2015 (1) TMI 566 - HC - Income Tax

Inordinate delay in issuing the notice u/s 158BD to the assessee - Held that - In the facts and circumstances of the present case, it cannot be held that there was any delay in recording the satisfaction note. The assessment of the searched person was completed on 31.12.2001. The satisfaction note was recorded on 30.05.2002 i.e. just about five months after the date of completion of searched person. Notice was issued on 03.06.2002, immediately after the satisfaction note was recorded to the present assessee. Thus there was no delay in issuance of notice under Section 158BD in the facts of the case. So far as the merits of the appeal are concerned, Court notices that the ITAT had not dealt with the merits of the assessee s contentions with regard to the various additions made, and grounds urged in that regard. In these circumstances, the matter is remitted to the ITAT to decide the contentions on merits. - Decided partly in favour of assessee.

Summary

Issues:
- Delay in issuing notice under Section 158BD to the assessee.
- Validity of satisfaction note recorded in the case.
- Merits of the appeal in relation to additions made by the assessing officer.

Analysis:
1. The main issue in this case revolves around the delay in issuing the notice under Section 158BD to the assessee. The Court had to determine whether the delay was significant and whether the satisfaction note was recorded in accordance with the law. The Supreme Court emphasized the importance of a satisfaction note for Section 158BD and the necessity of its preparation at specific stages.

2. The Court noted that the search operations were conducted in 1999, and the block assessment was completed in 2001. The satisfaction note in the present case was recorded in 2002. The Court referred to a previous decision to establish that the satisfaction note in this case met the legal requirements. It was also observed that the delay of five months between the completion of assessment and the recording of the satisfaction note was not unreasonable.

3. In light of the Supreme Court's guidance on when the notice under Section 158BD can be issued, the Court found that the delay in finalizing the satisfaction note was reasonable. Referring to a previous case, the Court upheld that a delay of around four and a half months was acceptable. The Court directed the ITAT to consider the merits of the appeal regarding the additions made by the assessing officer, as the ITAT had primarily focused on the delay issue.

4. The Court emphasized that the ITAT should address the contentions on merits and determine the correctness of the additions made by the assessing officer. Given that the satisfaction note and notice were issued in 2003, the ITAT was instructed to expedite the decision on the appeal. The rights and contentions of the parties were to be safeguarded, and the ITA was disposed of partially allowed, indicating a need for further review on the merits of the case.