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Commissioner of Income Tax-I, Ludhiana Versus Mridula Prop. M/s Dhruv Fabrics, M/s Calcutta Knitwears, M/s Rajan Knit Fab. (P) Ltd., M/s Arora Fabrics (P) Ltd.

2015 (4) TMI 632 - PUNJAB & HARYANA HIGH COURT

Recording of satisfaction under section 158BD - whether person searched and consequent issuance of notice under section 158BD on 02.09.2005 was belated and beyond the period prescribed by law when the section 158BD read with section 158BE does not specify that satisfaction has to be recorded by the Assessing Officer before completion of assessment under section 158BC? - Held that:- In the present case, the notices were issued to about 70 persons on the documents seized from the Bhatia Group. The .....

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having been prepared thereafter.

In these circumstances, the appellant having taken three and a half months to record his satisfaction cannot be held to be unreasonable. The appellant contended that the satisfaction was recorded on 15.07.2005. If that is established, as held earlier, it is sufficient compliance with the provisions of Section 158-BD of the Act. The respondents, however, contended that there was never any satisfaction recorded at all. The orders of the Assessment Offic .....

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(O&M), ITA No. 154 of 2010 (O&M), ITA No. 317 of 2010 (O&M), ITA No. 318 of 2010 (O&M) & Cross objections No.23-CII of 2015 - Dated:- 10-4-2015 - S. J. Vazifdar, Acting CJ And Hon'ble Mr. Justice Gurmit Ram,JJ. For the Petitioner : Mr. Rajesh Katoch, Advocate For the Respondent : Mr. Pankaj Jain, Sr. Advocate with Mr. Sachin Bhardwaj, Advocate, for the respondent in Mr. Alok Mittal, Advocate JUDGMENT S. J. Vazifdar, Acting Chief Justice These appeals raise common questions of law. The facts .....

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section 158BD on02.09.2005 was belated and beyond the period prescribed by law when the section 158BD read with section 158BE does not specify that satisfaction has to be recorded by the Assessing Officer before completion of assessment under section 158BC of the Income Tax Act, 1961. 3. The appeal is against the order of the Income Tax Appellate Tribunal upholding the order of the C.I.T. (Appeals) pertaining to the block period 01.04.1998 to 05.02.2003. The challenge is to the decision of the .....

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sole proprietor thereof. The search operation was conducted under section 132(1) on 05.02.2003 on one S.K.Bhatia, a yarn dealer. The documents pertaining to the respondent were seized. The Assessing Officer issued a notice under section 158-BC dated 02.09.2005 which was served on the respondent on 08.09.2005. The respondent filed a return of income for the block period declaring undisclosed income as Nil . The Assessing Officer finalized the assessment under section 158-BD at ₹ 91,96,083/- .....

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question was covered by the same. The C.I.T. (Appeals) accordingly deleted the addition. 6. It was contended on behalf of the respondent before the Tribunal that the Assessing Officer lacked jurisdiction to make the impugned assessment as the department had not complied with the requirement of Section 158-BD of the Act. It was contended that before initiating proceedings under section 158-BD it was mandatory for the Assessing Officer making the block assessment in case of the person searched (i .....

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re for block assessment.- 158-BC. Where any search has been conducted under Section 132 or books of account, other documents or assets are requisitioned under Section 132-A, in the case of any person, then,- [(a) the Assessing Officer shall- (i) xx xx xx xx xx (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fif .....

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with respect to whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section 132-A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed 2[under Section 158-BC] against such other person and the provisions of this Chapter shall apply accordingly. Time limit for completion o .....

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uary, 1997. 8. In the present case, the assessment in respect of the person with respect to whom the search was made under section 132 i.e. Bhatia Group was made on 30.03.2005. The Assessing Officer recorded his satisfaction that the undisclosed income belonged to the respondent i.e. the person other than the person with respect to whom the search was made under section 132 only thereafter on 15.07.2005. 9. The question before us is answered in favour of the appellant by an order and judgment of .....

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ourt held as under:- 41. We would certainly say that before initiating proceedings under Section 158-BD of the Act, the assessing officer who has initiated proceedings for completion of the assessments under Section 158-BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under Section 132 or the books of accounts were requisitioned under Section 132-A of the Act. This is in contrast to the provisions of Section 148 of the Act .....

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ompletion of assessment of a searched person under Section 158-BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under Section 132 or requisition of books of accounts was made under Section 132-A of the Act. The language of the provi .....

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under this Chapter was served on such other person in respect of search carried on after 1-1-1997. The said section thus, neither provides for nor imposes any restrictions or conditions on the period of limitation for preparation of the satisfaction note under Section 158-BD and consequent issuance of notice to the other person. 43. In the lead case, the assessing officer had prepared a satisfaction note on 15-7-2005 though the assessment proceedings in the case of a searched person, namely, S. .....

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plain and simple language employed by the legislature under Section 158-BD of the Act which clearly provides adequate flexibility to the assessing officer for recording the satisfaction note after the completion of proceedings in respect of the searched person under Section 158-BC. Further, the interpretation placed by the courts below by reading into the plain language of Section 158-BE(2)(b) such as to extend the period of limitation to recording of satisfaction note would run counter to the a .....

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of the following stages:- (a) at the time of or along with the initiation of proceedings against the searched person under Section 158-BC of the Act; (b) along with the assessment proceedings under Section 158-BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158-BC of the Act of the searched person. ….(emphasis supplied) 10. Mr. Mittal and Mr. Jain, learned counsel appearing on behalf of the respondents in these appeals rightly agreed that i .....

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g of the words immediately after in the judgment. The Supreme Court did not specify any outer limit. In our view, the words indicate that the satisfaction note must be prepared as soon as practicably possible and without undue delay after the assessment proceedings are completed under section 158-BC of the Act of the searched person. This must necessarily depend upon the facts of each case. We do not read the words immediately after to mean something as drastic or rigid as the very next moment o .....

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sfaction note after the completion of proceedings in respect of the searched person under Section 158-BC. (emphasis supplied). 12. It is neither possible nor necessary to have any strict formula in this regard. For instance, there may be cases where after the assessment proceedings are completed under section 158-BC of the Act of the searched person, the Assessing Officer is indisposed for some reason such as on the ground of health. It would not be unreasonable if the satisfaction is recorded s .....

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nd sons. The Division Bench held as under::- 17. …………………….As regards delay in issuing notice to the assessee, we find merit in the contention that it was a case which involved a huge fraud of tax evasion where business of searched person was to give accommodation entries resulting in tax evasion to the extent of ₹ 132 Crores in total, spread over the cases of various assesses in all over India. The coordination by the assessing office .....

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