TMI Blog2011 (5) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... Salil Kapoor, Mr. Sanat Kapoor and Mr.Anikit Gupta, Advs. DIPAK MISRA, CJ In this batch of appeals under Section 260A of the Income Tax Act, 1961 (for brevity ‗the Act ) preferred by the revenue. ITA No.582/2008, Commissioner of Income Tax v. Radhey Shyam Bansal has been treated as the lead case. It is stated that the relevant facts in all appeals are identical/similar, though details and particulars may be different. Four questions have been set out as substantial questions of law, but in the course of hearing, learned counsel appearing for the revenue have stated that the real questions that emerge for consideration are as follows: ―A. Whether the Assessing Officer is bound to record satisfaction within the meaning of Section 158BD of the Act, during the process of Assessment of the person searched under Section 158BC of the Act? B. Whether satisfaction as contemplated in Section 158BD of the Act has been duly recorded regard being had to be letter dated 15.7.2003 or in the assessment order, wherein undisclosed income of the respondent-assessee has been reflected and negation of such satisfaction by the Income Tax Appellate Tribunal is erroneous and perv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any material evidence on record. 5. The CIT (A) did not accept the contentions of the respondent assessee that no satisfaction was recorded by the assessing officer in the case of the searched person. The first appellate authority took note of the fact that the assessing officer assessing Manoj Aggarwal had communicated vide letter dated 15.7.2003 to the assessing officer having jurisdiction over the assessee, in which he had mentioned that the diaries seized from the possession of Manoj Aggarwal which established that the assessee Radhey Shyam Bansal was a mediator who had provided book entries to various beneficiaries; and that there was evidence of cash amounts were received by Manoj Aggawal from Radhey Shyam Bansal. On the aforesaid basis, the CIT(A) came to the conclusion that the communication dated 15.7.2003 amounted to the satisfaction of the assessing officer assessing the searched person as required by Section 158BD. Be it noted, the other contentions raised by the respondent were also negatived. 6. Grieved by the aforesaid order of the CIT(A), the respondent assessee approached the tribunal in IT(SS) A.No.12/Del/2007 and in the appeal it was urged that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n note dated 22.3.2004 which is a note recorded by the assessing officer of the assessee respondent but not that of the assessing officer of Manoj Aggarwal who is the searched person. The tribunal also referred to the letter dated 15.7.2003 written by DCIT Central, New Delhi the assessing officer having jurisdiction on Manoj Aggarwal to the assessing officer of the respondent-assessee and came to hold that the assessing officer of Manoj Aggarwal could not have made such a communication after the assessment of the person searched was completed. Be it noted, to arrive at the said conclusion the tribunal placed reliance on the decision rendered by the Co-ordinate Bench at Chandigarh in the case of ACIT, Yamunanagar vs. Kishore Lal Balwant Rai, Jagdhari decided on 29.6.2007. In the view of the tribunal, the assessing officer of Manoj Aggarwal had become functus officio on passing the assessment order and hence, could not have recorded any satisfaction. After so holding, the tribunal proceeded to enquire whether the notice under Section 158B required to be issued within a reasonable time and there was delay rendering the whole proceeding vulnerable in law. The tribunal took note of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm and verified in the same manner as a return under cl. (1) of sub-s. (1) of s.142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under s. 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return; (b) the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in s.158BB and the provisions of s.142, sub-ss. (2) and (3) of s.143 and s.144 shall, so far as may be, apply; (c) the AO, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) the assets seized under s.132 or requisitioned under s. 132A shall be retained to the extent necessary and the provisions of s.132B shall apply subject to such modifications as may be necessary and the references to ‗regular assessment or ‗reassessment in s.132B shall be construed as references to ‗block assessment .‖ ― ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a tax-payer and against the Revenue.‖ 9. Yet again in J. Srinivasa Rao v. Govt. of A.P. and Anr. 2006 (13) SCALE 27, it was held: ―In a case of doubt or dispute, it is well-settled, construction has to be made in favour of the taxpayer and against the Revenue.‖ 10. In Ispat Industries Ltd. v. Commr. of Customs JT 2006 (12) SC 379 : 2006 (9) SCALE 652, this Court opined: "In our opinion if there are two possible interpretations of a rule, one which subserves the object of a provision in the parent statute and the other which does not, we have to adopt the former, because adopting the latter will make the rule ultra vires the Act.‖ 11. Law in this regard is clear and explicit. The only question which arises for our consideration is as to whether the notice dated 06.02.1996 satisfies the requirements of s.158BD of the Act. The said notice does not record any satisfaction on the part of the AO. Documents and other assets recovered during search had not been handed over to the AO having jurisdiction in the matter. X X X X 16. As the AO has not recorded its satisfaction, which is mandatory; nor has it transferred the case to the AO having juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax in ITA No.250/Del/2005, (2007) 109 TTJ (Del) 700. Learned counsel would contend that the said order passed by the tribunal was challenged before this Court, wherein the Division Bench had dismissed the appeal and the revenue had chosen not to challenge the finding recorded by the tribunal and, therefore, the said note cannot be placed reliance upon. This decision of the Division Bench is reported in Commissioner of Income Tax v. SMC Share Brokers Ltd. (2007) 288 ITR 345 (Del). 14. To appreciate the controversy, first we shall refer to the order of assessment framed against the Manoj Aggarwal, the person who has searched. Learned counsel for the revenue has drawn our attention to paragraph 2.7 to 2.10 from the order of block assessment order in case of Manoj Aggarwal which was framed on 29.8.2008. The said paragraphs read as under: ―2.7 Apart from the admission of Sh. Manoj Aggarwal, the various documents seized during the course of search details of which are given below further established that he is a name lender involved in the business of giving accommodation entries. Sh.Manoj Aggarwal has accepted all these papers to be related to his bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer of the respondent assessee reads as follows: ―1) Various diaries have been seized from the possession of Sh. Manoj Aggarwal which establish that Radhey Shyam Bansal is a mediator for providing accommodation book entries by Sh. Manoj Aggarwal. The quantum of transaction done by him as per these documents is given in Annexure-A. Photocopies of these paper are enclosed in Annexure-B. 2) There are evidences of cash having been received by Mr. Manoj Aggarwal from Radhey Shyam Bansal. The summary of the amounts so received as per various seized documents is given in Annexure-C. The photocopies of these documents are provided as per Annexure-D.‖ 18. Before we advert to and analyse whether the letter dated 15.7.2003 really conveys satisfaction as is understood in the anatomical base of the provision and also under the backdrop of terms satisfaction mean in law we think it appropriate to refer to Section 158BD of the Act. The said provision has already been reproduced in the decision in Manish Maheshwari (supra). 19. On a plain reading of the aforesaid provision, it is vivid that for the purpose of initiation of block assessment proceeding against a thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the person searched to the Assessing Officer of the third person. Mere use or mention of the word ‗satisfaction in the order/note will not meet the requirement of concept of satisfaction as used in Section 158BD. The satisfaction has to be in writing and can be gathered from the assessment order, if it is so mentioned/recorded, or from any other order, note or record maintained by the Assessing Officer of the person searched. The word ―satisfaction‖ refers to the state of mind of the Assessing Officer of the person searched, which gets reflected in a tangible shape/form when it is reduced into writing. It is the conclusion drawn or the finding recorded on the foundation of the material available. The word ‗satisfied occurs in many a statute and has its connotation. The term ―is satisfied‖ means simply makes up its mind [per Lord Pearson in Blyth v. Bivth (1966) 1 ALL E.R. 524 (541)]. Dixon J. has defined it as ‗actual persuasion . It fundamentally means a mind not troubled by doubt or to adopt the language of Smith J. ‗a mind which has reached a clear conclusion (see Angland v. Payne (1944) N.Z.L.R. 610 (626). The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word ‗satisfaction , while Section 147 uses the words ‗reason to believe . But the underline role of the Assessing Officer and the principle, requirement or pre-conditions are the same. 23. In view of the aforesaid legal position we can now examine the letter dated 15th July, 2003 which was communicated by the Assessing Officer of the searched assessee to the assessing officer of the respondent. The question is whether the aforesaid letter can be regarded as ―satisfaction‖ as required under Section 158BD, i.e. satisfaction of the Assessing Officer of Manoj Aggarwal that there is material that the respondent assessee had undisclosed income. The first paragraph of the aforesaid letter states that the diary seized from the possession of Manoj Aggarwal establishes that the respondent assessee had acted as a mediator for providing accommodation book entries by Manoj Aggarwal. The second sentence in the first paragraph states that the quantum of transactions as shown in the documents were enclosed as Annexure-A and the photocopies of the papers were enclosed as Annexure-B. The second paragraph states that there was evidence that cash was received by Manoj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st plank of submission of learned counsel appearing for the revenue was a note that was recorded by the assessing officer of the Manoj Aggarwal on the date of assessment. It is contended by Ms. Prem Lata Bansal, learned senior counsel, Mr.Sanjeev Sabharwal, Ms. Suruchi Aggarwal, Mr. Chandramani Bhardwaj, learned counsel for the revenue that though the said note was not filed before the tribunal but the same should be treated as a part of evidence on record and dealt with it. Whether that could have been taken as an additional evidence under Order 41 Rule 27 of the Code of Civil Procedure though such an application has not been filed. The same is not necessary in view of the finding recorded by the tribunal in SMC Share Brokers Ltd.(supra) in. In the said case, i.e., ITA No.250/Del/2005, the tribunal expressed the view that a satisfaction note by the assessing officer of the searched person recording undisclosed income of any person within the meaning of Section 158BD could be validly recorded after completion of assessment of the searched person. In that context, the tribunal held the only requirement is that the satisfaction must be in writing. In the said case, the tribunal was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings under Section 158BD. The learned Counsel pointed out before us that no such approval was taken before 29th Aug., 2002. According to him, the proposal is dt. 19th Sept., 2002, i.e. after the date of the office note. The office note cannot, therefore, mention any event, which has occurred later on, i.e., after 29th Aug., 2002. The fact that the proposal itself is dt. 19th May, 2002 could not be controverted by the learned Departmental Representative. 16. On going through the alleged office note available on pp. 202 to 226, 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 pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said case, there was another satisfaction note dated 26.11.2002 and referring to the said note the tribunal in SMC Share Brokers Ltd. (supra) has held as follows: ―20.1 The next plea of the assessee is that the satisfaction note makes no reference to the seized material and thus the proceedings under Section 158BD judged from the satisfaction note cannot be justified. We do not find force in this submission also. The satisfaction note dt. 26th Nov., 2002, referred to above, is a detailed one. We have also reproduced the concluding observations of the AO, which indicate that he applied his mind before recording the satisfaction. It may be pointed out that the satisfaction note is not required to contain each and every minute detail and to refer to each and every material relevant for making assessment under Section 158BD. Thus, the argument that since, in the satisfaction note, there is no reference to seized material, the assessment made on the basis of such satisfaction note cannot be legally sustained, is not acceptable.‖ 26. Eventually, in the said case, as no cross-examination of Manoj Aggarwal was permitted, the appeal preferred by the assessee, apart fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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