Mandatory satisfaction note requirement under Section 158BD vitiates notice and block assessment when absent.

Recording of satisfaction is a mandatory precondition for invoking Section 158BD: the Assessing Officer must be satisfied that undisclosed income belongs to a person other than the searched person, hand over the seized material, and proceed under Section 158BC against that other person. Where no satisfaction note is recorded by either the search Assessing Officer or the recipient Assessing Officer, a mere letter or reference to notice issuance is not sufficient compliance. On that basis, the notice and consequent block assessment were unsustainable, and the Revenue's challenge failed.

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Issues: Whether the notice and block assessment under Section 158BD of the Income-tax Act, 1961 were valid in the absence of a recorded satisfaction note, and whether the Revenue's appeal could be sustained on that basis.

Analysis: Section 158BD can be invoked only when the statutory preconditions are satisfied, namely that the Assessing Officer records satisfaction that undisclosed income belongs to a person other than the searched person, the seized material is handed over to the Assessing Officer of such other person, and proceedings are taken under Section 158BC against that person. The record showed that no satisfaction note was recorded either by the Assessing Officer who made the search assessment or by the Assessing Officer of the respondent before issuing notice under Section 158BD. A mere letter or reference to notice issuance was not treated as compliance with the mandatory requirement. In such circumstances, the Tribunal's refusal to sustain the assessment was justified.

Conclusion: The notice under Section 158BD was not sustainable for want of the mandatory satisfaction note, and the Revenue's challenge failed.

Final Conclusion: The assessment based on Section 158BD was invalid and the Revenue's appeal was dismissed.

Ratio Decidendi: Recording of satisfaction by the Assessing Officer is a mandatory condition precedent for invoking Section 158BD, and absence of such satisfaction vitiates the notice and the consequent block assessment proceedings.

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