Satisfaction note under block assessment law remains non-fatal where the same Assessing Officer handles both persons

Section 158BD requires satisfaction that undisclosed income belongs to a person other than the searched person, and the record must be transmitted for assessment under section 158BC. The Supreme Court in Manish Maheshwari treated satisfaction as a condition precedent for invoking the provision. The earlier Division Bench ruling in Panchajanyam stated that, where the same Assessing Officer handles both the searched person and the other person, non-recording of satisfaction does not invalidate the assessment because the record-transfer requirement is still met within the composite assessment process. Calcutta Knitwears was confined to the timing of the satisfaction note and did not overrule that distinct principle.

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Issues: Whether, in a block assessment under section 158BD of the Income-tax Act, 1961, non-recording of satisfaction by the Assessing Officer invalidates the assessment when the same Assessing Officer handles both the searched person and the other person, and whether the decision in Calcutta Knitwears displaced the earlier Division Bench ruling in Panchajanyam.

Analysis: Section 158BD requires satisfaction that undisclosed income belongs to a person other than the searched person and the record must be transmitted for assessment under section 158BC. The apex court in Manish Maheshwari treated satisfaction as a condition precedent for invoking section 158BD. However, the earlier Division Bench in Panchajanyam held that where the Assessing Officer is common for both the searched person and the other person, non-recording of satisfaction does not invalidate the assessment because the requirement is only for transfer of records and the assessee is still assessed under the procedure in sections 158BC and 158BD. Calcutta Knitwears dealt only with the stage at which the satisfaction note must be prepared and did not consider the distinct situation where the Assessing Officer is common; it therefore did not overrule Panchajanyam.

Conclusion: Non-recording of satisfaction was not fatal in the present facts, and the Revenue's challenge succeeded.

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