TMI Blog2002 (8) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... e-requisite for applicability of the provisions of Chapter XIV-B. (ii) the provisions of section 132(9A) had not been complied with and the Assessing Officer had no jurisdiction to make the assessment, in view of non compliance of the mandatory provisions of the said section; (iii) no 'undisclosed income' was detected in course of search operations and the applicability of provisions of Chapter XIV are prima facie illegal. (iv) the notice dated 9-10-1997 under section 158BC, in purduance of which assessment have been made, is invalid being vague non specific and not in accordance with the provisions of law. 2. Because none of the following additions-- ------------------------------------------------------------------------------------------------ Sl.No. Asstt. yr. Rs. Particulars ------------------------------------------------------------------------------------------------ (a) 1997-98 25,45,055 Alleged unexplained invest ment in Gold ornaments weighing 5090.1 10 gms. out of stock found during the course of search. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 25 45,055) has been made in the assessment). 4.2 Because in any case, the onus law on the Department to prove the applicability of section 69 of the Act in the present case and such onus having not been undischarged, the addition of Rs. 25,45,055 is not maintainable. 5. Because, in view of the fact that- (a) the summons sent to customers had been duly served upon them which goes to prove genuineness of the persons and their identity; (b) the duly sworn in affidavits of the customers were filed in each case (c) through their personal appearances before the ld. Assessing Officer and they had duly owned their respective ornaments. the genuineness of transactions as entered in the books of account could not have been disputed and the additions made are illegal. 6. Because, other additions as are listed from Sl. Nos. (b) to (f) in ground No. 2 above are not maintainable even on facts as the appellant had submitted detailed reconciliation in relation to each and every item, duly supported by the documentary and other evidences. 7. Because the addition of Rs. 5,000 on account of deposit in SB Account of Ashok Kumar HUF is prima facie illegal: (a) as neit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details of the main assets found and seized and found but not seized are as under:-- ----------------------------------------------------------------------------------------------- "S.No. Items Found Seized Remarks ----------------------------------------------------------------------------------------------- 1. Cash 3,34,550 1,89,880 From business premises. (Rs. 1,89,880 + 1,26,520) = 3,16,400 18,150 Nil From residential premises 2. (i) Gold 7140 gms. Nil From business premises jewellery (gross weight) (ii) Gold 417 gms. Nil From residential premises jewellery (gross weight) and stones coins. 3. Silver jewellery 63.245 Kgs. From business residential coins silver Nil coins 222 -------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms. ------------- 2062.960 gms. ----------------------------------------------------------------------------------------------- Similar transaction has also been shown in the names of the following persons as mentioned in item No. 15 of Annexure 'A' of the Panchnama dated 3-11-1996: CHART B ----------------------------------------------------------------------------------------------- S. No. Name Address Date of receipt Weight of old ornaments ----------------------------------------------------------------------------------------------- 1 2 3 4 ----------------------------------------------------------------------------------------------- 1. Shri Govind Dhamnagar Varanasi. 30-9-1996 105.950 gms. 2. Shri Lalji, Hukulganj, VNS. 26-9-1996 113.650 gms. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrendered Rs. 1,89,880, but this figure was not included subsequently in the return filed. The Assessing Officer after considering the explanation of the assessee came to the conclusion that in Kachi Rokar Rs. 56,520. 1 Op. is available to the assessee as well as Rs. 50,000 withdrawn by Ashok Kumar on 26-10-1996 from the Bank. Thus, the Assessing Officer concluded that the assessee should be in possession of Rs. 1,06,520 only. The Assessing Officer further observed that the assessee has also failed to explain the cash amounting to Rs. 18,150 seized from the residential premises of Ashok Kumar and as such, held that unaccounted cash with the assessee firm as on the date of the search was Rs. 1,89,880 + Rs. 1,26,520 + Rs. 18,150 - Rs. 1,06,520 = Rs. 2,28,030 and made addition of this amount. Similarly, the Assessing Officer found silver ornaments silver coins, silver bricks and silver utensils in the premises of the assessee-firm and after considering the reply of the assessee made addition in a sum of Rs. 22,313, Rs. 30,208, Rs. 39,433 and Rs. 20,611 respectively on account of the above articles and treated the same as undisclosed investment. The Assessing Officer also during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the name and address of the customers, date of receipt of old ornaments, gross weight, receipt and delivery of the new ornaments and wages charged for these works, copy of the notice dated 29-10-1997 issued under sections 142(1) and 143(2) alongwith query letter issued by the ACIT, Central Circle-II, Varanasi after the change of the jurisdiction, copy of the assessee's letter dated 6-11-1997, furnished in compliance of the Assessing Officer's notice dated 29-10-1997, copies of the reconciliation statement pertaining to cash and gold and silver ornaments on 3-11-1996, copy of the assessee's letter dated 8-11-1997, copy of the balance sheet alongwith the assessment orders from assessment year 1994-95 to 199798, copy of the comparative chart of the job work receipts for making/ repairing of ornaments, copies of the cheque of Rs. 50,000 encashed on 23-10-1997, copy of the bill of ledger charges raised for job work, copies of the assessment orders of Smt. Ambika Devi. The ld. counsel for the assessee also filed supplementary paper book from pages 161 to 309 containing copy of the Panchnama dated 3-1-1996, copies of the relevant books of account and other documents where the old orna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. Atchaiah [1996] 218 ITR 239. The ld. counsel for the assessee also relied upon the order dated 31-7-2001 of the Income-tax Appellate Tribunal, Lucknow Bench in the case of Narendra Kumar Jain v. Dy. CIT [2001] 119 Taxman 213 (Mag.). 8. On the other hand, the ld. D.R. argued that there was no illegality in the search warrant. It is argued that as according to search warrant, issued under section 132(1), the residential premises of Ashok Kumar and business premises of the assessee-firm was searched though warrant of search was in the name of Ashok Kumar. The ld. D.R. was directed during the course of the argument to produce the original search warrant, which he has produced the same and we have perused the same. The search warrant was issued in the name of Ashok Kumar however, it was directed that the residential premises of Ashok Kumar and business premises of the firm M/s. Vishwanath Pd. Ashok Kumar be searched. Therefore, it is clear that there was no authorisation in the name of the assessee-firm and as such, there was no search warrant in the name of the assessee-firm. The ld. D.R. on the basis of the search warrant argued that though section 158BC is not applicable, but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D. The ld. counsel for the assessee relied upon the order of the ITAT Chandigarh Bench in the case of Ved Prakash Sanjay Kumar v. Asstt. CIT [2000] 66 TTJ (Chd.) 442. The order of the ITAT, Allahabad Bench in the matter of Dr. Ajay Kumar Agarwal v. Asstt. CIT [2001] 71 TTJ (All.) 445, the order of the Delhi Bench in the case of India Seed House Asstt. CIT [2000] TTJ (Delhi) 241, (Third member case) and the order of the ITAT, Delhi Bench in the matter of ITO v. Ashok Kumar Agrawal [1990] 38 TTJ (Delhi), 189, order of the ITAT, Allahabad Bench in the matter of Ashok Kumar Jaiswal v. ITO [IT Appeal No. 448 of 1988 dated 17-7-1992]. However, the ld. counsel for the assessee during the course of the argument fairly conceded that in view of the statement of the ld. D.R. that there was no search warrant in name of the assessee-firm, the order in the case of Narendra Kumar Jain of Lucknow Bench may not be applicable. The ld. D.R. however, argued that the Assessing Officer issued notice to all of them together after the search and as such the Assessing Officer was satisfied in proceeding under section 158BD. The ld. D.R. further argued that the Assessing Officer has legally proceeded agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable. The ld. counsel for the assessee has taken us to pages 177 to 206 in the paper book which are the copies of the seized documents, which shows that all the sale purchase of jewellery taken for remaking have been entered into the record, which was seized by the Department. The ld. counsel for the assessee has also taken us to page 64 of the paper book, which is t he reconciliation of the gold jewellery ornaments. The ld. counsel for the assessee has also taken us through various documents in the paper book to show that all the gold jewellery entered into the records prior to the search including the sale purchase etc. and comparative chart was submitted to the satisfaction of the Assessing Officer. According to him, the proceeding of the search was in the mid of the year and regular return was filed subsequently and no difference or defect was found therein would go to show that the assessee has entered all the gold jewellery before search and as such, it was not a case of block assessment. The ld. counsel for the assessee further argued that the cash was entirely reconciled from the books and the copy of reconciliation statement is filed at pages 59 60 of the paper book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase vouchers of the gold and these purchases have not been entered into the books of account maintained in the regular course of the business. The learned D.R. on a specific question asked by the Bench admitted that the purchases vouchers are not disputed. The ld. D.R. further argued that the order book was written from 3-4-1996 to 20-8-1996 and it has not recorded the source of purchases in the books and the D.R. further argued that all the new jewellery was found. The learned Departmental representative relied upon Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290 (Guj.) Dayachand v. CIT [2001] 250 ITR 327, CIT v. K.T.M.S. Mohammad [1997] 228 ITR 113, and Chuharmal v. CIT [1988] 172 ITR 250 SC and Dr. S.C. Gupta's case. The ld. D.R. further argued that no description of jewellery has been mentioned in the bills referred to above from pages 177 to 206. The learned D.R. further argued that the Assessing Officer has disbelieved all the persons who have given their old ornaments to the assessee for re-making and as such, the assessee has made up the theory after-thought. The ld. D.R. further argued that in the stock register the items given to the karigars have not been mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no equity could follow. The ld. counsel further argued that since ld. D.R. argued that all the gold jewellery were purchased and the same were not given for remaking would go to show that it was not a case of undisclosed income/investment as the ld. D.R. admitted this fact. The ld. counsel for the assessee argued that the Assessing Officer has made the addition at page 18 of the assessment order in respect of the gold weighing 5090.110 gms. on account of unaccounted stock. However, the ld. D.R. admitted that it was accounted for as purchases therefore we feel that the appeal of the assessee is liable to be allowed. The ld. counsel for the assessee further argued that all the vouchers from pages 177 to 206 in the paper book were seized by the Search Party and the same were entered into the books of account as well as in the Karigar register. The ld. counsel for the assessee further argued that the order book, karigar bahi, cash book etc. were seized in which all the entries in respect of which additions have been made have been shown. The ld. counsel for the assessee further argued that all the entries are made in the stock register which was also seized by the Search Party. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding to decide the merits of the appeal, we feel it appropriate to decide the above preliminary issue first. 12. Chapter XIV-B inserted by Finance Act, 1995 w.e.f. 1st July, 1995 provides special procedure for assessments in search cases. Section 158BC of the Income-tax Act provides special procedure for block assessment. Where any search has been conducted under section 132 of the Income-tax Act or books of account other documents or assets are requisitioned under section 132A of the Income-tax Act in the case of any person, the Assessing Officer shall serve a notice to such person requiring him to furnish within such time, not being less than 15 days and thereafter after providing opportunity and serving a notice shall pass the assessment order in respect of seized incriminating material recovered during the course of the search operation. However, another provision under section 158BD of the Income-tax Act provides procedure for the assessment in respect of undisclosed income of any person other than the person searched. It provides that where the Assessing Officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t what satisfaction is to be recorded by the Assessing Officer but the Act clearly provides that before proceedings under section 158BD the Assessing Officer who received the seized material and documents from the search party, shall have to be satisfied that any undisclosed income belongs to any person other than the person searched. The difference is created in these two provisions of law under the same chapter XIVB that it should be the objective satisfaction of the Assessing Officer and that satisfaction of the Assessing Officer has to be on the material found during the search and the Assessing Officer will have to identify that such seized material which reveals the undisclosed income of other person other than the person in whose case search has been made under section 132(1). In case under section 158BC the search is to be conducted on the basis of warrant of authorisation, which is issued by the different authorities like Director General or Director under section 132 in consequence of information in their possession and after recording the reasons to believe that any person would not produce the books of account or documents, unless search is conducted. Therefore, in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons against whom notices had been issued, had been transferred, were perfectly valid and the application of the provisions of Chapter XIVB was equally valid in their cases as well." However, with great respect, to the aforesaid judgment, the point of satisfaction has not been decided in this authority. Only validity of the notices were questioned. 14. The Income-tax Appellate Tribunal, Chandigarh Bench in the matter of Ved Prakash Sanjay Kumar, while dealing with the similar questions involved in this appeal as well as the question in case where the Assessing Officer is the same in the case of the person searched and such other person has held in the head note "Search and seizure-Block assessment-proceedings under section 158BD-Before proceeding against B under Chapter XIV-B on the basis of search made on A where the Assessing Officer conducting search and in possession of material seized is the same in the case of B, the Assessing Officer has to arrive at a positive and objective satisfaction on cogent material to be recorded in black and white, that the material seized in search of A disclose undisclosed income of B--In this case, on the basis of search at the residential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under section 158BC. Thus, the powers of the Assessing Officer under section 158BD cannot be invoked in a light and arbitrary manner and without complying with basic pre-requisites specified in section 158BD. We feel that the object underlying the provisions of section 158BD is not to give unbridled power to the Assessing Officer to proceed against any person without reaching satisfaction in an objective manner based on the cogent material/documents seized at the time of search. The satisfaction of the Assessing Officer is not a mere formality but it should be positive satisfaction that the seized material pertains to the other person and reveals undisclosed income of that other person. We feel that the provisions of section 158BD, incorporated in Chapter XIV B dealing with special procedure for assessment of search cases, have to be construed strictly, as the same provide a launching pad for the Assessing Officer to assume jurisdiction and proceed against a person other than the searched person, so as to rope him within the provisions of Chapter XIV-B. We feel that the Assessing Officer has to make himself sure of the correctness of the seized documents by proper examinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the case of the assessee-firm. However, it was mentioned that the authorisation was issued under section 132 in the name of Shri Ashok Kumar only with directions to search the residential premises of Ashok Kumar and business premises of M/s. Vishwanath Pd. Ashok Kumar. Since there was no valid authorisation in the name of the assessee-firm, therefore, the provisions of section 158BC would not be applicable to the case of the assessee. The Hon'ble Delhi High Court in the matter of Ajit Jain has held:-- "Search and seizure-Block assessment-condition, precedent for block assessment valid search-Search can be made only in case of information which results in reason to believe that person in possession of money or other asset will not disclose it for income-tax purposes Intimation simpliciter by CBI that cash was found in the possession of individual--Individual having a reasonable explanation for such possession--No "information" for purposes of Section 132--Search based on such information and consequent block assessment were not valid Income-tax Act, sections 132, 158BC." It was further held: "The mere fact that the petitioner was in possession of the said amount could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ACIT, C.C.-II. Varanasi some time in the month of October, 1997. It appears that the authorities below have proceeded against the assessee firm under section 158BC instead of proceeding under section 158BD read with section 158BC, therefore, the authorities below have not cared to mention anywhere that the Assessing Officer was satisfied that any undisclosed income belongs to such other person other than the person who is searched under section 132 of the Income-tax Act. It is undisputed fact that the search material was never handed over to the ITO, Ward-4, Varanasi who was having jurisdiction over the assessee-firm. Therefore, there is no question of his satisfaction at all as required under section 158BD of the Income-tax Act. 16. We have perused the original assessment record, in which ACIT, C.C.-I, Varanasi on 7-7-1997 issued notice under section 158BC(a) against the assessee-firm and no satisfaction as required under section 158BD is found to have been mentioned. Similarly, in the block assessment order of Shri Ashok Kumar dated 27-11-1997, the same Assessing Officer, ACIT, CC-II, Varanasi has nowhere mentioned about this satisfaction about undisclosed income of other pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rting this Chapter was explained by the Finance Minister Dr. Manmohan Singh in his Budget Speech for 1995-96 in the following words:-- The searches conducted by the Income-tax Department are an important means of unearthing black money. However, undisclosed income has to be related to the different year in which income was earned and such assessments are unduly delayed. In order to make the procedure more effective, I am proposing a new scheme under which undisclosed income detected as a result of search shall be assessed separately at flat rate of 60%." 20. Section 158B(b), which is reproduced above, shows that briefly the following conditions must be satisfied, to treat income as 'undisclosed income' i.e., (1) It must be in the form of money, bullion, jewellery other valuable articles or things or should constitute income or property based on any entry in the books of account of transaction. (2) It should be clear that the assets or entry in the books represents income or property which have not been disclosed or would not have been disclosed for the purpose of this Act. 21. Section 158BA provides for assessment of undisclosed income as a result of search and section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income shall not be included in the block period are that: (1) where assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) of section 139 relates for any previous year has not expired. (2) such income or transaction relating to such income are recorded on or before the search. (3) and such recording are in the books of account or other documents maintained in the normal course relating to such previous year." Though block assessment period in the present appeal starts from the assessment years 1987-88, to 1997-98, yet the entire additions are made in the assessment year 1997-98, except of Rs. 1,02,300 in the assessment year 1996-97 in respect of unexplained income added substantively in the hands of the assessee of Smt. Ambika Devi. There is no dispute that first requirement is satisfied as search was conducted on 3-11-1996 and the previous year has not expired. Let us examine whether it is a case of undisclosed income or the assessee is entitled to the benefit of section 158BA(3) of the Income-tax Act. Unexplained investment in Gold Ornaments/Jewellery:-- 24. The Assessing Officer has dealt with this issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of their gold jewellery and also signature did not tally with the receipts. The ld. D.R. strongly supported the finding of the Assessing Officer. However, the ld. counsel for assessee objected to the same on the grounds which we have already incorporated above. We are not in agreement with the contention of the ld. D.R. The Assessing Officer at page 4 of the assessment order himself mentioned that gold jewellery weighing 5090.110 gms are recorded on the order book. The same is also recorded in item No. 2 of the Annexure 'A' of the Panchnama prepared at the time of search. The Assessing Officer himself admitted that the different gold jewellery of different weights have been found recorded against the names of 17 parties. The details have already been given above in this order. We fail to understand, the moment the Assessing Officer mentioned this fact in the assessment order that the gold jewellery is found mentioned in the records of the assessee and the books of account prior to the date of the search, how the same can be treated as undisclosed income. All the details of 17 parties who have handed over their gold ornaments for remaking were found mentioned in the records, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts maintained by the assessee in the normal course relating to the previous year. The same can never be termed as undisclosed income. The stock register as seized under the search operation found mentioning of the details of gold jewellery given to 11 karigars of 5090.110 gms. in respect of 17 customers. All vouchers of karigars were available and seized also. The payments to karigars entered in the books of account. In the regular assessment proceedings also, the same is assessed. In the earlier year also, the same job work is shown and accepted by the Department. The details are specifically mentioned in the paper book at page 176 showing the job work and dealings with the karigars prior to the search on 3-11-1996. All the details are entered into the records of the assessee. The aims and object of Chapter XIV-B was to un-earth the block money. Since the assessee has shown every dealing with the customers and further dealing with the karigars in its record prior to the search, therefore, it is unbelievable that any undisclosed income was discovered during the search operation. The very purpose of the Chapter XIV-B is frustrated in this case in view of the entries made in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rigars and has held:-- "The Department cannot capitalise merely by saying that the karigars were not available at the given address when their identity expressly stated by accepting other transactions with them. On a consideration of totality of facts and circumstances of the case, we hold that there is no justification whatsoever to treat the balance in the accounts of the karigars which go to make the aggregate of 3-3.937 kgs. of silver ornaments in the case of Ashok Kumar and 64.139 Kgs. in the case of M/s. Benaras Alankar Mandir as having not been proved." The addition was accordingly deleted, The judgment of Madras High Court in the case of K.T.M.S. Mahamood is distinguishable as in this case, the assessee has failed to prove that the cash does not belong to him. 26. The ld. D.R. also relied upon Chuharmal's case, in which also the assessee failed to discharge their burden and on the basis of section 110 of the Evidence Act, the case was decided against the assessee. The petition of the assessee was dismissed. The facts are clearly distinguishable. The ld. D.R. also relied upon the judgment of Allahabad High Court in the matter of Pushkar Narain Sarral v. CIT [1990] 183 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced which was mentioned in the kachi rokar and withdrawal from the bank and treated Rs. 2,28,030 as unexplained cash in the assessment year 1997-98 till the date of the search. The ld. counsel for the assessee has filed copy of the reconciliation of the cash till 3-11-1996 at pages 59 60 in the paper book. The Assessing Officer has accepted the details of the cash available upto 24-10-1996 in a sum of Rs. 56,520.1 Op. A further sum of Rs. 50,000 was believed to have been withdrawn on 26-10-1996. Thereafter in the cash reconciliation the assessee has shown cash sale of gold ornaments (150.300 gms.) in a sum of Rs. 82,316 on 1-11-1996 and on the same date, cash sale of silver in a sum of Rs. 4,508.50p. On that date, some petty cash was also recovered from M/s. Roopanjali Swarn Kala Kendra against sale and trade tax. Certain expenses are also shown. In the account on 2-11-1996 cash sale of gold ornaments (161.130 gms.) in a sum of Rs. 83,787.60p. is shown. The remaining small details are also mentioned with regard to the petty sales and cash recovered from M/s. Roopanjali Swarn Kala Kendra. The major items are the sales of gold ornaments in a sum of Rs. 82,316 and Rs. 83,787.60p. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is justified in drawing adverse inference--Held, no". 28. The Income-tax Appellate Tribunal, Delhi Bench in the case of Ashok Kumar Agrawal has held- "Where the cash recovered from the assessee's possession did in fact belong to his brother as evidenced by confirmation of the affidavits of the lending parties, ITO was not justified in treating the amount as income from undisclosed sources of the assessee." It was further held: "Suspicion, though a ground for scrutiny of evidence cannot be made the foundation of decision. Conjecture is not a substitute for legal proof. Suspicion, however, strong, cannot take the place of proof." Though Ashok Kumar, partner of the assessee-firm has surrendered cash of Rs. 1,89,880 in his initial statement on 3-11-1996 but in the same statement, Ashok Kumar partner has specifically stated that he was not sitting in the shop for the last ten days and therefore, he is not aware of the cash details. We have already stated above that though Ashok Kumar has surrendered cash of Rs. 1,89,880 but subsequently, Ashok Kumar had been able to explain the inflow and out flow of cash. The major difference was of the sales made on 1-11-1996 and 2-11-1996. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was fully reconciled. However, the Assessing Officer disbelieved as no purchase voucher was found at the time of search and no payment was made and no supporting evidence was found available. Similarly, addition was made in respect of silver brick in a sum of Rs. 39,433 as no evidence of silver brick taken on loan on 1-11-1996 from Smt. Radha Devi was found. Lastly, the addition of Rs. 20,611 was made in respect of silver ornaments as no supportive evidence was found. The Assessing Officer made ' the addition as no evidence to the so-called loan was found at the time of search. As far as silver ornaments are concerned, purchase bill is a document. The Assessing Officer failed to make any enquiry with regard to this purchase. Nothing is mentioned in the assessment order whether the Assessing Officer has made any enquiry from any of the dealers from whom the purchases are made by the assessee. The details of the bill were produced before the Assessing Officer. No reasons were given by the Assessing Officer that the assessee would not disclose some purchases in the return for the purpose of Income-tax Act which is a condition precedent to treat the same as undisclosed income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer made addition of Rs. 5,000 in the hands of the assessee, though it was found to have been deposited on different dates on 13-8-1996,14-8-1996 and 20-8-1996 in the Bank account in the name of Ashok Kumar (HUF) in Oriental Bank of Commerce. The Assessing Officer did not find any evidence that this amount belongs to the assessee-firm. The Assessing Officer on the same reasons did not make addition in respect of the Bank Account of Smt. Vimla Devi and Gajendra Kumar. In the case of these persons, the Bank Pass Book was found at the time of search in the business premises of the assessee in respect of Smt. Vimla Devi and Gajendra Kumar. The assessee explained that the Bank Account did not belong to the assessee-firm and as such, the Assessing Officer did not take any adverse view against the assessee and did not make any addition in the hands of the assessee-firm. On the same reasons, the Assessing Officer should have believed the statements of the assessee. In the case of Ashok Kumar (HUF), it is very clear that the account did not belong to the assessee firm. No evidence is found that the assessee-firm has deposited this amount in the account of Ashok Kumar (HUF). Admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-firm in the block assessment about the protective assessment in the hands of Smt Ambika Devi. The entire addition is illegal and without any basis and is liable to be set aside. The same cannot be termed as "Undisclosed Income" in the block assessment. The addition made on this issue is accordingly deleted. 32. The parties have referred to certain other judgments which we have mentioned in order but, in view of above findings the same are not discussed. Even otherwise, same are clearly distinguishable on facts. No other point is argued or pressed by the parties. In view of the above findings, we hold: (i) Notice under section 158BC dated 7-7-1997 and resultant proceedings are illegal and void. (ii) No 'Undisclosed Income' detected in this case. The case of the assessee falls under section 158BA(3) and CBDT Circular No. 717 dated 14-8-1995. Keeping in view the above discussion, the findings on all issues, C.B.D.T. Circular and the authorities referred to above, we set aside and quash the impugned assessment order dated 27-11-1997 on preliminary issues as well as on merits. 33. As a result, the appeal of the assessee is allowed. - - TaxTMI - TMITax - Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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