TMI Blog2002 (10) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer has grossly erred in invoking provisions of section 158BD of the Act. 1.3 That the subsequent proceedings initiated under section 158BD are also bad in law as no notice was served on the assessee society or its office bearers under section 142(1) of the Act during the assessment proceedings. 1.4 The learned Assessing Officer has further erred in referring the case for special audit under section 142(2A) of the Act when provision of section 158BC were not applicable. 2. That the order passed by the learned Assessing Officer under section 158BD/144 being barred by the limitation of time provided under section 158 for completion of assessment the resultant order as passed deserves to be struck down. 2.1 That the ld. Assessing Officer has further erred in making addition of Rs. 12,62,515 on wrong assumptions and presumptions on account of undisclosed income for the block period 1-4-1986 to 18-9-1996. 3. That the ld. Assessing Officer has erred in making additions on the basis of statements stated to have been recorded of Shri P.C. Kedia P/o Kedia Co. and Shri Chandra Kant Ruia office bearer of some other. society namely Topkhana Desh Grab Nirman Society. 3.1 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered by the said two decisions and the same needs to be followed in this case also and allow this appeal also. 4. Accordingly the learned DR was asked to explain as to why prayer of the appellant should not be accepted and show if the facts and findings are not identical with the said two decisions of the Tribunal. The case was, therefore, adjourned for hearing on 8-8-2001. 5. The learned DR contends that the whole case of the Assessing Officer is based on the modus operandi admitted by Shri Prakash under section 131 of the Income-tax Act, 1961 on 13-11-1986 which was consequent to the date of search on 18-9-1996 on Shri P.C. Kedia and M/s Kedia Co. where certain blank pattas were found and seized. The employee's statement was also recorded but the same is not available and cannot be produced before the Tribunal. From the said blank pattas, which were found, it cannot be said that no income has been earned by the assessee. At least something has been earned. What that earning could be by the appellant, cannot be said, it may be Rs. 10 or even Rs. 5. He further contended that all the case laws relied upon by him in the case of Vikas Bhawan Nirman Sahkari Samiti Ltd. may also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch orders of the Tribunal have been relied by the assessee and without finding any earning of undisclosed income by the appellant. In view of the said submissions, it was, therefore, contended that the assessment has been framed by flouting the principles of natural justice and the same is bad in law and needs to be annulled. Besides this, on the aspect of service of notice on the society, a copy of letter is alleged to have been given to Mr. Kedia but the same was not sent to the address of the society. Mr. Kedia has no locus standi in the society. Shri O.P. Jain was not the office bearer. There had been a re-election in the society, details placed at assessee's paper book, vol. I. Even otherwise the income of the appellant was exempt by the principle of mutuality which aspect has not been denied by the Assessing Officer as is borne out from para 7 of his order. The proceedings taken under section 158BD were, in fact, wrong and not as per the spirit of law. No satisfaction has been recorded by the Assessing Officer before taking any action under section 158BD. Reliance has been placed on the decisions in the case of Ved Prakash Sanjay Kumar v. Asstt. CIT [1999] 107 Taxman 242 (Chd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequence of the same search on Shri P.C. Kedia and M/s. Kedia Co. and was based on the same material. No new facts or material has been brought on record by the Assessing Officer nor any different finding has been given. We agree with the plea of the learned counsel for the appellant that the issue in all four corners fully covered by the said two decisions of the Tribunal and all the facts and findings are also identical. We also agree that no adverse view could have been drawn from the statements taken at the back of the appellant which were recorded after the completion of the search on Shri P.C. Kedia and M/s Kedia Co. and not in connection with the searching of any undisclosed income of the appellant. Any modus operandi narrated by the learned DR related to the business by Shri P.C. Kedia and not by the appellant. We, however, referred to the statement of Shri P.C. Kedia heavily being relied upon by the revenue. This statement was recorded on 13-11-1996 under section 131 of the Income-tax Act. It was stated by Shri Kedia that the business in land was started with Topkhana Desh Grah Nirman Sahkari Samiti Ltd. about 17 to 18 years back. The land was purchased from this soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No specific instance has been shown or brought on record to prove that any undisclosed income has accrued or arisen or belongs to the appellant. No satisfaction is found to have been recorded before taking action under section 158BD of the Act. In fact the learned Departmental Representative merely seeks to send back the case to the Assessing Officer so as to bring more clarity and reality on record, which we find is too late at this stage and any lapses on the part of the Assessing Officer cannot be allowed to be covered by sending the case back. Having found that the facts and findings are identical with the two decisions rendered by the Tribunal and no new facts having been brought on record and also that there has been no application of mind by the Assessing Officer inasmuch as the same floppy as in these two other cases appears to have been used for framing the assessment except some minor changes, we do not find any justification in restoring the matter back to the Assessing Officer as such an exercise will amount to mockery of judicial system and cause great prejudice to the assessee besides being contrary to the legal procedure laid down for redressal of grievances of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal in the case of Vikas Bhawan Nirman Sahkari Samiti Ltd, addition or estimation of income was not warranted under Chapter XIVB of the I.T. Act. The same is, therefore, directed to be deleted. This disposes of all the grounds raised by the assessee, as the dispute relates to the estimation of income by the Assessing Officer for which issue stands decided in favour of the assessee." 10. Accordingly we allow the appeal of the assessee. Per Shri Dinesh K. Agarwal, Judicial Member.-- I have carefully gone through the order proposed by the learned Accountant Member but I have not been able to pursued myself to concur with the conclusion reached in allowing the assessee's appeal. I wish to record my respectful dissent with regard to the findings arrived at by the learned Accountant Member. 2. After hearing the rival submissions of the parties, perusing the material available on record and the number of decisions relied upon by both the parties, I find that the Assessing Officer, on the basis of several incriminating documents and papers pertaining to the assessee fond during the course of search conducted on 18-9-1996 and subsequent dates at the business premises and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same address, which was mentioned by the assessee even on 17-12-2001, therefore, in the absence of any contrary material, the Affidavit filed by the assessee in this regard does not inspire any confidence. I find support from the judgment of Hon'ble Calcutta High Court in the case of Ainal Kumar Chakraborty v. CIT [1994] 207 ITR 376, wherein at page 390, the dictum "falsus in uno falsus in omnibus" was held as a sound principle to apply in taxation. Accordingly, I do not find any merit in the contention of the ld. A.R. and the assessee and the same is, therefore, rejected. 5. As regards service of notice under section 142(1) dated 3-4-1998 which, according to the Assessing Officer, was served with great difficulty on Shri O.P. Jain, the office bearer of the Society. The ld. A.R. contends that at that time, Shri O.P. Jain was not office bearer of the society. The election in the Society took place on 22-7-1997 by the Government appointed Election Officer and as per results, Shri O.P. Jain was not the office bearer and, therefore, the same cannot be effected on him. The ld. A.R. has also filed the copy of the list dated 22-7-1997 of the office bearers of the Society as a new evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was a clear admission by the Secretary of the Society that the plot transfer fee is approximately Rs. 1,000 for each plot, which was not only a sufficient material but conclusive evidence about the undisclosed income, which has not been rebutted by the ld. A.R., therefore, the facts of this case are different from the facts of the case of other two societies, namely, M/s. Vikas Bhawan Nirman Sahkari Samitee Ltd., Jaipur and M/s. Topkhana Grah Nirman Society, Jaipur and, accordingly, the orders of this Bench in the case of Vikas Bhawan Nirman Sahkari Samiti Ltd. and Topkhana Desh Grah Nirman Sahkari Samiti Ltd., are distinguishable and not applicable to the facts of the present case. 10. However, while upholding the issuance of notice under section 158BD and service of notice under section 142(1) as valid in view of the decisions in CG.G. Panicker v. CIT [1999] 237 ITR 443 (Ker.) and Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC), I find merit in the plea of the ld. A.R. that the assessment has been completed without providing reasonable opportunity to the appellant. The ld. DR. has also submitted that the fact demands to bring some more clarity and reality sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Judicial Member that the matter should be set aside for re-examination afresh by the Assessing Officer. 2. Whether there was any material with the Assessing Officer that can be said to have been found as a result of search from which it could be said that there was any undisclosed income within the meaning of section 158B(b) of the Act so as to give a valid jurisdiction for completion of assessment under section 158BD of the Act." 2. We direct the registry to place the matter before the Hon'ble President, ITAT. Per Shri Dinesh K. Agarwal, Judicial Member.-- Following questions of difference are also referred in terms of section 255(4) of the Income-tax Act, 1961 for resolving the difference of opinion:-- "1. Whether, on the facts and in the circumstances of the case, the Judicial Member was right in holding that the Affidavit filed by the assessee does not inspire any confidence and consequently the dictum "falsus in uno falsus in omnibus", as held by the Hon'ble Calcutta High Court in Amal Kumar Chakraborty v. CIT [1994] 207 ITR 376 at Page 390 is applicable in this case. 2. Whether, the Judicial Member was right in holding that in view of the confessional statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication dated 18-5-1997 stated that the assessee was a Co-operative Society and its work was to provide land for housing on no profit no loss basis to its members and further land under various schemes had been acquired by the society and allotted to its members mainly prior to 1-4-1987. It was the claim of the assessee that no search proceedings had been carried out at its premises. 4. After service of notice under section 158BC, proceedings were initiated under section 142(2A) for auditing of the books of account of the assessee by a Chartered Accountant appointed with the approval of the Commissioner of Income-tax. This was found to be necessary as according to the Department there was considerable inter-mingling of the accounts of the Kedia family with those of the society. A Chartered Accountant was appointed on 5-9-1997 to audit the accounts and asked to submit the audit report within three months, but as per para 2 of the assessment order, no such report was filed and nor was any extension sought for preparing and filing the same. 5. The Assessing Officer also referred to the "admission" of one Shri Om Parkash Chauhan, Secretary of the assessee-society to the effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the observation of the Assessing Officer that the office bearers of the society pocketed the "real profit" because if such profits were disclosed in the accounts, then they would have to be shared with the other members on grounds of mutuality. 9. As per the Assessing Officer the examination of Shri Chauhan, the Secretary of the society revealed that the plot transfer fee was approximately Rs. 1,000 per plot and further the society earned money by way of membership fee, plot transfer fee and other transactions. According to him the society had not co-operated in the assessment proceedings, neither got its accounts audited under section 142(2A) and nor filed the return of income as required by law. Further according to the Assessing Officer no details had been provided with regard to the lands colonized, details of closing stock etc. and the assessment, therefore, had to be completed to the best of his judgment and he subsequently proceeded to estimate the undisclosed income of the society on the basis of the material available on record. In the concluding para of the assessment order i.e. 9 the Assessing Officer observed as under:-- "As per the own admission of Shri P.C. Ked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts were absolutely identical. It was emphasized that the assessments in those two cases had also been made pursuant to the action on Shri P.C. Kedia and M/s. Kedia Co. The two decisions are Vikas Bhawan Nirman Sahkari Samiti Ltd.'s case and Topkhana Desh Grah Nirman Sahkari Sainiti Ltd's case. The plea of the learned counsel for the assessee was that the Tribunal be pleased to decide the present appeal in the light of the two aforesaid orders. As per para 4 of the order of the learned Accountant Member the Departmental Representative was asked to give his reaction to the aforesaid submissions and put on notice as to why the prayer of the assessee's counsel be not accepted in case the facts and findings recorded in the aforesaid orders were squarely applicable to the facts of the assessee's case. 12. It is noted from para 5 of the order of the learned Accountant Member that the submission on behalf of the Revenue was that blank pattas were found and seized during the course of the search on 18-9-1996 on Shri P.C. Kedia and M/s. Kedia Co. and the modi4s operandi had been admitted by Shri Prakash under section 131 of the Income-tax Act, 1961 on 13-11-1986. The further submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y worded and the same computer floppy had been utilised. It was pointed out that at page 2 para 6 of the assessment order in appeal the Assessing Officer made observations about the sending of a notice to another assessee, namely, Vikas Bhawan Sahkari Samiti Ltd. and not to the assessee. The plea, in other words, was that there had been no independent application of mind by the Assessing Officer and the assessment had been made mechanically by using the same material, which was available in the cases of the other two societies. The further argument was to the effect that principles of natural justice had been flouted and even on this ground the order of assessment being bad in law needed to be annulled. The assessee also sought to highlight before the Tribunal that Mr. Kedia had no locus standi in the society and Shri O.P. Jain was not an office bearer. 17. The further submissions on behalf of the assessee were to the effect that the income was otherwise exempt on grounds of mutuality and the proceedings taken under section 158BD were in fact wrong and not as per the spirit of law. It was also submitted before the Tribunal that the Assessing Officer had not recorded any satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y relied upon by the Revenue. The factual aspects highlighted by Shri Kedia in his statement were adverted to by the learned Accountant Member and these can be summarized as under:-- (i) That the business in land was started about 17 to 18 years back in M/s. Topkhana Desh Grah Nirman Sahkari Samiti Ltd. and that land had been purchased from the aforesaid society and developed by him; (ii) The said society did not have any involvement or action with the development expenses, yet it gave blank pattas signed by its office bearers and which were kept by him for use at the time of allotment as also for issuing duplicate in case of mutation of the original; (iii) It was not possible to relate any patta with any plot of land or scheme and this was the reason why these blank pattas had been found during the course of search on his premises; (iv) In certain cases pattas had not been issued because sale deeds were directly executed and in some cases where sale deeds had been executed later, the pattas had been obtained blank; (v) That the procedure of executing sale deeds was the same as prevailed in the various schemes relating to the Topkhana Desh Grab Nirman Sahkari Samiti Ltd.; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for restoration of the matter back to the file of the Assessing Officer. The learned Accountant Member also highlighted the "rule of consistency" to ultimately follow the decision of the Tribunal in the case of Topkhana Desh Grah Nirman Sahkari Samiti Ltd., proceeding to allow the assessee's appeal. 24. The learned Judicial Member, however, did not agree with the views expressed by the learned Accountant Member. According to him the Assessing Officer had acted on the basis of "incriminating documents and papers" pertaining to the assessee found during the course of search conducted on 18-9-1996 and subsequent dates at the business and residential premises of Shri P.C. Kedia as also M/s. Kedia and Co., Jaipur and had, therefore, issued notice under section 158BC(2). However, since no authorization under section 132 had been issued in the case of the assessee the provisions, which were applicable were those of section 158BD and the Assessing Officer accordingly issued notice under the said section on 24-12-1997, the address given being shop No. 1, Hathroi Market, Jaipur. Further copy of the said notice was also sent to Shri P.C. Kedia. On the submission of the assessee's counsel th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the present case. 27. On the basis of the aforesaid line of reasoning, the learned Judicial Member while upholding the issuance of notice under section 158BD and treating the service of notice under section 142 as valid in law proceeded to examine the plea on behalf of the assessee about the assessment having been completed without providing reasonable opportunity and relating thereto the submission of the learned Departmental Representative that certain facts were required to be made clear and brought on record and, therefore, the assessment be set aside to the file of the Assessing Officer and such a submission not being rebutted by the learned Departmental Representative. The learned Judicial Member accordingly proceeded to set aside the assessment to the file of the Assessing Officer for re-examining the same afresh, after providing sufficient opportunity of being heard to the assessee. 28. As already observed by me, both the learned Members have proposed their own set of questions and coming to the order of the learned Accountant Member, the questions/points of difference are the following:-- "1. Keeping in view the entirety of facts, circumstances, mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. I have minutely perused the questions proposed by the learned Members of the Division Bench and it is quite apparent that the areas of difference are as follows:-- "1. Whether the facts existing in the present case are identical to those considered by the Tribunal in two other cases when the action of the Assessing Officer in block assessments came to be set at naught leading to consequential relief." "2. Whether there was any material with the Assessing Officer and such material having been found during the course of the search and on the basis of which it could be held that there was undisclosed income within the meaning of section 158B(b)." and "3. Whether the facts and circumstances of the case necessitated a set aside of the assessment order asking the Assessing Officer to re-examine the matter afresh. 31. The aforesaid points of difference emerge from a reading of the two questions proposed by the learned Accountant Member and question Nos. (2) to (4) proposed by the learned Judicial Member. As regards question No. (1) proposed by the learned Judicial Member, the learned Accountant Member has not expressed any opinion, so it cannot be said that there is any dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Shri Chauhan was recorded behind the back of the assessee and a copy thereof was not even placed before the Hon'ble Members constituting the Division Bench and under these circumstances the observation of the learned Judicial Member to the contrary was not appropriate; (xi) That the profit and loss account and receipt and payment account of the assessee duly reflected the plot transfer fee and there was no material on record to show that anything over and above had been received; (xii) The learned Judicial Member had doubted the affidavit of the President of the society, but it was a matter of record that the address mentioned in the assessment order was not the one where the alleged statutory notice had been sent and further the said alleged notice is dated 24-12-1997 and the order is dated 30-4-1998. Further the said notice was returned unserved and this clearly showed that the Assessing Officer was aware of the incorrect address in his record; (xiii) During the course of the hearing before the Division Bench, the Department filed only a copy of the statement of Shri P.C. Kedia dated 13-11-1996 in which he had stated that he had no dealings or links with the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that incriminating documents in the form of blank pattas were found during the course of the search on Shri P.C. Kedia and his group and the fact that the assessee was receiving approximately Rs. 1,000 for every transfer effected was borne out by the statement of Shri Om Prakash Chauhan, Secretary of the assessee-society recorded on 12-12-1997. It was emphasized by the learned Departmental Representative that the distinguishing feature in the present case vis-a-vis the two others already decided by the Tribunal was the statement of Shri Chauhan. As regards the plea made on behalf of the assessee about the recording of the statement behind the back of the assessee, the submission was that Shri Chauhan was the office bearer of the society and his statement was in fact the assessee's own submissions. Without prejudice to the aforesaid the further submission was that if there was any 'irregularity" in respect of the aforesaid, then it could be cured. In conclusion the learned Departmeital Representative urged that the view taken by the learned Judicial Member be approved. In support of the aforesaid arguments, reliance was placed on the judgment of the Hon'ble Rajasthan High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment, which is to be framed under the newly introduced Chapter XIV-B and concealed income has to be determined on the basis of the material and other evidence found during the course of the search and unless facts and circumstances warrant, the matter cannot be restored back for giving another inning to the Department to improve its case. This is what exactly has happened in this case when the stand of the assessee all along has been that the facts are absolutely identical to those recorded in the cases of Vikas Bhawan Nirman Sahkari Samiti Ltd. and Topkhana Desh Grah Nirman Sahkari Samiti Ltd. and which have already-been adjudicated upon in their favour by the Tribunal. During the course of the hearing before the Division Bench an opportunity in fact had been allowed to the Revenue to study the two orders of the Tribunal already passed and then to revert back to the Tribunal for the specific purpose of bringing forth distinguishing features. The learned Accountant Member, in my opinion, has rightly observed that there are no distinguishing features and even the three assessment orders, the two already decided and the one presently in appeal, are identically worded. 38. It is q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Member has laid undue stress on the "statement" of Shri Om Prakash Chauhan to come to the conclusion that there were incriminating documents in respect of the assessee pursuant to the raid on Shri P.C. Kedia and his group, but it is an undisputed fact in the present case that there was no statement recorded of Shri Om Prakash Chauhan and it is only an order-sheet entry made by the Assessing Officer and it categorically states that Shri Chauhan assumed the office of secretary somewhere in 1997, which as already observed by me is outside the block period. I have also observed that the so-called statement of Shri Chauhan was not placed before the Division Bench and even pattas found from the premises of Shri P.C. Kedia and his group were not placed before the Division Bench and nor before me during the present hearing. I really do not see as to what inference can be drawn against the assessee from the ordersheet entry or from blank pattas bearing no names and which have not been placed on record by the Revenue. 42. In the final analysis, I concur with the view taken by the learned Accountant Member whereby he has opined that the points raised in the present appeal are squarely c ..... 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