Block assessment notice for non-raided person u/s158BD: challenge for lack of "satisfaction" rejected, notice upheld

A notice for block assessment against a non-raided person under s.158BD was challenged as void for want of the raiding party's AO's "satisfaction" and non-application of mind. HC held that, absent any pleading specifically alleging lack of such satisfaction and without impleading the raidees' AO, no adverse inference could be drawn from the respondent AO's affidavit. Since seized books/documents were admittedly handed over, the Court invoked the presumption under s.114 Evidence Act that official acts were regularly performed, and rejected the claim that the Court must independently verify satisfaction as a jurisdictional fact in the abstract. The notice was upheld and the writ petition was dismissed with costs.

---

---

Issues: (i) Whether a notice issued under section 158BD of the Income-tax Act, 1961 against the petitioner is valid when no books of account or documents belonging to the petitioner were seized in the search; (ii) Whether absence of an affidavit or express record of satisfaction by the Assessing Officer of the raidees vitiates issuance of notice under section 158BD (i.e., whether such satisfaction is a jurisdictional fact); (iii) Whether proceedings under section 158BD can be initiated before completion of proceedings under section 158BC against the raidee; (iv) Whether provisions of sections 68 and 69 can be applied at the stage of issuance of notice under section 158BD.

Issue (i): Validity of notice under section 158BD where no books/documents of the petitioner were seized.

Analysis: The Court considered the scheme of Chapter XIV-B and earlier authority (Rushil Industries) holding that action under section 158BD is permissible where books/documents seized in search against raidees indicate undisclosed income of a person other than the raidee, even if no physical books of that other person were seized. The Court examined the material placed on record (post-search inquiries, non-existence of alleged purchasers, admissions in statements under section 132(4)) and found prima facie material to support issuance of the notice.

Conclusion: The notice under section 158BD is valid despite absence of books or documents of the petitioner seized in the raid; conclusion is against the petitioner.

Issue (ii): Whether absence of affidavit of satisfaction by the Assessing Officer of the raidees vitiates the notice.

Analysis: The Court held that proceedings under section 158BD are part of the search-and-assessment scheme in Chapter XIV-B and do not require a separate jurisdictional satisfaction beyond the search framework. In the absence of any challenge or averment in the petition about lack of such satisfaction and given that seized materials were handed over to the Assessing Officer of the petitioner, the Court invoked the presumption under section 114 of the Indian Evidence Act that official acts have been regularly performed.

Conclusion: Absence of an affidavit or explicit record of satisfaction by the Assessing Officer of the raidees does not invalidate the notice; conclusion is against the petitioner.

Issue (iii): Whether proceedings under section 158BD must await completion of proceedings under section 158BC against the raidee.

Analysis: Relying on the statutory scheme and precedent (Khandubhai Vasanji Desai), the Court explained that issuance of notice under section 158BD to others is an integrated part of Chapter XIV-B proceedings and need not await completion of proceedings under section 158BC in respect of the raidee.

Conclusion: Proceedings under section 158BD may be initiated without waiting for completion of proceedings under section 158BC; conclusion is against the petitioner.

Issue (iv): Application of sections 68 and 69 at the notice stage under section 158BD.

Analysis: The Court noted that determination and computation under sections 68 and 69 relate to computation of undisclosed income and that Chapter XIV-B procedures permit inquiry into entries and transactions seized; the Court referred to precedent holding that such provisions can be addressed in the assessment process under Chapter XIV-B.

Conclusion: Sections 68 and 69 need not be excluded at the notice/initiation stage; the petitioner may explain entries during proceedings; conclusion is against the petitioner.

Final Conclusion: The material on record furnished sufficient prima facie basis to sustain issuance of notice under section 158BD; the petition challenging the notice fails and is dismissed.

Ratio Decidendi: Proceedings under Chapter XIV-B of the Income-tax Act constitute a unified procedure arising from a search under section 132, and issuance of notice under section 158BD to persons other than the raidee does not require separate jurisdictional facts beyond the search records; official regularity may be presumed under section 114 of the Indian Evidence Act where no challenge to satisfaction is pleaded.

---