THE ACIT, CEN.Circle-2, v. SHRI NILESH S. RAITHATHA, JAMNAGAR

ITA 310/RJT/2003 | 1999-2000
Pronouncement Date: 31-12-2010 | Result: Allowed

Appeal Details

RSA Number 31024914 RSA 2003
Bench Rajkot
Appeal Number ITA 310/RJT/2003
Duration Of Justice 7 year(s) 7 month(s) 17 day(s)
Appellant THE ACIT, CEN.Circle-2,
Respondent SHRI NILESH S. RAITHATHA, JAMNAGAR
Appeal Type Income Tax Appeal
Pronouncement Date 31-12-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 31-12-2010
Date Of Final Hearing 16-12-2010
Next Hearing Date 16-12-2010
Assessment Year 1999-2000
Appeal Filed On 13-05-2003
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO. 310/RJT/2003 (ASSESSMENT YEAR 1999-2000) & ITSS NO.22/RJT/2003 (BLOCK PERIOD 01-04-1190 TO 25-04-2000) THE ACIT CENT.CIR.2 VS SHRI NILESH S RAITHATHA RAJKOT RAGHUKUL 6 PATEL COLONY JAMNAGAR PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) C.O. NO.06/RJT/2006 (ARISING OUT OF ITSS NO.22/RJT/2003) (BLOCK PERIOD 01-04-1190 TO 25-04-2000) SHRI NILESH S RAITHATHA VS ACIT CENT.CIR.2 JAMNAGAR RAJKOT (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI JM SAHAY ASSESSEE BY : SHRI DR ADHIA O R D E R A.L. GEHLOT : THE APPEALS ARE FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE WHICH ARE BASED ON SAME SET OF FACTS. THEREFORE FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS ARE CROSS OBJECTION A RE DECIDED BY THIS COMMON ORDER. 2. THE GROUNDS RAISED IN ITSS 22/RJT/2003 ARE AS BE LOW: 1. THE LEARNED C.I.T.(APPEALS) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.41 20 720/- MADE ON PR OTECTIVE BASIS ON ACCOUNT OF BENAMI BANK ACCOUNT OF SHRI BH ARAT B. KUNDALIA IN THE NAME OF THE ASSESSEE. ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 2 2. THE LD.C.I.T.(APPEALS) HAS ERRED IN LAW AND ON F ACTS IN DELETING THE ADDITION OF R.1 00 000/- MADE ON ACCOU NT OF UNEXPLAINED DEPOSIT. 3. THE GROUNDS RAISED IN ITA NO.310/RJT/2003 ARE AS BELOW: 1. THE LEARNED C.I.T.(APPEALS) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.5 78 638/- MADE ON PRO TECTIVE BASIS ON ACCOUNT OF UNEXPLAINED LIABILITIES. 2. THE LD.C.I.T.(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.3 59 784/- MADE ON PROTECTIVE BASIS ON ACCOUNT OF UNEXPLAINED CAPITAL. 3. THE LD.C.I.T.(APPEALS) HAS ERRED IN LAW AND ON F ACTS IN DELETING THE ADDITION OF RS.75 474/- MADE ON PROTE CTIVE BASIS ON ACCOUNT OF INTEREST PAYMENT. 4. THE ASSESSEE IN ITS CROSS OBJECTION HAS RAISED THE FOLLOWING LEGAL GROUND: 1. HON.CIT(A) ERRED IN LAW AS WELL AS ON FACT IN NOT QUASHING THE BLOCK ASSESSMENT ORDER PASSED U/S 158BC WITHOUT JURISDICTION. HE OUGHT TO HAVE HELD THAT SINCE NO SEARCH U/S 132 HAD BEEN CONDUCTED ON APPELLANT IN HIS INDIVIDUAL CAPACITY THE NOTICE ISSUED U/S 158BC AND SUBSEQUENT BLOCK ASSESSMENT IS INVALID AND WITHOUT JURIDICTION. 4.1 BLOCK ASSESSMENT APPEAL IN ITSS 22/RJT/2003 AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE AGAINST THE ORDER OF CIT(A)-IV AHMEDABAD DATED 28-03- 2003 FOR THE BLOCK PERIOD 01-04-1990 TO 25-04-2000. ITA NO.310/RJT/2003 FILED BY REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 28.2 .2003 FOR AY 1999-2000 5. FIRST WE TAKE UP APPEAL ITSS 22/RJT/2003 FILED BY REVENUE AND CO FILED BY THE ASSESSEE IN RESPECT OF BLOCK ASSESSMENT.THE BRIEF F ACTS OF THE CASE ARE THAT THE ASSESSEE IS AN EMPLOYEE OF M/S GB & COMPANY SIKKA JAMNAGAR AND PARTNER IN M/S VRUNDAVDAN CONSTRUCTION JAMNAGAR. A SEARCH AC TION U/S 132 OF THE ACT WAS CARRIED OUT AT M/S GB & COMPANY AND ITS ENTIRE GROUP ON 25-04-2000. THE ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 3 ASSESSEE IS ONE OF THE EMPLOYEES OF M/S GB & COMPAN Y. THEREFORE HIS RESIDENCE WAS ALSO COVERED IN SEARCH OPERATION. DU RING THE COURSE OF SEARCH BOOKS OF ACCOUNT AND ASSETS WERE FOUND AND SEIZED. ON THE BASIS OF MATERIAL FOUND AT THE TIME OF SEARCH THE ASSESSING OFFICER ISSUED NOTICE U/S 158BC DATED 25-08-2000 WHICH WAS SERVED TO THE ASSESSEE ON 12-0 9-2000. DURING THE BLOCK ASSESSMENT THE ASSESSING OFFICER NOTICED THAT THE A SSESSEE WAS HAVING BANK ACCOUNT WITH COMMERCIAL CO-OPERATIVE BANK JAMNAGAR BEARING ACCOUNT NO.11498. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE SAID BANK ACCOUNT. THE ASSESSEE VIDE LETTER DATED 17-04-2002 SUBMITTED BEFORE THE AO THAT SHRI BHARATBHAI B KUNDALIA HAD ACCEPTED ALL AC COUNT AND ALL TRANSACTIONS CARRIED THROUGH ACCOUNT NO.11498 MAINTAINED IN THE NAME OF SHRI NILESH S RAITHATHA IN APPLICATION MADE BEFORE THE SETTLEMENT COMMISSION AS HIS UNDISCLOSED INCOME / ASSET. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSES CONTENTION AND CALCULATED UNDISCLOSED AMOUNT FROM T HE SAID DEPOSIT AT RS.41 20 720. UNDER THE FACTS AND CIRCUMSTANCES T HE ASSESSING OFFICER MADE ADDITION OF RS.41 20 720 IN THE HANDS OF THE ASSESS EE ON PROTECTIVE BASIS. 6. THE ASSESSING OFFICER ALSO EXAMINED BANK ACCOUNT NO.5434 AND NOTICED THE FOLLOWING ENTRIES: RS.1 74 600 RECEIVED FROM M/S RK BUILDERS RS.1 50 000 RECEIVED FROM SNMT. ASHMITA RS. 3 50 000 RECEIVED FROM JAGHDISH J THOBHANI THE ASSESSING OFFICER MADE ADDITION OF RS.1 74 600 IN THE NAME OF RK BUILDERS AS UNEXPLAINED RECEIPTS ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE. AS REGARDS THE OTHER TWO ENTRIES IN THE NAME OF ASHMIT A & JAGSISH J THOBHANI THE ASSESSING OFFICER DID NOT MAKE SEPARATE ADDITION AS BOTH ADDITIONS COVERED IN THE AMOUNT OF RS.11 15 434 SEPARATELY MADE ON SUBSTANTI VE BASIS IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER EXAMINED CAPIT AL INTRODUCED BY THE ASSESSEE WITH VUNDRAVDAN CONSTRUCTION JAMNAGAR. T HE ASSESSING OFFICER ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 4 NOTICED THAT OUT OF THE TOTAL AMOUNT OF RS. 6 LAKHS INTRODUCED AS CAPITAL OF THE FIRM VUNDRAVAN CONSTRUCTION THE ASSESSEE FAILED T O EXPLAIN RS.1 LAKH. THEREFORE HE MADE A SEPARATE ADDITION OF RS.1 LAKH ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE. 7. THE ASSESSING OFFICER HAS ALSO MADE ADDITION OF RS.11 15 434 ON THE GROUND THAT THE ASSESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 1999-2000 ON 30 TH MARCH 2001 DECLARING INCOME OF RS.1 01 540. SINC E NO BOOKS OF ACCOUNT WERE MAINTAINED AND THE RETURN WAS FILED M UCH LATER TO THE DATE OF SEARCH THE INCOME WAS DETERMINED IN THE ASSESSMENT MADE U/S 143(3) R.W.S. 144 AT RS.11 15 434. THE SUMMARY OF ADDITION MADE BY THE ASSESSING OFFICER ON PAGE 10 OF THE ASSESSMENT ORDER IS AS UNDER: SUBJECT TO THE ABOVE REMARKS TOTAL UNDISCLOSED IN COME IS COMPUTED AS UNDER: INCOME AS PER BLOCK RETURN RS. 1 560 150/- ADD: ADDITIONS AS DISCUSSED ABOVE I) DEPOSITS IN BANK A./C NO.11498 MAINTAINED WITH COCO BANK ON PROTECTIVE BASIS RS.41 20 720/- II) UNEXPLAINED RECEIPTS RECEIVED FROM M/S RK BUILDERS ON SUBSTANTIVE BASIS RS. 1 74 60 0/- III) UNEXPLAINED DEPOSIT IN BANK IN CASH ON SUBSTANTIVE BASIS RS. 1 00 000/- IV) PROTECTIVE ADDITION MADE IN AY 99-2000 SAME ARE INCLUDED ON SUBSTANTIVE BASIS RS.11 15 43 4/- RS. 55 10 754/- RS. 56 60 904/- ROUNDED OFF TO RS. 56 60 900/- 8. THE ASSESSEE FILED APPEAL BEFORE CIT(A) CHALLENG ING JURISDICTION OF THE ASSESSING OFFICER ASSUMED BY ISSUING NOTICE U/S 158 BC OF THE ACT. THE ASSESSEE HAS ALSO CHALLENGED THE ORDER OF THE ASSESSING OFFI CER ON MERIT. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT SEARCH WARRANT WAS ISSUED IN THE NAME OF M/S M/S GB & COMPANY AND NOT IN THE NAME OF THE ASS ESSEE. AT THE TIME OF ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 5 SEARCH PANCHANAMA INVENTORIES AND ALL ANNEXURES FO RMING PART OF IT WERE ALSO PREPARED IN THE NAME OF M/S GB & COMPANY HENCE THE SEARCH IN FACT HAS BEEN CONDUCTED ON M/S GB & COMPANY AND NOT ON ASSESSEE I N HIS INDIVIDUAL CAPACITY. THE ASSESSE SUBMITTED THAT THE PRE-CONDITION FOR AS SUMING VALID JURISDICTION U/S 158BC IS THAT THE PERSON SHOULD HAVE BEEN SEARCH U/ S 132 IN HIS OWN CAPACITY. IN THE CASE OF THE ASSESSEE THE SEARCH WARRANT WAS ISSUED IN THE NAME OF M/S GB & COMPANY WHICH IS SEPARATELY ASSESSEE. THE WOR DING OF SEARCH WARRANT AND PANCHANAMA AND OTHER ANNEXURES AS POINTED OUT T O THE CIT(A) ARE REPRODUCED AS BELOW: (B) WE REPRODUCE HEREWITH THE WORDING ON SEARCH WA RRANT AND ALSO APPEARING ON PANCHNAMA AND OTHER ANNEXURES WA RRANT IN THE CASE OF : M/S GB & CO. AT RESIDENCE OF SHRI NILESH BHAI SHIVLAL RAITHATHA. 9. THE CONTENTION OF THE ASSESSEE IS THAT THE SEARC H WARRANT WAS NOT IN THE NAME OF THE ASSESSEE THEREFORE ASSESSMENT U/S 158BC CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. THE ASSESSEE RELIED UPON VA RIOUS DECISIONS WHICH HAVE BEEN NOTED BY THE CIT(A) ON PAGES 5 & 6 OF HIS ORDE R. THE CIT(A) REJECTED THIS LEGAL GROUND OF THE ASSESSEE AS UNDER: 3.1 I HAVE CAREFULLY GONE THROUGH THE CONTENTION O F THE APPELLANT. IT HAS BEEN ARGUED BY THE A.R. OF THE APPELLANT THA T THE ASSESSMENT U/S 158BC OF THE ACT WAS NOT VALID IN VIEW OF THE F ACT THAT THE WARRANT WAS ISSUED IN THE NAME OF M/S G.B. & COMPAN Y IN WHICH THE APPELLANT IS AN EMPLOYEE WHICH MEANS THAT IF A NY MATERIALS RELATED TO THE APPELLANT LYING AT THE PREMISES OF M/S G.B. & CO. AND IF ANY INCRIMINATING DOCUMENTS WERE FOUND AND SEIZE D UNDER THE SEARCH ASSESSMENT IN THE CASE OF THE APPELLANT SHO ULD HAVE BEEN COMPLETED U/S 158BD OF THE ACT. THIS IS THE PROCED URE OF ASSESSMENT LAID DOWN IN THE CHAPTER XIVB OF THE I.T . ACT 1961. I FIND THAT THERE IS A LAPSE ON THE PART OF THE A.O A ND THE CORRECT PROCEDURE HAS NOT BEEN FOLLOWED TO UNEARTH THE UNDI SCLOSED INCOME. BUT THE FACT REMAINS THAT THE LAW HAS TO T AKE ITS OWN COURSE RETURN OF INCOME FOR THE BLOCK PERIOD HAS B EEN FILED BY THE APPELLANT DETAILS HAVE BEEN SUBMITTED SEIZED MATE RIALS HAVE BEEN EXAMINED. IT IS PERTINENT TO MENTION HERE THAT THE APPELLANT WAS GUIDED BY A QUALIFIED CHARTERED ACCOUNTANT AND HE H AS NOT RAISED ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 6 ANY OBJECTION TO THE PROCEDURE FOLLOWED BY THE A.O DURING THE COURSER OF ASSESSMENT PROCEEDINGS U/S 158 BC OF THE ACT. HE WAS AWARE THAT IF HE RAISE ANY OBJECTION AT THE TIM E OF ASSESSMENT THE A.O WOULD MEND HIS ACTION BY ISSUE OF NOTICE U/ S 158BD OF THE ACT AND WOULD CONTINUE THE PROCEEDINGS IN THE CASE OF APPELLANT. THIS CLEARLY INDICATES THAT THERE WAS A SILENT CONS ENT ON THE PART OF THE A.R. OF THE APPELLANT IN THE ACTION OF THE A.O. AFTER GIVING HIS CO-OPERATION AND CONSENT AT THE ASSESSMENT STAGE N OW AT THE APPELLATE LEVEL THE APPELLANT WANTS TO TAKE THE PL EA OF INCORRECT PROCEDURE. THERE ARE MANY CASE LAWS DIRECTING THAT WHEN THERE IS A COMPARISON BETWEEN THE PROCEDURAL AND SUBSTANTIVE CLAUSE IT IS THE SUBSTANTIVE CLAUSE WHICH IS TO BE RELIED UPON. MOREOVER THERE ARE VARIOUS JUDICIOUS PRONOUNCEMENTS REGARDING THE LEGALITY OR ILLEGALITY OF SEARCH SUCH AS IN THE CASE OF DR. PAR TAP SINGH VS DIRECTOR OF ENFORCEMENT (1985) 155 ITR 166 (S) WHER EIN IT HAS BEEN HELD THAT THE ILLEGALITY OF THE METHOD MANNER OF INITIATION OF A SEARCH DOES NOT NECESSARILY MEAN THAT ANYTHING SEIZ ED DURING THE SEARCH HAS TO BE RETURNED AND THEREFORE ILLEGALIT Y OF SEARCH CANNOT VITIATE THE EVIDENCES COLLECTED. SIMILARLY IN THE CASE OF ITO VS. SETH BROS (1969) 74 ITR 836 (SC) IT HAS BEEN HELD T HAT SEARCH OF DOCUMENTS OF ALLIED PARTIES / TRANSACTIONS IN THE C ASE OF A FIRM CANNOT MAKE THE SEARCH ILLEGAL. KEEPING IN MIND TH E RATIO OF THE ABOVE DECISIONS OF THE HONBLE SUPREME COURT AND FA CTS AND CIRCUMSTANCES OF THE CASE THIS GROUND IS DISMISSED AND I DEAL WITH THE SUBSEQUENT GROUNDS ON MERIT. 10. THE CIT(A) WHILE DECIDING THE ISSUE ON MERIT DE LETED THE ADDITION OF RS.41 20 720 AS UNDER: 5.2 I HAVE GONE THROUGH THE ORDER UNDER APPEAL AND THE DETAILED WRITTEN SUBMISSION FILED BY THE APPELLANT. I FIND THAT SHRI BHARATBHAI B KUNDALIA HAD ADMITTED THE TRANSACTIONS IN THE BAN K ACCOUNT NO.11498 MAINTAINED WITH COMMERCIAL CO-OP.BANK LTD. JAMNAGAR IN TOTO BEFORE THE SELTTLEMENT COMMISSION TO DETERM INE THE CORRECT AMOUNT OF INCOME FRM THIS BANK ACCOUNT. IN VIEW OF THE ABOVE MENTIONED CIRCUMSTANCES I FIND NO REASON WHY THE A DDITION SHOULD REMAIN LYING HERE EVEN ON PROTECTIVE GROUND. THERE FORE THE ADDITION OF RS.41 20 720/- ON PROTECTIVE BASIS IS H EREBY DELETED. 11. THE CIT(A) HAS ALSO DELETED THE ADDITION OF RS. 1 74 600/- AS UNDER:- 6.2 I HAVE GONE THROUGH THE ASSTT.ORDER UNDER APPE AL AND THE WRITTEN SUBMISSION FILED BY THE A.R. OF THE APPELLA NT. AFTER CAREFUL CONSIDERATION OF THE SAME I AM OF THE OPINION THAT THOUGH THE ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 7 APPELLANT HAD PRODUCED SUFFICIENT EVIDENCE IN SUPPO RT OF HIS CLAIM I AM NOT ADJUDICATING THE GROUND IN THIS APPEAL BECAU SE THE ORDER UNDER APPEAL IS FRAMED U/S 158BC OF THE ACT AND UND ER THIS SECTION ONLY INCOME WHICH IS NOT DISCLOSED CAN BE CONSIDERED. WHEREAS THE APPELLANT HAS DISCLOSED THIS TRANSACTIO N IN THE REGULAR BOOKS OF ACCOUNT AND THE APPEAL AGAINST THE ORDER P ASSED U/S 143(3) OF THE ACT FOR THE RELEVANT PERIOD IS BEFORE ME. THIS ISSUE THEREFORE WILL BE ADJUDICATED THERE ONLY. THE ADDI TION OF RS.1 74 600/- IS HEREBY DELETED. 12. THE CIT(A) ALSO DELETED ADDITION OF RS.1 LAKH O BSERVING AS UNDER: 7.2 I HAVE GONE THROUGH THE ORDER UNDER APPEAL AND THE CONTENTIONS OF THE APPELLANT IN THIS REGARD. AFTER CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE I FIND THAT THERE IS NO REASON OF MAKING ADDITION OF RS.1 LAKH SINCE THE SAME HAS BEEN WITHDRAWN FROM REGULAR BOOKS OF ACCOUNT OF THE APPELLANT. EVEN OTHERWISE ALSO THE ADDITION CANNOT STAND HERE BECAUSE THE TRANSACTION SI DISCLOSED AND DOES NOT FALL U/S 158B C OF THE ACT. THEREFORE THE ADDITION IS HEREBY DELETED. 13. THE CIT(A) ALSO DELETED ADDITION OF RS.11 15 43 4 AS UNDER: 8.2 THE ADDITIONAL GROUND RAISED BY THE APPELLANT IS ADMITTED. KEEPING IN VIEW OF THE DETAILED SUBMISSION FILED BY THE APPELLANT ALONGWITH SUPPORTING JUDICIAL DECISION AND ALSO THE FACTS THAT NONE FO THE ADDITIONS MADE ABOVE ARE RELATED TO THE UNDI SCLOSED INCOME OF THE APPELLANT FOUND AS A RESULT OF SEARCH NO AD DITION CAN BE MADE IN THE BLOCK ASSESSMENT IN RESPECT OF ABOVE PO INTS. SINCE THE A.O HAS MADE THE SAME ADDITIONS ON PROTECTIVE B ASIS IN THE REGULAR ASSESSMENT FOR THE A.Y. 99-2000 IT WILL BE DECIDED ON MERITS WHILE DECIDING THE APPEAL FILED BY THE APPEL LANT AGAINST THE ASSESSMENT ORDER FOR THE A.Y. 99-2000. IN VIEW OF THE ABOVE THE ADDITION OF RS.11 15 434/- MADE HERE ON SUBSTANTIVE BASIS IS HEREBY DELETED. 14. THE REVENUE IS IN APPEAL AGAINST THE DELETION O F ADDITION OF RS.41 20 720 AND RS.1 LAKH IN BLOCK ASSESSMENT. 15. SINCE THE ASSESSEEE HAS RAISED A LEGAL GROUND WE WOULD FIRST EXAMINE THE THIS ASPECT OF THE MATTER. ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 8 16. SECTION 158BD PROVIDES THAT 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 U/S 132 OR WHOSE BO OKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS WERE REQUISITIONED U/S 132A THEN THE BOOKS OF ACCOUNT OTHER DOCUMENT OR ASSET SEIZED OR REQUISITIONED SHA LL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST SUCH OTHER PERSON AND THE PROVISIONS OF THIS CHAPTER SHALL APPLY ACCORDINGLY. THE CONDITION PRECEDENT FOR INVOKING A BLOCK ASSESSMENT IS THAT A SEARCH HAS BEEN CONDUCT3ED U/S 1`32 OR DOCUMENT OR ASSETS HAVE BEEN REQUISITIONED U/S 132A OF THE ACT. SECTION 158BD HOWEVER PROVIDES FOR TAKING RECOURSE TO A BLOCK ASSESSMENT IN TERMS OF SECTION 158BC IN RESPECT OF ANY OTHER PERSON. THE CONDITION PRECEDEN T THEREFORE ARE (1) SATISFACTION MUST BE RECORDED BY THE ASSESSING OFFI CER THAT ANY UNDISCLOSED INCOME BELONGED TO ANY PERSON OTHER THAN THE PERSON WITH RESPECT TO SEARCH WAS MADE U/S 132 OF THE ACT; (2) THE BOOKS OF ACCOUNT O R OTHER DOCUMENT OR ASSETS SEIZED OR REQUISITIONED HAD BEEN HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON (3) THE ASSESSI NG OFFICER HAS PROCEEDED U/S 158BC AGAINST SUCH OTHER PERSON. THE CONDITION PRE CEDENT FOR INVOKING THE PROVISIONS OF SECTION 158BD ARE REQUIRED TO BE SATI SFIED BEFORE THE PROVISIONS OF THE SAID CHAPTER ARE APPLIED IN RELATION TO ANY PER SON OTHER THAN PERSON WHOSE PREMISES HAD BEEN SEARCHED OR WHOSE DOCUMENTS OR OT HER ASSETS HAS BEEN REQUISITIONED U/S 132A OF THE ACT. A TAXING STATUT E AS IS WELL KNOWN MUST BE CONSTRUED STRICTLY. THE ONLY QUESTION WHICH ARISES FOR OUR CONSIDERATION IN THIS CASE IS WHETHER THE ASSESSEES CASE IS ASSESSABLE U /S 158BC OR U/S 158BD OF THE ACT. ON PERUSAL OF THE ORDER OF THE CIT(A) WE NOTICE THAT THE CIT(A) HAS CLEARLY STATED IN HIS ORDER AT PARAGRAPH 3.2 THAT T HERE IS A LAPSE ON THE PART OF THE ASSESSING OFFICER AND THE CORRECT PROCEDURE HAS NOT BEEN FOLLOWED TO UNEARTH THE UNDISCLOSED INCOME. HOWEVER THE CIT(A) DECIDED TH IS LEGAL ISSUE SHIFTING RESPONSIBILITY ON ASSESSEE THAT THERE WAS A SILENT CONSENT OF THE ASSESSEE FOR NOT POINTING OUT THIS DEFECT AT THE TIME OF HEARING BEF ORE THE ASSESSING OFFICER. IF THE ASSESSEE COULD HAVE POINTED OUT THIS DEFECT THE SA ME COULD HAVE BEEN RECTIFIED ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 9 BY THE ASSESSING OFFICER BEFORE MAKING THE ASSESSME NT. THUS THE ADMITTED FACTS OF THE CASE UNDER CONSIDERATION ARE THAT THE SEARCH WARRANT WAS IN THE NAME OF M/S GB & COMPANY IN WHICH THE ASSESSEE IS AN EMPLOY EE. THE SEARCH WARRANT WAS NOT IN THE NAME OF THE ASSESSEE. PANCHANAMA E TC. WERE ALSO PREPARED IN THE NAME OF M/S GB & COMPANY. FROM THESE DOCUMENTS IT IS CLEAR THAT THE SEARCH WAS ON M/S GB & COMPANY AND NOT ON THE ASSES SEE. IF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH WHICH BELONGED TO THE ASSESSEE THEN BLOCK ASSESSMENT IN THE CASE OF ASSESSEE IS REQUIRED TO B E MADE IN THE HANDS OF THE ASSESSEE U/S 158BD AND NOT U/S 158BC OF THE ACT. T HERE IS NO MATERIAL ON RECORD THAT THE ASSESSING OFFICER HAS RECORDED THE SATISFACTION AS REQUIRED U/S 1568BD THAT ANY UNDISCLOSED INCOME BELONGED TO THE PERSON AND THE SAME IS REQUIRED TO BE ASSESSED U/S 158BD O THE ACT. THE A PEX COURT IN THE CASE OF MANISH MAHESHWARI VS ACIT AND INDORE CONSTRUCTION P VT LTD VS CIT 321 ITR 362 THE APEX CURT HELD THAT IF THE ASSESSING OFFIC ER DOES NOT RECORD HIS SATISFACTION WHICH IS MANDATORY ON TRANSFER OF CASE TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THE MATTER NO ASSESSMENT C AN BE FRAMED ON THE OTHER PERSONS UNDER THE PROVISIONS OF SECTION 158BD UNDER CHAPTER XIVB OF THE ACT IF UNDISCLOSED INCOME OF ANY OTHER PERSON WHO HAS NOT BEEN SEARCHED BY THE RELEVANT MATERIAL RELATING TO UNDISCLOSED INCOME WA S FOUND DURING THE COURSE OF SEARCH THE ASSESSMENT OF OTHER PERSON IS ASSESSABLE U/S 158BD AND NOT U/S 158BC OF THE ACT. IN THE CASE UNDER CONSIDERATION THE BLOCK ASSESSMENT IN THE CASE OF ASSESSEE IS ASSESSABLE U/S 158BD AND SUCH G LARING MISTAKE IS NOT RECTIFIABLE U/S 290BB OF THE ACT. IN THE LIGHT OF LAW LAID DOWN BY THE APEX COURT IN THE CASE OF MANISH MAHESHWARI AND INDORE CONSTRUCTI ON PVT LTD AND ACIT VS HOTEL BLUE MOON 321 ITR 362 THE ASSESSING OFFICER H AS FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 158BD OF THE ACT. THEREFORE BLOCK ASSESSMENT IS LIABLE TO BE QUASHED. WE DO SO . 17. SINCE WE HAVE DECIDED THE ISSUE ON THE LEGAL GR OUND IN FAVOR OF THE ASSESSEE WE DO NOT THINK NECESSARY TO EXPRESS OPIN ION ON MERIT OF THE CASE. ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 10 18. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED AS PER ABOVE DISCUSSIONS AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 19. COMING TO THE APPEAL IN ITA NO.310/RJT/2003 TH IS APPEAL IS AGAINST THE REGULAR ASSESSMENT MADE U/S 143(3) OF THE ACT. THE ASSESSING OFFICER WHILE MAKING REGULAR ASSESSMENT U/S 143(3) R.W.S. 144 FOU ND THAT THE ASSESSEE HAS TAKEN LOAN OF RS.5 78 638./- THE ASSESSEE DID NOT FILE DETAILS. THEREFORE THE ASSESSING OFFICER MADE THE ADDITION TO THE TOTAL IN COME ON PROTECTIVE BASIS AND SUBSTANTIVE IN THE BLOCK PERIOD. SIMILARLY THE ASS ESSING OFFICER MADE ADDITION OF RS.3 59 784 ON ACCOUNT OF OPENING BALANCE IN CAPITA L AS UNEXPLAINED CAPITAL ON PROTECTIVE BASIS IN REGULAR ASSESSMENT AND SUBSTANT IVE BASIS IN BLOCK ASSESSMENT. THE ASSESSEE CLAIMED RS.75 474/- AS IN TEREST PAID. THE ASSESSEE FAILED TO EXPLAIN THE PURPOSE OF THE INTEREST EXPEN DITURE INCURRED. THEREFORE THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE. 20. THE CIT(A) DELETED ALL THE ABOVE THREE ADDITION S OBSERVING AS UNDER: 5.2 I HAVE CAREFULLY GONE THROUGH THE ASSTT.ORDER CONTENTIONS OF THE APPELLANT AND THE VARIOUS JUDICIAL PRONOUNCEMEN TS RELIED BY IT. I FIND THAT IN CASE OF DEPOSIT FROM SHRI JAGIDSHBHAI J. THOBHANI AND MRS. ASMITABEN THE APPELLANT HAS DISCHARGED HIS ON US BY FURNISHING THE REQUISITE DETAILS. NOW IT IS ON TH E A.O TO DISPROVE THE GENUINENESS. OTHERWISE ALSO IT DOES NOT FALL UNDER SECTION 68 OF THE ACT BECAUSE THE DEPOSIT DOES NOT PERTAIN TO THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 99-2000 BUT IN THE EARLIER YEARS. THE ADDITION OF RS.5 78 638/- I.E. RS.3 50 000/- L OAN FROM JAGDISHBHAI THOBHANI RS.1 50 000/- LOAN FROM MRS. ASMITABEN RAITHATHA AND RS.78 638/- INTEREST CREDITED IN THE ABOVE TWO ACCOUNTS IS THEREFORE DELETED. AS FAR AS THE INT EREST DEBITED OF RS.75 474/- IN ABOVE TWO ACCOUNTS DURING THE ASSESS MENT YEAR 1999-2000 BY THE A.O. IS CONCERNED SINCE THE ADDIT ION RELATED TO THE LOAN FOR WHICH INTEREST HAS BEEN DEBITED IS DEL ETED THE ADDITION RELATED TO THE LOAN FOR WHICH INTEREST HAS BEEN DEB ITED IS DELETED THE ADDITION ON ACCOUNT OF INTEREST PAID OF RS./75 474/- DOES NOT STAND AND HENCE DELETED. 6. THE FOURTH GROUND OF APPEAL RELATES TO ADDITION ON ACCOUNT OF UNEXPLAINED CAPITAL AS PER BOOKS OF ACCOUNTS OF RS. 3 59 784/- ON ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 11 PROTECTIVE BASIS. ON PERUSAL OF THE ACCOUNTS FILED ALONGWITH THE RETURN OF INCOME IT WAS NOTICED BY THE A.O THAT TH E ASSESSEE HAS SHOWN OPENING CAPITAL OF RS.3 59 784/- AS ON 1.4.19 98. THE ASSESSEE FAILED TO EXPLAIN THE SAME. THEREFORE TH E A.O ADDED THE SAME TREATING AS UNEXPLAINED ON PROTECTIVE BASIS. 21. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES RECORD PERUSED. THE ASSESSING OFFICER MADE ADDITION OF RS.5 78 638 AND RS.3 59 784 BY GIVING FINDING THAT THESE ADDITIONS WERE MADE BY THE ASSES SING OFFICER IN THE HANDS OF THE ASSESSEE IN REGULAR ASSESSMENT ON PROTECTIVE BA SIS AND SUBSTANTIVE ADDITIONS WERE MADE IN BLOCK ASSESSMENT. RS.75 474 BEING INTEREST EXPENSES WAS DISALLOWED AS THE ASSESSEE DID NOT FILE ANY DET AILS. THE CIT(A) WITHOUT CONSIDERING THE ASSESSING OFFICERS FINDING THAT TH ESE ARE PROTECTIVE ADDITIONS DELETED RS.5 78 638 ON MERIT. THE CIT(A) WHILE DEL ETING INTEREST EXPENDITURE OF RS.75 474 NOTED THAT THIS INTEREST RELATED TO THE P ARTIES WHOSE ADDITION OF RS.5 78 638 WAS MADE. THE CIT(A) WHILE DELETING TH E ADDITION OF RS.3 59 784 DELETED MERELY ON THE GROUND THAT THIS ADDITION WAS MADE ON PROTECTIVE BASIS. WE HAVE ALSO NOTICED THAT DURING THE COURSE OF HEAR ING THE LEARNED REPRESENTATIVES OF THE PARTIES POINTED OUT THAT THE ADDITION OF RS.41 20 720 MADE BY THE ASSESSING OFFICER N ACCOUNT OF DEPOSIT IN BA NK ACCOUNT NO.11498 WITH COCO BANK ON PROTECTIVE BASIS BUT A SETTLEMENT PETI TION HAS BEEN FILED BY SHRI BHARATBHAI KUNDALIA AND THE SAID INCOME HAD BEEN DI SCLOSED BEFORE THE SETTLEMENT COMMISSION. THE FINAL OUTCOME OF THE SE TTLEMENT COMMISSION IS STILL PENDING. 23. IN THE LIGHT OF ABOVE DISCUSSION WE FIND THAT T HE CIT(A) DELETED ALL THE ADDITION WITHOUT APPRECIATING THE FACTS OF THE CASE AND WITHOUT VERIFYING THE FINAL OUTCOME OF SETTLEMENT COMMISSION. THE ADDITIONS MA DE BY THE ASSESSING OFFICER ARE PROTECTIVE IN REGULAR ASSESSMENTS AND SUBSTANT IVE IN BLOCK ASSESSMENT. WHILE DECIDING THE BLOCK ASSESSMENT APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE THE LEGAL ISSUE RAISED IN THE CROSS OBJECTION BY THE ASSESSEE HAS BEEN DECIDED IN HIS FAVOR OF THE ASSES SEE. THEREFORE FACTS OF THE REGULAR ASSESSMENT ARE REQUIRED TO BE CONSIDERED IN THE LIGHT OF THAT ORDER OF THE ITA NO.310/RJT/2003 ITSS 22/RJT/2003 CO 06/RJT/2004 12 BLOCK ASSESSMENT AS MADE ABOVE. WE THEREFORE THI NK PROPER TO SEND THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WI TH A DIRECTION TO DECIDE THE ISSUES RAISED IN THE GROUNDS OF APPEAL OF REVENUE I N ACCORDANCE WITH LAW AFTER VERIFICATION OF FINAL OUTCOME OF SETTLEMENT COMMISS ION AND OTHER MATERIALS AND BLOCK ASSESSMENT DECIDED AS ABOVE AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 24. IN THE RESULT ITSS NO. 22/RJT/2003 IS DISMISSE D AND ITA NO.310/RJT/2003 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE AND CROSS OBJECTION NO. 6/JT/2004 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31-12-2010. SD/- SD/- (D.T. GARASIA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DT : 31 ST DECEMBER 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-IV AHMEDABAD 4. THE CIT CENTRAL-II AHMEDABAD 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT