IMPORTANT POINT
The assessing officer must record satisfaction as required under Section 158BD before initiating assessment proceedings, and additions to income must be justified by credible evidence.

JUDGMENT :

1. Heard Sri Saumyajit Dasgupta, learned counsel for the appellant/assessee and Sri Prithu Dudheria, learned junior standing counsel for the respondent/income tax department.

2. This appeal was admitted by this Court by order dated 08.10.2004 on the following substantial questions of law:

i) Whether the assessment of the sum of Rs.12,57,150/- in the hands of the appellant was without jurisdiction and the Tribunal was justified in law in presuming that the assessment was made by invoking section 158BD when the record did not show that any satisfaction was recorded nor any notice was issued under the said provision read with section 158BC to the appellant ?

ii) Whether and in any event it was open to the Assessing Officer to accept only a part of the statement/admission of the appellant and he was bound to either accept or reject the same in its entirety and any proceedings under section 158BD could be initiated against the appellant or any addition could be made in his hands on the basis of such statement/admission ?

iii) Whether the Tribunal was justified in law in holding that the appellant was required to be presumed to be the owner of the seized cash and the burden to prove the nature and source thereof was upon the appellant and proceedings had been rightly taken against the appellant in respect thereof ?

iv) Whether and in any event the Tribunal was justified in law in rejecting the explanation of the appellant that the seized cash of Rs.12,57,150/- belonged to M/s. S. K. Investment (Rs.6,30,000/-), M/s. ARC Finance Limited (Rs.6,07,150/) and M/s. Zenith Finvest Pvt. Limited (Rs.20000/-) and its purported findings upholding the addition of the said sum of Rs.12,57,150/- in the hands of the appellants are arbitrary, unreasonable and perverse ?

3. Briefly stated facts of the present case are that the appellant/assessee is director in two companies namely, Zenith Finvest Pvt. Ltd. and ARC Finance Ltd. He is partner in M/s. S.K. Investment, which is a partnership firm. Offices of all the aforesaid three entities are situated at the 4th Floor, 32A, C.R. Avenue, Kolkata-700 012. The appellant/assessee had income during the financial year 1999-2000 from salary from the partnership firm, dividend, interest, director’s fees and profit on sale of investment. Search in the office premises of the aforesaid three entities was conducted on 06.08.1999 and a panchnama dated 06.08.1999 was prepared in which it is mentioned that the search has been temporarily concluded for the day to be commenced subsequently for which purpose seals were placed on the entire place/ on a1 contents vest in the middle chamber belonging to Smt. Alka Kothari. The aforesaid search was conducted under the authority of the warrant issued by a competent authority in the name of M/s Zenith Finvest (P) Ltd. The aforesaid search was resumed on 12.08.1999 under the same warrant and 17 sets of documents including computerized cash book, journal, bank book, ledger and trial balance etc. relating to M/s. Zenith Finvest (P) Ltd., ARC Finance Ltd., the appellant/assessee and his family members were seized, but the search was not finally concluded and seals were again placed on the entire place. Again, the search was resumed on 22.09.1999 under the same warrant in the name of M/s. Zenith Finvest (P) Ltd. and again seven sets of documents including ledgers, journals, etc. relating to aforesaid business entities were seized and the search was concluded. The aforesaid search conducted with respect to the entities relating to the appellant/assessee shall be referred hereinafter as the first set of search.

4. Simultaneous search was conducted in the premises of Sri J. M. Kothari on 6th, 7th and 13th August, 1999 under the search warrant in the name of GIS Limited, at Ruby House, 6th Floor, 8, India Exchange Place, Kolkata-1 in which cash found of Rs.12,57,150/- in the safe in possession of Mr. J. M. Kothari was stated by him to be belonging to his son Ashok Vardhan Koth