Sh. Ashok Chadha, New Delhi v. ITO, New Delhi

PER BENCH These appeals, cross appeals and cross objections in the case of aforesaid assessee were argued in a consolidated manner by the ld. DR and the ld. counsel for the assessee. Therefore, we think it fit to pass a consolidated order. ITA No.1455(Del)/2009- A.Y. 2001-02- Appeal of the revenue CO No. 144(Del)/2009- A.Y. 2001-02-Objection of the assessee

2. The revenue has taken two grounds in the appeal to the effect that on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in (i) deleting the addition of Rs. 22,41,141/-, made by the AO u/s 69 of the Income-tax Act, 1961 (the Act for short), in respect of plot no. 251, Nangli Skhrawati on the basis of the seized material; and (ii) holding that the income was not assessable in the hands of the assessee in view of the provision contained in section 153C of the Act in spite of the fact that the assessee was given opportunity to explain the seized material and thereafter it was held that the investment has been made by the assessee. On the other hand, the only substantive ground taken by the ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 assessee is to the effect that the ld. CIT(A) erred in not appreciating that the assessment made u/s 153A of the Act was bad in law and void ab- initio as no notice was issued u/s 143(2). It is mentioned that he erred in holding that the grant of opportunity to the assessee amounts to compliance of the aforesaid statutory notice even in absence of its issuance. The objection of the assessee is common in respect of all the appeals except for the appeal of assessment year 2006-07. It is also preliminary in nature raising question about the jurisdiction of the AO to make assessment u/s 153A in order to make additions to the income returned by the assessee. Therefore, we shall take up the objection at the outset.

3. It may be appropriate at this stage to mention the facts stated in the assessment order relating to this issue. A search and seizure operation u/s 132(1) of the Act was conducted on 1.9.2005 in the case of Dilbagh Rai group, engaged in the trade of pan masala and gutka. The residence of the assessee and his locker no. 476 with Union Bank of India were also searched on 1.9.2005 and 28.9.2005 respectively. In the course of search, cash amounting to Rs. 22,500/-, jewellery of the value of Rs. 4,15,879/- were found in the residence. Jewellery of the value of Rs. 2,77,703/- was also found in the locker. Consequent upon the search, ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 a notice u/s 153A was issued to the assessee on 7.9.2007 requiring him to file the return within 15 days. In response to this notice, return of income was filed on 24.10.2007 declaring total income of Rs. 90,080/-. In the course of assessment proceedings a questionnaire dated 7.12.2007 was issued to the assessee and this was complied with by way of letter dated 24.12.2007. Another questionnaire was issued on 27.12.2007, which was complied on 28.12.2007. After hearing the assessee, the total income was computed at Rs. 23,31,760/-.

3. One of the grounds taken before the ld. CIT(A) in appeal filed before him was that no notice u/s 143(2) had been issued and served on the assessee before the completion of the assessment. Therefore, the assessment is bad in law. The ld. CIT(A) considered the facts of the case, the submissions of the assessee and the case law brought to his notice. Therefore, it has been mentioned that the notice is usually issued in the proforma marked as ITNS-33. The proforma is not prescribed under the statute. It is a communication by the AO to the assessee giving him the opportunity as required u/s 143(2). Therefore, once the assessee has been put to notice and given opportunity to attend the office, the requirement of section 143(2) is complete whether the notice is issued in ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 the proforma mentioned in ITNS-33 or in some other format. Coming to the facts of the case, it is mentioned that the AO had communicated his intention to scrutinize the return by way of two letters and afforded opportunity to the assessee to produce necessary accounts, documents or evidences. Therefore, the requirement of section 143(2) has been satisfied in this case. 3.1 Before us, the case of the ld. counsel is that it is mandatory on the part of the AO to issue and serve a notice u/s 143(2) before making assessment u/s 153A. In this connection, our attention has been drawn towards clause (a) of sub-section (1) of section 153-A, which reads as under:- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; 3.2 The point stressed by the ld. counsel is that the provisions contained in section 139 are applicable, in so far as may be, to a return furnished u/s 153-A. Therefore, for taking such a return for scrutiny, a notice u/s ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 153A has to be served on the assessee, which has not been done in this case. 3.3 In the aforesaid connection, our attention has been drawn towards the provision contained in section 158BC(b) (now omitted). It is mentioned that the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section

144 and section 145 shall, so far as may be, apply. It is her case that this provision contained in section 158BC is analogous to the provision contained in section 153A. Our attention has been drawn towards the decision of Honble Supreme Court in the case of Assistant CIT & Another Vs. Hotel Blue Moon (2010) 321 ITR 362, decided under chapter XIVB, containing provisions regarding special procedure for assessment of search cases (since omitted). The decision of the Honble Court is that if an assessment is to be completed u/s 143(3) read with section 158BC, notice u/s 143(2) should be issued within one year from the date of filing of the return of income for the block period. Omission to do so cannot be taken to be a procedural irregularity and, therefore, it cannot be cured. The ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 relevant portion of the judgment at page nos. 369 to 371, is reproduced below for ready reference:- We may now revert back to section 158BC(b) which is the material provision which requires our consideration. Section 158BC(b) provides for enquiry and assessment. The said provision reads that the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section

144 and section 145 shall, so far as may be, apply. An analysis of this sub-section indicates that, after the return is filed, this clause enables the Assessing Officer to complete the assessment by following the procedure like issue of notice under section 143(2)/142 and complete the assessment under section 143(3). This section does not provide for accepting the return as provided under section 143(1)(a). The Assessing Officer has to complete the assessment under section 143(3) only. In case of default in not filing the return or not complying with the notice under section 143(2)/142, the Assessing Officer is authorized to complete the assessment ex-parte under section 144. Clause (b) of section 158BC by referring to section 143(2) and (3) would appear to imply that the provisions of section 143(1) are excluded. But section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under section 143(2). However, if an assessment is to be completed under section 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that section 158BC(b) specifically refers to some of the provisions of the Act which require to be followed by the Assessing Officer ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 while completing the block assessments under Chapter XIV- B of the Act. This legislation is by incorporation. This section even speaks of sub-sections which are to be followed by the Assessing Officer. Had the intention of the Legislature been to exclude the provisions of Chapter XIV of the Act, the Legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the Assessing Officer, if for any reason, repudiates the return filed by the assessee in response to notice under section 158BC(a), the Assessing Officer must necessarily issue notice under section 143(2) of the Act within the time prescribed in the proviso to section 143(2) of the Act. Where the Legislature intended to exclude certain provisions from the ambit of section 158BC(b) it has done so specifically. Thus, when section 158BC(b) specifically refers to applicability of the proviso thereto it cannot be excluded. We may also notice here itself that the clarification given by the Central Board of Direct Taxes in its Circular No. 717 dated August 14,1995, has a binding effect on the Department, but not on the court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of section 143 of the Act. Accordingly, we conclude that even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of section 158BC, the provisions of section 142 and sub-section (2) and (3) of section 143 are applicable and no assessment could be made without issuing notice under section 143(2) of the Act. However, it is contended by Sri Shekhar, learned counsel for the Department that in view of the expression so far as may be in section 153BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this court in Dr. Partap Singhs case [1985] 155 ITR

166. In this case, the court has observed that section 37(2) provides that the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in section 165 has to be generally followed. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 The expression so far as may be has always been construed to mean that those provisions may be generally followed to the extent possible. The learned counsel for the respondent has brought to our notice the observations made by this court in the case of Maganlal v. Jaiswal Industries, Neemach, [1989] 4 SCC 344 wherein this court while dealing with the scope and import of the expression as far as practicable has stated without anything more the expression as far as possible will mean that the manner provided in the Code for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision therein which may not be practicable to be applied. The case of the Revenue is that the expression so far as may be apply indicates that it is not expected to follow the provisions of section 142, sub-sections (2) and (3) of section

143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression so far as may be apply. In our view, where the Assessing Officer in repudiation of the return filed under section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142, sub-sections (2) and (3) of section 143. Section 158BH provides for application of the other provisions of the Act. It reads : Save as otherwise provided in this Chapter, all the other provisions of this Act shall apply to assessment made under this Chapter. This is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment. The provisions which are specifically included are those which are available in Chapter XIV-B of the Act, which includes section 142 and sub-sections (2) and (3) of section 143. On a consideration of the provisions of Chapter XIV-B of the Act, we are in agreement with the reasoning and the conclusion reached by the High Court. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 3.4 In this very connection, our attention has been drawn towards the provision contained in section 148(1) regarding issue of notice where income has escaped assessment. This provision deals with the issuance of notice and the treatment to be meted out to the return filed in response to the notice. The return under this section has to be treated as a return furnished u/s 139 and the provisions of the Act are accordingly made applicable, so far as may be. For the sake of ready reference, the provision is reproduced below:- Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: 3.5 Thus, it is her case that a return u/s 148 stands on the same footing as a return u/s 139 as also the return u/s 153A. The requirement for issuance of notice u/s 143(2) for making an assessment u/s 143(3) was considered by the Special Bench of Delhi Tribunal in the case of Raj ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 Kumar Chawla & Another Vs. ITO (2005) 277 ITR (AT) 225. It has been held that the jurisdiction to assess or re-assess income which has escaped assessment is founded on a valid notice issued u/s 148. However, if the return filed u/s 148 is sought to be scrutinized, the compliance to the provision contained in proviso to section 143(2) is necessary. In other words, such a notice has to be served within a period of 12 months as provided under proviso to section 143(2) for making such an assessment. It may be mentioned here that the provision has been amended to remove the time limit of 12 months and the notice issued at any time before making assessment u/s 148 is now a valid notice. For the sake of ready reference, the finding contained in placitum 48 at page 254 of the report is reproduced below:- In the light of the analysis of the relevant provisions of law and judicial precedents, we are of the considered view that the return filed pursuant to notice under sec. 148 of the Act must be assumed and treated to be a return filed under section 139 of the Act and the assessment must thereafter be made under section 143 or 144 of the Act after complying with all the mandatory provisions. Accordingly, it is incumbent upon the assessing authority to issue notice under section 143(2) of the Act within the period as stipulated in the proviso thereunder. In this view of the matter, the first question before the Special Bench is answered in the affirmative. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 3.6 It is also her case that the provision contained in section 292BB, inserted in the Act by Finance Act, 2008, with effect from 1.4.2008, regarding notice deemed to be valid in certain circumstances is applicable prospectively and not retrospectively as held by the Special Bench of Delhi Tribunal in the case of Kuber Tobacco Products (P) Ltd. Vs. Dy. CIT (2009) 310 ITR (AT) 300. It has been held in this case that the provision cannot be construed to have retrospective operation and it has to be applied prospectively only. The Honble Bench furnished a summary of its finding in placitum 46 at page 324, which is reproduced below:- Summarising our findings we hold as follows:-

(i) Section 292BB even if it is procedural it is creating a new disability as it precludes the assessee from taking a plea which could be taken as a right, cannot be construed retrospectively as the same is made applicable by the statute with effect from April 1, 2008.

(ii) Section 292BB is applicable to the assessment year 2008-09 and subsequent assessment years. 3.7 The ld. counsel also relied on the decision of Honble Delhi High Court in the case of CIT Vs. Lunar Diamonds Ltd. (2006) 281 ITR 1, in ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 which it is mentioned that the assessee had filed affidavit stating that it did not receive the notice. In such a circumstance, the Tribunal rightly held that the burden was upon the department to prove that the notice was served on the assessee within the prescribed time. Her limited case on the basis of this decision is that it is for the revenue to prove that a notice has been served on the assessee. For the sake of ready reference, the relevant portion of the judgment in placitum 16 on page 5 is reproduced below: We may also point out that there appears to be some doubt whether the notice was at all sent to the assessee because, as observed by the Commissioner of Income-tax (Appeals), the receipt showing that an envelope was sent by registered post merely contained the name of the assessee without its address. Consequently, it is quite possible that the notice may have been sent to the assessee at some wrong or even some incomplete address. However, it is not necessary for us to go into this question at all because the assessee had filed an affidavit stating that it had not received the notice and the Tribunal rightly held that under these circumstances, the burden was upon the appellant to prove that notice was served upon the assessee within the prescribed time. The appellant had failed to prove its case in this regard. 3.8 Reliance has also been placed on the decision of Honble Bombay High Court in the case of Allana Cold Storage Ltd. Vs. ITO & Others (2006) 287 ITR 1, in which it has been mentioned that the assessee is ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 expected to file a return of income in response to notice u/s 148. The Honble Supreme Court has laid down that he has right to seek the reasons for issuance of the notice in the case of GKN Driveshaft (India) Ltd. Vs. ITO (2003) 259 ITR 19. Therefore, the AO is bound to furnish the reasons within a reasonable time. Once the reasons are received, the assessee has a right to file objections and the AO is bound to dispose them off by way of a speaking order. Therefore, in absence of compliance of the aforesaid procedure, the notice is liable to be quashed. The purpose of reliance on this decision is not very clear to us as the primary case of the ld. counsel is that no notice has been issued u/s 143(2) before completion of the assessment. Nonetheless, we tend to agree with her that if any statutory requirement is not satisfied, the order of assessment is liable to be struck down. 3.9 We have already summarized the relevant portion of the impugned order, in which it has been held that since two questionnaires have been issued to the assessee before completion of the assessment, the requirement of section 143(2) has been satisfied. In view thereof, the ld. counsel was requested to state as to why these questionnaires should not be taken as notices u/s 143(2). In this connection, she filed a proforma ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 notice u/s 143(2), marked as ITNS-33, about which a mention has also been made in the order of the ld. CIT(A). Her primary case is that notice in this proforma must be issued to the assessee for making compliance of section 143(2). When she was appraised that this was not a notice prescribed under the Act and it is only non-statutory proforma devised by the revenue for obtaining the necessity of its repeated printing, it has been submitted that for any notice to comply with the aforesaid provision, it must refer to the return of income filed by the assessee and afford him opportunity to file evidence in support of the return. This proforma notice, ITNS-33, duly filled for assessment year 2006-07, and issued by the AO on 27.7.2007 has been placed in the paper book, which reads as under:- There are certain points in connection with the return of income submitted by you on. for the assessment year 2006-

07 on which I would like some further information. You are hereby required to attend my office on 20.8.07 at 11.00 A.M either in person or through a representative duly authorized in writing in this behalf or produce or cause there to be produced at the said time any documents, accounts and any other evidence on which you may rely in support of the return filed by you. 3.10 She has also placed on record the questionnaire dated 7.12.2007 issued by the AO in respect of proceedings for assessment years 2000-01 ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 to 2006-07. This notice makes mention about the search conducted on 1.9.2005 at the residence of the assessee, various assets found in the residence and the locker, and the documents found and seized in the course of search of the residence. Information/details have been sought on 31 points. At the end of this notice, it is also mentioned that it may be complied on 17.12.2007 in person or through authorized representative along with supporting documents. The points primarily deal with assets and documents found in the course of the searches. 3.11 In reply, the ld. DR referred to the findings of the ld. CIT(A) in this matter. It has been held by him that the assessee had been put to notice by way of two questionnaires. Therefore, the requirement of section 143(2) stands satisfied. In the alternative, an additional plea has been taken that as per notice u/s 153A, issued on 7.9.2007, the assessee was required to file the return within 15 days. Therefore, the time limit for filing the return as per the notice expired on 22.9.2007. The return had not been filed till this date. Therefore, the return is non-est. In column no.

6 of the proforma on page 1 of the assessment order, it is mentioned that the order is passed u/s 153-A of the Act. In view of the fact that no valid return had been filed by the assessee, the order should be taken to have ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 been passed u/s 144 read with section 153-A of the Act. Since the return is non-est and the order had been passed u/s 144 read with section 153A of the Act, there was no requirement of issuing a notice u/s 143(2). 3.12 In the rejoinder, the ld. counsel submitted that none of the lower authorities has given a finding that the return is invalid. Therefore, the argument in this regard is a leap in the dark. It is further submitted by her that the assessment has been made on the basis of material found in the course of search. But a valid assessment in such a situation can be made, which leads to increase in the total income, only after issuance and service of a notice u/s 143(2).

4. We find that the ld. CIT(A) has given a categorical finding that the requirement of section 143(2) has been met as two questionnaires have been issued in this case, fixing the dates of hearing. Thus, his finding is that the questionnaires amount to notices u/s 143(2). It is an accepted position that these questionnaires were issued and served after the filing of the return u/s 153A. Therefore, if these are notices u/s 143(2), then, the case of the ld. counsel does not survive. We are of the view that the arguments advanced by the ld. counsel and the ld. DR do not fully address ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 to this fundamental issue. Therefore, we have taken recourse to the discussion on the subject made in the Law & Practice of Income-tax by Kanga, Palkiwala and Vyas, 9th edition, Volume-II at pages 1743 and 1744. In this discussion, a mention has been made about the decision in the case of Rajmani Devi Vs. CIT (1937) 5 ITR 631 (All.), which is directly on the point. As we are making reference to the commentary and the case law, we think it necessary to reproduce the relevant portion. Paragraph 10 of the commentary reads as under:-

10. Sub-section (2): Notice to Attend or Produce Evidence The provisions of this sub-section are mandatory. If the AO has made an assessment under sub-s (1) which is objected to by the assessee, (Salimullah v CIT, 218 ITR 74 [does not automatically cancel assessment]) or whether or not an assessment has been made under sub-s (1), the AO considers it necessary or expedient to verify the correctness and completeness of the return, he is bound to serve a notice under this sub-section on the assessee requiring him, on a specified date, either to attend at the AOs officer or to produce or cause to be produced any evidence on which the assessee desire to rely in support of his return. (Rattanlal v CIT, 97 ITR 533; CIT v Gyan 165 ITR 501; Rajmani v CIT, 5 ITR 631; Mohammed Hayat v CIT 5 ITC 159, 167; Dhunichand v CIT 2 ITC 188; Nirmal v Sec of State 2 ITC

20. In the last mentioned case, Greaves J opined that the assessee may waive notice required to be given under this sub-section). The only requirement for the issue of the notice is a satisfaction on the part of the AO that it is necessary or expedient to verify the correctness and completeness of the return filed by the assessee. (CIT v Krishnarjunan 225 ITR ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 510; CIT v Unnikrishnan 229 ITR 574 [s 143(2) not comparable to s 147]). Further, such notice can be issued notwithstanding the fact that assessment was completed under the summary assessment scheme as notified by the board. (Om Trading v Second ITO 188 ITR 641; Dadamchand v CIT 222 ITR 433). The only case in which the AO has to take the previous approval of the deputy commissioner for issuing a notice under this sub-section is where he has made an assessment under sub-s (1) which has been accepted by the assessee. The approval from the deputy commissioner is mandatory and cannot be presumed to have been granted. (CIT v Ladharam 245 ITR 340). Where the AO has reason to believe that the return is false, incorrect or incomplete, he cannot purport to compute the income under the proviso to s 145(1) or under s 145(2) without issuing a notice under this sub-section. (Kesaridas v CIT 2 ITC 213; Rampratap vs CIT 3 ITC 362). The meaning of this sub-section is that when a return is made the AO shall not reject it and take some other basis as the basis of assessment without giving the assessee an opportunity to appear before him and give any evidence which he may desire to give. (Harmukhrai v CIT 3 ITC 198, 206, per Rankin CJ.) The choice as to whether the assessee should attend the AOs office or whether he should produce or cause to be produced any evidence in support of his return lies with the assessee and not with the department. A notice under this sub-section which merely calls upon the assessee to attend the AOs office and does not give him the choice of producing or causing to be produced any evidence on which he may rely in support of the return, is therefore invalid. (Rajmani v CIT 5 ITR 631). The sub-section itself indicates that a general notice calling upon the assessee to appear or to produce evidence or cause it to be produced is sufficient. However, in some cases it has been held that the notice issued under this sub-section should ordinarily specify the points upon which the assessee has to produce evidence, (Nirmal v Sec of State 2 ITC 20, 25,per Mukerji [Greave J dissenting]) specially where the AOs objection is that the accounts are ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 incomplete, (Chan Lo Chuvan v CIT 3 ITC 397, 404) but not where the accounts are fabricated or cooked for income-tax purposes. (Ibid) If the notice contains a small error which does not in any way mislead the assessee, if would not vitiate the notice.( see s 139, under Validity of notice). [See s 292B and s 1, under Order or notice under wrong section.] The AOs power under this sub-section is not confined to issuing one notice only; he may issue further notices requiring the assessee to produce evidence on specified points. (Re Lachhmandas 2 ITC 1,3). No form has been prescribed for a notice under this sub-section. (Nopchand v CIT 2 ITC 146). 4.1 The relevant portion of the judgment in the case of Rajmani Devi (supra) reads as under:- The notice that was issued in the present case is printed at page 12 of the case. It is as follows: To enable me to test the correctness of the return made by you under sec. 22 of Act XI of 1922 for the year ending Shait Sambat 1988, I hereby require you to attend in person on October 20, 1932. It is argued on behalf of the assessee that there were two irregularities in this notice. The first irregularity is that the year ending Shait Sambat 1988 was mentioned, though the correct year which ought to have been mentioned was the year ending Shait Sudi 15, Sambat 1989. The learned Commissioner has rightly pointed out that this did not in any way mislead the assessee and we might further mention that the assessee did appear in person and did not ledge any protest in respect of this mistake. Moreover, the difference is only that of fifteen days and the account books, such as were furnished, were in respect of the correct year ending ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 Shait Sudi 15, Sambat 1989. The proceedings in connection with which the notice was issued relating to the year ending Shait Sudi 15, Sambat 1989 and these were the only proceedings pending at that time and the assessee knew perfectly well what account books he was required to produce. We are, therefore, of the opinion that this irregularity does not in any way vitiate the notice. The other irregularity is a more serious irregularity, and it is that the words or to produce, or to cause to be there produced any evidence on which such person may rely in support of the return were scored out. The contention on behalf of the assessee is that out of the alternatives provided in Sec. 23(2) if it is for him and not for the Department to choose the alternative. There are three alternatives provided by Sec. 23(2)-

1. to attend at the Income-tax Officers office.

2. to produce any evidence on which the assessee may rely,

3. to cause to be there produced any evidence on which the assessee may rely. In the present case, the Income-tax Officer did not give the assessee the option of choosing any one of the three alternatives but asked the assessee to attend the Income-tax Officers office. The learned Commissioner says: It is the Income-tax Officer, when he arrived at a certain frame of mind, who is required to give a notice and it is for him, I submit, to decide which of the alternatives he will choose. If he thinks that for his purposes it will be enough that the assessee came and explained how he had made out the return, there is no reason why he should enforce the other alternative, particularly when he knows that such an explanation would be supplemented by the accounts he had required the assessee under Sec. 22(4) to produce. It is the Income-tax Officer who has, in a certain frame of mind, to issue the notice and the alternatives would appear to be intended for him. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 There is no question of enforcing the other alternatives. The question is whether it is not the privilege of the assessee to choose one of the several alternatives provided by the section. If the contention of the Department were correct, then the word either" ought more appropriately to have occurred at a different place and the section might read as follows :- He shall serve on the person who made the return a notice either requiring him on a date to be therein specified to attend .or.. . But as the section reads the alternatives seem to be for the benefit of the assessee who has got to choose as to which of the options he will exercise. This is also more reasonable. The assessee has submitted his return and the Income-tax Officer has reason to believe that the return is incorrect or incomplete, and although the Income-tax Officer may be of the opinion that the explanations furnished by the assessee might remove the Officer's suspicion, yet the assessee might feel that no amount of explanations furnished by him would remove the doubts of the Officer, and it would be necessary for him to produce some evidence in support of the return, and if the notice directed only the attendance of the assessee the latter would not be able to produce valuable evidence. It may also be that the assessee might find it extremely inconvenient to attend in person and at the same time might feel that the Officer could be given every satisfaction by the production of some evidence. From every point of view we are of the opinion that the law intended to give the options to the assessee and not to the Department. It was contended by Mr. Varma on behalf of the Department that if the law were interpreted in the way in which we feel inclined to interpret it, the position would become unworkable. He said that if the option were with the assessee, then under certain circumstances there could be no default in compliance with a notice under Sec. 23(2) and the Income-tax Officer could never proceed to pass a best judgment assessment. The illustration that he gave was that the assessee who admittedly keeps no accounts and whose calling do not necessarily involve the ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 keeping of accounts might on a notice issued under Sec. 23(2) decide to attend at the Income-tax Officer's office and not to produce any evidence with the result that even though the Income-tax Officer may not be satisfied with the explanation of the assessee the Income-tax Officer would not be able to say that there was non-compliance with the notice and would have to proceed under Sec. 23(2), and in that case he would be compelled to accept the return filed by the assessee. There is really no substance in this contention, because first it was never intended that the Income-tax Officer should invoke the powers vested in him under Sec. 23(4) in the majority of cases and further if the assessee chooses not to produce any evidence in support of the return it might really work to the detriment of the assessee because then the Income-tax Officer might utilise the information which he has received about the income of the assessee and might place that information before the assessee and ask him to displace the same. The Income-tax Officer might well summon certain witnesses under Sec. 37 of the Act to show what the income of the assessee is and on the basis of that evidence-the assessee being given the option to cross- examine such witnesses -proceed to assess the individual on an income higher than that stated in the return and public revenues would not in any way suffer. Further the same difficulties would arise if the option were with the Officer. He might decide to ask the assessee to attend in person or he might decide to ask the assessee to produce evidence in support of the return and in either event it is conceivable that the Income-tax Officer may remain unsatisfied, and if the Income-tax Officer knows that the assessee keeps no accounts he would not issue a notice under Sec. 22(4) and he will have to proceed under Sec. 23(3). It seems to us that if the Income-tax Officer were the final Judge in the matter of the alternatives it would work great hardship on the assessee and the assessee in those cases in which the Income-tax Officer requires only the attendance of the assessee might lose the valuable right of producing the evidence in support of the return and removing the doubts of the Officer. Our answer to the first question is therefore, in the affirmative. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09

5. Having considered the submissions of the parties, we think it fit to dwelve upon the provision contained in section 143(2)(ii), applicable to the facts of this case. For making scrutiny assessment, the requirement mentioned in this provision is that the AO shall serve on the assessee a notice requiring him, on the date to be specified therein, either,-

(i) to attend his office; or

(ii) to produce any evidence on which the assessee may rely in support of the return; or

(iii) cause to be produced any evidence on which the assessee may rely in support of the return. 5.1 Firstly, there is some controversy as to whether a general notice would suffice or it had to be a specific notice. The generally accepted position of the law is that a general notice calling upon the assessee to appear or to produce evidence or cause the evidence to be produced is sufficient. However, in the case of Nirmal v Secretary of State, 2 ITC 20, it has been held that the notice should ordinarily specify the point on ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 which the assessee has to produce the evidence although a dissenting judgment was written by Greaves J. Thus, what can be said is that a specific notice stands on better footings than a general notice. Therefore, the position of law in this regard is that if the assessee has been given an opportunity to do any of the three alternatives, as the conjunction used is or, and the date and place of compliance are mentioned, it will be a valid notice u/s 143(2). Although the issue was decided against the revenue in the case of Rajmani Devi, but that was on account of the fact that the assessee was precluded from exercising two of the alternatives. It also appears that the position of law under the 1922 Act was somewhat different as the conjunction and was used between second and third alternatives. In the instant case, the statutory provision is clear as the conjunction used is or uniformally. Therefore, furnishing of any of the three alternatives to the assessee would suffice the condition of a valid notice, if date and place are also mentioned in the notice. In the questionnaire dated 7.12.2007, the place has been mentioned and the date of compliance has also been mentioned. Further, it has been mentioned that the compliance to the points raised may be made in person or through authorized representative. Thus, according to us, opportunities as per second and third alternatives have been granted to the assessee. As ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 mentioned earlier, the widely accepted proposition of law is that a general notice would suffice. However, a different view was taken in the case of Nirmal v Secretary of State, in which it was held that the notice should ordinarily specify the points in respect of which the assessee has to produce evidence. The objection in this case was that the notice was general in nature. Obviously, such an objection cannot be taken in this case as the AO specified the points in respect of which evidence was to be produced or was caused to be produced. Therefore, we are of the view that this notice amounts to compliance of the mandatory requirement of the provision contained in section 143(2)(ii). As the notices have been served after the filing the return, making a reference to it in the notices would amount to stating the obvious fact, which is not necessary according to us. 5.2 The ld. DR has raised a fresh plea in defence of the order of the ld. CIT(A) that since the return has not been filed within the prescribed time, it is non-est and, therefore, the assessment is made u/s 144 read with section 153A. The case of the ld. counsel is that no such finding has been given by any of the lower authority and, thus, the argument is a leap in the dark. We really do not agree with her in this regard. The revenue is ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 a defendant in this case, and it can take up any legal plea to defend the order of the ld. CIT(A) provided that no fresh fact is required to be found to furnish a decision in respect of the plea. This follows clearly from the decision of Honble Bombay High Court in the case of B.R.Bamsi Vs. CIT (1972) 83 ITR 223. This also follows from the decision of Honble Supreme Court in the case of Hukum Chand Mills Ltd. vs. CIT,

63 ITR 232, in which the defendant revenue was not only allowed to raise the additional plea but the AO was also directed to find facts regarding the claim of depreciation. As the facts regarding the date of notice and filing of the return are on record, therefore, the argument of the ld. DR is not a leap in the dark but a plea based on facts. Therefore, he is entitled to take such a plea. However, we need not go into the merits of this issue for the reason that we have already held that requirements of section 143(2) have been met in this case. 5.3 Before parting, we may mention here that our conclusion regarding compliance of the provision contained in section 143(2) can be arrived independent of the references to the commentary and the decision in the case of Rajmani Devi on plain reading of the provision. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 5.4 The result of aforesaid discussion is that this ground arising in various years, taken up by the assessee, is dismissed.

6. In regard to the two grounds taken by the revenue in its appeal, it is mentioned in the impugned order that during the course of search at the residence of the assessee, a document was found regarding plot no. 251, Nangli Sakhruwati, Najafgarh, which was valued at Rs. 22,41,141/- by Shri Gautam Akhouri in his report dated 15.10.2000. The assessee was required to explain the source of investment in the property. It was inter-alia submitted that the property does not belong to the assessee but to his wife, Smt. Jyoti Chadha as sole owner. The property was purchased for a sum of Rs. 50,000/- and the corresponding deed was registered in the office of Sub-Registrar at serial no. 2784, additional book no. 1, volume 351 at pages 83 to 87 on 26.8.2000. This property was got valued for the purpose of taking bank loan. She declared this property in the statement of her affairs as on 31.3.2001 at Rs. 58,000/-. On these facts, the findings of the ld. CIT(A) were two-fold-(i) nothing could be added as undisclosed investment in the hands of the assessee as the property did not belong to him, (ii) any action in regard to taxing ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 undisclosed investment will arise only in the case of Smt. Jyoti Chadha, the owner of the property. 6.1 Before us, the ld. DR relied on the order of the AO. In reply, the ld. counsel supported the order of the ld. CIT(A). It has been submitted that the property belongs to Smt. Jyoti Chadha and there is no evidence that it belongs to the assessee. Since the document belongs to Smt. Jyoti Chadha, any action in this regard will lie in her hand. 6.2 We have considered the facts of the case. In the assessment order, it is mentioned that the property has been valued at Rs. 22,41,141/- and, therefore, its actual value is this amount and not Rs. 50,000/-. From the returns of Smt. Jyoti Chadha, it is clear that she does not have the capacity to invest Rs. 22,41,141/- in the property. She has also not shown to have taken any loan for this purpose. She has made advances of further amounts of Rs. 22,51,000/- and Rs. 6,70,000/-. Even if it is assumed that she invested a sum of Rs. 22,41,141/- in the property, she would be left in no position to advance the aforesaid amount to the assessee. In view thereof, the sum of Rs. 22,41,141/- was taxed as the income of the assessee u/s 69. On going through these findings, it is clear ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 that the AO has not brought on record any evidence to show that investment in the property was made by the assessee. The conclusion is based on circumstantial evidence only. On the other hand, it is that she has been filing her income-tax return and investment in the property was shown at Rs. 58,000/-. This is in consonance with the registered deed signed before the Sub-Registrar. There will always be a difference between purchase consideration and determination of the value of a property on a certain date. Although the substantial difference in a small period does lead to a presumption of suppression of purchase consideration, but such a presumption is at best a rebutable presumption. In any case such a presumption can be drawn only in case of Smt. Jyoti Chadha as no evidence whatsoever has been found that the assessee invested any amount in this property. Therefore, we are of the view that the ld. CIT(A) was right in holding that no addition could have been made in the hands of the assessee. At the same time, he has granted liberty to the revenue to take any action feasible in law in the case of Smt. Jyoti Chadha and in this connection he has referred to the provisions contained in section 153-C. We do not find any error in this finding also. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 ITA No.1458(Del)/2009- A.Y. 2004-05- Appeal of the revenue ITA No. 1266(Del)/2009- A.Y. 2004-05- Appeal of the assessee

7. Ground no. 1 is that the ld. CIT(A) erred in deleting the addition of Rs. 73,50,000/- made by the AO u/s 69 in respect of investment in plot of land on the basis of seized material. The facts mentioned in this connection in the impugned order are that in the course of search, documents were seized showing investment in plot allotted by Haryana Urban Development Authority (HUDA for short) to Roopwell Converters, a concern belonging to the HUF of M/s Jyoti Chadha, an existing assessee. It was submitted that no addition could be made in the hands of the assessee as the property did not belong to him. Investment in the property was only Rs. 7,35,000/- because only 10% of the total value had been paid as booking amount by M/s Roopwell Converters and, thus, there is no reason to make the addition of Rs. 73,50,000/-. Even the addition of Rs. 7,35,000/- is not required to be made as the investment stands explained from the record of income-tax department. The ld. CIT(A) considered the facts of the case and submissions made before him. It is mentioned that the investment is in a plot of land and not in a flat as mentioned by the AO. The seized document is addressed to M/s Roopwell Converters stating inter-alia that a plot of land admeasuring ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 2100 sq. mts. has been allotted @ Rs. 3,500/- per sq. mt. and the tentative price is Rs. 73,50,000/-. The booking amount of Rs. 7,35,000/- has been adjusted against the aforesaid price and the allottee has been required to pay a further sum of Rs. 11,02,500/- within 30 days of issue of allotment letter so as to bring the amount paid to 25% of the total tentative price. The balance amount of Rs. 55,12,500/- is permitted to be paid in lump sum without any interest or in five half-yearly installments with interest. The balance-sheet of M/s Jyoti Chadha, HUF shows investment of Rs. 18,72,000/- on 31.3.2004, which consists of the earnest money and the further amount paid. It has been held that as the property does not belong to the assessee but clearly belongs to M/s Jyoti Chadha, HUF no addition could be made in the hands of the assessee. There is also a prima facie mistake in making the addition of Rs. 73,58,000/-. Thus, the addition made by the AO has been deleted. The revenue has been given liberty to consider the investment in the hands of the HUF. 7.1 Before us, the ld. DR relied on the order of the AO while ld. counsel relied on the order of the ld. CIT(A). ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 7.2 In the assessment order, it has been mentioned that seized material contains a letter of allotment by HUDA to M/s Roopwell Converters dated 11.8.2003, showing the price at Rs. 73,50,000/-. It has been submitted that the property belongs to M/s Jyoti Chadha, HUF which is a regular tax-payer. The return of this HUF shows total income of Rs. 72,000/- only for assessment year 2001-02. The income for assessment years 2002-03, 2003-04 & 2004-05 are Rs. 72,000/-, Rs. 11,882/- and Rs. 64,633/-. Therefore, the HUF does not have capacity to invest even a sum of Rs. 7,35,000/- by way of earnest money. The assessee is the karta of M/s Jyoti Chadha, HUF, who has to explain the source of investment. In absence of satisfactory explanation the amount is added in the hands of the assessee. 7.3 It is a matter of fact on record that the property belongs to M/s Jyoti Chadha, HUF, a regular assessee, who has shown investment in its return of income. No doubt the incomes returned by the HUF in various years do not evoke confidence that it could invest the amount out of its own income, but the source of investment could be other than its own income. In any case, no evidence has been brought on record to show that the assessee invested any amount in acquisition of the plot of ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 land from HUDA. Therefore, we do not find any error in the order of the ld. CIT(A) especially when he has given liberty to the revenue to take action as per law in that case.

8. Ground no. 2 is against the deletion of addition of Rs. 10.00 lakh made by the AO u/s 68 in respect of the bank account of the assessee. In this connection, it is mentioned in the impugned order that the AO made the addition in respect of two sums of Rs. 5.00 lakh each found credited in the bank account of the assessee on 13.1.2004 and 15.1.2004. It was submitted before the AO that these amounts were received by way of cheque nos. 613068 & 613069 from Pragati International Pvt. Ltd. This explanation was furnished by way of additional evidence. The AO did not controvert the additional evidence. Therefore, the addition was deleted. Before us, the ld. DR relied on the order of the AO while the ld. counsel relied on the order of the ld. CIT(A). 8.1 In the assessment order, it is mentioned that two sums as aforesaid were found credited in the bank account of the assessee with the narration PIPL and a debit entry of Rs. 10.00 lakh was made on 15.1.2004 with the narration Baba Intl. In absence of any proof ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 regarding nature and source of the credit, the amount was brought to tax u/s 68. On consideration of the two orders, it is seen that the amount was added by the AO in absence of any explanation. However, additional evidence was filed before the ld. CIT(A), in which it was submitted that the amounts were received by way of two cheques from Pragati International (P) Ltd. This evidence was put to the AO for report. It has been mentioned by the ld. CIT(A) that the AO did not controvert this evidence. Thus, the source was held to be properly explained by the assessee. In absence of any evidence or argument to displace this finding of the ld. CIT(A), we do not find any reason to interfere with his order in this matter.

9. Ground no. 3 is stated to be inconsequential, which deals with the provision contained in section 153C. Thus, it does not acquire any decision from us.

10. The assessee has taken two substantive grounds in respect of non- issuance of notice u/s 143(2) and confirmation of the amount of Rs. 10.00 lakh, being cash seized from Shri Dalbir Singh Rawat, an employee of the assessee. Ground no. 1 regarding non-issuance of notice u/s 143(2) ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 stands decided against the assessee as per order in C.O. No. 144(Del)/2009 (supra).

11. Coming to the addition of Rs. 10.00 lakh, it is mentioned in the impugned order that seized records reveal that a sum of Rs. 10.00 lakh was seized from Shri Dalbir Singh Rawat, an employee of the assessee, at Bhopal Railway Station. The explanation of the assessee is that this money belongs to Shri Sudhir Chadha, the nephew, who owns Chadha Seed Farm, Post Chaklava, Kaladhongi Road, Nanital. He has sent this money in connection with some property transaction through Shri Rawat. In order to support this claim, a recovery suit filed by him at Bhopal has been filed. The AO has drawn adverse inference against the assessee on the ground that the money was found in possession of the employee of the assessee. In spite of the claim of ownership by the nephew, the matter is still pending for adjudication before the Railway Magistrate, Bhopal. The assessee has not been able to explain as to why his employee was found in possession of the cash. Therefore, mere denial without supporting evidence cannot be accepted. Thus, the ld. CIT(A) upheld the finding of the AO. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 11.1 Before us, the ld. counsel referred to the findings of the ld. CIT(A), which have already been summarized by us. She drew our attention to Annexure 4, which is a claim made by Shri Sudhir Chadha before the magistrate, railway police, Bhopal dated 23.1.2008. It is inter-alia mentioned in this claim that he is carrying on the business of M/s Chadha Seed Farm Agricultural Export. Shri Dalbir Singh Rawat is a reliable person in his eye. He had sent him with a sum of Rs. 10.00 lakh to Bhopal for purchase of land. The railway police seized this amount from him at Bhopal railway station while searching him. This money has since then been taken over by the Income-tax Department. The sale bills and bank account are enclosed which show the complete details of this money. He is the owner of this money. He wants to take over this money till the decision in the matter. The court may decide the matter accordingly. On the basis of the annexure, it is her case that the money did not belong to the assessee but belonged to Shri Sudhir Chadha, the nephew. In reply, the ld. DR relied on the order of the ld. CIT(A) and brought anomalies in the submissions of the assessee to our notice. It is submitted that the claim made by Shri Sudhir Chadha contains averment about purchase of land at Bhopal. However, no detail has been filed about the land sought to be purchased by him. The amount was seized on ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 or about 20.4.2003 as seen from telegram sent by Thana Prabhari, GRP, Bhopal to the assessee. However, the claim has been made on 23.1.2008, much after the date of seizure and after the passing of the assessment order. Therefore, the claim has been made only to accommodate the assessee. 11.2 We have considered the facts of the case and submissions made before us. The facts are that a sum of Rs. 10.00 lakh was seized by Thana Prabhari, GRP, Bhopal from Shri Dalbir Singh Rawat on 20.4.2003. Shri Rawat is an employee of the assessee and, therefore, the police station sent the telegram to the assessee. It becomes clear from this conduct of the Thana Prabhari that Shri Rawat held out before him that the money belongs to the assessee. Thereafter, the money was taken over by the income-tax department u/s 132A. The assessee or Shri Sudhir Chadha did not do anything further in the matter till the passing of the assessment order on 31.12.2007. After this date, Shri Sudhir Chadha submitted a claim that the money belongs to him and it was sent through Shri Rawat for purchase of some land, the details of which have not been mentioned. Shri Sudhir Chadha has not been produced for examination before the AO. No proposal seems to have been made for ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 his production before the ld. CIT(Appeals). No such suggestion has been made even before us. Therefore, evidence on record suggests that the claim is an afterthought made by the nephew to accommodate the assessee. If the money really belonged to the nephew, action to claim the money would have been taken soon after its seizure by the police. Therefore, the evidence arising very much belatedly lacks the ring of truth in it. Any person of normal prudence, while seeing such an evidence, will come to a conclusion that it is only an accommodating claim. Therefore, we agree with the ld. CIT(A) and hold that this amount has been rightly included in the total income of the assessee. ITA No. 1459(Del)/2009-A.Y. 2005-06- Appeal of the revenue C.O. No. 147(Del)/09-A.Y. 2005-06-Objection of the assessee

12. The revenue has taken two grounds in the appeal against addition of Rs. 10.00 lakh each made by the AO in respect of investment in plot of land at Narela and flat in Vikrant Tower. The third ground regarding applicability of provision u/s 153C is stated to be consequential in nature. On the other hand, the assessee has taken up only one ground challenging the assessment order for non-issuance of notice u/s 143(2). This ground stands concluded against the assessee. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09

13. In regard to investment in plot no. 2258, Sector 1, Narela, it is mentioned in the assessment order that as per annexure A-4, page nos. 10 to 12, the possession of the land was taken by Shri Ashok Chadha, the director of Benson Packaging Industries (P) Ltd. It was submitted before him that this company has been closed down. However, the assessee was not able to furnish the details of nature and source of investment in the property. In absence of such details, the cost of the plot of land was estimated at Rs. 10.00 lakh @ Rs. 4,000/- per sq.yd. and the amount was brought to tax in the hands of the assessee as his undisclosed investment. 13.1 Before the ld. CIT(Appeals), it has been submitted that the plot of land was acquired by the company and not by him. Therefore, any action in this behalf could be taken only in the hands of the company under the provisions of section 153C(3) and not in the hands of the assessee u/s 153C(1). It appears that additional evidence was filed before him to demonstrate that the property actually belonged to the company. This evidence consisted of a receipt dated 30.12.1996, showing payment of Rs. 1,20,000/- towards allotment of the plot of land to the company. The ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 ledger account of the company was also filed to show that a sum of Rs. 1,20,000/- only had been paid as advance. Evidence was also filed that the plot of land was allotted by way of relocation of the plot for which application was made in 1996, and for which the advance was given by the company. These facts were put to the AO for his remand report and he could not dispute these facts in any manner. Therefore, on the basis of seized evidence and the additional evidence, he came to the conclusion that the possession of the plot was taken over by the assessee as director of the company and not as an individual. Thus, the addition was deleted with liberty to the revenue to take suitable action as per law in case of the company under the provision contained in section 153C(3).

14. Before us, the ld. DR relied on the order of the AO while the ld. counsel relied on the order of the ld. CIT(Appeals). Further, she drew our attention to page nos. 32 to 36 of the paper book. Page 32 is the receipt of application from the company along with receipt of Rs. 1,20,000/- by way of pay order no. 075558 dated 26.12.1996, drawn on Union Bank of India, Connaught Place, New Delhi. Page no. 33 is the ledger account in the books of the company showing the balance of Rs. 1,20,000/-. Page nos. 34 and 35 constitute allotment letter from Deputy Manager, Delhi ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 State Industrial Development Corporation Ltd., addressed to the company regarding the allotment of the land. Page no. 36 is a certificate by the Divisional Manager certifying that the company is engaged in manufacture of flexible packaging and printing. It has been allotted an industrial plot admeasuring 250 sq. meters at Narela Industrial Complex under relocation scheme of industries. Since the party has deposited the estimated full cost of the plot, it is authorized to arrange various facilities mentioned therein for issuance of no objection certificate.

15. We have considered the facts of the case and submissions made before us. The facts mentioned in the impugned order and the documents placed in the paper book lead to a clear inference that the plot was allotted to the company which had paid a sum of Rs. 1,20,000/- to the Delhi State Industrial Development Corporation Ltd. In view thereof, we do not find any error in the order of the ld. CIT(A) which requires correction from us more so when he has granted liberty to the revenue to take suitable action as per law in the hands of the company.

16. In regard to ground no. 2, it is mentioned in the assessment order that as per annexure A-2, page 28, Smt. Jyoti Chadha, wife of the ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 assessee, paid a sum of Rs. 10.00 lakh in respect of flat no. 3, 7th floor, Vikrant Tower, Rajendra Place, New Delhi. This flat has a covered area of 787 sq. ft. The returns filed by her show that she does not have capacity to pay a sum of Rs. 10.00 lakh. This lack of capacity becomes more clear when her accounts show that she also advanced unsecured loans of Rs. 22,51,000/- to the assessee and Rs. 6,70,000/- to Shri Vaibhav Chadha. In these circumstances, it has been held that the consideration actually flowed from the assessee. Therefore, the amount was included in the total income of the assessee as unexplained investment. 16.1 It was submitted before the ld. CIT(A) that from the agreement to sell and purchase, it is clear that Smt. Jyoti Chadha purchased the flat along with Smt. Asha Bhasin. She has half share in the property. She paid a sum of Rs. 5.00 lakh by way of cheque as is evident from the agreement. This investment has been disclosed by her in the return of income. In order to support the submissions additional evidence was filed by way of her balance-sheet as on 31.3.2005, which shows the investment of Rs. 5.00 lakh in this property. The ld. CIT(A) also noted that the agreement shows the joint ownership of the property and that Smt. Jyoti Chadha had only half share therein. Therefore, he came to the conclusion ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 that no amount could be added in the hands of the assessee on this ground also. 16.2 Before us, the ld. DR relied on the order of the AO and the ld. counsel relied on the order of the ld. CIT(Appeals). Besides this, she also referred to page nos. 37 to 43 of the paper book. Page nos. 37 to 41 constitute agreement to sell and purchase between Shri Prakash Arora and Ms. Abhinandan as vendors and Smt. Jyoti Chadha and Smt. Asha Bhasin as the purchasers. The consideration is placed at Rs. 10.00 lakh, which is paid by way of two cheque nos. 023258 and 023255 dated 12.4.2004, drawn on Uninon Bank of India, amounting to Rs. 5.00 lakh each. Page no. 42 is the receipt in respect of payments made by Smt. Jyoti Chadha and Smt. Asha Bhasin. Page no. 43 is the balance-sheet of Smt. Jyoti Chadha as on 31.3.2005 showing investment in the flat at Rs. 5.00 lakh.

17. We have considered the facts of the case and submissions made before us. From the evidence placed in the paper book, it is clear that the flat had been purchased by Smt. Jyoti Chadha and Smt. Asha Bhasin as joint owners. The other evidence shows that Smt. Jyoti Chadha paid only ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 a sum of Rs. 5.00 lakh, which is reflected in her balance-sheet as on 31.3.2005. In view of these facts, we do not find any error in the order of the ld. CIT(A) which requires correction from us. ITA No. 1460(Del)/2009-A.Y. 2006-07-Appeal of the revenue ITA No. 1267(Del)/2009-A.Y. 2006-07-Cross appeal of the assessee

18. The revenue has taken three substantive grounds in the appeal regarding the deletion of the addition of Rs. 2,23,70,000/-, Rs. 32,88,000/- and Rs. 1,02,921/-, made by the AO in respect of investment and other transactions made in the firm of M/s Pragati Packaging. In the course of search, a letter dated 6.6.2005 addressed by this firm to the bank was found, in which various banking facilities were sought. These facilities were term loan of Rs. 333.48 lakh, cash credit facility of Rs. 186.1 lakh and bank guarantees of Rs. 20.00 lakh. It was mentioned that the promoters of the firm had invested funds of Rs. 256.58 lakh as capital and Rs. 32.88 lakh as unsecured loans from friends and relatives to be utilized as long-term funds. It was submitted that this firm is an associate concern which had sought various facilities from Union Bank of India, which did not materialize. Further, the AO noted that in statement dated ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 1.9.2005 recorded in the course of search, the assessee inter-alia stated that he and his son are equal partners in a firm. The firm is located at Jammu where the construction work is in progress. However, the production is yet to start. It is further stated that Shri Vaibhav Chadha, the son, is pursuing MBA course in Lincon University, U.K. The assessee was required to explain the nature and source of the capital and loans stated to have been raised by the firm. The same was not explained. Therefore, the two amounts were brought to tax. Further, it was noted that three purchases of Rs. 10,000/-, Rs. 6,6715/- and Rs. 86,306/- have been made by this firm in cash for which bills were found. It was submitted that these transactions pertained to the firm. The AO noted that the payment is by way of cash and there is no entry in the ledger or cash book of the firm. Therefore, a further addition of Rs. 1,02,921/- was made. 18.1 In the course of the proceedings before the ld. CIT(A), the assessee filed additional evidence to explain the transactions and submitted that these are on account of M/s Pragati Packaging. The assessee has nothing to do with this firm. The case of the assessee is that the firm had been constituted by Foil Pack (India) Pvt. Ltd., a limited company, and Shri ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 Vaibhav Chadha, the son of the assessee. Foil Pack had been incorporated under the companies Act, 1956, on 9.1.1990, which is the major partner and which has contributed Rs. 234.00 lakh as capital. Shri Vaibhav Chadha has contributed Rs. 14.15 lakh as capital. Both these persons are existing assessees and they have shown their investments in the respective returns of income. The assessee has nothing to do with this firm. The affidavits were also filed by the friends and relatives with Union Bank of India regarding unsecured loans. On these facts, the ld. CIT(A) mentioned that in stead of handing over the document to the AO of M/s Pragati Packaging, Foil Pack (India) Pvt. Ltd. and Shri Vaibhav Chadha, the AO proceeded to take action in the case of the assessee. The assessee filed additional evidence by way of annual accounts of M/s Pragati Packaging, which show investment of partners and copies of accounts of Foil Pack (India) Pvt. Ltd. and Shri Vaibhav Chadha in the books of M/s Pragati Packaging. Since the assessee had not made any investment in the firm, it was argued that no addition could have been made in the hands of the assessee either in respect of capital or loans. The additional documents were forwarded to the AO for the for the remand report, who did not dispute the authenticity of the documents. Thereafter, the ld. CIT(A) came to the conclusion that the assessee had not made any investment in ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 M/s Pragati Packaging either as capital or loan. Therefore, no addition should be made in his hand in this regard. 18.2 The assessee also filed documents to explain the purchases in the hands of M/s Pragati Packaging. The AO could not contradict the documents contained in the additional evidence. Therefore, it was held that the transactions of purchase related to M/s Pragati Packaging. Thus, the addition made in respect of unaccounted purchases was also deleted.

19. Before us, the ld. DR relied on the order of the AO, while the ld. counsel relied on the order of the ld. CIT(A). Besides, she also referred to page nos. 44 to 65 of the paper book. These papers contain copies of balance-sheet, profit and loss account and their annexures with M/s Pragati Packaging; balance-sheet, profit and loss account and the annexures of Foil Pack (India) Pvt. Ltd. and capital accounts of the partners in the books of M/s Pragati Packaging. On the basis of these documents, it was her case that nothing could be added in the hands of the assessee.

20. We have considered the facts of the case and submissions made before us. The facts are that in the course of search of the premises of the ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 assessee, certain documents were found which related to M/s Pragati Packaging. These documents inter-alia contain the application for availing various credit facilities etc. from the bank and three purchases made by the firm. The statement of the assessee was recorded in the course of search, in which it was inter-alia deposed that he and his son are partners in a firm, which is establishing its factory at Jammu. The AO considered the evidence and the statement. The assessee was required to explain the capital introduced in the firm, the loan raised by the firm and purchases made by it in cash. In absence of any explanation in this behalf except that the transactions pertain to M/s Pragati Packaging, various amounts were added in his income. However, in the course of proceedings before the ld. CIT(Appeals), it was found that the assessee had no connection whatsoever with the firm. The company and the son of the assessee are partners in the firm. The assessee had neither invested in the firm by way of capital nor lent any money to it. The purchases were sought to be explained by way of filing further evidence. All the evidence filed in the course of hearing was forwarded to the AO for his remand report, but he could not disprove any document. His case rests solely on the statement recorded in the course of search, which does appear to us to be misleading. However, actual facts on record are to the contrary. It is clear that the ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 assessee has no connection with the firm. He has also not made any investment by way of capital or loan in the firm. The transactions of purchase also pertain to the firm. Therefore, any action in respect of these papers can be taken only in the hands of the firm and not in the hands of the assessee. Thus, we are in agreement with the ld. CIT(A) that no amount could be added to the income of the assessee on the basis of the documents found in the course of search of the premises of the assessee.

21. Coming to the appeal of the assessee, ground no. 1 is that the order of assessment is bad in law as no notice has been issued u/s 143(2) of the Act. This ground is contrary to the facts on record, which shows that a notice u/s 143(2) has been issued and served on the assessee for this year, which has also been discussed in the cross objection of the assessee for assessment year 2001-02. It appears that this ground was wrongly taken by the assessee, and that is why it has not been discussed by the ld. counsel before us. A copy of this notice exists on our record, which shows that notice dated 27.7.2007 was issued to the assessee. In view of these facts, this ground is dismissed. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09

22. Ground no. 2 is that the ld. CIT(A) erred in sustaining the addition of Rs. 3,87,364/- on the ground of unaccounted investment in jewellery. In this connection, it is mentioned in the impugned order that jewellery weighing 906.900 grams and valued at Rs. 6,93,582/- was found in the residence and lockers of the assessee. The explanation of the assessee is that this jewellery is Streedhan of Smt. Jyoti Chadha, who was married about 25 to 30 years ago. The AO did not accept the submission on the ground that no documentary evidence has been filed to support the contention that the status of the family was such that she could possess jewellery weighing 906.900 grams as streedhan. In view thereof, the AO accepted explanation to the extent of 400 grams and the value of jewellery weighing 506 grams and valued at Rs. 3,87,364/- was held to be income from undisclosed sources. Before the ld. CIT(A), it has been submitted that Smt. Jyoti Chadha received jewellery by way of gift from mother-in-law vide gift deed dated 15.5.1985, a copy of which was filed by way of additional evidence. The CIT(A) considered the matter. He mentioned about the explanation of the assessee that the jewellery is streedhan as well as gift received from mother-in-law to their children as well as grand-children. It is mentioned that no evidence was filed before the AO regarding ownership or acquisition of the jewellery. The ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 evidence is now being filed in the form of declaration. This declaration does not specify either the items or their individual value. Rs. 1.00 lakh is also mentioned in round figure. In these circumstances, the addition made by the AO has been upheld.

23. Before us, the ld. counsel referred to the orders of the AO and the ld. CIT(A) in this matter. It was submitted that the jewellery does not belong to the assessee. The jewellery belongs to his wife who had been married about 25 years ago. Therefore, the jewellery is her streedhan. The jewellery has not been acquired in one year but it has been acquired over a period of time. Further, the family of the assessee consists of self-wife and a son. Therefore, looking to the size of the family, acquisition of jewellery by his wife at the time of marriage, gift by mother-in-law, the lower authorities should have accepted the whole of the jewellery to be explained. In reply, the ld. DR relied on the orders of the authorities below.

24. We have considered the facts of the case and submissions made before us. The primary case of the ld. counsel is that the jewellery belongs to the wife and not to the assessee. It has been acquired at the time of ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 the marriage and subsequently over a period of time. It also includes a gift of Rs. 1.00 lakh from mother-in-law. The whole of the jewellery represents her streedhan. An alternate plea is also taken that the family consists of self, wife and a son. Looking to the size of the family, possession of jewellery to the extent of 906.9 grams is reasonable. On the other hand, the finding of the ld. CIT(A) is to the effect that since gift deed contains a mention of a round sum of Rs. 1.00 lakh, it is not be reliable. There is no other evidence regarding the streedhan being acquired by the assessee at the time of marriage and over a period of time. We find that there is some contradiction in the stand taken by the ld. counsel in as much as the jewellery is stated to be belonging to Smt. Jyoti Chadha and at the same time it is also being made out that there are three family members who can together possess jewellery weighing 906.9 grams. No evidence has been produced before the lower authorities that any worthwhile jewellery was acquired by the wife at the time of the marriage. The past income-tax records of the wife and the son have not been filed to show any evidence of withdrawals for acquisition of jewellery. The gift from mother-in-law is also not acceptable in view of the findings of the ld. CIT(A). In these circumstances, we do not think it ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 necessary to interfere with the order of the ld. CIT(A), which is based on available facts on record. Thus, this ground is dismissed.

25. The last ground is against upholding of the addition of Rs. 50,000/- on account of expenditure incurred at Tivoli Garden, whose receipt was in the name of Mrs. Archana Chadha. In this connection, it is mentioned in the assessment order that in the course of search, a document was found relating to booking made with Tivoli Garden Resort on 18.5.2005. The receipt is in the name of Smt. Archana Chadha. It was submitted that Smt. Archana Chadha is the niece, who booked space in Tivoli Garden for conducting some ceremony. She inadvertently left a receipt of Rs. 50,000/- at the residence of the assessee. The amount in question was paid by her. The AO considered this explanation. It has been mentioned that the receipt was found at the residence of the assessee, which leads to an inference that although the amount had been paid by the assessee, Smt. Archana Chadha was yet to reimburse the assessee for this expenditure. In absence of any satisfactory explanation about the nature and source of expenditure, the amount was brought to tax in the hands of the assessee. The ld. CIT(Appeals) upheld the order of the AO by stating that no acceptable explanation has been furnished by the assessee. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09

26. Before us, the ld. counsel relied on the submissions made before the lower authorities, while the ld. DR relied on the orders of the authorities below.

27. We have considered the facts of the case and submissions made before us. It is seen that the receipt had been found in possession of the assessee. If it is the case of the assessee that Smt. Archana Chadha had paid the amount, the onus was on him to bring on record evidence to that effect from her. No such evidence has been brought on record. In absence thereof, we are of the view that the submission is only in the nature of argument, which is not supported by any evidence on record. The onus of proving the expenditure satisfactorily was on the assessee as the receipt was found in his possession. In these circumstances, we do not find any reason to interfere with the order of the ld. CIT(A).

28. In the result, all the appeals of the revenue and the cross appeals and cross objections of the assessee are dismissed. This order was pronounced in the open court on 17th September, 2010. Sd/- sd/- (Rajpal Yadav) (K.G.Bansal) Judicial Member Accountant Member Date of order: 17th September, 2010. ITA Nos. 1455,1458,1459,1460, 1266,1267& C.O.nos. 144 & 147(Del)/09 SP Satia Copy of the order forwarded to:- Shri Ashok Chadha, New Delhi. ITO, Ward 47(2), New Delhi. CIT(A) The DR, ITAT, New Delhi. Assistant Registrar.