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2023 (11) TMI 807 - HC - Income TaxValidity of block assessment - whether or not a satisfaction note had been generated by AO of the searched person before issuing notice u/s 158BD r.w.s. 158BC - HELD THAT - Concededly, despite the order dated 02.08.2016 passed by the coordinate bench nearly seven (07) years ago, the revenue has not been able to produce the original files, which could have disclosed as to whether or not a satisfaction note was generated by the AO of the searched person. This being the position, we can only draw an adverse inference qua the revenue that no satisfaction note was generated by the AO of the searched person. During the course of arguments, counsel for the revenue sought to highlight the fact that the issue concerning the purported failure of the AO to generate a satisfaction note was not raised before the Tribunal. Our perusal of the record shows that this submission is incorrect. But even if we were to assume that this aspect was not pressed before the Tribunal, since it, otherwise, has a bearing on the jurisdiction of the AO of the assessee to deal with the matter, it can be raised, in our opinion, before the High Court for the first time. We have no reason to conclude that ground with regard to the AO wrongly assuming jurisdiction was not raised before the Tribunal. This being the factual situation, the issue is no longer res integra and stands concluded by the judgments rendered by the Supreme Court in the cases referred to hereafter. See cases Manish Maheswari vs. ACIT 2007 (2) TMI 148 - SUPREME COURT , Tapan Kumar Dutta 2018 (4) TMI 1375 - SUPREME COURT as held very object of the section 158BD is to give jurisdiction to the Assessing Officer to proceed against any person other than the person against whom a search warrant is issued. Although section 158BD does not speak of recording to of reasons as postulated in section 148, but since proceedings under section 158BD may have monetary implications, such satisfaction must reveal mental and dispassionate though process of the Assessing Officer in arriving at a conclusion and must contain reasons which should be the basis of initiating the proceedings under section 158BD - Decided in favour of assessee.
Issues Involved:
1. Existence of a satisfaction note by the Assessing Officer (AO) before issuing notice under Section 158BD. 2. Condonation of delay in filing appeals by the assessee. 3. Validity of assumption of jurisdiction by the AO. 4. Admission of additional evidence by the ITAT without giving the Revenue an opportunity to examine it. 5. Deletion of addition by the ITAT ignoring provisions of Section 132(4) and (4A) of the Income Tax Act. Summary: The primary issue in this case was whether the Assessing Officer (AO) of the searched person generated a satisfaction note before issuing a notice under Section 158BD, read with Section 158BC of the Income Tax Act, 1961. This issue is crucial as it affects the jurisdiction of the AO. A coordinate bench of the court had previously sought to ascertain the existence of such a satisfaction note. Despite the court's order dated 02.08.2016, the Revenue failed to produce the original files to confirm the existence of a satisfaction note. Consequently, the court drew an adverse inference against the Revenue, concluding that no satisfaction note was generated by the AO of the searched person. The court also addressed the condonation of delay in filing appeals by the assessee. The delay was condoned by another coordinate bench via order dated 01.11.2017. The appeals by the assessees raised the issue of the AO's jurisdiction, which was embedded in the grounds of appeal before the Tribunal. The Revenue's appeals involved questions of law regarding the admission of additional evidence by the ITAT without giving the Revenue an opportunity to examine it and the deletion of additions by ignoring provisions of Section 132(4) and (4A) of the Act. However, these questions became academic due to the court's conclusion on the primary issue. The court referred to several Supreme Court judgments, including Manish Maheshwari vs. ACIT, Commissioner of Income-Tax vs. Calcutta Knitwears, and Tapan Kumar Dutta vs. Commissioner of Income Tax, which established the necessity of recording a satisfaction note before invoking Section 158BD. The court concluded that the question of law regarding the validity of the AO's assumption of jurisdiction had to be answered in favor of the assessee and against the Revenue. As a result, the appeals preferred by the Revenue were rendered academic and were closed.
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