TaxTMI 
TaxTMI 
2011 (5) TMI 416
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....nder Section 158BC of the Act? B. Whether satisfaction as contemplated in Section 158BD of the Act has been duly recorded regard being had to be letter dated 15.7.2003 or in the assessment order, wherein undisclosed income of the respondent-assessee has been reflected and negation of such satisfaction by the Income Tax Appellate Tribunal is erroneous and perverse for not accepting such satisfaction?‖ 2. At the very outset, we may set out the facts from ITA No.582/2008 for the sake of clarity and convenience. As is evincible from the narration, there was a search under Section 132 of the Act in the premises of one Manoj Aggarwal of Baldev Park, Delhi on 30.8.2000. In the course of the search, several materials were seized on the basis of which a block assessment was completed in the case of Manoj Aggarwal under Section 158BC of the Act on 29.8.2002. On 15.7.2003, a letter was sent by the assessing officer of Manoj Aggarwal to the assessing officer of the respondent - assessee, namely, Radhey Shyam Bansal to the effect that the said assessee was acting as a mediator in transactions involving substantial tax evasion by giving bogus accommodation entries to various persons. 3. ....
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....003 amounted to the satisfaction of the assessing officer assessing the searched person as required by Section 158BD. Be it noted, the other contentions raised by the respondent were also negatived. 6. Grieved by the aforesaid order of the CIT(A), the respondent - assessee approached the tribunal in IT(SS) A.No.12/Del/2007 and in the appeal it was urged that the notice under Section 158BD was not issued within a reasonable period of time inasmuch as a period of nearly 19 months had elapsed from the date of completion of block assessment of Manoj Aggarwal before the notice under Section 158BD issued; that no satisfaction was recorded by the assessing officer assessing Manoj Aggarwal as required under Section 158BD of the Act; that the letter dated 15.7.2003 written by the said assessing officer to the assessing officer having jurisdiction over the respondent -assessee was written much after the block assessment was completed in the case of Manoj Aggarwal, which was against the statutory provision and in any case, no satisfaction was discernible from the said letter; that the order of assessment was vitiated being violative of principle of natural justice since the assessing ....
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.... officer of Manoj Aggarwal had become functus officio on passing the assessment order and hence, could not have recorded any satisfaction. After so holding, the tribunal proceeded to enquire whether the notice under Section 158B required to be issued within a reasonable time and there was delay rendering the whole proceeding vulnerable in law. The tribunal took note of the fact that the block assessment of Manoj Aggarwal was completed on 29.8.2002 but the notice to the respondent-assessee under Section 158BD was issued only on 22.3.2004, i.e., after 19 months later. The tribunal placing reliance on the decision in Khandubhai Vasanji Desai and others v. DCIT, (1999) 236 ITR 73 (Gujarat) came to hold that notice was issued well beyond a reasonable period. 9. Being of the aforesaid view, the tribunal set aside the order of assessment, which had been concurred with by the first appellate authority, and allowed the appeal preferred by the assessee. 10. Regard being had to the questions framed, we are only required to address whether the recording of satisfaction of the assessing officer of Manoj Aggarwal is mandatory and further whether in the facts and circumstances of the case the s....
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....uch assessment; (d) the assets seized under s.132 or requisitioned under s. 132A shall be retained to the extent necessary and the provisions of s.132B shall apply subject to such modifications as may be necessary and the references to ‗regular assessment' or ‗reassessment' in s.132B shall be construed as references to ‗block assessment'.‖ ―158BD. Undisclosed income of any other person - Where the AO is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under s.132 or whose books of account or other documents or any assets were requisitioned under s.132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against such other person and the provisions of this Chapter shall apply accordingly.‖ 7. Condition precedent for invoking a block assessment is that a search has been conducted under s.132, or documents or assets have been requisitioned under s.132A. The said provision would apply in the case of any person in respect of whom search has ....
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....ether the notice dated 06.02.1996 satisfies the requirements of s.158BD of the Act. The said notice does not record any satisfaction on the part of the AO. Documents and other assets recovered during search had not been handed over to the AO having jurisdiction in the matter. X X X X 16. As the AO has not recorded its satisfaction, which is mandatory; nor has it transferred the case to the AO having jurisdiction over the matter, we are of the opinion that the impugned judgments of the High Court cannot be sustained, which are set aside accordingly. The appeals are allowed. However, in the facts and circumstances of the case, there shall be no order as to costs.‖ 12. On a perusal of the aforesaid decision, it is graphically clear that the recording of satisfaction by the assessing officer of the searched person is a condition precedent. Satisfaction must be recorded by the said assessing officer that any undisclosed income belongs to any person, other than the person searched. Thereafter the assessing officer of the third person can proceed against his assessee under Section 158BC. The documents, books of accounts or assets seized or requisitioned have to be handed ove....
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....ase of Manoj Aggarwal which was framed on 29.8.2008. The said paragraphs read as under: ―2.7 Apart from the admission of Sh. Manoj Aggarwal, the various documents seized during the course of search details of which are given below further established that he is a name lender involved in the business of giving accommodation entries. Sh.Manoj Aggarwal has accepted all these papers to be related to his business of accommodation book entries. 2.8 Annexures A-16, A-18 & A-36 seized from the premises at 5A/12, Ansari Road, Daryaganj, Delhi are cashbooks of the business of accommodation entries. These give details of the cash received on the receipts side and the utilization thereof on the payments side. 2.9 Annexure A-19, A-20 & A-21 seized from the premises at 5A/12, Ansari Road, Daryaganj, Delhi are ledger accounts of the mediators through whom the transactions of accommodation entries has been arranged. These ledgers give the details of the name of the mediator, the date on which the cheque is issued, the name of the beneficiary, the cheque no., the amount thereof and the bank and branch from which it is issued. 2.10 Various pages of Annexures A-1, A-8, A-10, A-11, A-12,....
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....on as is understood in the anatomical base of the provision and also under the backdrop of terms satisfaction mean in law we think it appropriate to refer to Section 158BD of the Act. The said provision has already been reproduced in the decision in Manish Maheshwari (supra). 19. On a plain reading of the aforesaid provision, it is vivid that for the purpose of initiation of block assessment proceeding against a third person in respect of whom search has not been conducted certain conditions precedents are to be followed and they are mandatory. They have to be construed and complied absolutely strictly. The first pre-condition as the provision envisages is that the assessing officer of the person searched has to be satisfied that some undisclosed income belongs to a third person. Thus, the relevant expressions pertaining to condition precedent are ―undisclosed income‖ and ―which belongs to a person other than the person searched‖. As in the case at hand, we are actually concerned with the satisfaction we think it appropriate to refer to the said terms, namely, ―undisclosed income‖ which have been defined in Section 158-B(b) which reads as....
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....in many a statute and has its connotation. The term ―is satisfied‖ means simply makes up its mind [per Lord Pearson in Blyth v. Bivth (1966) 1 ALL E.R. 524 (541)]. Dixon J. has defined it as ‗actual persuasion'. It fundamentally means a mind not troubled by doubt or to adopt the language of Smith J. ‗a mind which has reached a clear conclusion' (see Angland v. Payne (1944) N.Z.L.R. 610 (626). The Assessing Officer is satisfied when he makes his mind or reaches a clear conclusion when he takes a prima facie view that the material available establishes ‗undisclosed income' of a third party. Assessing Officer must reach a clear conclusion that good ground exists for the Assessing Officer of the third person to initiate proceedings as material before him shows or would establish ‗undisclosed income' of a third person. At this stage, as the proceedings are at the very initial state, the ‗satisfaction' neither is required to be firm or conclusive. The ‗satisfaction' required is to decide whether or not block assessment proceedings are required to be initiated. But ‗satisfaction' has to be founded on reasonableness. It cannot be capric....
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....e possession of Manoj Aggarwal establishes that the respondent assessee had acted as a mediator for providing accommodation book entries by Manoj Aggarwal. The second sentence in the first paragraph states that the quantum of transactions as shown in the documents were enclosed as Annexure-A and the photocopies of the papers were enclosed as Annexure-B. The second paragraph states that there was evidence that cash was received by Manoj Aggarwal from the respondent and the summary of the amounts received as per the seized documents was given in Annexure C and the photocopies of the documents were annexed as Annexure-D. It is accepted that Annexures A, B, C & D, referred to in this letter were not filed before the tribunal and have not been produced before us. It is conceded by the learned counsel for the revenue that they are also not available on the file of the Assessing Officer of the respondent. There is no explanation forthcoming with regard to the aforesaid annexures. It is well nigh impossible to know their content. The first paragraph of the letter dated 15th July, 2003 states that the respondent-assessee had acted as a mediator i.e. they had introduced Manoj Aggarwal with o....
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....id case, i.e., ITA No.250/Del/2005, the tribunal expressed the view that a satisfaction note by the assessing officer of the searched person recording undisclosed income of any person within the meaning of Section 158BD could be validly recorded after completion of assessment of the searched person. In that context, the tribunal held the only requirement is that the satisfaction must be in writing. In the said case, the tribunal was dealing with the search carried out on the premises of Manoj Aggarwal on 3.8.2000. The present case also relates to the said search. It is noteworthy the departmental representative in the case of SMC Share Brokers Ltd. (supra) had pressed into service the note dated 29.8.2002 which has been sought to be pressed into service by the learned counsel for the revenue herein. The tribunal while dealing with the said note dated 29.8.2002 expressed their views as follows: ―14.3 As per the Departmental Representative, the satisfaction for initiating proceedings under Section 158BD was recorded by the AO making assessment in the case of Shri Manoj Aggarwal and M/s Friends Portfolio (P) Ltd. on 29th Aug., 2002 also i.e. on the date of passing assessment or....
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....entioned above including the fact regarding the mention of satisfaction note in the case of "this company" and proposal for centralization of the case in the circle in which the cases of searched persons fell, as referred to above, and also in view of the circumstances relating to this issue, we find force in the submissions of the learned Counsel for the assessee made before us and conclude that no satisfaction note was prepared on 29th Aug., 2002 and this note has been prepared even after 26th Nov.,. 2002. Our reasons for holding so are as under: (i) Had the satisfaction been recorded on 29th Aug., 2002, there would have been no necessity to record another satisfaction on 26th Nov., 2002. The note refers to the "satisfaction recorded in the case of this company" which reference is to the satisfaction dt. 26th Nov., 2002 and hence this note has been prepared subsequent to satisfaction note dt. 26th Nov., 2002. (ii) Had the satisfaction note been recorded on 29th Aug., 2002 then the record pertaining to the other person not searched should have been transferred to the AO of the present assessee who was a different officer at that time than the officer of the searched person. (ii....
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....to each and every material relevant for making assessment under Section 158BD. Thus, the argument that since, in the satisfaction note, there is no reference to seized material, the assessment made on the basis of such satisfaction note cannot be legally sustained, is not acceptable.‖ 26. Eventually, in the said case, as no cross-examination of Manoj Aggarwal was permitted, the appeal preferred by the assessee, apart from other grounds, was allowed. 27. The said order was assailed before this Court in ITA No.1221/2006 wherein this Court opined as follows: ―4. The Tribunal held that the Assessing Officer was functioning as a quasi judicial authority and was under an obligation to adhere to the principles of natural justice. Several requests were made by the assessed, but Manoj Aggarwal was not made available for cross-examination. On this basis, the Tribunal set aside the block assessment and that is why the Revenue is before us in an appeal under Section 260A of the Act. 5. Learned Counsel for the Revenue relied upon One-up Shares and Stock Brokers P. Ltd. vs. R. R. Singh, CIT (2003) 183 CTR (Bom) 254 : (2003) 262 ITR 275 (Bom) to contend that the statement o....