TMI Blog2007 (6) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the recording of satisfaction is the assessment in the case of dalal had been computed on an anterior date. On this count also we are of the opinion that the said satisfaction note does not comply with the requirements of section 158BD of the Act. The mechanics of section 158BD are governed by the provisions contained therein and section 158BG only comes into play only when the order of assessment is required to be made in the case of a person covered under Chapter XIV-B of the Act. Therefore, the inference of the revenue that the assessing authority in the case of the assessee is to be understood as ACIT, Yamuna Nagar automatically is not justified. If it were to be so, then there is no rationale for the order dated 13-12-2001 issued by the competent income-tax authority whereby the ACIT, Yamuna Nagar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roborative 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 view, the verifiability and subsequent confirmation of the bank transactions, can at best be viewed as proof of reliability of such entries alone and not to the other entries in the said Annexure. Moreover, this evidence does not corroborate the entries against the assessee. This is for the reason that factually it is admitted by the Revenue that none of the bank entries pertain to the assessee in question. Therefore, the evidence regarding the verifiability of bank entries do not corroborate Annexure A-1 against the assessee. The stand of the Assessing Officer was corroborated by the material found during the search of a third party. Such material showed payments to assessee for illegal gratification. This corroborative evidence supported the case of the Revenue against the assessee and it was in this context the observation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t neither the money was exchanged through him and nor was he a witness to the exchange of money. He categorically confirmed that the money was transacted by the parties amongst themselves without his knowledge. He claimed that his role was merely to bring together the party in need of money with the party who was willing to lend. From the aforesaid it emerges that the said evidence does not justify an inference that any transactions in cash have indeed taken place. Firstly, the parties ( i.e., the lender and borrower) named by Dalal have denied having undertaken any such transactions. Secondly Dalal himself also does not admit of having either witnessed the cash transaction or of having transacted it himself. In the face of this, it cannot be established that the transactions as narrated by Dalal ever took place. In the absence of any such evidence, the correctness of entries in Annexure A-1 cannot be established. After all the entries in the Annexure A-1 can be considered as corroborated only once the direct evidence of the person who is said to have made the payments or the direct evidence of a person who is said to have witnessed the exchange of payment is available on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties before us that the facts and circumstances which have culminated in passing of block assessments under Chapter XIV-B of the Act on all the assessees spring from a singular action of search under section 132(1) carried out by the Revenue and therefore the 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 assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do- -do- -do- -do- 3-6-1999 1,00,000 -do- -do- -do- Sadhu Ram Khub Chand 10-1-1999 20,000 -do- -do- -do- -do- 10-4-1999 20,000 -do- -do- -do- -do- 10-7-1999 20,000 -do- -do- -do- Seeta Sewa 9-2-1999 50,000 -do- -do- -do- -do- 9-5-1999 50,000 -do- 9 -do- Ghansham Sandeep 28-2-1999 1,00,000 -do- -do- -do- -do- 28-5-1999 1,00,000 4. The Assessing Officer 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 fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those transactions which were carried out through bank and which stood verified, the CIT (Appeals) came to a finding that the Assessing Officer in the instant case has not established that any of the transactions in question were carried out by the assessee through bank. Therefore according to him the said plea could not be utilized against the assessee in this case. Against the deletion of addition by the CIT (Appeals), the Revenue has come in appeal before the Tribunal. 5. On the issue of the merits of the addition, we have heard lengthy arguments of the rival parties vis- -vis the Grounds of appeal preferred by the Revenue. The sum and substance of the argument advanced 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l corroborated the fact that Nand Lal Group was indulging in lending and borrowing of money outside the books of account. Therefore, its authenticity and evidentiary value in relation to other transactions also stood established. 9. Assailing the order of the CIT(Appeals) that there was no corroborative evidence with the Revenue, the learned DR pointed out that the CIT(Appeals) has not specified as to what kind of evidence is required to corroborate the inference drawn by the Assessing Officer. Reiterating that the Annexure A-1 has been duly explained by dalal and having found that the same was maintained by him in the regular course of carrying on normal business, the entries contained 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reliance placed by the CIT(Appeals) on various case laws. With regard to the decision of Supreme Court in the case of CBI v. V.C.Shukla [1998] 3 SCC 410, it is submitted that the said decision has been rendered in a different context. The said decision was in relation to criminal proceedings under the Prevention of Corruption Act, 1988. According to her the technical rules of law of evidence do not apply to the income-tax proceedings and for that matter referred to the Third Member decision of the Tribunal in the case of Khopade Kisanrao Manikrao v. Asstt. CIT [2000] 74 ITD 25 (Pune). According to her the rigors of the Evidence Act which has been applied in the case of V.C. Shukla ( supra ) with respect to criminal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Annexure A-1, was unassailable and justifiable on facts. The learned counsel pointed out that the CIT(Appeals), after examining the entire material on record reached a finding that the Revenue had not found any paper or document which could prove the stand of the Assessing Officer against the assessee whereas the assessee had filed confirmations from the parties who had denied borrowing of money from the assessee. Coming to the arguments made by the learned DR it is submitted that the entire case of the Revenue is on the basis of the statement of dalal dated 20-1-2000 with respect to entries found to be recorded in Annexure A-1 seized from him. In this connection it is submitted that the said statement is unreliable. According to the learned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a statement recorded on 30-9-1999 (page 87 of the paper book) in reply to a question stated that he was not aware as to which party had advanced the money and which party had borrowed since his task was only to arrange a meeting of the parties. Thus, the dalal was not even aware of the modus operandi between the parties implicated by him. It is vehemently argued that dalal has admitted that the money lending transactions alleged to be contained in the Annexure A-1 were neither actually transacted through him and nor took place in his presence. It was submitted that in statement recorded on 2-11-1999 (page 92 of the Paper Book) the dalal was confronted with two receipts which were found from his house with respect to money lending. The learned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by dalal regarding the names, amounts and nature of transactions have to be read in the context of pressure on him to escape from the rigors of the material found from him in the course of search. The learned counsel pointed out that in all the previous statements recorded right from the date of search i.e . 14-9-1999, dalal consistently maintained that he does not know the name of the persons written in the seized documents and was also not aware as to who were the borrowers and the lenders and as to what was the nature of transactions. It is, therefore, inexplicable that all of a sudden a person with such mental position gives details with regard to Annexure A-1 in a single sitting as can be seen from the statement dated 20-1-2000. In connection with the veracity 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 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of business. In this connection, it is pointed out that the bahi is not maintained in a chronological manner and in fact is replete with extrapolations; it contains certain dates which are even subsequent to the date of search. In this connection our attention was invited to page 2 of the assessment order wherein entries alleged to be belonging to the assessee as contained in the bahi have been enumerated. Evidently the alleged entries are not in a chronological order it was contended that the seized document cannot be said to be a record maintained in the regular course of business. It is reiterated that insofar as the assessee is concerned, there is no corroborative evidence available with the Revenue that the entries alleged to have been explained by dalal as belonging to 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 DD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of this Tribunal in the case of Napar Drugs (P.) Ltd. v. Dy. CIT [2006] 98 ITD 285 (Delhi)(TM). The learned DR also relied upon the decision of the Hon ble Punjab Haryana High Court in the case of R.P. Vashisht v. Dy. CIT [IT Appeal No. 333 of 2006, order dated 5-9-2006] 1 to point out that the strict rules of evidence as contemplated under criminal proceedings cannot be applied in the same manner to the income-tax proceedings. That therefore the evidence which has not been construed to be good evidence in the case of V.C. Shukla ( supra ) because of the specific provisions of the Prevention of Corruption Act cannot be so rejected in the income-tax proceedings. 18. Regarding the order of Income-tax Settlement Commission in the case of Nand Lal Group of cases, the learned DR submitted that 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. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 158BD. The learned counsel pointed out that the statements of dalal are liable to be ignored inasmuch as they have been recorded by the DDIT without authority of law. For this proposition reliance was placed on the decision of Mumbai Bench of the Tribunal in the case of Mukund V. Kapadia v. ITO [2002] 82 ITD 489. It is submitted that a DDIT can record a statement under the power of section 131(1A) of the Act but only before taking action under clauses ( i ) to ( v ) of section 132(1), therefore the statement recorded post search ( i.e . after 14-9-1999) on 30-9-1999, 2-11-1999, 4-11-1999 and 20-1-2000 are without authority of law. In fact, consequent to the search on dalal , which stood concluded on 14-9-1999 itself, the DDIT could not invoke section 132(4) to record the statement of the dalal . Thus the statements which have been 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer was satisfied that certain undisclosed income belonged to the assessee. The learned DR also pointed out that in the instant case the Assessing Officer having jurisdiction over the person searched and the assessee is same. Therefore, the requirement of recording the satisfaction and transmission of relevant materials by the Assessing Officer of the person searched to the Assessing Officer of the other person stood complied with. The learned DR also made a reference to the commentary Law of Income-tax by Sampath Iyengar at pages 8687-8688. According to the learned DR, the wording of section 158BD contemplated only a situation where the Assessing Officer of the searched person and the other person are different, whereas the situation herein is different. In this connection in nutshell the stand of the Revenue is that the jurisdiction in this connection has been correctly 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 Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he salient features of the special procedure are that the undisclosed income of a person is assessed as income of the block period consisting of 10 previous years prior to the previous year in which the search was conducted and also the period of current previous year upto the date of search; that the undisclosed income of the block period is taxed at a flat rate of 60 per cent which is higher than the normal rate of taxation. It is pertinent to understand that an assessment under Chapter XIV-B results in taxation of undisclosed income at a rate higher than the normal rates of taxation. The underlying grain in Chapter XIV-B, as is evident from the text of the relevant provisions contained therein, is the emergence of undisclosed income as a result of a search under section 132 or a requisition under section 132A of the Act. The existence of a search action under section 132 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 subjecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther person; and ( iii )thereupon the Assessing Officer of such other person shall proceed against such other person and provisions of Chapter XIV-A shall apply accordingly. 23. The nature of the provisions of section 158BD has been the considered by the Hon ble Apex Court in the case of Manish Maheshwari ( supra ). The Hon ble Apex Court held that before Chapter XIV-B could be invoked against a person other than a person who is put to search under section 132 or a requisition under section 132A, the conditions prescribed under section 158BD are required to be strictly complied with. The Hon ble Supreme Court has held that conditions precedent in such cases, for taking recourse of block assessment in terms of section 158BD require the Assessing Officer to record a satisfaction that any undisclosed income belongs to any person other than the person with respect to whom search is made under section 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 Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue to the contrary in this regard has to fail. Another argument linked with this aspect taken by the revenue was to the effect that in the instant case the Assessing Officer who has passed the assessment order in the case of the person with respect to whom search under section 132 has been carried out as well as in the case of the assessee ( i.e. a person not put to search under section 132 or requisition under section 132) is common namely ACIT, Yamuna Nagar and thus the said Assessing Officer could, as well issue the notice under section 158BD to the assessee, on 15-3-2002 without recording the necessary satisfaction. We will take up this plea of the revenue in detail a little later in our order. 24. Other aspects of section 158BD which are of relevance in the instant case are as follows. Firstly what is the nature of satisfaction contemplated under section 158BD. Secondly as to whether any time limit has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If we address the question as to what is the time limit for recording of satisfaction, in our view the answer to the said question would also result in an answer to the question as to what is the time limit for issuance of notice under section 158BD of the Act. The issue being inter-twined, we address the same together. As we have observed earlier, for making an assessment under Chapter XIV-B a search under section 132 or a requisition under section 132A of the Act is a sine qua non. Consequent to a search under section 132 or a requisition under section 132A, an Assessing Officer proceeds to frame the assessment of undisclosed income of such person under section 158BC of the Act. The definition of undisclosed income in clause ( b ) of section 158B read with section 158BB enables an inference that the Assessing Officer on the basis of the evidence found as a result of search or requisition of books of account or other documents and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 158BC of the person with respect to whom search is made under section 132 or a requisition is made under section 132A of the Act. Thus, the Assessing Officer at this point of time is expected to reach at the satisfaction contemplated under section 158BD to the effect that the search material contains an undisclosed income belonging to the person other than the person put to search under section 132 or put to requisition under section 132A. 26. We can examine this from another angle also. The authorized officer who carries out a search under section 132 or makes a requisition under section 132A is required to hand over the books of account or other documents, materials seized under section 132(1) or requisitioned under section 132A to the Assessing Officer of the person who is referred to in clause ( a ), ( b ) or ( c ) of section 132(1) of the Act i.e. the person who has been put to search or a requisition under section 132A of the Act. This is 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisitioned to the Assessing Officer having jurisdiction over such "other person". Such an Assessing Officer, after receipt of the material referred above, shall proceed to issue notice under section 158BD read with section 158BC requiring such person to file return of income for the block period of undisclosed income belonging to such "other person". Now a second situation could also be visualized. In this situation, after having initiated the proceedings of assessment under Chapter XIV-B in the case of a person put to search under section 132 or a requisition under section 132A, the Assessing Officer in the course such assessment examines the material and evidence found as a result of search and makes enquiries relatable to such evidence and acquires a satisfaction that an undisclosed income belongs to a person other than the person with respect to whom search was made under section 132 or a requisition under section 132A was made. Again at this stage, the 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment of search cases "cost effective, efficient and meaningful", the new Chapter XIV-B was introduced whereby procedure for assessment of undisclosed income determined as a result of search under section 132 or a requisition under section 132A was devised. With this background it clearly emerges that the Legislature intended the income-tax authorities to proceed to finalize the proceedings of assessment of search cases in an efficient and speedy manner. Can this objective be ensured if one were to infer that the satisfaction contemplated under section 158BD can be arrived at by the Assessing Officer any time, even after the completion of assessment of undisclosed income in the case of the searched person. Can there be a situation whereby a notice under section 158BD of the Act can be issued at any time ? The answer to our mind is clearly no . In fact we are conscious that the Legislature has not specifically put a time frame as to within what period 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 158BD of the Act. A bare reading of the section 158BD clearly shows that the such provisions can be invoked only in a situation where the Assessing Officer is satisfied that any undisclosed income belongs to a person other than the person with respect to whom search under section 132 or a requisition under section 132A has been made. The satisfaction so contemplated, as the bare provision itself shows, has to be formed on the basis of the books of account or other documents or any assets which have been subject to requisition under section 132A of the Act or material seized as a result of search under section 132 of the Act. The material before the Assessing Officer must throw up an undisclosed income and must also enable him to conclude that such undisclosed income belongs to a person other than the person with respect to whom search under section 132 or requisition under section 132A has been made. The satisfaction so contemplated under section 158BD, being 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, therefore, of utmost importance that the validity and the authenticity of the seized material must be ensured by the Assessing Officer before deducing therefrom that it depicts undisclosed income belonging to such other person. The objectivity of such proceedings, to be carried out by the Assessing Officer, cannot be over emphasized inasmuch as the same are justifiable in the Courts. Needless to say the action of the Assessing Officer is open to challenge by the assessee in the court of law and therefore unless the satisfaction is arrived at, by the Assessing Officer, on the basis of material before him, such satisfaction cannot be assumed. Any viola-tion or infirmity in the recording of satisfaction or non-adhering to the pre-requisites contained in section 158BD is an illegality which would vitiate the entire consequential proceedings. This clearly emerges from the reading of the judgment of the Apex Court in the case of Manish Maheshwari ( supra ). 29. Now with the aforesaid 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded not later than the date of finalization of assessment under section 158BC in the case of dalal i.e. 21-5-2001 and on this count, the satisfaction recorded on 15-3-2002 is belated. In this connection the assessee has further contested the claim of the Department that assessing authority of two persons was same at the relevant point of time. The learned counsel pointed out with reference to the material brought on record by the Department that jurisdiction of dalal was with ACIT, Yamuna Nagar whereas the assessee was being assessed by ITO, Yamuna Nagar as on 21-5-2001. We have been provided by the learned DR with an order dated 13-12-2001 issued by Joint Commissioner of Income-tax, Yamuna Nagar Range, Yamuna Nagar in exercise of powers conferred by sub-sections (1), (2) and (3) of section 120 read with the relevant notification which permits ACIT, Yamuna Nagar to exercise jurisdiction and perform functions of Assessing Officer in respect of persons mentioned in the Annexure to the 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by an Assessing Officer not below the rank of an Assistant Commissioner or a Dy. Commissioner, as the case may be. The said section does not invest the authorities mentioned therein with jurisdiction over a person, which is dealt with by separate provisions but merely identifies the authorities competent to pass a block assessment order. In this context we are of the view that the Assessing Officer of dalal after recording satisfaction contemplated under section 158BD within the period of limitation ought to have transmitted such satisfaction along with the search material to then existing Assessing Officer of the assessee i.e. I.T.O. Ward-1, Yamuna Nagar. The mechanics of section 158BD are governed by the provisions contained therein and section 158BG only comes into play only when the order of assessment is required to be made in the case of a person covered under Chapter XIV-B of the Act. Therefore, the inference of the revenue that the assessing authority in the case of the assessee is to be understood as ACIT, Yamuna Nagar automatically is not justified. If it were to be so, then there is no rationale for the order dated 13-12-2001 ( supra ) issued by the competent income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave denied having ever lent or borrowed any money through the assessee (Shri Anil Dalal) and have also denied any connection or involvement with him. The issue of entries depicting advancing of loans by various persons as figuring in A-1/and other related documents has been examined in detail. On the basis of details, almost all the persons and concerns are identifiable except in the case of three accounts mentioned above. No real names relating to the family of Shri Nand Lal Garg and his sons could be identified and discovered. Therefore, cognizance of these entries on protective basis has been taken in the case of the assessee keeping in view the fact that block search assessment of Shri Nand Lal Garg and his sons are pending with Hon ble Settlement Commission. As regards entries of other persons and concerns no adverse inference is taken in the case of the assessee as these persons are identifiable. Moreover, in view of the fact that Shri Anil Kumar Goyal was a broker in the money lending business and document marked as A-1 has been maintained by him in the regular and normal course of business. Therefore, due cognizance is being taken separately in the case of lenders b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 158BD. Notwithstanding the aforesaid, we are also satisfied that on the basis of material available with the Assessing Officer of dalal as on the date of said note, it could not be deduced that the transactions in Annexure A-1 reflected undisclosed income of the assessee so as to justify the invoking of section 158BD of the Act. The quality of evidence available with the Assessing Officer does not justify any satisfaction regarding existence of the undisclosed income or even the identification of such other person contemplated under section 158BD. The only basis was the statement of dalal and no further. On an overall consideration of the material on record, we are satisfied that the office note dated 21-5-2001, although is within the period of limitation, however the same cannot be considered as a valid satisfaction contemplated under section 158BD of the Act. In fact it has been vehemently argued by the learned DR that Annexure A-1 and the subsequent statement of dalal have been put to verification regarding the transactions of lending of certain parties other than the assessee which have taken place through banking channels. It is thus submitted that Annexure A-1 was au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court further observed that the notice did not contain any other information regarding the search. Such a notice, according to the Supreme Court, does not meet with the requirements of section 158BD. 36. We have carefully perused the notice under section 158BD issued in the instant case in the context of the infirmities which were the subject-matter of consideration by the Hon ble Supreme Court. We find that herein also the notice has been issued in a mechanical manner and does not even specify the status of the assessee and a standard form has been utilized. In the instant case there is not even a reference to the search under section 132 in connection with which the said notice has been purportedly issued. In the case before the Hon ble Supreme Court it was specifically observed that the notice contained a reference to the concerned search conducted. What we are trying to bring out is that the infirmities and shortcomings that have been noticed by the Hon ble Supreme Court in the notice issued under section 158BD are also very much prevalent in the notice issued under section 158BD in the instant case. 37. We may also make an observation regarding the ambivalent and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , no authority can confer upon itself jurisdiction which it otherwise does not possess. The existence of the jurisdictional fact is thus the sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction. If the jurisdictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of the jurisdictional fact , it can decide the fact in issue or adjudicatory fact . A wrong decision on a fact in issue or an adjudicatory fact would not make the decision of the authority without jurisdiction or vulnerable provided the essential or fundamental fact as to existence of jurisdiction is present." 39. Considered in the aforesaid context, as we have already deduced in the present case that the invoking of section 158BD is vitiated, we therefore are of the opinion that the subsequent assessment framed by the Assessing Officer vide order dated 19-3-2004 under section 158BD read with section 158BC is liable to be quashed as lacking in jurisdiction. We hold so. 40. Since the assessment stands quashed, the dispute regarding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been briefly put against the respective names and such figures do not carry any prefix of a symbol , volume or unit so as to understand whether the same are in thousands, lacs or any other denomination. The names of the parties are recorded in abbreviated form, short names, caste name, etc. The entries do not indicate the nature of transaction undertaken. Certain dates are also entered in the Annexure A-1 against the amounts or names but not in any chronological or intelligible manner. There are cuttings and over-writings also in the Annexure A-1. The entire edifice of the Revenue is built on the Annexure A-1, in fact on the entries made therein, which has been seized from Dalal and therefore it is incumbent to examine the truthfulness and reliability of such evidence. It is an established position that the Annexure A-1 is in the handwriting of dalal . Looking at the manner in which the Diary ( i.e . Annexure A-1) has been maintained, it is safe to deduce that the entries recorded therein are only within the exclusive knowledge of its scribe as to what and to whom do they pertain. Therefore, before such an evidence is considered to fasten any tax liability on third party, i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound, Annexure A-1 seized in the course of search from Dalal enables the Revenue to presume that its contents are true. So however, such presumption is available only against the person to whom it belongs, i.e ., against dalal and is a rebuttable presumption. The subsequent statements of Dalal, specially the statement dated 20-1-2000 has to be understood in the said light. Be that as it may, it is sufficient for us to notice that when this statement of Dalal is to be used against the assessee before us, it does not carry the strength of presumption envisaged under section 132(4A) regarding its truthfulness. Therefore, our observation in the earlier paragraph that the evidence in the shape of Annexure A-1 along with the statement of Dalal is admissible against the assessee only if it is supported by a corroborative evidence. Ostensibly there is no such evidence available with the Revenue which can establish that the entries in the Annexure A-1 represent honest and real transaction; so as to inform that the assessee actually transacted in money lending as per the entries recorded in Annexure A-1. 45. Another reason for us to highlight the importance of corroborative evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue against the assessee and it was in this context the observation of the Tribunal that the material seized from a third person during the search is presumed to be correct and such observations have been thereafter approved by the Hon ble High Court. Now insofar as the instant case is concerned, first of all nothing incriminating has been either found or seized from the assessee. The evidence and material in question belongs to and is found from a third person namely dalal . There is nothing to corroborate the contents of the same. As the facts show, in the instant case the situation stands on a totally different footing than it was in the case before the Hon ble High Court. In the instant case there is no material to corroborate the stand of the Assessing Officer against the assessee. Therefore, in our view the parity of reasoning which prevailed in the case of R.P. Vashisht ( supra ) cannot be applied in the present case. 46. Two specific evidences have been used by the revenue. First is the Diary ( i.e . Annexure A-1) and second is the statement of Dalal, the scribe of the Diary. Insofar as the Annexure A-1 is concerned, the entries recorded therein do not, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us, he stated that he could not identify as to which party was the borrower and which party was the lender. He further explained that the parties who borrowed and lent money used to transact amongst themselves and that he was not involved in the actual transaction of money. Again with regard to certain parties identified by the DDIT, whose names appeared in the Annexure A-1, he denied knowledge about their addresses. In a subsequent statement recorded on 2-11-1999 he explained that he used to earn brokerage for arranging a meeting of the parties. On 4-11-1999, his statement was again recorded. He was asked to explain the entries in Annexure A-1 and confirm whether the same were in a coded form. In reply he stated that whatever entries are there, it pertained to his Dalali income and no code has been used. The entries written are only rough calculations. Similarly in the statement recorded subsequently, he replied that he had never advanced any money himself and that the transaction was done by the parties themselves. He further stated that he used to write his commission in the ledger (Annexure A-1) and recorded the names of the lender and borrower as told by the concerned p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of having transacted it himself. In the face of this, it cannot be established that the transactions as narrated by Dalal ever took place. In the absence of any such evidence, the correctness of entries in Annexure A-1 cannot be established. After all the entries in the Annexure A-1 can be considered as corroborated only once the direct evidence of the person who is said to have made the payments or the direct evidence of a person who is said to have witnessed the exchange of payment is available on record. As the position stands before us there is no such evidence on record. Thus, there is no material on the basis of which it can be said that transaction in cash have been entered into by the assessee as recorded in the Annexure A-1. We, therefore are satisfied that the material and evidence brought on record by the Revenue is not sufficient to conclude that the assessee had indulged in money lending transactions in cash outside the books of account. 49. Further, in reply to another question, during cross examination done during the impugned assessment proceedings (refer page 162 of the Paper book filed by the Revenue) Dalal stated that the name of the parties in Annexure A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and payments was maintained by Jain in the diaries and files which were recovered during the course of a search by CBI. The issue was as to whether the entries in the diaries and files was an admissible evidence under sections 34, 10 and 17 of the Evidence Act, 1872. The decision of the Hon ble Supreme Court hinges on the provisions of section 34 of the Evidence Act, 1872. Section 34 of the Evidence Act deals with the relevance of the entries in the books of account. It provides that the entries in the books of account, "regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability". On facts, the diaries seized were held to be admissible as evidence under section 34 of the Evidence Act, 1872. However the Supreme Court noted that the truthfulness of the entries in the diaries was not proved by any independent evidence. Hence it was held that the prosecution could not prove its case. In this context the Hon ble Supreme Court examined the expressions "books of account", "course of business", and "regularly kept" as appearing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the borrower. Dalali income is shown on the receipt basis. In view of the above facts dalali income as shown by the assessee has not been interfered with." Evidently in the case of Dalal , no adverse view has been taken in the face of the denials by the borrowers regarding the commission income in the hands of Dalal . Curiously, similar denials of the parties have not found credence with the revenue and adverse inference against such parties i.e . the assessee before us, has been drawn. Evidently, such a contradictory approach from the side of the Revenue is untenable. 52. On the basis of the aforesaid discussion, therefore, the addition of Rs. 4,98,000 which has been deleted by the CIT(Appeals) is hereby affirmed. The revenue has, thus to fail in its appeal. 53. Before parting, we may also observe that the Revenue had moved an application dated 21-6-2006 signed by the Learned DR for admission of additional evidence with reference to the grounds of appeal raised by the Revenue. The learned DR referred to the provisions of Rule 29 of the Appellate Tribunal Rules, and submitted that the said evidence was collected after the completion of assessment in the case of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of admission of proposed evidence, the Tribunal will have to restore the matter to Assessing Officer for the reasons mentioned by learned DR i.e., to enable the assessee to meet the new facts as now found by Assessing Officer. Such a course of action will thus enable the department to consider the material collected in the case of third parties assessments, after completion of block assessment in the case of the assessee, which could normally have been done by the department by re-opening assessment under the normal provisions of the Income-tax Act, after issue of proper legal notice under section 148. As already mentioned, recourse to the provisions of section 148 is not contemplated under Chapter XIV-B relating to block assessments. Thus, it will be an attempt to bypass the existing provisions of Chapter XIV-B and achieve something indirectly which cannot be done directly under the existing provisions relating to block assessments. Such an attempt will be a colourable device to defeat the provisions enacted by the Legislature and the Tribunal obviously cannot subscribe or accede to the plea urged by learned DR to admit the said evidence. We do appreciate the constraint p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entical to those considered by us in IT(SS)/19/Chandi/05 and C.O. No. 58/Chandi/2005 respectively. Therefore, our decision in appeal of Revenue in IT(SS)/19/05 and Cross Objection of the assessee in C.O.No. 58/Chandi/2005 applies mutatis mutandis in other appeals and C.Os. also. 59. In the result all the appeals of the Revenue are dismissed and Cross Objections of the assessee stand allowed. 60. We may make a mention in IT(SS) No. 113/Chandi/05, an appeal of the Revenue against which no C.O. has been preferred by the assessee. In this case, although there is no C.O. preferred by the assessee, yet in terms of Rule 27 of the Appellate Tribunal Rules, 1963, the respondent assessee has raised the issue relating to validity of assumption of jurisdiction by the Assessing Officer issuance of notice under section 158BD of the Act. An assessee is entitled to defend the order of the CIT(Appeals) on any ground decided against him in terms of Rule 27 of the Appellate Tribunal Rules, 1963. The CIT(Appeals) has also decided the issue relating to validity of proceedings under section 158BD of the Act against the assessee. We, therefore, deem it fit and proper to consider the plea of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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