2024 (7) TMI 514 - HC - Income Tax

Validity of Block assessment - no satisfaction note for initiating proceedings u/s 158BD recorded by proper AO - search in the premises of UIC Group was conducted by the income tax department in which certain share certificates issued in the name of the respondent/assessee were found - as per ITAT Satisfaction was to be recorded by the assessing officer of the UIC Group where the search was conducted but in the instant case in hand satisfaction has been recorded by the assessing officer having jurisdiction over the assessee HELD THAT - Under Section 158BD satisfaction has to be recorded by the assessing officer of the searched person and then to send it to the Assessing Officer of such other person. The facts of the present case clearly based on documentary evidences clearly reveals that the assessing officer of the searched person has neither recorded any satisfaction as required u/s 158BD nor handed over to the assessing officer of the respondent/assessee seized documents etc. to enable the assessing officer of the respondent/assessee to proceed under Section 158BC. Under the circumstances, the initiation of proceedings by the assessing officer of the respondent/assessee under Section 158BD of the Act, 1961 was without jurisdiction and unauthorized. The finding recorded by the ITAT in the impugned order with regard to the satisfaction note as aforementioned, does not suffer from any perversity. The view being taken by us is also supported by the law laid down in Manish Maheshwari 2007 (2) TMI 148 - SUPREME COURT . Thus no illegality in the impugned order of the ITAT. Decided against revenue.

Summary

Issues:
Validity of initiation of proceedings under Section 158BD of the Income Tax Act without satisfaction note from the assessing officer of the searched person.

Analysis:
The case involved a challenge to the initiation of proceedings under Section 158BD of the Income Tax Act, 1961, without a satisfaction note from the assessing officer of the searched person. A search in the UIC Group premises led to the discovery of share certificates in the name of the respondent/assessee. The assessing officer of the respondent/assessee passed an assessment order under Section 158BD, which was challenged by the respondent/assessee. The CIT(A) dismissed the challenge to the initiation of proceedings but allowed the appeal on other grounds. The ITAT Kolkata Bench 'A' then allowed the respondent/assessee's appeal, prompting the revenue to file the present appeal.

The assessment order showed that the satisfaction note for initiating proceedings under Section 158BD was recorded by the assessing officer of the respondent/assessee, not the searched person, raising jurisdictional issues. The assessing officer of the respondent/assessee attempted to mislead by presenting the note as if it was from the assessing officer of the searched person. The ITAT found that the procedure prescribed in Section 158BD for handing over documents from the searched person's assessing officer to the respondent/assessee's assessing officer was not followed. The ITAT concluded that the initiation of proceedings by the respondent/assessee's assessing officer under Section 158BD was without jurisdiction and unauthorized, in line with the Supreme Court's decision in Manish Maheshwari Vs. Asst. Commissioner of Income-Tax.

The ITAT's findings were based on documentary evidence, indicating that the assessing officer of the searched person did not record satisfaction as required by Section 158BD nor handed over seized documents to the respondent/assessee's assessing officer. The ITAT's decision was upheld, stating that there was no illegality in the impugned order, and the appeal lacked merit. The substantial question of law was answered in favor of the assessee and against the revenue, leading to the dismissal of the appeal.