TMI Blog2013 (7) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... uts of the pen drive being taken by illegal and unsafe process, without prescribed cyber forensic procedure make the evidence illegal, unreliable and having no evidentiary value. The reasons recorded for reopening on this basis of such pen drive and print out are not proper, therefore the reasons be quashed. The seizure memo of the pen drive by V.B. shows that the date of execution as 20.5.2007 whereas the statements of the two witnesses namely Shri Rakesh Kumar and Shri Gurcharan Singh ,DSP narrating the alleged story of seizure is dated 19.5.2007.i.e. one day in advance of the alleged search and seizure of pen drive. Thus the police search & recovery of pen drive itself suffers from fundamental defects which make the pen drive as not reliable evidence against assessee. The procedure followed as per the own version of the VB in the present case is a total infringement of relevant laws, negation of accepted norms and code of practices as laid down in the Evidence Act and the I.T. Act, 2000.The so called printouts are therefore unreliable and do not constitute admissible evidence in the eyes of law .The assessment made by the AO on the foundation of such non est material is devo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder suffers from violation of the principles of natural justice, not availability of relevant facts and non speaking order. The Learned Assessing Officer has merely and mechanically relied on the report/documents received from an external agency without conducting any independent enquiries, verifications and allowing the examination of material and cross examination and relevant evidence. - ITA Nos. 1891, 1892 & 1893/Del/2012, ITA No. 2757/Del/2012 - - - Dated:- 21-6-2013 - Shri R. P. Tolani And Shri Shamim Yahya, JJ. For the Petitioner : Shri Ashwani Kumar CA For the Respondent : Dr. Sudha Kumari CIT DR ORDER Per R. P. Tolani, J.M: 1. This is a set of 4 appeals - three appeals by the assessee for A.Y. 2001-02, 2002-03 2003-04 and one appeal by the Revenue for A.Y. 2003- 04, against CIT(A)-XXXI, New Delhi's respective orders dated 26-3-2012. 1.1. Summary of common grounds of appeals are as under: A: Challenging validityof 148 proceedings for all the years: 1. The alleged Pen drive is not an admissible evidence, therefore the recording of reasons and consequent 148 proceedings based on the reasons of such unreliable evidence are bad in law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of appellate proceedings and in respect of which an application under Rule 46A of the Income Tax Rules, 1962 was filed during the course of the appellate proceedings. (6) That the orders passed by CIT(A) are against law and facts on the file in as much as he was not justified to uphold additions of ₹ 16,91,08,420/- (for A.Y. 2001-02); ₹ 8,55,31,130/- (for A.Y. 2002-03); and ₹ 8,08,26,298/- (for A.Y. 2003-04). Without prejudice to assessee objections about reassessments being bad in law and alleged pen drive having no evidentiary value, ld CIT(A) erred in facts and in law in rejecting the contentions that proper effect should be given to notings in the pen drive and additions, if any, from such contents were to be made by arriving at the peak credit after:- (i) Working of the effect of peak by in a proper manner by considering opening balances, transfers and self withdrawals; (ii) Giving allowance for cash received against the opening debit balances of cash in hand as well as in the accounts of various persons/ parties; (iii) Considering the effect of cash withdrawn/ received and deposited/ advanced during the course of the year. 1.2. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - on which interest of ₹ 7,35,49, 141/- has also been paid and an amount of ₹ 84,86, 363/- has been shown as interest payable for this financial year. A perusal of the return reveals that the assessee has shown salary income from M/s Trans Air and M/s R.L Travels and income from house property on account of half share of N- 4, Janpath, New Delhi from M/s R.L Exports International and interest income from bank of Tikyo -Mitsubishi Ltd. and M/s Surya Kiran Textiles Pvt. Ltd. No balance sheet has been enclosed with the return of income As such, the assessee has no proprietary business in his name whose income has been shown in the return of income filed. These credits appearing in the pen drive and all these activities of money lending, etc., appearing from the printouts of the pen drive have not been disclosed in income tax return filed for the Asstt. Year 2001-02: The assessee has, therefore, not disclosed fully and truly all- material facts necessary for his assessment for this Asstt. Year and income chargeable to tax has been under assessed. Regarding .the statement of Sh. Chetan Gupta recorded on oath by ADIT(lnv.), Ludhiana dated 24.09.2007, whereby he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons for reopening the case are enclosed for your reference). I have been informed by the ACIT, Circle 3(1), Chandigarh that notice has been validly served on Shri Ved Prakash, accountant of Kiran Cinema (who also receives other notices of the concerned group concerns). The assessment is going to be barred by limitation on 31.12.2008. Therefore, you are hereby required to show cause why a sum of ₹ 40,49, 77,905/- on account of credits, ₹ 7,35,49,141/- on account of interest paid and ₹ 84,86,363/- on account of interest payable should not be added to your income as the above mentioned receipts are not declared in the return of AY 2001- 02 filed by you. Your reply may be reached before undersigned on or before 19.12.2008 at Room No. 361, ARA Centre, E-2, Jhandewalan Extension, New Delhi. In case of failure to avail the opportunity it may be assumed that you have nothing to say in this regard and case will be decided on merits Along with a letter was faxed to ACIT, Cir-3(1), Chandigarh regarding issue of notice u/s 148. ACIT, Cir-3(1), Chandigarh responded back through fax letter which is reproduced as: In this regard, you are informed that notice u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2.1. In the wake of these observations AO proceeded to make the reassessments by holding: (i) The reassessment proceedings were validly initiated by recording proper reasons; notices were properly issued u/s 148. (ii) Reassessments were framed properly and 143(2) notices were properly issued. (iii) The alleged Pen Drive and its print outs were valid and reliable evidence. (iv) Assessee was managing funds for others and serving as conduit for parking the moneys of big names. (v) All the entries in the Pen Drive were held to be undisclosed income of the assessee rejecting the claims of the assessee to correct mistakes, reduce contra entries and work out proper peak credit amounts. The contentions of the assessee that the same funds were demonstratively used repeatedly and rolled over many times, appropriate adjustments of opening balances noted in the pen drive were summarily rejected. 2.2. The AO thus made huge additions, same were challenged by assessee in first appeal. CIT(A) by and large upheld the findings of AO on jurisdiction as well as on merits, except giving some part relief based on some calculation mistake and double additions in AY 2002-03 for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the alleged 148 notice was served on Shri Ved Prakash The said Shree Ved Prakash is neither employee nor an authorized agent of the assessee. The admitted service of notice on said Shri Ved Prakash is neither legal nor tenable in terms of the requirements of the section 282(1) of Income Tax Act, 1961. (iii) Though this fact is accepted by AO in his remand report, however it has been assumed by the A.O. that Shree Ved Prakash is a responsible employee of Kiran Cinema owned by assessees wife therefore it is deemed to be a valid service on the assessee. AO further supports his assumption on the ground that different employees of Kiran Cinema have received the notices on behalf of the group entities which have been complied, therefore, this service on Ved Prakash it amounts to a proper service of 148 notice on assessee. (iv) The mere fact that Shri Ved Prakash is an employee of Kiran Cinema does not automatically make him an employee or authorized agent of the assessee for the purpose of receiving 148 notices from the Income Tax Department. (v) Thus it is admitted by the department that notice was issued on a wrong address and was served on said Ved Prakash claims it t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 362 (Gauhati)]; - CIT .v Salman Khan 2009-TIOL-731-HC-MUM -IT; - CWT v HUF of H.H Late JM Scindia [(2008) 300 ITR 193 (Bom)]; 3.5. It is pleaded that the reassessment for A.Y. 2001-02 being invalid for non-service of notices u/s 148 and 143(2) as prescribed by the law, the reassessment is liable to be quashed. III. On reasons for reopening on unreliable material and non existence of live link on unreliable material following is pleaded: a. Apropos the Evidentiary Value of alleged pen drive - ld. Counsel contends that the entire action of the Punjab Police (VB) is motivated by malafide intentions and the alleged pen drive, which is false and fabricated, has been illegally attributed the assessee. The conduct of VB is vitiated by contradictory and inconsistent statements before the judicial authorities. On the one hand the police filed an application before the trial court asking permission to make copies of the data of the Pen Drive and on the other hand the VB has itself admitted on oath before the Hon'ble Supreme Court in SLP No. 3477 of 2007 in case titled State vs. Capt. Amarinder Singh, that they have already accessed the data on the alleged Pen Drive, examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jurisdiction as per set prescribed norms based on principles of natural justice. As held by the Division Bench of Madras High court in V. Datchinamurthy v. Asst. Director of Inspection (Intelligence), I.T. Dept. [(1984) 149 ITR 341 (Mad)], the Income-tax Officer is within the limits assigned to him under the Act as an authority of exclusive jurisdiction for the purpose of assessment and are non adversarial in nature. Any proceedings or adjudication on same issue undertaken under other civil or criminal litigation is not ipso-facto binding on assessment in income tax. The Hon'ble Court for holding so has relied on the decision of the Supreme Court in Chhatrasinhji Kesarisinhji Thakore vs CIT (1966) 59 ITR 562 (SC). The Hon'ble Supreme Court has examined the powers and jurisdiction of the Income-tax Officer in relation to the assessment as compared with other statutory adjudications. (v) Where an assessee before the Income-tax Officer or other authorities under the Act denies the ownership of any document allegedly recovered from his possession by Police Authorities, it is not obligatory on such authorities to accept the police version without independent enquiry and ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusive. The AO confronted the assessee for the first time with the proposed addition of INR 40.49 crores on 12.12.2008 and handed over the alleged printouts on 19.12.2008 and immediately thereafter proceeded to pass the impugned order on 28.12.2008 making an addition of ₹ 30,59,91,360/-. In his anxiety to complete the time barring assessment, AO threw airay the principles of natural justice and denied proper opportunity to the assessee to properly defend his case and file evidence in his support. V. Police statements given by assessee can not be relied as evidence: 3.8. As regards the statements of the assessee recorded by the police, same are not admissible evidence u/s 25 and 26 of the Indian Evidence Act. Regarding the alleged pen drive , without prejudice to the claim of the assessee that no such pen drive has been recovered from the possession of the assessee on 20.5.2007 and that the alleged recovery is a mere frame up, the record of the case FIR No 5 of 2007 itself speaks about the bungling committed by the Vigilance Bureau as it establishes that no safeguards were even shown to be provided to ensure that the data as stood stored in the alleged pen drive was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en taken by the Delhi High Court in M/s Societe Des Products Nestles Anr. vs Essar Industries Ors. (delivered on 4.9.2006) following the Supreme Court judgment cited above. 3.12. Applying the statutory provisions of the I.T. Act 2000 as well as Evidence Act including section 65B and the interpretation thereof by the apex court and Delhi High Court as above. It is submitted that the printouts supplied by the VB have no sanctity value as evidence. Section 65B of the Evidence Act lays down the presumptions regarding the integrity and authenticity of electronic record. In the present case these presumptions do not apply since electronic record is not secure record in terms of section 16 of the IT Act, 2000 read with section 2(1)(ze) thereof. Electronic record in the pen drive which in handled or reproduced without the presence of witnesses is secondary evidence which in the instant case does not satisfy the condition as per section 63 of the Indian Evidence Act. The printouts do not fulfil the conditions as per section 63, and 65 B of the Evidence Act. Since there exist demonstrative discrepancies in the seizure of pen drive and its reported by police one day prior date of sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer are full of serious contradictions and glaring inconsistencies which are manifest on the face of the orders. At page 5 of the order for A.Y. 2- 001-02, the Assessing Officer states that During examination of the pen drive it emerges that Shri Chetan Gupta was administering the income/wealth of merely 148 persons which was kept with him . Thus according to assessing officer assessee was managing the funds for others, the police charge sheet filed by the VB also contains similar allegations. It is obvious from these observations of the AO that the money credited in the various accounts mentioned in the pen drive is not owned by the assessee and that he acts only as caretaker or administer of the funds kept with him by the said 148 persons. Thus the assessee's role becomes akin to a fund manager and applying this line of findings and commercial realities does not become owner of the funds, he could earn not more than 1-2% as fund management fees. 3.15. Despite such clear factual findings, AO takes a complete somersault and finally computes the income of the assessee by treating all the credits in the aforesaid accounts as undisclosed income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Col-5 Credit for debits not given : ₹ 27,44,40,888/- Col-6 Credit for opening debit balance not given: ₹ 6,63,46,242/- Total of (Col-2 to Col-6) : ₹ 48,95,98,013 Balance : Rs. (5,26,52,358/-) (58,43,000/- details are furnished to assessing officer -29-1-2008 pages 214- 245) 33.19. These items are explained in details as under: (i) While taking the credit balance of each account, opening credit balances have also been taken in case of some accounts resulting in a inflation of the amount (Rs. 8.98,632/-) (pages 207 to 212 of Paper Book) The Learned A O has given credit for double entries only for ₹ 3,19,67,750/- whereas the correct amount for giving credit for double entries should be ₹ 9,40,15,750/- ( pages 207 to 212 of Paper Book) 3.20. While computing the aggregate credit amounts, certain transfer entries on the credit side have also been considered as credit introduced. The said transfer entries are journal entries in which amounts have been transferred from one account to another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the AO's addition by ₹ 6,63,46,242/-. ( pages 207 to 212 of Paper Book). 3.23. It is pleaded that in order to determine the quantum of undisclosed income, sundry accounts can not be seen in isolation; to come to a realistic assessment of quantum peak quantum is to be worked out by properly considering all the accounts tabulated on a global basis. By this methodology which is well accepted by estimations of peak workings by Income-tax authorities and courts, peak quantum of undisclosed income is to be worked out. This is so because once a person introduces money by financing a person and out of the same, if some part is received back and given to another person, the second introduction cannot be considered again as a fresh inflow of undisclosed income. In case of money in circulation only the initial credit can, if at all, be considered as unexplained money. Subsequent circulation/roll over of money cannot be again considered as the introduction of fresh undisclosed money as it is part of the earlier infusion. Each circulation or rollover cannot be repeatedly added and taxed as assessees undisclosed income. This statement has been prepared by assessee by posting day- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espectively. Thereby, the said payments i.e. debit entries in the various accounts, during the year, are to be reduced from the credit entries. However, no credit /benefit of the said debits has been given in the computation as given to the Appellant. Without such working the assessing officer's aggregation of undisclosed income is arbitrary and distorted. 3.28. Apropos Contra Entries - There are many contra entries in which one account is credited and other account is debited with the same amount on the same date, whereby no fresh cash credit has been introduced and are to be ignored. These represent journal entries in nature, however, in the computation, they have been treated as fresh credit amounts been taken as unexplained income. Thus there is no application of mind at all to the real nature of the entries in the pen drive. 3.29. Expenditure Income- There are entries in the nature of expenditure and income mostly in the shape of interest etc., which are either credited to interest account by debiting to the various parties' account or similarly, debited to interest account by crediting the parties with the same amount. Assessee being manager of funds the entri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f imagination can be considered again as a fresh introduction. In case of circulating or rolling over money only the initial credit can be considered as unexplained money and subsequent circulation/roll over being application of amount cannot be again considered as fresh money. The said details placed at pages 224 -268 of the paper Book have been prepared after posting on day to day basis reflecting each entry in the individual accounts as well as the related accounts. According to the above statement, the peak balance comes to ₹ 36,89,310/- worked out at page 224 of the Paper Book as on 09-04-2001 has not been adversely mentioned by lower authorities.. 3.33. With regard to the proposed addition of ₹ 42,01,86,595/- by AO an item wise analysis of the various mistakes and correction about the contents of the pen drive were furnished to the Ld Assessing Officer and CIT(A) which is furnished at pages 201-206 of the paper book and is as follows:- 1. Alleged credit introduced as per working Less: Mistakes to be corrected 42,03,25,775 2. Debit entries in the various accounts 21,10,58,083 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken as unexplained income. AO has given no credit for reutilization of funds; Opening Debit Balance; Contra entries etc. and the addition has been made at an arbitrary figure. 3.38. After taking into account the corrected entries at ₹ 4,45,34,727/-, assessee furnished details about peak working of the undisclosed income at ₹ 46,16,387/- as on 28.8.2002. The details thereof were furnished before AO and CIT(A) and are placed at PB 243 to 279 (page255). Thus for AY 2003-04 the peak undisclosed income can be worked at ₹ 46,16,387/-. The undisclosed income from AY 2002-03 i.e. ₹ 36,89,310/- being also available with the assessee and part of the pen drive is to be reduced. Thus the resultant undisclosed income for AY 2003-04 will work out to (46,16,38 -36,89,310) ₹ 9,27,077/-. 3.39. It is submitted by the ld counsel that the without prejudice to legal submissions, alternatively the quantum additions be restricted to the working placed on record which has not been adversely commented by lower authorities. The assessees propositions are based on well settled principles on proper estimation of quantum from incriminating documents which are regularly fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be is difficult to enumerate and indeed, from the nature of the enquiry, it is almost impossible to do so. In the end, they must be such as can lead to the firm conclusion that the assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars. It is needless to reiterate that in a penalty proceeding the burden remains on the revenue of proving the existence of material leading to that conclusion (ii) CIT v. K. S. M. Guruswamy Nadar and Sons (1984) 149 ITR 127 (Mad.) But in this case in addition to the bogus cash credit there is an addition towards suppression of profit. In such a case as this, when there are two additions, it is always open to the assessee to explain that the suppressed profits during the year has been brought in as cash credits and, therefore, one has to be telescoped into the other and there can be only one addition. (iii) CIT V. Singhal Industrial Corporation 303 ITR 225(Allahbad) 33 6. We have perused the order of the Tribunal and the authorities below. Perusal of the order of the Commissioner of Income-tax (Appeals) shows that Commissioner of Income-tax (Appeals) has sustained the addition of ₹ 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of chit fund and unrecorded advances. After giving complete details of the borrowings and reconciling the same with reference to other assets, the assessee proposed that in the case of the firm, addition to the tune of ₹ 19,39,888 might be retained over and above the sum added in partners' cases as per their declarations in respect of their contribution in chit funds. It would be contrary to the canons of law to tax the same amount twice, i.e. , as borrowings and as cost of assets. The borrowings were utilised to acquire the assets. Once the contention of the assessee, that the amount as reflected in the 'seized paper' represented borrowings of the assessee, was accepted, it would be proper to presume that such amount was utilised for the acquisition of assets found at the time of search (v) Sanjay Kumar Jain V. CIT 254 ITR 38 (Cal.) There is no dispute that the amount shown in GNP 15 pertains prior to 25th April, 1985 and the cash credits found in GNP 1, 2 and 3 relate to subsequent period. Therefore, prima facie assessee has a case that the amount of ₹ 41,54,000 is found in GNP 15 that could have been introduced as cash credits in GNP 1, 2 and 3 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dy. CIT(A) by order, dated 4th Nov., 1992, deleted the addition of ₹ 50,000 for the assessment year 1980-81. In view of this fact, the Tribunal deleted the addition of ₹ 6,720, the same being consequential to the main addition of ₹ 50,000. 4. Having considered the facts of both the cases, we are satisfied that no referable question arises from the order of the Tribunal. Both the reference applications being DB IT Ref. No. 43/1998 and DB IT Ref. No. 1/1998 are rejected. 3.40. Apropos addition of ₹ 9,21,200/- on account of payment of US $ 20,000 in South Korea, in AY 2007-08the ld. Counsel contends that: (1) The Appellant is not aware of any transaction of USD 20,000/- and the basis of the said allegation and source and evidence of the said information. The Appellant has not done any payment or also is not aware of any transfer of USD 20,000/- to Mr Park Young Tae of South Korea as alleged in the reasons for reopening the case. (2) No opportunity was provided to the Appellant to cross examine Mr Park Young Tae regarding his statement before the Enforcement Directorates for the transfer of USD 20,000 by the Appellant thereby violating the principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s 292C as the contents of the pen drive have connection with the transactions of his concerns, bank accounts and financial dealings. Therefore the AO has properly recorded his satisfaction about income escaping assessment as the reasons recorded have live nexus with the contents mentioned in the pen drive and its print outs. Therefore the reasons are valid and issue of notice u/s 148 thereon is perfectly justified. (ii) Apropos the service of notice u/s 148 on the assessee for AY 2001-02 ld DR referred to the assessment record, remand report and letters received from the field about the service of notices u/s 148 and 143(2) which are as under: During the course of the appellate proceedings assessee has raised various issues. 1. The assessee has raised the issue that the notice u/s 148 has not been served upon him. The issue raised by the assessee is completely wrong. Notice u/s 148 was issued on 28-03-2008 and was served on Sh. Ved Prakash (Accountant) Kiran Cinema. Sector-22. Chandigarh on the same date; ,:It was the only available' address of the assessee i.e. C/o Kiran Cinema. Sector-22. Chandigarh. Sh. Ved Prakash who has been working as regular accountant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment. 3. Assessee has raised the issue with regard to validity of the approval granted u/s 151 by the Addl. Commissioner of Income Tax. A copy of the approval letter is annexed alongwith a remand report for your kind perusal. 4. The assessee has made details submission that the addition has not been done correctly. The contention of the assessee was looked at in detail during the course of assessment proceedings also and very little merit was found in it. In the assessment order Ld. A.O. has discussed in detail the working of peak credit and has point vise rejected the contentions of the assessee. The detailed working of peak credit has already been given in the assessment order and thus the addition heeds to be sustained on this account. In this regard, in order to authenticate that Sh. Ved Prakash, Accountant is a regular employee of Kiran Cinema, Sector-22, Chandigarh. It is submitted that notice u/s 148 has been issued and served on the address of Smt. Vandana Gupta, Kiran Cinema, Sector-22, Chandigarh. Smt. Vandana Gupta is the wife of Sh. Chetan Gupta. AO Chandigarh already held that all notice pertaining to address C/o Jagat Theatre, Sctor-17, Chandigrh were serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening debit balance the assertion of the appellant is not accepted as the appellant has not furnished any linking evidence that the amount shown as credit in the accounts was received out of debit opening balances in the respective accounts in various persons/ parties account. The appellant had denied maintaining other persons account therefore the benefit of opening debit balances cannot be given unless it owned up the contents as true. CIT (A)'s findings: Page 7 (d) The contention of the assessee to give credit for credit debit, could not be accepted since the assessee had denied from the beginning that he was maintaining the accounts of other persons and so the benefit of peak credit could not be given to the assessee. Assessee has not produced the confirmation from the persons that their accounts were maintained by assessee and that corresponding payments and receipts were made out of these accounts. Also relevant details/ confirmation of parties had not been filed. 4.4. Similar findings are there in the orders for AY 2002-03 and 03-04. 4.5. Ld CIT(DR) pleads that the burden to claim the benefit of such telescoping and peak credits is on the assessee. CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee for AY 2001-02 and if not so the effect thereof on the reassessment proceedings. Whether sec 292B cures such non service. (iv) Whether there is non service of notice u/s 143(2) also on the assessee for AY 2001-02 and the effect thereof. (v) Whether the alleged pen drive and its printouts are admissible evidence in income tax proceedings and can be used to make appropriate additions on the assessee. (vi) Whether the benefits of peak credit, set off or telescoping and the extent to which it can be given to the assessee in the facts and circumstances of the case. (vii) The above issues are to be examined on the basis of facts, circumstances and judicial precedents. 6.1. Coming to the first question set out by us above, it is apparent that many of the transactions recorded in the alleged pen drive belong to various concerns and bank accounts of the assessee. Thus prima facie the pen drive and its contents have a relationship with the assessee, the burden to disprove the same is on him. Assessee has raised various objections about the intentions and irregularities committed by Punjab Police while carrying out the search and seizure of the alleged pen drive and taki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Department went to serve the notice under section 148 for the assessment year 1995-96, the security guard informed them that the company was closed for Holi festival holidays. The security guard by no stretch of imagination can be said to be the agent of the assessee and admittedly no notice was tendered either to the assessee or his agent nor the same was refused either by the assessee or his agent. 23. Under order V, rule 17 of the Code of Civil Procedure, the affixation can be done only when the assessee or his agent refuses to sign the acknowledgement or could not be found. Here, in the present case, no effort was made by the Income-tax Department to serve the notice upon the assessee, since the company of the assessee was closed due to Holi festival holidays, and admittedly no effort was made by the Serving Officer to locate the assessee. 24. Even otherwise, as per order V, rule 19A of the Code of Civil Procedure, the notice sent by registered post ought to have been sent along with acknowledgement due but admittedly it was not sent along with acknow-ledgement due. 25. So, from the entire material available on record we have no hesitation in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conforms to the undisclosed income inferred by the authorities, there is no reason why the authorities should issue a notice under section 143(2). However, if an assessment is to be completed under section 143(3), read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of a notice under section 143(2) cannot be dispensed with. The other important feature that is required to be noticed is that the section 158BC(b ) specifically refers to some of the provisions of the Act which are required to be followed by the Assessing Officer while completing the block assessment under Chapter XIV-B. This legislation is by incorporation. This section even speaks of sub-sections which are to be followed by the Assessing Officer. Had the intention of the Legislature been to exclude the provisions of Chapter XIV, the Legislature would have or could have indicated that also. A reading of the provision would clearly indicate that if the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed agent, remains uncontroverted. Merely because he appeared in some other group entities will not detract the fact that notice was not served on assessee. During the course of reassessment AO was intimated about non service of notices u/s 148 and 143(2) but AO failed to take cognizance of assessee's intimation and objections. From the assessment record, remand reports, field correspondence and oral contentions, department could not demonstrate before us that notice u/s 148 was served on the assessee for A.Y. 2001-02. In view of these facts and circumstances and keeping in view the binding decisions of Hon'ble Delhi High Court in Hotline International and Hon'ble Supreme Court in the case of Hotel Blue Moon (supra) we are left with no choice but to respectfully follow them and hold that in the absence of a valid service of notice u/s 148 on the assessee the reassessment proceedings for AY2001-02 are bad in law, consequently they are quashed. 6.8. Since we have quashed the reassessment proceedings for AY 2001-02, we see no necessity to go into the other issues about service of notice u/s 143(2) and merits of additions for AY 2001-02. AYs 2002-03 03-04 6.9. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. print outs of pen drive is not being allowed to assessee. The assessment of undisclosed income is thus arbitrary and patently against the settled judicial propositions and departments own way of working in other survey, search or reassessment cases in which such principles are routinely applied. 6.13. We have heard both the parties on these issues at length most of the arguments are contained in the written submissions filed before lower authorities, which are mentioned above in brief. From AO's remand reports and observations contained in the orders ld. AO and CIT(A), the details furnished by assessee are as under: (i) Assessee filed details about each and every entry on day to day basis, these details are placed on paper book of respective year. (ii) From the details a summary of mistakes, opening balances (debit or credit as the case may be), contra entries etc is furnished to work out the correct amount of credits emerging from the print outs. (iii) These details are further supported by working of peak credit for each year from, which are filed by assessee. 6.14. Assessee claims to have submitted all these details before AO, who though gave some cursory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any observations are undesirable and may impinge on principles of natural justice. The departmental theory of assessee being a fund manager for others is supported by the fact that assessee filed complete day to day details and entry by entry details of contents of print outs available with the department. They all are part of the paper books. They were submitted before Assessing officer and CIT(A). Remand report was submitted by AO on CIT(A)'s initiative. 6.19. From the explanation of the entries and departmental theory, it emerges that assessee was working as the fund manger or administrator for others. While dealing with the issue this fact is to be kept in reckoning. 6.20. Presumption u/s 292C will not be applicable in this case as admittedly there was no search proceedings under income tax act on the assessee. A statutory presumption can be raised against assessee when the prescription of law warrants it. In the absence of enabling statutory provision such presumption can not be propped up against assessee. Since there was no search on assessee u/s 132 under income tax act, presumption u/s 292C can be applied to him. However the assessee case comes in the ken of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ball in the court of department by demonstrating from the details of entries that he manages the funds for others. In the course thereof he requests for necessary working of peak credit, correction of mistakes, contra entries and considering the claims of available opening balances. The claim of opening balances is made as the data recovered pertains to three years and assessees fund managing activities span to three years. Despite assessees diligence in filing all the details the authorities below fail to consider the assessee's objections and workings. In our considered view the facts and circumstances of the case and departmental theory warrant application of peak theory, telescoping, correction of mistakes and taking cognizance of journal/contra entries. In our view ratio of decisions in the cases of - Anantharam Veerasinghaiah Co. (supra); K.S.M. Guruswamy Nadar Sons (supra); Singhal Industrial Corpn. (supra); Kantilal Bros. (supra); Sanjay Kumar Jain (supra); Ishwardass Mutha (supra), support the assessee's case for peak credit and telescoping benefits. 6.25. In consideration of foregoings we have no hesitation to hold that assessee has discharged his prim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ung. This clearly violates the principles of natural justice embodied in the maxim audi alteram partem . We find merit in the argument of ld. Counsel. The impugned addition cannot be made in the hands of the assessee unless proper opportunity to defend himself against the allegation including the cross-examination of Mr. Young and the result of proceedings before the E.D. authorities are to be considered. This ground is set side restored back to the file of assessing officer to decide the same afresh in accordance with law. 9. Apropos the revenue's appeal for A.Y. 2002-03, regarding the properties sold by the assessee, the sale consideration has been received by the assessee through a registered sale deed. There is no allegation about violation of any circle rate or comparative sale instance. The purchaser of the property has not been examined so as to raise any doubt about any on money received by the assessee. In our view when a property is sold by a registered document, the addition cannot be made purely on the basis of a valuation report which is only in the nature of an opinion. CIT(A) while deleting the addition, has rightly relied on the Hon'ble Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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