ACIT,Circle-2(1),Range-2,Trichur, Trichur V. Sri. Nigam Mathew, Trichur

ITSSA 9/COCH/2009

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9446 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 12-06-2013
• Assessment Year: misc
• Appeal Filed On: 31-08-2009
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: K KITTU
• Keywords: Income from undisclosed sources; Search and seizure; Additional evidence; Procedural lapse; Block assessment; Documents seized
• Section: 143(3); 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.(SS)A. NO.09/COCH/2009 ASSESSMENT YEARS : 1996-2002 B.P. 01-04-1996 TO 18-04-2002 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), RANGE- 2, TRICHUR. VS. SHRI NIGAM MATHEW, PROP. C.K. MATHEW & SONS, CHERUVATHUR HOUSE, MISSION QUARTERS, THRISSUR-680 001. [PAN:ABGPN 8093B] (REVENUE-APPELLANT) (ASSESSEE-R ESPONDENT) REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI K. KITTU, ADV. DATE OF HEARING 12/06/2013 DATE OF PRONOUNCEMENT 30/08/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 26-05-2009 PASSED BY THE LD. CIT(A)-V, KOCHI AND IT RELATES TO THE BLOCK PERIOD FROM 01-04-1996 TO 18-04-2002. 2. THE EFFECTIVE GROUNDS URGED BY THE REVENUE READ AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN HOLDING THAT THE ASSESSMENT DONE U/S. 158BD IS ILLEGAL AND BAD IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) OUGHT TO HAVE NOTICED THAT THE ASSESSEE HAS PAID UNACCOUNTED AMOUNTS OVE R AND ABOVE THE DOCUMENT VALUE OF PROPERTY REGISTERED AND THE AGREEMENTS SH OWING THE UNACCOUNTED PAYMENTS WAS SEIZED FROM THE SELLER DURING THE COU RSE OF ACTION U/S. 132 AND THE NOTICE U/S. 158BD WAS ISSUED ON RECEIPT OF THIS IN FORMATION ONLY. I.T.(SS)A. NO.09/COCH/2009 2 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) OUGHT TO HAVE NOTICED THAT THE ACT DOES NOT SPECIFY ANY TIME LIMIT FOR I SSUE OF NOTICE AND THE ISSUE OF NOTICE WAS LEGALLY CORRECT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN HOLDING THAT THE TOTAL INVESTMENT IN THE PURCHASE OF SHOPS WAS RS. 12,25,000/- AS REPORTED BY ADIT(INV.) AND NOT RS. 14,32,500/- QUANTIFIED BY T HE ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE NOTICED THAT THE ASSESSING OFFICER HAS CONSIDERED THE PAYMENTS MADE IN 3 TRANSACTIONS AND ALL THE TRANSACTIONS ARE COMBINED. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BR IEF. THE ASSESSEE HEREIN IS THE PROPRIETOR A BUSINESS CONCERN NAMED M/S. C.K. MATHE W & SONS, WHICH IS ENGAGED IN FOOTWEAR BUSINESS IN ERNAKULAM. THE DEPARTMENT CARR IED OUT SEARCH AND SEIZURE OPERATIONS IN THE CASE OF M/S. GIRI PAI JEWELLERY, ERNAKULAM AND ITS PARTNERS SHRI SUNDARESA PAI ON 18-04-2002. DURING THE COURSE OF SEARCH, THE COPIES OF FIRST PAGES OF TWO AGREEMENTS WERE FOUND OUT. FROM THE SAID AGREE MENTS IT WAS NOTICED THAT THE ASSESSEE HEREIN HAD PAID MONEY TO SHRI SUNDARESA PA I & OTHERS TOWARDS PURCHASE OF SHOPS IN A SHOPPING COMPLEX. THE FIRST AGREEMENT WA S DATED 30-03-2001 AND IT WAS ENTERED BY SHRI SUNDARESA PAI AND HIS SON SHRI VISW ESWARA PAI WITH THE ASSESSEE HEREIN. AS PER THE SAID AGREEMENT, TWO SHOP ROOMS HAVING AN EXTENT OF 200 SQ. FT. EACH, ON THE FIRST FLOOR OF THE SHOPPING COMPLEX WA S AGREED TO BE PURCHASED BY THE ASSESSEE HEREIN AT THE RATE OF RS. 1550/- PER SQ. F T. ON THE BACK SIDE OF THE FIRST PAGE OF THE AGREEMENT, THE ENDORSEMENT OF RECEIPT OF MON EY FROM THE ASSESSEE WAS FOUND NOTED DOWN AS DETAILED BELOW: 30.3.2001 : RS.1,00,000 3.4.2001 : RS.1,00,000 3.7.2001 : RS.1,50,000 30.8.2001 : RS.1,00,000 18.9.2001 : RS.1,00,000 10.10.2001 : RS.1,00,000 16.11.2001 : RS.1,00,000 RS. 7,50,000 THE AO HAS ESTIMATED THE VALUE OF SHOPS AT RS.6,20, 000/- (400 SQ. FT X RS.1,550/-). I.T.(SS)A. NO.09/COCH/2009 3 4. THE SECOND AGREEMENT WAS DATED 16.11.2001 AND IT WAS ENTERED BY SHRI SUNDARESA PAI AND SMT. RAJESWARI PAI WITH THE ASSES SEE HEREIN. AS PER THIS AGREEMENT, ONE SHOP HAVING AN EXTENT OF 150 SQ. FT. IN THE GRO UND FLOOR WAS AGREED TO BE PURCHASED BY THE ASSESSEE AT THE RATE OF RS.2250 PE R SQ. FT. ON THE BACK SIDE OF THE FIRST PAGE OF THE AGREEMENT, ENDORSEMENT OF RECEIPT OF MONEY FROM THE ASSESSEE WAS FOUND NOTED AS DETAILED BELOW: 16.11.2001 : RS. 50,000 18.12.2001 : RS.1,00,000 12.11.2002 : RS.1,00,000 RS. 2,50,000 THE AO HAS ESTIMATED THE VALUE OF THIS SHOP AT RS.3 ,37,500/- (150 SQ. FT X RS.2,250/-) 5. A STATEMENT WAS RECORDED BY A.D. I (INV.) FROM T HE ASSESSEE ON THE DATE OF SEARCH I.E., ON 18-04-2002. IN THE SAID STATEMENT, THE ASSESSEE ADMITTED THAT HE HAD PURCHASED ONE MORE SHOP HAVING AN EXTENT OF ABOUT 1 98 SQ. FT. FOR RS.4.75 LAKHS. HOWEVER, THE CONSIDERATION WAS SHOWN AT RS.73,700/- ONLY IN THE DOCUMENT. 6. ACCORDINGLY, THE JOINT DIRECTOR (INV.) WROTE A LETTER TO THE ADDL. COMMISSIONER OF INCOME TAX, TRICHUR ON 26-07-2002, WHICH READS AS U NDER:- DURING THE COURSE OF SEARCH AND SEIZURE ACTION U/S 132 IN THE CASE OF M/S GIRI PAI JEWELLERY, M.G. ROAD, ERNAKULAM AND ITS PARTNER SHRI SUNDARESA PAI ON 18.4.2002, COPIES OF THE FIRST PAGES OF TWO AGREEME NTS FOR PURCHASE OF TWO SHOP PREMISES EXECUTED ON 30.3.01 AND 16.11.02 WERE SEIZ ED. THE DOCUMENTS SEIZED REVEALED THAT SHRI C. M. NIGAM, PROPRIETOR OF M/S C .K.MATHEW & SONS, FOOT WEAR DEALERS, ERNAKULAM HAD ADVANCED RS.6,50,000/- AND RS .2,00,000/- TO SHRI SUNDARESA PAI FOR PURCHASE OF SHOP PREMISES. A SWO RN STATEMENT WAS RECORDED FROM SHRI C.M. NIGAM IN WHICH HE ADMITTED THAT, IN FACT, HE HAD PAID RS.12,25,000/- IN CASH FOR PURCHASE OF SHOP PREMIES . SHRI NIGAM ALSO DID NOT RECORD THIS PAYMENT IN HIS BOOKS OF ACCOUNTS. HENC E, THE ASSESSING OFFICER, OF SHRI C M NIGAM MAY BE DIRECTED TO INITIATE NECESSAR Y ACTION TO TAX THE SUM OF RS.12,25,000/- BEING HIS UNACCOUNTED INCOME. A REP ORT ALONG WITH ITS ANNEXURES PREPARED BY THE ADIT (INV-I), ERNAKULAM IS FORWARDED HEREWITH. THE COPY OF REPORT GIVEN BY ADIT(INV) WAS NOT PRODU CED BEFORE US. HOWEVER, THE LD CIT(A) HAS EXTRACTED THE CONCLUSIONS OF ADIT AS UND ER IN PARA 1.3 OF HIS ORDER:- I.T.(SS)A. NO.09/COCH/2009 4 AS PER THE P & L ACCOUNT AS ON 31.3.2001 HIS NET P ROFIT IN THE BUSINESS WAS ONLY RS.1,42,192/-. SINCE THE SALE PRICE OF THE GROUND FLOOR PROPERTY AS PER THE SALE DEED EXECUTED AND REGISTERED WITH JOINT SUB-REGISTR AR, ERNAKULAM IS ONLY RS.73,700/-, IT WAS THE CLEAR INTENTION OF SHRI C.M . NIGAM TO SUPPRESS THE SALE PRICE. SINCE SHRI NIGAM MATHEW DID NOT RECORD THE SAID PAYMENT OF RS.12,25,000/- IN HIS BOOKS OF ACCOUNTS, AND SINCE HE HAD ADMITTED THAT THE SAID PAYMENT IS MADE IN CASH AND IS EARNED OUT OF HIS BU SINESS, THE ENTIRE SUM OF RS.12,25,000/- IS HIS UNACCOUNTED INCOME FOR THE Y. E. 31.3.2002. IT IS THEREFORE REQUESTED THAT THE ASSESSING OFFICER OF SHRI NIGAM MATHEW MAY BE DIRECTED TO INITIATE NECESSARY ACTION TO TAX THE ABOVE SAID UNA CCOUNTED INCOME. FROM THE OBSERVATIONS MADE BY LD CIT(A), IT IS SEEN THAT THE REPORT OF ADIT DATED 28.6.2002 WAS FORWARDED BY JDIT ON 26.7.2002 TO THE ADDL CIT, RANGE-I, TRICHUR. THE JCIT, RANGE- 2, TRICHUR, IN TURN, FORWARDED THESE R EPORTS TO THE AO, VIDE HIS LETTER DATED 8.8.2002 FOR TAKING NECESSARY ACTION. THEREAF TER, THE ASSESSING OFFICER ISSUED NOTICE U/S 158BD R.W.S. 158BC OF THE ACT TO THE ASS ESSEE ON 3.8.2004. THE LD CIT(A) HAS ALSO NOTICED THAT THE AO HAD INITIATED THE PROC EEDINGS U/S 143(3) FOR ASSESSMENT YEAR 2002-03 ALSO BY THAT POINT OF TIME. 7. BEFORE THE AO, THE ASSESSEE GAVE THE DETAILS OF PAYMENTS OF RS.4.75 LAKHS AS UNDER. 20-09-2000 : RS.1,00,000 30-03-2001 : RS.1,00,000 03-04-2001 : RS.1,00,000 30-05-2001 : RS. 73,700 AMOUNT RECD. FROM KING GRINDERS RS. 60,000 PAST SAVINGS RS. 40,000 ------------------- RS.4,73,700 ========== THE ASSESSEE CLAIMED THAT HE RECEIVED A LOAN OF RS. 2.00 LAKHS FROM A PERSON NAMED SUNNY AND USED THE SAME TO MAKE PAYMENTS MADE ON 20 -09-2000 AND 30-03-2001. HE FILED A CONFIRMATION LETTER OBTAINED FROM SHRI SUNN Y IN THIS REGARD. THE ASSESSEE HAD ALSO ACCOUNTED FOR THE PURCHASE OF SHOP AT THE RATE OF RS.73,700/- IN HIS BUSINESS BOOKS. THE AO ACCEPTED THE CLAIM OF LOAN RECEIPT O F RS.2.00 LAKHS FROM SHRI SUNNY. WITH REGARD TO THE SOURCES FOR OTHER PAYMENTS MADE AS PER THE AGREEMENTS, THE I.T.(SS)A. NO.09/COCH/2009 5 ASSESSEE STATED THAT HE WITHDREW FUNDS FROM HIS BUS INESS BOOKS AND UTILILSED THE SAME FOR MAKING THE SAID PAYMENTS. THE ASSESSEE FILED C OPIES OF HIS CAPITAL ACCOUNT, AS AVAILABLE IN HIS BUSINESS BOOKS IN SUPPORT OF THE S AID CLAIM. THE ASSESSING OFFICER NOTICED THAT THE WITHDRAWAL OF RS.73,700/- WAS SHOW N AS SHOP PURCHASE IN THE NARRATION WRITTEN FOR MAKING WITHDRAWAL. HOWEVER O THER WITHDRAWALS DID NOT CONTAIN THE PURPOSE OF WITHDRAWALS, I.E., THE PURPOSE OF WI THDRAWAL WAS NOT NARRATED AGAINST EACH OF THE WITHDRAWALS. SINCE THE SPECIFIC PURPOS E OF WITHDRAWAL WAS NOT MENTIONED IN THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT THE SAID WITHDRAWALS HAVE BEEN UTILISED FOR MA KING PAYMENTS MENTIONED IN THE BACK SIDE OF THE AGREEMENTS. THE AO ALSO REJECTED T HE CLAIM OF PAST SAVINGS AND RECEIPT OF MONEY FROM M/S KING GRINDERS. 8. THE ASSESSING OFFICER DETERMINED THE TOTAL A MOUNT OF INVESTMENTS MADE BY THE ASSESSEE AS UNDER: (A) SHOP PURCHASED ON 31-05-2001 : RS. 4,75,000/- (B) VALUE OF SHOP AS PER AGREEMENT : RS. 3,37,500/ - DATED 16-11-2001 (C) VALUE OF SHOP AS PER AGREEMENT : RS. 6,20,000/ - DATED 30-03-2001 TOTAL : RS.14,32,500/ - THE ASSESSING OFFICER GAVE CREDIT OF RS. 2,73,700/- , I.E., RS.73,700/- RECORDED IN THE BOOKS OF ACCOUNTS AND RS.2,00,000/- LOAN TAKEN FROM SHRI SUNNY. ACCORDINGLY, THE AO DETERMINED THE BALANCE AMOUNT OF INVESTMENT AT RS. 11,58,800/- 9. IN THE REGULAR RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2002-03, THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS.5.00 LAKHS. W HILE COMPLETING THE SAID ASSESSMENT U/S. 143(3) OF THE ACT ON 21-02-2005, THE ASSESSING OFFICER ASSESSED THE ABOVE SAID AMOUNT OF RS. 5.00 LAKHS ON A PROTECTIVE BASIS AS H E FELT THAT THE SAME IS ASSESSABLE AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE AMOUNT OF RS. 5.00 LAKHS OFFERE D BY THE ASSESSEE IN HIS REGULAR RETURN OF INCOME FOR 2002-03, AS UNDISCLOSED INCOME OF THE ASSESSEE AND GAVE SET OFF OF THE SAME AGAINST THE BALANCE AMOUNT OF INVESTMEN T OF RS. 11,58,800/- COMPUTED BY I.T.(SS)A. NO.09/COCH/2009 6 THE ASSESSING OFFICER. ACCORDINGLY, THE ASSESSING OFFICER DETERMINED THE UNDISCLOSED INCOME OF THE ASSESSEE AS UNDER: (A) ADDITIONAL INCOME DECLARED BY THE ASSESSEE : RS. 5,00,000/- IN ASSESSMENT YEAR2002-03 (B) BALANCE AMOUNT OF INVESTMENT COMPUTED BY : R S. 6,58,800/- THE ASSESSING OFFICER TOT AL : RS.11,58,800/- 10. THE ASSESSEE CHALLENGED THE BLOCK ASSESSMENT OR DER PASSED BY THE AO BY FILING APPEAL BEFORE LD CIT(A) BY RAISING GROUNDS ON LEGAL POINTS AS WELL AS ON MERITS. ON THE LEGAL POINT, THE ASSESSEE CONTENDED BEFORE THE LD C IT(A) THAT THE NOTICE ISSUED BY THE AO U/S 158BD R.W.S. 158BC IS NOT VALID, SINCE THE A SSESSING OFFICER OF THE PARTY SEARCHED DID NOT RECORD HIS SATISFACTION AS CONTEM PLATED U/S 158BD OF THE ACT, WHICH HAS BEEN STATED AS A MANDATORY REQUIREMENT BY THE H ONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI (289 ITR 341). ON MERITS, THE ASSESSEE CONTENDED THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF WITHDRA WAL OF FUNDS, WHICH WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 11. THE LD CIT(A) ACCEPTED THE CONTENTION OF T HE ASSESSEE WITH REGARD TO THE RECORDING OF SATISFACTION AS CONTEMPLATED U/S 158BD OF THE ACT. THE FINDINGS OF THE LD CIT(A) ARE GIVEN IN PARAGRAPH 3.3 TO 3.5 OF HIS ORD ER, WHICH READS AS UNDER:- 3.3 THEREFORE, IN MY VIEW, THE OBJECTION OF THE A PPELLANT THAT THE SATISFACTION SHOULD BE THAT OF THE AO OF THE PARTY SEARCHED AND NOT JCIT/JDIT/ADIT, IS A VALID OBJECTION. EVEN IF THE ACTION OF THE A.O. IS TREATED AS A PROCEDURAL LAPSE, IN VIEW OF THE FINDING RECORDED BY ADIT SHOWING UNDISC LOSED INCOME OF RS.12,25,000/- AND HANDINV OVER PHOTO COPIES SEIZED DURING THE SEARCH IN CASE OF GIRI PAI/ S. PAI TO THE A.O OF THE APPELLANT, TH ERE IS NOTHING ON RECORD TO SHOW WHY THIS PROCEDURAL LAPSE WAS NOT CURED IN THE INTE RIM PERIOD IN ACCORDANCE WITH THE PROVISIONS OF S/ 158BD R.W.S./158BC? PROCEEDIN GS UNDER S/158BD WERE INITIATED AGAINST THE APPELLANT AFTER 27 MONTHS THA T TOO AFTER INITIATING REGULAR ASSESSMENT PROCEEDINGS. THERE IS NO VALID EXPLANAT ION FOR THESE SO CALLED INFIRMITIES AS WELL AS DELAY IN INITIATION OF PROCE EDINGS U/S 158BD. 3.4 IT IS PERHAPS INDICATIVE OF THE FACT THAT T HE AO OF THE SEARCHED PARTY DID NOT RECORD A SATISFACTION NOTE CONCLUDING THAT THE INCOME BELONGS TO PERSON I.T.(SS)A. NO.09/COCH/2009 7 OTHER THAN THE PARTY SEARCHED. OBVIOUSLY NO BOOKS, EXCEPT PHOTOCOPIES OF AGREEMENTS, WERE HANDED OVER, THAT TO BY THE ADIT. SO EVEN THOUGH INVESTMENT CAME TO NOTICE OF DEPARTMENT NO SATISFAC TION NOTE APPEARS TO HAVE BEEN RECORDED BY THE AO OF THE PARTY SEARCHED. FUR THER, THOUGH THE INVESTMENT DID COME TO NOTICE OF THE DEPARTMENT THERE IS NO RE FERENCE TO IT BEING UNDISCLOSED INCOME. 3.5 THUS, IN MY OPINION, THE MATERIAL SEIZED WAS S UCH THAT IT DID NOT BELONG TO THE APPELLANT ALONE BUT TO THE SEARCHED PARTY AS WE LL AND THAT NO CONCLUSIONS ABOUT UNDISCLOSED INCOME OF THE APPELLANT COULD BE DRAWN BY THE AO OF THE PARTY SEARCHED. IN THE CIRCUMSTANCES IT DID NOT PERHAPS WARRANT ACTION UNDER SECTION 158BD BUT PERHAPS UNDER OTHER SECTIONS OF THE IT AC T. IN MY OPINION, IN VIEW OF THE FACTS AS ABOVE AS WELL AS SUPREME COURT DECISIO N, THE PROCEEDINGS UNDER SECTION 158BD ARE LEGALLY NOT TENABLE IN THIS CASE. 12. IT IS SEEN THAT THE LD CIT(A) HAS TAKEN THE VIEW THAT:- (A) THE DOCUMENT FOUND DURING THE COURSE OF SEARC H BELONGED TO BOTH THE ASSESSEE AND THE SEARCHED PARTY. HENCE NO CONCLUSI ON ABOUT UNDISCLOSED INCOME OF THE ASSESSEE COULD BE DRAWN BY THE AO OF THE SEARCH ED PARTY. (B) NO SATISFACTION HAS BEEN RECORDED BY THE AO O F THE SEARCHED PARTY. THE SATISFACTION RECORDED BY ADIT/JDIT/JCIT WAS NOT SUF FICIENT TO INVOKE THE PROVISIONS OF SEC. 158BD OF THE ACT. (C) THERE IS NO VALID EXPLANATION FOR THE DELAY I N INITIATION OF PROCEEDINGS U/S 158BD OF THE ACT, I.E., THE DELAY OF 27 MONTHS FROM THE DATE OF SEARCH. 13. THE REVENUE IS CHALLENGING THE VIEW EXPRESSE D BY LD CIT(A) ON THE LEGAL ISSUES DISCUSSED ABOVE. WE SHALL EXAMINE THESE LEGAL ISSU ES FIRST. THE LD D.R SUBMITTED THAT DETAILS OF UNDISCLOSED INVESTMENTS MADE BY THE ASSE SSEE HAVE COME TO THE NOTICE OF DEPARTMENT DURING THE COURSE OF SEARCH CONDUCTED IN THE CASE OF M/S GIRIPAI JEWELLERY AND SHRI SUNDARESA PAI. THIS INFORMATION WAS PASSE D ON TO THE AO OF THE ASSESSEE HEREIN AND HENCE HE HAS INITIATED PROCEEDINGS U/S 1 58BD OF THE ACT. THE LD D.R INVITED OUR ATTENTION TO SEC. 2(7) OF THE ACT AND SUBMITTED THAT THE TERM ASSESSING OFFICER MEANS ADIT/ JDIT/JCIT ALSO. THE ADIT, DURING THE C OURSE OF SEARCH PROCEEDINGS, HAS EXAMINED THE ASSESSEE HEREIN BY ADMINISTERING OATH AND THE ASSESSEE HAS ALSO CONFIRMED THE PAYMENTS SHOWN IN THE TWO AGREEMENTS FOUND DURING THE COURSE OF I.T.(SS)A. NO.09/COCH/2009 8 SEARCH. FURTHER THE ASSESSEE HIMSELF HAS ADMITTED ABOUT THE UNDERSTATEMENT OF PURCHASE CONSIDERATION IN THE SWORN STATEMENT TAKEN FROM HIM BY ADIT. SINCE THESE FACTS HAVE BEEN CONCLUSIVELY ESTABLISHED AT THE TIM E OF SEARCH ITSELF, THE ADIT HAS PASSED ON THE INFORMATION ALONG WITH THE RELEVANT D OCUMENTS TO THE AO OF THE ASSESSEE HEREIN THOUGH THE JDIT/JCIT. THE LD D.R FURTHER CO NTENDED THAT THE PROVISIONS OF SEC. 158BD DOES NOT PROVIDE FOR RECORDING OF SATISFACT ION AND IT ONLY REQUIRES THAT THE ASSESSING OFFICER SHOULD BE SATISFIED ABOUT THE UND ISCLOSED INCOME OF OTHER PERSON. IN THE INSTANT CASE, IN VIEW OF THE FACT THAT THE ASSE SSEE HIMSELF HAS ACCEPTED ABOUT THE FACT OF EXISTENCE OF UNDISCLOSED INCOME, THERE IS NO REQUIREMENT OF COMPLYING WITH FORMALITY OF RECORDING OF SATISFACTION UNDER THES E PECULIAR FACTS AND CIRCUMSTANCES. 14. ON THE CONTRARY, THE LD A.R STRONGLY PLACED RELIANCE ON THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. HE ALSO PLACED HEAVY RELIANC E ON THE FOLLOWING OBSERVATIONS MADE BY THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESWARI (SUPRA). SECTION 158BD, HOWEVER, PROVIDES FOR TAKING RECOUR SE TO A BLOCK ASSESSMENT IN TERMS OF SECTION 158BC IN RESPECT OF ANY OTHER PERS ON, THE CONDITIONS PRECEDENT WHEREFOR ARE: (I) SATISFACTION MUST BE RECORDED BY THE ASSESSING OFFI CER THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THA N THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 O F THE ACT; (II) THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS S EIZED OR REQUISITIONED HAD BEEN HANDED OVER TO THE ASSESSING OFFICER HAVIN G JURISDICTION OVER SUCH OTHER PERSON; AND (III) THE ASSESSING OFFICER HAS PROCEEDED UNDER SECTION 1 58BC AGAINST SUCH OTHER PERSON. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE SATISFAC TION OF THE ASSESSING OFFICER OF THE PARTY SEARCHED IS MANDATORY FOR INITIATING PROCEED INGS U/S 158BD OF THE ACT. ACCORDINGLY, HE CONTENDED THAT THE SATISFACTION OF THE ADIT/JDIT/JCIT IS NOT CONTEMPLATED U/S 158BD OF THE ACT, EVEN IF THEY COU LD BE CONSIDERED AS ASSESSING OFFICERS AS PER SEC. 2(7) OF THE ACT. HE FURTHER S UBMITTED THAT THE PROVISIONS OF STATUTE MUST BE STRICTLY AS HELD BY THE HONBLE SUPREME COU RT IN THE CASE OF SNEH ENTERPRISES I.T.(SS)A. NO.09/COCH/2009 9 VS. COMMISSIONER OF CUSTOMS (2006) 7 SCC 714, 721;( 2006) 7 RC 531. HE ALSO SUBMITTED THAT WHERE TWO VIEWS ARE POSSIBLE, THE VI EW IN FAVOUR OF THE ASSESSEE SHOULD BE TAKEN (ISPAT INDUSTRIES LTD V COMMISSIONER OF CU STOMS (2006) 12 JT 370; (2006) 7 RC 546). 15. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE PROVISIONS OF SEC. 158BD ARE RELEVANT HERE AND HENCE WE EXTRACT THE SAME BEL OW:- 158BD. WHERE THE ASSESSING OFFICER IS SATISFIED T HAT ANY UNDISCLOSED INCOME 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 DOCUMENTS OR ANY ASSETS WERE REQUISITIONED UNDER SECTION 132A, THEN, THE BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL B E HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH PER SON AND THAT ASSESSING OFFICER SHALL PROCEED UNDER SECTION 158BC AGAINST SUCH OTHE R PERSON AND THE PROVISIONS OF THIS CHAPTER SHALL APPLY ACCORDINGLY. BEFORE PROCEEDING FURTHER, WE FEEL IT PERTINENT TO DISCUSS ABOUT THE SCHEME OF THE ACT WITH REGARD TO THE SEARCH PROCEEDINGS WHICH WOULD R ESULT IN FRAMING OF BLOCK ASSESSMENTS. THE SEARCH IS INITIATED U/S 132 OF TH E ACT BY THE DIRECTOR GENERAL OR DIRECTOR OR THE CHIEF COMMISSIONER OF COMMISSIONER OR ANY SUCH JOINT DIRECTOR OR JOINT COMMISSIONER AS MAY BE EMPOWERED IN THIS BEHALF BY THE BOARD. ANY OF THE ABOVE SAID OFFICERS MAY AUTHORISE ANY OFFICER BELOW HIS RANK ( UP TO THE RANK OF INCOME TAX OFFICER) TO CONDUCT THE SEARCH. THE OFFICER SO AUTHORISED I S CALLED AS THE AUTHORISED OFFICER. AS PER THE PROVISIONS OF SUB SEC (9A) TO SEC. 132, IF THE AUTHORISED OFFICER HAS NO JURISDICTION OVER THE SEARCHED PERSON, HE SHALL HAN D OVER ALL THE DOCUMENTS TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH PER SON WITHIN A PRESCRIBED PERIOD. IF THE SEARCH IS INITIATED AFTER 30 TH DAY OF JUNE, 1995 BUT ON OR BEFORE 31 ST DAY OF MAY, 2003, THE ASSESSMENTS SHALL BE FRAMED UNDER CHAPTER XIV-B OF THE ACT. ACCORDING TO THIS CHAPTER, WHICH CONTAINS PROVISIONS OF SEC. 158B TO 158BH, THE ASSESSING OFFICER IS REQUIRED TO COMPUTE UNDISCLOSED INCOME ON THE BAS IS OF SEIZED MATERIALS AND SUBJECT THE SAME TO TAX SEPARATELY. THE ASSESSMENT SO MADE IS POPULARLY CALLED BLOCK ASSESSMENT. IT IS NOW WELL SETTLED PROPOSITION THA T THE BLOCK ASSESSMENT IS A DISTINCT I.T.(SS)A. NO.09/COCH/2009 10 AND SEPARATE ASSESSMENT AND IT RUNS PARALLEL TO THE REGULAR ASSESSMENT PROCEEDINGS. UNDER THE BLOCK ASSESSMENT, AS PER THE PROVISIONS O F SEC. 158BB OF THE ACT, THE AO IS REQUIRED TO DETERMINE THE UNDISCLOSED INCOME OF T HE ASSESSEE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION A S ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE. ANY INCOME NOT RELATABLE TO THE EVIDENCE FOUND AS A RESULT OF SEARCH CAN BE ASSESSED IN THE REGULA R ASSESSMENT ONLY. 16. IF THE ASSESSING OFFICER IS SATISFIED THAT ANY UNDISCLOSED INCOME NOTICED FROM THE EVIDENCES BELONGS TO ANY PERSON, OTHER THAN THE PER SON WITH RESPECT TO WHOM SEARCH WAS MADE U/S 132, THEN AS PER THE PROVISIONS OF SEC . 158BD OF THE ACT HE SHALL HAND OVER THE BOOKS OF ACCOUNT, OTHER DOCUMENTS ETC. TO THE ASSESSING OFFICER HAVING JURISDICTION TO SUCH OTHER PERSON AND THAT AO SHALL PROCEED U/S 158BC AGAINST SUCH OTHER PERSON. AT THIS STAGE, WE FEEL IT PERTINENT TO EXTRACT BELOW THE OBSERVATIONS MADE BY THE HONBLE KERALA HIGH COURT WITH REGARD TO THE SCOPE OF PROVISIONS OF SEC.158BD OF THE ACT IN THE CASE OF CIT VS. DR. T.M. KURIACHAN ( ITA NO.12 OF 2011 DATED MARCH 5, 2012):- CHAPTER XIV-B PROVIDES FOR SPECIAL PROCEDURE FOR A SSESSMENT OF SEARCH CASE. THE PROVISION PROVIDES FOR ASSESSMENT FOR BLOCK PER IOD PURSUANT TO SEARCH MADE UNDER SECTION 132 OR BASED ON REQUISITION OF ACCOUN TS OR DOCUMENTS UNDER SECTION 132A OF THE ACT. THE PROVISIONS FOR ASSESS MENT OF UNDISCLOSED INCOME OF THE ASSESSEE SEARCHED UNDER SECTION 132 OR WHOSE BO OKS OF ACCOUNTS AND OTHER DOCUMENTS ARE REQUISITIONED UNDER SECTION 132A, ARE CONTAINED IN SECTION 158BC OF THE ACT. UNLIKE SECTION 148(2), THERE IS NO PRO VISION IN CHAPTER XIV-B REQUIRING THE ASSESSING OFFICER TO RECORD SATISFACT ION OF UNDISCLOSED INCOME FOR MAKING ASSESSMENT OF THE SEARCHED ASSESSEE. HOWEVER, CHAPTER XIV-B VISUALISES THAT IN THE COURSE OF SEARCH OF AN ASSES SEE THERE IS POSSIBILITY OF RECOVERY OF EVIDENCE AND DOCUMENTS PERTAINING TO UN DISCLOSED INCOME OF OTHER PERSONS BASED ON WHICH SUCH PERSONS COULD BE ASSESS ED BY THE SAME OFFICER IF HE HAS JURISDICTION OR BY THE ASSESSING OFFICER HAV ING JURISDICTION OVER SUCH ASSESSEES. WHAT IS STATED IN SECTION 158BD IS THAT IF THE AS SESSING OFFICER ON SCRUTINY OF THE EVIDENCE RECOVERED IN SEARCH CONDUC TED UNDER SECTION 132 OR BASED ON DOCUMENTS REQUISITIONED UNDER SECTION 132A IS SATISFIED THAT THE SAME CONTAINS DETAILS OF UNDISCLOSED INCOME OF ANY OTHER ASSESSEE OVER WHOM SUCH ASSESSING OFFICER HAS NO JURISDICTION, HE HAS TO TR ANSFER THE RECOVERED MATERIALS AND EVIDENCE AND DOCUMENTS TO SUCH OTHER OFFICER HA VING JURISDICTION TO PROCEED FOR ASSESSMENT OF SUCH ASSESSEES UNDER SECTION 158B C. I.T.(SS)A. NO.09/COCH/2009 11 THE REVENUE HAS BROUGHT TO OUR NOTICE THE DECISION OF THIS COURT, IN CIT VS. PANCHAJANYAM MANAGEMENT AGENCIES & SERVICES (2011)( 333 ITR 281), WHEREIN THE DIVISION BENCH OF THIS COURT OF WHICH ONE OF US (CNR(J)) IS A MEMBER, HAS TAKEN THE VIEW THAT THE SATISFACTION UNDER SECTION 158BD IS ONLY ABOUT EVIDENCE OF UNDISCLOSED INCOME OF A PERSON OTHER THAN THE AS SESSEE SEARCHED AND THERE IS NO REQUIREMENT TO RECORD THE SAME AND SUCH SATISFAC TION BEING ONLY FOR TRANSFERRING THE FILE FROM ONE OFFICER TO ANOTHER, THERE IS NO REQUIREMENT FOR THE OFFICER TRANSFERRING THE FILE TO RECORD THE REASON FOR TRANSFER.. IN FACT, WHAT SECTION 158BD SAYS IS THAT WHEN THE E VIDENCE COLLECTED IN SEARCH OF AN ASSESSEE REVEALED UNDISCLOSED INCOME O F ANOTHER ASSESSEE, WHO IS NOT SEARCHED, THE MATERIAL OR EVID ENCE SO RECEIVED CAN BE THE BASIS OF MAKING ASSESSMENT UNDER SECTION 158 BC OF THE ASSESSEE WHO IS NOT SEARCHED. THE SATISFACTION REQUIRED UNDER SECTION 158BD FOR THE OFFICER TO TRANSFER THE MATERIAL AND EVIDENCE GATHERED DURING SEARCH OR AFTER REQUISITION OF ACCOUNTS IS ONLY TO JUSTIFY TRANSFER OF THE FILE TO THE ASSESSING OFFICER, WHO HAS JURISDICTION TO ASSESS T HE ASSESSEE WHO IS NOT SEARCHED BUT IN RESPECT OF WHOSE UNDISCLOSED INCOME EVIDENCE IS GATHERED. IN FACT, IT IS ABSOLUTELY LEFT TO THE OFFICER TO WHOM THE FILE IS TRANSFERRED UNDER SECTION 158BD TO CONSIDER THE TRANSFERRED EVIDENCE AND MATERIALS AND TO DECIDE WHETHER TO PROCEED WITH ASSESSMENT AGAINST THAT ASS ESSEE UNDER SECTION 158BC OR NOT. SO MUCH SO, THE SATISFACTION FOR TRANSFERRING A FI LE BY ONE OFFICER TO ANOTHER IS ONLY PRIMA FACIE SATISFACTION ON JURISDI CTION AND ON IDENTIFYING THE ASSESSING OFFICER, WHO HAS THE JURISDICTION OVER TH E OTHER ASSESSEE, THE MATERIALS AND EVIDENCE COLLECTED IN SEARCH OR REQUISITION ARE TRANSFERRED. THE SATISFACTION FOR INITIATION AND COMPLETION OF ASSESSMENT UNDER S ECTION 158BD IS OBVIOUSLY THAT OF THE ASSESSING OFFICER TO WHOM TRANSFER IS MADE B Y THE OFFICER WHO CONDUCTED SEARCH. HAVING DISCUSSED SO, THE HIGH COURT FOLLOWED THE DE CISION OF THE SUPREME COURT IN MANISH MAHESHWARI (SUPRA), WHERE IN IT WAS HELD THA T IF SATISFACTION IS NOT RECORDED BY THE ASSESSING OFFICER FOR TRANSFERRING THE FILE UND ER SECTION 158BD, THE ASSESSMENT MADE UNDER SECTION 158BC IS INVALID. SUBSEQUENTLY, THE REVENUE HAS FILED A REVIEW PETITION BEFORE THE HIGH COURT OF KERALA IN THE ABO VE SAID CASE AND THE HIGH COURT PASSED THE ORDERS ON THE REVISION PETITION NO.658 O F 2012 ON SEPTERMBER 12, 2012. THE HIGH COURT HELD THAT THE DECISION RENDERED BY T HE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESWARI (SUPRA) HAS NO APPLICATION IF THE ASSESSMENTS OF BOTH THE ASSESSEES, ONE U/S 158BC AND THE OTHER U/S 158BD, W ERE COMPLETED BY THE SAME ASSESSING OFFICER. I.T.(SS)A. NO.09/COCH/2009 12 17. A CAREFUL ANALYSIS OF THE SCHEME OF THE PROVI SIONS AND THE DECISION RENDERED BY THE HIGH COURT / SUPREME COURT SUGGESTS THAT THE SI TUATION CONTEMPLATED UNDER SECTION 158BD IS A SITUATION WHERE THE AO OF THE SEARCHED P ERSON, ON EXAMINATION OF THE EVIDENCES FOR THE FIRST TIME, IS SATISFIED THAT ANY UNDISCLOSED INCOME FOUND THEREIN BELONGS TO ANY OTHER PERSON. IN THAT SITUATION, HE SHALL HANDOVER THE EVIDENCES TO THE A.O HAVING JURISDICTION OVER SUCH OTHER PERSON. TH E FOLLOWING POINTS, IN OUR VIEW, ARE PERTINENT HERE. (A) AS PER THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF DR. T.M. KURIACHAN, THE SATISFACTION FOR TRANSFERRING A FILE BY ONE OFFICER TO ANOTHER IS ONLY PRIMA FACIE SATISFACTION ON JURISDICTION AND O N IDENTIFYING THE AO, WHO HAS JURISDICTION OVER THE OTHER ASSESSEE AND TO WHO M THE MATERIALS AND EVIDENCE COLLECTED IN SEARCH OR REQUISITION ARE TRA NSFERRED. HOWEVER, THE INITIATION AND COMPLETION OF ASSESSMENT UNDER SECTI ON 158BD IS OBVIOUSLY DONE BY THE ASSESSING OFFICER TO WHOM TRANSFER IS M ADE BY THE OFFICER WHO CONDUCTED SEARCH. (B) THE PROVISIONS OF SEC. 158BD DOES NOT CONTEMPLATE T HAT THE MATERIALS AND EVIDENCES COLLECTED IN SEARCH OR REQUISITION SHOULD HAVE NECESSARILY BEEN CONFRONTED WITH THE PERSON, TO WHOM IT BELONGS TO, IN ORDER TO ARRIVE AT THE SATISFACTION. IT IS ALSO NOT NECESSARY THAT THE UNDISCLOSED INCOME OF SUCH OTHER PERSON SHOULD HAVE BEEN CONCLUSIVELY ESTABLIS HED BY THE AO OF THE SEARCHED PERSON. AS HELD BY THE HONBLE JURISDICTI ONAL HIGH COURT, WHAT IS REQUIRED IS A PRIMA FACIE SATISFACTION THAT IT BE LONGS TO OTHER PERSON. (C) THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAH ESWARI (SUPRA) HAS LAID DOWN THAT THE RECORDING OF SATISFACTION BY THE AO OF SEARCHED PERSON IS A MANDATORY REQUIREMENT FOR TRANSFERRING MATERIALS AN D EVIDENCE TO THE AO HAVING JURISDICTION OVER THE OTHER PERSON. HOWEVER , THE HONBLE KERALA HIGH COURT, IN THE CASE OF PANCHAJANYAM MANAGEMENT AGENC IES & SERVICES (SUPRA) AND DR. T.M. KURIACHAN (SUPRA), DISTINGUISHING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI (SUP RA) HAS HELD THAT THE SATISFACTION IS NOT REQUIRED TO BE RECORDED IF THE ASSESSMENTS OF BOTH THE I.T.(SS)A. NO.09/COCH/2009 13 ASSESSEES ONE UNDER S. 158BC AND THE OTHER UNDER S. 158BD WERE COMPLETED BY THE SAME AO. (D) AS PER THE DECISION OF HONBLE JURISIDICTIONAL HIG H COURT, THE REQUIREMENT OF COMPLIANCE WITH MANDATORY CONDITION OF RECORDING O F SATISFACTION PRESCRIBED BY HONBLE SUPREME COURT CAN BE DISPENSED WITH IF T HE AO IS THE SAME FOR BOTH THE ASSESSEES, I.E., THE PERSON WHO WAS SEARCH ED AND THE OTHER PERSON, MEANING THEREBY, THE CONDITION OF RECORDING OF SAT ISFACTION WOULD DEPEND UPON THE FACTS AND CIRCUMSTANCES SURROUNDING THE CA SE. (E) THE ASSESSING OFFICER OF THE SEARCHED PERSON SHOUL D FIRST SATISFY HIMSELF THAT THE UNDISCLOSED INCOME FOUND IN THE EVIDENCES DOES NOT BELONG TO THE SEARCHED PERSON AND THEN ONLY, HE WOULD BE IN A POS ITION TO RECORD SATISFACTION THAT IT BELONGS TO SOME OTHER PERSON. (F) SECTION 158BD PROCEEDS ON THE PRESUMPTION THAT THE AO OF THE SEARCHED PERSON HAS FOUND OUT THE EXISTENCE OF UNDISCLOSED I NCOME OF SOME OTHER PERSON FOR THE FIRST TIME. HENCE, IT IS PROVIDED T HAT HE SHOULD SATISFY HIMSELF ABOUT THE EXISTENCE OF UNDISCLOSED INCOME BEFORE TR ANSFERRING RECORDS TO THE AO HAVING JURISDICTION OVER THE OTHER PERSON. 18. IN THE INSTANT CASE, THE EVIDENCES/MATERIAL S WHICH ARE RELEVANT ARE THE COPIES OF TWO AGREEMENTS FOUND DURING THE COURSE OF SEARCH. THE SAID AGREEMENTS WERE ENTERED BETWEEN THE SEARCHED PARTY AND THE ASSESSEE HEREIN. THUS, THE IMPUGNED MATERIALS BELONGED TO BOTH THE PARTIES. THE SAID AGREEMENTS REVEALED MONEY TRANSACTIONS, WHICH HAVE BEEN ACCEPTED BY THE ASSESSEE HEREIN. HENCE, IT MAY NOT BE CORRECT TO SAY THAT THE AO OF THE SEARCHED PARTY COULD NOT DRAW CONCLUS IONS ABOUT THE UNDISCLOSED INCOME OF THE ASSESSEE HEREIN, AS OBSERVED BY LD CIT(A). ON THE DATE OF SEARCH ITSELF, THE ADIT EXAMINED THE ASSESSEE HEREIN U/S 131 OF THE AC T BY ADMINISTERING OATH AND THE ASSESSEE HEREIN HAS CONFIRMED THE VERACITY OF THE A GREEMENTS AND ALSO THE MONEY TRANSACTIONS NOTED THEREIN. THUS, THE CIRCUMSTANCE S PREVAILING IN THE PRESENT CASE ARE THAT (A) MATERIALS BELONGING TO THE ASSESSEE WERE FOUND DURING THE COURSE OF SEARCH CONDUCTED IN THE HANDS OF M/S GIRIPAI JEWELLERY & S HRI SUNDARESA PAI. I.T.(SS)A. NO.09/COCH/2009 14 (B) IN FACT, THE SAID MATERIALS BELONGED BOTH TO T HE ASSESSEE AND THE SEARCHED PERSONS. (C) THE SAID MATERIALS WERE CONFRONTED WITH THE AS SESSEE HEREIN AND HE HAS ALSO ADMITTED THE TRANSACTIONS RECORDED THEREIN. THUS, IN THE INSTANT CASE THE ASSESSEE, BEING THE P ERSON OTHER THAN THE SEARCHED PERSON, HAS HIMSELF HAS ADMITTED AND ACCEPTED THE M ATERIALS FOUND DURING THE COURSE OF SEARCH, THAT TOO, ON THE DATE OF SEARCH ITSELF. IN THIS KIND OF SITUATION, THE AO OF SEARCHED PERSON WAS AWARE OF THIS FACT AT THE TIME OF RECEIPT OF THE MATERIALS AND DOCUMENTS FROM THE AUTHORISED OFFICER ITSELF, I.E., WITHOUT EXAMINING THE SEIZED MATERIALS, THE AO WAS AWARE OF THE FACT THAT THE IM PUGNED AGREEMENTS ALSO BELONGED TO THE ASSESSEE HEREIN AND FURTHER HE IS ALSO AWARE OF THE FACT THAT THE ASSESSEE HEREIN HAS ALSO ACCEPTED THE VERACITY OF THE AGREEMENTS AN D THE MONEY TRANSACTIONS RECORDED THEREIN. IN THIS KIND OF CLEAR SITUATION, IT MAY NOT BE CORRECT TO INSIST THAT THE AO SHOULD NECESSARILY RECORD THE SATISFACTION CONTEMPL ATED U/S 158BD OF THE ACT, AS THE SAME WOULD MERE BE AN EMPTY FORMALITY, PARTICULARLY IN VIEW OF THE FACT THAT THE ASSESSEE HEREIN HIMSELF HAS ACCEPTED THE INCRIMINAT ING MATERIALS. 19. IT IS ALSO A WELL ESTABLISHED PRINCIPLE OF INTERPRETATION OF LAW THAT THE PROVISIONS OF ACT SHOULD BE INTERPRETED IN A MANNER WHICH ACHIEVE S THE PURPOSE OF ENACTING THE SAID PROVISION, I.E., THE INTERPRETATION SHOULD AIM TO F ULFIL THE INTENTION OF THE PARLIAMENT. THE INTENTION OF THE PARLIAMENT IN ENACTING PROVISI ONS OF SEC. 158BD IS TO ASSESS THE UNDISCLOSED INCOME OF ANY PERSON, OTHER THAN THE PE RSON SEARCHED, IF THE SAME IS FOUND DURING THE COURSE OF SEARCH. AT THE COST OF REPETI TION, WE EXTRACT BELOW THE OBSERVATIONS MADE BY THE HONBLE JURISDICTIONAL KER ALA HIGH COURT IN THE CASE OF DR. T.M. KURIACHAN:- IN FACT, WHAT SECTION 158BD SAYS IS THAT WHEN THE EVIDENCE COLLECTED IN SEARCH OF AN ASSESSEE REVEALED UNDISCLOSED INCOME OF ANOTH ER ASSESSEE, WHO IS NOT SEARCHED, THE MATERIAL OR EVIDENCE SO RECEIVED CAN BE THE BASIS OF MAKING ASSESSMENT UNDER SECTION 158BC OF THE ASSESSEE WHO IS NOT SEARCHED. THE SATISFACTION OF THE ASSESSING OFFICER OF THE SE ARCHED PERSON, IN OUR VIEW, WOULD BE MANDATORY, IF THE UNDISCLOSED INCOME OF SUCH OTHER PERSON IS FOUND OUT BY HIM FOR THE FIRST TIME AND FURTHER THE SAID MATERIALS WERE NOT CONFRONTED WITH SUCH OTHER PERSON. I.T.(SS)A. NO.09/COCH/2009 15 THE OBVIOUS REASON, IN SUCH KIND OF SITUATION, COUL D BE THAT THE BLOCK ASSESSMENT PROCEEDING IS CONTEMPLATED ON A PERSON WHO WAS NOT SEARCHED AT ALL AND ALSO ON THE PERSON WHO IS NOT UNDER THE JURISDICTION OF THE SAM E AO. HENCE, IT WAS FOUND NECESSARY THAT THE AO OF THE SEARCHED PERSON SHOULD RECORD SATISFACTION BEFORE HANDING OVER THE MATERIALS TO THE AO HAVING JURISDICTION OV ER THE OTHER PERSON, SO THAT THE OTHER ASSESSING OFFICER COULD HAVE A BASE FOR INITIATING THE BLOCK ASSESSMENT PROCEEDINGS AGAINST SUCH OTHER PERSON. 20. HOWEVER, WHEN THE OTHER PERSON WAS EXAMINED AND CONFRONTED WITH THE SEIZED MATERIAL AND HE HAS ALSO ACCEPTED THE DOCUMENTS AND THE UNDISCLOSED INCOME FOUND THEREIN; THEN IN OUR VIEW, THE REQUIREMENT OF RECOR DING OF SUCH A SATISFACTION WOULD BECOME AN EMPTY FORMALITY. ONCE THE PERSON, OTHER THAN THE SEARCHED PERSON, ACCEPTS THAT THE SAID MATERIAL BELONG TO HIM AND FURTHER ON CE IT IS ESTABLISHED THAT THERE EXISTS UNDISCLOSED INCOME, IN OUR VIEW, THE REQUIREMENTS P RESCRIBED UNDER SEC. 158BD SHOULD BE DEEMED TO HAVE BEEN FULFILLED, SINCE THERE IS NO NECESSITY FOR THE AO OF THE SEARCHED PERSON TO DERIVE SATISFACTION SEPARATELY AGAIN. 21. IN THE INSTANT CASE, THE ASSESSEE HEREIN HA S ACCEPTED THE VERACITY OF THE AGREEMENTS AND ALSO ADMITTED THE MONEY TRANSACTIONS RECORDED THEREIN. HE ALSO ADMITTED THAT A SHOP COSTING RS.4,75,000/- WAS REGI STERED FOR ONLY RS.73,700/-. THUS, THE ASSESSEE HEREIN HAS ACCEPTED THAT THE DOCUMENTS BELONG TO HIM ALSO AND FURTHER IT WAS ALSO SEEN THAT THERE EXISTED UNDISCLOSED INCOME BELONGING TO THE ASSESSEE HEREIN. THESE FACTS HAVE EMANATED EVEN BEFORE THE SEARCH MA TERIALS WERE HANDED OVER TO THE ASSESSING OFFICER OF THE SEARCHED PERSON. FURTHER THESE FACTS WERE PASSED ON TO THE AO HAVING JURISDICTION OVER THE ASSESSEE HEREIN BY THE AUTHORISED OFFICER HIMSELF. IN VIEW OF THE ADMITTED FACTS, IN OUR CONSIDERED VIEW, IT M AY NOT BE CORRECT TO EXPECT THE AO OF THE SEARCHED PERSON AGAIN TO COMPLY WITH THE EMPTY FORMALITY OF RECORDING SATISFACTION AND HANDING OVER THE DOCUMENTS TO THE AO HAVING JUR ISDICTION OVER THE ASSESSEE. IN THE INSTANT CASE, THE PRIMA FACIE SATISFACTION WITH REG ARD TO THE EXISTENCE OF UNDISCLOSED INCOME OF THE ASSESSEE HEREIN HAS BEEN ESTABLISHED BY THE ADIT HIMSELF DURING THE COURSE OF SEARCH ITSELF BY EXAMINING THE ASSESSEE H EREIN AND BY TAKING SWORN STATEMENT I.T.(SS)A. NO.09/COCH/2009 16 FROM HIM. HENCE, UNDER THESE PECULIAR FACTS, IN OU R VIEW, THE SATISFACTION PRESCRIBED U/S 158BD OF THE ACT IS DEEMED TO HAVE BEEN ESTABLI SHED IN THIS CASE. 22. IN OUR VIEW, WHAT IS MORE IMPORTANT IS THE ASSUMPTION OF JURISDICTION, I.E., THE ASSESSING OFFICER, BEFORE PROCEEDING TO ASSESS THE UNDISCLOSED INCOME, SHOULD ASSUME THE JURISDICTION OVER THE SAID PERSON IN A PROPER A ND LEGALLY PERMITTED WAY. THERE IS NO DISPUTE IN THE INSTANT CASE THAT THE ASSESSING OFFI CER OF THE ASSESSEE HEREIN HAS ASSUMED JURISDICTION IN A PROPER MANNER BY ISSUING NOTICE U/S 158B R.W.S. 158BC OF THE ACT. ACCORDINGLY, IN OUR VIEW, THE ASSESSMENT FRAM ED BY THE AO U/S 158BD R.W.S. 158BC OF THE ACT CANNOT BE FIND FAULT WITH, IN VIEW OF THE PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WHICH WERE DISCU SSED IN THE PRECEDING PARAGRAPHS. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND HOLD THAT THE NOTICE ISSUED U/S 158BD WAS LEGALLY TENABLE. 23. THE LD. CIT(A) IN PARA 3.3 OF HIS ORDER HAS ALS O OBSERVED THAT THE ASSESSING OFFICER DID NOT GIVEN ANY EXPLANATION FOR THE DELAY IN INITIATION OF PROCEEDINGS U/S. 158BD OF THE ACT. THE LD CIT(A) HAS NOTICED THAT T HE NOTICE U/S 158BD HAS BEEN ISSUED AFTER EXPIRY OF ABOUT 27 MONTHS FROM THE DAT E OF SEARCH. THE REVENUE HAS CHALLENGED THE SAID OBSERVATION MADE BY THE LD. CIT (A). 24. THE SEARCH IN THE HANDS OF M/S. GIRIPAI JEWELLE RY AND SHRI SUNDARESA PAI TOOK PLACE ON 18-04-2002. THE NOTICE U/S. 158BD R.W.S. 158BC WAS ISSUED TO THE ASSESSEE ON 03-08-2004. IT IS PERTINENT TO NOTE THAT THE ST ATUTE DOES NOT PRESCRIBE ANY TIME FRAME FOR ISSUING NOTICE U/S. 158BD OF THE ACT. TH E HONBLE JURISDICTIONAL HIGH COURT OF KERALA HAD AN OCCASION TO CONSIDER AN IDENTICAL ISS UE IN THE CASE OF CIT VS. BIMBIS CREAMS & BAKES (2012) 254 CTR 633 (KER.). THE SAID DECISION WAS CONSIDERED BY THIS BENCH IN THE CASE OF N.C.THOMAS VS. DCIT IN IT(SS)A NO. 01/COCH/2011. THE OBSERVATIONS MADE BY THE TRIBUNAL ARE EXTRACTED BEL OW:- IN THE CASE BEFORE THE KERALA HIGH COURT, THE ASS ESSMENT IN THE CASE OF SEARCHED PERSON WAS COMPLETED ON 29-03-2001 AND THE NOTICE U /S. 158BD WAS ISSUED IN RESPECT OF THE PERSON OTHER THAN SEARCHED ON 29-05- 2001. THE KERALA HIGH COURT, AFTER CONSIDERING THE PROVISIONS OF SECTION 158BC A ND 158BD FOUND THAT A PRUDENT I.T.(SS)A. NO.09/COCH/2009 17 OFFICER WHO FIRST COMPLETED THE ASSESSMENT U/S. 158 BC ON THE SEARCHED PERSON AND THEREAFTER BASED ON THE MATERIALS AVAILABLE PROCEED S FOR ASSESSMENT U/S. 158BD AGAINST THE PERSON OTHER THAN SEARCHED ABOUT WHOM T HE MATERIALS WERE OBTAINED IN THE COURSE OF SEARCH. THE KERALA HIGH COURT FUR THER OBSERVED IN THE ABSENCE OF ANY PROVISION IN THE ACT REQUIRING THE DEPARTMENT T O ISSUE NOTICE U/S. 158BD WITHIN A TIME FRAME, THE COURT CANNOT PRESCRIBE ANY TIME L IMIT FOR ISSUE OF SUCH NOTICE. THE KERALA HIGH COURT FURTHER OBSERVED THAT AT THE MAXIMUM, THE ASSESSMENT COULD BE DECLARED ARBITRARY IF THE SAME WAS NOT INI TIATED WITHIN A REASONABLE TIME. THE KERALA HIGH COURT FOUND THAT TWO MONTHS PERIOD FROM THE DATE OF COMPLETION OF THE ASSESSMENT U/S. 158BC AGAINST THE SEARCHED P ERSON WAS REASONABLE. ACCORDINGLY IT WAS FOUND THAT THE ASSESSMENT U/S. 1 58BD WAS VALIDLY INITIATED. 25. IN THE INSTANT CASE, THE DETAILS AS TO THE DATE OF COMPLETION OF ASSESSMENTS U/S. 158BC IN THE HANDS OF THE SEARCHED PERSONS WERE NOT BROUGHT ON RECORD. IN THE CASE BEFORE THE KERALA HIGH COURT, THE NOTICE U/S. 158BD WAS ISSUED AFTER TWO MONTHS FROM THE DATE OF COMPLETION OF ASSESSMENT U/S. 158BC AND THE SAME WAS FOUND TO BE REASONABLE BY THE HONBLE HIGH COURT. IN THE INST ANT CASE IN THE ABSENCE OF THE DATE OF COMPLETION OF BLOCK ASSESSMENT U/S. 158BC OF THE ACT IN THE HANDS OF THE SEARCHED PERSONS, WE ARE UNABLE TO EXPRESS ANY OPINION ON TH IS ISSUE. WE ALSO NOTICED THAT THE LD. CIT(A) HAS MADE A SWEEPING OBSERVATION WITH REG ARD TO THE ISSUE OF NOTICE U/S 158BD OF THE ACT, WITHOUT EXAMINING THE DETAILS OF DATE OF COMPLETION OF ASSESSMENTS U/S. 158BC OF THE ACT IN THE HANDS OF SEARCHED PERS ONS. UNDER THESE CIRCUMSTANCES, WE HAVE TO HOLD THAT THE LD CIT(A) HAS MADE THE IMP UGNED OBSERVATIONS WITHOUT ANY BASIS AND HENCE WE HAVE NO OTHER OPTION BUT TO SET ASIDE THE SAID OBSERVATIONS MADE BY THE LD. CIT(A) ON THIS ISSUE. 26. THE LD. CIT(A) HAS ALSO CONSIDERED THE MERITS O F ADDITION AND HAS HELD THAT NO ADDITION IS WARRANTED ON MERITS FOR THE FOLLOWING R EASONS: (A) THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESS EE WERE NOT CALLED FOR BY THE ADIT TO ASCERTAIN WHETHER THE PAYMENTS RECORDE D IN THE AGREEMENT WERE DULY ACCOUNTED FOR OR NOT BY THE DATE OF THE SEARC H. (B) THE ASSESSEE HAS SHOWN THAT HE HAS DULY ACCOUN TED FOR THE PAYMENTS MADE FOR PURCHASE OF SHOPS, WHICH WERE SHOWN IN THE AGR EEMENTS. I.T.(SS)A. NO.09/COCH/2009 18 (C) THE ASSESSEE HAS BEEN MAINTAINING BOOKS OF AC COUNTS IN THE ORDINARY COURSE OF BUSINESS AND THE SAID FACT IS CORROBORATED BY R EGULAR FILING OF SALES TAX RETURNS. (D) THE ASSESSMENT FOR THE ASSESSMENT YEAR 2002-0 3 HAS BEEN COMPLETED U/S. 143(3) OF THE ACT AND THE ASSESSING OFFICER DID NO T MAKE ANY ADDITION TO THE INCOME RETURNED BY THE ASSESSEE. (E) THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSES SEE HAVE BEEN SUBJECTED TO AUDIT U/S. 44AB OF THE ACT. FOLLOWING OBSERVATIONS MADE BY LD CIT(A) ARE RELEVA NT HERE:- 6.1 I FIND THAT THE ADIT APPARENTLY WITHOUT REFERR ING TO THE BOOKS, HAS CONCLUDED THAT NET PROFIT FOR YEAR ENDING 31.3.01 I S RS. 1,42,192. FURTHER THERE IS NO EVIDENCE SHOWING THAT A CASH FLOW STATEMENT HAS BEEN CONSIDERED FOR THE YEAR 1.4.2001 TO 31.3.2002 BY THE ADIT OR THE ASSES SING OFFICER TO INDICATE THAT ADEQUATE AMOUNT WAS NOT AVAILABLE WITH THE APPELLAN T FROM KNOWN SOURCES INCLUDING BUSINESS FOR INVESTMENT. REGARDING RS.5 LAKHS TAXED ON PROTECTIVE BASIS, I FIND NO ENQUIRY HAS BEEN MADE EITHER IN RE GULAR OR BLOCK ASSESSMENT TO SHOW THAT IT IS NOT GENUINE. IN THE CIRCUMSTANCES IT IS IMPLIED THAT THE SOURCE FOR THE INVESTMENT WAS FROM BUSINESS, HAS BEEN ACCE PTED BY BOTH ADIT AND ASSESSING OFFICER AND NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW INVESTMENT WAS FROM SOURCE OTHER THAN BUSINESS WH ICH HAS NOT BEEN SUBJECTED TO TAX. 6.2 I FIND THAT THERE IS NO EVIDENCE THAT THE BOOKS WERE EVEN CALLED FOR, U/S. 131, BY THE ADI, AS THERE IS NO MENTION OF BOOKS IN THE SUMMONS ISSUED BY ADI. FROM THE FACTS ON RECORD, IT IS SEEN THAT SUM MON U/S. 131, DATED 18.4.2002 ISSUED BY ADI(INV)-I DIRECTING THE APPELL ANT TO APPEAR IN THE CASE OF GIRIPAI JEWELLERY ON 18.04.02, DOES NOT SPECIFY WHI CH BOOKS OF ACCOUNTS OR DOCUMENTS ARE TO BE PRODUCED. FURTHER, NO REFERENC E TO THE EXISTENCE OR OTHERWISE OF BOOKS HAS BEEN MADE BY ADIT WHILE RECO RDING THE ABOVE SWORN STATEMENT. NO QUESTION HAS BEEN ASKED WHY BOOKS HA VE NOT BEEN PRODUCED. I FIND THAT THE BOOKS WERE CATEGORICALLY CALLED FOR O NLY BY THE ASSESSING OFFICER VIDE SUMMONS DATED 3.8.04 I.E. MORE THAN 2 YEARS LA TER. FURTHER, DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS PRODUCED ON 4.10.07, AGAIN, PHOTOCOPY OF LOCAL DELIVERY BOOK EVIDENCING FILING OF MONTHLY SALES TAX RETURNS IN FORM 9 PERIODICALLY AND ANNUAL RETURN DATED 12.0 4.2002 FILED ON 15.04.2002 BEFORE SALES TAX AUTHORITIES, TO SHOW THAT THE BOOK S WERE BEING MAINTAINED BUT WERE NOT CALLED FOR BY THE ADI IN APRIL, 02. ON A REFERENCE ON THIS ISSUE, THE A.O. IN THE REMAND REPORT DATED 18.07.2007 STATED T HAT, THE ADDITIONAL EVIDENCE OF FORM NO 9 ETC FILED BEFORE SALES TAX AU THORITIES DOES NOT PROVE THAT TRANSACTIONS OF RS. 9 LAKHS HAD BEEN RECORDED IN RE GULAR BOOKS OF ACCOUNT I.T.(SS)A. NO.09/COCH/2009 19 BEFORE THE SEARCH. BUT IN MY VIEW, PRODUCTION OF S T RETURNS DOES PROVIDE CIRCUMSTANTIAL EVIDENCE SHOWING THE EXISTENCE OF BO OKS WHICH HAS NOT BEEN REFUTED. SO IT CANNOT BE CONCLUDED THAT THE BOOKS DID NOT EXIST AT THE TIME OF SEARCH AT GIRIPAI. 27. ON MERITS OF THE ISSUE, THE CONTENTION OF TH E ASSESSEE IS THAT HE HAD WITHDRAWN FUNDS FROM HIS BUSINESS FOR MAKING THE PAYMENTS AS SHOWN IN THE AGREEMENTS AND FURTHER THE SAID WITHDRAWALS HAVE BEEN DULY RECORDE D IN HIS BUSINESS BOOKS. THE LD A.R INVITED OUR ATTENTION TO THE COPIES OF CAPITAL ACCOUNT TO SHOW THAT THERE WERE WITHDRAWALS. THE LD A.R SUBMITTED THAT THE ASSESSI NG OFFICER WAS NOT JUSTIFIED IN REJECTING THE SAID WITHDRAWALS ONLY FOR THE REASON THAT THE ASSESSEE DID NOT STATE IN THE NARRATION THAT THEY WERE WITHDRAWN FOR GIVING ADVAN CE FOR PURCHASE OF SHOPS. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD OFFERED ADD ITIONAL INCOME OF RS.5.00 LAKHS IN HIS REGULAR RETURN OF INCOME FILED FOR THE ASSESSME NT YEAR 2002-03 AND ANOTHER SUM OF RS.2.50 LAKHS WAS OFFERED IN THE ASSESSMENT MADE U/ S 143(3) R.W.S. 147 OF THE ACT FOR THE VERY SAME ASSESSMENT YEAR. ACCORDINGLY HE SUBM ITTED THAT THE ASSESSEE WAS HAVING SUFFICIENT SOURCES FOR MAKING THE PAYMENTS S HOWN IN THE AGREEMENTS. THE LD A.R FURTHER SUBMITTED THAT THE ADIT DID NOT CALL FO R BOOKS OF ACCOUNTS AND HENCE THERE WAS NO OCCASION FOR THE ASSESSEE TO PRODUCE THE SAM E AT THE TIME OF EXAMINATION. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSE E HAD OFFERED THE ADDITIONAL INCOME ON ADHOC BASIS, OBVIOUSLY TO COVER UP THE UNDISCLOS ED INCOME. THE BOOKS OF ACCOUNTS WERE PRODUCED ONLY DURING THE COURSE OF REGULAR ASS ESSMENT PROCEEDINGS CONDUCTED IN THE YEAR 2005, AFTER ABOUT 3 YEARS FROM THE DATE OF SEARCH. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE AO WAS JUSTIFIED IN REJECTING TH E CLAIM OF WITHDRAWAL OF FUNDS FROM THE BOOKS, AS IT WAS CLEARLY AN AFTERTHOUGHT ONLY. 28. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND CAREFULLY PERUSED THE RECORD. ACCORDING TO THE ASSESSEE, THE ADIT, WHO E XAMINED THE ASSESSEE HEREIN, DID NOT CALL FOR BOOKS OF ACCOUNT. HOWEVER, FROM THE R EPORT SUBMITTED BY THE ADIT, WHICH IS EXTRACTED IN PARAGRAPH 6 SUPRA, WE NOTICE THAT T HE ADIT HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE DID NOT RECORD THE PAYMEN T OF RS.12.25 LAKHS. HOWEVER, THE ADIT DID NOT BRING ON RECORD THE BASIS FOR GIVING S UCH A REPORT. WE NOTICE THAT THE I.T.(SS)A. NO.09/COCH/2009 20 ASSESSEE HAS STATED BEFORE ADIT THAT THE HE PAID TH E AMOUNT OF RS.12.25 LAKHS IN CASH AND OUT OF HIS EARNING FROM HIS BUSINESS. HOWEVER, THE ADIT NOTICED THAT THE ASSESSEE HAS SHOWN A NET PROFIT OF RS.1,42,192/- ONLY FOR TH E YEAR ENDING 31.3.2001. ACCORDINGLY, THE ADIT MIGHT HAVE CONCLUDED THAT THE ASSESSEE COULD NOT HAVE ACCOUNTED FOR THE PAYMENT OF RS.12.25 LAKHS OUT OF THE SMALL AMOUNT OF NET PROFIT DECLARED IN THE EARLIER YEAR. 29. THE LD CIT(A) HAS STATED THAT THE ASSESSEE WAS FILING THE SALES TAX RETURNS REGULARLY AND THEY CORROBORATE THE FACT THAT THE AS SESSEE WAS MAINTAINING THE BOOKS OF ACCOUNT ALSO IN A REGULAR MANNER. WE ARE UNABLE TO AGREE WITH THE SAID CONTENTIONS. THE SALES TAX RETURNS ARE PREPARED ON THE BASIS OF DETAILS RELATING TO SALES AND SALES RETURNS AND HENCE, IT WOULD BE POSSIBLE TO PREPARE THE SALES TAX RETURN WITHOUT REGULAR BOOKS OF ACCOUNTS ALSO. SIMILARLY, THE FACT THAT T HE BOOKS OF ACCOUNTS WERE SUBJECTED TO AUDIT AND FURTHER THE AO DID NOT MAKE ANY ADDITION IN THE REGULAR ASSESSMENT PROCEEDINGS ARE ALSO, IN OUR VIEW, NOT RELEVANT TO DETERMINE THE UNDISCLOSED INCOME OF THE ASSESSEE. 30. THE ASSESSEE INVITED OUR ATTENTION TO THE C APITAL ACCOUNT OF THE ASSESSEE, AS AVAILABLE IN HIS BUSINESS BOOKS, TO SUBSTANTIATE HI S CONTENTION THAT THE AMOUNT GIVEN BY HIM AS PER THE AGREEMENTS WERE DULY ACCOUNTED FOR. WE NOTICE THAT THE AO DID NOT EXAMINE THE SAID CLAIM OF THE ASSESSEE ON THE REASO NING THAT THE ASSESSEE DID NOT STATE THE PURPOSE OF WITHDRAWAL IN THE NARRATION. IN OUR VIEW, THE EXAMINATION OF THE SAID CLAIM IS VERY VITAL IN ORDER TO DETERMINE THE QUANT UM OF UNDISCLOSED INCOME AND IT MAY NOT BE PROPER TO REJECT THE SAID CLAIM FOR THE REASON THAT THE SPECIFIC PURPOSE OF WITHDRAWAL WAS NOT GIVEN IN THE NARRATION. FURTHER , IN OUR VIEW, THE VERACITY OF CLAIM OF THE ASSESSEE WITH REGARD TO THE WITHDRAWALS CAN BE ASCERTAINED BY EXAMINING THE CASH BOOK ONLY AND NOT THROUGH THE CAPITAL ACCOUNT. A P ERSON CAN WITHDRAW MONEY ONLY IF CASH BALANCE IS AVAILABLE IN THE BOOKS OF ACCOUNT. A CURSORY LOOK OF THE CAPITAL ACCOUNT SHOWS THAT THE ASSESSEE, BESIDES MAKING WITHDRAWALS , HAS ALSO INTRODUCED LIKE AMOUNTS INTO HIS CAPITAL ACCOUNT. THE PURPOSE OF INTRODUCT ION OF FRESH FUNDS IN THE BUSINESS BOOKS AND THE SOURCES THEREOF NEEDS TO EXAMINED IN ORDER TO ASCERTAIN THE PURPOSE OF I.T.(SS)A. NO.09/COCH/2009 21 WITHDRAWALS. HENCE, IN OUR VIEW, THE VERACITY OF C LAIM OF WITHDRAWAL HAS TO BE EXAMINED ALONG WITH THE INTRODUCTION OF ADDITIONAL FUNDS BY VERIFYING THE CASH BOOK OF THE ASSESSEE. 31. THE ASSESSEE HAS CLAIMED THAT HE HAS OFFERED ADDITIONAL INCOME OF RS.5.00 LAKHS AND ANOTHER SUM OF RS.2.50 LAKHS IN ASSESSMENT YEAR 2002-03. THE PAYMENTS MADE BY THE ASSESSEE AS PER THE AGREEMENTS ALSO FALL IN THE VERY SAME ASSESSMENT YEAR. HENCE, IT NEEDS TO BE VERIFIED AS TO WHETHER THE ADDITIONA L INCOME WAS OFFERED ONLY TO COVER UP THE IMPUGNED PAYMENTS SHOWN IN THE AGREEMENTS OR NO T. ADMITTEDLY, THE ADDITIONAL INCOME HAS BEEN OFFERED IN THE RETURNS OF INCOME FI LED AFTER THE DATE OF SEARCH. IF THE ASSESSEE HAS OFFERED THE ADDITIONAL INCOME, ONLY TO COVER UP THE SAID PAYMENTS, THEN THERE MAY BE MERIT IN THE CONTENTION OF THE DEPARTM ENT THAT IT IS ONLY AN AFTERTHOUGHT FOR THE FOLLOWING REASONS:- (A) THE ASSESSEE HAS ADMITTED THAT A SHOP PURCHASE D FOR RS.4.75 LAKHS WAS ACCOUNTED FOR ONLY RS.73,700/-. (B) THE NET PROFIT SHOWN BY THE ASSESSEE IS NOT C OMMENSURATE WITH THE PAYMENTS MADE FOR PURCHASE OF SHOPS. IN THIS KIND OF SITUATION, THE AO MAY BE RIGHT IN T REATING THE ADDITIONAL INCOME OF RS.5.00 LAKHS AS THE UNDISCLOSED INCOME OF THE ASSE SSEE. WE MAY CAUTION HERE THAT WE ARE NOT EXPRESSING ANY VIEW, BUT ONLY EXPLAINING TH E CONTENTIONS OF LD. DR. IT IS FOR THE ASSESSING OFFICER TO TAKE AN APPROPRIATE VIEW AFTER CARRYING OUT NECESSARY EXAMINATION OF CASH BOOK AND OTHER MATERIALS THAT MAY BE RELEVA NT IN THIS REGARD. 32. HENCE, WE ARE UNABLE TO AGREE WITH THE VIEW EXPRESSED BY THE LD CIT(A) THAT THE ASSESSEE HAS DULY ACCOUNTED FOR THE PAYMENTS SH OWN IN THE AGREEMENTS IN HIS BOOKS OF ACCOUNT. AS STATED EARLIER, THE SAID CLAI M OF THE ASSESSEE REQUIRES PROPER EXAMINATION AT THE END OF THE ASSESSING OFFICER. A CCORDINGLY, WE SET ASIDE THE OBSERVATIONS MADE BY LD CIT(A) ON THIS ISSUE AND RE STORE THE SAME TO THE FILE OF THE AO. I.T.(SS)A. NO.09/COCH/2009 22 33. THE LAST ISSUE PERTAINS TO THE DETERMINATIO N OF QUANTUM OF UNDISCLOSED INCOME. THE AO HAD DETERMINED THE QUANTUM OF INVESTMENT AT RS.14,32,500/- AND THERE AFTER DETERMINED THE UNDISCLOSED INCOME AT RS.11,58,800/- . THE LD CIT(A) DETERMINED THE QUANTUM OF INVESTMENT AT RS.12.25 LAKHS. THE RELEV ANT DISCUSSIONS MADE BY LD CIT(A) FIND PLACE IN PARAGRAPH 7.5 OF HIS ORDER. THE LD C IT(A) NOTICED THAT THE AO HAS DETERMINED THE QUANTUM OF INVESTMENT OF RS.14,32,50 0/- BY ADOPTING THE VALUE OF PROPOSED INVESTMENT TO BE MADE IN PURCHASE OF SHOPS . HENCE, THE LD CIT(A) HAS OBSERVED THAT THE PROPOSED PURCHASE CONSIDERATION ADOPTED BY THE AO CANNOT BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE. WE AGREE WITH THE SAID OBSERVATION MADE BY LD CIT(A). FOR THE PURPOSE OF DETERMINING THE UNDISCLOSED INCOME, THE AMOUNT ACTUALLY SPENT BY THE ASSESSEE SHOULD BE CONSIDERED AND NOT THE VALUE OF PROPOSED INVESTMENT. HENCE THE AO WAS NOT RIGHT IN ADOPTING THE VALUE OF RS.3,37,500/- AND RS.6,20,000/- FOR THE SHOPS PROPO SED TO BE PURCHASED AS PER THE AGREEMENTS. 34. IN OUR VIEW, FOLLOWING AMOUNTS SHOWN IN THE AGREEMENTS AND THAT WAS AGREED TO BY THE ASSESSEE ARE RELEVANT. (A) PURCHASE OF SHOP FOR RS.4,75,000/-, WHICH WAS REGISTERED FOR A VALUE OF RS.73,700/-. (B) THE PAYMENTS MADE AS PER THE FIRST AGREEMENT RS.7,50,000/- (C) THE PAYMENTS MADE AS PER THE SECOND AGREEMEN T RS.2,50,000/-. THE LD CIT(A) HAS OBSERVED THAT THERE IS AN OVERLAP OF RS.2,50,000/- (ITEM (C) SUPRA) BETWEEN THE AMOUNTS OF RS.7,50,000/- AND RS.4,75,00 0/- STATED IN (A) AND (B) SUPRA. HOWEVER, THE AO DID NOT HAVE AN OCCASION TO EXAMINE THE SAID CLAIM OF THE ASSESSEE AND WE NOTICE THAT THE LD CIT(A) HAS ACCEPTED THE S AID CLAIM OF THE ASSESSEE WITHOUT CONFRONTING THE SAME TO THE AO. ACCORDINGLY, THE F INDING GIVEN BY THE LD CIT(A) ALSO REQUIRES FRESH EXAMINATION AT THE END OF THE AO. A CCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO. I.T.(SS)A. NO.09/COCH/2009 23 35. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 30-08-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 30TH AUGUST, 2013 GJ COPY TO: 1. SHRI NIGAM MATHEW, PROP. C.K. MATHEW & SONS, CHE RUVATHUR HOUSE, MISSION QUARTERS, THRISSUR-680 001. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -2(1), RANGE-2,THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-V, KOCHI . 4. THE COMMISSIONER OF INCOME-TAX, TRICHUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN