEN SOME F INDING AGAINST THE ASSESSEE. IN ORDER TO UNDERSTAND THE SCOPE OF RULE 27, WE PREFER TO REPRODUCE THE RULE 27 AS UNDER: THE RESPONDENT, THOUGH HE MAY NOT HAVE APPEALED, MA Y SUPPORT THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS DE CIDED AGAINST HIM. 16. FROM A PLAIN READING OF THIS RULE, WE ARE OF TH E VIEW THAT THE RESPONDENT MAY SUPPORT THE ORDER APPEALED AGAINST O N ANY OF THE GROUNDS DECIDED AGAINST HIM. MEANING THEREBY, THER E SHOULD BE SOME SPECIFIC FINDING AGAINST THE APPELLANT WHICH CAN BE CHALLENGED BY THE APPELLANT DURING THE HEARING OF THE APPEAL EVEN WIT HOUT FILING THE CROSS OBJECTION. WE HAVE ALSO CAREFULLY PERUSED THE JUDG EMENTS REFERRED TO BY THE ASSESSEES AND WE FIND THAT IN THOSE CASES THE C IT(A) HAS GIVEN SOME ITA 29&52/02 K.L.NARAYANA, YAMAM 13 FINDINGS AGAINST THE ASSESSEES WHICH WERE CHALLENGE D BY HIM IN THE REVENUES APPEAL WITHOUT FILING THE CROSS OBJECTION S AND THE TRIBUNAL IN ALL THESE JUDGEMENTS HAVE HELD THAT ASSESSEE IS ENTITLE D TO CHALLENGE THOSE FINDINGS PASSED AGAINST HIM BY THE CIT(A) IN REVENU ES APPEAL WITHOUT FILING THE CROSS OBJECTION UNDER RULE 27 OF THE INC OME TAX APPELLATE TRIBUNAL RULES. IT IS ALSO ABUNDANTLY CLEAR FROM T HE READING OF THE RULES THAT THE RESPONDENT MAY SUPPORT THE ORDER APPEALED AGAINST ON THE GROUND DECIDED AGAINST HIM. 17. BUT IN THE INSTANT CASE THE FACTS ARE DIFFERENT . BEFORE THE CIT(A) ASSESSEE HAS NOT RAISED ANY GROUND CHALLENGING THE VALIDITY OF THE BLOCK ASSESSMENT ON THE GROUND OF LIMITATION. THEREFORE, CIT(A) HAS NO OCCASION TO GIVE ANY FINDING EITHER IN FAVOUR OR AG AINST THE ASSESSEE ON THE POINT OF LIMITATION. NOW IN THE REVENUES APPE AL FILED BEFORE THE TRIBUNAL, THE ASSESSEE RAISED A GROUND THAT THE BLO CK ASSESSMENT IS BARRED BY LIMITATION AS IT WAS PASSED BEYOND THE PE RIOD OF 2 YEARS FROM THE DATE OF SEARCH ON WHICH FIRST PANCHNAMA WAS DRA WN. HE HAS ALSO CONTENDED BEFORE US THAT THE SECOND PANCHNAMA WAS N OT A CONTINUATION OF SEARCH. IT WAS SIMPLY A LIFTING OF PROHIBITORY ORDERS. NOW THE QUESTION ARISE WHETHER THIS TYPE OF ARGUMENT OR THE GROUND C AN BE RAISED IN REVENUES APPEAL BEFORE THE TRIBUNAL. ASSESSEE HAS TRIED TO RESORT THE PROVISIONS OF RULE 27 OF THE INCOME TAX APPELLATE T RIBUNAL RULES AND RULE 27 DOES NOT CONFER A BLANKET RIGHT UPON THE ASSESSE E TO RAISE ANY GROUND BEFORE THE TRIBUNAL IN THE REVENUES APPEAL. RULE 27 ONLY SAYS THAT THE RESPONDENT CAN SUPPORT THE ORDER APPEALED BY CHALLE NGING THE GROUNDS DECIDED AGAINST HIM BY THE CIT(A). SINCE THERE IS NO ADJUDICATION ON THE POINT OF VALIDITY OF THE BLOCK ASSESSMENT AS NO GRO UND WAS RAISED BEFORE THE CIT(A), THE PROVISIONS OF RULE 27 CANNOT COME I N RESCUE OF THE ASSESSEE TO RAISE THIS GROUND BEFORE THE TRIBUNAL. WE THEREFORE, OF THE VIEW THAT THE NEW GROUND RAISED BY THE ASSESSEE WIT H REGARD TO THE VALIDITY OF THE BLOCK ASSESSMENT IN THE POINT OF LI MITATION CANNOT BE ENTERTAINED IN THE REVENUES APPEAL. WE ACCORDINGL Y REJECT THIS GROUND OF THE ASSESSEES. ONCE WE REJECT THE ADMISSION OF THI S GROUND, WE DO NOT FIND ANY JUSTIFICATION TO ADJUDICATE THE SAME ON ME RIT. ITA 29&52/02 K.L.NARAYANA, YAMAM 14 18. NOW WE PROCEED TO DEAL WITH THE GROUNDS ON MERI T RAISED IN REVENUES APPEAL. 19. THE FIRST GROUND RELATE TO THE DELETION OF ADDI TION MADE ON ACCOUNT OF OPENING BALANCE AT RS.6,67,884/-. IN THIS REGAR D, IT IS NOTICED FROM THE ORDER OF THE LOWER AUTHORITIES THAT THE A.O. HAS MA DE AN ADDITION OF RS.6,67,884/- TOWARDS THE DIFFERENCE IN THE OPENING CAPITAL BALANCE FOR THE ASSESSMENT YEAR 1993-94. IN THIS CONTEXT, IT W AS ARGUED BEFORE THE CIT(A) THAT ADDITION MADE BY THE A.O. IS WITHOUT AN Y BASIS AND WITHOUT UNDERSTANDING THE ASSESSEES BUSINESS BACKGROUND AN D THEREBY HE HAS CLUBBED THE AFFAIRS OF THE INDIVIDUAL BUSINESS ALON G WITH THE FINANCIAL TRANSACTIONS OF THE HUF WHEREIN THE ASSESSEE IS A K ARTA OF THE HUF. IT WAS FURTHER STATED THAT A.O. HAS NOT CONSIDERED MAN Y ASPECTS APPEARING IN THE ROUGH BOOK WHEREIN MANY TRANSACTIONS RELATE TO HUF AS WELL AS CONSIGNMENT BUSINESS ARE AVAILABLE. HE HAS ONLY TA KEN THE CAPITAL BALANCE AND SAME IS COMPARED TO THE CAPITAL BALANCE AS APPEARING IN THE REGULAR RETURN OF INCOME. HE HAS ONLY TAKEN THE CR EDIT BALANCE OF THE CAPITAL ACCOUNT WHEREAS HE HAS IGNORED TO CONSIDER THE DRAWINGS, CONSIGNMENT STOCK AND THE TRANSACTION RELATED TO HU F. IF ALL THESE ASPECTS ARE TAKEN INTO ACCOUNT THE CAPITAL ACCOUNT BALANCE AS PER ROUGH BOOK WOULD NOT BE MORE. THE ASSESSEE HAS FURNISHED THE RECONCILIATION OF CAPITAL ACCOUNT AS ON 31.3.1993. IT WAS FURTHER EX PLAINED THAT THIS ROUGH BOOK AS MAINTAINED BY THE ASSESSEE IS NOT SYSTEMATI CALLY MAINTAINED. THE KARTA OF THE HUF HAS CLUBBED EACH AND EVERY ASPECT RELATING TO FAMILY TRANSACTIONS AND WHILE FILING THE RETURN OF INCOME IN THE INDIVIDUAL CAPACITY ONLY TRANSACTIONS RELATING TO OIL BUSINESS MAINTAIN ED IN THE BOOKS OF ACCOUNTS ARE CONSIDERED AND FILED THE RETURN OF INC OME. WHEN THE A.O. HAS TAKEN THE CAPITAL ACCOUNT FROM THE ROUGH BOOK H E SHOULD HAVE CONSIDERED EVERY ASPECTS LIKE THE INTEREST CHARGED ON THE CAPITAL CONSIGNMENT, SALES, CONSIGNMENT STOCK, MARKET LOANS , OTHER TRANSACTIONS RELATING TO AGRICULTURE WHICH ARE TO BE TAKEN AGAIN ST THE CAPITAL ACCOUNT BALANCE WHICH ULTIMATELY RESULTS INTO LOSS CAPITAL AS PER ROUGH BOOK. ITA 29&52/02 K.L.NARAYANA, YAMAM 15 20. CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF RE CONCILIATION STATEMENTS AND EXPLANATIONS OF THE ASSESSEES. BEIN G CONVINCED WITH IT HE DELETED THE ADDITION. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND HE PLACED A RELIANCE UPON THE ORDER OF THE ASSE SSING OFFICER. WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT HE HAS FILED THE RECONCILIATION STATEMENT AND EXPLAINED THE DISCREPA NCIES POINTED OUT BY THE ASSESSING OFFICER. 21. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWE R AUTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT ASSESSEE H AS FILED THE RECONCILIATION STATEMENTS EXPLAINING THE DISCREPANCIES POINTED OUT BY THE A.O. AND THE CIT(A) HAS CAREFULLY EXAMINED THE RECONCILIATION ST ATEMENT BEFORE ALLOWING THE CLAIM OF THE ASSESSEES. SINCE WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE CIT(A), WE CONFIRM THE SAME. 22. NEXT GROUND RELATE TO THE DELETION OF TRADE DEB TORS OF RS.4,31,199/- IN THIS REGARD, WE HAVE CAREFULLY PERUSED THE ORDE R OF THE LOWER AUTHORITIES AND WE FIND THAT THE A.O. HAS NOTICED CERTAIN DEBTORS IN THE ROUGH BOOK OF ABOUT RS.4,31,199/- AS THE SAME WERE NOT AVAILABLE WITH THE INDIVIDUAL RETURN OF INCOME AND HE ADDED ALL TH E DEBTORS APPEARING IN THE ROUGH BOOK RESULTING INTO AN ADDITION OF RS.4,3 1,199/-. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBM ISSIONS THAT THE REGULAR RETURN OF INCOME ASSESSEE HAS ADMITTED THE DEBTORS OF RS.73,550/-. HOWEVER, THE A.O. HAS IGNORED THE SAM E AND BY BEARING THE DEBTORS AS APPEARING THE ROUGH BOOK, HE PROCEEDED T O ADD ALL THE DEBTORS. 23. THE A.R. HAS FILED THE RECONCILIATION STATEMENT BEFORE THE CIT(A) WITH THE SUBMISSION THAT FIRST 3 DEBTORS SHRI P.V. RAMANA, P. ACHUTA RAO AND VANKAYALA SUBRAHMANIAM ARE THOSE TO WHOM PADDY WAS SOLD. THEY ARE AGRICULTURAL DEBTORS. HENCE, THE SAME ARE TO B E EXCLUDED. IT WAS FURTHER STATED THAT THERE IS ALSO A CREDIT BALANCE TO SHRI P. ACHUTA RAO AND SAME IS REQUIRED TO BE ADJUSTED. THE REMAINING BAL ANCE DEBTORS ARE CONSIGNMENT DEBTORS OF RS.3,41,345/- AND SINCE THES E DEBTORS ARE NOT ITA 29&52/02 K.L.NARAYANA, YAMAM 16 ASSESSEES BUSINESS DEBTORS AND ASSESSEE ONLY GETS COMMISSION FOR MAKING SALES OF THE CONSIGNMENT GOODS I.E. OIL, THE REFORE, THEY CANNOT BE CALLED TO BE THE ASSESSEES DEBTOR. 24. THE CIT(A) VERIFIED THIS FACT AND BEING CONVINC ED WITH THE EXPLANATIONS OF THE ASSESSEES, HE DELETED THE ADDIT IONS. 25. NOW THE REVENUE IS IN APPEAL BEFORE US BUT HE C OULD NOT BRING OUT ANYTHING TO ESTABLISH THAT THEY ARE IN FACT ASSESSE ES DEBTORS. WE HOWEVER, CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES AND WE FIND THAT CIT(A) HAS PROPERLY EXAMINED THIS ISSUE B EFORE ACCEPTING THE CLAIM OF THE ASSESSEES. SINCE WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE CIT(A), WE CONFIRM HIS ORDER. 26. NEXT GROUND RELATE TO THE TREATMENT OF CONSIGNM ENT TURNOVER AS A TOTAL TURNOVER OF THE ASSESSEE WITHOUT REALIZING TH AT ASSESSEE GETS ONLY COMMISSION ON CONSIGNMENT SALES. THE FACTS BORNE O UT IN THIS REGARD ARE THAT THE ASSESSEE HAS BEEN DOING CONSIGNMENT BUSINE SS, WHEREIN THE ASSESSEE IS A CONSIGNEE AND HE RECEIVED COMMISSION ONLY WHICH HAS BEEN DECLARED IN THE REGULAR RETURN OF INCOME FOR THE IM PUGNED ASSESSMENT YEAR 1994-95. THE A.O. HAS TAKEN THE DETAILS FROM THE REGULAR RETURN OF INCOME AND CONSIDERED THE CONSIGNMENT SALE AS ASSES SEES OWN SALE AND HAS ESTIMATED PROFIT AT 5% AND ADDED TO THE ASSESSE ES TOTAL INCOME AS UNDISCLOSED INCOME. 27. THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A) AND HAS CONTENDED THAT ASSESSING OFFICER HAS MISTAKENLY TAKEN CONSIGN MENT SALES AS ASSESSEES OWN SALE AND HAS MADE AN ESTIMATION WHIC H IS ABSOLUTELY WRONG AND UNJUSTIFIABLE AND WITHOUT ANY REASONS. T HE CIT(A) RE- EXAMINED THE ISSUE AND WAS OF THE VIEW THAT ASSESSE E GETS ONLY COMMISSION ON CONSIGNMENT SALES AND THE A.O. SHOULD NOT HAVE TAKEN THE DETAILS FURNISHED IN REGULAR RETURN OF INCOME FOR M AKING ADDITION IN THE BLOCK ASSESSMENT AFTER RELYING UPON THE VARIOUS JUD GEMENTS. HE ACCORDINGLY DELETED THE ADDITIONS MADE ON THIS ACCO UNT. ITA 29&52/02 K.L.NARAYANA, YAMAM 17 28. THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND SIMPLY PLACED A RELIANCE UPON THE ORDER OF THE A.O . THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HAS CONTENDED THAT A SSESSEE WAS ENGAGED IN A CONSIGNMENT BUSINESS AND IS ONLY CONCE RNED WITH THE COMMISSION ON CONSIGNMENT SALES. THE REVENUE HAS W RONGLY TREATED THE CONSIGNMENT SALE AS ASSESSEES SALES TURNOVER AND E STIMATED THE PROFIT THEREON. 29. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE LOW ER AUTHORITIES IN THE LIGHT OF RIVAL CONTENTIONS AND WE FIND THAT ASS ESSEE IS ENGAGED IN THE CONSIGNMENT BUSINESS AND IS CONCERNED WITH HIS COMM ISSIONS ONLY. NOTHING HAS BEEN BROUGHT OUT ON THE RECORD BY THE R EVENUE TO ESTABLISH THAT THE CONSIGNMENT SALE IS THE SALE TURNOVER OF T HE ASSESSEES. ONCE HE IS ACTING AS AN AGENT OF THE PRINCIPAL, THE SALE OF THE PRINCIPAL CANNOT BE CONSIDERED TO BE THE SALE OF THE AGENT AND PROFIT C ANNOT BE ESTIMATED THEREON. THEREFORE, WE FIND OURSELVES IN AGREEMENT WITH THE ORDER OF THE CIT(A). WE ACCORDINGLY CONFIRM HIS ORDER. 30. NEXT GROUND RELATE TO THE DELETION OF ADDITION OF RS.10,10,798/- REPRESENTING THE ASSESSEES EXPENDITURE AND INVESTM ENTS NOT RECORDED IN THE BOOKS OF ACCOUNTS. IN THIS REGARD, WE HAVE CAR EFULLY PERUSED THE ORDERS OF AUTHORITIES BELOW AND MATERIAL AVAILABLE ON RECORD AND WE FIND THAT THE A.O. HAS MADE AN ADDITION OF RS.10,10,798/ - AFTER HAVING OBSERVED THAT ASSESSEE HAS SPENT A SUM OF RS.10,10, 798/- TOWARDS HIS SON K.V.V. RAMALINGESWARA RAOS BUSINESS FROM ITS U NDISCLOSED SOURCES. BEFORE THE CIT(A), IT WAS EXPLAINED THAT ASSESSEES SON IS HAVING INCOME FROM CONTRACTS FOR WHICH ASSESSEE HAS ADVANCED MONE Y AND HIS SON IS REPAYING THE SAME REGULARLY. IT WAS FURTHER STATED THAT MONEY WAS ADVANCED FROM THE FUNDS OF THE HUF AND ASSESSEE MAD E THIS ADVANCES TO HIS SON IN THE CAPACITY AS KARTA OF HUF. THEREFORE , THIS ASPECT OF ADDITION CAN ONLY BE EXAMINED IN THE HANDS OF THE HUF. IT W AS FURTHER EXPLAINED TO THE CIT(A) THAT THE A.O. HAS TOTAL UP THE MONEY ADVANCED BY THE ASSESSEE TO HIS SON BUT HE HAS NOT GIVEN ANY CREDIT FOR THE MONEY REPAID ITA 29&52/02 K.L.NARAYANA, YAMAM 18 BY THE ASSESSEES SON. IT WAS ALSO ARGUED BEFORE T HE CIT(A) THAT AT THE MOST THE PEAK ADVANCES GIVEN TO HIS SON CAN ONLY BE ESTIMATED FOR THE PURPOSE OF ADDITION IN THE HANDS OF THE HUF ONLY. THE CIT(A) EXAMINED THIS ASPECT AND ON VERIFICATION HE WAS CONVINCED WI TH THAT THE ADVANCE WAS GIVEN FROM THE HUFS ACCOUNT WHEREIN PEAK CREDI T CAN BE WORKED OUT. WE ACCORDINGLY WORKED OUT THE PEAK CREDIT AT RS.1,0 3,339/- AND DIRECTED THE A.O. TO MAKE AN ADDITION IN THE HANDS OF THE HU F. HE ACCORDINGLY GRANTED A RELIEF TO THE ASSESSEES. 31. NOW THE REVENUE IS BEFORE US BUT DURING THE COU RSE OF HEARING, THE LD. D.R. COULD NOT POINT OUT A SPECIFIC DEFECT IN T HE ORDER OF THE CIT(A). 32. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE CIT(A) HAS MADE A PROPER VERIFICATION AND AFTER HAVING BEEN CO NVINCED THAT THE MONEY WAS ADVANCED FROM THE HUFS ACCOUNT, HE DIREC TED THE A.O. TO WORK OUT A PEAK CREDIT AND MAKE AN ADDITION OF RS.1 ,03,339/- IN THE HANDS OF THE HUF. UNDER THESE CIRCUMSTANCES, THE A DDITION OF THE SAME AMOUNT IS NOT CALLED FOR IN THE HANDS OF THE ASSESS EE. 33. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOW ER AUTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT CIT(A) HIM SELF HAS MADE A NECESSARY VERIFICATION ABOUT THE SOURCE OF FUNDS FO R ITS ADVANCES GIVEN TO THE ASSESSEES SON. ONCE HE WAS CONVINCED THAT IT WAS GIVEN OUT OF THE HUF ACCOUNT HE DIRECTED THE A.O. TO MAKE AN ADDITIO N OF THE PEAK CREDIT IN THE HANDS OF THE HUF AND ACCORDINGLY DELETED THE ADDITIONS IN THE HANDS OF THE ASSESSEES. UNDER THESE CIRCUMSTANCES, WE FIND THAT CIT(A) HAS RIGHTLY GIVEN A DIRECTION TO THE ASSESSING OFFI CER TO MAKE A NECESSARY ADDITION IN THE HANDS OF THE ASSESSEES. WE THEREFO RE FIND NO INFIRMITY IN HIS DIRECTIONS AND ACCORDINGLY WE CONFIRM THE ORDER . 34. NEXT GROUND RELATE TO THE RELIEF OF RS.10,26,09 3/- TOWARDS PAYMENT MADE IN VIOLATION OF SECTION 40A(3) OF THE ACT GIVE N TO THE ASSESSEES. THE FACTS BORNE OUT FROM THE RECORD IN THIS REGARD ARE THAT A.O. HAS NOTICED FROM THE ROUGH BOOKS THAT ASSESSEE HAS MADE THE PAY MENT OF ITA 29&52/02 K.L.NARAYANA, YAMAM 19 RS.10,26,093/- IN VIOLATION OF PROVISIONS OF SECTIO N 40A(3) OF THE ACT AND HE ACCORDINGLY MADE THE ADDITION OF THE SAME. 35. BEFORE THE CIT(A), THE LD. COUNSEL FOR THE ASSE SSEE HAS CONTENDED THAT A.O. HAS GROSSLY IGNORED THE INSTRUCTIONS OF T HE MINISTRY OF FINANCE, WHEREIN IT IS STATED THAT SECTION 40A(3) OF THE ACT IS NOT APPLICABLE IN THE CASE OF PAYMENTS MADE BY THE COMMISSION AGENTS FOR THE GOODS RECEIVED BY THEM FOR SALE ON COMMISSION OR ON CONSIGNMENT BA SIS. HE HAS ALSO PLACED A PRESS NOTE DATED 2.5.1969 ISSUED BY THE MI NISTRY OF FINANCE BEFORE THE CIT(A). THE CIT(A) HAS EXAMINED THE ASS ESSEES CONTENTIONS AND BEING CONVINCED WITH IT HE DELETED THE ADDITION S AFTER HAVING OBSERVED THAT PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE SINCE HE IS A CONSIGNEE AND THE PAY MENTS MADE BY HIM ARE TO THE CONSIGNOR. 36. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL BUT THEY HAVE NOT PLACED THE INSTRUCTIONS ISSUED BY THE MINISTRY OF FINANCE AND THE PRESS NOTE DATED 2.5.2009. THE LD. D.R. HA S SIMPLY STATED THAT EVEN IN THE CASE OF CONSIGNOR AND CONSIGNEES, PROVI SIONS OF 40A(3) ARE APPLICABLE. THE LD. COUNSEL FOR THE ASSESSEE HAS P LACED A HEAVY RELIANCE UPON THE ORDER OF THE CIT(A). BESIDES, IT WAS CONT ENDED ON BEHALF OF THE ASSESSEE THAT ASSESSEE WAS SIMPLY A CONSIGNMENT AGE NT AND WHATEVER AMOUNT WAS PAID IT WAS OF PROCEEDS OF CONSIGNMENT S ALES. SINCE THE ASSESSEE HAS NOT MADE PAYMENT IN THE CAPACITY OF BU YER THE PROVISIONS OF SECTION 40A(3) CANNOT BE APPLIED. 37. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER A UTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS AND THE RELEVANT PROVISI ONS OF THE ACT, WE FIND THAT PROVISIONS OF SECTION 40A(3) CAN ONLY BE APPLI ED WHERE THE ASSESSEE INCURS EXPENDITURE AND THE PAYMENT OF THE SAME IS M ADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE EXCEEDING RS.20,000/-. IN THE INSTANT CASE, ASSESSEE WAS ACTING AS A CONSIGNMENT AGENT AND WHAT EVER PAYMENT WAS MADE, IT WAS MADE ON BEHALF OF SOME OTHER PERSON. THEREFORE, THE PAYMENT MADE BY THE ASSESSEE TO THE CONSIGNOR CANNO T BE CALLED TO BE AN ITA 29&52/02 K.L.NARAYANA, YAMAM 20 EXPENDITURE U/S 40A(3) OF THE ACT FOR WHICH PROVISI ONS OF SECTION 40A(3) CAN BE ATTRACTED. THEREFORE, WE AGREE WITH THE FIN DINGS OF THE CIT(A) AND WE ACCORDINGLY CONFIRM HIS ORDER. 38. NEXT GROUND RELATE TO THE DISALLOWANCE OF RS.38 ,864/- U/S 40A(3) OF THE ACT. IN THIS REGARD, THE FACTS BORNE OUT FROM THE RECORD ARE THAT THE A.O. HAS NOTICED CERTAIN CASH PURCHASES BY THE ASSE SSEE OF RS.1,94,320/- AND FOR VIOLATION OF SECTION 40A(3) HE MADE ADDITIO N OF 20% OF THE SUM I.E. AT RS.38,864/-. AN APPEAL IS PREFERRED BEFORE THE CIT(A) WITH THE SUBMISSION THAT THE PAYMENTS WERE MADE THROUGH DEMA ND DRAFTS AND IN SUPPORT OF SAME NECESSARY DOCUMENTS WERE PLACED BEF ORE THE CIT(A) FOR VERIFICATION. IT WAS FURTHER CONTENDED THAT THIS B USINESS TRANSACTION RELATE TO HIS SONS BUSINESS AND ADDITION FOR THE SAME CAN NOT BE MADE IN THE HANDS OF THE ASSESSEES. THE CIT(A) VERIFIED THE FA CTS AND HAS OBSERVED THAT PURCHASES WERE MADE THROUGH DEMAND DRAFTS ONLY . MOREOVER, THE ADDITION MADE BY THE A.O. ON THIS ACCOUNT CANNOT BE SUSTAINED IN BLOCK ASSESSMENT AS THE PURCHASES WERE DISCLOSED IN THE B OOKS OF ACCOUNTS AND THE ADDITION CAN ONLY BE MADE IN REGULAR ASSESSMENT ON VERIFICATION. THE CIT(A) ACCORDINGLY DELETED THE ADDITIONS IN THE HAN DS OF THE ASSESSEES. 39. NOW THE REVENUE IS BEFORE US WITH THE SUBMISSIO NS THAT THE FINDING OF CIT(A) ARE NOT ON THE BASIS OF CORRECT FACTS. T HE LD. D.R. HAS SUBMITTED THAT THE PAYMENTS WERE MADE IN CASH. BUT NO CORRESPONDING EVIDENCE ARE PLACED BEFORE US FOR VERIFICATION. TH E LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE CIT(A) HAS VERIFIED THE FACTS BEFORE ALLOWING THE CLAIM TO THE ASSESSEES. 40. HAVING GONE THROUGH THE ORDER OF THE LOWER AUTH ORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT CIT(A) HAS MADE A CATEGORICAL AVERMENTS IN HIS ORDER THAT HE HAS PERSONALLY VERIF IED THE FACTS AND THE PURCHASES WERE MADE THROUGH DEMAND DRAFTS ONLY. WE HAVE ALSO FIND FORCE IN THE CONTENTION OF THE CIT(A) THAT THESE PU RCHASES WERE DISCLOSED IN THE BOOKS OF ACCOUNTS. THEREFORE, THIS ASPECT C AN ONLY BE EXAMINED IN THE REGULAR ASSESSMENT AND NOT IN THE BLOCK ASSESSM ENT. WE THEREFORE, ITA 29&52/02 K.L.NARAYANA, YAMAM 21 FIND NO INFIRMITY IN THE DELETION OF THIS ADDITION. WE ACCORDINGLY CONFIRM THE ORDER OF CIT(A). 41. NEXT GROUND RELATE TO THE RELIEF OF RS.1,50,266 /- GIVEN TO THE ASSESSEES. IN THIS REGARD, FACTS BORNE OUT FROM TH E ORDERS OF THE LOWER AUTHORITIES ARE THAT ON THE BASIS OF SOME CREDIT SA LES FOUND NOTED IN THE SMALL LOOSE NOTE BOOK, THE A.O. HAS MADE AN ADDITIO N OF RS.1,50,266/- ON THE GROUND THAT THESE SALES WERE NOT RECORDED IN TH E REGULAR BOOKS OF ACCOUNTS. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSION THAT THE SEARCH TOOK PLACE ON 29.1.1999 AND THE BOOKS OF ACCOUNTS WERE WRITTEN UPTO 21.1.1999 AND THERE WAS A TIME FOR THE ASSESSEE TO FILE REGULAR RETURN OF INCOME TILL AUGU ST, 2000. SUBSEQUENTLY, THE CREDIT SALES FOUND IN THE NOTE BOOK FOUND WERE ENTERED IN THE REGULAR BOOKS OF ACCOUNTS AND LATER ON RETURN OF INCOME WAS FILED. THESE ASPECTS WERE NOT EXAMINED BY THE A.O. BEFORE MAKING AN ADDI TION. 42. THE CIT(A) EXAMINED THIS ASPECT AND HAVING NOTE D THAT ONCE ALL THE ENTRIES WERE DECLARED IN THE REGULAR BOOKS OF A CCOUNTS NET ADDITION UNDER THIS HEAD IS NOT CALLED FOR. HE ACCORDINGLY DELETED THE ADDITIONS. 43. NOW THE REVENUE IS BEFORE US AND PLACED A HEAVY RELIANCE UPON THE ORDER OF THE A.O. WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED A RELIANCE UPON THE ORDER OF THE CIT(A). 44. HAVING CAREFULLY EXAMINED THE ORDER OF LOWER AU THORITIES WE FIND THAT ONCE THE SALES WERE PROPERLY DECLARED IN THE R EGULAR BOOKS OF ACCOUNTS NO ADDITION CAN BE MADE ON THE BASIS OF TH E DOCUMENTS FOUND DURING THE COURSE OF SEARCH. ACCORDINGLY, WE CONFI RM THE ORDER OF THE CIT(A). 45. LAST GROUND RAISED IN THIS APPEAL IS WITH REGAR D TO THE DELETION OF ADDITION OF RS.4,19,915/- MADE ON THE BASIS OF THE PRO-NOTES FOUND DURING THE COURSE OF SEARCH. IN APPEAL BEFORE THE CIT(A), IT WAS CONTENDED THAT EXCEPT TWO PRO-NOTES, ALL PRO-NOTES WERE EXPLAINED IN THE ASSESSEES ITA 29&52/02 K.L.NARAYANA, YAMAM 22 REGULAR RETURN OF INCOME. ONE PRO-NOTE PERTAINING TO THE ASSESSEES DAUGHTER-IN-LAW SMT. REKHA AND ANOTHER PRO-NOTE PER TAINS TO HUF OF THE ASSESSEES. THEREFORE ALL PRO-NOTES WERE EXPLAINED. 46. CIT(A) VERIFIED THESE FACTS AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEES, HE DELETED THE ADDIT IONS. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL BUT HE DID NOT BRING ANYTHING ON RECORD TO DISPUTE THE OBSERVATIONS OF THE CIT(A) . SINCE THE CIT(A) IS ARMED WITH CO-TERMINUS POWERS OF THAT A.O. AND HE H AS EXAMINED THE DETAILS OF PRO-NOTES AND AFTER BEING CONVINCED WITH THAT THE PRO-NOTES WERE DULY EXPLAINED IN THE REGULAR RETURN OF INCOME OF THE ASSESSEES, HE DELETED THE ADDITIONS. 47. WITH REGARD TO THE OTHER TWO PRO-NOTES, THE CIT (A) HAS ALSO EXAMINED THE EXPLANATIONS OF THE ASSESSEES AND HAVI NG CONVINCED WITH IT, HE DELETED THE ADDITIONS. 48. THOUGH THE REVENUE HAS PREFERRED THIS APPEAL BE FORE US BUT DURING THE COURSE OF HEARING NOTHING HAS BEEN BROUGHT ON R ECORD TO ESTABLISH THAT THESE PRO-NOTES DURING THE COURSE OF SEARCH WE RE NOT EXPLAINED BY THE ASSESSEES IN ITS REGULAR RETURN OF INCOME. UND ER THESE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND WE CONFIRM THE SAME. 49. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 11.4.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 11 TH APRIL, 2011 ITA 29&52/02 K.L.NARAYANA, YAMAM 23 COPY TO 1 DCIT, CIRCLE - 1, RAJAHMUNDRY 2 SRI KANCHERLA LAKSHMINARAYA (HUF), S/O LTATE VEERAI AH, D.NO.3 - 276, PYDIKONDALA ST., YANAM, E.G. DIST. 3 THE CI T, RAJAHMUNDRY 4 THE CIT (A) , RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM