2014 (4) TMI 33 - SC - Income Tax

Block Assessment - Requirement to record the satisfaction Notice to be issued u/s 158BD of the Act - Notice for undisclosed income of any other person - At what stage of the proceedings under Chapter XIV-B does the assessing authority require to record his satisfaction for issuing a notice u/s 158BD of the Act Held that - The provisions of section 158BD is a machinery provision and inserted in the statute book for the purpose of carrying out assessments of a person other than the searched person under Sections 132 or 132A of the Act - Under Section 158BD of the Act, if an officer is satisfied that there exists any undisclosed income which may belong to a other person other than the searched person u/s 132 or 132A of the Act, after recording such satisfaction, may transmit the records/documents/chits/papers etc. to the assessing officer having jurisdiction over such other person - Relying upon In Prakash Nath Khanna v. C.I.T. 2004 (2) TMI 3 - SUPREME Court - the language employed in a statute is the determinative factor of the legislative intent - The legislature is presumed to have made no mistake - The presumption is that it intended to say what it has said - Assuming there is a defect or an omission in the words used by the legislature, the Court cannot correct or make up the deficiency - Where the legislative intent is clear from the language, the Court should give effect to it. Before initiating proceedings u/s 158BD of the Act, the AO who has initiated proceedings for completion of the assessments u/s 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 accounts 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 u/s 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. For the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person - the assessing officer had not recorded the satisfaction note as required u/s 158BD of the Act - thus, the Tribunal and the High Court were justified in setting aside the orders of assessment and the orders passed by the first appellate authority the matter is remitted back to the HC for consideration - Decided against Revenue.

Summary

Issues Involved:
1. Delay in filing and refiling of Special Leave Petitions.
2. Stage for recording satisfaction for issuing notice under Section 158BD of the Income Tax Act, 1961.
3. Validity of notice under Section 158BD.
4. Period of limitation for issuance of notice and completion of assessment under Section 158BD.

Issue-wise Detailed Analysis:

1. Delay in Filing and Refiling of Special Leave Petitions:
The court condoned any delay in filing and refiling the Special Leave Petitions, granting leave for the appeals to proceed.

2. Stage for Recording Satisfaction for Issuing Notice under Section 158BD:
The primary issue was determining at what stage the assessing authority must record satisfaction for issuing a notice under Section 158BD. The court clarified that the satisfaction note must be prepared by the assessing officer before transmitting records to another assessing officer. This satisfaction note could be prepared at three stages:
(a) At the time of or along with the initiation of proceedings against the searched person under Section 158BC.
(b) During the assessment proceedings under Section 158BC.
(c) Immediately after the completion of the assessment proceedings under Section 158BC of the searched person.

3. Validity of Notice under Section 158BD:
The respondent firm challenged the validity of the notice issued under Section 158BD, arguing it violated provisions and was beyond the period of limitation. The assessing authority, however, rejected this challenge and proceeded with the assessment. The Tribunal and High Court had held that the satisfaction note must be prepared during the assessment proceedings of the searched person and not after, thus deeming the notice belated and invalid. The Supreme Court, however, disagreed, stating that the plain language of Section 158BD allows for the satisfaction note to be recorded even after the completion of the assessment of the searched person.

4. Period of Limitation for Issuance of Notice and Completion of Assessment under Section 158BD:
The court addressed the contention regarding the period of limitation for issuing a notice under Section 158BD. The Tribunal and High Court had interpreted that the satisfaction note must be prepared within the limitation period provided under Section 158BE(2)(b). The Supreme Court clarified that Section 158BE(2)(b) only provides for the period of limitation for completing the block assessment under Section 158BD and does not restrict the period for preparing the satisfaction note. Therefore, the satisfaction note can be prepared after the completion of the assessment proceedings under Section 158BC.

Conclusion:
The Supreme Court held that the satisfaction note is a sine qua non for initiating proceedings under Section 158BD and must be prepared before transmitting records to another assessing officer. The court remanded the matters to the respective High Courts for fresh consideration in light of these observations, ensuring that the satisfaction note's timing aligns with the court's interpretation of Section 158BD. The appeals were disposed of accordingly, and similar orders were passed for related appeals.