The Commissioner Of Income Tax v. M/S Mukta Metal Works

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.22 of 2008 Date of decision: 28.2.2011 The Commissioner of Income Tax Vs. M/s Mukta Metal Works. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTALHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Yogesh Putney, Sr.Standing Counselfor the appellant. for the appellant. Ms. Radhika Suri, Advocatefor the respondent. --- ADARSH KUMAR GOEL, J. 1.This appeal has been preferred by the revenue underSection 260-A of the Income Tax Act, 1961 (for short, “the Act”)against the order of the Income Tax Appellate Tribunal,Chandigarh in IT/SS No.37/Chandi/2005 and C.O. 71/Chandi/2005 for the block period ending on 14.9.1999 claiming followingsubstantial questions of law:- “1.Whether the Ld. Tribunal is right in holding atpage 68 of the order that the office note dated21.05.2001 which was appended to 158BC orderdated 21.5.2001 and is part of the said order, doesnot constitute a satisfaction note within the parameter of Section 158 BD of the Income Tax Act, 1961 inrespect of the person who has borrowed moneythrough the assessee broker who is the searchedperson for the purpose of order U/s 158 BC of theIncome Tax Act, 1961? 2.Whether the Ld. Tribunal is right in holding thatthe ACIT Circle, Yamuna Nagar ought to have handedover the seized material and satisfaction note to ITO,Ward-1, Yamuna Nagar without appreciating the factthat the ITO, Ward-1, Yamuna Nagar was not havingjurisdiction over the case, as an officer not below therank of Assistant Commissioner of Income Tax only iscompetent to pass an order u/s 158 BC/158BD of theIncome Tax Act, 1961 and since the ACIT YamunaNagar himself was granted jurisdiction as per orderdated 31.12.2001, there was no necessity to transferthe seized material/satisfaction note to ITO Ward-1? 3.Whether the Ld. Tribunal is right in holding thatthere has been delay in recording of satisfaction priorto issue of notice u/s 158 BD of the Act whereas theTribunal has itself observed that the satisfaction notedated 21.05.2001 referred to in Qus.No.1 above iswithin the period of limitation. And, when the statutehas not prescribed any time limitation for issue ofnotice u/s 158BD of the Act? 4.Whether the Ld. Tribunal is right in law indeleting the addition of Rs.3,17,500/- ignoringoverwhelming evidence in the shape of Annexure A-1and another documentary evidence in the shape ofstatement of the author of the document establishingthat these transactions relates to the assessee? 5.Whether the Ld. Tribunal is right in law in nottaking into cognizance of additional evidence i.e. an examination report/opinion of laboratory of theGovernment Examiner of Questioned Documents,Shimla regarding the Diary of Dalal & (ii) Affidavit ofDalal dated 27.10.2004, which was adduced duringthe proceedings before the Ld. Tribunal?” 4.Whether the Ld. Tribunal is right in law indeleting the addition of Rs.3,17,500/- ignoringoverwhelming evidence in the shape of Annexure A-1and another documentary evidence in the shape ofstatement of the author of the document establishingthat these transactions relates to the assessee? 5.Whether the Ld. Tribunal is right in law in nottaking into cognizance of additional evidence i.e. an examination report/opinion of laboratory of theGovernment Examiner of Questioned Documents,Shimla regarding the Diary of Dalal & (ii) Affidavit ofDalal dated 27.10.2004, which was adduced duringthe proceedings before the Ld. Tribunal?” 2.On 14.9.1999, search was carried out at theresidence of one Anil Kumar Goel @ Anil Dalal who was derivingincome from commission from the money lending business.During search, a bahi (diary), Annexure A-1, was seized. Thesame contained various entries in code language in figures andwords. His statement was recorded on 14.9.1999, 30.9.1999,2.11.1999, 4.11.1999 and was concluded on 20.1.2000. Thesubstance of his statement was that he was, inter-alia, doingbusiness of broker in money lending transactions betweenvarious parties. The lenders/borrowers contacted him and hewould arrange meetings between them. If the transactionmatured, he would get his commission and if he got commission,he made entries in the diary. The entries in the diary seizedrepresented commission received in transactions between partiesmentioned in the diary in code form which could be identified. Inhis case, block assessment was completed on 21.5.2001 and onthe said date, an office note was appended to the assessmentorder to the effect that undisclosed income of persons other thansearched persons was disclosed, as under:- “The issue of entries depicting advancing of loans byvarious persons as figuring in A-1/and other related documents has been examined in detail on the basisof details, almost all the persons and concerns areidentifiable except in the case of three accountsmentioned above. No real names relating to thefamily of Shri Nand Lal Garg and his sons could beidentified and discovered. Therefore, cognizance ofthese entries on protective basis has been taken inthe case of the assessee keeping in view the fact thatblock search assessment of Shri Nand Lal Garg andhis sons are pending with Hon’ble SettlementCommission. As regards entries of other persons areconcerned, no adverse inference is taken in the caseof the assessee as these persons are identifiable.Moreover, in view of the fact that Shri Anil KumarGoyal was a broker in the money lending businessand document marked as ‘A-1’ has been maintainedby him in the regular and normal course of business.Therefore, due cognizance is being taken separately,in the case of lenders by initiating proceedings underChapter XIV-B of the I.T.Act, 1961.” 3. Accordingly, proceedings under Section 158BD readwith Section 158BC of the Act were initiated against the assesseewho was identified as having lent money from undisclosedsources. The assessee filed return of its income dated30.12.2002 declaring undisclosed income at nil. However, theAssessing Officer assessed the undisclosed income at `3 lacsrelying upon the statement of Anil Dalal and the entries in the document found during the search, apart from `17,500/- asincome from interest thereon. 3. Accordingly, proceedings under Section 158BD readwith Section 158BC of the Act were initiated against the assesseewho was identified as having lent money from undisclosedsources. The assessee filed return of its income dated30.12.2002 declaring undisclosed income at nil. However, theAssessing Officer assessed the undisclosed income at `3 lacsrelying upon the statement of Anil Dalal and the entries in the document found during the search, apart from `17,500/- asincome from interest thereon. 4. On appeal, the addition was set aside by the CIT(A)on the ground that except the diary and the statement of thebroker, there was no other corroborative evidence and thelenders/borrowers mentioned in the diary denied the transactionsrecorded therein. Appeal of the department was dismissed by theTribunal. Cross-objections of the assessee on preliminary issue,of jurisdiction to initiate block assessment proceedings withoutproper satisfaction, was accepted by the Tribunal. The Tribunalrejected application of the revenue for additional evidence in theform of report of Government laboratory on the issue ofauthenticity of diary entries and affidavit of the searched person.The findings recorded by the Tribunal are as under:- -On the issue of validity of satisfaction: “33.We have examined the above contention raisedon behalf of the Revenue. A perusal of the aforesaidnote shows that there is no averment or a finding bythe assessing officer that the transactions which havebeen explained by the ‘dalal’ as belonging to certainpersons are undisclosed transactions in the hands ofthe respective parties. Evidently there is nothing onrecord to show that any verification exercise wascarried out by the assessing authority beforerecording the aforesaid satisfaction for the purpose ofSection 158BD. The only observation of theAssessing Officer is that the persons and concernedexplained by ‘dalal’ are identifiable. The mere identity of the parties recorded in Annexure A-1 by itself doesnot imbibe those transactions with the nature of“undisclosed” since there is no collateral finding thatthe respective parties have not accounted for suchtransactions in their books of account. It has beenvehemently canvassed that subsequently the ACIT,Yamuna Nagar by way of his communication dated28.12.2001 has confronted the said entries to theassessee in response to which the assessee, by wayof his communication dated 7-1-2002 has denied thesaid entries. It is further contended by the Revenuethat the requisite verification exercise has beencarried out by the Assessing Officer before issuanceof notice u/s 158BD of the Act on 15.3.2002. Be thatas it may, it is sufficient for us to deduce here that inorder to arrive at the satisfaction contemplated u/s158BD in this case the necessary investigation andculling out of the facts and information was required toprecede the recording of the satisfaction on21.5.2001. The material and information which cameto the knowledge of the Assessing Officer subsequentto the date of recording of satisfaction i.e. 21.5.2001is not relevant to decide the validity of the satisfactionrecorded on an anterior date. After examining theaforesaid note dated 21.5.2001 and the submissionsof the learned DR, we do not find any satisfactionemerging “that any undisclosed income belongs” to aperson other than the person in respect of whomsearch was made. Neither is there any identification ofany undisclosed income or transaction and nor isthere any identification of the ‘other person’contemplated u/s 158BD. Not withstanding theaforesaid, 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 deducedthat the transaction in Annexure A-1 reflectedundisclosed income of the assessee so as to justifythe invoking of Section 158BD of the Act. The qualityof evidence available with the A.O. does not justifyany satisfaction regarding existence of the undisputedincome or even the identification of such other personcontemplated u/s 158BD. The only basis was thestatement of ‘dalal’ and no further. On an overallconsideration of the material on record, we aresatisfied that the office note dated 21.5.2001,although is within the period of limitation, however thesame cannot be considered as a valid satisfactioncontemplated u/s 158BD of the Act. In fact is hasbeen vehemently argued by the learned DR thatAnnexure A-1 and the subsequent statement of ‘dalal’have been put to verification regarding thetransactions of lending of certain in parties other thanthe assessee which have taken place through bankingchannels. It is thus submitted that Annexure A-1 wasauthentic and reflected true state of affairs. Thisaspect can at best provide a reason to the Revenue toprobe further and make deeper investigations to arriveat the true state of affairs. However, the same byitself cannot be enough to deduce that thetransactions which are explained by ‘dalal’ construeundisclosed income of the other person contemplatedu/s 158BD i.e. the assessee before us. We therefore,conclude that the aforesaid note does not fall withinthe parameters of Section 158BD regarding recordingof satisfaction. This vitiates the assumption of jurisdiction by the A.O. by issue of notice u/s 158BDof the Act dated 15.3.2002. xxxxxxxxxx 37. We may also make an observation regarding theambivalent and casual manner in which notice u/s158BD has been issued in the instant case. As notedearlier the jurisdiction permitting the ACIT, YamunaNagar to exercise jurisdiction and perform functions ofAssessing Officer in regard to the assessee was byway of an order dated 13.12.2001. This order iscommon order containing 133 names wherein itemNo.30 has been explained as that of the assessee.We have also reproduced the said entry at para 29 ofour order elsewhere. The status of the assessee ismentioned therein as a ‘firm’ whereas admittedly theassessee in question is an ‘individual’ who has aproprietory concern by the name of M/s DasondhiRam Kishan Chand. Coupled with the fact the noticeu/s 158BD dated 15.3.2002 does not even specify thestatus of the assessee, it only shows a casualapproach in which the jurisdiction u/s 158BD hasbeen sought to be assumed. Therefore, on the parityof reasoning which prevailed with the Hon’bleSupreme Court, we find it expedient to hold in theinstant case that the impugned notice does notcomply with the requirement of Section 158BD of theAct. Thus proceedings initiated thereupon standvitiated. 38.Considering the entire facts and on the basis ofthe aforesaid discussion, we are of the opinion thatthe assumption of jurisdiction by the Assessing Officerby issuance of notice u/s 158BD dated 15.3.2002 isvitiated in law. As we have noted earlier the invoking of Section 158BD is a jurisdictional aspect and itsvalidity is critical to justify the subsequentproceedings…..” On merits:- 38.Considering the entire facts and on the basis ofthe aforesaid discussion, we are of the opinion thatthe assumption of jurisdiction by the Assessing Officerby issuance of notice u/s 158BD dated 15.3.2002 isvitiated in law. As we have noted earlier the invoking of Section 158BD is a jurisdictional aspect and itsvalidity is critical to justify the subsequentproceedings…..” On merits:- “48.From the aforesaid it emerges that the saidevidence does not justify an inference that anytransactions in cash have indeed taken place. Firstly,the parties (i.e. the lender and borrower) named bydalal have denied having undertaken any suchtransactions. Secondly Dalal himself also does notadmit of having either witnessed the cash transactionor of having transacted it himself. In the face of this, itcannot be established that the transactions asnarrated by ‘Dalal’ ever took place. In the absence ofany such evidence, the correctness of entries inAnnexure A-1 cannot be established. After all theentries in the Annexure A-1 can be considered ascorroborated only once the direct evidence of theperson who is said to have witnessed the exchange ofpayment is available on record. As the positionstands before us there is no such evidence on record.Thus there is no material on the basis of which it canbe said that transaction in cash have been enteredinto by the assessee as recorded in the Annexure A-1. We, therefore are satisfied that the material andevidence brought on record by the Revenue is notsufficient to conclude that the assessee had indulgedin money lending transactions in cash outside thebooks of account.49.Further, in reply to another question, duringcross examination done during the impugnedassessment proceedings (refer page 162 of the paper book filed by the Revenue) ‘Dalal’ stated that thename of the parties in Annexure A-1 are writing byhim as told by the parties who indulged in moneylending. This also supports the inference that therecording in Annexure A-1 are not on the basis of thefirst hand knowledge of ‘Dalal’. In other words, it canbe safely deduced that the charge made out by ‘Dalal’against the assessee is not on the basis of hispersonal knowledge. Under these circumstances, wefeel that the evidence brought on record by theRevenue does not carry its case any further. Theevidence in question is not amenable to be taken astrue and correct to implicate the assessee with anytax liability under Chapter XIV-B of the Act. 50.Much has been argued by the either partiesregarding the manner of maintaining of Annexure A-1by Dalal. The Revenue has contended that the saidannexure was maintained in the shape of a ledger andas a record of broking transactions and is maintainedin the regular course of business and can be equatedto be a book of account. The assessee contends thatthe said Diary cannot be equated to a book of accountof any business. We do not find it necessary to gointo this controversy as it does not help much todecide the question on hand. What is of relevance isto decide the evidentiary value and correctness of theAnnexure which we have already addressed in theearlier paragraphs. Similarly, much has been arguedby the either parties on the decision of the Hon’bleSupreme Court in the case of V.C. Shukla and others(Supra). The assessee has attempted to draw supportfrom it and CIT (Appeals) has also relied on itwhereas according to the Revenue the said decision is inapplicable to the facts of the present case. Wehave carefully perused the said decision. The Hon’bleSupreme Court was dealing with the case of theprosecution against various persons under section 7and 12 of the Prevention of Corruption Act, 1998 andSection 56 read with section 8 of the ForeignExchange Regulation Act, 1973. The allegation of theprosecution was that Jains entered into a criminalconspiracy amongst themselves, the object of whichwas to receive unaccounted money and to disbursethe same to various persons, including, V.C. Shuklaand others. In pursuance of the said conspiracy Jainlobbied with various public servants to persuade themto award contracts to different foreign bidders with themotive of getting illegal kickbacks from them. Anaccount of such receipts and payments wasmaintained by Jain in the diaries and files which wererecovered during the course of a search by CBI. Theissue was as to whether the entries in the diaries andfiles was an admissible evidence under section 34, 16& 17 of the Evidence Act, 1872. The decision of theHon’ble Supreme Court hinges on the provisions ofsection 34 of the Evidence Act, 1872. Section 34 ofthe Evidence Act deals with the relevance of theentries in the books of account. It provides the entriesin books of account, “regularly kept in the course ofbusiness, are relevant whenever they refer to a matterinto which the Court has to inquire, but suchstatements shall not alone be sufficient evidence tocharge any person with liability”. On facts, the diariesseized were held to be admissible as evidence undersection 34 of the Evidence Act, 1872. However, theSupreme Court noted that the truthfulness of the entries in the diaries was not proved by anyindependent evidence. Hence it was held that theprosecution could not prove its case. In this contextthe Hon’ble Supreme Court examined the expressions“books of account” “course of business” and “regularlykept” as appearing in section 34 of the Evidence Act,1872. The above discussion is sufficient to deducethat the reasoning adumbrated in the said decision isonly in the context of the wordings of the relevantsections of the Prevention of Corruption Act, 1988.Ostensibly such reasoning cannot be imported intothe income tax proceedings. It is a quite well settledproposition that the strict rules of evidence are notapplicable to the income tax proceedings. So,therefore, the principles laid down in the case of V.C.Shukla (Supra) do not help in resolving thecontroversy before us. The principle that we havefound useful to resolve the controversy before us hasbeen discussed by using elsewhere in our order. 51.We may also refer to the manner in which theevidence in the shape of Annexure A-1 has beenconsidered by the assessing authority of dalal fromwhose possession such evidence has been seized inthe course of assessing finalized u/s 158BC of theAct. We may also mention here that initially the orderu/s 158BC was passed by ACIT, Yamuna Nagar inthe case of dalal on 21.5.2001 which was reviewed bythe CIT u/s 263 vide order dated 31.12.2003 and wasquashed. Subsequently, the assessment u/s 158BCread with Section 263 of the Act has been finalized byACIT, Yamuna Nagar on 31.3.2004. We have perusedboth the assessments and find no dissimilarity in thetwo Annexure A-1 has been accorded by the Assessing Officer as explained by dalal which wehave already narrated in the earlier portion of ourorder. In the course of such assessmentproceedings, the Assessing Officer, by way of officenote No.4 recorded as under: Assessing Officer as explained by dalal which wehave already narrated in the earlier portion of ourorder. In the course of such assessmentproceedings, the Assessing Officer, by way of officenote No.4 recorded as under: “The assessee has shown its receipts fromDalali business at Rs.42115/- and Rs.32720/- for theassessment years 1999-2k and 2000-2001respectively. The assessee was confronted withfigures of dalali is estimated by the DDIT(Inv.) Ambalafrom D.No. The assessee has given the completedetail of dalali received by him as per this document.No adverse cognizance is drawn in view of the factthat most of the persons have denied having paid anydalali to the assessee. Moreover, brokerage wasbeing received from the borrowers only. None of thelenders whose statement were recorded hadadmittedly having paid any brokerage. The brokerageis charged only once that is at the time of advancingof loan by the lender to the borrower, Dalali income isshown on the receipt basis. In view of the above factsdalali income as shown by the assessee has not beeninterfered with.” Evidently in the case of dalal, noadverse view has been taken in the face of denials bythe borrowers regarding the commission income in thehands of ‘Dalal’ Curiously, similarly denials of theparties have not found credence with the Revenueand adverse inference against such parties i.e. theassessee before us, has been drawn. Evidently sucha contradictory approach from the side of theRevenue is untenable.” On the issue of additional evidence:- “53.Before parting, we may also observe that theRevenue has moved an application dated 21.6.2006signed by the Learned DR for admission of additionalevidence with reference to the grounds of appealsraised by the Revenue. The learned DR referred tothe provisions of rule 29 of the Appellate TribunalRules and submitted that the said evidence wascollected after the completion of assessment in thecase of assessee. The additional evidence is, (i) anexamination report/opinion of Laboratory of theGovernment Examiner of Questioned Documents,Simla regarding the Diary of ‘Dalal’ & (ii) affidavit ofdalal dated 27.10.2004. The learned DR has urgedthat the documents/evidence “go to the very rot of thematerial” and the same ought to be admitted. Thelearned DR has argued that the evidence has bearingon the stand of Assessing Officer that the contents ofthe Diary are authentic. xxxxxxxxxx55.We have considered the pleas made by both theparties with reference to the admissibility of theaforesaid additional evidence. We have also carefullyperused the order of the Tribunal dated 16.11.98(Supra) passed by our co-ordinate Bench. TheTribunal was dealing with admissibility of additionalevidence collected by the Department aftercompletion of assessment in the case of the assesseewhich was collected in the course of assessment of athird party. After an exhaustive exposition of rivalcontentions, case laws and provisions of Chapter XIV-B of the Act, the Tribunal concluded that it was notpermissible for it to admit additional evidence. The following portion of the order of the Tribunal is worthyof notice: xxxxxxxxxx55.We have considered the pleas made by both theparties with reference to the admissibility of theaforesaid additional evidence. We have also carefullyperused the order of the Tribunal dated 16.11.98(Supra) passed by our co-ordinate Bench. TheTribunal was dealing with admissibility of additionalevidence collected by the Department aftercompletion of assessment in the case of the assesseewhich was collected in the course of assessment of athird party. After an exhaustive exposition of rivalcontentions, case laws and provisions of Chapter XIV-B of the Act, the Tribunal concluded that it was notpermissible for it to admit additional evidence. The following portion of the order of the Tribunal is worthyof notice: “3.4- We may also make a reference here to theprovisions of section 158BC of the Act relating toblock assessment, whereunder the issue of notice u/s148 is dispensed with for the purpose of proceedingsunder Chapter XIV-B and the assessee is alsoprevented from revised return. Further, under theprovisions of section 158BF, penalties forconcealment under the provision of Section 271(1)(c)cannot be imposed in respect of undisclosed incomedetermined in block assessment. Having regard tothe said provisions, in case of admission of proposedevidence the Tribunal will have to restore the matter toA.O. for the reasons mentioned by learned DR i.e. toenable the assessee to meet the new facts as nowfound by Assessing Officer. Such a course of actionwill thus enable the department to consider thematerial collected in the case of third partiesassessment, after completion of block assessment inthe case of the assessee, which could normally havebeen done by the department by re-openingassessment under the normal provisions of the IT Act,after issue of proper legal notice u/s 148. As alreadymentioned, recourse to the provisions of section 148is not contemplated under Chapter XIV-B relating toblock assessments. Thus, it will be an attempt tobypass the existing provisions of Chapter XIV-B andachieve something indirectly which cannot be donedirectly under the existing provisions relating to blockassessments. Such an attempt will be a colorabledevice to defeat the provisions enacted by theLegislature and the Tribunal obviously cannot subscribe or accede to the plea urged by learned DRto admit the said evidence. We do appreciate theconstraint placed on the department by the existingprovisions of Chapter XIV-B to complete assessmenthurriedly within the specific period on the basis ofwhatever evidence is available within that period withthe Assessing Officer and at the same time not beingin a position to reopen the assessment, as provided inthat Chapter so as to consider any further evidencecollected against the assessee in his case orconnected cases. However, the Tribunal is bound bythe existing provisions of law and it cannot act in away so as to supplement law or remove the lacunae, ifany, therein. 3.5.- In view of the foregoing position, the prayer ofthe department to admit the aforesaid evidence asadditional evidence is turned down.” 56.We find that the situation before us is akin towhat was before the Tribunal on the case R.K. Syal(Supra). Moreover, we find that the evidence in theshape of forensic report is dated 7.10.2004 and theaffidavit of ‘dalal’ as dated 27.10.2004. Both theseevidences were available with i.e. Revenue evenduring the course of first appellate proceedings beforethe CIT (Appeals). The CIT (Appeals) has passed herorder on 4.1.2005. There is no explanation or reasonbrought on record by the Revenue as to why suchevidence could not be produced before the CIT(Appeals) specially when an opportunity wasavailable. The CIT(Appeals), as is evident from herorder called for a remand report from the Assessingofficer and has passed an order after consideringsuch report of the Assessing Officer.” 5. We have heard learned counsel for the parties. 5. We have heard learned counsel for the parties. 6. Learned counsel for the revenue submitted that officenote dated 21.5.2001 by itself constituted satisfaction underSection 158BD of the Act for proceeding against the assessee onthe basis of material found during the search. Recording ofsatisfaction did not require investigation, as such satisfaction wasonly to see prima facie case for proceeding further. The Tribunalerred in holding that the notice under Section 158BD issued byACIT, Yamunanagar was not valid, as such notice had to beissued by the Assessing Officer of the assessee. The ACIT,Yamunanagar himself had been given jurisdiction to makeassessment in respect of the assessee vide order dated31.12.2001. The satisfaction could not be held to be beyondlimitation on the ground that vide note dated 15.3.2002, theAssessing Officer of the assessee also recorded a note ignoringthe fact that the said note was in continuation of satisfactionalready recorded. Even if note dated 15.3.2002 is ignored, noterecorded on 21.5.2001 itself amounted to satisfaction underSection 158BD of the Act. Finding of the Tribunal in setting asidethe deletion on merits was vitiated by perversity by placing onuson the revenue and by not drawing presumption under Section292C of the Act of correctness of the material found duringsearch. The Tribunal also erred in not taking into accountadditional evidence comprising of report of the Forensic Science Laboratory stating that there was no interpolation in the entries inthe diary and the affidavit of Anil Dalal dated 27.10.2004,reiterating the version that the entries in the diary related to theassessee. Reliance has been placed on judgment of GujaratHigh Court in Rishul Industires Ltd. v. Harsh Prakash[2001]251 ITR 608 to the effect that satisfaction referred to underSection 158 BD of the Act is required to be prima faciesatisfaction to show that there was undisclosed income of aperson other than the searched person. Reliability of the materialfound was not required to be gone into at that stage. The saidjudgment was followed in Priya Blue Industries Pv.t Ltd.v. Joint Commissioner of Income Tax[2001] 251 ITR 615 (Guj). 7. Learned counsel for the assessee supported theimpugned findings and submitted that the satisfactioncontemplated under Section 158BD of the Act had to be specificand based on verification of facts. The satisfaction recorded didnot comply with the statutory requirement in the note recorded on21.5.2001 and note dated 15.3.2002 was after conclusion ofassessment of the searched person which could not be taken intoaccount. It was also submitted that the diary recovered was notby itself sufficient to presume undisclosed income at the hands ofthe assessee. The entries in the diary are said to be in codelanguage and there was no corroboration either that the samerelated to the assessee or that the extent of income was to theextent of the amount which has been added. The statement of Anil Dalal was not reliable. At best, the statement recordedimmediately after the search could be relied upon and not thesubsequent improved version which was at variance with theinitial version. Even otherwise, the diary did not qualify to be thebooks of account under Section 34 of the Evidence Act, 1872,which could be relevant or admissible in evidence. It was furthersubmitted that the Tribunal was justified in rejecting the additionalevidence, by relying upon its own order in the case ofShri R.K.Syal v. ACITI.T.A. No.1165/CHANDI/96 and also for the reasonthat the revenue had not given any reason for not producing anyreason earlier. Reliance has been placed on followingjudgments:- 1.Manish Maheshwariv.to submit that satisfactionACIT & anr.(2007) 289 ITRunder Section 158 BD is a341 (SC). conditionprecedentforproceeding against a personother than the searchedpersons. 1.Manish Maheshwariv.to submit that satisfactionACIT & anr.(2007) 289 ITRunder Section 158 BD is a341 (SC). conditionprecedentforproceeding against a personother than the searchedpersons. 2.CITv. Dawn View Farmsto submit that in absence of(P) Ltd.(2009) 224 CTRspecificrecordingof(Del),Subhas Chandrasatisfaction that undisclosedBhaniramkav.ACITincome belonged to the(2010) 320 ITR 349 (Cal)assessee on the basis ofand Amity Hotels (P) Ltd.material found during search& Ors.v. CIT & ors.(2005)and the same being forwarded272 ITR 75 (Del) andto the Assessing Officer ofChhugamal Rajpalv. S.P.assessee,theblockassessment was withoutChaliha & ors. (1971) 79jurisdiction.ITR 603 (SC)3.Om Parkash Jindal & anr.to submit that the wordv. Union of India & ors.‘information’ under Section(1976) 104 ITR 389 (P&H),132(1) means informationCITv. Sunil Bhala(2011)which could be believed and50 DTR 238 (Del),notmeresuspicion.Additional CIT v. MissInvestigation was necessaryLata Mangeshkar(1974)before effecting seizure and97 ITR 696 (Bom) andforming of opinion that thereChandradhar Goswami &was reason to believe thattherewasundisclosedors. v. Gauhati Bank Ltd.income. AIR 1967 SC 1058. 4.CBIv. V.C. Shukla &to submit that even if entriesothers (1998) 3 SCC 410in the books of account areadmissible under Section 34of the Evidence Act, the sameare only corroborative andcould not be acted uponwithout independent evidenceas to trustworthiness of thesaid entries.others (1998) 3 SCC 410in the books of account areadmissible under Section 34of the Evidence Act, the sameare only corroborative andcould not be acted uponwithout independent evidenceas to trustworthiness of thesaid entries.5.Ram Prasad Sharma v.to submit that additionalCIT(1979) 119 ITR 867 andevidence should not beSumati Dayalv. CIT(1995)mechanically allowed unless214 ITR 801.the Tribunal finds it necessaryfor its decision.CIT(1979) 119 ITR 867 andevidence should not beSumati Dayalv. CIT(1995)mechanically allowed unless214 ITR 801.the Tribunal finds it necessaryfor its decision. 8. We have given due consideration to the rival submissions. We are of the view that the questions raised haveto be answered in favour of the revenue and the matter remandedto the Tribunal for fresh decision. 9.We have already reproduced the office note dated21.5.2001, which by itself clearly indicates that there are entrieswhich may show undisclosed income of persons other thansearched persons who were identifiable from the diary.Accordingly, due cognizance was being taken thereof for initiatingproceedings for block assessment in those cases. The samemeets the requirement for proceeding under Section 158 BD of 8. We have given due consideration to the rival submissions. We are of the view that the questions raised haveto be answered in favour of the revenue and the matter remandedto the Tribunal for fresh decision. 9.We have already reproduced the office note dated21.5.2001, which by itself clearly indicates that there are entrieswhich may show undisclosed income of persons other thansearched persons who were identifiable from the diary.Accordingly, due cognizance was being taken thereof for initiatingproceedings for block assessment in those cases. The samemeets the requirement for proceeding under Section 158 BD of the Act. The judgments relied upon by learned counsel for theassessee do not militate against the view we are taking.Judgments dealing with formation of satisfaction for authorizingsearch do not apply for action under Section 158BD. It is clearfrom the language of Section 158BD of the Act that if whileconsidering the case of the searched persons, the materialindicates undisclosed income at the hands of any other person,further action could be taken as stipulated therein. In the presentcase, the Assessing Officer considering the case of the searchedpersons, found prima facie material to proceed against personsother than the searched persons and initiated proceedings. Thereis no compulsion to read any further requirement than what ismentioned as necessary for action under Section 158BD. It is notpossible to hold that any further investigation is required to beconducted at that stage. Questions 1 and 3, thus, have to beanswered in favour of the revenue. 10. It is not disputed that the ACIT, Yamunagar had beenconferred jurisdiction to make assessment in the case of theassessee on 31.12.2001 prior to passing of the order ofassessment and before recording the note dated 15.3.2002. Thesaid note obviously was in continuation of earlier note dated21.5.2001. Notice issued by the said authority could not betreated as invalid. Question 2 stands answered accordingly infavour of the revenue. 11. As regards question 4, the Tribunal has not adoptedsound approach in dealing with the matter and its findings are,thus, vitiated by error of law. Section 292C of the Act, whichthough introduced later by Finance Act, 2007 with effect from1.10.1975, was made applicable for the period in questionprovides that presumption could be raised as to correctness ofthe material found during search. The said section has notbeentaken into consideration by the Tribunal. It cannot be held,as submitted by learned counsel for the assessee, that if therewas code language used in the diary, no inference could bedrawn. No doubt entries by itself were not enough to proceedagainst the assessee, if the entries were explained andcorroborated by the author thereof. However, in case thecircumstances justify drawing of an inference against theassessee, the burden was on the assessee and in absence ofany reason, the same could be acted upon. 12.In Kundan Lal Rallaramv. Custodian, Evacuee PropertyAIR 1961 SC 1316, it was observed:- "Briefly stated, the burden of proof may be shifted bypresumptions of law or fact, and presumptions of law orpresumptions of fact may be rebutted not only by direct orcircumstantial evidence but also by presumptions of law or fact.We are not concerned here with irrebuttable presumptions oflaw." 13. In M.S. Narayana Menon Alias Maniv. State of Kerala and another(2006)6 SCC 39, it was observed:- “40. In P. Ramanatha Aiyar's Advanced LawLexicon, 3rd edition, at page 3697, the term'presumption' has been defined as under: "A presumption is an inference as to theexistence of a fact not actually known arisingfrom its connection with another which is known. A presumption is a conclusion drawn fromthe proof of facts or circumstances and standsas establishing facts until overcome by contraryproof. 13. In M.S. Narayana Menon Alias Maniv. State of Kerala and another(2006)6 SCC 39, it was observed:- “40. In P. Ramanatha Aiyar's Advanced LawLexicon, 3rd edition, at page 3697, the term'presumption' has been defined as under: "A presumption is an inference as to theexistence of a fact not actually known arisingfrom its connection with another which is known. A presumption is a conclusion drawn fromthe proof of facts or circumstances and standsas establishing facts until overcome by contraryproof. A presumption is a probable consequencedrawn from facts (either certain, or proved bydirect testimony) as to the truth of a fact allegedbut of which there is no direct proof. It follows,therefore that a presumption of any fact is aninference of that fact from others that areknown". (per ABBOTT, C.J., R. v. Burdett, 4 B.and Ald, 161) The word 'Presumption' inherently importsan act of reasoning a conclusion of thejudgment; and it is applied to denote such factsor moral phenomena, as from experience weknown to be invariably, or commonly, connectedwith some other related facts. (Wills onCircumstantial Evidence) A presumption is a probable inferencewhich common sense draws from circumstancesusually occurring in such cases. The slightestpresumption is of the nature of probability, andthere are almost infinite shades from slightprobability to the highest moral certainty. Apresumption, strictly speaking, results from apreviously known and ascertained connection between the presumed fact and the fact fromwhich the inference is made." 14. In view of above, the finding of the Tribunal has to beset aside and matter remanded to it for fresh decision. Thequestion is answered accordingly in favour of the revenue.15.As regards question 5, relating to additional evidence,we are of the opinion that the report of the Forensic ScienceLaboratory was a relevant material and so was the affidavit dated27.12.2004 of the searched person. The additional evidence wasnecessary for just decision of the matter. At best, the deponentcould be produced for cross-examination. The additional evidencecan be allowed in the interest of justice if the same is authenticand necessary for the decision of the issue raised before theTribunal. In the facts and circumstances, the Tribunal was notjustified in declining to consider the additional evidencecomprising of the opinion of the laboratory of the Governmentexaminer and also the affidavit of the author of the diary, thoughthe documents had direct bearing on the issue. The question isanswered accordingly in favour of the revenue.16. Accordingly, this appeal is allowed, the impugnedorder of the Tribunal is quashed and the matter is remanded tothe Tribunal for fresh decision in accordance with law. Parties may appear before the Tribunal for furtherproceedings on 23.5.2011. (ADARSH KUMAR GOEL) February 28, 2011ashwani JUDGE ( AJAY KUMAR MITTAL ) JUDGE