2015 (1) TMI 617 - HC - Income Tax

Opinion formation in terms of Section 158BB of the Income Tax Act, and the time within which it had to be recorded was complied with - Hon ble Supreme Court which had by its judgment and order reported as CIT V. Calcutta Knitwear (2014 (4) TMI 33 - SUPREME COURT) questioned - Held that - On going through the alleged office note available it is found that the office note has been allegedly signed on 29th Aug., 2002 that is the date on which the assessment order in the case of M/s Friends Portfolio (P) Ltd. was completed. On closer scrutiny of the facts and circumstances mentioned above including the fact regarding the mention of satisfaction note in the case of this company and proposal for centralization of the case in the circle in which the cases of searched persons fell, as referred to above, and also in view of the circumstances relating to this issue, we find force in the submissions of the learned Counsel for the assessee made before us and conclude that no satisfaction note was prepared on 29th Aug., 2002 and this note has been prepared even after 26th Nov., 2002. In the present case the revenue s contention are not different from what they were in the main appeal, which was decided in the judgment reported as CIT V. Radhey Shayam Bansal (2011 (5) TMI 416 - DELHI HIGH COURT ). It is sought to be reported that the opinion formation contained in the letter dated 15.7.2003 accords with the opinion of Section 158BB. the appellant-revenue has not discharged the onus that there was valid satisfaction as required under Section 158 BD. Therefore, the irresistible conclusion is the pre-requisite of satisfaction as engrafted under Section 158B for the purpose of initiation of block assessment proceeding is non-existent or absent. - Decided against revenue.

Summary

Issues Involved:
1. Compliance with opinion formation under Section 158BB of the Income Tax Act.
2. Validity of the satisfaction note for initiating proceedings under Section 158BD.
3. Timeliness and authenticity of the satisfaction note.
4. Adequacy of evidence provided by the revenue.

Issue-wise Detailed Analysis:

1. Compliance with opinion formation under Section 158BB of the Income Tax Act:
The Supreme Court directed an examination of whether the opinion formation in terms of Section 158BB of the Income Tax Act and the time within which it had to be recorded was complied with. The case involved a search conducted on 3.8.2000, leading to the seizure of documents and a statement recorded under Section 132. Notices were issued on 22.03.2004 based on the opinion formation by the assessing officer of Manoj Aggarwal. The ITAT held that the requirements of Section 158BB were not met, referencing the Supreme Court judgment in Manish Maheswari V. ACIT (2007).

2. Validity of the satisfaction note for initiating proceedings under Section 158BD:
The revenue contended that the actual satisfaction was recorded on 29.8.2002. However, the court noted that the satisfaction must be in writing and that the note dated 29.8.2002 was challenged for its authenticity. The tribunal in SMC Share Brokers Ltd. case had expressed that the note seemed antedated, as there was no necessity to record another satisfaction on 26.11.2002 if the first was genuine. The court found force in the argument that the note was prepared after 26.11.2002.

3. Timeliness and authenticity of the satisfaction note:
The court scrutinized the note dated 29.8.2002, finding inconsistencies such as the mention of proposals and approvals dated after the note. The tribunal concluded that no satisfaction note was prepared on 29.8.2002, and the note was likely created post 26.11.2002. This conclusion was based on several factors, including the necessity of a second satisfaction note and the timing of related proposals.

4. Adequacy of evidence provided by the revenue:
The revenue argued that the letter dated 15.7.2003 constituted valid satisfaction under Section 158BD. However, the court found that the letter only indicated that the respondent acted as a mediator, without alleging that accommodation book entries or amounts belonged to the respondent. The second paragraph of the letter mentioned evidence of cash received by Manoj Aggarwal from the respondent, but the evidence was not presented before the tribunal or the court. The court concluded that the revenue did not discharge the onus of proving valid satisfaction as required under Section 158BD.

Conclusion:
The court dismissed the revenue's appeal, concluding that the pre-requisite of satisfaction under Section 158BD was non-existent or absent. The appeal was dismissed due to the lack of merit in the revenue's submission.