TaxTMI 
TaxTMI 
2015 (2) TMI 293
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....st be issued by the Assessing Officer ("the A.O" in short) within a reasonable period of time in relation to assessment proceedings under sections 158BC and 158BD of the Act. 2. The facts which give rise to the present appeal are that the Respondent/Assessees are individuals. On 03.08.2000 a search was conducted under Section 132 of the Act at the business premises of M/s Friends Portfolio Pvt. Ltd. and at the residential premises of its Director, Shri Manoj Aggarwal. During the search and the course of investigation and assessment proceedings before the Deputy Commissioner of Income Tax (hereafter "the DCIT"), Central Circle-3, New Delhi, it was found that that Sh. Manoj Aggarwal provided bogus accommodation entries to various individuals. The beneficiaries included the present respondent-assessees who received accommodation entries in lieu of cash. The assessment u/s 158BC of M/s Friends Portfolio Ltd. was completed on 29.08.2002. The AO, after considering the materials, recorded to his satisfaction and issued a letter to the respective A.O.'s of the respective assessees No. 1 & 2. Thereafter, the case of the assessees was taken up for scrutiny as per the provisions of section 1....
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....gs, therefore, penalty proceedings u/s 158BFA(2) have been initiated, separately..." 7. The relevant portion of the CIT (A's) order is as follows: "....All these go to prove that not even an iota of evidence has been brought out on record to prove that the transaction of capital gain was bogus and that the amount of Rs. 76,00,000/- and Rs. 40,12,000/- for the purchase and sale of shares is hereby deleted. Similarly the addition of 24,360/- made by the AO on surmises, treating the payment of brokerage and service tax on purchase and sale of shares as unaccounted cash without bringing any evidence on record is also hereby deleted. As a result appeal is allowed." 8. The ITAT considered the merits of the revenue's appeal as well as the assessee's cross-objections, i.e., CO No.408/Del/2007. The ground raised by the assessee in his cross objection was on the issue of the assessement proceeding being time barred. Apart from the satisfaction being recorded by the AO on 13-02-2000, it was urged in the cross objection that that the notice under section 158BD was issued by the assessee's A.O. on 10.07.2003. The ....
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....ed 31.08.2005 inter alia, held that: "With the remarks made as above, the total undisclosed income for the block period is assessed at Rs. 15,28,570/-. Penalty under Sec. 158BFA is being initiated separately. Assessed at Rs. 15,28,570/-. Charge interest u/s 158BFA for late filing of Return in Form 2B. Issue demand notice and challan." 12. The order of the CIT(A) dated 04.10.2006 inter alia, held that: "2.1 ...A perusal of the assessment order also shows that the provisions of Section 158BD were invoked on the basis of specific information received from D.C.I.T. Central-III, New Delhi. It is the satisfaction of the Assessing Officer of the person searched u/s 132 which is important for initiating proceedings u/s 158BD. As held by Gujarat High Court, the requirement for taking action u/s 158BD is only prima facie satisfaction of the Assessing Officer that in search operation there is material to show undisclosed income of a person, other than the one against whom the search was conducted (251 ITR 608). Hence, the argument of the appellant that....
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....cer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedingjs are completed under Section 158BC of the Act of the searched person 45. We are informed by Shri Santosh Krishan, who is appearing in seven of the appeals that the assessing officer had not recorded the satisfaction note as required under Section 158BD of the Act, therefore, the Tribunal and the High Court were justified in setting aside the orders of assessment and the orders passed by the first appellate authority. We do not intend to examine the aforesaid contention canvassed by the learned counsel since we are remanding the matters to the High Court for consideration of the individual cases herein in light of the observations made by us on the scope and possible interpretation of Section 158BD of the Act." 15. The revenue argues that app....
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....er person who is now known as a person to whom that undisclosed income belongs. The AO once he reaches the requisite satisfaction, it bound to act swiftly to proceed against such other person as soon as may be in reasonable time. The speed and despatch with which he should act is writ large on the connected provisions of s. 132(9A) of the Act under which the authorised officer who has no jurisdiction over the person referred to in cls. (a), (b) or (c) of sub-s. (1) of s. 132 has to hand over the books of account, documents and assets seized to the ITO having jurisdiction over such person within 15 days of such seizure and the AO is required to serve a notice to such person under s. 158BC(1) requiring him to furnish return in the prescribed Form 28 and to complete the block assessment in one year from the end of the month in which the last authorisation for search or requisition was executed. Thus, the apprehension that a notice can be issued under s. 158BD r/w s. 158BC (1) by the AO in the case of such "other person" at any time is ill-founded. There is no lifting of the limitation period for making the assessment order which is one year and the starting point of limitation in case....
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.... section 158BD in case of the person other than the searched person as two years from the end of the month in which the notice under this Chapter was served on such other person in respect of search carried on after 01.01.1997. The said section does neither provides for nor imposes any restrictions or conditions on the period of limitation for preparation the satisfaction note under Section 158BD and consequent issuance of notice to the other person. 43. In the lead case, the assessing officer had prepared a satisfaction note on 15.07.2005 though the assessment proceedings in the case of a searched person, namely, S.K. Bhatia were completed on 30.03.2005. As we have already noticed, the Tribunal and the High Court are of the opinion that since the satisfaction note was prepared after the proceedings were completed by the assessing officer under Section 158BC of the Act which is contrary to the provisions of Section 158BD read with Section 158BE(2)(b) and therefore, have dismissed the case of the Revenue. In our considered opinion, the reasoning of the learned Judges of the High Court is contrary to the plain and simple languag....
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....ection 158BD can be issued to third party/assessee, on the basis of material found on the premises of the searched person, the period of five months spent by the AO of the searched person in finalizing the satisfaction note, can be said to have been proximate to the assessment proceedings. We also recollect the decision of this Court in Commissioner of Income Tax v. Raghubir Singh Garg ITA No. 1420/2010 decided on 27.08.2014. In that case, the search took place on 29.08.2002 and the satisfaction note was recorded on 16.01.2003 i.e. within a period of 4 ½ months. The Court was of the opinion that the satisfaction note could be upheld. Following the said decision it is held that there was no delay in issuance of notice under Section 158BD in the facts of the case." 18. In light of the aforementioned position of law this Court finds that the delay of 5 months in the issuing of notice by the A.O. in the present appeals cannot be unreasonable. Accordingly, the impugned orders of the ITAT dated 04.04.2008 & 17.04.2009 is set aside on this aspect. The satisfaction note is held to be validly issued and within a reasonable time. In the light of the above observations of the Supreme ....