The ACIT, Mehsana Circle,, Mehsana v. Shri Sendhabhai M.Desai & Others,, Mehsana

ITSSA 154/AHD/2006 | misc
Pronouncement Date: 22-01-2010 | Result: Dismissed

Appeal Details

RSA Number 15420516 RSA 2006
Bench Ahmedabad
Appeal Number ITSSA 154/AHD/2006
Duration Of Justice 3 year(s) 7 month(s) 2 day(s)
Appellant The ACIT, Mehsana Circle,, Mehsana
Respondent Shri Sendhabhai M.Desai & Others,, Mehsana
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 22-01-2010
Date Of Final Hearing 11-01-2010
Next Hearing Date 11-01-2010
Assessment Year misc
Appeal Filed On 19-06-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD BEFORE SHRI BHAVNESH SAINI J.M. AND SHRI D.C.AGARW AL A.M. IT(SS)A NO.154/AHD/2006 BLOCK PERIOD ENDING ON : 28.08.1997 ACIT MEHSANA CIRCLE 2 ND FLOOR APOLLO ENCLAVE HIGHWAY MEHSANA. V/S SHRI SENDHABHAI M. DESAI DESAI AND OTHERS (AOP) C/O. SENDHABHAI VIJAYBHAI DESAI URVASHI BUNGLOW NR. RAMASANA JAKATNAKA MEHSANA-384 002 PAN NO. (APPELLANT) (RESPONDENT) C.O.NO.205/AHD/2006 IN IT(SS)A NO.154/AHD/2006 BLOCK PERIOD ENDING ON 28.08.1998 SHRI SENDHABHAI M. DESAI AND OTHERS ( AOP ) C/O. SENDHABHAI VIJAYBHAI DESAI URVASHI BUNGLOW NR. RAMASANA JAKATNAKA MEHSANA-384 002 V/S ACIT MEHSANA CIRCLE 2 ND FLOOR APOLLO ENCLAVE HIGHWAY MEHSANA. PAN NO. (APPLICANT) (RESPONDENT) FOR ASSESSEE: SHRI B.S.GEHLOT CIT DR FOR DEPARTMENT: SHRI S.N.DIVETIA AND SHRI ANIL KSHA TRIA O R D E R PER SHRI BHAVNESH SAINI JUDICIAL MEMBER:- THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(APPEALS)-XXI AHM EDABAD DATED 24.03.2006 FOR THE ABOVE BLOCK PERIOD. 2. THE FACTS OF THE CASE ARE THAT SEARCH OPERATION UNDER SECTION 132 OF THE I.T. ACT WAS CARRIED OUT AT THE VARIOUS PREMISE S OF SHRI SENDHABHAI M.DESAI AND OTHERS ON 28.08.1997. DURING THE COURSE OF SEARCH AT SABERA HOTEL PVT. LTD. MEHSANA CERTAIN DOCUMENTS MARKED ANNEXURE-A-37(LOOSE 2 PAPER FILE) WERE FOUND WHICH WAS SEIZED. SOME PAPER (SR. NO.119 TO 127) PERTAINS TO LAND TRANSACTIONS RECORDING SALES AND P URCHASES. SHRI SENDHABHAI M. DESAI WAS PRESENT AT THE SEARCH PREMI SE WAS CONFRONTED WITH THESE PAPERS AND HE HAS AGREED THAT THESE PAPE RS PERTAIN TO PARTNERSHIP CONSISTING OF 6 PARTNERS AND HE HAS ALS O ADMITTED THAT NO RETURN IS FILED FOR THE SAME. THE NOTICE UNDER SECTION 158 BD WAS ISSUED ON 6.01.2003 UPON THE ASSESSEE BUT RETURN WAS NOT FILE D WITHIN TIME AND THE NOTICES REMAINED UNCOMPLIED WITH. THE ASSESSING OFF ICER FURTHER ISSUED NOTICE UNDER SECTION 142(1) TO THE ASSESSEE EXPLAIN ING THE ABOVE DOCUMENTS AND STATEMENT OF SHRI SENDHABHAI M. DESAI ABOUT IN WHICH HE HAS AGREED TO PAY THE TAX AMOUNTING TO RS.57 30 000/-. ULTIMATELY THE ASSESSEES REPRESENTATIVE APPEARED BEFORE THE ASSESSING OFFICE R AND FILED THE WRITTEN REPLIES IN WHICH THE ISSUANCE OF NOTICE UNDER SECTI ON 158BD WAS STRONGLY OBJECTED. SHRI SENDHABHAI M. DESAI IN HIS OBJECTION STATED THAT SINCE THE ADDITION ON THE BASIS OF THE ABOVE SEIZED MATERIAL IS MADE IN HIS INDIVIDUAL CASE IN THE ORDER UNDER SECTION 158BC/143(3) THERE FORE PROCEEDINGS UNDER SECTION 158BD SHOULD BE DROPPED. HE HAS EXPLAINED T HAT SINCE SEARCH IS CONDUCTED IN HIS NAME AND IN THE NAME OF HIS FAMILY MEMBER AT HIS PREMISES AND NOTICES UNDER SECTION 158BC HAVE BEEN ISSUED IN THEIR CASES AND THAT HE HAS CONFESSED TO PAY TAX THEREFORE IT IS SURPR ISED TO RECEIVE THE NOTICE UNDER SECTION 158BD. IT WAS THEREFORE REQUESTED TH AT PROCEEDING UNDER SECTION 158BD MAY BE DROPPED. SHRI SENDHABHAI M. DE SAI ON BEING CONSIDERING AS ONE OF THE MEMBER OF AOP ALSO REQUES TED FOR COPIES OF THE SEIZED MATERIAL CONNECTED WITH THE PROCEEDINGS UNDE R SECTION 158BD OF THE I.T.ACT 1961. HE HAS ALSO EXPLAINED THAT THE NOTIC ES ISSUED AGAINST HIM AGAIN UNDER SECTION 158BD FOR DEALING IN THE PROPER TIES ON THE BASIS OF STATEMENT RECORDED UNDER SECTION 132(4) OF THE I.T. ACT BUT HE HAS ALREADY RETRACTED FROM HIS STATEMENT RECORDED DURING THE AS SESSMENT PROCEEDINGS. THEREFORE STATEMENT RECORDED UNDER SECTION 132(4) HAS NO LEGAL VALUE IN THE ABSENCE OF ANY SUPPORTING EVIDENCE/DOCUMENTS ON REC ORD. HE HAS FURTHER EXPLAINED THAT HIS CONTENTION WAS NOT ACCEPTED BY T HE ASSESSING OFFICER (DCIT SR.2 AHMEDABAD) AND MADE THE ADDITION OF RS .20 01 400/- IN THE ASSESSMENT ORDER UNDER SECTION 158BC/143(3) DATED 2 9.09.1999. THE COPY OF THE ASSESSMENT ORDER WAS ALSO FILED BEFORE HIM. IT WAS THEREFORE REQUESTED THAT PROCEEDINGS UNDER SECTION 158BD MAY BE DROPPED. THE 3 OTHER ALLEGED MEMBER OF AOP SHRI K.V.DESAI V.H.DES AI MAHOMMADBHAI SHAIKH MOHANBHAI M.PATEL AND TULSIBHAI M.PATEL ALS O SIMILARLY OBJECTED TO THE INITIATION OF THE BLOCK ASSESSMENT PROCEEDINGS. IT WAS BRIEFLY EXPLAINED THAT THEY HAVE NO RELATION WITH ANY LAND TRANSACTIO NS AND THEY DENIED THE SAME. THEY DENIED ANY STATEMENT OF SHRI SENDHABHAI M. DESAI AND ALSO DENIED HAVING KNOWLEDGE OF PARTNERSHIP CONCERN OF 6 MEMBERS WITH SHRI SENDHABHAI M. DESAI AND OTHERS AND ALSO DENIED ANY SUCH ENTITY. THEY WERE NOT SUPPLIED COPY OF THE REASONS RECODED FOR I NITIATING PROCEEDINGS UNDER SECTION 158BD. THEY DENIED HAVING ANY CONCERN WITH SHRI SENDHABHAI M. DESAI AND ALSO REQUESTED TO CONFRONT ENTIRE EVIDENCE ON RECORD. THEY HAVE ALSO DENIED THEIR IMPLICITY WITH ANY ALLEGED AOP. THEY HAVE DENIED CONDUCTING ANY ACTIVITY BY AOP OR OTHER AND ALSO REQUESTED TO CROSS EXAMINE SHRI SENDHABHAI M. DESAI ON HIS STATE MENT MADE DURING THE COURSE OF SEARCH. IT WAS ALSO EXPLAINED THAT SINCE SHRI SENDHABHAI M. DESAI HAS RETRACTED FROM HIS STATEMENT NO RELIANCE COULD BE PLACED ON HIS STATEMENT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENC E. IN THE ALTERNATE CONTENTION IT WAS EXPLAINED THAT AT THE MOST BROKE RAGE OF 5% COULD BE CONSIDERED. IT WAS ALSO SUBMITTED THAT THE SATISFAC TION NOTE IN THIS CASE SUFFERS FROM GREAT INFIRMITIES BECAUSE ON MERE RETR ACTED STATEMENT PROCEEDINGS COULD NOT BE INITIATED AND THAT TOO IN THE ABSENCE OF ANY RIGHT TO CROSS EXAMINATION GIVEN IN THIS WAY. IT WAS EXPLAIN ED THAT THERE IS NO MATERIAL ON RECORD FOUND DURING THE COURSE OF SEARC H TO DETERMINE ANY UNDISCLOSED INCOME OR COMPLICITY OF THE ASSESSEE IN ANY LAND TRANSACTIONS. IT WAS SUBMITTED THAT BLOCK ASSESSMENT PROCEEDINGS ARE TIME BARRED. IT WAS THEREFORE REQUESTED THAT IT MAY BE HELD:- I. THERE WAS NO AOP IN THE NAME OF THE ASSESSEE. II. ISSUANCE OF NOTICE UNDER SECTION 158BD ON THE B ASIS OF SATISFACTION RECORDED ON 6.01.2003 IS WITHOUT VERIFICATION OF TH E MATERIAL ON RECORD. III. THERE IS NO MATERIAL ON RECORD THAT THEY ARE B ENEFICIARY OUT OF ANY TRANSACTION. IV. SINCE ADDITION IS ALREADY MADE IN THE CASE OF S HRI SENDHABHAI M. DESAI ON THE BASIS OF SAME SEIZED MATERIAL AND THER EFORE THERE IS NO NECESSITY IN MAKING THE DOUBLE ADDITIONS. V. THE TRANSACTIONS ARE PRIOR TO 1.04.1987 THEREF ORE OUTSIDE THE SCOPE OF CHAPTER XIVB OF THE I.T.ACT. 4 3. THE ASSESSING OFFICER CONSIDERING THE SUBMISSION S OF THE ASSESSEE DID NOT ACCEPT THE CONTENTION OF THE ASSES SEE AND NOTED THAT PROTECTIVE ASSESSMENT IS TO BE MADE IN THE CAS E OF THE AOP(ASSESSEE). THE ASSESSING OFFICER ACCORDINGLY NO TED THAT THE PROCEEDINGS U/S.158BD OF THE ACT 1961 IS INITIATED ON THE BASIS OF THE SEIZED MATERIAL AND STATEMENT MADE BY SHRI SEN DHABHAI M. DESAI AFTER RECORDING THE SATISFACTION NOTE BY THE ASSESSING OFFICER. THE RETRACTION OF THE STATEMENT BY SHRI SENDHABHAI M.DESAI WAS ALSO NOT CONSIDERED. THE ASSESSING OFFICER HOWEVER A CCEPTED THE CONTENTION OF THE ASSESSEE REGARDING SOME OF THE DO CUMENTS WHICH FALL BEYOND THE BLOCK PERIOD SUBJECT TO VERIFICATIO N. THE ASSESSING OFFICER ULTIMATELY NOTED THAT SINCE THE SAME SEIZED MATERIAL IS CONSIDERED IN THE INDIVIDUAL SHRI SENDHABHAI M. DES AI IN THE BLOCK ASSESSMENT PROCEEDINGS AND THE ISSUE IS PENDING BEF ORE ITAT FOR DECISION THEREFORE THE TAXABILITY OF THE INCOME H AS NOT REACHED THE FINALITY AND THAT THE SAME IS ADDED ON SUBSTANTIVE BASIS IN THE CASE OF INDIVIDUAL SHRI SENDHABHAI M. DESAI HENCE THIS AMOUNT IS INCLUDED IN THE CASE OF THE ASSESSEE (AOP) FOR PROT ECTIVE BASIS. THE ASSESSING OFFICER ACCORDINGLY MADE THE ADDITION OF RS.14 30 810/- AS BROKERAGE INCOME IN THE CASE OF THE PRESENT (AOP ) ASSESSEE ON PROTECTIVE BASIS UNDER SECTION 158BD VIDE BLOCK ASS ESSMENT ORDER DATED 28.01.2005. 4. THE ASSESSEE CHALLENGED THE INITIATION OF T HE PROCEEDINGS U/S.158BD OF THE ACT 1961 BEFORE THE CIT(APPEALS) AS WELL THE ADDITION ON MERIT. THE ASSESSEE REITERATED THE SUB MISSION BEFORE ASSESSING OFFICER AND ALSO CHALLENGED THE FORMATION OF AOP. IT WAS SUBMITTED THAT THERE WERE NO IOTA OF EVIDENCE TO IM PLICATE OTHER PERSONS HAVE ANY RELATION WITH THE TRANSACTION OR F ORMATION OF AOP. IT WAS ALSO EXPLAINED THAT NO ADDITION ON PROTECTIV E BASIS COULD BE MADE IN THE CASE OF SO-CALLED AOP. THE CIT(APPEALS ) HOWEVER REJECTED THE CONTENTION OF THE ASSESSEE AS REGARDS INITIATION OF THE 5 PROCEEDINGS U/S.158BD IN THE CASE OF THE ASSESSEE-A OP. THE ASSESSEE CHALLENGED THE ADDITION ON MERITS AND IT W AS EXPLAINED THAT SINCE ADDITION IS MADE ON THE SAME MATERIAL IN THE CASE OF INDIVIDUAL SHRI SENDHABHAI M.DESAI ON SUBSTANTIVE BASIS AND TH E MATTER IS PENDING BEFORE THE TRIBUNAL THEREFORE NO PROTECTI VE ASSESSMENT COULD BE MADE IN THE CASE OF THE AOP. THE ORDER O F CIT(APPEALS) IN THE CASE OF RAMANBHAI D.PATEL OF STARLINE TRACTORS LTD. MEHSANA WAS RELIED UPON IN WHICH ALL THE IDENTICAL ISSUE AD DITION U/S.158BD WAS DELETED. THE LD.CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND NOTED THAT SINCE THE SAME AMOUNT HAS BEEN TAXED ON SUBSTANTIVE BASIS IN THE CASE OF INDIVIDUAL SHRI SE NDHABHAI M.DESAI AND CIT(APPEALS) CONFIRMED THE VIEW AND THEREFORE N O PROTECTIVE ASSESSMENT COULD BE MADE U/S.158BD IN THE CASE OF T HE ASSESSEE. ADDITION WAS ACCORDINGLY DELETED. 5. THE REVENUE IN THE DEPARTMENTAL APPEAL CHALLENGE D THE DELETION OF ADDITION OF RS.14 30 810/-. THE ASSES SEE IN THE CROSS OBJECTION RAISED SEVERAL GROUNDS INCLUDING ADDITIO NAL GROUND OF CROSS OBJECTION AND IN BRIEF CHALLENGED THE INITIAT ION OF BLOCK ASSESSMENT PROCEEDINGS U/S.158BD OF THE I.T. ACT 1 961 ON PROTECTIVE BASIS AND ASSUMPTION OF JURISDICTION U/S .158BD OF THE I.T. ACT 1961. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED T HE SUBMISSION MADE BEFORE AUTHORITIES BELOW AND AT THE OUTSET SU BMITTED THAT PROTECTIVE ASSESSMENT IN THE CASE OF THE PRESENT AS SESSEE IS NOT VALID AND THE ASSESSING OFFICER HAS WRONGFULLY ASSU MED THE JURISDICTION UNDER SECTION 158BD. HE HAS SUBMITTED THAT 158BC ASSESSMENT IS CONCLUDED IN THE CASE OF INDIVIDUAL M R.SENDHABHAI M. DESAI UNDER SECTION 158BC READ WITH SECTION 143(3) VIDE ORDER DATED 29 TH SEPTEMBER 1999 IN WHICH THE ENTIRE ADDITION HAS B EEN MADE ON THE BASIS OF THE SAME SEIZED MATERIAL ANNEXURE-A 37 (SR. NO.119 TO 127). HE HAS SUBMITTED THAT SHRI SENDHABHAI HAS RE TRACTED FROM HIS 6 EARLIER STATEMENT AND ALSO DID NOT ACCEPT EXISTENCE OF AOP THEREFORE INITIATION OF THE PROTECTIVE ASSESSMENT UNDER SECTION 158BD IN THE CASE OF THE AOP ON 6.01.2003 IS NOT VA LID. HE HAS RELIED UPON ORDER OF ITAT AHMEDABAD BENCH IN THE CA SE OF SMT. FARJANA M. DESAI REPORTED IN 119 TTJ 387 (COPY OF T HE ORDER IS ALSO FILED) IN WHICH IT WAS HELD THAT UNDER CHAPTER XIVB OF THE I.T. ACT THE UNDISCLOSED INCOME COULD BE ASSESSED ON SUBSTANTIVE BASIS AND NOT ON PROTECTIVE BASIS. PARA.10 AND 11 OF THE ORDER IS REPRODUCED AS UNDER: 10. COMING TO THE PROVISIONS OF S.158BD OF THE ACT WE AFTER HAVING ANALYZED THE SAME ARE OF THE OPINION THAT A PERSON IN WHOSE CASE THERE HAS BEEN NEITHER A SEARC H UNDER S.132 OF THE ACT NOR A REQUISITION UNDER S.132A OF THE ACT CAN BE BROUGHT WITHIN THE AMBIT OF PROVISIONS OF CHAPTE R XIV-B OF THE ACT ONLY IF THE ASSESSING OFFICER HAVING JURISD ICTION OVER THE ASSESSEE IN WHOSE CASE THERE HAS BEEN SEARCH UNDER S.132 OF THE ACT OR REQUISITION UNDER S.132A OF THE ACT I S SATISFIED THAT THE MATERIAL FOUND AND SEIZED DURING THE SEARCH CON TAINS THE UNDISCLOSED INCOME OF THE PERSON OTHER THAN THE PER SON IN WHOSE CASE THERE HAS BEEN SEARCH OR REQUISITION UND ER S. 132A OF THE ACT (CALLED AS SUCH OTHER PERSON). TH ESE PROVISIONS THEREFORE IN OUR OPINION CAN BE INVOK ED ONLY WHEN THE ASSESSING OFFICER OF A PERSON IN WHOSE CASE TH ERE HAS BEEN SEARCH UNDER SECTION 132 OF THE ACT OR REQUISI TION UNDER S.132A OF THE ACT IN POSITIVELY AND SUBSTANTIVELY S ATISFIED WITH RESPECT TO THE UNDISCLOSED INCOME RELATING TO SUCH OTHER PERSON AND ONCE THERE IS SUCH POSITIVE OR SUBSTANTI VE SATISFACTION. SUCH UNDISCLOSED INCOME HAS TO BE TAX ED IN THE HANDS OF SUCH OTHER PERSON AND ONCE THERE IS SUCH P OSITIVE OR SUBSTANTIVE SATISFACTION OF THE ASSESSING OFFICER P REFERS NOT TO MAKE ADDITION IN THE HANDS OF SUCH OTHER PERSON ON SUBSTANTIVE BASIS SUCH PERSON CANNOT BE ASSESSED U NDER THE PROVISIONS OF CHAPTER XIV-B OF THE ACT. CLARIFY FUR THER WE ARE OF THE OPINION THAT IF SUCH OTHER PERSON IS TO BE A SSESSED UNDER CHAPTER XIV-B OF THE ACT THE UNDISCLOSED INCOME IN THIS CASE HAS TO BE ASSESSED ON SUBSTANTIVE BASIS AND NOT ON PROTECTIVE BASIS. 11. COMING TO THE PRESENT CASE IT IS OBSERVED FROM THE FACTS ON RECORD THAT THE TRIBUNAL HAS IN ASSESSEE S OWN CASE FOR THIS VERY ASSESSMENT YEAR GIVEN THE TWO FINDIN GS; NAMELY (I) THAT IN CASE OF BLOCK ASSESSMENT FRAMED UNDER S.158BD R/W S.158BB(1) OF THE ACT THERE CANNOT BE ANY ACTION UN DER S.158BD OF THE ACT UNLESS AND UNTIL THE ASSESSING O FFICER HAVING JURISDICTION OVER THE CASE OF THE PERSON IN WHOSE CASE THERE HAS BEEN SEARCH UNDER S.132 OF THE ACT OR REQ UISITION 7 UNDER S.132A OF THE ACT COMES TO A SATISFACTION TH AT THE DOCUMENTS RECORDS ASSESSMENT (SIC-ASSETS) VALUAB LE ETC. FOUND AND SEIZED DURING THE SEARCH CONTAINS UNDISCL OSED INCOME OF A PERSON OTHER THAN THE PERSON SEARCHED MEANING THEREBY THAT SUCH A SATISFACTION HAS TO BE A POSITI VE ONE AND HAS TO BE DULY RECORDED. HE HAS FURTHER SUBMITTED THAT THE AFORESAID ORDER IS FOLLOWED BY ITAT AHMEDABAD BENCH IN THE CASE OF MR.AMIT SHAH VS . ACIT DATED 10.07.2009 (COPY FILED) AND RELIED UPON THE DECISIO N OF JURISDICTIONAL HIGH COURT IN THE CASE OF SAYAJI IRON ENGINEERING 2 53 ITR 749 (GUJ) IN WHICH IT WAS HELD THAT THE DECISION OF THE COORD INATE BENCH IS BENDING ON THE TRIBUNAL. HE HAS RELIED UPON DECISIO N OF GUJARAT HIGH COURT IN THE CASE OF KANDUBHAI VASANJI DESAI AND OT HERS 236 ITR 73 AND REFERRED TO PAGE 95 OF THIS DECISION ON THE PRO POSITION THAT THE ASSESSING OFFICER WHO HAS JURISDICTION OVER THE RAI DED PERSON IS DIFFERENT THE MATERIAL WILL BE TRANSMITTED TO HIM FOR MAKING BLOCK ASSESSMENT THEREFORE THE ASSESSING OFFICER OF THE RAIDED SHOULD BE SATISFIED THAT UNDISCLOSED INCOME BELONGS TO THE AS SESSEE. HE HAS RELIED UPON THE DECISION OF GUJARAT HIGH COURT IN T HE CASE OF CARGO CLEARING AGENCY GUJARAT V. ACIT 307 ITR 1 ON THE PR OPOSITION THAT CHAPTER XIV-B OF THE I.T.ACT IS THE SPECIAL PROCEDU RE AND THE ASSESSMENT IS TO BE MADE ACCODRINDLGY AND NO OTHER PROVISION WOULD APPLY. THE COURTS ARE NOT EMPOWERED TO ADD WORDS IN THE STATUTE OR SUBSTITUTE THE WORDS WHILE INTERPRETING A PROVISION . THE COURTS CAN ONLY READ AND INTERPRET THE LANGUAGE EMPLOYED BY TH E STATUTE. HE HAS ALSO RELIED UPON DECISION OF GUJARAT HIGH COURT IN THE CASE OF N.R.PAPER AND BOARD LTD. AND OTHERS VS.DCIT 234 ITR 733 IN WHICH IT WAS HELD THAT HIGH COURT DECISION ON CENTRAL STA TUTE LIKE INCOME TAX ACT HAVE PERSUASIVE VALUE BUT NOT BINDING ON OTHER HIGH COURTS. HE HAS ALSO SUBMITTED THAT IN THIS CASE ALSO IT WAS HE LD THAT CHAPTER XIV- B IS A SPECIAL PROCEDURE FOR COMPUTING UNDISCLOSED INCOME. HE HAS SUBMITTED THAT SINCE THERE WAS NO MATERIAL AGAINST THE ASSESSEE AFTER CONCLUSION OF ASSESSMENT IN THE CASE OF INDIVIDUAL SHRI SENDHABHAI 8 M. DESAI THEREFORE ON THE FACTS AND CIRCUMSTANCES OF THE CASE PROTECTIVE ASSESSMENT IS UNJUSTIFIED IN THE MATTER. 7. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE DEPARTMENT HAD TO SAFEGUARD THE INTEREST OF THE REVENUE THEREFORE P ROTECTIVE ASSESSMENT IN THIS CASE IS JUSTIFIED AND RELIED UPO N DECISION OF KERALA HIGH COURT IN THE CASE OF T.S. SUJATHA VS. UOI 238 ITR 599 IN WHICH THE WRIT PETITION WAS DISMISSED. HE HAS RELIED UPO N DECISION OF SUPREME COURT IN THE CASE OF ITO VS.BACHULAL KAPOOR 60 ITR 74 IN WHICH HONBLE SUPREME COURT RELIED UPON ITS EARLIER DECISION IN THE CASE OF LALJI HARIDAS VS. ITO 43 ITR 387 IN WHICH IT WAS HELD THAT WHEN THERE WAS A DOUBT AS TO WHICH PERSON AMONG TW O WAS LIABLE TO BE ASSESSED PARALLEL PROCEEDING MIGHT BE STARTED F OR PROTECTIVE AND SUBSTANTIVE ASSESSMENT. HE HAS RELIED UPON DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF SMT. HEMLATA AGARWAL VS. CIT 64 ITR 428 IN WHICH IT WAS HELD THAT THOUGH IT MIGHT BE OPEN T O THE ITO TO MAKE A PROTECTIVE ASSESSMENT IT IS NOT OPEN TO INCOME TAX APPELLATE TRIBUNAL WHICH IS THE FINAL COURT OF FACT TO MAKE A PROTECTIVE ASSESSMENT. HE HAS ALSO RELIED UPON DECISION OF GUJ ARAT HIGH COURT IN THE CASE OF BANYAN AND BERRY VS. CIT 222 ITR 831 IN WHICH IT WAS HELD THAT PROTECTIVE ASSESSMENT CAN BE MADE WHERE T HERE IS A DOUBT REGARDING ASSESSABLE ENTITY. THE DR SUBMITTED THAT ALL PROVISIONS OF THE ACT ARE APPLICABLE TO THE BLOCK ASSESSMENT PROC EEDING AND SUBMITTED THAT DECISION OF MANOJ AGARWAL IS NOT CIT ED BEFORE CIT(APPEALS) AND THAT SUBSTANTIVE AND PROTECTIVE AS SESSMENT SHOULD BE HEARD TOGETHER AND NO SPECIFIC GROUND IS TAKEN I N THIS REGARD. 8. LD. COUNSEL FOR ASSESSEE IN THE REJOINDER REI TERATED THE SUBMISSIONS MADE ABOVE AND REFERRED TO PAGE 82 OF T HE DECISION OF THE SUPREME COURT IN THE CASE OF BACHULAL KAPOOR (S UPRA) RELIED UPON BY THE DR IN WHICH HONBLE SUPREME COURT HAS NOT EXPRESSED 9 OPINION ON THE QUESTION OF PROTECTIVE ASSESSMENT. L D. COUNSEL FOR ASSESSEE ALSO FILED COPY OF SATISFACTION NOTE RECOR DED UNDER SECTION 158BD BY THE ASSESSING OFFICER IN THE CASE OF THE A OP AND SUBMITTED THAT NO SATISFACTION IS RECORDED IN THE C ASE OF THE PERSONS SEARCHED I.E. INDIVIDUAL SHRI SENDHABHAI M. DESAI. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND MATE RIAL ON RECORD. CONSIDERING THE SUBMISSIONS OF THE PARTI ES WE FIND THAT THE FOLLOWING PRELIMINARY ISSUE IS TO BE DECIDED: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE ABOV E CASE ASSESSING OFFICER WAS JUSTIFIED IN INITIATING PROCEEDINGS U/S.158BD OF THE IT ACT/OR PASSING BLOCK ASSESSMENT ORDER U/S.158BD OF THE IT ACT ON PROTECTIVE BASIS IN THE CASE OF THE ASSESSEE (AOP) ? 9.1. SECTION 158BD PROVIDES :- WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON OTHER THA N THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 OR WHOSE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR ANY ASSETS WERE REQUISITIONED UNDER SE CTION 132A THEN THE BOOKS OF ACCOUNTS OTHER DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED UND ER SECTION 158BC AGAINST SUCH OTHER PERSON AND THE PROVISIONS OF THIS CHAPTER SHALL APPLY ACCORDINGLY. 9.2. CHAPTER XIV-B PROVIDES FOR SPECIAL PROCEDURE IN ASSESSMENT IN SEARCH CASES. SECTION 158BC PROVIDES FOR BLOCK A SSESSMENT IN THE CASES IN WHICH SEARCH HAS BEEN CONDUCTED UNDER SECT ION 132 OR DOCUMENTS REQUISITIONED UNDER SECTION 132A. HOWEVE R ANOTHER PROVISION UNDER SECTION 158BD IS PROVIDED FOR ASSES SMENT IN RESPECT OF UNDISCLOSED INCOME OF ANY PERSON OTHER THAN THE PERSON SEARCHED. IT PROVIDES THAT WHERE THE ASSESSING OFFICER IS SAT ISFIED THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON OTHER THA N THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 THEN THE BOOKS OF ACCOUNTS OTHER DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED 10 SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVIN G JURISDICTION OVER SUCH OTHER PERSON AND THE ASSESSING OFFICER SHALL P ROCEED AGAINST OTHER PERSON AND THE PROVISIONS OF CHAPTER XIV-B SH ALL BE APPLICABLE. IF THE ASSESSING OFFICER HAVING SEIZED THE RECORD W ITH HIM AND AFTER SATISFYING HIMSELF FROM THE SEIZED RECORD FOUND THA T THE UNDISCLOSED INCOME BELONGED TO OTHER PERSON OTHER THAN THE PERS ON SEARCHED THEN TO HAND OVER THE SEIZED MATERIAL TO THE ASSESS ING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON. THEN THE ASSE SSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON SHALL PR OCEED AGAINST SUCH OTHER PERSON UNDER SECTION 158BD TO DETERMINE THE U NDISCLOSED INCOME AS PER LAW. 10. HON'BLE DELHI HIGH COURT IN THE CASE OF AMITY H OTELS PRIVATE LIMITED VS. CIT ; 272 ITR 75 HELD - HELD THAT IN THE PRESENT CASE THERE WAS NOTHING TO INDICATE THAT THE ASSESSING OFFICER COULD HAVE FORM ED AN OPINION AND ARRIVED AT A SATISFACTION THAT THE PETI TIONER HAD NOT TRULY DISCLOSED ITS INCOME. THE APPRECIATING REPORT CLEARLY REVEALED THAT THE ASSESSING OFFICER WAS CAL LED UPON TO LOOK INTO IT WITH REGARD TO SEVERAL ENTRIES AND THE ASSESSING OFFICER IN HIS NOTHING HAD CLEARLY INDICA TED THAT IT REQUIRED FURTHER INVESTIGATION IN-DEPTH SCRUTINY AN D THERE WAS NOTHING TO INDICATE THAT HE HAD RECORDED IN WRI TING THAT HE WAS SATISFIED ABOUT THE ACTION REQUIRED TO BE IN ITIATED. EVEN IN THE AFFIDAVIT IN REPLY IT WAS NOT STATED TH AT THE ASSESSING OFFICER WAS SATISFIED AND HENCE ISSUED NO TICE. ON THE CONTRARY IT REVEALED THAT TO ARRIVE AT A SA TISFACTION NOTICE WAS ISSUED AND THAT WAS CLEAR FROM THE AFFID AVIT OF THE ASSESSING OFFICER. THE PROPERTY WHICH WAS REF ERRED TO FOR INITIATING PROCEEDINGS HAD ALREADY BEEN DISCLOS ED IN THE RETURN OF INCOME. THE NOTICES ISSUED UNDER SECTION 158BD WERE NOT VALID AND WERE LIABLE TO BE QUASHED. 11. ITAT SPECIAL BENCH BANGALORE IN THE CASE OF Y .SUBBARAJU & COMPANY VS. ACIT; 91 ITD 118 HELD - THE ESSENTIAL INGREDIENTS OF SECTION 158BD ARE : (I) THE ASSESSING OFFICER OF A PERSON SEARCHED SHOU LD BE SATISFIED. 11 (II) THAT UNDISCLOSED INCOME BELONGS TO PERSON OTHE R THAN THE PERSON IN RESPECT OF WHOM SEARCH WAS CONDUCTED. (III) THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR AS SETS SEIZED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THAN OTHER PERSON. (IV) THE ASSESSING OFFICER SHALL PROCEED AGAINST SU CH OTHER PERSON UNDER THE PROVISIONS OF THIS CHAPTER. ON THE BASIS OF THE SEARCH MATERIAL IN THE POSSESSI ON OF THE ASSESSING OFFICER OF A PERSON WHO IS SEARCHED HE MUST COME TO A PRIMA FACIE VIEW THAT UNDISCLOSED IN COME BELONGS TO OTHER PERSON. 11.1 ITAT ALLAHABAD BENCH IN THE CASE OF VISHWAN ATH PRASAD VS. ACIT; 86 ITD 516 HELD THE DEPARTMENT AS SUCH COULD NOT GIVE SURPRISE TO THE ASSESSEE AT THE APPELLATE STAGE BY MENTIONING THAT THERE WAS NO AUTHORIZATION OF SEARCH IN THE NAME OF THE ASSESSEE-FIRM. THE SATISFACTION HAD TO BE ARRIVED AT BY THE INITIAL ASSESSING OFFICER BEFORE PROCEEDINGS UNDER SECTION 158BD. IT WAS UNDISPUTED THAT THE ASSESSING OFFICE R IN THE CASE OF THE ASSESSEE FIRM WAS THE ITO. THAT FACT W AS MENTIONED IN THE PANCHNAMA ALSO BUT LATER ON THE CA SE WAS TRANSFERRED TO THE ASSTT. COMMISSIONER. THE A SSISTANT COMMISSIONER ISSUED A SHOW-CAUSE NOTICE TO THE ASSE SSEE FIRM BUT LATER ON THE RECORD WAS AGAIN TRANSFERRED TO ANOTHER ASSISTANT COMMISSIONER. IT APPEARED THAT THE AUTHORITIES BELOW HAD PROCEEDED AGAINST THE ASSESSE E FIRM UNDER SECTION 158BC THEREFORE THE AUTHORITIES BEL OW HAD NOT CARED TO MENTION ANYWHERE THAT THE ASSESSING OF FICER WAS SATISFIED THAT ANY UNDISCLOSED INCOME BELONGED TO SUCH PERSON OTHER THAN THE PERSON WHO WAS SEARCHED UNDER SECTION 132. IT WAS AN UNDISPUTED FACT THAT THE SEARCH MATERIAL WAS NEVER HANDED OVER TO THE ASSESS ING OFFICER WHO WAS HAVING JURISDICTION OVER THE ASSESS EE FIRM. THEREFORE THERE WAS NO QUESTION OF HIS SATISFACTIO N AT ALL AS REQUIRED UNDER SECTION 158BD (PARA 15) 11.2 ITAT DELHI BENCH IN THE CASE OF NAVIN VERMA; 283 ITR (AT) 83 HELD THAT RECORDING OF SATISFACTION IS A PRE-REQ UISITE CONDITION UNDER SECTION 158BD. SATISFACTION CAN BE RECORDED SEPARATELY. 12 11.3 HON'BLE SUPREME COURT IN THE CASE OF MANISH MA HESHWARI VS. ACIT; 289 ITR 341 HELD 11. THE CONDITION PRECEDENT FOR INVOKING A BLOCK ASSESSMENT IS THAT A SEARCH HAS BEEN CONDUCTED UND ER SECTION 132 OR DOCUMENTS OR ASSETS HAVE BEEN REQUISITIONED UNDER SECTION 132A. THE SAID PROVISI ON WOULD APPLY IN THE CASE OF ANY PERSON IN RESPECT OF WHOM SEARCH HAS BEEN CARRIED OUT UNDER SECTION 132A OR DOCUMENTS OR ASSETS HAVE BEEN REQUISITIONED UNDER SECTION 132A. SECTION 158BD HOWEVER PROVIDES FOR TAKING RECOURSE TO A BLOCK ASSESSMENT IN TERM OF SE CTION 158BC IN RESPECT OF ANY OTHER PERSON THE CONDITION S PRECEDENT WHEREFOR ARE (I) SATISFACTION MUST BE REC ORDED BY THE ASSESSING OFFICER THAT ANY UNDISCLOSED INCOME B ELONGS TO ANY PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 OF THE ACT; (II) THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR ASSETS SEIZ ED OR REQUISITIONED HAD BEEN HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON; AND (III) THE ASSESSING OFFICER HAS PROCEEDED UNDER SECTION 1 58BC AGAINST SUCH OTHER PERSON. THE CONDITIONS PRECEDENT FOR INVOKING THE PROVISIO NS OF SECTION 158BD THUS ARE REQUIRED TO BE SATISFIED BEFORE THE PROVISIONS OF THE SAID CHAPTER ARE APPLIED IN R ELATION TO ANY PERSON OTHER THAN THE PERSON WHOSE PREMISES HAD BEEN SEARCHED OR WHOSE DOCUMENTS AND OTHER ASSETS H AD BEEN REQUISITIONED UNDER SECTION 132A OF THE ACT. IT WAS FURTHER HELD LAW IN THIS REGARD IS CLEAR AND EXPLICIT. THE ONL Y QUESTION WHICH ARISES FOR OUR CONSIDERATION IS AS TO WHETHER THE NOTICE DATED FEBRUARY 6 1996 SATISFIES THE REQUIR EMENTS OF SECTION 158BD OF THE ACT. THE SAID NOTICE DOES NOT RECORD ANY SATISFACTION ON THE PART OF THE ASSESSIN G OFFICER. DOCUMENTS AND OTHER ASSETS RECOVERED DURING SEARCH HAD NOT BEEN HANDED OVER TO THE ASSESSING OFFICER HAVIN G JURISDICTION IN THE MATTER. IT WAS FURTHER HELD AS THE ASSESSING OFFICER HAS NOT RECORDED HIS SATI SFACTION WHICH IS MANDATORY; NOR HAS HE TRANSFERRED THE CASE TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THE MATT ER WE ARE OF THE OPINION THAT THE IMPUGNED JUDGMENTS OF T HE HIGH COURT CANNOT BE SUSTAINED WHICH ARE SET ASIDE ACCORDINGLY. THE APPEALS ARE ALLOWED. HOWEVER I N THE FACTS AND CIRCUMSTANCES OF THE CASE THERE SHALL BE NO ORDER AS TO COSTS. 13 12. IN THIS CASE SATISFACTION NOTE READS AS UNDER: - REG: SENDHBHAI M.DESAI & OTHERS STATUS : AOP SATISFACTION FOR ISSUE OF NOTICE U/S.158BD OF THE I.T. ACT DURING THE COURSE OF SEARCH U/S.132 OF THE I.T. ACT AT SABERA HOTEL PALANPUR HIGHWAY ROAD MEHSANA CERTAI N DOCUMENTS RELATING TO THE AFORESAID CONCERN WERE FO UND AND SEIZED AS PER PAGE NO.119 TO 127 OF ANNEXURE A- 37 (LOOSE PAPER FILE). THE AFORESAID DOCUMENTS CONTE NTS SUMMARY SHEETS WHEREIN THE SALE WAS RECORDED AT 2 07 58 000 AND THE PURCHASES WERE SHOWN AT 1 92 70 000/-. THE CLOSING STOCK WAS SHOWN AT 42 4 2 000/- THAT MEANS THE PROFIT WAS TO THE EXTENT OF RS.57 30 000/-. DURING THE COURSE OF SEARCH STATEMENT OF SHRI SENDH ABHAI M.DESAI WAS RECORDED U/S.132(4) OF THE I.T. ACT AND THE FACTS CONTAINED IN THE AFORESAID DOCUMENTS WERE CONFRONTED. SHRI SENDHABHAI M.DESAI IN ANSWER TO QUESTION NO.8 STATED THE AFORESAID ENTRIES RELATE T O PARTNERSHIP CONCERN CONSISTING OF 6 PARTNERS. IT WAS STATED BY SHRI SENDABHAI M.DESAI THAT THIS IS PROFIT OF VA RIOUS YEAR AND NO RETURN HAS BEEN FILED IN RESPECT OF THE PROF IT. HE AGREED TO PAY THE TAX ON THE PROFIT AS WORKED OUT A BOVE AMOUNTING TO RS.57 30 000/-. AS AGREED BY SHRI SENDHABHAI M.DESAI NO TAX WAS PAID AND NO RETURN WA S FILED IN RESPECT OF THE AFORESAID INCOME. THE INCO ME TO THE EXTENT OF RS.57 30 000/- IN THE UNDISCLOSED INCOME OF THE FIRM. THE SAME REMAIN TO BE TAXED. THE INCOME EMANATING FROM THESE DOCUMENTS HAS NOT BEEN CONSIDE RED IN ANY OTHER HAND. IN VIEW OF THE ABOVE I AM SATISFIED THAT THE DOCUM ENTS PERTAIN TO THE FIRM/AOP AND ARE REQUIRED TO BE CONS IDERED IN THE HANDS OF THE IMPUGNED ASSESSEE CONSISTING OF 6 INDIVIDUALS. NOTICE U/S.158BD R.W.S.158BC IS THEREFORE ISSUED. DATE : 6/1/2003 SD_ (R.N. POONIA) ASSTT.COMMISSIONER OF INCOME-TAX MEHSANA CIRCLE MEHSANA 14 13. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF COM MISSIONER OF INCOME TAX VS. LAXMI PD. AND SONS [2009] 316 ITR 33 0(ALL) HELD AS UNDER: AN ASSOCIATION OF PERSONS IS A VOLUNTARY ASSOCIATI ON OF TWO OR MORE PERSONS WHO JOINED TOGETHER FOR A PARTICULAR P URPOSE WHICH MAY NOT NECESSARILY BE WITH THE OBJECT OF DER IVING OF INCOME OR PROFITS OR GAINS. WHATEVER THE OBJECT OF ASSOCIATING THE ASSOCIATION HAS TO BE VOLUNTARY ON THE PART OF THE PERSONS FORMING ASSOCIATION. FORCED ASSOCIATION OF PERSONS BECAUSE OF INHERITING JOINT PROPERTY UNDER A WILL OR SUCH O THER CIRCUMSTANCES NOT BEING VOLUNTARY WOULD NOT CONSTIT UTE SUCH JOINT LEGATEES AN ASSOCIATION OF PERSONS. 14. HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME TAX V. H.C.CHANDNA P. LTD. [2008] 299 ITR 42 9 (DELHI) HELD AS UNDER: A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 O F THE INCOME TAX ACT 1961 WAS CONDUCTED IN THE RESIDENT IAL AND BUSINESS PREMISES OF THE ASSESSEE ON FEBRUARY 22 1 996. AMONG THE DOCUMENTS RECOVERED WERE A REGISTER WITH REFERENCE TO SOME CANCELLED AND BLANK BILLS. ON THE BASIS OF THIS AN ESTIMATION WAS MADE OF THE INCOME OF THE A SSESSEE FOR THE ASSESSMENT YEAR 1996-97. THE TRIBUNAL REQUI RED THE ASSESSEE TO PRODUCE THE ORIGINAL CANCELLED AND BLAN K BILLS WHICH WAS DONE. AFTER EXAMINING THESE BILLS AND COM PARING THEM WITH THE ENTRIES IN THE SALE REGISTER IT WAS FOUND THAT THE CANCELLED AND BLANK BILLS WERE A PART OF THE REGULA R BILL BOOKS MAINTAINED BY THE ASSESSEE FOR ITS BUSINESS PURPOSE S. ALL THE BILL NUMBER WERE ENTERED IN THE SALE REGISTER AND T HEY WERE TALLIED ON THE BASIS OF SALE MADE OR AS CANCELLED B ILLS FOUND ENTERED IN THE SALE REGISTER SERIAL-WISE. ON THIS B ASIS THE TRIBUNAL CAME TO THE CONCLUSION THAT THERE WAS NO Q UESTION OF ANY UNDISCLOSED INCOME OF THE ASSESSEE BASED ON THE SE CANCELLED AND BLANK BILLS. THE TRIBUNAL ALSO NOTED THAT FOR THE SAME ASSESSMENT YEAR 1996-97 THE ASSESSEE HAD FILE D REGULAR RETURNS AND THESE WERE ACCEPTED BY THE REVE NUE. ON APPEAL TO THE HIGH COURT: HELD DISMISSING THE APPEAL THAT THERE WAS NO BAS IS FOR THE ASSESSING OFFICER TO MAKE ANY ESTIMATION IN RES PECT OF BLANK AND CANCELLED BILLS. THE TRIBUNAL WAS FULLY J USTIFIED IN TAKING INTO CONSIDERATION THE SUBSEQUENT FINDINGS NAMELY THAT A RETURN FOR THE ASSESSMENT YEAR 1996-97 HAD BEEN A CCEPTED BY THE REVENUE. 15 15. HON'BLE BOMBAY HIGH COURT IN THE CASE OF INDIAN EXPRESS NEWSPAPERS (BOMBAY) P. LTD. AND ANOTHER VS. UNION O F INDIA AND OTHERS [2008] 300 ITR 351 (BOM) HELD AS UNDER: WE ARE INFORMED BY THE ADVOCATES THAT THE CASE OF THE REVENUE RESTS ON THE DEPOSITION OF J.K. BANTHIA WHO HAS SINCE EXPIRED. IT HAS BEEN BROUGHT TO YOUR NOTICE THAT MR .J.K.BANTHIA HAS RETRACTED HIS STATEMENT. IN FACT THE AFFIDAVIT OF MR. J.K.BANTHIA SWORN BEFORE A NOTARY RETRACTING HIS D EPOSITION IS PLACED ON RECORD AS ANNEXURE-G TO THE PETITION. AS THE REVENUE HAS FAILED TO COMPLY WITH THE ORDER DATED M ARCH 26 2007 DIRECTING THEM TO PRODUCE THE REASONS WITH RE GARD TO THE NOTICES FOR REOPENING THE ASSESSMENT IT CAN BE PRE SUMED THAT THE REASONS WHICH WERE ALREADY PROVIDED WERE EARLIE R FOUND TO BE INSUFFICIENT BY THE EARLIER BENCH. EVEN INDEPEND ENTLY ASSESSING THE REASONS AS CONTAINED IN THE AFFIDAVIT IN REPLY FILED AT THE STATEMENT OF MR. J.K.BANTHIA WHO EXPIR ED AFTER RETRACTING THE STATEMENT. THE DOCUMENTARY EVIDENCE INDICATES THE EXISTENCE OF THE LOAN AND THE PAYMENT OF INTERE ST AFTER DEDUCTION OF TDS. AS AGAINST THIS DOCUMENTARY EVIDE NCE THE REVENUE HAS RELIED UPON THE STATEMENT OF MR. J.K.BA NTHIA TO THE EFFECT THAT THESE WERE ONLY HAWALA ENTRIES. MR. BANTHIA HAVING EXPIRED NO PURPOSE WILL BE SERVED IN PROCEED ING FURTHER. IN OUR VIEW THESE IS NO SUFFICIENT REASON FOR REOPENING THE ASSESSMENT. RULE IS THEREFORE MADE ABSOLUTE I N TERMS OF PRAYER CLAUSE (A). 16. HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME TAX VS. 1. PRADIP KUMAR GUPTA (ITA NO.353 OF 2006) 2. VIJAY GUPTA (ITA NO.610 OF 2006) [2008] 303 ITR 95 (DELHI ) HELD THAT : HELD THAT THE ASSESSMENT HAD NOT BEEN COMPLETED U NDER SECTION 143(3) OF THE ACT. THERE WERE BANKING TRANS ACTIONS BETWEEN THE ASSESSES AND A. THE REASSESSMENT PROCEE DINGS HAD BEEN INITIATED AFTER SEVERAL YEARS OF THE ACCEP TANCE OF THE RETURN UNDER SE3CTION 143(1) OF THE ACT. THE ASSESS EES FAILURE TO BRING THE PERSON TILLING THE LAND ON THEIR BEHAL F COULD NOT INEXORABLY LEAD TO THE CONCLUSION THAT NO AGRICULTU RAL INCOME HAD BEEN GENERATED BY THE ASSESSEES. SUCH AN INFERE NCE COULD ONLY BE DRAWN FROM THE STATEMENT OF A TO THE EFFECT THAT THE TRANSACTIONS BETWEEN HIM AND THE ASSESSEES WERE BOGUS. THEREFORE IT WAS MANDATORY FOR THE REVENUE TO PROD UCE A FOR CROSS EXAMINATION BY THE ASSESSEE ON THEIR SPECIFIC DEMAND. ONCE SECTION 147 OR 148 WAS RESORTED TO THE ASSESS ING OFFICER MUST FIRST DISCHARGE THE BURDEN OF SHOWING THAT INCOME HAD ESCAPED ASSESSMENT. IT WAS ONLY THEREAFTER THAT THE ASSESSEES HAD TO PROVIDE ALL THE ANSWERS. THE TRIBU NAL ARRIVED AT THE CORRECT CONCLUSION. 16 17. MADRAS BENCH A IN THE CASE OF L. SAROJA VS. AC IT 76 ITD 344 IN PARA 10 HELD : THE CASE OF M/S. PALAGAPANDI GROUP ESTATES [IT(SS) A NO.123 (MDS) 1998] STANDS ON A DIFFERENT FOOTING AS FAR AS WE COULD SEE FROM HE MATERIALS ON RECORD. ADMITTEDLY T HE ESTATE IS AN AGRICULTURAL ESTATE. THE BOOKS OF M/S. PALAGAPAN DI GROUP ESTATE WERE NOT FOND IN THE PREMISES AT THE TIME OF SEARCH NOR WERE THEY SEIZED IN THE COURSE OF THE SEARCH. NO IN CRIMINATING DOCUMENT WAS FOUND AT THE TIME OF SEARCH OR AT ANY TIME BEFORE THE ISSUE OF NOTICE ON 9-04-1997 UNDER SECT ION 158BC VIS--VIS 158BD. EVEN THE ADDITIONS THAT WERE FINAL LY MADE WERE PRIMA FACIE ON PROTECTIVE BASIS. IN THE SCHEME OF CHAPTER XIVB THERE IS NO SCOPE FOR PROTECTIVE ASSESSMENT AS BETWEEN THE PERSON (WITH RESPECT TO WHOM SEARCH WAS CONDUCT ED UNDER SECTION 132) AND THE PERSON SOUGHT TO BE COVE RED BY THE PROVISIONS OF SECTION 158BD. PROTECTIVE ASSESSM ENT QUA THE PERSON SOUGHT TO BE COVERED UNDER SECTION 158BD MUST NECESSARILY FAIL AS NOT SATISFYING THE CONDITIONS P RESCRIBED UNDER THAT SECTION. THE BLOCK ASSESSMENT IN THE CAS E OF M/S. PALAGAPANDI GROUP ESTATES IS THEREFORE CANCELLED. 18. ITAT DELHI I BENCH IN THE CASE OF TAHIL RAM M OOLCHANDANI VS. ACIT 115 TTJ (DELHI) 692 HELD AS UNDER: AO OF THE ASSESSEE ISSUING NOTICE UNDER S.158BD TO THE ASSESSEE AFTER A PERIOD OF 23 MONTHS AND 10 DAYS FROM THE TIME WHEN HE RECEIVED INTIMATION FROM THE AO OF THE PERSON WHO WAS SUBJECTED TO A SEARCH THE ORDER OF BLOCK A SSESSMENT UNDER S.158BD IS LIABLE TO BE ANNULLED ON THE GROUN D OF INORDINATE DELAY IN INITIATING PROCEEDINGS. 19. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISIONS IT IS CLEAR THAT THE PROTECTIVE ASSESSME NT IS MADE IN THE CASE OF THE ASSESSEE(AOP) ON THE BASIS OF STATEMENT MADE BY SHRI SENDHABHAI M. DESAI WHEN SEARCH WAS CONDUCTED IN H IS NAME AND PREMISES ON 28.08.1997. CERTAIN LOOSE PAPERS A-37(S R.NO.119 TO 127) PERTAINS TO LAND TRANSACTIONS. THE ASSESSING O FFICER NOTED THE GIST OF THE SAME IN THE ASSESSMENT ORDER WHICH DID NOT LEAD TO ANY CONCLUSION THAT THE SAME PERTAIN TO THE ASSESSEE (A OP) OR EXISTENCE OR FORMATION OF ANY AOP. THE ASSESSING OFFICER THER EFORE NOTED THAT SHRI SENDHABHAI M. DESAI WAS ASKED TO EXPLAIN THE N ATURE OF THE 17 TRANSACTIONS RECORDED IN THESE LOOSE PAPERS. SHRI S ENDHABHAI M. DESAI IN HIS STATEMENT EXPLAINED THAT THE ENTRIES PERTAIN TO 6 PARTNERS AND HE HAS AGREED TO PAY THE TAX ON THE SA ME. HOWEVER SHRI SENDHABHAI M. DESAI RETRACTED FROM HIS STATEME NT BEFORE THE ASSESSING OFFICER IN HIS INDIVIDUAL CASE AND DENIED TO HAVE ANY BUSINESS OF PROPERTY TRANSACTION WITH ANY OTHER PER SONS. THE SAME SEIZED PAPERS WERE CONSIDERED IN HIS INDIVIDUAL CAS E AND BLOCK ASSESSMENT ORDER UNDER SECTION 158BC/143(3) WAS PAS SED BY DCIT- SR.2 AHMEDABAD ON 29 TH SEPTEMBER 1999 AND ADDITION OF RS.20 01 400/- WAS MADE ON SUBSTANTIVE BASIS. THUS IT WAS CONCLUDED ON 29.09.1999 THAT THE SAME SEIZED MATERI ALS RECOVERED DURING THE COURSE OF SEARCH FROM SHRI SENDHABHAI M. DESAI BELONG TO HIM WHICH HE HAS FAILED TO EXPLAIN THE SAME. IT W AS THEREFORE CONCLUSIVE FACT THAT THE SAME SEIZED MATERIAL BELON G TO INDIVIDUAL SHRI SENDHABHAI M. DESAI ONLY. THE ADDITION WAS ALS O ADMITTEDLY CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN HIS INDIVIDUAL CASE. THUS ON THE DATE OF INITIATIO N OF BLOCK ASSESSMENT PROCEEDINGS UNDER SECTION 158BD IN THE CASE OF AOP ON 6.01.2003 THERE WAS NO DOUBT ABOUT WHO IS TO BE ASSESSED IN RESPECT OF THE SAME SEIZED MATERIAL FOUND DURING TH E COURSE OF THE SEARCH. NO SATISFACTION UNDER SECTION 158BD HAS BEE N RECORDED BY THE ASSESSING OFFICER IN THE CASE OF THE PERSONS SE ARCHED UNDER SECTION 132 I.E. SHRI SENDHABHAI M. DESAI. THEREFO RE THE CONDITION OF SECTION 158BD AS NOTED ABOVE HAVE NOT BEEN COMPL IED WITH IN THE CASE OF ASSESSEE (AOP). ONLY SATISFACTION RECORDED BY THE ASSESSING OFFICER IN THE CASE OF ASSESSEE (AOP) I.E. ACIT ME HSANA CIRCLE MEHSANA ARE FILED AS RECORDED IN HIS ORDER WHICH W OULD NOT SATISFY THE REQUIREMENTS OF SECTION 158BD OF THE I.T.ACT. MOREOVER IN THIS SATISFACTION THE ASSESSING OFFICER OF THE ASSESSEE (AOP) NOTED THAT THE INCOME EMANATING FROM THESE DOCUMENTS HAS NOT B EEN CONSIDERED IN ANY OTHER HAND. THIS STATEMENT OF FAC T IS FACTUALLY INCORRECT BECAUSE PRIOR TO RECORDING OF THIS SATIS FACTION RECORDED ON 18 6.01.2003 THE SAME SEIZED MATERIAL WAS CONSIDERED IN THE INDIVIDUAL CASE OF SHRI SENDHABHAI M. DESAI AND SUBSTANTIVE AS SESSMENT HAS BEEN MADE IN HIS CASE AND ADDITION IS MADE VIDE BLO CK ASSESSMENT ORDER DATED 29.09.1999 WHICH IS ALSO CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). WE HAVE NOTE D SEVERAL DECISIONS IN WHICH IT WAS HELD THAT THE PROTECTIV E ASSESSMENT IN BLOCK ASSESSMENT COULD NOT BE MADE WOULD STRENGTHEN THE FINDINGS IN THIS CASE THAT EVEN THE INITIATION OF THE PROTEC TIVE ASSESSMENT IN THE CASE OF THE AOP WAS NOT JUSTIFIED. IT MAY ALSO BE NOTED HERE THAT THERE IS NO EVIDENCE OR MATERIAL AVAILABLE ON RECOR D ABOUT FORMATION OF AOP. THE ASSESSING OFFICER MERELY RELIED UPON ST ATEMENT OF SHRI SENDHABHAI M. DESAI FROM WHICH HE HIMSELF RETRACTED AND THAT THE FORMATION OF AOP BEING A VOLUNTARY ACT IS DISPUTED IN THIS CASE ALSO. IN THE ABSENCE OF ANY EVIDENCE ON RECORD ABOUT FORM ATION OF AOP IT IS DIFFICULT TO BELIEVE THAT AOP VALIDLY EXISTED IN THIS CASE. THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF LAX MI P.D. & SONS (SUPRA) SQUARELY APPLY TO THE FACTS OF THE CASE. S HRI SENDHABHAI M. DESAI ON RECEIPT OF NOTICE UNDER SECTION 158BD DENI ED EXISTENCE OF AOP OR CARRYING ON ANY BUSINESS ACTIVITY WITH ANY M EMBER OF SO CALLED AOP. THE OTHER ALLEGED MEMBER OF AOP ALSO DE NIED EXISTENCE OF AOP BEFORE ASSESSING OFFICER AND HAVE NEVER ACCE PTED EXISTENCE OF AOP. SINCE THE EXISTENCE OF AOP WAS DENIED AND THAT THERE WAS NO SPECIFIC MATERIAL AVAILABLE ON RECORD TO PROVE E XISTENCE OF AOP THEREFORE THERE WERE NO QUESTION OF MAKING ANY PRO TECTIVE ASSESSMENT IN THE HANDS OF AOP. THE ONLY STATEMENT OF SHRI SENDHABHAI M. DESAI RECORDED INITIALLY WAS RETRACTE D BY HIMSELF PRIOR TO INITIATION OF PROCEEDING UNDER SECTION 158BD AND THAT HE WAS ALSO NOT SUBJECTED TO CROSS EXAMINATION BY OTHER MEMBER OF ALLEGED AOP WOULD PROVE THAT HIS ORAL STATEMENT HAS NO EVIDENTI ARY VALUE UNDER THE LAW AND ON THE BASIS OF THIRD PARTY STATEMENT WITHOUT SUBJECTED TO CROSS EXAMINATION COULD NOT BE READ IN EVIDENCE AGA INST THE OTHER PERSONS I.E. AOP AND ITS SO CALLED MEMBERS. THERE I S ALSO NO 19 EVIDENCE ON RECORD THAT THE AOP CONDUCTED ANY BUSIN ESS OF LAND TRANSACTIONS. THE DECISIONS OF TRIBUNAL IN THE CASE S OF SMT. FARJANA F. DESAI (SUPRA) AND N.SAROJA (SUPRA) ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE. SINCE WE HAVE CONSIDERED THE IS SUE OF PROTECTIVE ASSESSMENT ON THE FACTS AND CIRCUMSTANCES OF THIS C ASE THEREFORE THERE IS NO NEED TO EXPRESS OPINION ON THE GENERAL PROPOSITION OF MAKING THE PROTECTIVE ASSESSMENTS. THE DECISIONS CI TED BY LD. DEPARTMENTAL REPRESENTATIVE ARE TAKING INTO CONSIDE RATION FOR THE PURPOSE OF DECIDING THE PRESENT MATTERS AND THE SAM E WOULD NOT APPLY TO THE FACTS OF THE CASE. 20. CONSIDERING THE ABOVE DECISION IT IS CLEAR THA T THE ASSESSEE HAS A CASE FOR QUASHING OF THE PROCEEDINGS UNDER SE CTION 158BD OF THE I.T.ACT. NO MATERIAL IS PRODUCED BEFORE US TO PROVE THAT THE ASSESSING OFFICER OF THE PERSON SEARCHED WAS SATISF IED THAT UNDISCLOSED INCOME BELONGS TO ANY OTHER PERSON OTHE R THAN THE PERSON WITH RESPECT TO WHOM SEARCH HAS BEEN CONDUCT ED. NO MATERIAL IS ALSO PRODUCED BEFORE US IF ANY SATISFA CTION WAS RECORDED BY THE ASSESSING OFFICER IN THE CASE OF THE PERSONS SEARCH. NO MATERIAL IS ALSO PRODUCED TO SHOW THAT ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR SEIZED MATERIALS WAS HANDED OVER TO TH E ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSONS . NO EVIDENCE IS PRODUCED IF THERE WAS ANY AOP IN THE NAME OF THE A SSESSEE. THE ASSESSING OFFICER IN THE CASE OF ASSESSEE I.E. ACI T MEHSANA CIRCLE RECORDED FACTUAL INCORRECT SATISFACTION UNDER SECTI ON 158BD AS NOTED ABOVE. NO MATERIAL IS PRODUCED ON RECORD THAT ANY O F THE MEMBERS OF AOP WAS BENEFICIARY OUT OF ANY SEIZED MATERIAL. CON SIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND DISCUSSION ABOVE IT IS CLEAR THAT THE ASSESSING OFFICER DID NOT VALIDLY ASSUME J URISDICTION UNDER SECTION 158BD OF THE I.T.ACT IN THE CASE OF ASSESSE E (AOP) AND THAT THE INITIATION OF THE PROCEEDINGS UNDER SECTION 158 BD OF THE I.T.ACT / PASSING OF THE BLOCK ASSESSMENT ORDER UNDER SECTION 158BD OF THE 20 I.T.ACT ON PROTECTIVE BASIS IN THE CASE OF THE ASSE SSEE (AOP) WAS NOT JUSTIFIED. WE ACCORDINGLY SET ASIDE THE ORDER S OF THE AUTHORITIES BELOW AND QUASHED THE BLOCK ASSESSMENT ORDER UNDER SECTION 158BD OF THE I.T.ACT. RESULTANTLY ALL ADDITIONS S TAND DELETED. 21. IN THE RESULT THE DEPARTMENTAL APPEAL STANDS D ISMISSED. THE CROSS OBJECTION OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY 2010. SD/- SD/- (D.C.AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 22-01-2010 PARAS* COPY OF THE ORDER FORWARDED TO : 1. THE RESPONDENT 2. THE DCIT (APPELLANT). 3. THE CIT CONCERNED 4. THE CIT(A)-XXI AHMEDABAD 5. THE DR ITAT 6. GUARD FILE BY ORDER //TRUE COPY// DY.R/AR ITAT AHMEDABAD