2012 (6) TMI 233 - HC - Income Tax

Whether the Tribunal was justified in holding that in order to transfer a file by an Assessing Officer to another Assessing Officer to assess an assessee based on information gathered in search conducted on the premises of another assessee, the Officer transferring the file should record his satisfaction about the undisclosed income to be assessed at the hands of other assessee under Section 158BD of the Income Tax Act, 1961 Held that - in Manish Maheshwari (2007 (2) TMI 148 (SC)) if satisfaction is not recorded by the Assessing Officer for transferring the file under Section 158BD, the assessment made under Section 158BC is invalid. appeal filed by the Revenue dismissed.

Summary

Issues:
1. Whether the Tribunal was justified in holding that the transferring Assessing Officer should record satisfaction about undisclosed income to be assessed at the hands of another assessee under Section 158BD of the Income Tax Act, 1961.

Analysis:
The judgment in question revolves around the interpretation of Section 158BD of the Income Tax Act, 1961, concerning the transfer of files by an Assessing Officer to another Assessing Officer for assessing an assessee based on information gathered during a search conducted on the premises of another assessee. The primary issue is whether the transferring officer must record satisfaction about the undisclosed income to be assessed at the hands of the other assessee under Section 158BD.

The facts leading to the controversy involve a search conducted in the premises of a company, which revealed evidence of undisclosed income of an assessee. The Assessing Officer who conducted the search did not have jurisdiction over the assessee, leading to the transfer of the file to the Assessing Officer with jurisdiction for assessment under Section 158BD read with Section 158BC. The initial litigation resulted in the matter being remanded to the Tribunal, where the assessee raised a contention that the assessment was invalid due to the lack of satisfaction recorded by the transferring officer, which the Tribunal accepted, resulting in the cancellation of the assessment.

The crux of the matter lies in the interpretation of Section 158BD, which deals with undisclosed income of any other person. The Revenue argued that transferring a file only requires prima facie satisfaction about jurisdiction without the need for written recording. On the other hand, the assessee contended that without satisfaction recorded under Section 158BD, the assessment is invalid. The Court analyzed Chapter XIVB, which provides a special procedure for assessment of search cases, and highlighted that Section 158BC does not mandate the recording of satisfaction for making assessments of searched assessees. The Court emphasized that Section 158BD is an enabling provision for transferring evidence of undisclosed income of another assessee for assessment under Section 158BC by the Assessing Officer with jurisdiction.

The Court referred to a previous decision where it was held that satisfaction under Section 158BD is only about evidence of undisclosed income of a person other than the searched assessee, with no requirement for written recording. However, the Supreme Court's decision in another case stated that without recorded satisfaction under Section 158BD, the assessment under Section 158BC is invalid. As the Supreme Court's decision is binding, the Court dismissed the Revenue's appeal based on the precedent set by the higher court.

In conclusion, the judgment clarifies the requirement of recording satisfaction under Section 158BD for transferring files between Assessing Officers for assessing undisclosed income of other assessees based on search findings, highlighting the differing interpretations and the binding nature of the Supreme Court's decision on the matter.