TMI Blog2010 (5) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... Act ). Whether, on the facts and in the circumstances of the cases above, the learned Commissioner of income-tax (Appeals) was justified in annulling the Block Assessment Orders under section 158BD of the I.T. Act, 1961 passed by the Assessing Officer ? 2. The undisputed facts of the cases are that in this Group a search under section 132 of the Act was conducted on 12.12.2002 at the residential and business premises of the Flagship Company M/s. S. Goenka Lime Chemicals Ltd. and its director, Shri Anand Goenka. The assessment of the Flagship Company M/s. S.Goenka Lime Chemicals Ltd. was completed under section 158BC of the Act alongwith other cases where the warrant of authorisations were issued under section 132 of the Act. In the search, some of the seizures made directly related to several private limited companies whose director was found to be Smt. Mukta Goenka wife of Shri Anand Goenka. During the search and seizure operations, certain incriminating documents were found. The investigation revealed that the company M/s. S. Goenka Lime Chemicals Ltd. had received large amount in the form of share capital from the sister concerns, source of which was alleged to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee has been found as a result of search. (ii) That the ld. D.R. produced the copy of the order sheet dated 5th September, 2003 recorded in the case of the person searched. This order sheet also did not reveal the recording of satisfaction as required by section 158BD of the Income-tax Act for initiation of block assessment proceeding in the case of the assessee. (iii) That the order sheets dated 4.9.2003 and 5.9.2003 filed by the ld. D.R. do not disclose any satisfaction that any undisclosed income belongs to the assessee has been found as a result of search. (iv) The notice u/s 158BC was issued on 5th September, 2003 to the person searched, hence in order sheet dated 4th September 2003, how the AO could record that on examination of books of account and other documents for which no satisfactory evidence could be put forward in the case of M/s. S. Goenka Lime Chemicals Ltd. and in the case of Anant Kumar Goenka during the course of assessment proceedings, when admittedly the assessment proceedings have not started on 4.9.2003. (v) That despite giving opportunity to the department no material was produced before us to prove the satisfaction as requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, and the orders of the Ld. Members. I find that the ld. J.M. has reproduced the order sheet entry dated 4-9-2003 in para 11 of his order. He has also reproduced the order sheet entry dated 5.9.2003 made in the case of M/s. S.Goenka Lime Chemicals Ltd. in para 11 of his order. The main argument of the assessee is that no satisfaction, as required by section 158BD of the Act, is recorded in the case of persons searched for initiation of block assessment proceedings in the case of the assessees and hence the block assessment orders are bad in law. It is true that the Ld. J.M. opined that no satisfaction has been recorded in the case of persons searched for initiation of the block assessment proceedings in the case of present assessees. However, it is observed that the Ld. A.M. is of the opinion that as the assessee has not raised this issue before the lower authorities and the Cross Objections filed by the assessees have been dismissed, hence the Tribunal cannot go beyond the grounds of appeal of the Revenue and decide this issue. The relevant observations of the Ld. A.M. are as under: With due respect, the ITAT cannot therefore, go beyond the grounds of appeal of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction in the order sheet dated 4.9.2003 has been recorded before the commencement of block assessment proceedings of the persons searched on 5.9.2003. In my opinion, this satisfaction is not in accordance with the provisions of section 158BD of the Act. The Hon ble Supreme Court in the case of Manish Maheshwari v. ACIT (2007) 289 ITR 342 has specified the following conditions precedent for taking action under section 158BD of the Act : Section 158BD, however, provides for taking recourse to a block assessment in terms of section 158BC in respect of any other person, the conditions preceding wherefore are: (i) satisfaction must be recorded by the Assessing Office that any undisclosed income belongs to any person other than the person with respect to whom search was made under section 132 of the Act, (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the assessing officer having jurisdiction over such other person; and (iii) the Assessing Officer has proceeded under section 158BC against such other person. The Hon ble Supreme Court has concluded as follows : As the Assessing Officer has not recorded his satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law. Similarly, the reason given by the Ld. A.M. that the AO in the case of assessees and the persons searched is the same and hence it is immaterial whether the reasons recorded were in the file of the persons searched or in the case of assessees is incorrect and is contrary to law as interpreted by the Hon ble Supreme Court in the case of Manish Maheshwari (supra) and five Members Special Bench of the Tribunal in the case of Manoj Agrawal (supra). For argument s sake, if this reason given by the Ld. A.M. is accepted, then it will mean that the proceedings under section 158BD can be initiated by the AO on his whims in any person s case. Satisfaction should be recorded by the AO of person searched as per the provisions of section 158BD of the Act, as ruled by the Hon ble Supreme Court in the case of Manish Maheshwari (supra). It is well settled law that satisfaction recorded has to be objective/judicious satisfaction and the order sheet dated 4.9.2003, which is in the opinion of the Ld. A.M. is satisfaction recorded for the initiation of block assessment proceedings in the cases of the present assessees does not fulfil this condition because the block assessment proceedings of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on searched. 14. The Ld. A.M. has observed that the AO used wrong words in the reasons recorded on 4.9.2003 and instead of during the assessment proceedings , the AO should have written during the enquiries conducted . The Ld. A.M. was of the opinion that for wrong statements made in the satisfaction recorded on 4.9.2003 in the order sheet, the initiation of block assessment proceedings cannot be held to be bad in law. In the instant cases, the block assessment proceedings of the persons searched were initiated by issuing notice under section 158BC on 5.9.2003, whereas the satisfaction in the case of the assessees was recorded on 4.9.2003, hence there is no question of the AO of persons searched for conducting enquiry on 4.9.2003. 15. The ld. A.M. has also observed that the satisfaction is discernible from the seized record. In my opinion this observation is also not tenable in view of the decision of the Hon ble Supreme Court in the case of Manish Maheshwari (supra) wherein it has been held that satisfaction must be recorded by the AO that any undisclosed income belongs to any person other than the person with respect to whom search was made u/s 132 of the Act. 16. In v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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