Satisfaction note under block assessment can be recorded after completion of searched person's assessment; 158BD proceedings remain valid.

A satisfaction note under section 158BD of the Income-tax Act is mandatory for proceeding against a person other than the searched person, but the statute does not require it to be recorded only before completion of the searched person's block assessment under section 158BC. The note may be prepared at initiation, during the search assessment, or immediately after its completion, and section 158BE(2)(b) governs only the time limit for completing proceedings against the other person. On that basis, recording the satisfaction note after completion of the searched person's block assessment did not invalidate the 158BD proceedings, and the matter was remanded to the Tribunal on the merits of the additions.

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Issues: Whether a satisfaction note under section 158BD of the Income-tax Act, 1961 could validly be recorded after completion of the block assessment under section 158BC in the case of the searched person.

Analysis: Section 158BD is a machinery provision for assessment of a person other than the searched person. A satisfaction note is mandatory, but the statute does not require it to be recorded only before completion of the assessment of the searched person. The note may be prepared at the time of initiation of proceedings under section 158BC, during those proceedings, or immediately after their completion. Section 158BE(2)(b) prescribes only the limitation for completing proceedings against the other person and does not control the stage at which satisfaction is recorded.

Conclusion: The recording of the satisfaction note after completion of the searched person's block assessment did not invalidate proceedings under section 158BD. The question of law was answered in favour of the Revenue and against the assessee. The matter was remanded to the Tribunal for decision on the merits of the additions.

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