TMI Blog2014 (7) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in quashing the block Assessment completed under section 158BC read with section 158BD of Income Tax, 1961 whereas neither objection was raised against legal validity of proceedings before the AO nor any remedy was sought at any, other level; The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. The facts available on record as per the assessment order show that search seizure operation was conducted on the residence of the assessee on 08.05.2003 in connection with the search in Vatika Group of companies. For ready-reference we extract the opening para of the assessment order hereunder:- Search Seizure operations were conducted at the residence of the assessee on 8/5/2003 in connection with the search in Vatika Group of Companies. A satisfaction note was recorded by the Assessing Officer having jurisdiction over the Vatika Group of Cases. Accordingly a notice u/s 158BD was issued on 31/05/2005 and the assessee filed its return of income u/s 158BD on 20/10/2005 declaring NIL undisclosed income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earched at his residence. It could thus not be denied that assessee was a person who had been searched on 08.05.2003. That in doing so he has failed to appreciate the assessment has been framed by him by invoking the provisions of Sec. 158BD of the I.T. Act, 1961 and not that the proceedings have been initiated against the assessee by invoking the provisions of Section 158BC of the Income Tax Act, 1961. That the ld. DCIT has further erred in failing to appreciate that under the provisions of section 158BD of the Income Tax Act, 1961 a note of satisfaction was required to be recorded in the case of the person who had been searched on the basis of which the AO having jurisdiction over the assessee was required to be satisfied that books of accounts, other documents or assets seized represented undisclosed income of then person against whom the proceedings have been initiated by him. In the absence of any such satisfaction having been recorded in the case of person searched no valid proceedings could have been initiated against the assessee. That the ld. Deputy Commissioner of Income Tax has failed to appreciate that no such documents or evidence were either found or se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the written submissions, it has been contended that, satisfaction note was recorded in the case of assessee and, no satisfaction note was recorded by the Assessing Officer in the case of Vatika Group of companies. Therefore, according to the assessee, no note of satisfaction was recorded by the AO having jurisdiction over the assessee who has been searched although in the assessment order it is stated that, a satisfaction note was recorded by the AO having jurisdiction over the Vatika group of companies. The assessee has stated that, the AO has in the first para of the order of assessment framed u/s 158BD has noted that, a satisfaction note was recorded by the AO having jurisdiction over the Vatika Group of Cases . Again in second para of the order, it is stated that a copy of satisfaction note was duly provided to the assessee and the assessee filed its letter dated 10.05.2006. The appellant has disputed the observation made by the AO in the first para of the order of assessment that a satisfaction note was recorded by the AO having jurisdiction over the Vatika Group of cases. It is contended that during the course of hearing, the assessee filed a reply dated 14 th May, 2007 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Vatika Group of Companies. Even in the note of satisfaction there is no mention of any incriminating document seized from the residential premises of Sh. Anupam Nagalia. The assessee has therefore, objected to the observations of the AO that a note of satisfaction was recorded in the case of Vatika Group of companies. In fact, there cannot be any occasion to record any note of satisfaction for the papers seized during search on the assessee not pertaining to Vatika Group of Companies. Secondly, the assessee is aggrieved on the assessment made by the AO under the provisions of section 158BD since according to the assessee, the AO has no jurisdiction for assessment u/s 158BD which jurisdiction was wrongly assumed by the AO instead of application of provisions of section 158BC in order to circumvent non issue of notice u/s 158BC. In this connection without prejudice and in the alternative the assessee submitted that the assessment has been framed u/s 158BD whereas it should have been completed under the provisions of section 158BC and thus, the assessment made is barred by limitation and the provisions of section 158BD are not attracted in the case of the assessee. The appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same within a period permissible under the Act, the ld. AO issued notice u/s 158BD of the Act. In fact it may be stated that, recourse to the provisions of section 158BD of the Act can be said to have been taken for collateral purpose i.e., to circumvent the non-issue of notice u/s 158BC of the Act. It is submitted that, the assumption of jurisdiction by invoking the provisions of section 158BD of the Act, is without jurisdiction, as no valid notice could have been issued beyond a period of two years from the end of the month in which search took place at assessee s premises. It is further submitted that the legislature has provided a period of two years to an AO to complete assessment u/s 158BC where search has taken place. It is however, submitted that when an action is taken, then it should not be because of any remissness on the part of the AO to initiate the proceedings. In the instant case, the ld. AO on the same facts had taken up the proceedings in the case of the assessee and, had completed the same after period of 2 years as prescribed and, as such, if, he did not choose to initiate proceedings under the correct provisions of the Act where he was within his jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 158BD of the Income Tax Act, 1961 only to circumvent the time provided to complete assessment u/s 158BE of the Act, which had expired as such assessee contends that the assessment made is barred by limitation. Without prejudice, the assessee, further submits that in then instant case search was conducted on Vatika Group of Companies on 08.05.2003 and in the cases of Vatika Group assessments were made by 31.05.2005, whereas in assessee s case proceedings were initiated by the AO on 31.05.2005, though without jurisdiction and improperly, yet inspite of, the assessee had furnished his reply on 10.05.2006. However, the AO again proceeded when assessment was going to be barred by limitation as had stated when according to assessee it had already become barred by limitation by long lapse of time, which according to assessee should have been completed on 31.05.2005 as there was a seizure made form the assessee on 08.05.2003. It is contended by the assessee that the entire purpose for making the assessment is to burden the assessee, with the tax liability and without affording to the assessee a fair and proper opportunity, when assessment had already become barred by li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, in view of provisions of section 292BB of Income Tax Act, 1961, the assessee is precluded from taking any objection in the block assessment proceedings. Accordingly, the objections of the assessee against the block assessment are liable to be rejected. (Emphasis provided in the present proceedings) The record further shows that the Remand Report forwarded by the AO was confronted to the assessee by the CIT(A) and comments of the assessee were invited thereon. It is further seen that the assessee vide letter dated 23.03.2009 forwarded the following submissions (these are extracted from pages 12 13 of the impugned order):- The assessee in comments on the remand report on 23.12.2009 submitted as under: It is submitted that the assessment as had been framed on 21.05.2007 is barred by limitation, whereas it had to be framed by 31.05.2005, since the search u/s 132(1) of the Income Tax Act, 1961 had been completed on 08.05.2003, when the documents on the basis of which an undisclosed income has been computed were found and seized from the residential premises of the assessee. It is an admitted fact that, the search had been conducted on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication and further the aforesaid provisions, had been inserted by the Finance Act, 2008 w.e.f. 01.04.2008 whereas the assessment had been completed on 21.05.2007 and as such a provision otherwise too has no application. It is respectfully submitted that, the assessee could not have decided for himself not to participate in the proceedings despite the fact that, (the same has became barred by limitation) since the assessee had to comply with the notice issued and had not option not to do so, it and as such it could not be stated that merely because assessee had participated in the assessment proceedings he is not entitled to contend that assessment made was barred by limitation and the purported notice u/s 158BD of the Act was no notice in the eyes of law. In such circumstances it is submitted the objection raised by the ld. AO by his letter dated 26.08.2009 is misdirected, misconceived and thus, deserves to be rejected as is entirely untenable. It is thus prayed that, it be held that an assessment made is barred by limitation. In respect of the other issues and grounds of appeal detailed submissions have already been made and in respect of which there have been no cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the CIT(A) can be summarized as follows: That the search and seizure operation u/s 132( 1) of the Act was conducted on 8.5.2003 at the residence of the assessee as well Vatika Group of Companies. This observation of the CIT(A) is factually incorrect because the search warrant was issued in the name of M /s Vatika Land Base Pvt. Ltd., Anil Bhalla, Gaurav Bhalla.Gautam Bhalla. No search warrant was issued in the name of Shri Anupam Naglia (Copy of Search Warrant Panchnama is enclosed for ready reference). The basic statutory precondition for invoking provision contained in section 158BD of the Act is the satisfaction recorded by the AO of the searched person and that such satisfaction should be recorded in writing on the basis of material found as a result of search on the searched person. Applying these to the facts of the instant case it should be seen that basis adopted for initiation of proceeding u/s 158BD of the Act in the case of appellant is that there has been a search conducted on the premises of Vatika Group of Companies and as a result of the material found during the search satisfaction was recorded by the AO having jurisdiction over the Vati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises of appellant himself and not from any other person (M/s Vatika Land Base Pvt. Ltd.) The above view taken by the CIT(A) IS factually incorrect in view of the following facts: Search was carried out in the case of Vatika Group of cases specifically M/s Vatika Land Base Pvt. Ltd., Anil Bhalla, Gaurav Bhalla, Gautam Bhalla as is evident from the search warrant as well as Panchnama. Search warrant was issued in the name of Vatika Land Base Pvt. Ltd. at the residence of Anupam Naglia i.e. EG-3118,Garden Estate, Gurgaon. No search warrant was issued in the name of appellant Sh. Anupam Naglia. It is settled Law that section u/s 132(1) is person specific and not premises specific .{Smt. Nasreen Yusuf Dhanani Vs ACIT-(2009) 118 ITD 133(MUM)} The books of accounts/documents were seized from the searched persons. M/s Vatika Land Base Pvt. Ltd., Anil Bhalla, Gaurav Bhalla and Gautam Bhalla. AO has having jurisdiction with Vatika group of companies recorded satisfaction as required u/s 158BD of the Act and on the basis of this satisfaction, notice was issued u/s 158BD to the appellant. Reliance is placed on the following case: Vinod Goel (Page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Gautam Bhalla as also at the residence of the assessee-respondent Sh. Anupam Nagalia (Director in various companies of Vatika Group) (Kindly see copy of warrant of authorization annexed as Annexure A and copy of panchnama enclosed at pg no. 1 of paper book). 23.07.2004: Notice u/s 158BC of the Act was issued to M/s Vatika Landbase Private Limited. 31.05.2005: Assessment was framed on M/s Vatika Landbase Private Limited u/s 158BC of the Act at an undisclosed income of ₹ 45,89,68,830/-. No notice u/s 158BC of the Act was however issued in the name of the assessee-respondent . 31.05.2005: That a notice u/s 158BD of the Act was however issued to the assessee-respondent and thereafter, the assessee sought for the copy of satisfaction note and copy of seized documents vide replies dated 13.06.2005 and 29.06.2005 (kindly see pages 15 and 16 to 18 of the paper book). Thereafter, the purported satisfaction note was provided to the after a delay of almost seven months on 27.01.2006 (kindly see page 38 of the paper book). 21.05.2007: The AO framed an assessment at an undisclosed income of ₹ 1,89,53,900/-. The assessee-respondent being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. ACIT (ITAT Mumbai) reported in 118 ITD 133. In rebuttal thereof it was again re-iterated that the Revenue is only aggrieved by the quashing of the proceedings on the ground that validity of the proceedings were not challenged before the AO. It was contended that not only this grievance is not relevant even otherwise it is de hors the facts as it has been ignored by the Ld. CIT. DR that the CIT (A) has categorically recorded a finding at page 20 para 4.8 of his order that the objection in regard to the initiation of proceedings was infact raised before the AO by the assessee vide letter dated 14.05.2007. In support of the same, our attention was invited to page 60 to 72 of the Paper Book filed (Specific para 16 at page 72). In this background it was his submission that the contention of the AO in his Remand Report dated 20.08.2009 copy of which is placed at pages 348-349 of the Paper Book regarding applicability of provisions of section 292BB of the Act is factually incorrect and contrary to material available on record. It was contended that where admittedly the only grievance posed by the Revenue is that no such ground was raised before the AO which factually is inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 158BC of the Act. Even otherwise it was contended that the assessee respondent being a Director in various companies of M/s Vatika Group was searched on 08.05.2003 as such the assessment on the assessee could have been made only under the provisions of section 158BC and the assessment proceedings should have been concluded by 31.05.2005 as provided u/s 158BE of the Act. However in the facts of the present case notice u/s 158BD was issued on 31.05.2005 and in pursuance to the said notice assessment was completed u/s 158BD of the Act on 21.05.2007. In the facts of the present case it was his submission that in respect of undisclosed income if any the assessment should have been completed u/s 158BC till 31.05.2005 as per the provision of section 158BE(1)(b) of the Act and accordingly since notice u/s 158BC had not been issued recourse to the provisions of Section 158BD was taken for the collateral purposes i.e. to circumvent the non-issuance of notice u/s 158BC. It would be appropriate to extract from the submissions dated 15.05.2014 filed so as to emphasize in assessee s own words the arguments advanced addressing the mistake of the AO:- 6.3.3 .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he would further like to refer to certain other facts in this context. These are extracted from the submissions dated 15.05.2014 hereunder:- That on 13.06.2005 and 29.06.2005,the assessee-respondent sought from the AO a copy of note of satisfaction, if recorded for initiating proceedings u/s 158BD of the Act (see pages 15 and 16 to 18 of the paper book). The ld. AO never acceded to the request of the assessee till 27.01.2006 (see page 38 of the paper book), when the purported/alleged note of satisfaction was provided to the appellant. Thus, it is evident that a note of satisfaction was provided to the assessee-respondent on 27.01.2006 i.e. nearly after 7 months of the request made by the assessee and thus, it is submitted that no valid proceedings were initiated against the assessee and since, there had been a failure on the part of AO to frame assessment u/s 158BC of the Act, a notice u/s 158BD of the Act was issued as an afterthought and that too by predating a satisfaction note recorded by dating the same as 31.05.2005. Thus, the proceedings so initiated u/s 158BD of the Act (without recording of proper satisfaction note) is without satisfying the statutory preconditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to the notice of the Bench that over and above the written submissions dated 15.05.2014 the assessee has also placed on record supplementary rebuttal to the written submissions of the CIT DR, these are dated 21.05.2014 and has been made available to the department. The Ld. CIT DR accepted the fact that it has been made available to her however it was her stand that her stand is fully addressed by the submissions already on record. Ld. AR briefly summarizing the 8 paged submissions invited specific attention to para 3.1 to 3.2.3 as under:- The argument of ld. CIT DR that no search was conducted on assessee- respondent, as no search warrant was prepared in the name of assessee is fallacious and contrary to material available on record, as it is an admitted fact that the search party, searched and entered the residence of assessee-respondent as the assessee was a director in M/s Vatika Landbase P. Ltd. and it is also an admitted fact that documents on the basis of which proceedings u/s 158BD of the Act had been initiated were also seized from the said premises of assessee. Thus, the submission of the assessee-respondent is that once the search party entered the premises o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded here that the provisions of section 68 also could not be invoked as there are no credits in the books of accounts. That the assessee- respondent had explained before both the lower authorities that the said documents on which purported satisfaction note was recorded do not depict the undisclosed income of the assessee and the same is summarized below: S.No. Annexure Pages Amount (in Rs.) Page of Findings of the AO Explanation/submission of assessee-respondent 1 A-11 33 18,23,628/ - 4 Pg 329 to 334 of the paper book. 2 A-11 38 13,84,400/ - 4 Pg 334 to 335 of the paper book. 3 A-11 34 2,15,000/- 5 Pg 335 to 337 of the paper book. 4 A-1 17 2,25,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son from the premises of the searched person is enough to initiate proceedings under section 153C of the Act, whereas, situation is entirely different under the provisions of section 158BD of the Act as has been explained by Hon ble Delhi High Court in the judgment on SSP Aviation vs. DCIT reported in 346 ITR 177. Referring to the documents filed it was further submitted that the SLP filed by the Revenue against the judgement of the Hon ble Bombay High Court in J.M. Trading has been dismissed. Further relying upon on the above facts and addressing the specific para 18 of the judgement of the Jurisdictional High Court SSP Aviation vs DCIT (cited supra) which bring out the distinction between section 158BD and section 153A, it was contended that these decisions further strengthen the impugned order. Following submissions on facts and law in support of the impugned order were also made :- Thus, it is submitted that since the documents were seized from the search being conducted on residential of the assessee-respondent and as such, there had been a failure on the part of AO to frame assessment u/s 158BC of the Act. The notice issued u/s 158BD of the Act was issued as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e validity of the proceedings were not challenged before the AO; and b) no remedy was sought by the assessee at any other level we on consideration of the factual and legal aspects thereon primarily do not find any merit in the departmental appeal. Although the specific ground has been extracted right at the outset in this order, we for the sake of ready-reference still fill the need to reproduce the same hereunder again:- The order of the ld. CIT(Appeals) is not correct in law and facts; In the facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in quashing the block Assessment completed under section 158BC read with section 158BD of Income Tax, 1961 whereas neither objection was raised against legal validity of proceedings before the AO nor any remedy was sought at any, other level; The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. On a consideration of the specific wording of Ground No-1 reproduced above, we are of the view that it may be possible to advance the argument that by the said ground the grievance is posed to the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on the basis of papers/documents found and seized in pursuance of the provisions of section 158BD, I am required to prepare a true and correct return of my undisclosed income. It is submitted that I do not have any undisclosed income. However, before I file a return in Form No.2B as directed, you are requested to please furnish to me a note of satisfaction which is required to be recorded in writing by you as has been held by the Hon'ble Delhi High Court in the case of Amity Hotels reported in 272 ITR 75. I shall be highly grateful if you could please furnish to me a note of satisfaction on the basis of which you proceeded to issue notice to me directing me to furnish a return of my undisclosed income by 17th June, 2005. I shall be grateful, if this note of satisfaction is served on me as also the documents on the basis of which you are satisfied that there is an undisclosed income belongs to me. I shall be grateful if the needful is done expeditiously so that I do not delay in furnishing the return as directed by you. (Emphasis provided in the present proceedings) It is further seen that the said written request was followed by another written request d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate according to law. It is thus submitted that unless the department furnishes such documents and provides copies thereof to me, it would be contrary to the principles of natural justice fair play to expect the assessee to file a return of an alleged undisclosed income, (and that too considering the same as true and correct) without any evidence supplied in this behalf. It is most respectfully prayed that you may kindly furnish the basis for initiation of proceedings and also provide a copy of satisfaction note , recorded by the learned ACIT, on the basis of which the instant proceedings have been initiated. This submission is being made on the basis of various Judicial pronouncements wherein it has been held that a valid initiation of proceedings can be made on the basis of a satisfaction note , recorded by the learned Assessing Officer having jurisdiction on the assessee who had been subjected to a search u/s 132(1) of the Income-Tax Act. For the sake of convenience, the provision of section 158BD are being extracted herein below- '158BD. Undisclosed income of any other person Where the Assessing Officer is satisfied that any undisclosed income b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken note of in the impugned order but also vide specific paras 1 to 4. In paras 5 to 15 the documents on the basis of which satisfaction purportedly has been recorded on consideration to form the view that they pertained to unaccounted money was assailed in detail. A perusal of the same would show that objection to the validity of the proceedings were made on multiple reasons. However, for the purposes of the present proceedings only para 1 to 4 are being reproduced hereunder:- In the instant pending proceedings, a notice u/s 158BD of the Income Tax Act dated 31.5.2005 was issued to the assessee and in compliance of the aforesaid notice which was received by the assessee on 1.6.2005 a return of income was furnished under protest , on 20.10.2005. It may be stated here that, on receipt of the aforesaid notice by the assessee, a letter of objection was filed, wherein the assessee sought for a copy of note of satisfaction allegedly recorded, if any, by the assessing officer , who held jurisdiction over the person on which search was conducted , on the basis of which you had initiated the proceedings on the assessee. The note of satisfaction sought for was of the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounted income under the following heads:- Remuneration- Annexure A-11, page 33,34,37 and 38 reveals receipt of unaccounted remuneration by Sh. Anupam Nagalia. Profit in Danisco Deal - Annexure A-1 reveals receipt of unaccounted profit from business deal with M/s Danisco Ingredients (India) Pvt. Ltd. Investment in assets - Annexure A-1, page 65 reveals unaccounted investment in land at Rajpur Road, Dehradun amounting to ₹ 55 lacs, at Village Bhondsi (Haryana) amounting to ₹ 18 lacs and immovable properties comprising loans and advances, investment in shares and deposits, jewellery etc. arnountinq to ₹ 48 lacs. Unaccounted loan -Annexure A-2, page 1,2,3,5,6,8,10,13,15 and 21 reveals transactions on account of loans not disclosed for the purpose of income tax. In view of the facts stated above and material available in the form of seized documents, I am satisfied that Sh. Anupam Nagalia had undisclosed income for the block period 1.4.1997 to 8.5.2003 which was not disclosed in the regular return of income. Therefore, notice u/s 158BC read with section 158BD is issued. 4. It is submitted as is apparent these are reasons wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional High Court in the case of Adobe Systems Software Ireland Ltd. vs Assistant Director of Income Tax (2014) 363 ITR 174(Del) wherein their Lordships held that existence of Jurisdictional fact cannot be examined in Writ proceedings and assessee was directed to resolve disputed questions of fact in alternative remedies available under law. Infact to approach the Court without filing the return was considered to have led the Hon ble Court to observe The conduct of the petitioner has been one of defiance . Accordingly the grievance posed by the ground is misplaced. A perusal of the impugned order shows that the CIT(A) after inviting the objections of the AO qua the proceedings has proceeded to decide the issue vide para 4.8 of his order after obtaining the Remand Report. The Remand Report of the AO has already been extracted by us in the earlier part of this order (specific para 3.3) a perusal of which would show that vide sub para 3.4 of the impugned order and para 3 (d), (e) (f) of the Remand Report the AO contradicts himself in the ground raised. We first deem it appropriate to extract the same also hereunder :- In response to the submissions made by the assessee, a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice was not served upon him in time or served upon him in an improper manner. It will be seen that the contention of the appellant is neither that notice was served or notice was not served upon him in time or served upon him in an improper manner. On the contrary, objection of the appellant is that statutory pre-condition for invoking provisions contained in section 158BD of the Act had not been satisfied in as much as satisfaction note so recorded is not recorded on the basis of seized material found from the searched person i.e Vatika Group of Cases and therefore, there could not have been valid assumption of jurisdiction. In light of the above, it is held that section 292BB of the Act has no application to the facts. On consideration of the facts available on record which we have brought out above in detail considering the findings arrived at in the impugned order against which a specific ground has been raised by the Revenue, we find on considering the ground raised no infirmity in the impugned order and accordingly dismissing the ground raised as misconceived and based on no facts and an incorrect appreciation of the law, the departmental appeal accordingly is dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments or assets have been requisitioned under section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of section 158BC in respect of any other person, the conditions precedent whereof are: (i) satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect of 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 conditions precedent for invoking the provisions of section 158BD, thus, are required to be satisfied before the provisions of the said Chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under section 132A of the Act. The only question which arises for our consideration is as to whether the notice dated February 6, 1996, satisfies the requirements of section 158BD of the Act. The sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eel that the person who is to be proceeded against under section 158BD and then section 158BC, must be informed about the satisfaction of the Assessing Officer which has been recorded and he must be given a reasonable opportunity to object to the same. Satisfaction can be arrived on some material. That material would provide the reasonable satisfaction. The Hon'ble Tribunal in the case of Manoj Aggarwal vs. DCIT reported in 113 ITD DCIT (SB) (Del) in para 123 to 124 has held as under :- 123. Having held that recording of satisfaction is imperative before assumption of jurisdiction u/s 158BD, we may now turn to examine the meaning of the expression where the Assessing Officer is satisfied appearing at the beginning of section 158BD for the meaning so ascertained gives us a clue as to the nature of the note of satisfaction that is envisaged in the said section. . ...................... . 124. . ........................... On the other hand, the term 'satisfaction' in section 158BD connotes that there exists undisclosed income and that such undisclosed income is that of the person not searched. The use of the expression 'satisfied' in section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvisaged and the context in sections 147 and 158BD are entirely different decision in the case cited (supra) into the section 158BD proceeding for the reasons detailed herein. In other words, the basic statutory pre-condition for invoking section 158BD of the Act is the satisfaction of the AO of the searched person and, such satisfaction is to be recorded in writing on the basis of material found as a result of search .on the searched person. Applying the foregoing principles to the facts of the instant case, it will be seen that in the instant case, the basis adopted for initiation of proceedings under section 158BD of the Act in the case of the appellant is that, there has been a search conducted at the premises of Vatika Group of Companies (herein after alternatively referred to as searched person ) and as a result of search, satisfaction note was recorded by the learned Officer having jurisdiction over Vatika Group of Cases. The satisfaction note, as recorded by the Assessing Officer having jurisdiction over Vatika Group of cases reads as under:- Reasons u/s 158BC read with 158BD in the case of Shri Anupam Nagalia Warrant was issued in the name of Vatika Group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to establish that, a valid satisfaction note had been recorded on the basis of material found as a result of the searched person. In the instant case, the perusal of satisfaction note would clearly show that, since there is no material found as a result of the search on the searched person, no satisfaction could have been recorded under section 158BD of the Act in the case of the searched person. On the contrary, it is a case where proceedings have been initiated on the basis of material found as a result of search conducted on the appellant and, not on the searched person i.e. Vatika Group of cases. In these circumstances, it is evident that, statutory precondition for invoking provisions contained in section 158BD of the Act is not satisfied and therefore, notice under section 158BD of the Act is without jurisdiction. I am also supported here by the order of the Hon ble Tribunal in the case of ACIT vs M/s Cozy Enterprises Ltd. in I.T.(SS) A. No. 249/Del/2005 wherein it has been held as under:- 6.2. Coming to the facts of this case, a diary was seized from Shri S.K.Jain, which contained the transactions of the assessee. No asset or material was seized from Shri Praveen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceedings or inquiry under this Act that the notice was not served upon him or notice was not served upon him in time or served upon him in an improper manner. It will be seen that the contention of the appellant is neither that notice was served or notice was not served upon him in time or served upon him in an improper manner. On the contrary, objection of the appellant is that statutory pre-condition for invoking provisions contained in section 158BD of the Act had not been satisfied in as much as satisfaction note so recorded is not recorded on the basis of seized material found from the searched person i.e Vatika Group of Cases and therefore, there could not have been valid assumption of jurisdiction. In light of the above, it is held that section 292BB of the Act has no application to the facts. 4.9. I seek to add here that, undisputedly, a search had been conducted on the premises on 8.5.2003. However, it is apparent that no action was taken on the basis of the said search as no notice under section 158BC of the Act was ever issued to the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, this cannot be said in the present case. The appeal is consequently allowed, the judgment of the High Court is set aside and the impugned notices are quashed. The parties in the circumstances shall bear their own costs throughout. The decisions relied upon by the Ld. CIT DR and by the Ld. AR have been taken into consideration. It is seen that the decisions relied upon by the Revenue proceed on different facts and are distinguishable. For instance in the decision of ACIT vs Vinod Goel (2008) 111 ITD 76 (ASR) the peculiar fact available on record was that therein the validity of the proceedings had already been specifically challenged by the assessee before the Hon ble High Court and the Hon ble High Court had upheld the same in CWP No.-963 of 1999 vide its judgement and order dated 26.09.2000 and cognizance of this fact has been variously taken note of in the order of the Tribunal in paras 5, 6 and 7. Similarly in Smt. Nasreen yusuf Dhanani vs ACIT (2009) 110 ITD 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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