2014 (12) TMI 1396 - HC - Income Tax

Timely Satisfaction Note Crucial for Valid Assessment Proceedings under Section 158BC

The High Court upheld the Tribunal's decision, emphasizing the importance of the assessing officer's satisfaction note being prepared promptly after ... Validity of block assessment u/s 158BD - Whether notice issued u/s 158BD does not satisfy the requirements of law on the ground that Assessing Officer has recorded satisfaction after completion of the block assessment under Section 158BC in the case of the person search? - tribunal has held that the satisfaction note has been recorded after the expiry of time limit under Section 158 BE in the case of the search person and therefore the notice issued under Section 158 BD is not validly issued - HELD THAT:- In the instant case, the assessment year in the case of search as was made on 28.03.2003. The notice under Section 158BD is issued on 09.07.2003. The satisfaction note is prior to the date of issue of notice. But certainly, not either on the day the assessment order was passed in the case of searched person or before 31.03.2003. As held by the Apex Court in the aforesaid judgment the satisfaction note has to be prepared immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person. Therefore on the ground that such a note was not prepared either at the time when the order was issued under Section 158BD or before 31.03.2003, the proceedings initiated under Section 158BD cannot be held valid. What remains is the question of word “immediately” used in the aforesaid provision. However in the instant case we do not propose to go into the said question because the order passed by the tribunal has to be sustained on the ground that satisfaction has not been recorded in the case of the searched person. Admittedly, in this case the satisfaction note is prepared in the case of the assessee itself. It ought to have been prepared in the case of the person searched. Therefore the entire initiation of proceedings under Section 158BD is vitiated. In that view of the matter the order passed by the tribunal confirming the order of the appellate authority cannot be found fault with. Issues:Validity of notice under Section 158BD and requirement of satisfaction note before initiating proceedings under Section 158BD.Analysis:The High Court addressed the appeal challenging the Tribunal's order dismissing the revenue's appeal. The substantial questions of law considered were whether the notice under Section 158BD satisfied legal requirements and if satisfaction under Section 158BD should be recorded before completing the block assessment under Section 158BC for a person searched. The Tribunal held the notice invalid as the satisfaction note was recorded after the time limit under Section 158BE for the searched person. The High Court referred to the Supreme Court's ruling in a similar case, emphasizing the necessity of the assessing officer's satisfaction before initiating proceedings under Section 158BD. The satisfaction note should be prepared either during the initiation of proceedings against the searched person, along with assessment proceedings, or immediately after completing the assessment proceedings of the searched person under Section 158BC.The High Court found that in the present case, the satisfaction note was prepared after the assessment order for the searched person, which rendered the proceedings under Section 158BD invalid. The Court highlighted the importance of the timing of preparing the satisfaction note, as per the Supreme Court's guidance, emphasizing that it should be done immediately after completing the assessment proceedings of the searched person. The Court noted that the satisfaction note was prepared in the case of the assessee, not the person searched, which vitiated the initiation of proceedings under Section 158BD. Consequently, the Tribunal's decision upholding the appellate authority's order was deemed appropriate, leading to the dismissal of the appeal without addressing the substantial questions of law raised.In conclusion, the High Court upheld the Tribunal's decision, emphasizing the significance of the assessing officer's satisfaction note being prepared promptly after completing the assessment proceedings of the searched person under Section 158BC. The failure to adhere to this requirement resulted in the invalidity of the proceedings initiated under Section 158BD. The Court's decision focused on the procedural compliance and the necessity of recording satisfaction in the correct context, ultimately leading to the dismissal of the appeal without delving into the substantial legal questions raised.