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TMI Blog2015 (11) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, the notice under Section 158-BD issued to the Assessee is held to be bad in law. - Decided in favour of assessee. - ITA 537/2015 - - - Dated:- 5-11-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Mr S. Krishnan, Advocate For the Respondent : Ms Suruchi Aggarwal, Senior Standing Counsel, Ms Lakshmi Gurung, Junior Standing Counsel, Mr Abhishek Sharma and Ms Radhika Gupta, Advocates ORDER S. Muralidhar, J. 1. This is an appeal by the Assessee against an order dated 21st July, 2014 passed by the Third Member and the consequential confirmatory order dated 8th December 2014 of the Income Tax Appellate Tribunal ( ITAT ) in IT(SS) 26 33/Delhi/2010 for the block period 1st April, 1987 to 15th December, 1997. 2. Admit. 3. For the purposes of the present appeal, only the two following questions are framed for consideration: (a) Whether on the facts and in the circumstances of the present case, the notice under Section 158-BD is bad in law? (b) Whether recording of satisfaction by the Assessing Officer of the person searched is a necessary ingredient to validate block assessment proceedings under Section 158-BD? 4. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) the Assessee again made a request for the copy of the satisfaction note. A remand report dated 10th June, 2009 was received from the AO and in respect of the satisfaction note it was stated that satisfaction note on the basis of which notice under Section 158-BD of the Act dated 25th September, 2006 was issued had been supplied to the Assessee on 10th September, 2008. 9. The CIT(A) on 25th March, 2010 upheld the order of the AO. The Assessee then preferred an appeal before the ITAT. While the Accountant Member (AM) of the ITAT by an order dated Nil March 2013 agreed with the Assessee that no satisfaction was recorded by the AO and, therefore, the proceedings under Section 158 BD were bad in law, the Judicial Member (JM) disagreed and held in favour of the Revenue. The matter was then referred to the Third Member of the ITAT. Although there were subsequent orders passed by both the AM and the JM even while the matter was pending before the Third Member, it is not necessary to refer to those orders since what mattered thereafter was the order of the Third Member. That order came to be passed on 21st July, 2014. The Third Member held that the onus of having to show that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158 BC against such other person and the provisions of this Chapter shall apply accordingly. XXXXX Section 158BE Time limit for completion of block assessment (2) The period of limitation for completion of block assessment in the case of the other person referred to in section 158 BD shall be - (b) two years from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997. 13. Section 158BD requires the AO of the searched person to record a proper note of satisfaction that there is cogent and demonstrated material to conclude that the seized documents show that some undisclosed income belongs to a person other than the searched person. Explaining the mandatory nature of this requirement, the Supreme Court in Commissioner of Income-Tax v. Calcutta Knitwears (2014) 362 ITR 673 (SC) observed as under: 41. We would certainly say that before initiatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed person. 15. Turning to the decisions of this Court, in Commissioner of Income Tax v. Sunil Bhala (2011) 336 ITR 50 (Del) the Court held that the AO of the searched person has to record satisfaction to the effect that there was undisclosed income belonging to the assessees. in the absence of there being any recording of the satisfaction of the AO while forwarding the case to the AO of the 'other person', the block assessment proceedings were held to have been rightly invalidated. In Commissioner of Income Tax v. Feather Breweries Market (2008) 166 Taxman 271 (Del) the Court noted that the Revenue is unable to produce the satisfaction recorded by the Assessing Officer in terms of Section 158 BD of the Act and held that the in view of the decision of the Supreme Court in Manish Maheshwari v. Asst. CIT (2007) 289 ITR 341 (SC), the block assessment proceedings were unsustainable in law. 16. Recently, in Commissioner of Income Tax v. Manju Finance Corporation (2015) 231 Taxman 44 (Del) the Court reiterated as under: The requirement of Section 158 BD is that the Assessing Officer of the person searched or against whom an order under Section 132 A has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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