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TMI Blog2018 (6) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... of Companies. A satisfaction note was recorded by the Assessing Officer having jurisdiction over the Vatika Group of Cases. Accordingly a notice under section 158BD was issued on 31.05.2005 and the assessee filed its return of income declaring NIL undisclosed income. The A.O, however, computed the undisclosed income of the assessee at Rs. 1,89,53,900/- in the Order passed under section 158BD dated 21.05.2007. 2.1. The assessee challenged the order of the A.O. before Ld. CIT(A) on several grounds in which the assessee, inter alia, challenged the validity of the proceedings initiated under section 158BD of the I.T. Act as well as additions on merit. The assessee in the written submissions 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 Assessing officer 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 Assessing officer having jurisdiction over the Vatika group of companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since assessee was subjected to search, therefore, assessment should have been framed in the case of assessee under section 158BC of the I.T. Act. Therefore, assessment so framed is time barred. The assumption of jurisdiction by invoking the provisions of section 158 BD 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. 2.3. The Ld. CIT(A) called for the remand report from the A.O. in which the A.O. reported that it is an undisputed fact that search was conducted under section 132 of the I.T. Act in the case of assessee and on the Company M/s. Vatika Landbase Private Limited in which he was Director on 08.05.2003. Notice under section 158BD of Income tax Act, 1961 was issued on 31.05.2005 after recording satisfaction note which is within time. The A.O. thereafter, framed the block assessment under section 158BD on 21.05.2001. During the course of block assessment proceedings, the assessee did not raise the issue of block assessment under section I58BC but objected to the initiation of proceedings under section 158BD on merits of satisfaction note. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of any person in respect of whom search has been carried out under section 132A or documents 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of whom the undisclosed income has been discovered. Once this is done, we feel 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. 4.3. The Hon'ble Tribunal in the ease of Manoj Aggarwal vs. DCIT reported in 113 ITD DCIT (S B) Del.) in par a 123 to 124 has held as under : "123. Haring 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the said section. The circumstances envisaged and the context in sections 147 and 15SBD arc entirely different decision in the case cited (supra) into the section 158BD proceeding for the reasons detailed herein." 4.4. 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. 4.5. 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 Warr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case. The burden was on the Assessing Officer to establish that, a valid satisfaction note had been recorded on the basis of material found as a result of the searched persona 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 15SBD of tine 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 per son i. e. Vatika Group of cases. In these circumstances, it is evident that, statutory pr econdition 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 IT(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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is required to be served upon him has been duly served upon 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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced in the findings of the Ld. CIT(A) above. The Ld. D.R. submitted that search was conducted in the Vatika Group of cases on 08.05.2003. The A.O. is same in the case of Vatika Group of cases i.e., the person searched and the present assessee. PB-1 is Panchanama to show that warrant of search was issued in the name of M/s. Vatika Landbased Private Limited, Shri Anil Bhalla, Shri Gaurav Bhalla and Shri Gautam Bhalla. No warrant of search was issued in the name of assessee. However, the warrant was issued to search the residence of Shri Anupam Nagalia (assessee). In the case of the assessee, there has been a search conducted on the premises of VatiKa group of companies and as a result of material found during the course of search, satisfaction was recorded by the A.O. having jurisdiction over the Vatika group of companies. The Ld. CIT(A) quashed the order on the ground that papers on the basis of which satisfaction was recorded, found as a result of search on the assessee and not from Vatika group of companies. Since, no search was conducted on the assessee, seized paper relied upon by the A.O. were found from the premises of Vatika group of companies, the A.O. was satisfied from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. in the case of Vatika group of companies i.e., person searched. The satisfaction note was supplied to the assessee only on 27.01.2006 was anti dated. Further, such satisfaction note was not recorded in the case of person searched. He has relied upon the decision of Hon'ble Madhya Pradesh High Court in the case of CIT vs. Tarachand Khushiram (2008) 303 ITR 298 (MP) in which it was held as under : "In the absence of any explanation whatsoever by the Department for the inordinate delay in service of the order of assessment on the assessee, the court must presume that the order was not made on the date it purported to have been made and must have been made after the expiry of the period of four years prescribed for passing, such an order in revision." 5.1. The Learned Counsel for the Assessee also relied upon decision of Hon'ble Delhi High Court in the case of CIT vs. Intercontinental Trading & Investment Co. Ltd., (2013) 350 ITR 316 (Del.) in which it was held as under : "Where no satisfaction was recorded by Assessing Officer of searched person that any undisclosed income belonged to assessee, condition precedent for assuming jurisdiction under section 158BD was not satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings under section 158BD against the assessee. Apart from the above, the tenor of the satisfaction note clearly shows that note of satisfaction was recorded by A.O. having jurisdiction over the case of the assessee and not by the A.O. having jurisdiction over the person searched i.e., M/s. Vatika Landbased Private Limited. It is, therefore, clear that note of satisfaction have not been recorded by the A.O. of the person searched. He has relied upon decision of Hon'ble Supreme Court in the case of CIT vs. Calcutta Knitwears (2014) 43 taxmann.com 446 (SC) in which in para-44 it was held as under : "44. In the result, we hold that for the purpose of section 158BD a satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under section 158BC; (b) along with the assessment proceedings under section 158BC; and (c) immediately after the assessment proceedings are completed under Section 158B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is issued by Shri P.K. Singh, ACIT, Central Circle-20, New Delhi. It is not accompanied by satisfaction note if recorded by the A.O. The assessment in the case of assessee has been completed by DCIT, Central Circle- 20, New Delhi. The language used in the satisfaction note clearly show that satisfaction note was recorded by A.O. in the case of assessee viz., Shri Anupam Nagalia, who was having jurisdiction over the assessee and not the A.O. having jurisdiction over M/s.Vatika Landbased Private Limited i.e., the person searched. Learned Counsel for the Assessee referred to various letters filed before A.O. after service of the notice under section 158BD in which assessee asked for the copy of the satisfaction note and the documents on which A.O. wanted to rely upon to establish that assessee earned undisclosed income. However, the satisfaction note and the documents have not been supplied to assessee for a considerable period and it was only on 27.01.2006 the satisfaction note was supplied to the assessee. There is no explanation whatsoever by the department for inordinate delay in supplying the copy of the satisfaction note and the documents to the assessee. Therefore, we presume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Assessee have not been rebutted by the Revenue Department through any evidence or material on record. No material is referred to in the reasons to indicate if assessee earned any undisclosed income. The burden is upon A.O. to prove that a valid satisfaction note had been recorded on the basis of the material found as a result of search of the person searched. In the instant case, the perusal of the satisfaction note would clearly show that there is no material found as a result of the search on the person searched, therefore, no satisfaction could have been recorded under section 158BD of the Act in the case of the person searched. Therefore, no documents or other records could have been handed-over to the A.O. of the such other person. 8. On the other hand, the proceedings under section 158BD have been initiated on the basis of the material found as a result of search conducted on the assessee and not on the person searched i.e., Vatika Group of companies. The CBDT vide Circular No.24 of 2015 dated 31.12.2015 explained the recording of satisfaction note under section 158BD/153C of the I.T. Act. The Board examined the issue in the light of Judgment of the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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