Block assessment proceedings held bad in law as no satisfaction noted by AO, HC
Block assessment proceedings held bad in law as no satisfaction noted by AO, HC
After search & seizure AO issued notice u/s 158BC (of Income Tax Act, 1961) to assessee & passed block assessment order. On appeal, Tribunal annulled assessm't order on ground that proceedings u/s 158BD (of Income Tax Act, 1961) were to be initiated. On appeal HC held, no satisfaction note recorded by AO of person searched is available. Thus, as per CIT v. Calcutta Knitwears [2014] 362 ITR 673, block assessment proceedings initiated u/s 158BD (of Income Tax Act, 1961) & Sec.158BC (of Income Tax Act, 1961) were held to be bad & contrary to law.-000308
Facts in Brief:
1. During search conducted at residence of one 'N', books of account belonging to the assessee were found and seized. Subsequently the jurisdiction of the assessee was transferred to the Assessing Officer of the searched person, i.e., 'N'.
2. Assessing Officer issued notice under section 158BC (of Income Tax Act, 1961) to the assessee and passed block assessment order.
3. On appeal, the Tribunal annulled the assessment order on ground that proceedings under section 158BD (of Income Tax Act, 1961) were to be initiated where concerned Assessing Officer had received an information from the Assessing Officer of the searched person but in instant case, no information/intimation was received by the Assessing Officer of the assessee from the Assessing Officer of 'N'.
On appeal High Court held as under:
4. In the instant case, no satisfaction note recorded by the Assessing Officer of the person searched is available. In these circumstances and in view of the decision of the Supreme Court in CIT v. Calcutta Knitwears [2014] 362 ITR 673/223 Taxman 115/43 taxmann.com 446, the block assessment proceedings initiated under section 158BD (of Income Tax Act, 1961) read with section 158BC (of Income Tax Act, 1961) were bad and contrary to law.
RELEVANT PARAS OF JUDGMENT ARE AS UNDER:
5. The finding of the Tribunal was that the Assessing Officer of 'N' had not given any intimation or information to the Assessing Officer of the assessee. On the said aspect, section 158BD (of Income Tax Act, 1961) is clear and stipulates as a pre-condition that the Assessing Officer of the person searched must record his satisfaction that any undisclosed income belongs to a third person, i.e., the person other than the person who was searched or whose documents, account books or assets were requisitioned.
6. Thereafter, he should handover the said documents to the Assessing Officer of the third person. In the instant case the Assessing Officer of the person searched and the Assessing Officer of the assessee were the same as there is an order under section 127 (of Income Tax Act, 1961). However, this would not mean that the Assessing Officer of the person searched should not have recorded the satisfaction before notice was issued under section 158BD (of Income Tax Act, 1961) read with section 158BC (of Income Tax Act, 1961).
7. The requirement of section 158BD (of Income Tax Act, 1961) is that the Assessing Officer of the person searched or against whom an order under section 132A (of Income Tax Act, 1961) has been passed, should be satisfied that any undisclosed income belongs to a third person. This is the statutory mandate and a jurisdictional prerequisite before proceedings under section 158BD (of Income Tax Act, 1961) are initiated. Violation of the said requisite and mandatory requirement would result in annulment of assessment under section 158BD (of Income Tax Act, 1961) read with section 158BC (of Income Tax Act, 1961).
Case Reference-Commissioner of Income-tax, New Delhi v. Manju Finance Corporation
HIGH COURT OF DELHI
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