TMI Blog2017 (1) TMI 1627X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee is pending before the apex court, is a precedent binding on this court. Therefore, since the AO is common, the reasoning of the Tribunal that non-recording of reason by the Assessing Officer is fatal to the assessment cannot be sustained. Therefore, answering the questions of law framed by the Revenue in its favour, the appeal is allowed and the order passed by the Tribunal is set aside. - Income-tax Appeal Nos. 1150 and 1303 of 2009. - - - Dated:- 13-1-2017 - Antony Dominic And Dama Seshadri Naidu JJ. For the Appellant ; P. K. R. Menon, Senior Counsel, Government of India (Taxes) and Jose Joseph, Standing Counsel for Income-tax Department For the Respondent : T. M. Sreedharan, Senior Advocate, V. P. Narayanan, Smt. Divya Ravindran and V. V. Varghese, Advocates JUDGMENT ANTONY DOMINIC J. - 1. The Revenue is in appeal aggrieved by the common order passed by the Tribunal disposing of I. T. (S S) A Nos. 113/ Coch|/2004 and 135/Coch/2004. We heard the learned senior counsel for the Revenue and the learned senior counsel for the assessee. 2. On facts, it is only sufficient to note that proceedings under section 158BD of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to the Assessing Officer having jurisdiction over such other person, the books of account, other documents or assets seized or requisitioned and the jurisdictional Assessing Officer shall proceed under section 158BC of the Act against such other person and complete the assessment in accordance with the provisions contained in Chapter XIV-B of the Act. 5. In the judgment in Manish Maheswari, the scope of section 158BD was examined by the apex court. The apex court held that recording of satisfaction by the Assessing Officer that any undisclosed income that belong to any person, other than the person with respect to whom the search was made under section 132 of the Act, is a condition precedent for invoking a block assessment against the person other than the person searched. It has been so laid down in paragraph 7 of the judgment, which reads thus (page 348 of 289 ITR) : The condition precedent for invoking a block assessment is that a search has been conducted under section 132, or documents or assets have been requisitioned under section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under section 132A or do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than the searched assessee, or the assessee whose accounts or documents are called for, then he shall hand over all those records pertaining to search or inspection to the Assessing Officer having jurisdiction over such other person who is to be assessed based on such materials. It is specifically provided that such other Assessing Officer to whom the file is transferred shall proceed for assessment under section 158BC and the provisions of Chapter XIV-B are applicable for such assess ment. In our view, this is only an enabling provision to assess a person other than the assessee searched or other than the assessee whose books of account and documents were called for and verified under section 132A of the Act. What the statute visualises is the pos sibility of recovery of cash, valuables or records in the course of search of an assessee which may pertain to another assessee or other asses sees. In the normal course, an assessment in such cases could be ini tiated against such other assessee about whose income materials are gathered by the Department by making income escaping assessment under section 147 of the Act, which in many cases may be time barred. In order to safeguard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons and materials based on which undisclosed income is proposed to be assessed should be communi cated to the assessee when assessment is made based on the return filed which is a step after issuing notice and after receipt of return. By virtue of operation of section 142 every assessee assessed under sec tions 158BC and 158BD gets an opportunity to file objections. In other words, the validity of the assessment is not affected by reason of the Assessing Officer's failure to record his satisfaction under section 158BD which is only for the purpose of transferring the file and once the file is transferred, the transferring officer becomes functus officio and the jurisdiction for all purposes is transferred to the officer to whom the file is transferred and who has jurisdiction to assess the assessee about whom details are obtained in the course of search of another assessee. The peculiar features of this case are such that there was no necessity for transferring the file from one officer to another, because the person searched is the managing partner and based on the materials gathered during search assessment is made on the part nership firm, wherein the searched assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the assessment proceedings under section 158BC of the Act or after completion of the proceedings under section 158BC of the Act. The Tribunal and the High Court are of the opinion that it could only be prepared by the Assessing Officer during the course of the assessment proceedings under section 158BC of the Act and not after the completion of the said proceedings. The courts below have relied upon the limitation period provided in section 158BE(2)(b) of the Act in respect of the assessment proceedings initiated under section 158BD, i.e., two years from the end of the month in which the notice under Chapter XIV-B was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after January 1, 1997. We would examine whether the Tribunal or the High Court are justified in coming to the aforesaid conclusion. We would certainly say that before initiating proceedings under section 158BD of the Act, the Assessing Officer who has initiated pro ceedings for completion of the assessments under section 158BC of the Act should be satisfied that there is an undisclosed income which has been traced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Assessing Officer under section 158BC of the Act which is contrary to the provisions of section 158BD read with section 158BE(2)(b) and, therefore, have dismissed the case of the Revenue. In our considered opinion, the reasoning of the learned judges of the High Court is contrary to the plain and sim ple language employed by the Legislature under section 158BD 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 158BC. Further, the interpretation placed by the courts below by reading into the plain language of section 158BE(2)(b) such as to extend the period of limi tation to recording of satisfaction note would run counter to the avowed object of introduction of Chapter to provide for cost-effective, efficient and expeditious completion of search assessments and avoiding or reducing long drawn proceedings. In the result, we hold that for the purpose of section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assess ing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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