1999 (8) TMI 115 - AT - Income Tax

Summary

Issues Involved:
1. Proper opportunity and limitation.
2. Action taken u/s 132 and conversion of survey proceedings u/s 133A into proceedings of search u/s 132.
3. Validity of notice issued u/s 158BC without recording satisfaction u/s 158BD.

Summary:

Proper Opportunity and Limitation:
Ground Nos. 2 and 3, relating to proper opportunity and limitation, were not pressed by the assessee.

Action Taken u/s 132 and Conversion of Survey Proceedings u/s 133A into Proceedings of Search u/s 132:
The assessee argued that only a survey u/s 133A was conducted at their premises, and no papers were seized as they could not be under section 133A. The search and seizure operations u/s 132 were carried out at the residential premises of the partners, and the notice u/s 158BC was issued based on documents found during the search of the partners. The counsel contended that the Assessing Officer (AO) must record satisfaction that the undisclosed income belongs to the assessee before proceeding under Chapter XIV-B, as per section 158BD.

Validity of Notice Issued u/s 158BC Without Recording Satisfaction u/s 158BD:
The Tribunal noted that no satisfaction was recorded under section 158BD before issuing the notice u/s 158BC. The Tribunal emphasized that the AO must reach an objective satisfaction based on material found during the search, which should be recorded or evidenced on the file. The Tribunal referred to various judicial precedents and statutory provisions, concluding that the satisfaction of the AO is not a mere formality but a necessary precondition for proceeding against the assessee under section 158BD.

The Tribunal held that the failure to record satisfaction u/s 158BD before issuing the notice u/s 158BC rendered the notice void ab initio. Consequently, the assessment framed without following the due process of law as contemplated under section 158BD was quashed. The Tribunal did not address other grounds raised in the appeal, as the legal contentions were accepted.

Conclusion:
The appeal was allowed, and the assessment was quashed due to the AO's failure to comply with the procedural requirements of section 158BD before issuing the notice u/s 158BC.