Verma Roadways Vs. Assistant Commissioner of - Court Judgment

Excerpt:
1. in this appeal, against the order of assistant commissioner of income-tax (investigation), kanpur, dated 28-11-1997, the assessee has challenged the assessment for the block period, completed under the provisions of chapter xivb of the income-tax act. the block period is from 1-4-1994 to 28-11-1996.2. this appeal was heard on priority basis as directed by the hon'ble high court of judicature at allahabad. the hon'ble court, vide its order dated 23-7-1999, has directed the tribunal to decide the appeal by 15th september, 1999.3. in the grounds of appeal, initially, the assessee took as many as 46 grounds. as many of these grounds were argumentative in nature, an objection was filed on behalf of the department on 19-4-1999 alleging that these grounds being in the nature of written.....

Judgment:
1. In this appeal, against the order of Assistant Commissioner of Income-tax (Investigation), Kanpur, dated 28-11-1997, the assessee has challenged the assessment for the block period, completed under the provisions of Chapter XIVB of the Income-tax Act. The block period is from 1-4-1994 to 28-11-1996.

2. This appeal was heard on priority basis as directed by the Hon'ble High Court of Judicature at Allahabad. The Hon'ble Court, vide its order dated 23-7-1999, has directed the Tribunal to decide the appeal by 15th September, 1999.

3. In the grounds of appeal, initially, the assessee took as many as 46 grounds. As many of these grounds were argumentative in nature, an objection was filed on behalf of the Department on 19-4-1999 alleging that these grounds being in the nature of written arguments, either should not be allowed, or in the alternative, the assessee should not be allowed to make arguments, simultaneously.

4. The appellant moved an application for admitting additional grounds.

These are annexed with the application of the appellant dated 18-8-1999 as Annexure-B. The additional grounds were admitted by the Bench vide order of the Bench dated 18-8-1999. A detailed order was passed in this regard on the application of the appellant dated 18-8-1999. However, as so many grounds were repeated and as the position was not very clear, the ld. counsel for the assessee was asked to consolidate and concise the original grounds as well as the additional grounds.

5. Prior to it, during the course of hearing, in application was also moved on behalf of the assessee-appellant on 16-5-1999 for admitting fresh evidence by the Tribunal. After hearing both the parties, the documents mentioned in para 3 of the application dated 16-5-1999, were admitted in evidence and detailed order has been passed in this regard on 17-8-1999 on the application of the assessee-appellant. It is to be clarified here that the additional evidence was admitted as there was no objection in this regard by the Department. The ld. Special Counsel for the Department also stated that no document in rebuttal was to be filed at this stage.

6. The assessee has finally submitted the grounds which were to be pressed on behalf of the assessee-appellant. These are contained in Part-III (Annexure-C) annexed with the application of the assessee dated 18-8-1999. According to the finally drafted/re-cast grounds, total 27 grounds have been raised on behalf of the appellant. Hence, these grounds alone were pressed as is also undertaken in writing by the ld. counsel for the assessee-appellant. Out of these, ground No. 12 has been deleted and later part of ground No. 25 has also been deleted.

8. The assessee-appellant, a registered partnership firm, was engaged in the business of transportation of goods. It has various branches spread all over the country. The Head Office of the assessee-firm was situated at 133/225 Transport Nagar, Kanpur. There was another branch office at 133/283 Transport Nagar, Kanpur.

9. On 27-11-1996, the Assistant Director of Anti Evasion, Central Excise, Kanpur, conducted a search in the premises of the assessee. The search was conducted at 133/225, Transport Nagar, Kanpur, and a large number of documents, viz. builty books, ledgers, mentioned in Annexure-A (Department's Paper Book pages 87 to 91), gunny bags of Supari (details given in Annexure-B pages 92 and 93 of Department's Paper Book) were recovered. The search commenced at 11.30 hours on 27-11-1996 and was completed at 17.30 hours on the same day.

10. A search was also conducted by the Department of Central Excise at premises No. 133/283 (Panchnama at pages 94 to 96 of Department's Paper Book). This search began at 11th hour on 27-11-1996 and was concluded at 20th hour on the same day. In these premises, cash of Rs. 1,70,20,000, as mentioned in Annexure-A (Page 97 of Department's Paper Book) was found. The denominations of the currency notes are given in Annexure-A. A search was also conducted at 133/174 A.T.P. Nagar, Kanpur (Details are given at page 98 of Paper Book of Department).

11. According to Panchnama dated 27-11-1996, search was also conducted at premises No. 133/111, M-Block, Kidwai Nagar, Kanpur by the Department of Central Excise on 27-11-1996. A photostat copy of the Panchnama is at pages 100 and 101 of the Paper Book (of the Deptt.).

12. So far as the searches by the Income-tax Department are concerned, on the basis of documents filed by the Department before us, it is clear that these searches were conducted on the strength of warrant of authorisation dated 28-11-1996, which is in the name of "Verma Transport Co., Lucknow Banda Transport Co.". A certified photo copy of this warrant of authorisation is available at P-3 and 4 annexed with the application dated 10-9-1999, which was produced and filed by the Department in compliance to our directions.

13. According to Panchnama dated 28-11-1996 of Income-tax Department, the premises of M/s. Verma Transport Co., Lucknow and Banda Transport Co., 133/283, godown between Sugam Parivahan and Bombay General Freight Carriers, T.P. Nagar, Kanpur, were searched by the Income-tax Department on 28-11-1996. A copy of the Panchnama is available at P-54 to 58 of the Paper Book of the Department. This search commenced at 3.30 P.M. on 28-11-1996 and was concluded at 7.45 P.M. on the same day.

The documents found/seized in the search are mentioned in Annexure-B (Page 58 of the Paper Book of the Department).

14. On the strength of the warrant of authorisation mentioned above, another search was conducted on 28-11-1996 at premises of M/s. Verma Transport Co. and Banda Transport Co., T.P. Nagar, Kanpur. The relevant papers of this search and seizure are at pages 67 to 84 of the Paper Book of the Department.

15. According to the Panchnama dated 28-11-1996, on the basis of the same warrant or authorisation, premises of M/s. Verma Transport Co./Lucknow Banda Transport Co. (Verma Roadways) godown at 133/225, Transport Nagar, Kanpur, were searched by the Income-tax Department.

This search began at 6 A.M. on 28-11-1996 and concluded at 4.15 A.M. on 29-11-1996. In the godown, 920 bags of Supari were found. The details of the material found and the documents seized in this search are contained from pages 1 to 53 of the Paper Book of Department.

16. A notice under section 158BC dated 8-5-1997 in the name of M/s.

Verma Roadways, 133/283, T.P. Nagar, Kanpur was issued to the assessee firm. This notice was served on 15-5-1997. A photostate copy of the notice is available at page-1 of the supplementary Paper Book of the assessee-appellant filed with the application dated 16-5-1999. The assessee was required to file its return for block period i.e. 1-4-1986 to 28-12-1996 in the prescribed form and to deliver the same within 15 days from the service of the notice in the office of the Assessing Officer. Several other notices and reminders were given to the assessee to which the assessee has replied. The details of the notices, the replies, the queries and the prayers made by the assessee for time etc.

are contained in the assessment order. These details need not be repeated here.

17. The assessee filed his regular return on 11-11-1997 showing income for the period from 1-4-1996 to 26-11-1996 claiming the same for the Assessment year 1997-98.

18. The assessment order under section 158BC was made on 28-11-1997.

The assessment for the block period has been completed at total income of Rs. 3,12,97,430, under section 158BC/144 of the Income-tax Act.

19. The Assessing Officer has assessed the undisclosed income under various heads, which are follows : premises No. 133/283 Rs. 1,70,20,000 Cash found during search by the Income-tax Deptt.

Rs. 1,08,195 (c) Unreconciled stock of Supari Rs. 70,99,839 (d) Unreconciled stock of cloth Rs. 5,04,000 (e) Unspent investment in trucks Rs. 10,50,000 (f) Income of the assessee from 1-4-1996 to 28-11-1996 Rs. 38,70,219 (g) Unexplained investment in house property 20. In this appeal, the assessee has filed various documents in the Paper Books which are contained in Volumes 1 to 6 and supplementary Paper Book, the details of which are contained in para 3 of the application dated 16-5-1999. The documents in this supplementary Paper Book are from pages 1 to 11.

21. The department has filed only one paper book which contains pages 1 to 179. The documents are listed in the index of the paper book. Some other documents in the shape of loose papers have also been filed on behalf of the department. On our directions dated 8-9-1999 and 10-9-1999 the Department has filed photo copy of warrant of authorisation which is in the case of Verma Transport Co., Lucknow-Banda Transport Co. and some papers relating to proceedings of requisition taken under section 132A of the Income-tax Act.

22. The ld. counsel for the assessee, Ld. Sr. Advocate Shri S. P.Gupta, made detailed submissions with regard to the legal grounds which have been taken in this appeal. We are, therefore, taking up the same first.

"1. Because the power under section 132 has not been exercised and, therefore, the proceedings under Chapter 14B were invalid.

5. Because no warrant of authorisation was issued against the appellant." 25. The ld. counsel for the assessee, Shri Gupta, while assailing the validity of the proceedings taken against the assessee under Chapter XIV-B of the Income-tax Act, submitted that the proceedings of assessment against the assessee in the impugned matter were not legally maintainable and the same are liable to be quashed. Referring to the caption of Chapter XIV-B of the Income-tax Act, he submitted that this Chapter lays down special procedure for assessment in search cases. He invited our attention to the provisions contained under section 158BA(1) of the Income-tax Act and pointed out that the conditions precedent for the application of the Special procedure are : (ii) that books of account, other documents or any assets are requisitioned under section 132A in the case of any person.

26. The ld. counsel further submitted that under Chapter XIV-B the assessment proceedings can be started only in the case of "any person" against whom "a search is initiated under section 132" or "books of account, other documents or any other assets are requisitioned under section 132A". His main contention in this regard was that neither there was a valid and legal search initiated against the assessee under section 132 of Income-tax Act nor the requisitioned material was available to the Assessing Officer before the issuance of notice under section 158BC.27. In support of the contention, the ld. counsel made reference to the copy of order under second proviso to section 132(1) dated 28-11-1996 (Paper No. 196 Vol. III of the paper book of the assessee), copy of which is also available at page Nos. 7 and 8 of the paper book of the department. This order is addressed to Verma Transport Co. and Lucknow Banda Transport Co., 133/225, Transport Nagar, Kanpur. The contention of the ld. counsel for the assessee was that the order is addressed not to "Verma Roadways" but to "Verma Transport Company etc." He also invited our attention to the copy of panchnama dated 28-11-1996 (papers 197 to 200 of the Paper Book of the assessee), a copy of which is also available at pages 54 to 57 of the Paper Book of the Department. In this Panchnama, in the first column, i.e., warrant in the case of (address is noted as) "M/s. Verma Transport Company and Lucknow Banda Transport Company, 133/283, Transport Nagar, Kanpur." On the basis of these documents, he contended that the entire search stands vitiated because the search was against "Verma Transport Company" and not against "Verma Roadways Co." On the basis of this contention, he further submitted that, as these documents go to indicate, the authorisation warrant for initiating the search and seizure was also not in the name of "M/s. Verma Roadways" and as such the entire proceedings of search and seizure were neither legal nor valid and the entire procedure of assessment under Chapter XIVB is liable to be vitiated on this basis alone.Kalidas Dhanjibhai v. State of Bombay AIR 29. Referring to the decision of Calcutta High Court in the case of Ashok Viniyoga Ltd. (supra), the ld. counsel submitted that in that case, adopting the grammatical aspect and natural and ordinary sense, the word 'such' was taken to refer to the last antecedent, i.e.

"something just before specified" or "spoken of", and not mere previous the Ld. counsel also referred to the decision of the Hon'ble Supreme Court of India in the case of Kalidas Dhanjibhai (supra) in which case also the term "such" was taken to denote 'what follows to what has gone before'.

30. The ld. counsel further emphasised that the word "Then" under section 158BC of the Income-tax Act further goes to show that the procedure for block assessment can be initiated only after valid search had been conducted under section 132 or a valid requisition has been made under section 132A in the case of assessee and as there was no valid search in the case of the assessee, no valid proceedings could be taken for block assessment in its case.

31. In this regard he also drew our attention to the notice under section 158BC has been filed on behalf of the assessee in the supplementary Paper Book and which is available at page 1 of the Paper Book of the assessee. Referring to this notice he contended that in this notice there is no mention of the fact that proceedings under section 132 of Income-tax Act have been taken against the assessee and, therefore, the notice does not indicate that it is in consequence of proceedings under section 132 of Income-tax Act taken against the assessee. According to him, the notice also does not disclose that it is in respect of undisclosed income of the assessee discovered during the search proceedings under section 132 of the Income-tax Act.

32. The other submission of the ld. counsel for the assessee related to the second source for adopting the procedure for block assessment, i.e., the requisition under section 132A. On this aspect, the ld.counsel for the assessee, contended that the alleged requisition is said to be of 11-12-1996 which has not been produced by the Department.

Referring to the "certificate of commencement of proceedings of the requisition and the delivery of material dated 7-8-1997" (Page No. 103 of the Paper Book of the Department), he contended that as the material seized by the Central Excise Deptt. was requisitioned on 7-8-1997, there could be no justification to issue notice dated 8-5-1997 on the basis of such requisitioned material because this material was not available to the Assessing Officer before 7-8-1997, i.e., before the date of the issuance of notice.

33. The ld. Senior standing counsel for the department, Shri Bharatji Agarwal, Advocate, firstly explained that search was admittedly conducted in the premises of M/s. Verma Roadways. In this regard, he specifically invited our attention to the Panchnama of Central Excise Department, dated 27-11-1996 (page 85 of the Paper Book of the Department) in which the address of the premises searched is noted as M/s. Verma Roadways, 133/225, Transport Nagar. He also invited our attention to Panchnama dated 27-11-1996 relating to search conducted by the Central Excise Department at the premises of M/s. Verma Roadways which is on the 1st Floor of 133/283, Transport Nagar, Kanpur. He further invited our attention to the seizure memo relating to currency notes of Rs. 1,70,20,000 which were recovered from the office of M/s.

Verma Roadways situated on the 1st floor of M/s. Lucknow Banda Transport Company, 133/285, Transport Nagar. Copy of this document is available at page 97 of the Paper Book of the Department.

34. Regarding the so-called discrepancy in the address of the assessee, noted in the Panchnamas of the Income-tax Department, the ld. counsel submitted that the Panchnama and other documents were prepared in the case of Verma Transport Company (Verma Roadways) and there is no mistake in these documents. He also invited our attention to Panchnama dated 29-11-1996 (pages 1 to 4 of the Paper Book of the Department) on the back of which signatures of Panchas have been obtained. He also pointed out that these Panchas are none but the employees of Verma Roadways as is clear from their addresses noted on page-4 of the Panchnama. Referring to various other documents, the ld. senior standing counsel emphasised that there is no denying the fact that searches were factually and actually conducted in the premises of Verma Roadways, the assessee in this case, and cash, stock of supari, stock of cloths, books and other materials were recovered from the premises of the assessee.

35. We have carefully considered the facts and circumstances relating to this issue, the material to which our attention was invited and the rival submissions.

36. At the outset, we consider it necessary to describe the factual position concerning this matter which is as follows : 37. As the assessee has taken ground No. 1 and also ground No. 5 specifically relating to warrant of authorisation, and as the department had not filed warrants of authorisation relating to searches under section 132(1) of Income-tax Act relating to the assessee and as objection regarding non-production of this document was also taken by the ld. counsel for the appellant during the course of hearing of appeal, we had to issue specific directions to the department for producing the same. Our direction dated 8-9-1999, 10-9-1999 and 13-9-1999 are reproduced below : In view of ground No. 5, taken by the appellant, the department is directed to produce warrant(s) of authorisation in pursuance of which search or seizure proceedings were conducted in various premises of the appellant-assessee. The said warrant(s) be produced in original on 10-9-1999.

"Today Shri S. D. Singh Advocate, appeared for the assessee. Shri B. Dogra, the ld. Sr. D.R. produced certain papers in compliance to the direction dated 8-9-1999 with the application dated 10-9-1999. Paper No. 1 is photo copy of Form No. 45C which is incomplete as page No. 2 etc. has not been filed. The deptt. is directed to file complete form immediately.

Paper No. 2 in Form No. 45 which is copy of warrant of authorisation in the case of M/s. Verma Transport Co., Lucknow-Banda Transport Co.

and for Godown 133/225. Other paper relate to Panchnama.

Vide our direction dated 8-9-1999 the deptt. was directed to produce all the warrants of authorisation relating to searches & seizures in the present matter. Only one warrant of authorisation has been filed hence the ld. D.R. is directed to specifically clarify as to whether there is any other warrant or warrants of authorisations relating to the searches & seizures. He should also clearly specify as to whether, there is any warrant of authorisation in the name of M/s.

Verma Roadways.

The report of the DR. be filed immediately and, in any case, before the next date of hearing alongwith all the relevant documents required as above." Shri A. N. Mahajan, Standing Counsel and B. Dogra, Senior D.R. for the Deptt.

In compliance to our direction dated 10-9-1999, the ld. D.R. Shri Dogra, informs us that there is no other warrant of authorisation except one which has already been filed by the Deptt. on 10-9-1999.

Hence, no other warrant of authorisation is filed today.

In respect of Section 132A proceedings, Shri Dogra has filed photo copies of record of proceedings under section 132A dated 7-8-1997.

These are taken on record." 38. In compliance to our directions referred to above, a photo copy of only one warrant of authorisation has been produced which is available at pages 1 to 4 annexed with application of the department dated 10-9-1999. This warrant of authorisation is one Form No. 45 under Rule 112(1) of Income-tax Rules. The relevant portions of this warrant are reproduced below : "FORM NO. 45 (See rule 112) Warrant of authorisation under section 132 of the Income-tax Act, 1961, and rule 112(1) of the Income-tax Rules, 1952. ** ** ** Whereas information has been laid before me on the consideration thereof I have reason to believe that if a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of Section 131 of the Income-tax Act, 1961, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922 or under sub-section (1) of section 142 of the Income-tax Act, 1961, is issued to Verma Transport Co., Lucknow Banda Transport Co. (name of person) to produce or cause to be produced, such books account or other documents as required by such summons or notice - Sarvashri/Shri/Shrimati M/s. Verma Transport Co., Lucknow Banda Transport Co. are/is in possession of any money, bullion, or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been or would not be disclosed for the purposes of the Indian Income-tax Act, 1922, or the Income-tax Act, 1961.

And whereas I have reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing have been kept and are to be found in godown 133/225, Transport Nagar, Kanpur (specify particulars of the building/place/vessel/vehicle/aircraft). This is to authorise and require you as per reverse ............" (The contents of warrant of authorisation except the italicised portion which is hand written, are in printed form) 39. The department has also filed a copy of Panchnama dated 29-11-1996 and a copy of order under section 132(3) and a copy of order under second proviso to section 132(1) of Income-tax Act, 1961. All these documents (Pages 5 to 8, Page-9 and Pages 10 to 12 annexed with the application dated 10-9-1999 respectively, are addressed to the following : "M/s. Verma Transport Company (Roadways), 133/225, Transport Nagpur (Kanpur)." 40. It is significant to note that the warrant of authorisation as well as the Panchnama and other documents referred to above, are addressed to M/s. Verma Transport Company and not to M/s. Verma Roadways.

41. In the setting of this factual position, we proceed to deal with the issue before us.

42. The provisions relating to the authorisation of search etc. are contained under section 132(1) of Income-tax Act. The relevant portions of the same are extracted below : "132. (1) Where the Director General or Director or the Chief Commissioner or Commissioner or any such Joint Director or Joint Commissioner as may be empowered in this behalf by the Board, in consequence of information in his possession has reason to believe that - (a) ** ** ** (b) ** ** ** (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), (A) the Director General or Director or the Chief Commissioner or Commissioner, as the case may be, may authorise any Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or (B) such Joint Director or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, the officer so authorised in all cases being hereinafter referred to as the authorised officer, to - (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; 43. An In-depth scrutiny of the provisions relating to search and seizure will indicate that Section 132 of Income-tax Act, which empowers the designated authorities for authorising search and seizure etc. and for executing the authorisation warrant by way of search and seizures etc., does not confer any arbitrary authority or power on them. It is perhaps because the basic rights relating to the liberty of the subjects which have been well guarded and safe guarded in our Constitution may not be violated or invaded. It is because of this reason that the issuance of warrant of authorisation which may lead to serious civil and penal consequence is to be made only when information is laid before the concerned warrant issuing authority and on consideration of the same, he has 'reason to believe' that if a summons etc. or a notice etc. under the relevant provisions of Income-tax Act, is issued to the person about whom information has been laid, would not produce or cause to be produced, such books or documents etc. as may be required by such notice and summons. The incorporation of the term "have reason to believe" in Section 132 of Income-tax Act, has, therefore, much significance. The usage of this term clearly indicates the intention of the legislature which is that before issuing warrant of authorisation, the concerned authority has to record its 'satisfaction' and 'belief' on the basis of concrete material before it. It, therefore, requires a long drawn and well reasoned process. The reason or belief of the concerned officers can not be based on whines or caprices.

44. In the case of ITO v. Seth Bros. [1967] 74 ITR 836, the Hon'ble Supreme Court has observed as follows : "The Commissioner or the Director of Inspection may, after recording reasons, order a search of premises, if he has reason to believe that one or more of the conditions in section 132(1) exist. The order is in the form of an authorization in favour of a subordinate departmental officer authorising him to enter and search any building or place specified in the order, and to exercise the powers and perform the functions mentioned in section 132(1). ** ** ** The section does not confer any arbitrary authority upon the revenue officers. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorisation in favour of a designated officer to search the premises and exercise the powers set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. If the Officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of account or other documents, and to place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the tax payer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorizes it to be exercised. If the action of the officer issuing the authorization or of the designated officer is challenged, the officer concerned must satisfy the court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collaterial purpose ........" 45. Similar observations have been made about the term "reason to believe" in the following cases :Jain & Jain v. Union of India 46. The most important aspect of the matter is that in view of the provision under section 132(1) of the Income-tax Act, warrant of authorisation of search is to be issued against "a person" or against "any person" who fulfils any of the three conditions as laid down in Section 132(1) of Income-tax Act in its clauses (a), (b) and (c).

Hence, the warrant of authorisation under section 132(1) of Income-tax Act is to be issued not in respect of premises, places or properties, which may be belonging to such person. Such premises or places may be specified in such warrant but the authorisation has to be in respect of a person. On this premise, it may be said that if warrant of authorisation has been issued in the name of 'A', it can not be treated or taken to be in the name of 'B' or 'C' because mentioning of the name of 'A' in the authorisation warrant pre-supposes that there was information before the concerned authority issuing the warrant in respect of 'A' only and on the basis of such information that authority had reason to believe that 'A' would not produce the document or thing etc. Thus the validity of the search proceedings and seizure under section 132 of Income-tax Act has to have a clear cut nexus with the warrant of authorisation which is the main foundation rather the anchor of the entire proceedings of search and seizure.

47. On the basis of the above, it may further be stated that the sine-qua-non of authorisation warrant is 'the person' against whom the warrant is issued. Such person has thus to be identified and specified in the warrant. The identification of such person is to be made on the basis of satisfaction of the concerned authority that there are strong reasons to believe that his or its conduct will be covered and qualified under any of the three conditions laid down in clauses (a), (b) or (c) of Section 132(1) of the Income-tax Act.

48. In the context of this legal aspect of the matter, if we examine the authorisation warrant dated 28-11-1996, referred to above, it will be clear that the warrant has been issued against "M/s. Verma Transport Co., M/s. Lucknow Banda Transport Company" and not against "M/s. Verma Roadways". The documents and books of account, money or other assets in possession of this person, i.e. "Verma Transport Co. Lucknow Banda Transport Co." could have been searched in the premises specified in the warrant. Thus, so far as the assessee "M/s. Verma Roadways", which is an independent and separate partnership firm from Verma Transport Co., a proprietary concern, or M/s. Lucknow Banda Transport Co., is/are concerned, the Assessing Officer, if he was satisfied that M/s. Verma Roadways had any undisclosed income, could have proceeded to make assessment under the provisions of Section 158BD of the Act.

49. In this connection, it is also significant to mention that documents relating to execution of the authorisation warrant, i.e., panchnama and seizure memos etc. have also been prepared in the name of M/s. Verma Transport Co./Lucknow Banda Co. and not in the name of M/s.

Verma Roadways although an attempt has been made to add the name of M/s. Verma Roadways after the name of M/s. Verma Transport Co./Lucknow Banda Transport Co., in bracket i.e. (....). According to the ld.counsel for the assessee, the name of M/s. Verma Roadways after the name of M/s. Verma Transport Co./Lucknow Banda Transport Co. has been added subsequently when the mistake came to the notice of the department. This contention of the ld. counsel for the assessee cannot be easily rejected.

50. In this regard, it is necessary to make reference to some of the documents of search and seizure which are in consequence or in execution of the warrant of authorisation dated 28-11-1998, referred to above. These are as follows : (i) Panchnama dated 29-11-1996 (Page 124 of the paper book of the department) which mentions as follows : A. Warrant in the case - M/s. Verma Transport Co./Lucknow Banda Co.

(Verma Roadways).

(ii) Order under proviso 2nd to section 132(1) (pages 7-8) which is addressed as follows : To M/s. Verma Transport Co. (Roadways, 173/225, Transport Nagar, Kanpur).

(iii) Inventory of stock seized/restrained at the premises in the case of M/s. Verma Transport Co., 133/225, Transport Nagar, Kanpur (Page-14 of the Paper Book of the Deptt.).

(iv) Panchnama dated 28-11-1996 (Paper Nos. 54-57 of the Paper Book of the deptt.) in which the following entries made : (A) Warrant in the case of - M/s. Verma Transport Co. and Lucknow Banda Transport Co., 133/283, Transport Nagar, Kanpur.

(B) Warrant to Search - M/s. Verma Transport Co. and M/s. Lucknow Banda Transport Co.'s godown.

(v) Panchnama dated 28-11-1996 (Papers 59-62 of paper book) which contains following entries : (A) Warrant in the case of - M/s. Verma Transport Co. and Lucknow Banda Transport Co., 133/283, Transport Nagar, Kanpur.

(B) Warrant to Search - M/s. Verma Transport Co. and M/s. Lucknow Banda Transport Co.'s godown.

(vi) Panchnama dated 28-11-1996 (Papers 67-70 of the Paper Book of the deptt.) which contains following entries : (A) Warrant in the case of - M/s. Verma Transport Co. and Lucknow Banda Transport Co., 133/283, Transport Nagar, Kanpur.

(B) Warrant to Search - M/s. Verma Transport Co. and Lucknow Banda Transport Co., 133/283, Transport Nagar, Kanpur.

51. From the documents referred to above, what follows is that there was no warrant of authorisation in the case of M/s. Verma Roadways, the appellant before us, and, therefore, there could have been no search under section 132(1) in the case of M/s. Verma Roadways. Thus, as there was no warrant of authorisation, in the case of M/s. Verma Roadways for conducting search under section 132(1), the plea of the assessee that there was no warrant of authorisation in the case of the assessee is bound to succeed.

52. Here, we may also mention that it is not the case of the deptt.

that M/s. Verma Transport Co. and M/s. Verma Roadways are one and the same entity. It is also not the case of the department that by mistake M/s. Verma Transport Co. has been written in place of M/s. Verma Roadways. The position appears to be just otherwise. The department of Central Excise conducted a search in the case of M/s. Verma Roadways, as is evident from their Panchnama dated 27-11-1996 which is available at pages 85-86 of the Paper Book of the department. This Panchnama is for conducting the search in the case of M/s. Verma Roadways. Besides, it, not only this Panchnama but all other documents, viz., the annexures, the Panchnamas including the list of documents and books, found and seized by the Central Excise Department related to M/s. Verma Roadways. The most important document is annexure 'A' to Panchnama dated 27-11-1996 which is paper 97 of the Paper Book of the department.

This contains the details of currency notes to the tune of Rs. 1,70,20,000 which were seized from the premises of the office of M/s.

Verma Roadways situated on the first floor of M/s. Lucknow Banda Transport Company, 133/283, T.P. Nagar, Kanpur. The same is the position with respect to other documents of Central Excise Department.

The list showing details of records which is available on page 102 of the paper book of the department, prepared by the Central Excise Department, also pertains to M/s. Verma Roadways, T.P. Nagar, Kanpur.

The record of proceedings (Pages 104 to 112) also relate to M/s. Verma Roadways. Thus all these documents referred to above, which relate to the search and seizure conducted by the Excise Department, strongly demonstrate that there is a firm in the name of M/s. Verma Roadways which was searched by the Central Excise Department. Thus there is no scope for any imagination that M/s. Verma Roadways and M/s. Verma Transport Co. are one and the same entity.

53. Since the department has specifically admitted before the Bench that there is no warrant of authorisation other than the warrant of authorisation dated 28-11-1996, filed with the letter of the ld. D.R.dated 10-9-1999, in compliance to the directions of the Bench dated 8-9-1999, which is in the name of M/s. Verma Transport Co., Lucknow Banda Transport Co., it stands established that there was no warrant of authorisation for conducting search, as stipulated under the provisions of Section 132(1) of the Income-tax Act, 1961, in the case of the person styled as "M/s. Verma Roadways" and if it is so, then, all consequential actions, such as seizure, issuance of notice under section 158BC and consequential Block assessment in the hands of M/s.

Verma Roadways are rendered illegal.

54. While taking the above view, we are fully supported by the decision of I.T.A.T., Bangalore Bench, in the case of Microland Ltd. v. Asstt.

CIT [1998] 67 ITD 446. In that case, the warrant of authorisation was not in the case of assessee company, viz., Microland Ltd.'s case (supra). The Panchnamas were all in the name of Shri Pradeep Kar, C.M.D., M/s. Microland. In this factual situation, the assessee insisted for production of search warrant.

55. On the direction of the Tribunal, a photo copy of the warrant was produced which contained the name of M/s. Microland Ltd. The Tribunal after examining the entire circumstances, including the Panchnamas etc.

came to the conclusion that all the papers were in the name of Shri Pradeep Kumar and not in the name of the company. In view of this, the assessment made under section 158BC was held to be invalid and void in law. In the case of Southern Herbals Ltd. v. Director of Income-tax [1994] 207 ITR 55 (Kar.), Hon'ble Calcutta High Court held that warrant of authorisation under section 132(1) of the Income-tax Act has to be in prescribed form. It cannot be issued in general terms without specifying "the person" in respect of whom it is issued.

56. So far as the objections and arguments of the ld. Senior Standing Counsel for the department relating to the raising of the plea regarding validity of the search and authorisation for the first time in the appeal and maintainability of the ground Nos. 1 and 5, are concerned, we are unable to agree with him that such pleas cannot be taken in the first appeal because these pleas, which are legal pleas, can be taken at any stage and definitely at the stage of first appeal.

57. As regards his next submission that the assessee did not challenge the validity of authorisation for search and legality of search before the Assessing Officer and even filed its return, is concerned, here too, it will be sufficient to mention that the assessee is not deprived in raising the legal issues before the appellate authorities.

58. So far as submissions of the ld. Senior Standing Counsel that there was factual search in the premises of the assessee and factually the material and cash etc. was seized from its premises is concerned, we are unable to justify such an approach and uphold the same because if a particular procedure for a particular act has been prescribed and specified in the Statute, that procedure has to be followed in accordance with the such specific statutory provisions so as to give full effect to the object and intent behind such statutory provisions.

In the present case, in our considered view, the same has not been done.

59. In view of the above, we hold that power under section 132 was not exercised in the case of the appellant-assessee, i.e., M/s. Verma Roadways, as no warrant of authorisation was issued against the assessee. The consequence will be that the assessment have to be declared bad in law and void ab initio on these grounds and the same are liable to be quashed. The submissions raised on behalf of the assessee-appellant, relating to ground Nos. 1 & 5, therefore, are accepted and those of the revenue are not accepted. Ground Nos. 1 & 5 are, therefore, allowed in favour of the assessee.

61. Through these grounds, the assessee has challenged the validity of the notice under section 158BC dated 8-5-1997.

62. The first submission of the ld. counsel for the assessee, as contained in ground No. 2, is that the issuance of a valid notice is a pre-condition for making assessment under section 158BC, as notice under section 158BC is statutory and mandatory and jurisdictional. The assessee has challenged the validity of the notice on the ground that it does not specify the status of the assessee. The next challenge of the assessee as contained in ground No. 4 is that the notice is invalid inasmuch as it required the assessee to file return for the period which could not have been legally included in it.

63. On these objections relating to the notice, the ld. counsel for the assessee has invited our attention to the copy of notice which is available at page 1 of the supplementary paper book and which is reproduced below : "Notice under section 158BC of the Income-tax Act, 1961 PAN/GIR To M/s. Verma Roadways, Block Period : 1-4-1986 to 133/283, T.P. Nagar, 28-12-1996 Kanpur.

ACIT (Inv) Cir, I (1), Civil Lines, Kanpur, 64. Pursuance of the provisions of section 158BC of the Income-tax Act, 1961, you are required to prepare a true and correct return of your total income including the undisclosed income in respect of which you as individual/HUF/Firm/Company/AOP/Body of Individual/Local Authority are assessable for the block period mentioned in section 158B(a) of the Income-tax Act, 1961.

65. The return should be in the prescribed form No. 2B and be delivered in this office within 16 days of service of this notice, duly verified and signed in accordance with the provisions of section 140 of the Income-tax Act, 1961.

65. Referring to the above mentioned notice, the ld. counsel for the assessee, Shri S. P. Gupta, ld. Senior Advocate, submitted that the notice has to be against a person and definition of person is given in section 2(31) of the Income-tax Act, according to which person is defined as follows : (v) an association of persons or a body of individuals, whether incorporated or not; (vii) every artificial juridical person, not falling within any of the preceding sub-clauses." 66. According to him, "M/s. Verma Roadways" is a registered firm while the notice does not specify as to whether it is in the case of an individual or a registered firm or a company etc. and the relevant printed words in the printed form of the Notice, i.e., individual/HUF/Firm/Company/AOP/Body of Individual/Local Authority, do not exactly and correctly specify the status of the assessee.

67. The next objection of the ld. counsel for the assessee relating to this notice is that it is for the period 1-4-1986 to 28-12-1996 while it could have legally covered only the period from 1-4-1986 to 28-11-1996, i.e., Ten years from the end of the month in which the last of the authorisation for search under section 132 was made. According to him, in the present case, the last of the authorisation was made on 28-11-1996 and, therefore, the block period cannot be extended beyond 28-11-1996.

68. In this regard the main contention of the ld. counsel for the assessee was that the notice under section 158BC is a jurisdictional notice inasmuch as the assessing authority can assume jurisdiction only on the basis of notice and hence the notice is mandatory. He further elaborated his argument by saying that the notice to be a valid notice has to contain all the material details and necessary information.

69. In support of his submissions, ld. counsel for the assessee relied on the following decisions : (vi) CIT v. Bibhuti Bushan Mallick [1987] 165 ITR 107/[1986] 26 Taxman 211 70. The ld. counsel for the assessee, comparing the provisions of section 148(1) of the Income-tax Act and section 21 of U.P. Trade Tax Act with the provisions of section 158BC, relating to the requirement of notice, emphasised that these notices are jurisdictional notices.

Explaining the object, effect and consequences of the notices required under these provisions, the ld. counsel pointed out that the issuance and service of a valid notice is a pre-requisite for initiating the relevant assessment proceedings, as the Assessing Officer assumes or acquires jurisdiction only after and on the basis of a valid notice under the relevant provisions of law, therefore, if the notice is not valid or its service is not valid, then it is no notice in the eyes of law and the consequence of such an invalid notice is that the entire assessment proceedings made subsequent to the notice or on the basis of notice, are void.

71. About the nature and scope of notice under section 158BC, the ld.counsel for the assessee further submitted that as in the case of section 148(1) of the Income-tax Act, the notice under section 158BC "requires the assessee to furnish a return ....." According to him, the only difference is that under section 148(1), the return is required to be filed for the relevant assessment year while under section 158BC, the return is to be filed for the block period. He also pointed out that in both the cases, i.e., under section 148 and Chapter XIV-B fundamentally it is assessment of escaped or undisclosed income. Hence the proceedings in both the cases are of similar nature. According to him, considering the language and provisions and the scheme of these provisions, the provisions relating to notice under section 158BC are to be treated in pari materia to the provisions relating to notice under section 148 of the Act.

72. About the notice dated 8-5-97, ld. counsel submitted that considering the panchnamas and other documents of search and seizure which according to him were not in the case of Verma Roadways, no notice could legally be issued against it as it could be issued only against such persons against whom any search had been conducted under section 132 or books of account etc. have been requisitioned under section 132A. In this regard his main contention was that against M/s.

Verma Roadways, neither there was legal and valid search nor the notice relates to the requisitioned material under section 132A of the Act relating to that firm.

73. Ld. Senior Standing counsel, Shri Bharatji Agarwal, on the other hand, submitted that notice under section 158BC was not a jurisdictional notice but only a procedural notice. He has pointed out that the notice was addressed to none else but to M/s. Verma Roadways, the assessee, and was served on the assessee firm on 16-5-1997. He further pointed out that after the service of notice on that very date, a request was made on behalf of the assessee for supply of the form No.2B and further request for time to file the return was also made on the same date. According to him, the assessee went on making several requests which were on 16-5-1997, 29-5-97, 13-6-97, 8-8-97 and so on.

Thus the notice was validly served upon the assessee. Its contents were known to it and no objection regarding the validity of the notice was ever raised by the assessee before the Assessing Officer during the assessment proceedings or before. He has further pointed out that in the present case there was search in the premises of the assessee by the Central Excise Department and the documents relating to that search were properly requisitioned and there was also search by the Income-tax Department in the premises of the assessee. The ld. standing counsel further pointed out that notice under section 158BC had been issued in pursuance of search which took place under section 132 of the Income-tax Act. Referring to the speech of Hon'ble Finance Minister reported in 212 ITR 87 Statute para 71(81), he pointed out that the provisions of Chapter XIV-B were introduced to make the procedure more effective and, therefore, only procedural part was changed and modified. This was done with a view to unearth black money/undisclosed income which related to different years in which years income was earned and as such the assessments were unduly delayed.

74. Regarding various objections pointed out on behalf of the assessee appellant, the ld. counsel submitted that search under section 132 of the Income-tax Act was factually conducted.

75. In his view, the notice under section 158BC cannot be equated with that of section 148 as the requirements of both the notices are different. So far as the so-called mistake in not mentioning the status in the notice is concerned, the ld. Counsel submitted that the notice has been properly addressed to "M/s. Verma Roadways" and if there is any mistake in not scoring the irrelevant portions in the body of the notice, such a mistake is curable under section 292B of the Income-tax Act. According to him, merely because status is not mentioned in the body of the notice, on this ground the notice shall not become invalid.

He also made a specific reference to the last part of the notice which requires the assessee to furnish return in prescribed form No. 2B and to deliver the same in the office within 15 days of the service of notice.

76. About the period of notice, ld. counsel submitted that if there was some mistake in the writing of the date, then the notice shall not stand vitiated. And such a mistake is curable under section 292B. About the decisions referred to by the ld. counsel for the assessee in support of his objections against the validity of the notice, the ld.Senior Standing counsel referring to these cases in detail, submitted that the cases are distinguishable on facts and are not applicable so far as notice under section 158BC is concerned.

77. In reply to the submissions of the ld. Sr. Standing Counsel, the ld. counsel for the assessee repeated that the notice under section 158BC is not merely procedural, rather it is jurisdictional. According to him, it is not an empty formality and, therefore, content-wise, it has to be a substantive notice and should, therefore, communicate to the addressee in clear terms, the subject matter to which it relates and the direction which the assessee has to comply with. There is total absence of the necessary material in the notice, without which the assessee could not comply the directions to file the return. He further pointed out that notice does not disclose the quantum and character of undisclosed income nor does it disclose the valid block period nor the basis of proceedings, i.e., the search or requisition. In the submission of the ld. counsel for the assessee, the infirmities existing in the notice under section 158BC are not curable by provisions of section 292B because section 292B does not cover such infirmities. Relying on the decision of Shri P. N. Sasi Kumar's case (supra), he said that such a fundamental infirmity cannot be called a "technical objection or a mere irregularity" and such valid infirmity cannot be cured or obliterated by relying on section 292B of the Income-tax Act.

78. We have carefully considered the facts and circumstances the relevant materials to which our attention was invited and the rival submissions relating to these grounds.

79. The first and foremost objection of the ld. counsel for the assessee, Shri Gupta, is that the notice under section 158BC is mandatory. Referring to the impugned notice, he has pointed out that this notice neither refers to section 132 nor to section 132A. Hence the notice is neither founded on any search, as envisaged under section 132 of the Income-tax Act nor on the basis of 'requisition' referred to under section 132A. Referring to the various documents relating to search and seizure by the Income-tax Department including panchnamas and seizure memos, he pointed out that these documents do not relate to M/s. Verma Roadways which goes to establish that there was no valid search under section 132(1) of the Income-tax Act in the case of M/s.

Verma Roadways and, therefore no notice could be issued under section 158BC on the basis of any such search. The next argument of the ld.counsel was that the notice could also not be issued on the basis of requisitioned material because there was no requisitioned material available to the assessee before 7-8-1997. Hence the notice in regard to such requisitioned material could be issued only after 7-8-1997 and not prior to it.

80. We have considered this aspect of the matter carefully. The warrant of authorisation produced by the department on 10-9-1999 is not in the case of M/s. Verma Roadways but pertains to M/s. Verma Transport Co., Lucknow Banda Transport Company, which goes to prove that there was no authorisation as such in the name of M/s. Verma Roadways. The documents of search and seizure, including the panchnamas referred to above, are all in the name of M/s. Verma Transport Co. and Lucknow Banda Transport Co., which further goes to establish that there was no search under section 132(1) of the Income-tax Act, against or in respect of M/s.

Verma Roadways. The Department has failed to show that there was any warrant of authorisation in respect of or relating to the assessee, i.e., M/s. Verma Roadways. We have discussed in detail this aspect of the matter while discussing ground Nos. 1 and 5 and have recorded our findings. Thus the contention of the assessee that in the absence of any valid and legal authorisation of search and search under section 132(1) of Income-tax Act in the case of the assessee, i.e., M/s. Verma Roadways, there was no occasion or justification for issuing any notice under section 158BC on the basis of such search, deserves to be accepted.

81. The other aspect of the matter is that a search was conducted in the premises of M/s. Verma Roadways by the officers of Central Excise Department. The officers of the Central Excise Department seized documents, books and other materials including cash of Rs. 1,70,20,000 from the premises of M/s. Verma Roadways. The department of Income Tax requisitioned this material vide requisition letter dated 11-12-1996.

However, it is not known as to where this document remained. The proceedings of requisition took place on 7-8-1997 as is evident from paper No. 103 of the paper book of the department. Thus before this date, the question of taking delivery of possession by the Income Tax Department of the documents relating to search and seizure made by the Central Excise Department does not arise. The inventory of account books etc. contained in Annex A (pages 104-112) also goes to show that these documents were received by the Income Tax Department on 7-8-97.

We have also gone through the statements of Shri Ramesh Kumar Verma and Shri Jagdamba Prasad Verma recorded by the Assessing Officer.

82. The statement of Shri Jagdamba Prasad Verma was recorded on 19-8-1997 and that of Shri Ramesh Kumar Verma was recorded on 3-9-1997.

It is thus implied that the requisitioned material came into hands of the Income Tax Department after the issuance of the notice. Further, there is no other fact to prove that the Income-tax Department issued notice under section 158BC on the basis of any other information relating to search and seizure conducted by the Central Excise Department. Thus, the contention of the ld. counsel for the assessee, in this respect also deserves to be accepted and the notice dated 8-5-1997 reproduced on page 16 of this order deserves to be quashed, being illegal and void.

83. So far as the legal aspect of the notice is concerned, in the case of Monga Metal (P.) Ltd. v. Asstt. Commissioner, the Income-tax Appellate Tribunal, Allahabad Bench 'A' vide its order dated 30-6-99 to which one of us was party, has held that notice under section 158BC is akin to the notice under section 148 of the Income-tax Act.

Respectfully following the same view and without discussing the case laws discussed in that decision in detail, we are of the view that the notice under section 158BC is akin to the notice under section 148 of Income-tax Act.

84. It will be relevant and significant to refer to some of the important decisions on the point of validity of notice which are as follows : "The notice presented by section 34 of Income-tax Act for purposes of initiating reassessment proceedings is not a mere procedural requirement. The service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under section 34. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice would be illegal and void." CIT v. Kurban Hussain Ibrahimji Mithiborwala [1971] 82 ITR 821 (SC) In this case, it was held that; "It is well settled that the Income-tax Officer's jurisdiction to reopen an assessment under section 34 depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reasons, the entire proceedings taken by him would be void for want of jurisdiction." 85. In the case of P. N. Sasi Kumar (supra), the Hon'ble Kerala High Court, in relation to notice under section 148 of Income-tax Act held that issue of a valid notice under section 148 is a condition precedent to the validity of assessment order to be passed under section 147 of the Act. The Hon'ble Court further observed as follows : "... It is settled law that the issue of a notice under section 148 of the Income-tax Act is a condition precedent or a matter of jurisdiction to the validity of any reassessment order to be passed under section 147 of the Act. It is also settled law that if no such notice is issued or if the notice issued is invalid or not in accordance with the law or is not served on the proper person in accordance with the law, the assessment would be illegal and without jurisdiction. The notice should specify the correct assessment year and should be issued to the particular assessee. Under section 2(31), "person" includes an individual or a Hindu undivided family or company, firm, an association of persons or body of individuals, whether incorporated or not, etc. They are distinct and different assessees. The service of a prescribed notice, on a particular assessee, who is to be assessed, is a condition precedent to the validity of any assessment to be made under section 147 of the Act.

It is the very foundation of the jurisdiction of the Income-tax Officer." 86. In the case of K. Adinarayana Murthy (supra), the Hon'ble Supreme Court of India has held that where a notice under section 34 of Income-tax Act to reopen the assessment was in the status of an 'individual' but the return was filed in the status of a Hindu Undivided Family, such a notice in which correct status of the assessee was not mentioned, could not have been validly acted upon.

87. In the case of Madan Lal Agarwal (supra), the Hon'ble Allahabad High Court, has held that if the notice does not give any inclination that it was issued to the assessee in his capacity as representing Hindu Undivided Family which is different from his individual capacity, prima facie, such a notice could not be interpreted as having been issued to him as an individual. It was further held that in such a notice, the defect could not be rectified by the ITO. In that case, the Hon'ble High Court held that entire proceedings were vitiated on account of invalid notice.

88. In the case of Bhagwan Devi Saraogi (supra), the Hon'ble Calcutta High Court has held that if no valid notice of reassessment was issued or if issued was illegal or invalid, then the entire reassessment proceedings would be without jurisdiction. The court further held that the issuance of the notice being illegal and the notice being invalid, the ITO had no jurisdiction to proceed thereunder and the assessment, which had followed therefrom, is also necessarily illegal.

89. About the requirements of a valid notice, the Hon'ble Gujarat High Court in the case of Nyal Chand Maluk Chand Dagli v. CIT [1966] 59 ITR page 24, the Hon'ble High Court has held as under : ".... The only requirement of the statute is that the notice must contain all or any of the requirements of a notice under section 22(2). It is evident from this requirement and also implicit from the nature of the notice that it must specify with clearness and particularly the assessment year for which the assessment is sought to be reopened for which in the opinion of the Income-tax Officer, income has escaped assessment or has been under assessed and in respect of which the assessee is required to file a return of his total income and total world income during the previous year. This condition must be clearly satisfied if the notice is to be a valid notice." 90. In the case of CIT v. Bibhuti Bhushan Mallick [1977] 107 ITR 164, the Hon'ble Calcutta High Court upheld the view of the Tribunal which held that the notice was illegal as it did not correctly mention the name of the assessee. On this basis, the proceeding of reassessment under section 147 were held to be invalid.

91. In the case of Satya Narain Kirana Bhandar (supra), the Hon'ble Allahabad High Court upholding the view of the Tribunal, held that notice under section 21 of the U.P. Sales Tax Act for reassessment was defective as it did not indicate that the assessing authority had reasons to believe that either a part of the turnover had escaped assessment to tax or had been taxed at a lower rate or a particular exemption claim had been wrongly allowed.

92. In the case of Prakash Spun Pipe v. ITO Ward-A, the I.T.A.T. Bench 'A' Allahabad vide its order dated 13-2-98 has held that the defects or omissions in the assessment notice cannot be cured by resorting to provisions of section 292B of the Income-tax Act as that provision is not panacia for curing all the defects.

93. The decisions cited above will apply to notice under section 158BC with equal force on the point of validity of notice, as the provisions of section 21 of U.P. Sales Tax and those of section 148 of Income-tax are virtually similar in nature.

93. So far as the contention of the Ld. Senior Standing counsel that the notice is only procedural and not mandatory is concerned, we are unable to accept the same as the ld. counsel could not support his view by citing any decision. His contention that the case laws cited on behalf of the appellant are not applicable to the present case and are distinguishable, too cannot be accepted. His argument that the defects in the notice are curable under section 292B is also not convincing inasmuch as the defects in the impugned notice are not of minor nature or of technical type but are of major nature.

94. The other contention of the ld. counsel for the respondent that since the assessee had not objected to the validity of notice before the Assessing Officer and even filed return in compliance thereof and hence it cannot be allowed to raise the objection against the validity of notice at this stage, cannot be accepted, as in our view the plea relating to validity and legality of Notice is definitely a legal plea and "the question regarding the validity of notice is a pure question of law" as held by the Hon'ble Calcutta High Court in the case Bhagwan Devi Saraogi (supra), hence such a legal plea can be raised in first appeal. The case law referred to by the ld. counsel for the respondent.

On this aspect of the matter, therefore, is also not of any help to him.

95. Thus the submissions of the ld. counsel for the deptt. for defending the notice cannot be accepted.

96. In view of the above stated legal position and in view of the totality of the facts and circumstances of this case, we accept the contention of the ld. counsel for the assessee that the impugned notice is invalid and illegal.

97. In view of the above, we hold that the impugned notice dated 8-5-97 is bad, defective, illegal and invalid firstly, because such a notice could not be issued on the basis of alleged search under section 132 of the Income-tax Act as there was no valid authorisation for the same; secondly because such a notice could not be issued on the basis of requisition under section 132A at there existed no requisitioned material before the issuance of the notice; thirdly, because the notice does not specify the status of the assessee; fourthly, because it does not indicate the material particulars and necessary informations i.e.

as to whether it has been issued on the basis of 'search' or 'Requisition' or both, which was necessary to be shown in the notice in the special circumstances relating to this case, and lastly, because it wrongly mentions the block period. It is to be mentioned here that the notice is for the block period of 1-4-86 to 28-12-96, while the assessment has been made for the block period of 1-4-94 to 28-11-96.

98. We further hold that since for assumption of the jurisdiction to proceed for making of the assessment for block period, service of a valid notice in terms of section 158BC is a pre-requisite and a mandatory condition, and since the notice in the present case is found to be void and defective on the grounds mentioned above, the assessment framed under such conditions is bad in law and void ab initio. We, therefore, hold accordingly.

99. The ground Nos. 2, 3 and 4 are, therefore, allowed in favour of assessee and against the Revenue.

The assessee-appellant has challenged the validity of approval to the assessment order accorded by the C.I.T., Kanpur on the following grounds : "6. Because prior approval of CIT Kanpur has not been obtained. This mandatory pre-requirement having not been met the order in nullity, without jurisdiction and void ab initio.

7. Because in the alternative, no prior approval of CIT Kanpur having been communicated to the appellant. The same does not exist in the eyes of law and the order impugned is a nullity.

8. Because again in the alternative, no opportunity to show cause or of hearing having been granted to the assessee prior to grant of approval (if any) by CIT Kanpur, no approval has come into existence in the eyes of law.

101. Shri S. P. Gupta, the ld. Sr. Advocate, firstly submitted that no previous approval was obtained by the Assessing Officer at the time of passing of the impugned assessment order. Referring to the provisions of section 158BC of the Income-tax Act, he submitted that no order of assessment for the block period can be passed by an Assessing Officer without the previous approval of the Commissioner. According to him, in the impugned assessment order, there is no mention of the fact that the previous approval of the Commissioner was granted by the Commissioner before passing of the assessment order. In this regard he further submitted that the department cannot be allowed to place the order of approval before the Tribunal for the first time and if the order of approval is placed before the Tribunal at the time of hearing of the appeal, then no cognisance of such a document should be taken.

102. The main challenge of the ld. counsel for the assessee in this regard is based on the following grounds : (a) The existence of prior approval/on record before the assessment is mandatory.

(b) The so-called approval is non-speaking as it does not contain reasons.

(c) It does not disclose the application of mind of the approving authority.

(d) The approval has been given without affording any opportunity to the assessee which is violation of the principle of natural justice and fair play and is, therefore, void.

(e) The approval cannot be read in evidence because it has not been communicated to the assessee.

103. The assessment order cannot be supplemented or supported by a matter which is not contained in the assessment order of which has not been communicated.

104. In support of his contention and above mentioned objections, the ld. counsel relied on the following decisions : 1. C. B. Gautam v. Union of India [1993] 199 ITR 530/[1992] 65 Taxman 440 (SC)S. L. Kapoor v. Jagmohan 5. CIT v. Oriental Rubber Works [1984] 145 ITR 477/[1983] 15 Taxman 51 (SC) 105. The ld. Senior Standing Counsel, Shri Bharatji Agarwal, in reply to the objections of the assessee on the point of approval submitted that the provisions of section 158BC are procedural and, therefore, there was no necessity to give any opportunity of being heard to the assessee before granting of approval. He also contended that there was no provision for such an opportunity in the relevant statutory provisions. Referring to the judgment of the Hon'ble Supreme Court of India in the case of C. B. Gautam (supra) the ld. counsel, Shri Agarwal, submitted that the decision is in relation to other provisions of the Income-tax Act and the provisions of section 158BG are distinguishable from those provisions. The ld. counsel further submitted that wherever the legislature intended to provide an opportunity, the requirement of providing opportunity has been specifically mentioned. It was also submitted that the assessee did not take the plea regarding approval before the Assessing Officer.

106. We have carefully considered the facts and circumstances relating to this aspect of the matter, the material to which our attention was invited and the rival submissions. The preliminary objection of the ld.counsel for the department regarding raising of the grounds mentioned above was that as the assessee had not taken these grounds before the Assessing Officer, such pleas cannot be taken for the first time in appeal. The ld. counsel for the assessee, on the other hand, submitted that the legal grounds can be raised at any point. We are of the view that the assessee is entitled to raise even a fresh plea if the plea relates to some legal aspect of the matter but it can do so only on the basis of the same material i.e., material already existing on record.

Thus, the preliminary objection of the ld. counsel for the department cannot be sustained.

107. So far as the contention of the ld. counsel for the assessee that the approval did not exist before the passing of the assessment order or that the fact of granting of approval has not been mentioned in the assessment order, we are unable to agree with the ld. counsel on this point. In our opinion, it is not necessary to mention in the assessment order the fact that the approval had been granted.

108. As regards the plea of providing opportunity of being heard before granting the approval and the requirement of communication of approval are concerned, we have learnt that on this issue, Special Bench of the Tribunal has been constituted at Delhi and the matter has also been heard. Hence, normally, and in accordance with sound notions of judicial propriety, we would have waited for the decision of the Special Bench on this issue but as the assessee has taken specific pleas which have to be adjudicated by us and as the time limit for deciding this appeal has also been fixed by the Hon'ble High Court, we consider it proper to deal with these pleas on the basis of the availability of material and the arguments of the ld. counsel for the parties. Hence, we are proceeding to decide these pleas.

109. In the case of Microland Ltd. (supra), the ITAT, Bangalore Bench, while explaining the object behind the section 158BG, has held that the provision for according approval to the assessment orders, to be passed in cases of search and seizure, were introduced mostly for purposes of allowing the Commissioner to monitor the search and seizure cases in a legal manner. According to the Tribunal, but for this provision, any interference on the part of the Commissioner, even to oversee how the search and seizure assessments are progressing might have been considered as illegal and invalid. Elaborating the limited functions of the Commissioner, while approving the assessment order, the Tribunal held that since the approval itself does not create any civil liability of great consequence and is merely of administrative nature, no effective harm was to be caused to the assessee on account of such approval and therefore not granting opportunity of being heard to the assessee, did not constitute denial of principles of natural justice.

110. In the case of Shaw Wallace & Co. Ltd. v. Asstt. CIT [1999] 68 ITD 148 (Cal.) - Jurix, The Corporate Law Suits, June, 99 page 16, the Tribunal has observed as under : "In our opinion, the purpose/necessity to take approval under section 158BG by Assessing Officer to pass block assessment order appears to be that the Commissioner should monitor the supervise the assessment of the block period for the reason of this being not a routine assessment but a special assessment being in a case of search and seizure and involving the block period of 10 years. It is from this angle that the Board's instructions contained in its Circular letter dated 2-1-1996 directs the CITs to keep themselves involved in search assessment proceedings right from the beginning and that for proper monitoring of search cases and internal correspondence folder should be maintained. While considering the giving of approval under section 158BG the Commissioner may on perusal of record consider some part of the draft assessment order to need a modification or some addition not to be made, and to advise/instruct the Assessing Officer accordingly. This process may rid the appellate authority of some of its exercise. Therefore, even if there happens to be some irregularity in giving approval the same hardly has any fatal consequence inasmuch as the resultant block assessment order remains very much assailable in appeal before the Tribunal and thus approval hardly entails any material prejudice to the assessee. Such approval, even if laconic in some aspects, will not invalidate/vitiate the assessment itself. The only understandable impact seems to be that it may necessitate somewhat more exercise at the appellate stage. We cannot agree to the ld. D.R.'s contention that after the factum of approval is established, the Tribunal cannot touch the approval whether the same is right or wrong as this is an appeal against assessment and not against approval against which no appeal is provided. If we were to accept the contention we are afraid, lest it should betray our awareness as to the bare fact that the approval, a statutory requirement, is for the purpose of passing an assessment order of the block, an assessment order in accordance with law, and in appeal against assessment order what the Tribunal judicially scrutinises is the correctness/propriety, validity/legality of the block assessment order and the Tribunal vide its appellate order confirms, cancels, quashes, modifies or sets aside the block assessment order in so far as the same is found to be or not to be in accordance with the said standards of scrutiny. Considering the scheme of Chapter XIV-B together with the fact of there being a fixed period of limitation for completing the assessment of the block and the block period being spread-over a span of 10 years, and the case being a special one involving search and seizure, the approval being not of any decisive consequence as discussed above, and the statute, though specifically providing for the previous approval along with other detailed procedure, not containing any provision for the giving of opportunity of hearing to the assessee prior to grant of approval, we are of the considered opinion that in the matter of block assessment under Chapter XIV-B, the giving of opportunity of hearing to the assessee prior to according approval under section 158BG by the Commissioner is not essentially needed. This is so also because such an opportunity may, not unoften, involve lengthy hearings and time absorbing as well, together with adjournments which, in turn, may spell obstruction/pendency and thereby frustrate the very purpose." 111. In the case of Jaya S. Shetty v. Asstt. CIT [1999] 69 ITD 336, the Bombay Bench of the Tribunal has also held that no opportunity is needed before according approval. The relevant extract of the decision of the I.T.A.T. Mumbai Bench 'D' is reproduced as follows : "... Similarly, regarding the assessment order becoming illegal because no opportunity was given to the assessee by the CIT before granting approval to the assessment order, we feel that the arguments as advanced by the ld. D.R. before us were not advanced before the Chennai Bench of the I.T.A.T. We agree with the ld. D.R. that wherever the Legislature considered it necessary to provide an opportunity to the assessee such provisions were incorporated in the Income-tax Act, examples of a few of which have been given by Shri Jha and noted by us in this order. In our opinion, no court, much less the I.T.A.T. can add some words in or exclude some words in any section of the Statute when the meaning of the words from that section is clear. Therefore, this objection is also rejected." 112. In view of this legal position mentioned above, we are of the opinion that neither opportunity of being heard is required before granting approval nor the approval order is needed to be communicated to the assessee. The pleas of the assessee, therefore, are not sustainable.

114. Coming to the aspect of the application of mind, while granting approval, we are of the view that requirement of approval pre-supposes a proper and thorough scrutiny and application of mind. in the case of Kirtilal Kalidas & Co. (supra), the I.T.A.T. Madras Bench 'A' has observed that the function to be performed by the Commissioner in granting previous approval requires an enquiry and judicial approach on the entire facts, materials and evidence. It has been further observed that in law where any act or function requires application of mind and judicial discretion or approach by any authority, it partakes and assumes the character and status of a judicial or at least quasi-judicial act, particularly because their act, function, is likely to affect the rights of affected persons.

115. After going through the relevant provisions relating to granting of approval and the relevant case laws, we are of the view that the intention of the legislature while enacting the provisions of 158BG appears to be that the block assessment in search cases of undisclosed income entailing serious consequences should be thoroughly gone through before the assessment is made. That is the object for entrusting a job of approval to a superior and very responsible officer of the rank of Commissioner or Director so that he, with his ability, experience and maturity of under-standing, can scrutinize the documents, can appreciate its factual and legal aspects and can properly supervise the entire progress of assessment. Thus, the concerned authority, while granting approval, is expected to examine the entire material before approving the assessment order. It is also a settled law that whenever any statutory obligation is cast on any authority, such authority is legally required to discharge the obligation not mechanically nor formally but by application of mind.

116. So far as the approval in the present case is concerned, a copy of the same is available at page 169 of Paper Book of the department. The relevant part is reproduced as under : Sub : Approval of assessment order in the case of M/s. Verma Roadways, Transport Nagar, Kanpur and Shri Jagdamba Prasad Verma, Prop.

M/s. Lucknow Banda Transport Ltd., Transport Nagar, Kanpur. On going through the facts on the basis of the seized materials and documents scrutinized by you, the approval for passing order under section 158BG is hereby accorded.

Suitable office note should be left wherever the version of the assessee has been accepted while giving positive reasons." 117. It is to be mentioned here that as observed earlier the warrant of authorisation under section 132 as well as Panchnamas and other relevant documents relating to search by the Income-tax Department were not in the case of M/s. Verma Roadways but in the case of M/s. Verma Transport Co. The Commissioner, while according approval, was expected to go through all these documents. Had he done so, he could have detected the mistake which he has not done and which indicates non-application of mind on his part. He has also not stated the fact that he has himself gone through the material relating to search and seizure and the requisitioned documents. The approval granted by him is non-speaking as the reasons have not been mentioned in it. In view of these facts and circumstances, we are led to conclude that there was non-application of mind on the part of the Commissioner and as such, the approval has been granted in just a mechanical or formal way which action of the approving authority cannot be legally justified. We are constrained to observe that a very senior officer, entrusted with a very onerous and responsible job has failed in discharging his duties in the manner expected by law. The seriousness of such act or conduct can be appreciated by considering the consequences which entail such a defective action.

118. In view of the above, the objection of the ld. counsel for the assessee, regarding the validity of the approval on this ground is sustained. The approval being void and invalid leads to the consequences that the assessment order made on the basis of such approval is also liable to be quashed as being void and illegal.

"9. Because the impugned proceedings/assessment order are against the provisions of section 158BB and Chapter XIV-B of the Act." 123. The assessee has challenged the validity of the assessment order on the ground that the determination of undisclosed income for the block period has not been made yearwise as is required by section 158BB. Referring in detail the provisions of section 158BB of the Income-tax Act, ld. counsel submitted that the computation of undisclosed income of the block period has to be in the manner and method prescribed under section 158BB. According to him, the Assessing Officer has committed a mistake by making computation for the entire block period without making computation of income of each previous year. He also referred to the provisions of section 158BC which provide that the manner of computation shall be as laid down under section 158BB. In this regard he submitted that the assessee is an old assessee since 1994 and returns for the earlier two assessment years had already been filed on its behalf and, therefore, effect was to be given to those assessments. In support of his submission, ld. counsel for the assessee has relied on the decision in the case of Express Movers (P.) Ltd. v. Dy. CIT STR 1997 301.

124. The ld. Senior Standing Counsel, on the other hand, submitted that as the assessee did not file any return in form No. 2B and hence determination of undisclosed income yearwise was neither possible nor necessary. According to him, the procedure of yearwise computation of undisclosed income is relevant only where the assessee files return in form 2B.125. We have carefully considered the rival submissions. As specifically provided under section 158BB, referred to above, while computing the undisclosed income of the block year, the Assessing Officer shall work out the aggregate of the total income of the previous years and this has to be done yearwise only. The intention of the legislature behind this provision is that there should be no duplicacy of assessments. Section 158BA deals with the assessment of undisclosed income as a result of search. This provision empowers the Assessing Officer to proceed to assess the undisclosed income in accordance with the provisions of this Chapter. Therefore, by a plain reading of section 158BA, it is clear that this provision is intended to assess the undisclosed income in distinction to a regular assessment. The explanation inserted by the Finance Act No. 2 of 1998 with effect from July 1, 1995 states that the assessment made under this Chapter shall be in addition to the regular assessment.

126. In the case of Shaw Wallace & Co. Ltd. (supra) the position has been clarified by the Hon'ble Calcutta High Court as follows : (Jurix "The Corporate Law Rule" June 1999 P. 9.) 1999, 68 ITD 148 "From the perusal of the provisions of Chapter XIV-B and in particular provision of section 158BB(1), it is clear that for the purpose of computation of undisclosed income of the block period the total income of the previous years falling within the block period shall have to be computed and that will be done in accordance with the provisions of Chapter IV, though on the basis of evidence found as a result of search and such other materials/information as may be available with Assessing Officer, as is provided under section 158BB(1). After determining the total income of each of the previous years falling within the block period the same shall be aggregated and the said aggregate will be reduced by the aggregate of the total income or increased by the aggregate of losses, of the said previous years. The aforesaid total income/losses of the previous years shall be determined in case assessments having already been concluded on the basis of such assessments as provided in clause (a). The said determination shall be made, where returns of income have been filed but assessments have not been made till the date of search, on the basis of income disclosed in such returns, as provided in clause (b). Where the due date for filing of return of income has expired but no return has been filed, the said total income/loss shall be determined at nil as provided in clause (c).

Similarly, the effect shall be given to the provisions of clauses (a) to (f). As such, for computing the undisclosed income of the block period the total income of the previous years falling within the block period shall have to be computed as required by section 158BB(1), though this computation, in accordance with Chapter will be on the basis of evidence found as a result of search and such other materials or information as available with the Assessing Officer. Thus for the purpose of computing undisclosed income of the block period under section 158BB the total income of those previous years, falling within block period in respect of which returns have been filed but assessments have not been made till the date of search, will also have to be determined under section 158BB(1). As such determination of the total income of the said previous years in respect of which returns have been filed but assessment have not been made till the date of search being made under section 158BB(1) due to having been necessitated for the purpose of computing undisclosed income of the block period, of course in accordance with Chapter IV of the Act, the determination of the total income of the said previous year again by way of separate regular assessment will simply spell duplicity and that too for no purposes at all. Such an uncalled for duplicity can hardly be the intent/spirit of the Legislature. The determination of total income under section 158BB(1) of other previous years in respect of which regular assessments have already been made up to the date of search is however obviously understandable for the reason that this determination under section 158BB(1) though being made again, is on the basis of evidence found as a result of search and the barber regular assessments in respect of these previous years were made without taking into consideration the evidence found as a result of the present search. But the determination of total income or for that matter the assessment of total income of the previous years falling within the block period and in respect of which though the returns were filed but assessment were not made till the date of search, being made under section 158BB(1), is after taking into consideration the evidence found as a result of search etc. In that view of the matter we are of the view that in respect of those previous years, falling within the block period, pertaining to which returns have been filed but assessments have not been made till the date of search, there shall have to be only one assessment, which shall be a part of block assessment and made under section 158BB(1) read with section 158BC, under Chapter XIV-B, without there being any other separate assessment under Chapter XIV of the Act for the same." 127. In view of the above mentioned legal position, the computation has to be yearwise. As the Assessing Officer has failed to compute the income yearwise, the impugned assessment order deserves to be set aside. This ground is, therefore, allowed in favour of the assessee.

Consequently the assessment is set aside. However, on this aspect, we will like to restore the matter to the Assessing Officer for making a fresh assessment in accordance with the provisions of section 158BB(1) as is referred to above and in accordance with the rules.

128. Ground Nos. 10, 11, 13, 14, 15, 16 and 17 - This set of grounds relates to the addition made on account of currency notes seized from the premises of the assessee during the searches conducted by the Central Excise Department and the Income-tax Department, while ground No. 17 specifically challenges the addition of Rs. 1,24,46,944.62, ground No. 13 is directed against the rejection of the explanation of the assessee with regard to the sum of Rs. 40,04,000. In Ground Nos.

14, 15 and 16, the assessee has challenged the findings of the Assessing Authority to the effect that the amount of Rs. 65,59,302 does not belong to Late Rameshwar Dayal Shiksha Samiti (registered). Ground Nos. 10 and 11, which are general in nature also challenge the findings of the Assessing Authority with regard to the cash of Rs. 39 Lakhs and Rs. 65,59,302. These contain general objections, which relate to the violation of Rules of natural justice while recording findings by the Assessing Officer on these two items. As this set of grounds (Ground Nos. 10, 11, 13, 14, 15, 16 and 17) relate to the seizure of cash and the explanation of the assessee in respect thereto, we propose to adjudicate upon the issues involved in these grounds in three heads, namely : (A) Cash of Rs. 39 lakhs claimed by the assessee to have been withdrawn on 26-11-1996; (B) Cash of Rs. 65,59,302 which according to the assessee belonged to Late Rameshwar Dayal Shiksha Samiti; (C) Balance Cash, which according to the assessee belonged to its branches.

130. Thus, we do not think it proper to adjudicate upon each ground separately as the abovementioned method will also be in accordance with the approach of the Assessing Officer.

131. A. Regarding cash of Rs. 39 lakhs claimed by the assesses to have been withdrawn on 26-11-1996. - To pick up the relevant facts, a sum of Rs. 1,70,20,000 was seized by the officers of the Central Excise Department from the premises of the office of M/s. Verma Roadways situated on the first floor of M/s. Lucknow Banda Transport Co.

133/283, Transport Nagar, Kanpur, as per Panchnama dated 27-11-1976. As explained at page 20 of the assessment order by the Assessing Officer, although in the Panchnama, cash seized was shown at Rs. 1,70,20,000.

However, it was found that the actual amount seized by the Central Excise Department was Rs. 1,71,28,195. That is the reason why a sum of Rs. 1,08,195 has been treated as unexplained like Rs. 1,70,20,000 separately.

(i) About the abovementioned cash, statement of Shri Ramesh Kumar Verma, partner of the assessee firm was recorded on 3-9-1997. In reply to question No. 6, which related to the seizure of cash of Rs. 1,70,20,000, Shri Verma Stated that out of it, Rs. 40 lakhs belonged to M/s. Verma Roadways, which was withdrawn from the State Bank of Bikaner and Jaipur, Transport Nagar Branch, Kanpur on 26-11-1996 and a sum of Rs. 65 Lakhs belonged to Late Rameshwar Dayal Shiksha Samiti. About the balance, he stated that the same belonged to the branch offices of the firm.

(ii) So far as cash of Rs. 40 lakhs allegedly withdrawn from State bank of Bikaner and Jaipur is concerned, the Assessing Officer proceeded to investigate into the matter. On 4-9-1997, a letter was written to the Branch Manager of the Bank to confirm the withdrawals of Rs. 40 lakhs from the account of assessee firm on 26-11-1996. The bank was also asked to give the denominations in which the cash was handed over to the assessee. Vide reply dated 5-9-1997, the bank confirmed that a sum of Rs. 39 lakhs was shown to be paid to Shri Ramesh Kumar Verma on 26-11-1996, but on the next day i.e., on 27-11-1996, the entries in the books of the bank were made. It was also informed that the details of denominations of the currency notes of the amount paid to Shri Ramesh Kumar Verma were not mentioned in the bank records. On this information, further investigation was conducted by the Assessing Officer.

(iii) The investigation revealed that at about 4 P.M. on 26-11-1996 after the closure of banking hours, three account paying slips were received for depositing a total sum of Rs. 4,04,000 in the account of one Smt. Jai Rani Verma in her account No. 5576. It was also revealed that a cheque No. 0448202 dated 26-11-1996 for withdrawing the amount of Rs. 39 lakhs from the account No. 822 was also presented in the bank at the same time. It was further found that the payment of Rs. 39 lakhs was shown in the books of the bank to have been made out of the deposit of Rs. 40,04,000. The investigation also revealed that the entire transactions were shown to have been completed on 26-11-1996 itself though the entries were made on 27-11-1996.

(iv) In this back ground, the Assessing Officer, proceeded further to investigate the matter. He recorded the statement of Shri Shiv Narain Lal Srivastava, Cashier of the Bank on 15-9-1997 and made enquiries from him about the time of the presentation of the paying in slips of Rs. 40,04,000 the time of presentation of the cheque, the bank Officer to whom the alleged cash of Rs. 40,04,000 was given for depositing and also about other relevant facts. The Assessing Officer also examinated the following documents :- (v) After examining the documents the Assessing Officer noticed some anomalies which are noted on pages 5 to 8 of the assessment order.

(vi) The Assessing Officer also made thorough enquiry about the account of Smt. Jai Rani Verma, who was also directed to appear in person. Her affidavit was filed, the extract of which is quoted at page 9 of the assessment order. As according to the statement of Shri Shiv Narain Lal Srivastava the entire transaction has been recorded in the books at the instance of then Manager, Shri R. S. Saroj, the Assessing Officer also issued a commission under section 131 of the Income-tax Act, 1961 to the Assistant Commissioner of Income-tax, Cir. 18(1), Calcutta, vide letter dated 6-10-1997. The statement of Shri Saroj under section 131 of the Act was recorded on 22-10-1997. After comparing the statement of Shri Saroj and that of Shri Srivastava, the Assessing Officer found certain contradictions and discrepancies which have been noted at page 11 of the assessment order. On the basis of the contradictions and discrepancies, the Assessing Officer concluded that neither the Head Cashier nor the Bank Manager received the cash nor accounted the same. He further concluded that it was with the connivance of the bank officials that the assessee succeeded in obtaining some book entries for establishing the claim that a sum of Rs. 39 lakhs was actually withdrawn from the bank on 26-11-1996. In the opinion of the Assessing Officer, this was the gameplan of the assessee and, thus, rejecting the version of the assessee, he treated the entire sum of Rs. 39 lakhs as undisclosed income of the assessee.

132. The learned counsel for the assessee has assailed the findings of the Assessing Officer on various grounds. His main objection was that in the presence documentary evidence in support thereof, the Assessing Officer was not justified in coming to the conclusion that the entire transactions were fake and were manipulated by the assessee with the connivance of the bank officials. The learned Senior Advocate, Shri Gupta, vehemently contended that the Assessing Officer conducted the entire investigation behind the back of the assessee. He pointed out that the assessee was not confronted with the affidavit of Smt. Jai Rani Verma, statement of Shri Shiv Narain Lal Srivastava, Cashier and that of Shri R. S. Saroj, the Manager of the bank. He further pointed out that the material collected by the Assessing Officer i.e., the bank documents and bank books were never shown by the Assessing Officer to the assessee. The challenge of the learned counsel in this regard may be summarised as follows : (a) The assessee was not confronted to the entire evidence collected relating to the account of Smt Jai Rani Verma.

(b) The Assessing officer had drawn the inference at page 5 of the assessment order without affording any opportunity to the assessee.

(d) The entire investigation was conducted by the Assessing Officer without any notice or information to the assessee.

(e) The bank ledgers and other documents taken into consideration for drawing the inferences were never shown to the assessee nor copies thereof were supplied to it. The copy of the statement of Shri Shiv Narain Lal Srivastava, Cashier, the copy of statement of Shri R. S. Saroj, Bank Manager, the copy of the affidavit of Smt.

Jai Rani Verma and copies of other documents were never supplied to the assessee.

(f) While ignoring and rejecting the bank entries, no opportunity of being heard was given to the assessee.

(g) No opportunity to cross-examine any witness relied upon by the Assessing Officer, was given to the assessee.

(i) On the basis of the above objections, it has been submitted by the learned counsel for the assessee that the entire investigation was a roving and fishing investigation, the substance of which was not even communicated to the assessee. In support of his submission, the learned counsel for the assessee relied on the following decisions : (1) Kishinchand Chellaram v. CIT [1980] 125 ITR 713/4 Taxman 29 (SC), 133. On behalf of the Revenue, learned Senior Standing Counsel Shri Bharatji Agrawal, submitted that no adverse material has been relied on against the assessee. He pointed out that the entire material was in the knowledge of the assessee and the investigation was made only on the basis of the statement of Shri Ramesh Kumar Verma, according to which the amount of Rs. 39 lakhs was withdrawn from the bank. Shri Agrawal further submitted that it was just to test the veracity of the statement of Shri Verma that the bank officials were interrogated and a scrutiny of the bank record was made. According to him, it was for the assessee to establish the fact that out of the amount seized by the Central Excise Department a sum of Rs. 40 lakhs belonged to M/s. Verma Roadways which was withdrawn from the bank on 26-11-1996. Thus, whatever enquiry was made it was in consonance with the stand taken by the assessee and proper inference could be drawn only after making an enquiry. Shri Agrawal pointed out that various anomalies in the bank account and more particularly the anomaly relating to the entry made on 27-11-1996, which is shown by "A-1", were recorded by the Assessing Officer after showing the same to the Cashier and to the Bank Manager and after pointing out the position of bank documents to them. Shri Agrawal emphatically argued that the whole transaction established a deep conspiracy and connivance of the bank officials with the assessee.

134. According to him, in view of the circumstances pointed out by the Assessing Officer, there remains no scope to challenge his finding. The learned Counsel, specifically submitted following points in this regard : (a) In fact, no cash was deposited in the account of Smt. Jai Rani Verma as the denominations of the currency notes were not noted on the paying slips; (b) in fact, no cash was withdrawn by the assessee as denominations of the notes are not noted in the bank record.

(c) It is not proved that the money was actually deposited and withdrawn. It is not known to whom the money (cash) was given for depositing.

(d) The assessee has failed to discharge the onus for proving its stand; (f) The enquiry made by the Assessing Officer cannot be challenged on the ground that the assessee was not given opportunity to participate in the enquiry.

135. We have carefully considered the facts and circumstances relating to this matter, the material to which our attention was invited and the rival submissions.

136. The details of the investigation conducted by the Assessing Officer have been given in the assessment order at pages 5 to 8 of the order. The Assessing Officer has not mentioned that at any stage of investigation or enquiry, he called the assessee to participate in it.

The assessee was not supplied the copies of documents viz. bank documents/bank books etc., the affidavits of Smt. Jai Rani Verma, the statement of Shri Shiv Narain Lal Srivastava, Cashier and the statement of Shri R. S. Saroj, the Manager. In fact, the assessee was not informed at any stage of the investigation by the Assessing Officer. It was not called to controvert the evidence collected by the Assessing Officer for recording the finding that the entire transaction relating to withdrawal of Rs. 39 lakhs was a sham or fake transaction. As the adverse findings were being drawn against the assessee by the Assessing Officer, on the basis of the investigation, it was imperative on his part to confront the assessee with each document, which spoke against it or against its stand. Neither the assessee was given opportunity to confront the witnesses nor to cross-examine them nor the assessee was given opportunity to give evidence in rebuttal. The Assessing Officer has assumed jurisdiction of an Investigation Officer and not only collected the entire material against the assessee behind its back but also concluded the investigation without any notice to it. Such a course is definitely against the settled principles of fairness and rules of natural justice. While conducting the enquiry behind the back of the assessee, the Assessing Officer has flouted the settled principles of natural justice, which is bound to vitiate the findings recorded by him.

(i) In the case of Kishinchand Chellaram (supra) the facts were similar. The Income-tax Officer had gathered information that the assessee has, by two telegraphic transfers remitted the amount from Madras to Bombay through a bank. The Income-tax Officer wrote two letters to the Manager of the Bank for making enquiries about the remittances. These letters were not disclosed to the assessee. The reply of the Manager confirming the remittances was also not disclosed to the assessee. Relying upon the two letters of the Income-tax Officer written to the bank, the Tribunal held that a sum of Rs. 107,350 was undisclosed income of the assessee. On a reference, the Hon'ble High Court upheld the view of the Tribunal. On appeal, reversing the decision of the Hon'ble High Court, the Hon'ble Supreme Court held that the two letters did not constitute any material evidence which the Tribunal could take into account for the purpose of arriving at the finding that the sum of Rs. 1,07,350 was remitted by the assessee from Madras and if these two letters were eliminated there was no material evidence at all which could support its finding. The Hon'ble Supreme Court in that case also observed as follows : "It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence.

But before the Income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine the manager of the bank with reference to the statements made by him."State of Kerala v. K. T. Shaduli Grocery Dealer AIR 1977 S.C. 1627, the Hon'ble Supreme Court referring to the observations of Tuker, L.J. in Russell v. Duke of Norfolk (1949) 1 All ER 109 observed as under : "3. One of the rules which constitutes a part of the principles of natural justice in the rule of audi alteram partem which requires that no man should be condemned unheard. It is indeed a requirement of the duty to act fairly which lies on all quasi judicial authorities and this duty has been extended also to the authorities holding administrative enquiries involving civil consequences or affecting rights of parties because, as pointed out by this Court in A. K. Kraipak v. Union of India (1970) 1 SCR 457 (AIR 1970 SC 150)" the aim of the rules of natural justice is to secure justice or to put it negatively, to prevent miscarriage of justice and justice, in a society which has accepted socialist as its article of faith in the Constitution is dispensed not only by judicial or quasi judicial authorities but also by authorities discharging administrative functions. This rule which requires an opportunity to be heard to be given to a person likely to be affected by a decision, it also, like the genus of which it is a species, not an inflexible rule having a fixed connotation. It has a variable content depending on the nature of the inquiry, the framework of the law under which it is held the constitution of the authority holding the inquiry, the nature and character of the rights affected and the consequences flowing from the decision. It is, therefore, not possible to say that in every case, the rule of audi alteram partem requires that a particular specified procedure to be followed. It may be that in a given case, the rule of audi alteram partem may impart a requirement that witnesses whose statements are sought to be relied upon by the authority holding the inquiry should be permitted to be cross-examined by the party affected while in some other case, it may not. The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on facts and circumstances of each case." (iii) In the case of Premier Motors (P.) Ltd. v. CST, 1970 U.P.T.C.203, the Hon'ble Allahabad High Court has held as under : "It is true that the Evidence Act, as such does not apply to the proceedings under the U.P. Sales Tax Act and it is also true that the Assessing Authority may use certain materials, which, strictly speaking, may not be admissible evidence in a Court of Law. But that does not mean that any material or information, gathered by the Assessing Authority as a result of a private enquiry, can be used against an assessee without disclosing to him the material and without affording him an adequate opportunity to rebut the same. The question that would be as to whether in the circumstances of the case the assessee can be said to have been afforded a reasonable opportunity to meet the case against him. It cannot be laid down as a matter of law that a witness, examined by the Assessing Authority, can never be summoned for cross-examination. The question would always depend upon the circumstances of each case." (iv) It is to be mentioned that the rules of natural justice are to be applied to the relevant procedure under Income-tax Act in the same way as they apply to the procedure laid down under U.P. Sales Tax Act.

(v) In the case of Gargi Deen Jwala Prasad v. CIT [1974] 98 ITR 97, Jwala Prasad Thakur Prasad v. CST 1981 U.P.T.C. 281, and in the case of CST v. Faqir Chand Hazari Lal 1981 UPTC 656, the Hon'ble Allahabad High Court has held that no material can be relied against the assessee with which the assessee is not confronted. It was further held that confronting does not mean telling the assessee that a document is on record. According to the Hon'ble High Court, the word "admissible" may not be understood in the strict sense of Evidence Act, but it cannot admit of any doubt that no material can be relied with which the assessee is not confronted.

137. In view of the above referred legal position, we are of the considered view that the well-settled principles of natural justice have not been followed by the Assessing Officer. The witnesses whose statements are sought to be relied upon by the Assessing Officer holding the enquiry, should have been permitted to be cross-examined by the assessee who was the affected party. In the case of Colonisers v.Asstt. CIT [1992] 41 ITD 57, the Special Bench of the Income-tax Appellate Tribunal, Hyderabad, has held that an order rendered in violation of rules of audi alteram partem is null and void and the same may be struck down as invalid on this score only. Thus, the findings recorded by the Assessing Officer are in violation of Rules of audi alteram partem and, therefore, cannot be upheld as such.

138. In the light of the discussion made above, the finding of the Assessing Officer being in violation of the settled principles of natural justice has to be set aside. In our view, it will be proper to direct the Assessing Officer to re-adjudicate the entire issue relating to withdrawal of cash of Rs. 39 lakhs properly, thoroughly and in accordance with the Rules. In this context, we want to observe that the main person involved in the entire transaction was the bank manager, Shri R. S. Saroj. His statement should have been recorded by the Assessing Officer himself and an opportunity should have been given to the assessee to cross-examine him. Similar course should have been adopted for examining the Cashier. We would have summoned these two witnesses, but for the time constraint, we are not doing so. We, therefore, direct the Assessing Officer to summon these two witnesses and also others and examine them in accordance with the relevant banking rules and Procedure relating to deposits and withdrawals of huge amounts. While doing so, the assessee shall be given full opportunity of cross-examining them and confronting them. Only after this is done and after proper enquiry is made, according to rules, the finding shall be recorded by the Assessing Officer. To this extent, we set aside the finding of the Assessing Officer and restore the matter back to him for fresh adjudication in the light of the observations made above.

B. Cash of Rs. 65,59,302 which according to the assesses belonged to Late Rameshwar Dayal Shiksha Samiti - Reverting to the facts relating to the seizure of cash of Rs. 1,70,20,000 the explanation of Shri Rakesh Kumar Verma was that a sum of Rs. 65,59,302 belonged to Late Shri Rameshwar Dayal Shiksha Samiti. The version of the assessee was that a society was formed and registered in the name of "Swargiya Rameshwar Dayal Shiksha Samiti" in the year 1995 and donations were collected for the construction of the school building. The assessee has filed copies of the Rules of the society, copy of the resolution of the Gram Panchayat allotting land, the list of donors, the balance sheet of the society and other documents which are in Vol. I of its Paper Book, and which are available, pages 1 to 136.

138. Since in his statement dated 3-9-1997, Shri Rakesh Kumar Verma stated that out of Rs. 1,70,20,000, Rs. 65,59,302 belonged to that society, the Assessing Officer conducted enquiry into this matter. He recorded the statement of Jagdamba Prasad, elder brother of Shri Rakesh Kumar Verma on 19-8-1997. It is significant to point out that Shri Jagdamba Prasad happened to be the founder of the society as revealed out from the Memorandum of association, copy available at pages 11 to 17 of the Paper Book (Vol. I). While Shri Rakesh Kumar Verma showed his inability about the details of the donations, Shri Jagdamba Prasad Verma could not specify in his statement on 19-8-1997 that out of the sum of Rs. 1,70,20,000, Rs. 65,59,302 belonged to the society. The Assessing Officer gave notice under section 142(1) on 8-9-1997 and vide question No. 3, the assessee was asked to give details about the Late Rameshwar Dayal Shiksha Samiti and was also asked to produce the date of registration of the society, confirmation of all the persons involved in the registration, list alongwith complete address of donors from whom the money was received and other details. Although, the assessee filed reply on 10-9-1997, but nothing was stated about the queries relating to the society. Another notice under section 142(1) of the Act was served on the assessee on 19-9-1997. On reply to this notice also, nothing was disclosed. The date for compliance was fixed 29-9-1997. On 29-9-1997, again the assessee prayed that the questionnaire may not be pressed into service for sometime. On 30-9-1997, a detailed reply was filed on behalf of the assessee which is dated 29-9-1997, but in this reply also relevant questions relating to society were not answered. Hence, a show cause notice was issued to the assessee on 9-10-1997 referring to the notices dated 8-9-1997 and 19-9-1997 and reminding the assessee that the queries relating to cash remain uncomplied with. The assessee was given last opportunity and 14-10-1997 was fixed for compliance but still on 14-10-1997, the assessee filed reply regarding other points, but chose not to divulge any information regarding the society. Yet another notice was issued on 21-10-1997 and the assessee was asked to prove the genuineness, the identity and creditorworthiness of the donors relating to the society.

This time the date of compliance was fixed on 3-11-1997. It was only before this date i.e., on 23-10-1997, the information regarding the society was furnished.

139. In this background, and particularly referring to the statements of Shri Rakesh Kumar Verma and Shri Jagdamba Prasad Verma, the Assessing Officer concluded that the entire story of the assessee that Rs. 65,59,302 belonged to the Late Rameshwar Dayal Shiksha Samiti was an afterthought. The detailed grounds for arriving at this conclusion are recorded at pages 15, 16, 17 and 18 of the assessment order, which need not be repeated here.

140. The Assessing Officer, rejecting the stand of the assessee in this regard, held that Rs. 65,59,302 is undisclosed income of the assessee firm, i.e., M/s. Verma Roadways, from whose premises it was found during the course of Central Excise Search on 27-11-1996.

141. The assessee-appellant has challenged the findings of the Assessing Officer on several grounds. It is submitted on behalf of the appellant that the society was registered on 16-9-1995 and in accordance with the bye-laws of the society, Schools and Colleges were to be established. Shri Gupta, learned Senior Advocate, referring to the objects of the society, invited our attention to the lay out plan prepared by the Architect for construction of the college. Regarding the donors, it was submitted that the donations to the tune of Rs. 51,000, Rs. 31,000 and Rs. 35,000 and also in smaller sums were given for construction of the college building etc. In this regard, he referred to the various lists of the donors, which have been placed in the paper book. So far as the statement of Shri Jagdamba Prasad dated 19-8-1997, is concerned, the learned counsel pointed out that the language in which question No. 10 was put, did not specifically require the answer specifying the details of the donors etc. and, therefore, adverse inference could not be drawn from such a vague question and its answer particularly when no specific query was made to him. Shri Gupta, further pointed out that none of the details given by the society vide applications dated 5-11-1997 and 20-11-1997 were proved to be false by the Assessing Officer. He further pointed out that the Assessing Officer did not summon Shri Krishna Gopal Shastri, although a request was made to summon him nor he summoned any of the donors though the details were given in the list of the donors. He further pointed out that the Assessing Officer has also issued a notice under section 158BC of the Income-tax Act, 1961 dated 27-11-1997 to Late Shri Rameshwar Dayal Shiksha Samiti for the block period from 1-4-1986 to 27-11-1996 which goes to show that the Assessing Officer himself was satisfied about the amount of Rs. 65,59,302 being that of the society.

142. The learned Sr. Standing counsel for the department Shri Bharatji Agarwal, relying on the order of the Assessing Officer, submitted that the assessee has concocted a story at the fag end. According to him, had there been genuine donors, they could have come forward to claim the amount or to lodge a claim on behalf of the society before the Central Excise Authorities or before the Income-tax Authorities.

Referring to the bye-laws of the society and more particularly its clauses 9 and 11, he pointed out that the amount of the society was to be deposited in a nationalised bank and was not to be kept at the residence or in the office of the Manager or any other office bearer.

Accordingly to him, if the members of the society lost faith in Shri Jagdamba Prasad as was the story of Shri K. G. Shastri then there was all the more reason for them to lodge the protest against Shri Verma in the court about the mis-management of money of the society. Shri Agrawal also pointed out that the assessee was repeatedly directed to produce the donors but it failed to do so, which only proves that the donors were not genuine. He further pointed out that it is unbelievable that such a huge sum could be collected within such a short period by the society. Shri Agarwal also raised the following points for suspecting and rejecting the story of the assessee : (i) A society is expected to function in accordance with its bye-laws. In the case of alleged Samiti, all the bye-laws relating to maintenance of cash etc. were not followed; (ii) The amount of the society was not kept in Nationalised bank as laid down in bye-laws of the said society; (iii) Shri Jagdamba Prasad stated in his statement dated 19-8-1997 that the amount which was recovered from the office of M/s. Verma Roadways was to be explained by that firm, which means that Shri Jagdamba Prasad Verma being founder of the society was ignorant about the fact that huge amount of the society was kept in the office of M/s. Verma Roadways; (iv) The conduct of the assessee shows that the evidence was being created so that the same could be filed at the fag end; (v) About the application of Shri Krishna Gopal Shastri, Shri Agarwal submitted that the entire story is unbelievable and is concocted.

143. We have carefully considered the facts and circumstances relating to this matter, the material to which our attention was invited and the rival submissions which were made by the ld. counsel for the parties.

The facts as gathered from the records, go to demonstrate that the assessee has prepared a story for justifying the possession of Rs. 65,59,302 with it. The entire circumstances strongly indicate that this story is an afterthought and a concocted one. Had the society been functional and had the amount been collected by the members of the society for fulfilling its aims and objects then according to the bye-laws, the entire business should have been transacted. It appears to be strange that after seizure of the entire collected money to the tune of Rs. 65,59,302 no hue and cry was made by the society, its executive committee, its members or the donors. Had the money been of the society, the society itself would have asserted its claim for release of the money from the Central Excise Department. It is neither convincing nor creditworthy that a huge amount of Rs. 65,59,302 belonging to the society will be kept in the shape of cash particularly when the bye-laws of the society provided that the cash above Rs. 1,000 shall be deposited in a Nationalised bank. The story of dispute amongst members of the society is also not believable.

144. Likewise, the story set out in the application of Shri Krishna Gopal Shastri dated 5-11-1997 does not inspire confidence. The cause for the source of knowledge narrated in para 17 of the application is also not reliable. It is surprising that before 5-11-1997 neither the assessee nor the society placed the details before the Assessing Officer. The reasons for not doing so, speak volumes against the conduct of the assessee, raising every doubt against it and such doubtful conduct cannot be overlooked. The assessee was repeatedly directed by the Assessing Officer to produce the documents relating to the society and also the donors. There is no explanation on the part of the assessee for not producing the donors. If Shri Jagdamba Prasad Verma was a founder member and a key person, then it would not have been difficult for him to produce the persons from whom large sums were collected. It is not the case of the assessee that the donors were not traceable or that they refused to come. No application was moved by the assessee or Shri Jagdamba Prasad Verma for summoning the donors before the Assessing Officer. It was only on 23-10-1997 that a request was made to summon Shri Krishna Gopal Shastri. This request was turned down by the Assessing Officer on the ground that it was primarily the burden of the assessee to prove the genuineness of its claim that Rs. 65,59,302 out of the cash seized by the Central Excise Department belonged to the society and not to it. The decision was conveyed to the assessee on 23-10-1997. Thereafter, there was time for the assessee to produce Shri Shastri or other donors. The assessee having failed to discharge its primary onus cannot be allowed to lay blame on the part of the Assessing Officer. It is also significant to point out that the assessment was to be completed within November, 1997 and as such there was no time left for delaying the assessment.

145. The detailed reasons have been assigned by the Assessing Officer for doubting the story of the assessee. On page 18, details of donors have been given date-wise which reveal startling and unbelievable facts. It is also to be mentioned here that separate proceedings under section 158BC have been initiated in the case of the society also and it is for the society to put forward its claim in those proceedings.

However, so far as this issue is concerned, at this stage, the findings of the Assessing Officer, in our opinion, do not call for any interference. We, therefore, reject the objections of the assessee appellant and accepting the contention of the learned Senior Standing counsel, hold that the assessee has failed to establish that the amount of Rs. 65,59,302 belonged to Late Rameshwar Dayal Shiksha Samiti. In our view, the Assessing Officer has rightly treated this amount to be unexplained income of the assessee. The addition to this extension is therefore confirmed by us.

146. C. Balance Cash of Rs. 78,65,878 - Regarding the balance amount of Rs. 78,65,878 Shri Verma disclosed in his statement dated 3-9-1997 that it belonged to Branch Offices. In this regard, a notice dated 8-9-1977 was given by the Assessing Officer to the assessee for explaining the entire cash. As no compliance was made by the assessee, another notice dated 19-9-1997 was given and question No. 8 was annexed to this notice relating to the query for explaining the balance cash. The assessee was asked to give detailed working of receipts of cash from Branch Offices upto 28-11-1996, i.e., the date of the search. The assessee, vide its reply dated 29-9-1997 requested for time. However, no working was submitted and ultimately a show cause notice dated 9-10-1997 was sent to the assessee. The assessee was given last opportunity. The date for compliance was fixed on 14-10-1997. On this date, the assessee took the stand copies of cash books of 8 branches were still awaited and, therefore, it was not possible to furnish the explanation in respect of cash relating to the branches. The Assessing Officer, rejecting the claim of the assessee, held that the entire amount of Rs. 78,75,878 was undisclosed income of the assessee. Likewise, the excess cash of Rs. 1,08,195 which was not entered in the Panchnama of the Central Excise was also treated to be undisclosed income of the assessee.

147. Before us, the learned counsel for the assessee submitted that the position of the cash has been shown by the assessee in the balance sheet filed on 11-11-1997. Referring to pages 137 to 150 of its paper book (Vol. II), the learned counsel for the assessee submitted that cash in hand at Rs. 1,19,55,425 was available with the assessee as is clear from page 146 of the paper book. Relying on this paper, the learned counsel further submitted that the position of the cash branchwise has been specified in this paper. He also invited our attention to the profit and loss account for the period ending on 26-11-1996 (paper No. 138) according to which the total booking receipts were to the tune of Rs. 3,83,89,940.

148. Opposing, learned Chief Standing counsel for the Department, Shri Bharatji Agarwal, submitted that the assessee failed to explain the possession of the balance cash and it took a false stand that the cash books were not available while the cash books were very much available with the assessee.

149. We have carefully considered the facts and circumstances relating to this aspect of the matter. The categorical stand of the assessee was that the balance amount of Rs. 78,65,878 related to the various Branches. The Assessing Officer has not discussed the details of the availability of cash branch-wise. He has simply rejected the version of the assessee. In our view, in the interest of justice, this aspect also requires to be examined properly. We, therefore, restore this aspect of the Assessing Officer for fresh adjudication and direct him to examine the availability of the cash in each branch on the basis of the documents furnished by the assessee. Ground No. 17 is decided accordingly.

150. Ground Nos. 13 and 17 are for statistical purposes allowed and Ground Nos. 14, 15 and 16 are rejected. Ground Nos. 10 and 11 being general grounds need no specific adjudication. Ground Nos. 13, 17 are being restored to the Assessing Officer for decision afresh in light of our relevant observations.

152. These grounds are directed against the additions made on account of Supari and Cloth seized during the searches conducted in the premises of the assessee. We are taking up these items separately.

154. The stock of Supari was found during the searches conducted by the Central Excise Department as well as by the Income-tax Department. The stock was inventorised as per three Panchnamas, details of which are given below : (iii) Panchnama drawn for godown premises between Sugam Parivahan and Bombay Freight Carrier.

(i) The consolidated position of Supari found at different premises has been given by the Assessing Officer at page 23 of the assessment order, which is as follows : ------------------------------------------------------------------------ Premise No. Annexure Items Bags Weight (Kg.) ------------------------------------------------------------------------ 133/225, T.P. Nagar, 'S' Panchnama Supari 3684 248000 Kanpur dated 29-11-1996 133/225, 'S' " 526 39450 Godown 133/283 'S' " 121 9075 (ii) The Assessing Officer gave notice to the assessee on 8-9-1997 to reconcile the position from bilties as per Annexures 'C', 'D', 'G', 'N' and 'S' vide Panchnama dated 29-11-1996 drawn at premises No. 133/325, Transport Nagar. Vide reply dated 10-9-1997, the assessee stated that the details are not available. The proceedings were adjourned to 16-9-1997 at the request of the assessee. On 16-9-1997, Shri M. D. Keshwani, C.A. appeared on behalf of the assessee and filed partial reply in response to notice dated 8-9-1997. On 19-9-1997, again a notice was given to the assessee to reconcile the position of stock of Supari as per Annexure 'S' of Panchnama dated 28-11-1996 drawn at Godown 133/174-A, Transport Nagar and also as per Annexure 'C' of Panchnama dated 28-11-1996 drawn at 133/283, Transport Nagar, Kanpur. The assessee filed reply dated 29-9-1997 alongwith details of G.R. Nos. and other details. On 14-10-1997 also reply was filed by the assessee.

155. It was submitted on behalf of the assessee that it carries on business of transportation from one place to another within the entire country and the consignment of Supari belonged to others, who booked the commodity through the assessee. In order to explain the possession of Supari, the assessee submitted Annexures 'R-1' to 'R-5'. The details of G.R. Nos., the details of consignors and consignees alongwith supporting documents of trade tax were also given by the assessee.

(i) After examining these details and the procedure adopted by the assessee for transporting goods, the Assessing Officer concluded that the assessee has not been able to reconcile the stock of supari to the extent of 198695 Kgs. The value of supari was taken by the Assessing officer at the rate of Rs. 38.88 per Kg. The Assessing Officer, however, reduced the value of 141 bags for which the claim of the assessee was accepted. Thus, the Assessing Officer made addition of Rs. 70,99,839 on account of unreconciled stock of Supari.

Before us, the learned Senior Advocate, Shri Gupta appearing on behalf of the assessee submitted that the assessee is not a trader and does not deal in purchase and sale of goods. It was further pointed out that no evidence was found to prove the fact that the assessee was dealing in any commodity including Supari and Cloth. The learned Counsel for the assessee invited our attention to the documents contained in its Paper Book Vol. V from pages 309 to 522. According to him, there was a mistake in calculation and excess of 129 bags was on account of such a mistake, which occurred due to repetition of figures. The details in this regard have been given at page 309 of the assessee's Paper Book (Vol. V). The learned Counsel further invited our attention to pages 310 to 312, which contain details of 4511 bags of Supari found at three different premises mentioned above, during the course of search conducted on 28/29-11-1996. According to him, all the details of G.R.Nos., the package, consignor and consignee were supplied, but the Assessing Officer did not bother to summon any of the consignee to test the veracity of the statement of the assessee and the genuineness of the documents filed on its behalf. The learned Counsel also submitted that the method adopted by the Assessing Officer was totally defective.

According to him, it had been explained to the Assessing Officer that one to one identification was not possible by tallving the 'Marka' on the bags because the bags are loaded and unloaded at different places and "Markas" are also changed in the transit. It was also pointed out that no effort was made to actually, and physically verify the correctness either of the 'Markas' noted by the Excise Authorities or by the Income-tax Department. The learned Counsel also argued that in the trade of Supari, the material is purchased and sold at different stages and during this process, the consignment changes hands.

According to him, no addition should be made in the hands of the assessee under this head in the face of the documents, list of consignors and consignees of such stock and other details. He also relied on the following decisions in support of his contention : 155. On behalf of the Revenue, Shri Bharatji Agrawal, Chief Standing Counsel of the Department, on the other hand, argued that the assessee had totally failed to reconcile the stock of Supari and the Assessing Officer has rightly made the addition on the basis of unreconciled stock.

156. According to him, since drivers' copies could not be produced, it could not be said that the goods had not been booked through the assessee. It was also pointed out that the assessee could not produce the consignees and relevant evidence although repeated opportunities were given to it.

157. We have carefully considered the facts and circumstances relating to this matter. It is true that a huge stock of Supari of hundreds of bags was found in the premises of the assessee. The version of the assessee that the entire stock of Supari related to consignees was based on the documentary evidence. As is evident, on perusal of pages 310 to 312, not only the details of the consignees and consignees had been given but their complete addresses have also been mentioned. The learned Counsel for the assessee had also drawn our attention to the bilties of consignments which contained the relevant details including bag numbers, name of the commodity, the destination and the details of the consignee. The documents relating to trade tax have also been filed by the assessee. The Assessing Officer, no doubt gave opportunity to the assessee to reconcile the stock, but in our view, proper and thorough enquiry was not made by the Assessing Officer. It may be on account of paucity of time or on account of carelessness or non co-operation on the part of the assesses. In any case, the Assessing Officer was required to summon some of the consignors or the consignees, just to test the veracity of the documents of the assessee.

A proper physical verification was also necessary. It also appears that all the documents filed by the assessee have not been properly considered.

158. In view of the above circumstances, we are of the opinion that in the interest of justice and fairness, it shall be proper if the matter is restored to the Assessing Officer for proper verification and adjudication of this issue afresh. We, therefore, set aside the order and findings of the Assessing Officer relating to the addition made on account of unexplained stock of supari and restore the same to him for fresh adjudication. In doing so, the Assessing Officer shall give proper opportunity to the assessee for explaining the stock of supari.

160. During the course of search conducted in the premises of the assessee, stock of cloth was also found. The details of this stock are given by the Assessing Officer at page 29 of the assessment order, which are as follows : ------------------------------------------------------------------------ Item Annex No. of bails------------------------------------------------------------------------ Cotton cloth 133/225 'E' 222 T.P. Nagar, Kanpur.

-do- 'D' 103 Saree 'E' 216 + 96+25 -do- 'C' 46 Suiting Shirting 'E' 141 Chadar 'C' 59 161. The assessee was required to explain and reconcile the stock, which related to cotton cloth, Sarees, Suiting, Shirtings, Chadar etc.

Vide its reply dated 29-9-1997 Annexures R-9 and R-10, the assessee gave details of cloth found during the course of search. The Assessing Officer examined the version of the assessee and noticed that in large number of cases, there was no G.R. Nos. available to tally the stock recorded in Panchnama. A list of such un-reconciled stock of cloth has been given in Annexure 'B' to the assessment order. The Assessing Officer treated this total stock as un-reconciled and unexplained in the case of the assessee M/s. Verma Roadways. Taking the valuation as per the actual bilties, he made an addition of Rs. 5,04,000.

162. The contention of the ld. Counsel for the assessee before us in this regard is the same as in the case of stock of Supari. It has been stated that verification on the basis of 'Marka' could not be made because that was not possible.

163. Shri Bharatji Agrawal, learned Chief Standing Counsel for the Department justified the order of the Assessing Officer.

164. We have carefully considered the entire matter and the rival submissions. On this issue also, we are of the opinion that the Assessing Officer has not conducted proper enquiry. He has not examined the documents in detail. Neither the consignors nor the consignees were ever examined. There were other methods for verification of the bilties etc. Under the circumstances, we deem it expedient and just to restore the matter relating to this issue also to the Assessing Officer. We, therefore, set aside the order and finding of the Assessing Officer relating to this addition and direct him to adjudicate upon the issue afresh after giving proper opportunity of being heard to the assessee.

Ground Nos. 18 to 23 are allowed for statistical purposes and are decided accordingly.

166. This ground has been taken to challenge the addition of Rs. 3,40,000 made on account of unexplained investment in house property.

167. While completing the assessment, the Assessing Officer noticed that the assessee had purchased a house property No. 133/225, Transport Nagar vide sale deed registered on 16-11-1994. As per the sale deed 1/6th of the undivided share of the house property was purchased for sale consideration of Rs. 8,50,000. From local enquiries, the Assessing Officer gathered that the property was in prime business area of Kanpur and prevalent market practice was of payment of on money in the ratio of 60 - 40. He was, thus, of the view that only 60 per cent of the disclosed sale consideration was shown in the sale deed and the remaining 40 per cent was paid in cash, which was totally unaccounted.

168. Shri S. P. Gupta, Senior Advocate, for the assessee has challenged this addition on the ground that the Assessing Officer has drawn the inference of payment of 40 per cent out of books without any material.

The learned Chief Standing Counsel for the Department has relied on the order of the Assessing Officer.

169. We have carefully considered the order of the Assessing Officer.

No mention has been made of any exemplar, proof/evidence. The Assessing Officer has not cited the value of any other property in the area in which the property is purchased by the assessee, is situated.

170. The addition thus has been made purely on the basis of surmises and guess work, which cannot be sustained. The Assessing Officer has not examined any person for coming to the conclusion that 40 per cent of the sale price was paid outside the books. In absence of any material such a finding cannot be upheld. We, therefore, delete this addition.

173. The assessee has challenged the addition of Rs. 10.5 lakhs made on account of unexplained investment in trucks. The Assessing Officer compared the returns filed by the assessee for the assessment years 1995-96 and 1996-97. He found that in the Schedule of fixed assets as on 31-3-1995, the assessee had shown only 9 trucks with registration numbers while in the schedule of fixed assets as on 31-3-1996 attached along with the return for the assessment year 1996-97, two additional trucks, namely, UP 78-B 8673 and UP 77A 1644 were shown as opening balance. He, thus, concluded that two new trucks, which were shown in the Opening Balance of 1996-97 were not shown in closing balance of 1995-96. On this basis, he treated the value of two trucks as unexplained investment out of undisclosed income of the assessee and taking the value of each truck at Rs. 5.25 lakhs, the addition of Rs. 10.5 lakhs has been made as undisclosed income of the assessee.

174. Shri S. P. Gupta, learned Senior Advocate, appearing on behalf of the assessee, contended that the two trucks initially purchased by Shri Rakesh Kumar Verma in the year 1994-95 and were taken through Kailash Motors, Kanpur. According to him, in the assessment year 1996-97, these were introduced in the firm. To prove this fact, he has invited our attention to pages 2 and 3 of the Supplementary Paper Book filed along with the application dated 16-5-1999.

175. Shri Bharatji Agrawal, learned Senior Standing Counsel for the Revenue, relied on the order of the Assessing Officer.

176. We have carefully considered the submissions relating to this issue. The assessee had filed returns for the assessment years 1995-96 and 1996-97. The disputed two trucks have been shown in the return of assessment year 1996-97. The acquisition of these two trucks has been shown by the assessee in its return. In view of the provisions under section 158BA and 158BB, the income/investment relating to these trucks, cannot be connected to the seized papers, any addition was called for, this should be made in the assessment for the assessment year 1996-97 for which return had been filed by the assessee.

Therefore, this addition cannot be maintained as such which is directed to be deleted.

179. Through these grounds, the assessee has objected to the various additions made in the computation of income by the Assessing Officer for part of the assessment year i.e. from 1-4-1996 to 28-11-1996.

180. The assessee filed return for the assessment year 1997-98 giving computation of income upto 26-11-1996. The Balance Sheet and Profit and Loss Account were also attached with the return. The Assessing Officer required the assessee to produce the books of account on the basis of which Profit and Loss Account was prepared by it. The assessee failed to do so. A last opportunity was also given to the assessee. Details and the documents were not produced. The assessee also did not file return in Form 2B for the block period. The Assessing Officer, therefore, treated the return filed by the assessee only as information and not a return filed under section 139(1) nor one filed in compliance to notice under section 158BC. He, therefore, proceeded to compute the income of the assessee in the following manner : (i) Taking the total receipt at Rs. 3,83,89,940 as disclosed by the assessee in its return, he worked out the profit at the rate of 5 per cent of the booking freight, and took it as undisclosed income.

181. This was done on the basis that in the case of Lucknow Banda Transport Co. for the assessment year 1997-98, the net income was shown at the rate of 3.44 per cent of the booking freight receipts. On this basis, an addition of Rs. 19,19,497 was made.

(ii) The assessee had shown interest income on loans and advances at Rs. 3,38,136 and interest from partners at Rs. 2,12,584 and profit on sale of trucks at Rs. 5,89,544. The Assessing Officer enhanced the profit on sale of trucks from Rs. 5,89,544 to Rs. 6,50,000.

(iii) The assessee had shown income from scrap sales at Rs. 6,73,870. The Assessing Officer enhanced it to Rs. 7,50,000.

On the basis of the above, the Assessing Officer made an addition of Rs. 38,70,217.

182. The Learned Senior Advocate Mr. Gupta, appearing on behalf of the assessee, submitted that the net profit had been worked out on estimate basis for which there is no scope in the block assessment. It was further submitted that the enhancements made on account of profit on sale of trucks and scraps were also uncalled for.

183. The learned Senior Standing Counsel, Shri Bharatji Agrawal appearing on behalf of the revenue, relied on the order of the Assessing Officer.

184. We have carefully considered the order of the Assessing Officer.

In the case of the block assessment, the provisions of section 145 are not applicable. Hence, there is no scope for best judgment assessment.

Otherwise also, the Assessing Officer has not given reasons to apply the net profit rate of 5 per cent. If the Assessing Officer has relied on the return of the assessee as information, he should have relied upon the net profit rate disclosed in the return. We, therefore, cannot approve the approach of the Assessing Officer. The addition made on account of application of net profit rate is, therefore, deleted.

Likewise, there is no justification for enhancing the profit on sale of trucks. In absence of any material evidence or information, it is difficult to sustain the same. Similar is the position with regard to the addition made on account of scrap sales. The Assessing Officer has not given any justification for enhancing this income. In absence of any material or reasons for making this addition, the same cannot be upheld.185. In view of the above, we are unable to sustain the additions of Rs. 38,70,217 and the same are, therefore, deleted. Ground Nos. 26 and 27 are, therefore, allowed in favour of the assessee.

186. In the result, the appeal of the assessee is allowed on legal ground viz. Ground Nos. 1 to 6 and 9 of appeal, in view of our relevant findings recorded in relation to these grounds.

187. On merits, the appeal is partly allowed as per our findings and directions against relevant grounds relating to various additions made on account of undisclosed income of the assessee.