9911796707
TMI Blog2007 (6) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... issues raised are identical. For the above reasons, we have heard the aforesaid appeals and C.O.s together and proceed to dispose of the same by way of this consolidated order for the sake of convenience and brevity. 2. In order to facilitate the factual and other aspects leading up to the present proceedings, we take up for consideration specifically the appeal of the Revenue in IT(SS) No. 19/Chandi/05 and the corresponding C.O. preferred by the assessee by way of C.O. No. 58/Chandi/05. In this case an assessment under section 158BD read with section 158BC of the Act has been finalized by the ACIT, Yamuna Nagar vide his order dated 19-3-2004 whereby the undisclosed income has been assessed at Rs. 4,98,650. The said assessment has since been subject-matter of appeal before the CIT (Appeals) who has deleted the entire addition. Against such deletion the Revenue is in appeal. 3. In this case the genesis of the assessment is a search and seizure operation which was carried out by the revenue under section 132(1) of the Act at the residential premises of one Shri Anil Goyal at Jagadhari (hereinafter referred to as 'dalal'). The search upon the said 'dalal', it emerges, was as a cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer issued notice under section 158BD of the Act on 15-3-2002 to the assessee and has thereafter finalized an assessment under Chapter XIV-B. The Assessing Officer noted that the aforesaid entries were not found recorded in the regular books of account of the assessee and therefore the amount of loan along with interest earned thereon represented undisclosed income chargeable to tax in terms of section 158BD read with section 158BC of the Act. The reasons which weighed with the Assessing Officer to hold so can be summarized as follows : (i)That the Annexure A-1 was found during the course of search operation from 'dalal' and the entries therein are in his own handwriting. That therefore the contents of the Annexure A-1 as disclosed by 'dalal' are to be accepted as correct. (ii)That the said 'dalal' was found to be in the business of money lending and therefore the entries recorded in Annexure A-1 corroborated the fact that his business was that of a money lending broker and thus the transactions recorded can be said to have taken place. (iii)That the 'dalali' income declared by 'dalal' in his returns corroborated the contents of entries in Annexure A-1. (iv)That Annexure A-1 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Smt. Sukhwinder Khanna, the Learned Sr.DR on behalf of the Department are on the following lines:- 6. According to her the CIT (Appeals) has grossly erred in not accepting the contents of Annexure A-1 as credible evidence. Learned DR pointed out that Annexure A-1 was maintained by 'dalal' in the course of carrying on his business of finance broking which was found in the course of a search operation and therefore, the contents of the Annexure can be understood to have been recorded without any pre-mediated mind, thus enabling an inference to be drawn that its contents are true and correct. According to her, the fact that the names in Annexure A-1 were recorded in abbreviated form or the amounts were recorded in coded form cannot straightaway be taken as a justifiable reason to disregard its contents. The learned DR pointed out that consequent to the seizure of Annexure A-1, the Investi-gation Wing of the department had examined 'dalal' on several occasions and it was during the course of such examination 'dalal' gave complete details of the transactions recorded in the Annexure, namely names and addresses of the lenders and borrowers; rate of interest; mode of payment; and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therein are to be taken as representing the true state of affairs. The learned DR further submitted that the fact that a number of entries of Annexure A-1 stood verified, this itself was a corroborative evidence in support of the contents of the diary. The learned DR pointed out that in such situations it would be impossible on the part of the Revenue to bring on record a direct evidence of the lenders and borrowers having entered into transactions in cash. 10. The learned DR pointed out that while appreciating the evidence in question it has to be borne in mind that the same has been not voluntarily brought on record by 'dalal' but has been unearthed as a consequence of a search operation undertaken by the Department. According to her, on account of preponderance of probability and surrounding circumstances, the Assessing Officer was justified in inferring that the impugned transactions actually took place between the lenders and borrowers recorded therein, which were not declared in their regular books of account by the respective parties. 11. The learned DR relied upon the decision of the Supreme Court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801 for the proposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iminal proceedings cannot be made applicable to the income-tax proceedings as in the present case. According to her the same were inapplicable to the facts in the instant case. Regarding the decision of the Hon'ble Punjab & Haryana High Court in the case of Mohan Lal Vig (supra) the learned DR pointed out that the conclusion of the Hon'ble High Court has to be read in the background of the facts of the case. In the case before the Hon'ble High Court, there was no Seizure Memo which reflected the seizure of the 'dasti bahi' in question and therefore, it created a doubt as to whether or not the evidence in question was recovered from the business premises of the assessee or not and hence the inference that transactions reflected by 'dasti bahi' could not be used as evidence against the assessee. Pointing out that the facts in the instant case stand on a totally different footing inasmuch as there is no doubt that Annexure A-1 has been found and recovered from 'dalal', who has maintained it in his own handwriting and in the normal course of carrying on his business of finance broking. That therefore, the CIT (Appeals) has erred in importing the reasoning of the Hon'ble Punjab & Haryan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel, if one was to analyze the conduct of 'dalal' starting from the date of search and subsequently when the explanation regarding the entries in Annexure A-1 has been provided by him, the same shows contradictions and unreliability. The learned counsel pointed out that during the course of examination by the department on several occasions prior to 20-1-2000 'dalal' had categorically stated that he does not know the name of any person written in the Annexure A-1 and then in a complete turn around narrates each and every detail in one sitting running into 50 pages on 20-1-2000. Insofar as the contents of Annexure A-1 are concerned, it is argued that the material itself cannot be considered as a document evidencing actual state of affairs. Moreover, the said 'dalal' has put different signatures on different dates on the statement showing his inconsistent nature. In any case, it is argued that the name of the assessee respondent does not appear in the said Annexure. The name of the assessee and also the amounts said to have been lent by the assessee has been inferred only on the basis of the alleged explanation of 'dalal'. If the seized material is read without the explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel pointed out that both the receipts have been accepted by 'dalal' as being relatable to the money lending carried out by his wife and nephew. On this basis, it was therefore submitted that the money lending was indeed carried out by 'dalal' and cannot be attributed to the assessee in question since his name does not figure in the Annexure seized. It was thereafter argued that Annexure A-1 can at best be taken as a record of incomes of transactions of the 'dalal' himself. To support this, the learned counsel pointed out that 'dalal' has claimed that he has worked out his commission income on the basis of entries made in Annexure A-1 and such a claim has been accepted by the Assessing Officer in the assessment of 'dalal' finalized under section 158BC on 21-5-2001. A specific reference was made to the statement recorded on 4-11-1999 (page 98 of Paper Book) wherein the said 'dalal' categorically admitted that the bahi reflected his brokerage income and that the recordings contained therein did not represent any codes or abbreviations. The learned counsel submitted that the only statement that is being used against the assessee is dated 20-1-2000, a copy of which has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city of the statement of 'dalal' dated 20-1-2000 the learned counsel submitted that the names of 'Prince', 'Anuradha' and 'Santosh' found recorded in Annexure A-1 have been explained as referring to the transactions undertaken by Nand Lal Garg Group; and, such explanation has been accepted by the Revenue. However, such stand has not met with the approval of Income-tax Settlement Commission (ITSC) vide its judgment dated 9-1-2007, a copy was placed on record. It is submitted that in para 26 of its order, the Hon'ble ITSC has held as under: "26. We have considered the rival submissions. Considering the overall facts and the material, we are of the opinion that the only statement of Anil Kumar links the applicant with the three names viz. Anuradha, Prince and Santosh. We are of the opinion that the evidence is not adequate to link the findings through the ledger as that of the applicant. No other evidence is found. Under these circumstances, we hold that no addition is called for on this account." Therefore, the statement of 'dalal' cannot be straightaway relied upon as it has not found to be reliable even by the ITSC. 15.1 Apart from arguing that the statement attributable to 'dal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee are true. In the course of submission the learned counsel has relied upon various decisions viz. V.C. Shukla's case (supra), Addl. CIT v. Miss Lata Mangeshkar [1974] 97 ITR 696 (Bom.), Bansal Strips (P.) Ltd. v. Asstt. CIT [2006] 99 ITD 177 (Delhi), Khopade Kisanrao Manikrao v. Asstt. CIT [2000] 74 ITD 25 (Pune)(TM). 17. In reply, the learned DR reiterated that the DDIT was competent to record the statement dated 20-1-2000 inasmuch as it was recorded in continuation of the search proceedings conducted on 14-9-1999 and filed a sequence of events starting with the date of search and upto the date of recording the statement of 'dalal'. The learned DR admitted that the DDIT had issued summons under section 131 in response to which the statement in question has been recorded. The learned DR argued that, in any case, a DDIT is authorized to record the statement of a person under section 131(1A) to make enquiries/investigation even in cases where no proceeding with respect to such person is pending. Therefore, according to her, even if section 132(4) is found to be inapplicable in this case, section 131(1A) comes to the rescue regarding the authority of DDIT to record the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue in the case of the present assessee stands on a different footing than in the case before the Income-tax Settlement Commission. According to her in the case of Nand Lal Group 'dalal' had claimed to have maintained accounts in benami names which were being denied by Nand Lal Group. In the case of the assessee it was not so. There are no benami names. 18.1 The aforesaid arguments of the assessee and the Revenue relate to the merits of the addition deleted by the CIT(Appeals). In the Cross Objection (C.O. No. 58/Chandi/05), the assessee has challenged the validity of assumption of jurisdiction by the Assessing Officer by issuance of notice under section 158BD read with section 158BC of the Act. We find it appropriate to record hereinafter the rival submissions on this issue. 19. The plea of the assessee is that the proceedings initiated by issuance of notice under section 158BD dated 15-3-2002 are unsustainable in law and thus invalid. The challenge to the issuance of notice under section 158BD has been made by assessee on several counts. Firstly, it is submitted that the recording of satisfaction contemplated under section 158BD is a condition precedent and which has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een recorded by DDIT by issue of summons under section 131 are to be ignored as the same are illegally procured. If the statements are ignored, there does not remain any material whatsoever to implicate the assessee under the provisions of Chapter XIV-B of the Act. Reference was invited to the decision of the Tribunal in the case of Monga Metals (P.) Ltd. v. Asstt. CIT [2000] 67 TTJ (All.) 247 regarding the nature of statements recorded by the authorized officer after conclusion of search and its relevance for making a block assessment. Notwithstanding the aforesaid, it is pointed out that the statement recorded in the month of January, 2000 also becomes suspect considering the conduct of the 'dalal' in the past and in this connection, the earlier submissions have been relied on. In the course of submissions the learned counsel has relied upon various decisions viz. Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 (SC), Amity Hotels (P.) Ltd. v. CIT [2005] 272 ITR 75 (Delhi), Janki Exports International v. Union of India [2005] 278 ITR 296 (Delhi), Priya Blue Industries (P.) Ltd. v. Jt. CIT [2001] 251 ITR 615 (Guj.), Khandubhai Vasanji Desai v. Dy. CIT [1999] 236 ITR 73 (Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrectly assumed by the Assessing Officer. 21. We have considered the rival submissions carefully. We find it expedient to consider and adjudicate the validity of issuance of notice under section 158BD of the Act at the outset. This is for the reason that if the issuance of notice under section 158BD by the Assessing Officer is found to be invalid, that aspect being an incurable jurisdictional defect would lead to cancellation of assessment order itself. Thus, this aspect, which goes to the root of the matter is therefore, considered at the outset. 22. Before we proceed to dilate on the issue concerning the validity of action under section 158BD we find it appropriate to refer to the scheme and the purport of Chapter XIV-B dealing with the procedure for making assessment in the cases of search which has been inserted in the Act by the Finance Act, 1995 consisting of sections 158B to 158BH with effect from 1-7-1995. Under these provisions the undisclosed income detected as a result of a search initiated or requisition made after 30-6-1995, was required to be assessed separately as income of a block of 10 previous years. Where the previous year had not ended or the due date for fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 or a requisition under section 132 is thus a condition which enables the Assessing Officer to invoke the procedure of assessment prescribed under section 158BC of the Act. Generally, it is only the person with respect to whom search under section 132 or a requisition under section 132A is made that is subjected to the procedure of block assessment prescribed under Chapter XIV-B of the Act. The only exception to this is contained in section 158BD of the Act. Section 158BD of the Act seeks to provide for assessment of undisclosed income in terms of the procedure prescribed under Chapter XIV-B in the case of a person other than the person who is put to search under section 132 or a requisition under section 132A of the Act. It is this section which is the source of controversy before us. Needless to say, the operation of section 158BD enables the Assessing Officer to put a person who has been subjected neither to search under section 132 nor a requisition under section 132A of the Act on par with a person who has been subjected to a search under section 132 or a requisition under section 132A of the Act. It is, therefore to be understood that section 158BD provides a jurisdiction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 132 or a requisition is put under section 132A of the Act. Secondly the books of account or other documents or assets seized or requisitioned are required to be handed over to the Assessing Officer having jurisdiction over such 'other person'. It is further noted by the Hon'ble Supreme Court that only upon the happening of the aforesaid that the Assessing Officer having jurisdiction of the 'other person' shall proceed under section 158BC against such other person. With the above discussion, a premise, which can be safely deduced, is that the satisfaction as contemplated under section 158BD is to be of the Assessing Officer of the person who has been put to search or requisition under section 132 or 132A respectively. Another premise which can be safely deduced from the decision of the Hon'ble Supreme Court is that the requirement of recording of such satisfaction is a mandatory condition. At this stage we may refer to and reject the plea advanced on behalf of the revenue that the satisfaction in such cases only be discernible on the basis of material available on record and such satisfaction need not be specifically recorded. The learned DR has argued that satisfaction is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been prescribed, under the Act for recording such satisfaction and consequent invoking of section 158BD and, if not so provided specifically, can the same be read into the Statute by implication ? Both these issues are of relevance to decide the controversy on hand. 25. We may now examine the issue relating to time limit for initiation of proceedings under section 1158BD of the Act. As we have noted earlier under the scheme of provided for issuance of notice under section 158BD of the Act. Section 158BE, which details the time limits, is helpful only to ascertain the time limits fixed for completion of block assessment. Sub-section (2) of section 158BE provides the period of limitation for comple-tion of block assessment in the case of the "other person" referred to in section 158BD of the Act. Thus, the plea of the revenue is that a notice under section 158BD of the Act can be issued by the Assessing Officer on such other person at any stage. Referring to the case on hand it has also been specifically argued that there has been no undue delay in issuance of notice under section 158BD on 15-3-2002. It is thus contended that as there is no time limit prescribed for issuance of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d such other materials or information as is available with him, proceeds to determine the undisclosed income in the manner prescribed under section 158BC of the Act. In the course of the assessment of the searched person, the Assessing Officer is in a position to examine and analyze the various material unearthed as a result of search and after considering the result of the relatable enquiries if any conducted by him, he forms an opinion as to what constitutes undisclosed incomes thereof. On the basis of such an exercise the Assessing Officer proceeds to finalize an assessment under Chapter XIV-B determining the undisclosed income of the person searched under section 132 or put to requisition under section 132 of the Act. It is also at this stage, the Assessing Officer upon discovering the existence of an undisclosed income is in a position to decipher as to whether such undisclosed income, belongs to the person put to search under section 132 or to requisition under section 132A or it belongs to any 'other person'. Therefore it is only during the course of assessment of the person put to search under section 132 or requisition under section 132A that the Assessing Officer is in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the first instance where the Assessing Officer who has the jurisdiction over the person put to search under section 132 or requisition under section 132A comes into picture and he is required to make an assessment for the block period computing the undisclosed income under Chapter XIV-B of the Act. In order to frame such assessment, the said Assessing Officer is authorized, in terms of section 158BC, to issue notice to the person who has been put to search under section 132 or requisition under section 132A requiring him to furnish a return of undisclosed income for the block period as defined under Chapter XIV-B. At this stage when the said Assessing Officer proceeds to make an assessment of undisclosed income he comes in possession of the evidence and the material found as a result of search under section 132 or a requisition under section 132A and which has been handed over to him by the authorized officer. Insofar as the person put to search or requisition is concerned, the Assessing Officer proceeds to frame assessment on the strength of the presumption that the material seized belongs to the person in whose possession it was found. It is for this reason that the invoking of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer is competent to proceed against such other person by issuing notice under section 158BD read with section 158BC of the Act after recording the necessary satisfaction. Similarly if the person so identified is not within the jurisdiction of the said Assessing Officer, then the Assessing Officer after recording the satisfaction proceeds to transmit books of account, other documents or seized material to the Assessing Officer having jurisdiction over such person. In the scheme of Chapter XIV-B, it is discernible that the recording of satisfaction that any undisclosed income belongs to "other person" is the point which triggers the subsequent invoking of section 158BD. In both situations, the material on the basis of which such satisfaction is to be arrived at is within the domain of the Assessing Officer of the person put to search under section 132 or to a requisition under section 132A. Therefore, logically speaking, the point of time whereby the Assessing Officer, after having examined the entire material and evidence for the purpose of making an assessment in the case of person searched, shall be in a position to satisfy himself as to whether any undisclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of time a notice under section 158BD is required to be issued. However, in view of the aforesaid discussion it can be inferred from the Scheme of Chapter XIV-B that a limitation can be read into the Statute in this regard. The Apex Court in the case of Manish Maheshwari (supra) has explained the nature of proceedings under Chapter XIV-B. According to the Hon'ble Apex Court provisions contained in Chapter XIV-B are drastic in nature and has "draconian consequences". The implementation of such proceedings has therefore to be based on strict rules of interpretation. At this stage we may also refer to the judgment of the Hon'ble Gujarat High Court in the case of Khandubhai Vasanji Desai v. Dy. CIT [1999] 236 ITR 73 . The Hon'ble High Court of Gujarat was considering a group of petitions challenging the constitutional validity of the provisions of section 158BD of the Act. Although the period of limitation for issuance of notice under section 158BD was not specifically an issue before it, yet in the context of the constitutional vires of the section, the Hon'ble High Court was also of the opinion that a notice under section 158BD read with section 158BC cannot be an open-ended situati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a jurisdictional aspect is required to be objectively arrived at by the assessing authority. The satisfaction contem-plated is not merely a subjective satisfaction but is required to be based on the material seized under section 132 or requisitioned under section 132A of the Act. The Assessing Officer is required to sift, examine, analyse and investigate the material before him and only on the basis of the result thereon a satisfaction has to be recorded that any undisclosed income belongs to any person other than the person with respect to whom search under section 132 or a requisition under section 132A of the Act is made. This aspect finds support from the reasoning enunciated by the Hon'ble Delhi High Court in the case of Amity Hotels (P.) Ltd. (supra) wherein it has been held that satisfaction is required to be preceded by necessary investigations and not that the investigation are required to be preceded recording of satisfaction. The nature of the satisfaction contemplated under section 158BD therefore is of a level much higher than what an Assessing Officer acquires in order to invoke section 147/148 of the Act. The satisfaction, in our view, must be based on some positiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid background we come back to the facts of the instant case. Certain important dates which are of relevance are as follows. A search under section 132(1) was carried out in the case of the 'dalal' on 14-9-1999. A notice under section 158BC was issued to 'dalal' requiring him to file return of income declaring undisclosed income for the block period on 5-5-2000. The assessment under section 158BC was finalized by the Assessing Officer on 21-5-2001. Subsequently in the case of the assessee before us a notice under section 158BD was issued on 15-3-2002 calling upon the assessee to file return of income of undisclosed income for the block period. The first plea of the assessee is that the satisfaction purported to have been recorded on 15-3-2002 before issuance of notice under section 158BD is invalid for the reason that the same has been recorded belatedly. Secondly that such satisfaction was required to be recorded by the Assessing Officer in the case of 'dalal' and not in the case of the assessee per se. The stand of the revenue, on the contrary, is that the assessing authority who has framed the assessment in the case of the 'dalal' as also in the case of the assessee is same i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order. This list contains 133 names and it is claimed by the revenue that the name of the assessee appears at Sr. No. 30 which is an entry, which reads as under:- S. No. Name & complete address of the assessee Status 30. M/s. Dashondhi Ram Krishan Chand, Pansari Bazar, Jagadhri Firm 31. It is further made clear in this order that it takes effect from 13-12-2001. Factually speaking we are satisfied that the ACIT, Yamuna Nagar acquired jurisdiction to act as an Assessing Officer in the case of the assessee only with effect from 13-12-2001. With this background now we may proceed to consider as to whether the satisfaction note dated 15-3-2002 recorded by ACIT, Yamuna Nagar can be said to be the satisfaction as contemplated under section 158BD of the Act. 32.Firstly the said satisfaction is much after the date of assessment of undisclosed income in the case of the person searched i.e. 'dalal' and hence the same is belated. Such assessment has been completed on 21-5-2001 whereas this satisfaction has been recorded on 15-3-2002. Moreover on 15-3-2002. The ACIT, Yamuna Nagar could not be construed to be acting as an Assessing Officer of the person searched, i.e. 'dalal' qua t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it were to be so, then there is no rationale for the order dated 13-12-2001 (supra) issued by the competent income-tax authority whereby the ACIT, Yamuna Nagar has been authorized to exercise jurisdiction and perform the functions of an Assessing Officer under Chapter XIV-B of the Act with respect to the assessee. Ostensibly, the said order is governed by the statutory provisions provided in Chapter XIII-A and XIII-B of the Act. Thus, the revenue is not justified to argue that there was no Assessing Officer to whom the satisfaction along with the search material could be transmitted in terms of section 158BD and that the jurisdiction over the assessee under Chapter XIV-B automatically vested with the ACIT, Yamuna Nagar, i.e. Assessing Officer of 'dalal'. Thus the said plea does not help in the case of the revenue that the requirements of section 158BD stood complied. On the basis of the foregoing, we hold that the satisfaction note dated 15-3-2002, does not comply with the requirement of section 158BD of the Act. 33. In the face of the aforesaid, the learned DR made a spirited defence of the revenue's case in the following manner. According to the learned DR while finalizing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal course of business. Therefore, due cognizance is being taken separately in the case of lenders by initiating proceedings under Chapter XIV-B of the Income-tax Act, 1961." 34. We have examined the above contention raised on behalf of the revenue. A perusal of the aforesaid note shows that there is no averment or a finding by the Assessing Officer that the transactions which have been explained by the 'dalal' as belonging to certain persons are undisclosed transactions in the hands of the respective parties. Evidently there is nothing on record to show that any verification exercise was carried out by the assessing authority before recording the aforesaid satisfaction for the purpose of section 158BD. The only observation of the Assessing Officer is that the persons and concerns explained by 'dalal' are identifiable. The mere identity of the parties recorded in Annexure A-1 by itself does not imbibe those transactions with the nature of undisclosed since there is no collateral finding that the respective parties have not accounted for such transactions in their books of account. It has been vehemently canvassed that subsequently the ACIT, Yamuna Nagar by way of his communicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which have taken place through banking channels. It is thus submitted that Annexure A-1 was authentic and reflected true state of affairs. This aspect can at best provide a reason to the revenue to probe further and make deeper investigations to arrive at the true state of affairs. However, the same by itself cannot be enough to deduce that the transactions which are explained by 'dalal' construe undisclosed income of the other person contemplated under section 158BD i.e. the assessee before us. We, therefore, conclude that the aforesaid note does not fall within the parameters of section 158BD regarding recording of satisfaction. This vitiates the assumption of jurisdiction by the Assessing Officer by issue of notice under section 158BD of the Act dated 15-3-2002. 35. In addition to the above, we may also refer to the notice issued under section 158BD of the Act to the assessee which reads as under : "Notice under section 158BC read with section 158BD of the Income-tax Act. PAN NO. 35-A Office of the Asstt. Commissioner of Income-tax Yamuna Nagar Dated: 15-3-2002 To, M/s. Dasondhi Ram Kishan Chand Pansari Bazar, Jagadhri In pursuance of the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d casual manner in which notice under section 158BD has been issued in the instant case. As noted earlier the jurisdiction permitting the ACIT, Yamuna Nagar to exercise jurisdiction and perform functions of Assessing Officer in regard to the assessee was by way of an order dated 13-12-2001. This order is common order containing 133 names wherein Item No. 30 has been explained as that of the assessee. We have also reproduced the said entry at para 29 of our order elsewhere. The status of the assessee is mentioned therein as a 'firm' whereas admittedly the assessee in question is an 'individual' who has a proprietory concern by the name of M/s. Dasondhi Ram Kishan Chand. Coupled with the fact that the notice under section 158BD dated 15-3-2002 does not even specify the status of the assessee, it only shows a casual approach in which the jurisdiction under section 158BD has been sought to be assumed. Therefore, on the parity of reasoning which prevailed with the Hon'ble Supreme Court, we find it expedient to hold in the instant case that the impugned notice does not comply with the requirement of section 158BD of the Act. Thus proceedings initiated thereupon stand vitiated. 38. Consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereon thus, is rendered academic in nature. So however, rival parties have made submissions even with regard to the merits of the addition. In order to ensure completeness and in deference to the views of the parties, we proceed to evaluate the efficacy of the addition made by the Assessing Officer. The rival contentions in this regard have already been noted by us in the earlier paragraphs. 41. To recapitulate, a red bahi was seized on 14-9-1999 in the course of search on the Dalal which is referred to as Annexure A-1. This Annexure is in the form of a Diary containing amounts and names in abbreviated forms of digits and initials. The investigation conducted by the Revenue to demystify and comprehend the entries in the said Diary revealed that certain parties, including the assessee in question, had indulged in money lending transaction in cash, through 'dalal' claiming to be the broker. The manner in which the result of the investigations has been used by the Assessing Officer to make the addition has already been noted by us in the earlier portion of our order and the same is not being repeated for the sake of brevity. It is sufficient to note here that the inference drawn by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it becomes imperative to ensure its authenticity and correctness. According to the Revenue, the said Diary (Annexure A-1) has been maintained in the regular course of business by 'dalal' and can be equated to a book of account. Since it has been recovered during a search under section 132(1) of the Act, its contents carry the presumption under section 132(4A) and are to be taken as true and correct. 43. In our considered view the impugned evidence is not sufficient to charge the assessee with any tax liability. The test of regularity of recording of transactions cannot by itself be a guarantee regarding its correctness and trustworthiness. The probative value of such evidence is to be tested on the basis of an independent and corroborative evidence. The entries in the Diary, cannot be taken as correct and authentic without any corroborative evidence. The plea of the Revenue is that the entries in the Annexure which pertained to the transaction carried out through banking channels have been put to verifications and stand admitted by the respective parties. This aspect is stated to be a corroborative evidence regarding the correctness of the contents of the said Annexure. In our v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re A-1 could not be understood without the help of Dalal for it contained entries which were meaningful only to him. Therefore, the statement tendered by the Dalal regarding the entries which seek to implicate a third party i.e., the assessee, is required to be supported by an independent and corroborative evidence. At this stage we refer to the argument of the Ld. D.R. based on the decision of the Hon'ble Punjab & Haryana High Court in the case of R.P. Vashisht (supra). It is submitted that since the Annexure was found in the course of search it cannot be presumed that Dalal would have recorded the transaction in the name of the assessee for no rhyme or reason. Therefore, the entries made in such diary are presumed to be correct unless otherwise proved. We have carefully perused the above decision of the Hon'ble Punjab & Haryana High Court. The facts of the case were that an assessee 'S' was searched whereby certain loose slips were found relating to expenditure incurred by him for renovation of his ancestral house. The explanation of the assessee regarding the source to meet the expenditure was rejected. Addition was made, taking into account payments made by one 'L' from whom a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scribe himself. Therefore the only specific evidence i.e. meaningful and which requires scrutiny is in the shape of the statements of Dalal. This evidence is alone required to be scrutinized and evaluated as to whether it supports the inference drawn by the Assessing Officer that the assessee has indulged in transactions of money lending outside the books of account. 47. In this background we have scrutinized and examined the statements of the Dalal recorded by the Investigation Wing. Much has been argued by the rival representatives with regard to the veracity and admissibility of the statement given by Dalal. The Investigation Wing of the department through DDIT, Ambala has recorded statements of 'Dalal' on various dates viz. 14-9-1999, 30-9-1999, 2-11-1999, 4-11-1999 and 20-1-2000. The assessee has contended that the statement of 'Dalal' is unreliable and does not carry any evidentiary value. The revenue, on the other hand, has defended the authenticity and reliability of the statement tendered by Dalal. We have perused the statements which have been placed in the respective Paper-books filed by the assessee and revenue. We may briefly notice as under. In the statement reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dalal recorded on 20-1-2000. During this examination conducted by DDIT, Ambala he has given a long list of names running into 40-45 pages. He has identified the parties in the Annexure A-1 and provided the complete details, viz. names, addresses of the lenders, borrowers and the amounts transacted, etc. A significant aspect of the said statement is that he again confirmed that he was not involved in the actual transaction of money. For not having rendered the aforesaid explanation during previous occasions, he stated that after perusing the photocopies of Annexure A-1 he recalled the names of the parties. Further, 'Dalal' was also examined by the Assessing Officer in the course of the impugned assessment of the assessee and a copy of such statement has been placed at pages 161 to 163 of the Paper-book filed by the Revenue. We have also perused the same. It emerges from the examination of such statement that according to Dalal the assessee had indulged in money lending activity outside the books of account and claimed to have recorded so in the Annexure A-1. On being questioned for proof, he stated that he has no documentary or other evidence to support his statement. The position t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. This also supports the inference that the recording in Annexure A-1 are not on the basis of the first hand knowledge of Dalal. In other words, it can be safely deduced that the charge made out by 'Dalal' against the assessee is not on the basis of his personal knowledge. Under these circumstances we feel that the evidence brought on record by the Revenue does not carry its case any further. The evidence in question is not amenable to be taken as true and correct to implicate the assessee with any tax liability under Chapter XIV-B of the Act. 50. Much has been argued by the either parties regarding the manner of maintaining of Annexure A-1 by Dalal. The Revenue has contended that the said Annexure was maintained in the shape of a ledger and as a record of broking transactions and is maintained in the regular course of business and can be equated to be a book of account. The assessee contends that the said Diary cannot be equated to a book of account of any business. We do not find it necessary to go into this controversy as it does not help much to decide the question on hand. What is of relevance is to decide the evidentiary value and correctness of the Annexure, which we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce that the reasoning adumbrated in the said decision is only in the context of the wordings of the relevant sections of the Prevention of Corruption Act, 1988. Ostensibly such reasoning cannot be imported into the income-tax proceedings. It is a quite well settled proposition that the strict rules of evidence are not applicable to the income-tax proceedings. So therefore the principles laid down in the case of V.C. Shukla (supra) do not help in resolving the controversy before us. The principle that we have found useful to resolve the controversy before us has been discussed by us in elsewhere in our order. 51. We may also refer to the manner in which the evidence in the shape of Annexure A-1 has been considered by the assessing authority of 'dalal' from whose possession such evidence has been seized in the course of assessment finalized under section 158BC of the Act. We may also mention here that initially the order under section 158BC was passed by ACIT, Yamuna Nagar in the case of 'Dalal' on 21-5-2001 which was reviewed by the CIT under section 263 vide order dated 31-12-2003 and was quashed. Subsequently the assessment under section 158BC read with section 263 of the Act ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Examiner of Questioned Documents, Shimla regarding the Diary of 'Dalal'; and (ii) affidavit of 'Dalal' dated 27-10-2004. The learned DR has urged that the documents/evidence "go to the very root of the material" and the same ought to be admitted. The learned DR has argued that the evidence has bearing on the stand of Assessing Officer that the contents of the Diary are authentic. 54. On the other hand, the learned counsel appearing for the respondent assessee has opposed the prayer of the Revenue for admission of aforesaid additional evidence. The primary objection of the respondent is that in a case of assessment covered by Chapter XIV-B of the Act, it is not permissible for the Revenue to bring on record further evidence which the Assessing Officer collected post assessment against the assessee. The learned counsel has relied upon the decision of the Chandigarh Bench of the Tribunal in the case of R.K. Syal v. Asstt. CIT [IT Appeal No. 1165 (Chd.) of 1996, dated 16-11-1998]1. 55. We have considered the pleas made by both the parties with reference to the admissibility of the aforesaid additional evidence. We have also carefully perused the order of the Tribunal dated 16-11-199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod on the basis of whatever evidence is available within that period with the Assessing Officer and at the same time not being in a position to reopen the assessment, as provided in that Chapter so as to consider any further evidence collected against the assessee in his case or connected cases. However, the Tribunal is bound by the existing provisions of law and it cannot act in a way so as to supplement law or remove the lacunae, if any, therein. 3.5 In view of the foregoing position, the prayer of the department to admit the aforesaid evidence as additional evidence is turned down." 56. We find that the situation before us is akin to what was before the Tribunal in the case of R.K. Syal (supra). Moreover we find that the evidence in the shape of forensic report is dated 7-10-2004 and the affidavit of 'dalal' is dated 27-10-2004. Both these evidences were available with the Revenue even during the course of first appellate proceedings before the CIT(Appeals). The CIT(Appeals) has passed her order on 4-1-2005. There is no explanation or reason brought on record by the Revenue as to why such evidence could not be produced before the CIT(Appeals) specially when an opportunity wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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