JUDGMENT Jagmohan Bansal, J. (Oral) By this common order, both the captioned appeals are adjudicated. For the sake of brevity and convenience, the facts are borrowed from ITA No.254 of 2006. 2. The appellant through instant appeal under Section 260A of the Income Tax Act, 1961 (for short 1961 Act') is seeking setting aside of order dated 07.09.2005 passed by Income Tax Appellate Tribunal (for short 'Appellate Tribunal') in ITA No.138(ASR)/2003 for the assessment year 1988-89 whereby appeal of the Assessee has been accepted. 3. The appeal was admitted by this Court vide order dated 17.08.2006 to consider following questions of law: - "1. Whether in the facts and circumstances of this case order of Income-tax Appellate Tribunal, is perverse on the ground that basis of assessment did not exist after FERA Proceedings were quashed by Special Director in the Enforcement Directorate ignoring the evidence of Revenue Department that appeal against that order has been filed by FERA Authorities with Appellate Tribunal for Foreign Exchange, New Delhi. 2. Whether in the facts and circumstances of the case Income-tax Appellate Tribunal, is legally justified in dismissing Revenue appeal for A.Y. 1988-89 when there was independent evidence indicating under invoicing of export by the assessee apart from confessional statement of partner Sh. Ashok Kumar. 3. Whether in the facts and circumstances of the case the Income-tax appellate Tribunal, is legally correct in holding that the learned Commissioner of Income Tax (Appeal) had quashed the assessment as the same was barred by limitation, whereas the learned Commissioner of Income Tax (Appeals) held that the question of limitation became infructuous and academic in nature as the reassessment proceedings had already been quashed on some other ground." 4. The respondent-Assessee for the assessment year 1988-89 filed its return on 05.08.1988 wherein it declared income of Rs. 1,48,675/-. The officers of Enforcement Directorate searched different premises of the respondent-Assessee on 31.05.1997 alleging that it has mis-declared value of goods exported by it. During the course of investigation, Enforcement Directorate recorded different statements of officials of respondent-Assessee. Based on documents seized during search and statements of different officials of respondent-Assessee, the Enforcement Directorate issued 6 show cause notices alleging that respondent-Assessee has mis-declared value of goods exported by it. It is apt to mention here that respondent-Assessee had exported rice. During the course of investigation, Enforcement Directorate recorded different statements of officials of respondent-Assessee. Based on documents seized during search and statements of different officials of respondent-Assessee, the Enforcement Directorate issued 6 show cause notices alleging that respondent-Assessee has mis-declared value of goods exported by it. It is apt to mention here that respondent-Assessee had exported rice. The Enforcement Directorate was not alleging that the value declared by respondent-Assessee was on the higher side whereas allegation was that respondent-Assessee had under-valued the goods. The show cause notice was not based upon shipping bills and other export documents whereas it was based upon documents resumed during search. The show cause notices issued by Enforcement Directorate came up for consideration before Special Director, Directorate of Enforcement who vide order dated 20.02.2002 dropped the proceeding against all the noticee(s) holding that the statements recorded during search or thereafter are not duly supported by independent evidence, thus, are uncorroborated. He further concluded that documents on record are not sufficient to conclude that noticee(s) have mis-declared value of goods exported by them. He compared value of goods declared by noticee(s) with the maximum value as well as value notified by the Central Government. In the interregnum, the appellant-Income Tax Department initiated proceedings under Section 148 of 1961 Act alleging that respondent-Assessee has mis-declared value of goods exported by it. The assessment proceedings were initiated on the basis of show cause notice issued by Enforcement Directorate. The Assessing Officer made additions on the basis of record of Enforcement Directorate. The respondent-Assessee preferred an appeal before the first Appellate authority i.e. Commissioner of Income Tax (Appeals). The first Appellate authority allowed appeal for the assessment year 1988-89, however, dismissed appeal for the assessment year 1989-90. The respondent- Assessee as well as appellant-Income Tax Department preferred appeals before Appellate Tribunal which vide order dated 07.09.2005 allowed appeal of respondent-Assessee and dismissed appeal of appellant-department. The Appellate Tribunal recorded finding to the effect that Special Director, Directorate of Enforcement has already dropped the proceedings against the respondent-Assessee and appellant-Income Tax Department has not conducted independent investigation. The documents resumed during search conducted by Enforcement Directorate and statements recorded are not sufficient to make additions in the returned income. 5. The Appellate Tribunal recorded finding to the effect that Special Director, Directorate of Enforcement has already dropped the proceedings against the respondent-Assessee and appellant-Income Tax Department has not conducted independent investigation. The documents resumed during search conducted by Enforcement Directorate and statements recorded are not sufficient to make additions in the returned income. 5. The appellant-department, feeling aggrieved from order of Appellate Tribunal has preferred present appeals primarily on the ground that revision against order passed by Special Director, Directorate of Enforcement is pending before Appellate Tribunal for Foreign Exchange (for short 'ATFE'). 6. Ms. Urvashi Dhugga, Advocate fairly concedes that Special Director, Directorate of Enforcement vide order dated 20.02.2002 dropped proceedings against respondent-Assessee on merits and ATFE has dismissed revision filed by Enforcement Directorate. 7. Ms. Radhika Suri, Senior Advocate submits that it is a settled proposition of law that demand under 1961 Act cannot be made if it is based upon proceedings initiated by any other department/agency which stand dropped. In the case in hand, the appellant-department has made additions on the basis of proceedings initiated against Enforcement Directorate. The said proceedings stand dropped, thus, there is no reason to create demand under 1961 Act against the respondent-Assessee. 8. We have heard the arguments of learned counsels for both sides and perused the record with their able assistance. 9. From the perusal of record, it is quite evident that Income Tax Department had created demand on the sole ground that Enforcement Directorate has searched premises of the respondent-Assessee and thereafter issued show cause notices alleging mis-declaration of value. Enforcement Directorate has dropped proceedings against the respondent-Assessee and the matter stands settled between the respondent-Assessee and Enforcement Directorate. The foundation of proceedings under 1961 Act stands wiped out, thus, there is no ground to make additions in the returned income of the respondent-Assessee. The Appellate Tribunal has further recorded finding to the effect that documents resumed by Enforcement Directorate related to subsequent assessment years and Income Tax Department cannot make additions in the returned income of a particular year with respect to which documents do not relate. 10. In the wake of above discussion and findings, we do not find any factual or legal infirmity in the impugned orders passed by Appellate Tribunal, thus, present appeals being bereft of merit deserve to be dismissed and accordingly dismissed. 11. Pending application(s), if any, shall also stand disposed of.