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2020 (5) TMI 528 - HC - Income TaxValidity of Proceeding u/s 158BC - satisfaction was not recorded before completion of assessment proceeding - Tribunal held that assessment order passed u/s 158BD read with Section 158BC is not valid and is void ab initio - HELD THAT - Satisfaction can even be recorded immediately after completion of the assessment proceedings u/s 158BC - In the instant case, admittedly, the satisfaction has been recorded after completion of the proceedings u/s 158BC - the order passed by the AO as well as the CIT (Appeals) has been set aside by the Tribunal merely on the ground that the satisfaction has not been recorded before completion of the assessment proceedings. The aforesaid finding is contrary to law laid down in the case of CALCUTTA KNITWEARS 2014 (4) TMI 33 - SUPREME COURT . Therefore, the same cannot be sustained in the eye of law. Substantial question of law framed by this Court is answered in the negative. In the result, the impugned order passed by the Tribunal is hereby quashed and the matter is remitted to the Tribunal to deal with the appeal on merits expeditiously in accordance with law.
Issues:
1. Validity of assessment order under Section 148BD read with Section 158BC 2. Recording of satisfaction by the Assessing Officer before completion of block assessment proceedings under Section 158BC 3. Interpretation of law in relation to recording of satisfaction for issuing notice under Section 158BD Analysis: Issue 1: Validity of assessment order under Section 148BD read with Section 158BC The appeal pertains to a block period from 01.04.1981 to 29.05.2001, initiated by the revenue. The case involved a search under Section 132 of the Income Tax Act, 1961, revealing undisclosed transactions related to the sale of property. The assessing officer concluded that the transfer of property had occurred, resulting in capital gains chargeable to tax for the block period. Subsequently, interest and penalties were imposed under relevant sections. The assessee appealed the decision, leading to a series of judicial reviews culminating in the present appeal before the High Court. Issue 2: Recording of satisfaction by the Assessing Officer before completion of block assessment proceedings under Section 158BC The core contention revolved around whether the assessing officer had to record satisfaction before the completion of block assessment proceedings under Section 158BC. The Tribunal held that the assessing officer must establish whether the undisclosed income belonged to the person searched or any other person before concluding the assessment. Despite the assessing officer being the same for both parties, the satisfaction had to be recorded before the completion of proceedings for the searched person. The failure to do so rendered the assessment order void ab initio, leading to the appeal by the revenue. Issue 3: Interpretation of law in relation to recording of satisfaction for issuing notice under Section 158BD The High Court referred to the Supreme Court's decision in the case of 'CIT Vs. CALCUTTA KNITWEARS' to determine the stage at which the assessing authority must record satisfaction for issuing a notice under Section 158BD. The Supreme Court clarified that the satisfaction note is essential and can be prepared at different stages, including immediately after the completion of assessment proceedings under Section 158BC. In the present case, the satisfaction was recorded post the completion of proceedings under Section 158BC, contrary to the Tribunal's finding. The High Court ruled that the Tribunal's decision was against the established law and quashed the order, remitting the matter for further consideration on merits. In conclusion, the High Court allowed the appeal, emphasizing the importance of complying with procedural requirements and established legal principles in conducting block assessment proceedings under the Income Tax Act, 1961.
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