TaxTMI 
TaxTMI 
2015 (11) TMI 412
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.... The brief facts are that the Assessee is a partnership firm engaged in the business of manufacture and sale of paneer and snack items at Fateh Puri, Delhi. A search and seizure operation under Section 132 of the Act was conducted on 15th December, 1997 at the premises of one Mr. Kamal Chand Jain, wherein certain hundis as stated to have been issued by him were seized. It appears that the some of the hundis which purportedly pertained to the Assessee were forwarded by the Assessing Officer ('AO') of Mr. Jain to his counterpart having jurisdiction over the Assessee herein. Subsequently, the AO having jurisdiction over the Assessee recorded the reasons for reopening of the assessment and proceeded to issue a notice to the Assessee under Section 148 of the Act on 29th January, 2001. 5. A re-assessment order was passed by the AO on 28th March, 2002 making an addition of a sum of Rs. 65 lakhs to the income of the Assessee under Section 69D of the Act. In the appeal filed against the said order by the Assessee, the Commissioner of Income Tax (Appeals) by the order dated 12th December, 2002 held that the proceedings in the assessment could only be resorted to under Section 158 BA (1) of ....
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....action note recorded by the AO of Mr Kamal Chand Jain in the file was on the Assessee. Since it had failed to do so, the requirement of Section 158BD of the Act stood satisfied. Thereafter the Division Bench of the ITAT passed a confirmatory order on 8th December 2014 dismissing the Assessee's appeal. 10. At the hearing of this appeal on 24th September 2015, Ms. Suruchi Aggarwal, learned Senior Standing counsel for the Revenue, sought some time to seek instruction on the aspect of the satisfaction note as well as on the question of limitation. At the hearing today she stated that pursuant to the order passed by this Court on the previous date, she had asked the Department to give her information about the existence of the satisfaction note in the file. She has shown to the Court the letter dated 28th October, 2015 written by the ITO, Ward 47(2) New Delhi where, inter alia, a reference is made to a letter received from the ITO/Ward 47[1]/ dated 19th October, 2015 which reads as under: "In this connection, it is submitted that I have gone through the file and find that the ACIT, Central Circle-14, New Delhi vide his letter dated 23.09.2008 informed the ACIT Circle-29(1), New D....
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....ct, the Assessing Officer who has initiated proceedings for completion of the assessments under section 158BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under section 132 or the books of account were requisitioned under section 132A of the Act. This is in contrast to the provisions of section 148 of the Act where recording of reasons in writing are a sine qua non. Under section 158BD, the existence of cogent and demonstrative material is germane to the Assessing Officers' satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action under section 158BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the Assessing Officer either at the time of initiating proceedings for completion of assessment of a searched person under section 158BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the Assessing Officer cannot prepare the satisfaction note to the effect that there exists income tax (sic income) belonging to any per....
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.... belongs to a third person. This is the statutory mandate and a jurisdictional prerequisite before proceedings under Section 158 BD are initiated. Violation of the said requisite and mandatory requirement would result in annulment of the assessment under Section 158 BD read with Section 158 BC." 17. In the present case, as already noticed, the Revenue has been unable to produce the satisfaction note of the AO of the searched person, to the effect that there was "cogent and demonstrative" material to conclude that the seized documents showed undisclosed income belonging to the Assessee. The absence of such satisfaction note on the file also explains why the AO resorted to Section 147 of the Act to reopen the assessment in the first place instead of issuing notice under Section 158 BD of the Act. Consequently, on this short ground of there being no satisfaction note, which is a mandatory requirement under Section 158 BD of the Act, as explained by the Supreme Court in Commissioner of Income-Tax v. Calcutta Knitwears (supra), the entire block assessment proceedings are held to be bad in law. Question (b) is accordingly answered in the affirmative and in favour of the Assessee and ag....