Judgment:
Vikramajit Sen, J.
ITA No. 185/2009
1. This Appeal under Section 260A of the Income Tax Act, 1961 (Act for short) has been preferred by the Commissioner of Income Tax, Delhi-I against the Order dated 11.4.2008 passed by the ITAT. The Tribunal had dismissed the Appeal of the Revenue assailing the Order of the CIT(A), who had deleted the addition of Rupees 68,00,000 made by the Assessing Officer under Section 69A of the Act. Both the Appellate Authorities had concluded that no incriminating material had been collected in the course of a simultaneous search under Section 132 carried out on 24.11.2000 on the Assessee along with allegedly connected concerns including Nopani Group and Mourya Investments Pvt. Ltd.. Revenue had endeavoured to rely on materials and statements recorded of a third party, namely, Shri Sushil Kumar Tulsian during a consequent survey under Section 133A. Predicated on this Statement an inference was drawn, nay it was taken as having been proved, that the Assessee was engaged in affording accommodation entries in exchange/lieu of cash.
2. The Tribunal has dismissed the Appeal of the Revenue on the ground that the evidence which was sought to be acted upon should have been gathered in the course of the Search or Requisition under Chapter XIV-B of the Act. The Tribunal has applied CIT v. G.K. Senniappan : [2006]284ITR220(Mad) in which the Division Bench of the High Court of Madras has opined that in the context of a Block Assessment whilst material gathered in the course of the Search may be acted upon by virtue of Section 158BB, material collected during the Survey under Section 133A does not constitute requisite evidence. The ITAT has also applied CIT v. Ravi Kumar where the Division Bench of the High Court of Punjab and Haryana held that it was improper to take into consideration 'loose slips' recovered during a Search of the Assessee, which slips did not conclusively prove anything, as sufficient cause to invoke Section 69A of the Act. This reasoning was applied by the ITAT to the facts obtaining in the case in hand, to arrive at the conclusion that there was no justification to hold that Rupees 68,00,000 could be added into the profits of the Assessee as undisclosed cash.
3. The Division Bench of this Court, comprising Arijit Pasayat and D.K. Jain, JJ., as their Lordships then were, have held in CIT v. Ravi Kant Jain [2001] 250 ITR 141 that undisclosed income not determined on the basis of material gathered in a Search cannot justify the ordering of a Block Assessment.
4. It will be useful to recall that in CIT v. Mukundray K. Shah : [2007]290ITR433(SC) their Lordships considered it valid to take into account the contents of a Diary found as a result of a Search. Unlike the loose slips found in Ravi Kumar, in an enquiry founded on the recovered Diary it emerged that Rupees 5,99,00,000 was undisclosed income. In other words, the Diary in the said case was a material which was the starting point of the enquiry which when connected with the other results of the enquiry led the Department to the undisclosed income of the assessee. It was in this context that the Supreme Court upheld the stand of the Department in invoking the provisions of chapter XIV-B of the Act.
5. Similar observations are to be found in CIT v. Balaji Wire Pvt. Ltd. : [2008]304ITR393(Delhi) where the Bench observed that the Search had been conducted on 11th/12th September, 2001 but the Revenue had sought to proceed against the assessee on the strength of a statement made by a third party on 25.9.2001 and 14.12.2001. As it was manifestly not any part of the sequence of the Search, the said statement was held not to be of any consequence. A similar analysis is available in CIT v. Jupiter Builders P. Ltd. : [2006]287ITR287(Delhi) where the conclusion was that income not disclosed or unearthed as a result of the Search or Requisition cannot be brought to tax under Chapter-XIVB of the Act.
6. So far as the case in hand is concerned, the CIT(A) as well as the ITAT have arrived at the conclusion that the Revenue had taken into consideration a Statement made by a third party independent of the Search and since nothing was discovered in the course of the Search, the action was contrary to law. This is also our appreciation of the facts and our understanding of the law. Therefore, no substantial question of law arises for our consideration in this Appeal, which is accordingly dismissed. ITA No. 353/2009
7. The Revenue has filed this Appeal under Section 260A of the Act against the Order of the Tribunal passed on 14.3.2008. The facts were that the addition was predicated on the statement of Shri Vinod Arora, recorded after the conclusion of the Search. Even this statement was controverted by Shri Arora in cross-examination inasmuch as he had confirmed having supplied all the goods in question to the assessee. On a different plank it was also observed that the Respondent Assessee as well as the other supplier were assessed to Income Tax and Sales Tax and were transacting business independent of each other.
8. No substantial question of law arises for our consideration in this Appeal, which is accordingly dismissed.