TaxTMI 
TaxTMI 
2008 (3) TMI 766
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.... liable to be quashed on this account alone. 2. No copy of satisfaction note, if any, recorded before the issue of notice under s. 158BD was made available." 4. Thereafter, application was moved by the assessee for admitting additional ground. This application was allowed vide order dt. 9th Oct., 2007. Hence, additional ground was admitted as ground No. 3 and the same reads as under : "3. The alleged satisfaction was recorded on 19th Dec., 2002 and assessment under s. 158BC was completed on 29th Aug., 2002, hence the said note was recorded beyond time and as such notice issued under s. 158BD was illegal, bad in law and without jurisdiction." 5. In its cross-objection, the assessee has raised several legal pleas to assail the validity of the block assessment order under s. 158BD of the IT Act. We, therefore, consider it proper to deal with the legal grounds taken in the cross-objection, first. 6. The facts concerning this matter, in brief, are as under : 6.1 The assessee company was incorporated on 5th Jan., 2000. Its registered office was at 7/22, Ansari Road, Daryaganj, New Delhi. One of the directors of the assessee company was Manoj Aggarwal. The assessee ....
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.... person. He invited our attention to the satisfaction note dt. 19th Dec., 2002 to submit that this satisfaction cannot be regarded as a proper satisfaction for assumption of jurisdiction under s. 158BD. 9. The learned Departmental Representative on the other hand submitted that the assumption of jurisdiction was fully justified. He pointed out that the satisfaction was recorded vide office note dt. 29th Aug., 2002. 10. We have carefully considered the entire material on record and the rival submissions. The assessee has filed copy of letter of Shri P.D. Kanunjna, Asstt. CIT, Cen. Cir.-3, New Delhi dt. 16th Aug., 2007, through which a copy of satisfaction note for initiating proceedings under s. 158BD was supplied to the assessee. This letter is as under : "F. No. Asstt. CIT/CC-3/2007-08/141 Dt. : 16th Aug., 2007 To, M/s NITS Softech Ltd., G-92, Preet Vihar, Delhi-110092. Sir, Sub : Copy of satisfaction note for initiating proceedings under s. 158BD'Furnishing regarding. With reference to your letter dt. 13th Aug., 2007 on the above subject-matter, enclosed please find herewith copy of the satisfaction note as mentioned vide your letter under reference. ....
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....e. On going through the office note it is found that it was for Departmental use only. With this note a list of 159 parties has been attached. On further examination it is found that against several parties/assessees, it is mentioned that information is being passed for taking up proceedings under s. 158BD. The name of the assessee appears at sl. No. 130 and a similar note has been made against the name of the assessee. 14. The contention of the learned counsel for the assessee was that this note cannot be treated to be a satisfaction note and secondly that this note has been written much after the completion of the assessment in the case of Manoj Aggarwal and is antedated. To prove this fact, the learned counsel pointed out that in various cases it is written that proposal for centralization of the case in this circle has been approved for taking up proceedings under s. 158BD. In this regard example of SMC Share Brokers Ltd. appearing at sl. No. 69 was given. It was further pointed out that in that case on examination it was found that the proposal of centralization of the case was sent for approval much after 25th Aug., 2002 and therefore it is proved that this note was not prep....
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....g effect. As the facts of the present matter are similar to the facts of SMC Share Brokers Ltd. (supra) in relation to the controversy about the note dt. 19th Dec., 2002, we follow the same approach in the case of present assessee about the authenticity of this note and hold that this note cannot be treated to be a satisfaction note as required under law for initiating proceedings under s. 158BD against the assessee. Rather, the note dt. 19th Dec., 2002 contains and records the satisfaction of AO but this note is subsequent to the passing of the assessment order under s. 158BC in the case of searched person. Hence, jurisdiction cannot be legally justified for initiating proceedings under s. 158BD on the basis of such subsequent satisfaction note in the case of the present assessee. 18. Besides the above, it may be pointed out that at the time of hearing of the case, the assessee demanded the satisfaction note and vide order-sheet entry dt. 10th Oct., 2007 the learned Departmental Representative was directed to produce copy of the proposal for centralizing the case of the assessee and approval given on such proposal. A copy of order passed under s. 127 of the IT Act was also requir....
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....61. Sd/- (Ram Mohan Singh) Dy. CIT, Central Circle-3, New Delhi. 22. On perusal of the notice as reproduced above, it is found that this notice does not indicate any material or the basis on which it is issued. It does not indicate the person in whose case the search was conducted and the material found during the course of such search relating to the assessee. It does not indicate the satisfaction of the AO for initiating proceedings under s. 158BD against the assessee. It is a very formal notice prepared on proforma. 23. The requirement of notice under s. 158BD was considered by the Hon'ble Supreme Court in the case of Manish Maheshwari (supra). In that case it was also pointed out that no evidence had been filed by the Department to show that any material relating to the assessee which was found during the course of search conducted in the premises of Manish Maheshwari (supra) was handed over to the AO of the present assessee. In the case of Manish Maheshwari (supra) the Hon'ble Supreme Court has observed that one of the conditions for initiating proceeding under s. 158BD is that the AO of the searched person should handover the material relating to the assesse....
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....ed income in respect of which you as individual/HUF/firm/company/AOP/BOI/local authority are assessable for the block period mentioned in s. 158B(a) of the IT Act, 1961. The return should be in the prescribed Form No. 2B and be delivered in this office within 16 days of service of this notice duly verified and signed in accordance with the provisions of s. 140 of the IT Act, 1961. (Search was conducted in the month of November, 1995)". 26. The Hon'ble Supreme Court after considering the provisions of ss. 158BC and 158BD held that the notice dt. 6th Feb., 1996 did not record any satisfaction on the part of the AO. This observation of the Hon'ble Court is as under : "Law in this regard is clear and explicit. The only question which arises for our consideration is as to whether the notice dt. 6th Feb., 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." 27. In view of the above decision, recording of satisfaction before issuing the notice issued under s. 158BD....
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....visions contained in Chapter XIV-B are drastic in nature. It has draconian consequences. Such a proceeding can be initiated, it would bear repetition to state, only if a raid is conducted. When the provisions are attracted, legal presumptions are raised against the assessee. The burden shifts on the assessee. Audited accounts for a period of ten years may have to be reopened. 19. We are of the opinion that the law laid down by the Supreme Court is clearly applicable to the facts of the present case regarding issuing of a proper notice to the assessee for initiating block assessment proceedings. The notice dt. 26th Oct., 1998 issued to the assessee is a vague (if not more) than the notice issued in Manish Maheshwari. Such a vague notice, as held by the Supreme Court shows a patent non-application of mind. 20. It has been pointed out by the Supreme Court that the consequences arising out of invoking the provisions of Chapter XIV-B of the Act are drastic and draconian. The accounts of the assessee may be reopened for ten years and not only a legal presumption is raised against the assessee but the burden shifts on the assessee to show that it did not have any undisclosed income. U....
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....2005 and IT(SS)A No. 140/Del/2005. and thereafter in the case of Radhey Shyam Bansal (supra). 32. If we compare the notice issued under s. 158BD in the present case with the notice issued in the case of Manish Maheshwari (supra) and in the case of New Delhi Auto Finance (P) Ltd. (supra), we find that the notice in the case of the present assessee issued under s. 158BD is identical to the notice issued in the case of New Delhi Auto Finance (P) Ltd. (supra). In fact, in this notice also even the date of search conducted in the case of Manoj Agrawal has not been mentioned nor any other detail is given in the notice. Even the date of notice is not given which indicates the casual approach and non-application of mind on the part of the AO. The satisfaction of the AO is not discernable from the contents of the notice which appears to be on prescribed proforma only. In view of the above, in our considered opinion, since the notice does not contain or record the satisfaction of the AO nor other details, such notice is to be held as vague and following the ratio of decision of the Hon'ble Supreme Court in the case of Manish Maheshwari (supra) as well as the latest decision of the juris....