2018 (2) TMI 673 - HC - Income Tax

Proceedings u/s 158BC - recording satisfaction after completion of proceedings - inordinate delay in recording satisfaction - period of limitation - block assessment - Held that - Even going by the judgment of the Supreme Court in the case of Calcutta Knitwears 2014 (4) TMI 33 - SUPREME COURT that satisfaction note can be recorded after completion of the proceedings under Section 158BC the same must be done immediately thereafter. The Supreme Court in the said judgment had noted that there is no embargo in the law for recording satisfaction after completion of proceedings under Section 158BC of the Act. Further noticed that Section 158BE 2 (b) only provides for limitation for completion of block assessment under Section 158BD which is two years from the end of the month in which the notice for such purpose was served on such person, who happen to be other than the searched person. It was in this background the Supreme Court had culled out the ratio, as reproduced in para 44 of the judgment. Thus, even if such satisfaction note were to be recorded after completion of the proceedings under Section 158BC, the same has to be done immediately thereafter. The term immediately has not been defined nor is it possible to quantify it in absolute terms. In any case, period close to nine months for completion of the proceedings under Section 158BC of the Act, without there being any limiting factor on the Assessing Officer to have recorded satisfaction earlier, cannot be stated to be an immediate action. See Commissioner of Income-Tax v. Bharat Bhushan Jain 2015 (1) TMI 705 - DELHI HIGH COURT - Decided against revenue

Summary

Issues Involved:
1. Validity of assessment order under Section 158BC r.w.s 144 of the Income-tax Act due to delay in recording satisfaction.
2. Deletion of addition of undisclosed income for the block period 1992-93 to 2001-02 and upto 17th April 2001.

Issue 1:
The first issue in this case revolves around the validity of the assessment order under Section 158BC r.w.s 144 of the Income-tax Act due to a delay in recording satisfaction. The appeal was filed by the Revenue against the judgment of the Income Tax Appellate Tribunal, challenging the quashing of the assessment order. The Tribunal based its decision on the inordinate delay in recording satisfaction by the Assessing Officer, which led to the termination of the block assessment proceedings. The Commissioner had opined that the delay was reasonable, but the Tribunal disagreed, citing a Supreme Court judgment that emphasized the importance of recording satisfaction promptly. The Supreme Court clarified that the satisfaction note must be prepared before transmitting records to the assessing officer of the searched person, and it can be done at various stages, including immediately after completing the assessment proceedings of the searched person under Section 158BC. The Court highlighted that there is no specific timeframe defined for 'immediately,' but a delay of close to nine months without limiting factors cannot be considered immediate. The Delhi High Court also emphasized the need for vigilance in issuing notices promptly after completing the assessment of the searched person. Consequently, the Tax Appeal challenging the Tribunal's decision was dismissed.

Issue 2:
The second issue pertains to the deletion of an addition of undisclosed income amounting to ?36,67,115 for the block period 1992-93 to 2001-02 and up to 17th April 2001. The Tribunal had deleted this addition based on the grounds of undue delay in recording satisfaction by the Assessing Officer. The Supreme Court's judgment highlighted the flexibility provided to the assessing officer in recording satisfaction notes after completing proceedings under Section 158BC. However, the satisfaction note must be prepared promptly after completing the assessment proceedings of the searched person. The Court emphasized that any delay beyond a reasonable timeframe could render the notices unduly delayed and not in conformity with the legal requirements. The Court's interpretation aimed at ensuring efficient and expeditious completion of search assessments, avoiding prolonged proceedings. Consequently, the Tribunal's decision to delete the addition of undisclosed income was upheld, and the Tax Appeal was dismissed.

This detailed analysis of the judgment highlights the key legal issues, the arguments presented, the Tribunal's decision, and the Supreme Court's interpretation, providing a comprehensive understanding of the case.