2011 (5) TMI 464 - AT - Income Tax

Satisfaction for issue of notice under section 158BD - Section 158BD provides for assumption of jurisdiction to make a block assessment in the case of a person not searched and against whom no proceedings have till then been initiated. Can it be said that such jurisdiction can be assumed without recording satisfaction? - Held that -the material examined shows that the undisclosed income pertains to some other person- AO has to give a finding to this effect after an honest appreciation of the seized material with an objective mind - the recording of such satisfaction is impliedly to be done in the course of the section 158BC proceeding as the satisfaction has to be recorded only by the Assessing Officer making the block assessment. - In view of the binding decision of the Delhi Special Bench of the Tribunal in Manoj Aggarwal v. Dy. CIT (2008 -TMI - 63312 - ITAT DELHI-A) and as the Assessing Officer has not recorded the satisfaction for issue of notice under section 158BD, prior to completion of assessment, the issue of notice under section 158BD is bad in law - Decided in favor of assessee.

Summary

Issues:
Validity of notice issued under section 158BD of the Income-tax Act, 1961.

Detailed Analysis:

Issue: Validity of Notice under section 158BD
The appeal challenged the order confirming the block assessment under section 158BD of the Income-tax Act, 1961. The primary question was whether the notice issued under section 158BD was legally valid. The timeline of events was crucial in determining the legality of the notice. The Commissioner's review note highlighted the necessity of issuing a notice under section 158BD based on the search conducted. However, it was observed that the satisfaction note for issuing the notice under section 158BD was not recorded before the completion of the assessment under section 158BC for the individual. The Special Bench of the Tribunal emphasized the importance of recording satisfaction in the course of section 158BC proceedings before issuing a notice under section 158BD. The Departmental representative argued that satisfaction could be recorded at any time before issuing the notice, but the Tribunal disagreed, citing the necessity of recording satisfaction during the section 158BC proceedings. The Tribunal concluded that since the satisfaction was not recorded before the completion of the assessment under section 158BC, the notice under section 158BD was invalid, leading to the cancellation of the assessment.

In conclusion, the Tribunal allowed the assessee's appeal, emphasizing the importance of recording satisfaction in the course of section 158BC proceedings before issuing a notice under section 158BD. The judgment highlighted the legal requirement for recording satisfaction and the implications of failing to do so in the context of block assessments under the Income-tax Act, 1961.