2020 (8) TMI 73 - HC - Income Tax

Validity of proceedings u/s 158BD - non recording satisfaction note for issuing notice under Section 158BD - HELD THAT - This appeal cannot be pursued by the Revenue in the light of the Board's circular in Circular No.24/2015 dated 31.12.2015. In the said circular, it has been stated that the guidelines of the Hon'ble Supreme Court in the case of M/s.Calcutta Knitwears 2014 (4) TMI 33 - SUPREME COURT with regard to recording any satisfaction note were brought to the notice of all for strict compliance and it has been clarified that even if the AO of the searched person and the 'other person' is one and the same, then also, he is required to record his satisfaction as has been held by the Courts. As clarified that filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the said judgment. Taking note of the said decision, the Board directed that pending litigation with regard to recording of satisfaction note under Section 158BD/153C of the Act should be withdrawn/not pressed if it does not meet the guidelines laid down by the Hon'ble Apex Court. - Decided against revenue.

Summary

Issues:
- Appeal filed by Revenue under Section 260A of the Income Tax Act, 1961 against order made in IT(SS)A.No.27/Mds/2011 on the file of the Income Tax Appellate Tribunal.
- Substantial questions of law regarding quashing of assessment order under Section 158BD of the Income Tax Act.

Analysis:
The High Court of Madras heard an appeal filed by the Revenue against an order dated 02.3.2012 made by the Income Tax Appellate Tribunal for the block period 01.4.1996 to 15.11.2002. The appeal was admitted based on substantial questions of law raised, which included whether the Tribunal was correct in quashing the assessment order without the Assessing Officer recording reasons before initiating proceedings under Section 158BD of the Income Tax Act. Another question was whether the Tribunal was right in quashing the order without considering that there is no time limit prescribed for recording satisfaction note under Section 158BD.

The Court noted a circular issued by the Board in Circular No.24/2015 dated 31.12.2015, which emphasized the importance of recording satisfaction notes as per the guidelines of the Supreme Court. The circular clarified that even if the Assessing Officer of the searched person and the 'other person' is the same, satisfaction must be recorded. The Board directed that pending litigation related to recording satisfaction notes under Section 158BD/153C should be withdrawn if they do not meet the guidelines set by the Apex Court. In light of this circular and the guidelines, the Court dismissed the tax case appeal filed by the Revenue, stating that the issue raised in the case was fully covered by the circular, and the appeal had to be dismissed. The substantial questions of law framed were left open, and no costs were awarded in this matter.