Section 158BD satisfaction requirement upheld while a Section 144A income-fixation direction was struck down.

A second notice under Section 158BD was valid because the Assessing Officer, on the basis of seized material, recorded the requisite satisfaction that undisclosed income belonged to a person other than the searched person; the fact that the same officer handled both matters did not dispense with that statutory requirement. The challenge to the notice failed. A direction under Section 144A that sought to fix undisclosed income at a higher figure was contrary to law and unsustainable; the direction was invalid. The statutory notice and consequent block assessment proceedings were upheld, and the appeal was dismissed.

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Issues: (i) Whether the second notice issued under Section 158BD of the Income-tax Act, 1961 was valid; (ii) Whether the direction issued under Section 144A of the Income-tax Act, 1961 was sustainable.

Issue (i): Whether the second notice issued under Section 158BD of the Income-tax Act, 1961 was valid.

Analysis: Section 158BD applies where the Assessing Officer is satisfied, on the basis of seized material, that undisclosed income belongs to a person other than the searched person. The same Assessing Officer was dealing with the searched firm and the appellant, and the first notice under Section 158BC did not dispense with the statutory requirement of satisfaction under Section 158BD. The later notice was issued after the Assessing Officer recorded the requisite satisfaction that the undisclosed income belonged to the appellant and that the earlier notice was not in conformity with the statutory scheme.

Conclusion: The second notice under Section 158BD was valid and the challenge to it failed.

Issue (ii): Whether the direction issued under Section 144A of the Income-tax Act, 1961 was sustainable.

Analysis: The direction under Section 144A, by which the undisclosed income was sought to be fixed at a higher figure, was held to be contrary to law and unsustainable.

Conclusion: The direction under Section 144A was invalid.

Final Conclusion: The statutory notice and consequent block assessment proceedings were upheld, and the appeal was dismissed.

Ratio Decidendi: A notice under Section 158BD is valid where the Assessing Officer, on the basis of seized material, records prima facie satisfaction that undisclosed income belongs to a person other than the searched person, and such satisfaction can sustain proceedings even where the same officer handles the searched person and the other person.

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