Invalidation of Block Assessments Under Sec.158BD for Lack of Recorded Satisfaction - Compliance Emphasized

The Tribunal invalidated block assessments under sec.158BD due to the absence of recorded satisfaction by the Assessing Officer, rendering the proceedings void ab initio. The CBDT Circular emphasized the necessity of recording satisfaction notes under sec.158BD/153C, aligning with the Supreme Court's directives in a related case. As a result, the appeals were dismissed as withdrawn, underscoring the importance of strict compliance with legal requirements for the validity of block assessments and associated proceedings.

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Issues:
1. Validity of block assessments under sec.158BD
2. Requirement of recording satisfaction note under sec.158BD/153C

Analysis:
1. Validity of block assessments under sec.158BD:
The Tribunal had quashed the block assessments for the Assessee due to the absence of recorded satisfaction by the Assessing Officer before issuing the notice under sec.158BD. The Tribunal found that the Assessing Officer did not even record any material found during the search showing the undisclosed income of the assessee. As per the Tribunal, without the mandatory requirement of recording satisfaction and the absence of material found during the search, the Assessing Officer lacked jurisdiction to invoke the provisions of sec.158BD against the assessee. The Tribunal held that the proceedings initiated under sec.158BD were invalid and void ab initio. The CBDT Circular No.24/2015 dated 31.12.2015 emphasized the importance of recording satisfaction note under sec.158BD/153C, as highlighted by the Supreme Court's judgment in the case of M/s Calcutta Knitwears. The Circular directed the withdrawal of appeals against orders granting relief to the Assessee where satisfaction was not recorded by the competent authority.

2. Requirement of recording satisfaction note under sec.158BD/153C:
The CBDT Circular clarified that the provisions of section 153C of the Act are substantially similar to section 158BD, and the guidelines laid down by the Supreme Court in the M/s Calcutta Knitwears case apply to both sections. The Circular directed strict compliance with the guidelines on recording satisfaction notes, emphasizing that even if the Assessing Officer of the searched person and the "other person" are the same, satisfaction must be recorded. The Circular directed that pending litigation regarding the recording of satisfaction notes under sec.158BD/153C should be withdrawn if it does not meet the guidelines established by the Apex Court. In light of this Circular, the Appellant's counsel chose not to press the appeals on merits, seeking withdrawal, which was not opposed by the Respondent's counsel. Consequently, the appeals were dismissed as withdrawn, with no costs imposed.

This judgment highlights the significance of recording satisfaction notes before invoking provisions under sec.158BD, emphasizing the need for strict compliance with legal requirements to ensure the validity of block assessments and related proceedings.

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