TMI Blog2004 (2) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... l facts, therefore, all the matters were heard together and we dispose of the same by this common order. 4. All the matters were directed to be taken up for out of turn hearing vide order dt. 7th Oct., 2002 passed in Stay Petition Nos. 19 and 20/All/2002 in the case of both the assessees. The stay was granted subject to certain conditions for a period of six months and next date of hearing was fixed for final disposal of the appeal on 25th Nov., 2002. The aforesaid stay against the outstanding demand was extended vide order dt. 23rd Oct., 2003 for a further period of six months on the same terms and conditions as directed in Stay Petitions Nos. 10 and 11/All/2003. In pursuance of the directions in stay petitions, all the matters were taken up for out of turn hearing. 5. Since the facts are identical in all the matters and Revenue and both the assessees have taken common grounds of appeal in their respective appeals/cross-objections, therefore, for the sake of brevity, we reproduce the grounds of appeal taken in the case of the assessee M/s Fertilisers Traders. 6. ITA Nos. 762 and 763/All/1999 are directed on the following grounds, which are taken from ITA No. 762/All/1999, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the order of the CIT(A) passed under s. 158BC and 154 of the IT Act, 1961 on the following grounds and the grounds of appeal are reproduced as taken in the case of M/s Fertilisers Traders: "1. Because the learned CIT(A) has erred in law and on facts in upholding the validity of the order dt. 4th Oct., 2000 that had been passed earlier by the Dy. CIT, Central Circle, Gorakhpur under s. 154 r/w s. 158BC, after holding that "....The AO did not only have the right, but in fact, it was his duty to correct any arithmetical mistake, that had occurred while working out of the peak in the original assessment order...." 2. Because the overall working of peak of the balances in various accounts, which formed the basis of computing the undisclosed income of the appellant in the block assessment order dt. 24th Feb., 1999, having already been the subject-matter of appeal (against the said block assessment order dt. 24th Feb., 1999) in terms of the appellate order dt. 18th May, 1999, no order of rectification under s. 154 could have been legally passed by the AO and view to the contrary as has been taken by the learned first appellate authority is wholly erroneous. 3. Because the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Tribunal vide its order dt. 15th Jan., 2002 passed in appeal numbers ITA 164 165/All/2001; (i) in their order dt. 15th Jan., 2002 (copy of which was duly placed before the learned first appellate authority) the Hon'ble Bench had specifically held that "13. In view of above facts and circumstances and various decisions we are of the opinion that the orders of assessment for block period dt. 24th Feb., 1999 in case of both the appellant stood merged in the common order of the CIT(A) passed on 18th May, 1999 and therefore, no original order was in existence even on 16th April, 2000 the date of issue of notice under s. 263 of the Act; what to say of existence of original orders of assessment on 28th March, 2001 when the CIT passed the orders under s. 263 of the Act. That being the case the orders of the CIT passed under s. 263 of the Act on 28th March, 2001 were absolutely illegal and void ab initio." and accordingly the appellate order (which is the subject-matter of present appeal) is wholly vitiated. 5. Because wholly without prejudice to the contention raised in the foregoing grounds there was no understatement of the working of peak in the block assessment order dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorisation issued in the name of assessees and others. During the course of search and seizure operation at the business premises of the assessee, various unexplained and incriminating documents and papers were found. On the basis of seized documents, notice under s. 158BC(a) of the IT Act, 1961 was issued requiring the assessee to prepare a true and correct return of income including the undisclosed income in respect of which they are assessable for the block period on the prescribed form No. 2B and also to deliver the return within 45 days from the receipt of the notice. The said notice was served on the assessee and the assessee in compliance with the above notice filed its return of income in the prescribed form on 15th April, 1998 in the status of firm declaring total income including the undisclosed income computed in accordance with the provisions of s. 158BB of the IT Act, 1961 in a sum of Rs. 1,23,57,500 (Rs. 78,09,940 + Rs. 47,560). The AO issued notice under s. 142 of the IT Act asking for the compliance along with the detailed queries. M/s Fertiliser Traders was having its partners as Vinod Saraf and Atul Saraf. M/s Saraf Trading Company was having partners, namely, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... huge cash payments in lakhs were not made by them and in almost all the cases they asserted that they are persons with small capital and not able to pay full amount of bill in one go. The AO further observed that these persons take fertilisers on credit and make payments on instalment basis and as such in no circumstances they have left credit balances as they themselves are doing business on credit. The AO further observed that they withdrew from their cash credit limit and made payment of their bills. The AO further observed that they all asserted that they never made advances for future supply and that they asserted that they themselves have taken stock on credit, therefore, there is no question of further receiving of any cash from assessee's Group. According to the AO this shows that huge amount of cash debit in their accounts is not correct and in fact entries were made by the assessee himself out of assessee's unaccounted funds. The statement of Vinod Saraf was recorded under s. 131 of the IT Act, 1961 on 3rd June, 1997 and he was asked that there are various examples in the computer printsout which showed that the assessee introduced its cash in parties' accounts, which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded in computer printsout. 1,45,54,484 Less: claim of bad debt 21,96,984 Balance 1,23,57,500 Both the assessees itself bifurcated the above undisclosed income in the ratio of 36.8 per cent and 63.2 per cent respectively. Accordingly the undisclosed income was shown by both the assessees as under: Name of assessee Percentage Undisclosed income as shown in the return of income M/s Fertiliser Traders 36.8% Rs. 45,47,560 M/s Saraf Trading Co. 63.2% 78,09,940 Total: Rs. 1,23,57,500 13. Before proceeding further on the findings of the AO and the CIT(A), it would be necessary to mention some of the relevant paragraphs of the show cause notice issued by the AO raising queries on various points and reply filed by both the assessees. The AO raised the query vide letter dt. 13th July, 1998 alongwith notice under s. 142(1) of the IT Act, 1961, copy of which is filed in 1st paper book and the relevant paragraphs are on pp. 314 to 320: "Cash Credits The scrutiny of your books of accounts and other details obtained in this regard reveals that two separate se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e after making sales because of his financial condition, is not in a position to advance any amount. (c) Jaiswal Khad Bhandar, Nausarh Smt. Vinita Jaiswal appeared in compliance of the notices. On being interrogated she submitted on oath that no advance is paid for purchasing fertilisers. She simply puts an order for supply to the agent and the goods are supplied at her shop and denies any advance in this regard. (d) Achchey Lal Khad Bhandar, Gulheria Shri Achchey Lal Gupta proprietor of the concern submitted that the entries appearing at p. 115 in the ledger of 1996-97 amounting to Rs. 80,000 are not correct. He further added that the cash credit account No. 293 held at Gorakhpur Chhetriya Gramin Bank, Gulheria Branch bears below the above amount, as such the question of payment of this amount does not arise. In reply to the query he also pleaded that he is a trader of small trading limits and that the huge payments referred to above are beyond his financial approach. Thus the cash payment appearing in his ledger folio has been devised. (e) Madhesia Khad Bhandar, Gulheria Similarly Shri Ram Asrey Gupta the proprietor of the concern was also interrogated particularly wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts are considered in the light of ledger entries, the onus to prove these entries lies upon the assessee. Considering this aspect of law an opportunity to prove the correctness of these entries were extended but the reply was not affording any substance which may lead to any dependable conclusion. However, a further opportunity is being extended to you to explain entire defects pointed out and to substantiate the entries appearing in the ledger referred to above. Your reply should bear independent evidence, which may prove the submissions. Please note that the analysis of the above facts and other facts bearing the facts other than the identical characteristics of the account has established the existence of your planned device of introducing your own money through undisclosed means. It also leads to suggest that the undisclosed money kept out of the flow of accounts had to be brought in the streamline of accounts and for this a plan was devised and designed. Under this plan, the unaccounted money was received by way of sales and the same was ledgerised on the ledger under the several ledger accounts, which has been found incorrect on verification and investigation made. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g system of accountancy the goods sold are debited equal to the bill amount and on receipt of payment the same is credited to that account but the close scrutiny of the account suggests that in place of raising bills cash has been shown debited. In this regard, you are required to explain; (a) Cash credited has been denied by the creditor as such explain as to why this cash should not be treated as introduction of your own money earned through undisclosed means. (b) In several accounts of manual ledger the respective entries are shown as cash debit entry contrary to it, the same entry of cash credit has been shown as cash but at credit side of the book. Please explain the difference with support of your accounts drawn manually and computer ledger. (c) Please explain the missing entries of computer printout manual ledger. The reply should be based upon the entries appearing in the accounts as referred to above. (d) It has also been gathered from the scrutiny of computer printout that the accounts of Saraf Trading Company and Fertiliser Traders have been mixed. You have claimed the firms are enjoying separate units in the eyes of law. But as per the provisions of law and cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings, therefore, the enquiries relating thereto may be excluded and also have not been covered in our separate reply. Refer Item No. 4 (computer printouts) at pp. 7 to 9 of your above show cause notice). 15. Both the assessees filed another common reply on the same day 26th Aug., 1998 against the aforesaid notices, copies of the same are filed in paper book-I at pp. 326 and 327: "Cash credits Vide item No. (3) on pp. (3) to (7) of your notice much has been said about alleged unexplained cash-credits. In this regard our pointed reply is as under: (1) You may provide and confront copies of statements of 8 persons mentioned on page No. (4) of your notice, in case you want to draw any inference based on statement of these persons recorded by you/Asstt. Director of IT (Inv.) or you want us to explain the contents under each sub-item (a to h) of page No. 4. (2) A peak of all alleged unexplained cash credit may be drawn in case you are convinced that the credits in the customers' accounts are not creditworthy as alleged in your notice. (3) Since computer printouts are patently incorrect and have been arbitrarily taken to the entire exclusion of the assessee or his staff, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cash credits should be provided to you for furnishing the explanation/reconciliation. Considering your request, a clear copy showing the complete details of the working is being made available to you for the year 1994-95, 1995-96 and 1996-97. You are, therefore, required to go through the annexed list showing the head-wise details of each person in whose names the cash credits are introduced and furnish the personwise reconciliation of each account along with written explanation and supporting evidences thereof. Your reply should also bear the; (i) the respective evidences in support of each entry shown in the annexed list. (ii) The chart of verification of each entry showing the account-based explanation. (iii) evidence in respect of claims, if any made, the account being related to your trading. Please note that your reply should be data based reply which may substantiate your claim." 17. Both the assessees filed their common reply dt. 14th Sept., 1998 before the AO, copy of which is filed in paper book-II from pp. 28 to 29: "From: Fertiliser Traders, Gandhi Nagar, Gorakhpur. Date: 14th Sept., 1998 To, The Asstt. CIT, Central Circle, Gorakhpur. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings conducted by the Asstt. Director of IT (Inv.), Gorakhpur your goodself is requested to conduct an impartial and independent enquiry under s. 131 at assessee's cost before drawing any adverse inference in haste. It will not be out of place to mention that unless full account is considered in totality and a peak of alleged unexplained cash credits is made, the alleged addition on the basis of working of cash credit supplied by you is unjustified, insupportable in law and on facts and in any case unsustainable. 3. The assessee has filed a detailed computation chart with explanatory notes in support of its returned income. The computation chart read with notes thereon are self-explanatory. However, in case any specific information is required, the same may be submitted for due compliance. 4. That the unexplained income for the entire block period was first determined as a whole. Thereafter the same has been bifurcated in the ratio of sales amongst two firms as explained in the computation of income itself. In case you have any other acceptable mode of bifurcation of total income between the two firms, which according to you would be more scientific, reasonable and appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome by letter F. No. S S/Sarraf/ACIT/CC/GKP/98-99, dt. 31st Aug., 1998. Your reply was received vide your letter undated received on 14th Sept., 1998 saying that gross amount should not be taken and only peak amount should be taken by the Department. Reliance was placed by you on a Gauhati High Court decision. Now accordingly peak amount has been calculated as per chart enclosed. It shows cash credit introduced by you/debtors outstanding as on 31st March, 1995, 31st March, 1996 and on the date of search at Rs. 1,39,87,788, 1,79,57,411 and Rs. 1,77,48,156 respectively. The highest peak amount is 1,79,57,411 as on 31st March, 1996. Please explain why these figures should not be taken as correct figures as representing undisclosed income of M/s Fertiliser Traders and Saraf Trading Company. Date fixed for the purpose is on 25th Jan., 1999. Sd. Girdhari Lal Asstt. CIT, Central Circle, Gorakhpur." 19. The common reply of both the assessees dt. 25th Jan., 1999 was filed before the AO. The relevant portion of the reply appears in the paper book-II p. 71 and is reproduced below: Dt. 25th Jan., 1999 "To The Asstt. CIT, Central Circle, Gorakhpur. Reg.: M/s Fertil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 158BC the income at Rs. 1,23,57,500 (FT + STC together) after claim of bad debt Rs. 21,96,984 which means assessee admits the working of peak to the extent of Rs. 1,23,57,500 + 21,96,984 = 1,45,54,484. He has not given the working of the figure of Rs. 1,45,54,484 inspite of specific query given by the Departmnt. Hence this correct peak is taken at Rs. 1,79,57,411 as on 31st March, 1996 as determined and stated in earlier paras. 10. The peak worked out on 31st March, 1995 at Rs. 1,39,87,788 is taken as income for the asst. yr. 1995-96. The peak worked out on 31st March, 1996 is Rs. 1,79,57,411. The increase from 31st March, 1995 (Rs. 1,79,57,411 - 1,39,87,788) comes to Rs. 39,69,623. This will be treated as income for asst. yr. 1996-97. The peak worked out on 13th Feb., 1997 comes to Rs. 1,77,48,156 which is lower than peak on 31st March, 1996. Hence no part of it is taken as addition to the income for asst. yr. 1997-98. 11. The computer printout is for transactions relating to both concerns M/s Fertiliser Traders and M/s Saraf Trading taken together. There is no basis for bifurcating this into two concerns. Therefore, the assessee has taken the basis of ratio of disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,174 - 62,674 and STC is Rs. 87,245 + 2,866 = 90,111 for asst. yr. 1997-98 in this head." 22. The AO considering the above, computed the undisclosed income in the case of M/s Fertiliser Traders at Rs. 66,71,600 and in the case of Saraf Trading Company at Rs. 1,14,39,194. 23. Both the assessment orders were challenged before the CIT(A) and the learned CIT(A) after considering the facts and circumstances of the case computed undisclosed income which was bifurcated in the ratio mentioned above and, thus passed the common impugned order dt. 18th May, 1999 in the case of both the assessees. The relevant findings of the CIT(A) are mentioned in paragraph 4 and are reproduced as under: "4. First ground of appeal in both the cases relate to addition made on the basis of a consolidated peak of Rs. 1.79 crores prepared by the AO. The working of the peak was confronted to both the appellant firms in the course of assessment proceedings. The appellant firms vide their written replies dt. 25th Jan., 1999 filed objections on the working of peak. The learned counsel for the appellants vehemently argued that the peak of Rs. 1.79 crores prepared by the Department was not correct for the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. In any way, these balances show debts outstanding as a result of undisclosed income by the assessee. All these accounts have been rightly included in the working of peak representing undisclosed income. 3. The assessee-firm be not allowed to raise any new explanation in appeal if the same was not given before AO in block assessment proceedings. 4. The peak worked out at Rs. 1.79 crores is correct and the same is upheld. The AO raised almost similar objections during the hearing of appeals before me on 29th April, 1999. The counsel for the appellant contended that the first objection is not maintainable because the peak was prepared by the AO himself and accounts were selected by him for inclusion in the peak. Further since the ledgers (regular books) and computer printouts were seized and available with AO, he could have verified that which accounts are in the nature of cash credits and which are of different nature. Regarding the second objection also the learned counsel contended that since the peak of Rs. 1.79 crores represent debit balance as on 31st March, 1996, therefore, any unnecessary debit balance taken into accounts will have the effect of increasing the deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out in the working of peak as by the appellant in their written reply dt. 25th Jan., 1999 filed in the course of block assessment proceedings before the AO, I find that the AO has not discussed the objections of the appellants either in the assessment order or in his comments dt. 29th April, 1999. The AO while reiterating that 23 accounts pointed out by the appellant be not excluded from the working of the peak, has failed to give any convincing reasons for non-exclusion. He has also not given any material or evidence to show that these 23 accounts represent cash credit in the regular books or the assessee has enjoyed any other benefit from these accounts." "I have heard the AO and the counsel for the appellants and have also carefully gone through the case records, block assessment order and written submissions of the appellants. The AO has prepared a peak of transaction appearing in the computer printouts. On the premises that the appellants were introducing their own money in the name of several customers, the modus operandi adopted by the appellants for introduction of their own money is briefly discussed here. The appellants have maintained two different sets of accounts ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee to deduct bad debt out of undisclosed income was allowed. 25. As far as the addition of discrepancy in stock was concerned, it was revealed by the survey under s. 133A of the IT Act. The learned CIT(A) took a view that the AO has not given any cogent reason or evidence to support unaccounted sales and that there are possibilities of mistakes in noting down the stock tally. The CIT(A) was also of the view that in the total stock, minor differences in few items are not significant. Accordingly, the addition made by the AO on account of discrepancy in the stock was deleted. As a result the appeal of the assessee was partly allowed. 26. The Revenue felt aggrieved by the impugned order of the CIT(A) dt. 18th May, 1999 and filed these appeals on the ground mentioned above in ITA Nos. 762 and 763/All/1999. The assessee has filed cross-objections in both the Departmental appeals challenging the working of the peak and the part addition sustained by the CIT(A). In addition to this, other legal grounds are also taken which have also been reproduced above in this order. 27. However, the things would not end here. We may mention that after passing of the assessment order dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken from ITA no. 304/All/2002: "13. Coming to the alternative plea of the appellant that the revised peak has been wrongly calculated by the AO inasmuch as the entries with respect to two parties have been included which should have in fact been excluded as per the principle determined by the CIT(A), I agree that this should not have been done by the AO. He is accordingly directed to verify the facts of the case to work out the peak on the basis of the principle determined by the CIT(A) in his appellate order inasmuch as if there are no credit entries against the names of these parties then these accounts should not be considered while determining the peak. Likewise he is also directed to rework the peak with respect to the remaining three parties after considering the objections of the appellant with respect to the same." 13-9-2002 Both the assessees filed second appeals against the said orders in ITA Nos. 304 and 305/All/2002. 29. We have heard the learned Departmental Representative and the learned counsel for the assessee at length. The learned counsel for the assessee filed two separate paper books on quantum as well as on proceedings under s. 154 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to Rs. 1,39,87,788 and the said figure was taken as income of that year. Similarly, in the financial year relevant to the asst. yr. 1996-97, the peak was worked out at Rs. 1,79,57,411. Against this figure the peak of Rs. 1,39,87,788 was given set off and the resultant figure of Rs. 39,69,623 (Rs. 1,79,57,411 - Rs. 1,39,87,788) was taken as income for the asst. yr. 1996-97. As far as the year of search, such peak was worked out on credit figure of Rs. 1,77,48,156 and as the same was lower than the figure of Rs. 1,79,57,411 for the immediately preceding year, the said figure was held to be covered by the figure of Rs. 1.79 crores. The same being the highest peak amount of Rs. 1,79,57,411 was taken as undisclosed income for both the firms. The learned Departmental Representative explained the nature of the entries as found recorded in the computer printouts. The entries found recorded in the computer printouts were of three categories. (i) Opposite entries are recorded in computer and manual account; debit entries in computer shown as credit in manual accounts. (ii) Undisclosed entries shown as debit entries in computer accounts were not shown in manual accounts; (iii) entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition. According to the learned Departmental Representative, even no details were furnished before the AO. The learned Departmental Representative further argued that bad debts can be claimed against business income and not against undisclosed income. The learned Departmental Representative further argued that the CIT(A) has not seen even if the same were a bad debt outside the undisclosed income as computed by the AO. According to the learned Departmental Representative, benefit of bad debts has already been given while computing the income on peak basis in block period as income disclosed has already been deducted. The learned Departmental Representative further argued that income of such persons was not disclosed in block assessment. The learned Departmental Representative further argued that the cash credits may not be bad debts as it represents income of the assessee. The learned Departmental Representative further argued that, during the survey, on the same day excess stock was found for which no proper explanation was given before the AO. Therefore, the CIT(A) was not justified in deleting the addition under this head. The learned Departmental Representative relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. That the said 'date-wise summary' revealed that; (a) peak of the investment during the period of three years was Rs. 47,60,184.70 which reached on 18th Dec., 1995 (internal p. 12 of the "summary" - Annex. I hereto); (b) the negative cash balance at its "peak" was Rs. 45,49,628.19 which had reached on 30th Jan., 1997 (internal p. 20 of the said summary); and (c) the later figure is fully covered by the figure mentioned at Sl. No. (a) above. A copy of the said statement running into 20 pages is enclosed and the same has been made as Annex.-I hereto." 31. The learned counsel for the assessee argued that the Tribunal, being last fact finding authority should consider this aspect of the matter that the Department has worked out the peak on the basis of few selected ledger accounts. However, the Revenue-Department has seized the documents numbering in 2614. According to the learned counsel for the assessee, the summary submitted by the learned Departmental Representative (D.R.-I) showing computation of undisclosed income on the basis of peak as worked out by the AO is not complete compilation of search as details were in more than 2500 accounts and the AO picked only a few ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee further argued that the assessee has to explain the debits as the same in law was treated as his income. The assessee filed details of all the search material. The learned counsel for the assessee invited our attention to the details furnished in Annex.-I of AR-I filed along with the affidavit of Vinod Saraf in which on 18th Dec., 1995, peak of debit balance is shown in a sum of Rs. 47,60,184.70 and on 29th Jan., 1997 peak of credit balance is shown in a sum of Rs. 45,49,628.19. According to the learned counsel for the assessee, peak of debit balance is, thus, of Rs. 47,60,184.70. The learned counsel for the assessee accordingly argued that the assessee declared undisclosed income in the return in block assessment at Rs. 1,23,57,500 which is already excessive. The learned counsel for the assessee relied upon the decision of Hon'ble Supreme Court reported in the matter of CIT vs. Mahalakshmi Textiles Mills Ltd. (1967) 60 ITR 710 (SC) and argued that the point at issue could be decided even at the appellate stage. The learned counsel for the assessee invited our attention to the reply filed before the CIT(A), copy of which is filed in the paper book-II. He has referred to pp. 138 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd he did not discuss it was cash credit as stated by the learned Departmental Representative. Therefore, bad debt is to be excluded. According to him, all the details were filed, copy of which is also filed in the paper book-I on p. 217 before the AO. 33. The learned counsel for the assessee further argued that excess and shortage both were noticed by the AO. However, the difference was bona fide considering the nature of the business. He has further argued that in block assessment, on the basis of survey, no addition could be made. According to him, it is a subject-matter of regular assessment. He has relied upon the order of Tribunal, Lucknow Bench dt. 31st May, 2003 in the case of Dr. Ratan Kumar Singh. 34. The learned counsel for the assessee also argued on cross-objection and on grounds Nos. 1 and 2 submitted that notice under s. 158BC was vague in many respects. However, the assessee filed return of income and acted upon the notice. The learned counsel for the assessee fairly stated that the case of the assessee is covered by order of Tribunal, Allahabad Bench in the case of Dr. R.M.L. Mehratra vs. Asstt. CIT (1999) 64 TTJ (All) 259 : (1999) 68 ITD 288 (All), wherein thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 18th May, 1999, therefore, the same should be ignored. According to the learned Departmental Representative even the assessee claimed against his own pleading. The learned Departmental Representative referred to paper book-I pp. 207 to 216 to show what relief was sought by the assessee and invited our attention that only on two items relief was sought in a sum of Rs. 53,86,222. According to the learned Departmental Representative whatever relief has been claimed by the assessee has been granted by the learned CIT(A). The learned Departmental Representative further argued that the AO issued show cause notice to the assessee on the basis of the working (D.R.-I) to explain the situation of peak (during the course of arguments we have asked the specific question to learned Departmental Representative to tell the total number of accounts in ledger as the assessee claimed that total number of ledgers was 2614. However, the learned Departmental Representative could not specify as to how many accounts in ledger were taken into consideration while calculating the peak). According to the learned Departmental Representative, the assessee did not claim the peak position as is claimed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tmental Representative lastly argued that provisions of s. 158BB have been amended, therefore, material recovered during survey could be considered. 38. The learned counsel for the assessee submitted that the details submitted in the affidavit are not additional evidence as it contain no fresh information. The same details were furnished at various stages of the block assessment proceedings/rectification proceedings under s. 154 of the IT Act and in the revision proceedings under s. 263 of the Act in relation to the block assessment order which took place simultaneously. All such details were submitted before the CIT(A) during the course of the appeal proceedings. According to him, the same computation cannot be treated as additional evidence as it was merely a compilation based upon the seized material in the form of computer printouts containing the ledger accounts for the financial years involved in the appeal as the same were supplied by the Department. The only question had been whether such peak was properly considered by the learned AO. The learned counsel for the assessee filed details of the case laws relied upon in support of his contention. 39. We have considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In other words, the same very data as was available in the computer printouts has been presented in the form where all the debits and credits have been systematically arranged by the assessee. Therefore, there is no dispute that this was the same material which was taken into consideration by the AO while computing the undisclosed income, though on selective basis. The system of calculation of the AO may be different. Therefore, in our view the said compilation-Annex.-I in the affidavit of Vinod Saraf (marked AR-I) cannot be termed as additional evidence or information as stated by the learned Departmental Representative therefore, it could be considered for the purpose of deciding all the appeals of the assessee and the Department and the cross-objection filed by the assessee. 41. We may also mention here that the details submitted in Annex.-I in the affidavit of Vinod Saraf marked A.R.-I had also been placed by the assessee in the paper book-II from pp. 224 to 243 and the copies of the paper book were duly supplied by the assessee to the learned Departmental Representative before commencement of the hearing of the appeals. Therefore, such material was available with the Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting from 1st April, 1994 to 12th Feb., 1997." We may also mention that the similar submissions were also made before the learned CIT(Central), Kanpur in the proceedings under s. 263 of the IT Act. The appeals of the assessee in ITA Nos. 304 and 305/All/2002 and cross-objections of the assessee are pending on the same issue before us for consideration along with Departmental appeals. Since the Departmental appeals and the appeals of the assessee against the order under s. 154 and cross-objections are taken together for hearing and were pending before us on the same question of working of the peak for the purposes of determination of undisclosed income, therefore, it is relevant and necessary to adjudicate upon the submissions which are raised on the basis of marked A.R.-I, Annex.-I, copies of which are also filed in the paper book as mentioned above. 42. The powers of the Tribunal are defined under s. 254(1) of the IT Act, 1961 in which it is mentioned. "The Tribunal may, after giving both the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit." Sec. 255(6) of the IT Act, 1961 is reproduced below for the sake of convenience: "Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter a particular judgment. The Tribunal can compel the production of documents, enforce the attendance of witnesses and issue commissions for their examination. They follow a procedure which conforms in many respect to that followed by Courts; i.e., the same functions as a Court and their proceedings partake of the nature of judicial proceedings. They have power to take and weigh evidence, to determine facts based upon the consideration of evidence and to make an order supported by findings. They have power to hear, to determine, and to enforce. The powers exercised by them affect the personal and private rights of private individuals and their determinations are final and conclusive. They must proceed in a judicial spirit, conform to rules of natural justice and come to judicial conclusions upon properly ascertained facts. Discretion conferred on a judicial or quasi-judicial Tribunal is an impartial legal discretion to be exercised in conformity with the spirit of law and in a manner to subserve rather than to defeat substantial justice. 45. The Hon'ble apex Court in the case of Esthuri Aswathiah vs. CIT (1967) 66 ITR 478 (SC) has held "the function of the Tribunal in hearing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol the power of the Tribunal under s. 33(4) of the Act. We are accordingly of the opinion that the Tribunal had jurisdiction to entertain the argument of the Department in this case and to direct the ITO to find whether any depreciation was actually allowed under the Industrial Tax Rules and whether such depreciation should be taken into consideration for the purpose of computing the written down value." In this case, the Tribunal permitted the Department to raise the contention even being as the respondent. The Hon'ble Supreme Court in the above case, observed that the Tribunal had jurisdiction to permit the question to be raised for the first time in appeal. 47. The Hon'ble Supreme Court in the matter of Kapurchand Shrimal vs. CIT (1981) 24 CTR (SC) 345 : (1981) 131 ITR 451 (SC) held "It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statue." 48. The Hon'ble Calcutta High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e procedure of the Benches of the Tribunal. The Rules therefore embody the principles of procedure to be followed by the Tribunal and its Benches for the discharge of its functions. The scheme of the Rules read as a whole does not suggest that the rules in any way have the effect of curtailing or circumscribing the power, authority and jurisdiction of the Tribunal in dealing with matters at its disposal. There is no prohibition in the rules totally precluding the Tribunal from considering any ground beyond those mentioned in the memorandum of appeal filed by a party, whether the assessee or the Department, in the absence of an appeal or the cross-objection by the other side projecting the new ground. It is a settled principle that procedural law is the hand-maid of justice. This view is enforced by the language of r. 11 which does not require the Tribunal to be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal provided the party who may be affected thereby had sufficient opportunity of being heard on that ground. There cannot be any estoppel against law. It is permissible on the part of the Tribunal to entertain a ground beyond those in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard. In this case, copies of the paper book were supplied to the learned Departmental Representative well in advance and the copy of the affidavit of Vinod Saraf with marked A.R.-I Annex.-I was also supplied to learned Departmental Representative and we have heard the learned representatives of the parties on all the aspects of the matter of this issue. Therefore, considering the above facts it could not be held that Annex.-I, II and III filed along with the affidavit of Vinod Saraf (Marked A.R.-I) represent any additional evidence. But these are the compilation of the material already on record and, therefore, the same are necessary and relevant for proper decision of all the issues involved in all the appeals of the assessee and Department and cross-objections of the assessee in accordance with law. Hence the Annexures filed in the affidavit and details submitted in the paper book deserves consideration by the Tribunal. 53. The learned Departmental Representative relied upon the decision of the Hon'ble Kerala High Court in the matter of CIT vs. N.T.A. Kareem in which it was held that the word "thereon" restricts the jurisdiction of the Tribunal to the subject-matter of appeal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee on the basis of summary of the peak datewise was raised before the CIT(A) in the proceeding under s. 154 of the IT Act, 1961. Same plea was also raised before the CIT(Central), Kanpur in the proceedings under s. 263 of the IT Act. Therefore, it cannot be termed as additional ground or additional information. Whatever material was seized during the search was compiled by the assessee datewise to work out the correct peak which would form the basis of computation of undisclosed income. Therefore, in our considered view, it would be relevant and appropriate to take into consideration the above facts mentioned in the affidavit of Vinod Saraf (marked A.R.-I) and as mentioned in Annex.-I, copies of which are also filed in the paper book. We, therefore, reject the contention of the learned Departmental Representative that the facts mentioned in the affidavit could not be taken into consideration. We are of the view that the annexure of the said affidavit as stated by us earlier, deserve our consideration, while deciding the various grounds of appeal raised in the appeals of the Department, assessee and cross-objections of the assessee. 55. Before proceeding further to dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission of the learned Departmental Representative that the claim for bad debt could be allowed only on examination of accounts of the assessee as the bad debts under s. 36(1)(vii) could be allowed subject to provisions of sub-s. (2) of the IT Act, 1961 and we find that even the condition of s. 36(2)(i) of the IT Act, 1961 is not complied with in this case. Accordingly findings of CIT(A) are reversed and findings of AO are restored. The Departmental appeals on these grounds are accordingly allowed. Excess Stock 57. The other issue involved in the Departmental appeals was the addition deleted by the CIT(A) on account of excess stock found during the course of survey under s. 133-A of the IT Act, 1961 and profit/stock found to be short, which has been treated to have been sold outside the books of accounts. 58. The learned CIT(A) has allowed the relief to the assessee looking to the volumes of the stock and the possibility of error in accounting. The learned Departmental Representative argued that the CIT(A) has wrongly allowed relief to the assessee. However, the counsel for the assessee supported the finding of the CIT(A). 59. We have considered the submissions in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of peak of the balances and the inference that could be legitimately drawn from the working of the peak. 61. It is necessary to mention here that the data for the financial year 1996-97 as taken by the Department from the hard disc got mixed up and in the ledger accounts even such entries were referable to (i) Bills issued by the two firms in the regular course; (ii) Bills received from customers through demand drafts/cheques. The amounts deposited in the bank and withdrawn from the bank also got included although such amounts had duly appeared in the books of accounts. While giving copies of computer printouts, the AO in all fairness had segregated the figures directly to manual account and had duly specified the remaining figures that were liable to be considered in block assessment. This is borne out from the documents filed in the paper book and also finding given in paragraph 4(i) of the block assessment order. While compiling the statement referred to above, the assessee has duly taken into account all the remaining figures other than the figures which got squared out by corresponding entries in the manual set of accounts. 62. We are constrained to mention tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and set off as per standard practice and legal norms. Therefore, the assessee submitted before the AO to make proper and detailed examination and investigation de novo because the details provided are neither correct nor revealed correct state of affairs. Despite the above explanation, the AO has not considered all the printouts of ledger accounts in the matter to work out the peak. During the course of arguments, the learned Departmental Representative could not specify about the details of the 23 parties upon which the learned CIT(A) has granted relief. Even the learned Departmental Representative could not point out as to how many accounts were considered by the AO while calculating the peak. It was very clear from the material available on record that the entire seized material in the form of ledger was not considered by the authorities below while working out the peak of the balances to make the addition by way of undisclosed investment in the block assessment. During the course of arguments, we have directed to supply this information but no information is yet supplied by the learned Departmental Representative. However, the assessee has submitted a chart according to whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment. Looking to the nature of both the sides of entries, it is not necessary even to go into the nature of the credit in the manual sets, which have been termed as peak credits by the Revenue-Department. The reason being that the effect of such entries also got included in the overall peaks of the computer printouts. In view of our finding as aforesaid, it is not necessary to go into the arguments submitted on behalf of the assessee to the effect that the credits in the manual set of accounts could not be termed as bogus simply on the basis of statement as given by both the parties before the ADI (Inv.). Even if information collected by the ADI (Inv.) is treated to be the extraneous material in view of the decision of the Tribunal in the case of Moga Metals (P) Ltd. vs. Asstt. CIT (2000) 67 TTJ (All) 247 by taking into account aggregate of debits appearing in the computer printouts, the aggregate of various credits as appearing in the manual set of accounts also stand considered. Therefore, the issue whether any adverse inference could have been drawn in relation to the credits appearing in the manual set of accounts on the basis of statements recorded by the ADI wing is wholly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of M/s Singhania Polyester (P) Ltd. Therefore, the action of the AO was clearly unjustified to the extent that he has not considered the entire seized material while working out the peak. The action of the AO is itself unjustified and arbitrary. 67. The learned counsel for the assessee on the basis of working out of the entire seized material, intimated that on 18th Dec., 1995, there was a peak of debit balance in a sum of Rs. 47,60,184.70 and the credit balance of negative cash as on 29th Jan., 1997 was Rs. 45,45,49,628.19. Therefore, it appears that the peak of the negative credit balance is covered by the peak of debit balance. 68. On the basis of the above facts, the question that comes up for consideration is that how the undisclosed income of the assessee taken together should be calculated and worked out. In our view no defect whatsoever is encountered in this regard as Chapter XIV-B itself is a complete code. The provisions particularly those contained in s. 158BB read with Explanation thereto clearly goes go show that the income has to be computed in accordance with the provisions of this Act. The Act clearly lays down in terms of ss. 69 and 69A that such money, bull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the Departmental authorities that, merely because the assets in the balance sheet changed from time to time, the difference would not be available for explaining a similar difference in subsequent years." The Tribunal inferred that there was a connection between unexplained assets and unaccounted moneys used in the business from year to year and observed: "If a particular asset was sold and in its place new asset is purchased, that does not mean that fresh unaccounted money has been utilised; it is the same money that has changed face. An assessee cannot certainly be taxed on the change of investment every time." The Hon'ble Allahabad High Court, considering the above facts of the case and observation of the Tribunal mentioned above, was of the view that the finding of the Tribunal cannot be said to be groundless. It was further held that the findings of the Tribunal are not speculative and the reference of the Revenue was dismissed. 70. The learned counsel for the assessee also filed copy of the CBDT circular No. 14 of 1955 dt. 11th April, 1955, which is reproduced as under: "Officers of the Department must not take advantage of ignorance of an assessee as to his rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment. Clause (c) of s. 158BC envisages passing an order of assessment and determination of the tax payable after determination of the undisclosed income of the block period and the order of the assessment so passed by the AO should specify the manner in which the undisclosed income of the block period has been computed by him. It is, thus, clear that Chapter XIV-B, which is a self-contained code, defines the expression "undisclosed income" chargeable to tax in the special assessment and the manner and method of computation of such income is also specified therein. In accordance with these special provisions, the AO is required to determine the undisclosed income of the block period in a specific manner and the findings of the AO regarding the undisclosed income are to be based on the material found as a result of search. A combined reading of these provisions makes it clear that the amount which is taxable as "undisclosed income" in the block assessment should fall within the scope and ambit of the definition expressly given in Chapter XIV-B and the amount which is not covered by the said definition cannot be subjected to tax in the block assessment, even though declared as such b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putation of undisclosed income of block period as provided by s. 158BB(1) is highly technical and complicated and it would be rather unjust to require an assessee to compute his undisclosed income correctly and precisely in a short period available for filing the block return. In the present case, a search and seizure operation was conducted simultaneously in the group cases related to the assessee and considering the various documents found during the course of search from the possession of different assessees, there was apparently no alternative but to compute the undisclosed income of the entire group in a consolidated manner and declare the same in the hands of different assessees belonging to one group on ad hoc basis. This is also evident from the fact that the assessee himself returned his undisclosed income for the block period at Rs. 7 lakhs on ad hoc basis without giving any break-up of the said amount. In such circumstances, when a detailed working made subsequently by the assessee of undisclosed income revealed that the total undisclosed income assessable in the hands of the assessee was lower than the returned income, we are of the opinion that the same has to be asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to dispute arithmetical accuracy of the said summary. From the negative cash balances as appearing in the said summary of the balances (marked A.R.-I) the only logical conclusion that emerges is that the payments exceed receipts (to the extent of negative cash balance) on various dates, the source of which remained unexplained. Therefore, such an excess payment over the receipts represents nothing but undisclosed income of the assessee liable to be assessed as such in the block assessment, subject to the set off against the peak of debit/credit entries. 74. We are also aware of the fact that though the assessee has filed explanation before the AO to consider full accounts of the ledger for the purpose of working out of the peak, but the AO and the CIT(A) did not consider the same and have not given any finding. When, later on, the assessee prepared summary of the peak on the basis of the principle mentioned above, the AO and the CIT(A), while disposing of the matter under s. 154 of the IT Act, 1961, did not consider the same. Similarly, the CIT (Central), Kanpur did not consider this matter while taking action under s. 263 of the Act. Therefore, considering the above facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, there is no need to give finding with regard to 23 parties for which relief is granted by CIT(A). The cross-objections of the assessee are allowed as such. 76. As a result, the Departmental appeals in ITA Nos. 762 and 763/All/1999 are allowed partly and the cross-objections filed by the assessee in CO Nos. 14 and 15/All/2000 are also allowed partly as indicated above. ITA Nos. 304 and 305/All/2002 (by assessee under s. 154 of IT Act) 77. The facts are similar as mentioned above. However, briefly it is stated that block assessment order dt. 24th Feb., 1999 was passed computing the undisclosed income for the block assessment period at Rs. 1,79,57,411. It was bifurcated in both the assessments. The assessment order was challenged before the CIT(A) and the CIT(A), vide order dt. 18th May, 1999, decided both the appeals of the assessee and granted part relief against which the Department was in appeal and the assessees were in cross-objections, which we have already decided above. It is worth to mention that the CIT (Central), Kanpur issued show cause notice under s. 263 of the IT Act on 22nd March, 2000 and 23rd Feb., 2001 as, according to him, the block assessment order was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the above basis, issued show cause notice to which the assessee filed reply dt. 24th July, 2000 and in which it was briefly submitted that only few accounts have been selected. Therefore, it was submitted that the so-called errors, as have been pointed out in the notice under reply, should not be treated in isolation with the entries appearing in large number of accounts which should have effect of reducing the debit balance to much lower level than the figures disclosed by the assessee in the return filed by them for block period. However, the AO did not agree with the reply of the assessee and passed the order under s. 154 of the IT Act, 1961, dt. 4th Oct., 2000. The AO gave benefit of the amount reduced by the CIT(A) vide order dt. 18th May, 1999 and ultimately revised the working. In the case of Fertiliser Traders it was taken at Rs. 1,23,96,279 and in the case of Saraf Trading Company, it was taken at Rs. 2,12,88,936 and thus, the total undisclosed income was taken at Rs. 3,36,85,215. 78. The order under s. 154 dt. 4th Oct., 2000 was challenged before the CIT(A) and it was submitted that the AO should not have passed the impugned order enhancing the peak worked out earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been done by the AO. He is accordingly directed to verify the facts of the case and to work out the peak on the basis of the principle determined by the CIT(A), in his appellate order in as much as if there are no credit entries against the names of these parties then these accounts should not be considered while determining the peak. Likewise he is also directed to rework the peak with respect to the remaining three parties after considering the objections of the appellant with respect to the same." 79. The assessee is in appeal before us with the following grounds. Since the grounds are common, therefore, the grounds taken in ITA No. 304/All/2002 are reproduced below: "1. Because the learned CIT(A) has erred in law and on facts in upholding the validity of the order dt. 4th Oct., 2000 that had been passed earlier by the Dy. CIT, Central Circle, Gorakhpur, under s. 154 r/w s. 158BC, after holding that "....The AO did not only have the right, but in fact, it was his duty to correct any arithmetical mistake that had occurred while working out the peak in the original assessment order..." 2. Because the overall working of peak of the balances in various accounts, which forme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late order dt. 18th May, 1999, the block assessment order dt. 24th Feb., 1999, no longer remained to be the order of the AO; (g) the above referred block assessment order dt. 24th Feb., 1999 was sought to be revised by the learned CIT, Central Kanpur in exercise of his revisionary jurisdiction under s. 263, on the same premise and under the similar circumstances under which the order under s. 154 dt. 4th Oct., 2000 had been passed. (h) such an order under s. 263 had been quashed by the Hon'ble Tribunal vide its order dt. 15th Jan., 2002 passed in appeal numbers ITA Nos. 164 165/All/2001; (i) in their order dt. 15th Jan., 2002 (copy of which was duly placed before the learned first appellate authority) the Hon'ble Bench had specifically held that "13. In view of above facts and circumstances and various decisions we are of the opinion that the orders of assessment for block period dt. 24th Feb., 1999 in case of both the appellant stood merged in the common order of the CIT(A) passed on 18th May, 1999 and, therefore, no original order was in existence even on 16th April, 2000, the date of issue of notice under s. 263 of the Act; what to say of existence of original orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the impugned orders are liable to be quashed. The learned counsel for the assessee has taken us minutely to the order of the Tribunal to support the contention, the copy of the same is filed in the paper book-II at p. 290 in ITA Nos. 164/All/2001 and 165/All/2001 in the case of both the assessees. The learned counsel for the assessee argued on merits that the assessee has prepared summary of the peak on the basis of arranging the same by date in chronological order, which is marked as A.R.-I and as discussed earlier, the same details were filed before the AO and the CIT(A). He further argued that the authorities below have not computed the peak on the basis of entire seized material and the assessee has prepared the summary of the same by utilising the entire seized material and according to the same, on 18th Dec., 1995, the debit balance comes to Rs. 47,60,184,70. Therefore, this peak should have been taken by the authorities below instead of enhancing it to Rs. 3.90 lakhs approximately. The learned counsel for the assessee further argued that the AO before the CIT(A) on 19th Jan., 2001 in the proceedings under s. 154 of the IT Act has admitted that the peak was prepared on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 : (1997) 227 ITR 216 (Guj), 10. CIT vs. Hind Wire Industries Ltd. (1995) 124 CTR (Cal) 224 : (1993) 202 ITR 274 (Cal), 11. Bundy Tubing of India Ltd. vs. CIT (2002) 173 CTR (Mad) 383 : (2002) 253 ITR 286 (Mad), 12. CWT vs. Uttam Chand Jain (2000) 163 CTR (Del) 211 : (2000) 245 ITR 838 (Del), 13. Sai Electrical vs. ITO (1990) 32 ITD 186 (Del). 81.1 The learned Departmental Representative argued that the AO passed the order under s. 154 of the IT Act prior to order under s. 263 of the Act. He has further argued that there is no finding of Tribunal while passing the order under s. 263 of the Act to debar the AO from making rectification under s. 154. He has further argued that if the principle of merger is applicable, it requires reconsideration as Department could not present its case in right perspective before the Tribunal earlier. The learned Departmental Representative further argued that the assessee wanted rectification of certain mistakes, which were not part of the record of the AO and as such no such rectification could be made on those items. He has relied upon the following decisions: 1. Sharda Prasad vs. CIT (1975) 100 ITR 373 (All), 2. Paramount Trading C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such cases, the decree of the Trial Court is merged in the decree of the appellate Court. In the course of time, this concept, which was originally restricted to appellate decree on the ground that an appeal is the continuation of suit came to be gradually extended to other proceedings like revision and even to proceedings before quasi judicial and executive authorities." 84. Therefore, the principle of merger is applicable to quasi-judicial authorities, like the IT authorities including the CIT(A). Therefore, the first question shall be whether the peak worked out by the AO as per block assessment order dt. 24th Feb., 1999 got merged with the appellate order of the CIT(A) dt. 18th May, 1999. 85. Before coming to the arguments of the learned Representatives of the parties as mentioned above, we would like to mention that both the appeals arise out of the order passed under s. 154 of the IT Act on 4th Oct., 2000 as is confirmed by the CIT(A) vide order dt. 14th Aug., 2002 with regard to the computation of the undisclosed income. The claim of the assessee since the beginning had been that the undisclosed income on the basis of peak of the credit should be calculated on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The above order under s. 263 was challenged in appeals before the Allahabad Bench of the Tribunal which decided the same matter vide order dt. 15th Jan., 2002. We found from the above said order that Allahabad Bench of the Tribunal took into account whole of the proceedings that had taken place at the stage of block assessment proceedings as well as the appellate proceedings in relation to the same matter in issue. All the submissions made by the assessee and the facts of the case were discussed. The assessee has taken a specific ground no. 3 in appeal against the order under s. 263, which is reproduced as under: "3. Because in any case, the block assessment order dt. 24th Feb., 1999 already stood merged with the appellate order dt. 18th May, 1999 on the specific issue of computation of undisclosed income on the basis of 'peak' of the balances as taken from computer printouts and the learned CIT could not have revised the same under s. 263 of the IT Act, 1961 and view to the contrary as taken by the learned CIT is erroneous." 86. The Tribunal, Allahabad Bench considering the entire grounds of appeal as mentioned above, decided the point in issue in favour of the assessee. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue' as a whole which is said to be the subject-matter of appeal and not only the 'aspect' alone. 12.2 Coming to the cases of the appellants before us and the issues involved in proceedings under s. 263 of the Act, we are of the opinion that the undisclosed income on the basis of so-called introduction of undisclosed cash by way of credit entries in manual books and corresponding debit entries of the same amount and also the credit entries made in computer printouts (account) on the actual receipt of cash could be determined only by way of taking the peak of debit and credit entries in the computer printouts and the issues relating to the undisclosed income on the basis of such entries being specifically raised by the appellants before the CIT(A) and having been considered by him, the whole of the issue relating to the computation of undisclosed income on the basis of such credit and debit entries in manual and computer accounts had merged in the order of the CIT(A) passed on 18th May, 1999. 13. In view of above facts and circumstances and various decisions, we are of the opinion that the orders of assessment for block period dt. 24th Feb., 1999 in case of both the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the Tribunal has recorded a categorical finding about the merger of the block assessment order dt. 24th Feb., 1999 with the appellate order dt. 18th May, 1999. It is very significant to note here that the proceedings under s. 263 had been initiated by the CIT (Central), Kanpur precisely on the same grounds, on which the rectification proceedings had been initiated under s. 154 and an order has been passed on 4th Oct., 2000. The matter in issue in proceedings under s. 154 of IT Act was directly and substantially same as in the proceedings under s. 263 of IT Act. The finding of the merger as recorded by the Tribunal in the proceedings under s. 263 as above, are, therefore, clearly applicable in the appeals before us also. Before concluding the above order, we would like to discuss the case laws relied upon by the learned Departmental Representative. 88. The learned Departmental Representative relied upon (a) CIT vs. East Coast Marine Production (P) Ltd., in which it was held that the matters which are not covered by the appellate order are left untouched and to that extent ITO's order survives permitting exercise of revisional jurisdiction by the CIT under s. 263. (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of development rebate was not before the CIT(A), therefore, there was no merger of the order of ITO. (l) CIT vs. Uttam Chand Jain, in which it was held that there was no merger when issue was not the subject-matter of appeal. (m) The other case laws relied upon by the learned Departmental Representative reported in (1975) 100 ITR 373 (All) and (1980) 17 CTR (All) 57 : (1980) 124 ITR 55 (All) are in respect of the point that for the mistake committed by the assessee would not be the subject-matter under s. 154. (n) The learned Departmental Representative relied upon (2001) 167 CTR (Ker) 280, decision of Kerala High Court in the matter of CIT vs. N.T.A. Karim and the decision of Hon'ble Supreme Court in the matter of Hukumchand Mills Ltd. vs. CIT with regard to powers of the Tribunal to decide the additional ground, which we have already referred to above in this order, while deciding the Departmental appeal and cross-objections of the assessees. (o) At the cost of repetition, we may mention again that whatever order Tribunal has passed while deciding the appeal of the assessee in ITA Nos. 164 and 165/All/2001 vide order dt. 15th Jan., 2002 has become final as the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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