Adarsh Kumar Goel, J.

1. This appeal has been preferred by the Revenue under Section 260A of the IT Act, 1961 (for short, " the") against the order of the Tribunal, Chandigarh in IT/SS No. 37/Chd/2005 and CO. 71/Chd/ 2005 for the block period ending on 14th Sept., 1999 claiming following substantial questions of law:

1. Whether the learned Tribunal is right in holding at p. 68 of the order that the office note dt. 21st May, 2001 which was appended to 158BC order dt. 21st May, 2001 and is part of the said order, does not constitute a satisfaction note within the parameter of Section 158BD of the IT Act, 1961 in respect of the person who has borrowed money through the assessee broker who is the searched person for the purpose of order under Section 158BC of the IT Act, 1961

2. Whether the learned Tribunal is right in holding that the Asstt. CIT Circle, Yamuna Nagar ought to have handed over the seized material and satisfaction note to ITO, Ward-1, Yamuna Nagar without appreciating the fact that theO, Ward-1, Yamuna Nagar was not having jurisdiction over the case, as an officer not below the rank of Asstt. CIT only is competent to pass an order under Section 158BC/158BD of the IT Act, 1961 and since the Asstt. CIT Yamuna Nagar himself was granted jurisdiction as per order dt. 31st Dec., 2001, there was no necessity to transfer the seized material/satisfaction note to ITO Ward-1

3. Whether the learned Tribunal is right in holding that there has been delay in recording of satisfaction prior to issue of notice under Section 158BD of thewhereas the Tribunal has itself observed that the satisfaction note dt. 21st May, 2001 referred to in qus. No. 1 above is within the period of limitation. And, when the statute has not prescribed any time limitation for issue of notice under Section 158BD of the

4. Whether the learned Tribunal is right in law in deleting the addition of Rs. 3,17,500 ignoring overwhelming evidence in the shape of Annex. A-1 and another documentary evidence in the shape of statement of the author of the document establishing that these transactions relates to the assessee

5. Whether the learned Tribunal is right in law in not taking into cognizance of additional evidence i.e. an examination report/opinion of laboratory of the Government Examiner of Questioned Documents, Shimla regarding the Diary of Dalai and (ii) Affidavit of Dalai dt. 27th Oct., 2004, which was adduced during the proceedings before the learned Tribunal

2. On 14th Sept., 1999, search was carried out at the residence of one Anil Kumar Goel @ Anil Dalai who was deriving income from commission from the money lending business. During search, a bahi (diary), Annex. A-1, was seized. The same contained various entries in code language in figures and words. His statement was recorded on 14th Sept., 1999, 30th Sept., 1999, 2nd Nov., 1999, 4th Nov., 1999 and was concluded on 20th Jan., 2000. The substance of his statement was that he was, inter alia, doing business of broker in money lending transactions between various parties. The lenders/borrowers contacted him and he would arrange meetings between them. If the transaction matured, he would get his commission and if he got commission, he made entries in the diary. The entries in the diary seized represented commission received in transactions between parties mentioned in the diary in code form which could be identified. In his case, block assessment was completed on 21st May, 2001 and on the said date, an office note was appended to the assessment order to the effect that undisclosed income of persons other than searched persons was disclosed, as under:

The issue of entries depicting advancing of loans by various persons as figuring in A-1/and other related documents has been examined in detail on the basis of details, almost all the persons and concerns are identifiable except in the case of three accounts mentioned above. No real names relating to the family of Shri Nand Lal Garg and his sons could be identified and discovered. Therefore, cognizance of these entries on protective basis has been taken in the case of the assessee keeping in view the fact that block search assessment of Shri Nand Lal Garg and his sons are pending with Honble Settlement Commission. As regards entries of other persons are concerned, no adverse inference is taken in the case of the assessee as these persons are identifiable. Moreover, in view of the fact that Shri Anil Kumar Goyal was a broker in the money lending business and document marked as A-1 has been maintained by him in the regular and normal course of business. Therefore, due cognizance is being taken separately, in the case of lenders by initiating proceedings under Chapter XIV-B of the IT Act, 1961.

3. Accordingly, proceedings under Section 158BD r/w Section 158BC of thewere initiated against the assessee who was identified as having lent money from undisclosed sources. The assessee filed return of its income dt. 30th Dec., 2002 declaring undisclosed income at nil. However, the AO assessed the undisclosed income at Rs. 3 lacs relying upon the statement of Anil Dalai and the entries in the document found during the search, apart from Rs. 17,500 as income from interest thereon.

4. On appeal, the addition was set aside by the CIT(A) on the ground that except the diary and the statement of the broker, there was no other corroborative evidence and the lenders/borrowers mentioned in the diary denied the transactions recorded therein. Appeal of the Department was dismissed by the Tribunal. Cross-objections of the assessee on preliminary issue, of jurisdiction to initiate block assessment proceedings without proper satisfaction, was accepted by the Tribunal. The Tribunal rejected application of the Revenue for additional evidence in the form of report of Government laboratory on the issue of authenticity of diary entries and affidavit of the searched person. The findings recorded by the Tribunal are as under:

On the issue of validity of satisfaction:

33. We have examined the above contention raised on behalf of the Revenue. A perusal of the aforesaid note shows that there is no averment or a finding by the AO that the transactions which have been explained by the Dalai as belonging to certain persons are undisclosed transactions in the hands of the respective parties. Evidently there is nothing on record to show that any verification exercise was carried out by the assessing authority before recording the aforesaid satisfaction for the purpose of Section 158BD. The only observation of the AO is that the persons and concerned explained by Dalai are identifiable. The mere identity of the parties recorded in Annex. A-1 by itself does not imbibe those transactions with the nature of undisclosed since there is no collateral finding that the respective parties have not accounted for such transactions in their books of account. It has been vehemently canvassed that subsequently the Asstt. CIT, Yamuna Nagar by way of his communication dt. 28th Dec, 2001 has confronted the said entries to the assessee in response to which the assessee, by way of his communication dt. 7th Jan., 2002 has denied the said entries. It is further contended by the Revenue that the requisite verification exercise has been carried out by the AO before issuance of notice under Section 158BD of theon 15th March, 2002. Be that as it may, it is sufficient for us to deduce here that in order to arrive at the satisfaction contemplated under Section 158BD in this case the necessary investigation and culling out of the facts and information was required to precede the recording of the satisfaction on 21st May, 2001. The material and information which came to the knowledge of the AO subsequent to the date of recording of satisfaction i.e., 21st May, 2001 is not relevant to decide the validity of the satisfaction recorded on an anterior date. After examining the aforesaid note dt. 21st May, 2001 and the submissions of the learned Departmental Representative, we do not find any satisfaction emerging that any undisclosed income belongs to a person other than the person in respect of whom search was made. Neither is there any identification of any undisclosed income or transaction and nor is there any identification of the other person contemplated under Section 158BD. Notwithstanding the aforesaid, we are also satisfied that on the basis of material available with the AO of Dalal as on the date of said note, it could not be deduced that the transaction in Annex. A-1 reflected undisclosed income of the assessee so as to justify the invoking of Section 158BD of the. The quality of evidence available with the AO does not justify any satisfaction regarding existence of the undisputed income or even the identification of such other person contemplated under Section 158BD. The only basis was the statement of dalal and no further. On an overall consideration of the material on record, we are satisfied that the office note dt. 21st May, 2001, although is within the period of limitation, however the same cannot be considered as a valid satisfaction contemplated under Section 158BD of the. In fact it has been vehemently argued by the learned Departmental Representative that Annex. A-1 and the subsequent statement of Dalal have been put to verification regarding the transactions of lending of certain in parties other than the assessee which have taken place through banking channels. It is thus submitted that Annex. A-1 was authentic and reflected true state of affairs. This aspect can at best provide a reason to the Revenue to probe further and make deeper investigations to arrive at the true state of affairs. However, the same by itself cannot be enough to deduce that the transactions which are explained by Dalal construe undisclosed income of the other person contemplated under Section 158BD i.e. the assessee before us. We therefore, conclude that the aforesaid note does not fall within the parameters of Section 158BD regarding recording of satisfaction. This vitiates the assumption of jurisdiction by the AO by issue of notice under Section 158BD of thedt. 15th March, 2002.

37. We may also make an observation regarding the ambivalent and casual manner in which notice under Section 158BD has been issued in the instant case. As noted earlier the jurisdiction permitting the Asstt. CIT, Yamuna Nagar to exercise jurisdiction and perform functions of AO in regard to the assessee was by way of an order dt. 13th Dec., 2001. This order is common order containing 133 names wherein item No. 30 has been explained as that of the assessee. We have also reproduced the said entry at para 29 of our order elsewhere. The status of the assessee is mentioned therein as a firm whereas admittedly the assessee in question is an individual who has a proprietory concern by the name of M/s Dasondhi Ram Kishan Chand. Coupled with the fact the notice under Section 158BD dt. 15th March, 2002 does not even specify the status of the assessee, it only shows a casual approach in which the jurisdiction under Section 158BD has been sought to be assumed. Therefore, on the parity of reasoning which prevailed with the Honble Supreme Court, we find it expedient to hold in the instant case that the impugned notice does not comply with the requirement of Section 158BD of the. Thus proceedings initiated thereupon stand vitiated.

38. Considering the entire facts and on the basis of the aforesaid discussion, we are of the opinion that the assumption of jurisdiction by the AO by issuance of notice under Section 158BD dt. 15th March, 2002 is vitiated in law. As we have noted earlier the invoking of Section 158BD is a jurisdictional aspect and its validity is critical to justify the subsequent proceedings....

On merits:

48. From the aforesaid it emerges that the said evidence does not justify an inference that any transactions in cash have indeed taken place. Firstly, the parties (i.e. the lender and borrower) named by Dalai have denied having undertaken any such transactions. Secondly Dalai himself also does not admit of having either witnessed the cash transaction or of having transacted it himself. In the face of this, it cannot be established that the transactions as narrated by Dalai ever took place. In the absence of any such evidence, the correctness of entries in Annex. A-1 cannot be established. After all the entries in the Annex. A-1 can be considered as corroborated only once the direct evidence of the person who is said to have witnessed the exchange of payment is available on record. As the position stands before us there is no such evidence on record. Thus there is no material on the basis of which it can be said that transaction in cash have been entered into by the assessee as recorded in the Annex. A-1. We, therefore are satisfied that the material and evidence brought on record by the Revenue is not sufficient to conclude that the assessee had indulged in money lending transactions in cash outside the books of account.

49. Further, in reply to another question, during cross examination done during the impugned assessment proceedings (refer p. 162 of the paper book filed by the Revenue) Dalai stated that the name of the parties in Annex. A-1 are writing by him as told by the parties who indulged in money lending. This also supports the inference that the recording in Annex. A-1 are not on the basis of the first hand knowledge of Dalal. In other words, it can be safely deduced that the charge made out by Dalai against the assessee is not on the basis of his personal knowledge. Under these circumstances, we feel that the evidence brought on record by the Revenue does not carry its case any further. The evidence in question is not amenable to be taken as true and correct to implicate the assessee with any tax-liability under Chapter XIV-B of the.

50. Much has been argued by the either parties regarding the manner of maintaining of Annex. A-1 by Dalai. The Revenue has contended that the said Annexure was maintained in the shape of a ledger and as a record of broking transactions and is maintained in the regular course of business and can be equated to be a books of account. The assessee contends that the said Diary cannot be equated to a book of account of any business. We do not find it necessary to go into this controversy as it does not help much to decide the question on hand. What is of relevance is to decide the evidentiary value and correctness of the Annexure which we have already addressed in the earlier paras. Similarly, much has been argued by the either parties on the decision of the Honble Supreme Court in the case of V.C. Shukla & Ors. (supra). The assessee has attempted to draw support from it and CIT(A) has also relied on it whereas according to the Revenue the said decision is inapplicable to the facts of the present case. We have carefully perused the said decision. The Honble Supreme Court was dealing with the case of the prosecution against various persons under Section 7 and 12 of the Prevention of Corruption Act, 1998 and Section 56 r/w Section 8 of the Foreign Exchange Regulation Act, 1973. The allegation of the prosecution was that Jains entered into a criminal conspiracy amongst themselves, the object of which was to receive unaccounted money and to disburse the same to various persons, including, V.C. Shukla and others. In pursuance of the said conspiracy Jain lobbied with various public servants to persuade them to award contracts to different foreign bidders with the motive of getting illegal kickbacks from them. An account of such receipts and payments was maintained by Jain in the diaries and files which were recovered during the course of a search by CBI. The issue was as to whether the entries in the diaries and files was an admissible evidence under Section 34, 16 and 17 of the Evidence Act, 1872. The decision of the Honble Supreme Court hinges on the provisions of Section 34 of the Evidence Act, 1872. Section 34 of the Evidence Act deals with the relevance of the entries in the books of account. It provides the entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability. On facts, the diaries seized were held to be admissible as evidence under Section 34 of the Evidence Act, 1872. However, the Supreme Court noted that the truthfulness of the entries in the diaries was not proved by any independent evidence. Hence it was held that the prosecution could not prove its case. In this context the Honble Supreme Court examined the expressions books of account course of business and regularly kept as appearing in Section 34 of the Evidence Act, 1872. The above discussion is sufficient to deduce that the reasoning adumbrated in the said decision is only in the context of the wordings of the relevant sections of the Prevention of Corruption Act, 1988. Ostensibly such reasoning cannot be imported into the income-tax proceedings. It is a quite well-settled proposition that the strict rules of evidence are not applicable to the income-tax proceedings. So, therefore, the principles laid down in the case of V.C. Shukla (supra) do not help in resolving the controversy before us. The principle that we have found useful to resolve the controversy before us has been discussed by us elsewhere in our order.

51. We may also refer to the manner in which the evidence in the shape of Annex. A-1 has been considered by the assessing authority of Dalai from whose possession such evidence has been seized in the course of assessing finalized under Section 158BC of the. We may also mention here that initially the order under Section 158BC was passed by Asstt. CIT, Yamuna Nagar in the case of Dalai on 21st May, 2001 which was reviewed by the CIT under Section 263 vide order dt. 31st Dec, 2003 and was quashed. Subsequently, the assessment under Section 158BC r/w Section 263 of thehas been finalized by Asstt. CIT, Yamuna Nagar on 31st March, 2004. We have perused both the assessments and find no dissimilarity in the two Annex. A-1 has been accorded by the AO as explained by Dalai which we have already narrated in the earlier portion of our order. In the course of such assessment proceedings, the AO, by way of office note No. 4 recorded as under:

The assessee has shown its receipts from Dalali business at Rs. 42, 115 and Rs. 32,720 for the asst yrs. 1999-2000 and 2000-01 respectively. The assessee was confronted with figures of Dalali is estimated by the Dy. Director of IT (Inv.) Ambala from D. No. The assessee has given the complete detail of dalali received by him as per this document. No adverse cognizance is drawn in view of the fact that most of the persons have denied having paid any Dalali to the assessee. Moreover, brokerage was being received from the borrowers only. None of the lenders whose statement were recorded had admittedly having paid any brokerage. The brokerage is charged only once that is at the time of advancing of loan by the lender to the borrower, Dalali income is shown on the receipt basis. In view of the above facts Dalali income as shown by the assessee has not been interfered with. Evidently in the case of Dalai, no adverse view has been taken in the face of denials by the borrowers regarding the commission income in the hands of Dalal Curiously, similarly denials of the parties have not found credence with the Revenue and adverse inference against such parties i.e. the assessee before us, has been drawn. Evidently such a contradictory approach from the side of the Revenue is untenable.

On the issue of additional evidence:

53. Before parting, we may also observe that the Revenue has moved an application dt. 21st June, 2006 signed by the learned Departmental Representative for admission of additional evidence with reference to the grounds of appeals raised by the Revenue. The learned Departmental Representative referred to the provisions of r. 29 of the Tribunal Rules and submitted that the said evidence was collected after the completion of assessment in the case of assessee. The additional evidence is, (i) an examination report/opinion of Laboratory of the Government Examiner of Questioned Documents, Simla regarding the Diary of Dalai and (ii) affidavit of dalal dt. 27th Oct., 2004. The learned Departmental Representative has urged that the documents/evidence go to the very root of the material and the same ought to be admitted. The learned Departmental Representative has argued that the evidence has bearing on the stand of AC) that the contents of the Diary are authentic.

55. We have considered the pleas made by both the parties with reference to the admissibility of the aforesaid additional evidence. We have also carefully perused the order of the Tribunal dt. 16th Nov., 1998 (supra) passed by our co-ordinate Bench. The Tribunal was dealing with admissibility of additional evidence collected by the Department after completion of assessment in the case of the assessee which was collected in the course of assessment of a third party. After an exhaustive exposition of rival contentions, case laws and provisions of Chapter XIVB of the, the Tribunal concluded that it was not permissible for it to admit additional evidence. The following portion of the order of the Tribunal is worthy of notice:

3.4 We may also make a reference here to the provisions of Section 158BC of therelating to block assessment, whereunder the issue of notice under Section 148 is dispensed with for the purpose of proceedings under Chapter XIV-B and the assessee is also prevented from revised return. Further, under the provisions of Section 158BF, penalties for concealment under the provision of Section 271(1)(c) cannot be imposed in respect of undisclosed income determined in block assessment. Having regard to the said provisions, in case of admission of proposed evidence the Tribunal will have to restore the matter to AC) for the reasons mentioned by learned Departmental Representative i.e. to enable the assessee to meet the new facts as now found by AC). Such a course of action will thus enable the Department to consider the material collected in the case of third parties assessment, after completion of block assessment in the case of the assessee, which could normally have been done by the Department by reopening assessment under the normal provisions of the, after issue of proper legal notice under Section 148. As already mentioned, recourse to the provisions of Section 148 is not contemplated under Chapter XIV-B relating to block assessments. Thus, it will be an attempt to bypass the existing provisions of Chapter XIV-B and achieve something indirectly which cannot be done directly under the existing provisions relating to block assessments. Such an attempt will be a colorable device to defeat the provisions enacted by the legislature and the Tribunal obviously cannot subscribe or accede to the plea urged by learned Departmental Representative to admit the said evidence. We do appreciate the constraint placed on the Department by the existing provisions of Chapter XIV-B to complete assessment hurriedly within the specific period on the basis of whatever evidence is available within that period with the AO and at the same time not being in a position to reopen the assessment, as provided in that Chapter so as to consider any further evidence collected against the assessee in his case or connected cases. However, the Tribunal is bound by the existing provisions of law and it cannot act in a way so as to supplement law or remove the lacunae, if any, therein.

3.5 In view of the foregoing position, the prayer of the Department to admit the aforesaid evidence as additional evidence is turned down.

56. We find that the situation before us is akin to what was before the Tribunal on the case R.K. Syal (supra). Moreover, we find that the evidence in the shape of forensic report is dt. 7th Oct., 2004 and the affidavit of Dalai as dt. 27th Oct., 2004. Both these evidences were available with i.e. Revenue even during the course of first appellate proceedings before the CIT(A). The CIT(A) has passed her order on 4th Jan., 2005. There is no explanation or reason brought on record by the Revenue as to why such evidence could not be produced before the CIT(A) specially when an opportunity was available. The CIT(A), as is evident from her order called for a remand report from the AO and has passed an order after considering such report of the AO.

5. We have heard learned counsel for the parties.

6. Learned counsel for the Revenue submitted that office note dt. 21st May, 2001 by itself constituted satisfaction under Section 158BD of thefor proceeding against the assessee on the basis of material found during the search. Recording of satisfaction did not require investigation, as such satisfaction was only to see prima facie case for proceeding further. The Tribunal erred in holding that the notice under Section 158BD issued by Asstt. CIT, Yamunanagar was not valid, as such notice had to be issued by the AO of the assessee. The Asstt. CIT, Yamunanagar himself had been given jurisdiction to make assessment in respect of the assessee vide order dt. 31st Dec., 2001. The satisfaction could not be held to be beyond limitation on the ground that vide note dt. 15th March, 2002, the AO of the assessee also recorded a note ignoring the fact that the said note was in continuation of satisfaction already recorded. Even if note dt. 15th March, 2002 is ignored, note recorded on 21st May, 2001 itself amounted to satisfaction under Section 158BD of the. Finding of the Tribunal in setting aside the deletion on merits was vitiated by perversity by placing onus on the Revenue and by not drawing presumption under Section 292C of theof correctness of the material found during search. The Tribunal also erred in not taking into account additional evidence comprising of report of the Forensic Science Laboratory stating that there was no interpolation in the entries in the diary and the affidavit of Anil Dalai dt. 27th Oct., 2004, reiterating the version that the entries in the diary related to the assessee. Reliance has been placed on judgment of Gujarat High Court in Rishul Industires Ltd. vs. Harsh Prakash : (2001) 166 CTR (Guj) 300 [LQ/GujHC/2000/1257] : (2001) 251 ITR 608 (Guj) to the effect that satisfaction referred to under Section 158BD of theis required to be prima facie satisfaction to show that there was undisclosed income of a person other than the searched person. Reliability of the material found was not required to be gone into at that stage. The said judgment was followed in Priya Blue Industries (P) Ltd. vs. Jt. CIT : (2001) 166 CTR (Guj) 306 [LQ/GujHC/2001/57] : (2001) 251 ITR 615 (Guj).

7. Learned counsel for the assessee supported the impugned findings and submitted that the satisfaction contemplated under Section 158BD of thehad to be specific and based on verification of facts. The satisfaction recorded did not comply with the statutory requirement in the note recorded on 21st May, 2001 and note dt. 15th March, 2002 was after conclusion of assessment of the searched person which could not be taken into account. It was also submitted that the diary recovered was not by itself sufficient to presume undisclosed income at the hands of the assessee. The entries in the diary are said to be in code language and there was no corroboration either that the same related to the assessee or that the extent of income was to the extent of the amount which has been added. The statement of Anil Dalai was not reliable. At best, the statement recorded immediately after the search could be relied upon and not the subsequent improved version which was at variance with the initial version. Even otherwise, the diary did not qualify to be the books of account under Section 34 of the Evidence Act, 1872, which could be relevant or admissible in evidence. It was further submitted that the Tribunal was justified in rejecting the additional evidence, by relying upon its own order in the case of R.K. Syal vs. Asstt. CIT (ITA No. 1165/Chd/1996) reported at : (2000) 66 TTJ (Chd) 641 Ed. and also for the reason that the Revenue had not given any reason for not producing any reason earlier. Reliance has been placed on following judgments :

1.

Manish Maheshwari vs. Asstt. CIT & Anr. : (2007) 208 CTR (SC) 97 [LQ/SC/2007/237] : (2007) 289 ITR 341 (SC) [LQ/SC/2007/237]

to submit that satisfaction under s. 158BD is a condition precedent for proceeding

against a person other than the searched persons.

2.

CIT vs. Dawn View Farms (P) Ltd. : (2009) 224 CTR (Del) 504: (2008) 15 DTR (Del) 83, Subhas Chandra Bhaniramka vs. Asstt. CIT (2009) 226 CTR (Cal) 84 : (2009) 25 DTR (Cal) 226 : (2010) 320 ITR 349 (Cal), Amity Hotels (P) Ltd. & Ors. vs. CIT & Ors. : (2004) 192 CTR (Del) 607 : (2005) 272 ITR 75 (Del) [LQ/DelHC/2004/1169] and ChhugamalRajpal vs. S.P. Chaliha & Ors. : (1971) 79 ITR 603 (SC)

to submit that in absence of specific recording of satisfaction that undisclosed income belonged to the assessee on the basis of material found during search and the same being forwarded to the AO of assessee, the block assessment was without jurisdiction.

3.

Om Parkash Jindal & Anr. vs. Union of India; Ors. : 1976 CTR (P &H) 316 : (1976) 104 ITR 389 (P&H) [LQ/PunjHC/1975/151] , CIT vs. Sunil Bhala (2011) 50 DTR (Del) 238, Addl. CIT vs. Miss LataMangeshkar : (1974) 97 ITR 696 (Bom) [LQ/BomHC/1973/83] and ChandradharGoswami & Ors. vs. Gauhati Bank Ltd. : AIR 1967 SC 1058 [LQ/SC/1966/265] .

to submit that the word information under s. 132(1) means information which could be believed and not mere suspicion. Investigation was necessary before effecting seizure and forming of opinion that there was reason to believe that there was undisclosed income.

4.

CBI vs. V.C. Shukla & Ors. : (1998) 3 SCC 410 [LQ/SC/1998/284]

to submit that even if entries in the books of account are admissible under s. 34 of the Evidence Act, the same are only corroborative and could not be acted upon without independent evidence as to trustworthiness of the said entries

5.

Ram Prasad Sharma vs. CIT : (1979) 119 ITR 867 [LQ/AllHC/1979/337] (All) and SumatiDayal vs. CIT : (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC)

to submit that additional evidence should not be mechanically allowed unless the Tribunal finds it necessary for its decision.

8. We have given due consideration to the rival submissions. We are of the view that the questions raised have to be answered in favour of the Revenue and the matter remanded to the Tribunal for fresh decision.

9. We have already reproduced the office note dt. 21st May, 2001, which by itself clearly indicates that there are entries which may show undisclosed income of persons other than searched persons who were identifiable from the diary. Accordingly, due cognizance was being taken thereof for initiating proceedings for block assessment in those cases. The same meets the requirement for proceeding under Section 158BD of the. The judgments relied upon by learned counsel for the assessee do not militate against the view we are taking. Judgments dealing with formation of satisfaction for authorizing search do not apply for action under Section 158BD. It is clear from the language of Section 158BD of thethat if while considering the case of the searched persons, the material indicates undisclosed income at the hands of any other person, further action could be taken as stipulated therein. In the present case, the AC) considering the case of the searched persons, found prima facie material to proceed against persons other than the searched persons and initiated proceedings. There is no compulsion to read any further requirement than what is mentioned as necessary for action under Section 158BD. It is not possible to hold that any further investigation is required to be conducted at that stage. Questions 1 and 3, thus, have to be answered in favour of the Revenue.

10. It is not disputed that the Asstt. CIT, Yamunagar had been conferred jurisdiction to make assessment in the case of the assessee on 31st Dec., 2001 prior to passing of the order of assessment and before recording the note dt. 15th March, 2002. The said note obviously was in continuation of earlier note dt. 21st May, 2001. Notice issued by the said authority could not be treated as invalid. Question 2 stands answered accordingly in favour of the Revenue.

11. As regards question 4, the Tribunal has not adopted sound approach in dealing with the matter and its findings are, thus, vitiated by error of law. Section 292C of the Act, which though introduced later by Finance Act, 2007 w.e.f. 1st Oct., 1975, was made applicable for the period in question provides that presumption could be raised as to correctness of the material found during search. The said section has not been taken into consideration by the Tribunal. It cannot be held, as submitted by learned counsel for the assessee, that if there was code language used in the diary, no inference could be drawn. No doubt entries by itself were not enough to proceed against the assessee, if the entries were explained and corroborated by the author thereof. However, in case the circumstances justify drawing of an inference against the assessee, the burden was on the assessee and in absence of any reason, the same could be acted upon.

12. In Kundan Lal Rallaram vs. Custodian, Evacuee Property AIR 1961 SC 1316 [LQ/SC/1961/125] , it was observed:

Briefly stated, the burden of proof may be shifted by presumptions of law or fact, and presumptions of law or presumptions of fact may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact. We are not concerned here with irrebuttable presumptions of law.

13. In M.S. Narayana Menon Alias Mani vs. State of Kerala & Anr. : (2006) 6 SCC 39 [LQ/SC/2006/547] , it was observed:

40. In P. Ramanatha Aiyars Advanced Law Lexicon, 3rd edition, at p. 3697, the term presumption has been defined as under:

A presumption is an inference as to the existence of a fact not actually known arising from its connection with another which is known.

A presumption is a conclusion drawn from the proof of facts or circumstances and stands as establishing facts until overcome by contrary proof.

A presumption is a probable consequence drawn from facts (either certain, or proved by direct testimony) as to the truth of a fact alleged but of which there is no direct proof. It follows, therefore that a presumption of any fact is an inference of that fact from others that are known, (per Abbott, C.J. R. vs. Burdett, 4 B. and Ald, 161)

The word presumption inherently imports an act of reasoning a conclusion of the judgment; and it is applied to denote such facts or moral phenomena, as from experience we know to be invariably, or commonly, connected with some other related facts. (Wills on circumstantial evidence)

A presumption is a probable inference which common sense draws from circumstances usually occurring in such cases. The slightest presumption is of the nature of probability, and there are almost infinite shades from slight probability to the highest moral certainty. A presumption, strictly speaking, results from a previously known and ascertained connection between the presumed fact and the fact from which the inference is made.

14. In view of above, the finding of the Tribunal has to be set aside and matter remanded to it for fresh decision. The question is answered accordingly in favour of the Revenue.

15. As regards question 5, relating to additional evidence, we are of the opinion that the report of the Forensic Science Laboratory was a relevant material and so was the affidavit dt. 27th Dec., 2004 of the searched person. The additional evidence was necessary for just decision of the matter. At best, the deponent could be produced for cross-examination. The additional evidence can be allowed in the interest of justice if the same is authentic and necessary for the decision of the issue raised before the Tribunal. In the facts and circumstances, the Tribunal was not justified in declining to consider the additional evidence comprising of the opinion of the laboratory of the Government examiner and also the affidavit of the author of the diary, though the documents had direct bearing on the issue. The question is answered accordingly in favour of the Revenue.

16. Accordingly, this appeal is allowed, the impugned order of the Tribunal is quashed and the matter is remanded to the Tribunal for fresh decision in accordance with law.

Parties may appear before the Tribunal for further proceedings on 23rd May, 2011.