Commissioner Of Income Tax v. M/S Mechmen 11-C, Industrial Areagovindpura, Bhopal

1 HIGH COURT OF MADHYA PRADESH : JABALPUR I.T.A. No.44/2011, I.T.A. No.45/2011 I.T.A. No.48/2011, I.T.A. No.50/2011 I.T.A. No.53/2011, I.T.A. No.54/2011 I.T.A. No.56/2011 Commissioner of Income Tax …..Appellant Versus M/s Mechmen 11-C, Industrial AreaGovindpura, Bhopal ….Respondents ============================================= Coram: Hon’ble Shri Justice A. M. Khanwilkar, Chief JusticeHon’ble Shri Justice K.K.Trivedi, J. Whether approved for reporting : Yes ============================================= Shri Sanjay Lal, Advocate for the appellant/Commissioner ofIncome Tax. Shri A. P. Shrivastava, Advocate with Shri Sapan Usrethe,Advocate for the respondent. ============================================= Reserved On : 02.07.2015Date of Decision : 10.07.2015 J U D G M E N T{10[th] July, 2015} Per: A.M. Khanwilkar, Chief Justice: These appeals are filed by the Department qua single assesseeregarding seven separate assessment years i.e. 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, bearing I.T.A.Nos.53, 48, 50, 54, 45, 44 and 56 of 2011 respectively. Moreover,these appeals emanate from a common order passed by the IncomeTax Appellate Tribunal, Indore Bench, at Indore dated 29.12.2010.Since common substantial questions of law have been framed inthese appeals, the same were heard analogously and, therefore, arebeing disposed of by this common judgment. 2.The respondent is a partnership firm carrying on the businessof Hi. Tech Heavy Steel Fabricators and manufacturer for last morethan 25 years. It is stated that the respondent has been maintainingregular books of accounts, which were duly audited under Section44AB of the Income Tax Act (hereinafter referred to as the IT Act).Further, it had filed returns under Section 139(1) of the IT Actregularly. A search was conducted against the partners ofrespondent firm under Section 132(1) of the IT Act on 16.9.2005. Asurvey under Section 133A was conducted at the business premisesof the respondent firm and no papers were impounded during thecourse of that survey. However, the Assessing Officer [ACIT-1(2)]issued notice under section 153C on 22.3.2006, calling upon therespondent to file returns for the AYs 2000-01 to 2005-06 within 30days from the date of receipt of the said notice. The respondent filed returns within the prescribed time on 24.4.2006 for therespective assessment years. The respondent also filed return for theAssessment Year 2006-07 under Section 139(1) on 30.10.2006.Besides, a response was also filed to the notice under Section 142(1) dated 1.9.2007 on 28.9.2007. The Assessing Officer vide orderdated 31.12.2007, passed under Section 153C/143(3) of the IT Act,made identical additions towards disallowances of purchaseamounts and fabrication charges for all the assessment years and bymaking further addition towards excess stock in the AssessmentYear 2006-07. Being aggrieved, the respondent filed seven appealsbefore the Commissioner of Income Tax (Appeals)-I, Bhopal,(M.P.), bearing Appeal Nos.CIT(A)-I/BPL/IT-275 to 281/2007-08.These appeals were decided by a common order passed by the FirstAppellate Authority dated 15.7.2008. Before the AppellateAuthority, amongst other grounds, the principal grievance wasabout the inappropriate assumption of jurisdiction under Section153C. With regard to that ground, the Appellate Authority relied onthe decision of CIT (A), Jabalpur in the case of Hotel Sonam andSmart Bar, Sagar in appeal No.J/CIT (A)-1/ACIT/SAGAR/116 to122/06-07 and extracted the relevant portion of Paragraph No.6.1 ofthat decision, which reads thus:- “I have carefully considered the facts on record and thesubmissions made by the rival parties. First of all, it isnoted that the section 153C affects the substantive rightsof a person in so far as a person, who has not beensearched is made to face the harsh consequences ofreopening of six year cases. This section thus cannot begiven a liberal interpretation since if it is so done, then theproceedings under this section can be initiated against aperson-not-searched merely on the ground that someaccount or even a bank statement of the person has beenfound in a search action. If in such a case invoking ofsection 153C is held to be justified, then this section canbecome a ready tool for reopening six year cases on anypretext of a person, who had some dealing with theperson-searched. The ld. A. R. has argued that beforeinvoking section 153C there has to be some material onrecord to come out of the presumption of sec. 292C andwhich is possible only after confronting the impugnedmaterial to the person-searched. But no such finding ofpresumption not being application has been given beforeinvoking section 153C. I find some merit in this claim.Further I also find that the satisfactions recorded inMarch’2006 for all the seven years were withoutapplication of mind as is evident from the fact that in allthe other 12 cases, involving about 40 assessments, theassessing officer has recorded identical stereo typesatisfactions by stating that during search actions carriedout in December’2003 in the cases of Santosh KumarSahu and others incriminating documents pertaining toeach of the years were found and seized whereas the factis that in some of the years of some of those concernswere not in existence. However, these facts by themselvescould not be regarded to be a sufficient ground to hold theinvoking of section 153C was illegal. It is because of thereason that on a plain reading of sec. 153C, it does nottranspire that recording of a satisfaction is a must. But atthe same time, it is also to hold that it does not mean thatrequired satisfaction could be highly subjective, not opento scrutiny by the appellate authorities. The minimumrequirement to justify the invoking of sec. 153C is that atleast it should be possible to gather a satisfaction-thereshould be some seized record pertaining to the assesseewhich had been found in a search action. Further the sameshould have also been confronted to the assessee. Butduring the assessment proceedings no seized recordpertaining to the assessee was confronted to him. Whatwere confronted were the documents impounded duringthe survey action conducted at its office. In view of these facts, it is held that the invoking of section 153C againstthe assessee was bad in law. The proceedings so initiated,therefore, are held to be void ab-initio and all theassessments therefore, are declared ab-initio null and”void. (emphasis supplied) facts, it is held that the invoking of section 153C againstthe assessee was bad in law. The proceedings so initiated,therefore, are held to be void ab-initio and all theassessments therefore, are declared ab-initio null and”void. (emphasis supplied) 3.The First Appellate Authority found as of fact that, in thepresent case, no incriminating material attributable to therespondent was seized during the course of search at the premisesof the searched person and there was no satisfaction or even thebasis for satisfaction to issue a notice under Section 153C of the ITAct. It further held that no satisfaction has been recorded by theAssessing Officer even before issuance of notice under Section153C. On these findings, the Appellate Authority concluded that theaction of the Assessing Officer was illegal and invalid; and quashedthe same for the concerned assessment years. The First AppellateAuthority accordingly allowed the appeals filed by the respondents.The First Appellate Authority also considered other grounds raisedby the respondent in the said appeals about denial of adequateopportunity, book of A/cs, finding of the Assessing Officerregarding undisclosed sales of Rs.9,73,541/-, bogus purchases forconcerned assessment year, disallowances of fabrication expenses,levy of interest under Section 234 A, 234 B, 234C, credit forprepaid taxes for the concerned assessment years. However, those aspects are not the relevant for the present appeals. 4.The Department carried the matter in appeal before theIncome Tax Appellate Tribunal, Indore Bench at Indore by filingseparate appeals which were numbered as I.T(SS).A.Nos.182 to188/Ind/2008 for the concerned assessment years. The respondentassessee also filed cross objection numbered asC.O.No.126/Ind/2008 for A.Ys. 2003-04. All the above numberedappeals and cross objection were disposed of together by a commonjudgment by the Tribunal. The Tribunal, in turn, relied on itsdecision in the case of M/s Chirchind Hydro Power Limited - IT(SS) A No.171. 172 and 174/Ind/2008and also M/s GwaliorTanks & Vessels Limited – IT(SS) A No.175 to 181/Ind/2008.Paragraph Nos.78 to 82 of the said decision has been reproduced bythe Tribunal for dealing with the question about the scope ofSection 153C of the IT Act and the efficacy of notices issued by theAssessing Officer against the respondent therein. The same readsthus :- "78. We have considered the rival contentions, carefully gonethrough the orders of the authorities below and deliberatedon the case laws referred by the lower authorities in theirrespective orders and by the respective counsels during thecourse of hearing before us. From the record we find that thesearch was carried out at the residential premises ofdirectors/partners of these concerns and not at the premisesof these concerns. After the search was carried out at thethrough the orders of the authorities below and deliberatedon the case laws referred by the lower authorities in theirrespective orders and by the respective counsels during thecourse of hearing before us. From the record we find that thesearch was carried out at the residential premises ofdirectors/partners of these concerns and not at the premisesof these concerns. After the search was carried out at the residence of directors/partners of these associate concerns,assessment was framed in respect of these concerns u/s153C of the Act on the plea that incriminating material wasfound during the course of search at the residence ofpartners/directors. The assumption of power by theAssessing Officer u/s 153C of the Act for framing theassessment is subject to the condition that the AssessingOfficer assessing the search party, is satisfied that thejewellery or other valuable articles or things or books ofaccounts or documents or assets, seized or requisitioned,pertain to some person other than the person referred to insection 153A, then the books of accounts or the documentsor assets seized or requisitioned, shall be handed over by theAssessing Officer of searched person to the AssessingOfficer having jurisdiction over such other person and thatthe Assessing Officer shall proceed against each of suchpersons and issue such other person notice and assess orreassess income of such other person in accordance with theprovisions of section 153A of the Act. The opening word ofsection 153C speaks that not-with-standing anythingcontained in sections 139, 147, 148, 149, 151 and 153,where the Assessing Officer is "satisfied" that any money,jewellery or books of accounts or documents seized orrequisitioned belongs to a person other than the personreferred to in section 153A, meaning thereby the AssessingOfficer is to record a satisfaction to the effect that suchjewellery or document so seized does not belong to thesearched person but to some other person referred to insection 153A of the Act. Thus, the pre-requisite of section153C is that the Assessing Officer making the assessment ofthe searched person has to satisfy himself that some materialfound during the course of search and seizure belongs tosome person other than the searched person. Then theAssessing Officer making the assessment of searched personhas to hand-over the said incriminating material belongingto some person other than the searched person to theAssessing Officer having jurisdiction over the said otherperson. Thereafter, the Assessing Officer having thejurisdiction over the person other than the searched personshall issue a notice u/s 153C to such other person and assesshis income in terms of the provisions of section 153A of theAct. Thus, the notice u/s 153C of the Act is to be issued onlyafter recording of satisfaction. The assumption ofjurisdiction to issue notice and frame assessment undersection 153C read with section 153A is acquired by theAssessing Officer only after having been satisfied and suchsatisfaction is recorded in writing. These provisions ofsection 153C are in pari materia with the provisions of section 158BD which provides that the Assessing Officermaking the assessment of the searched person has to satisfyhimself that some undisclosed income found by him belongsto some person other than the searched person and then he orthe Assessing Officer having jurisdiction over such otherperson after receipt of record from the Assessing Officer ofthe searched person has to issue notice u/s 158BD of the Actand has to assess income of such other person. Theprovisions of section 158BD of the Act were examined indetail by the Hon'ble Supreme Court in the case of ManishMaheshwari; 208 CTR 97. The said Hon'ble Supreme Courtdecision was followed by the Hon'ble Delhi High Court inthe case of New Delhi Auto Finance Limited; 300 ITR 83.The Hon'ble Supreme Court has laid down a proposition thatthe Assessing Officer making the assessment of the searchedperson has to necessarily record in writing the specificobjective satisfaction which is mandatory to the effect thatthe undisclosed income found by him, on the basis of seizedmaterial, belongs to some person other than the searchedperson. Insofar as the provisions of section 153C of the Actare in pari materia with the provisions of section 158BD ofthe Act with regard to the requirements of recordingnecessary satisfaction by the Assessing Officer of searchedperson, the law laid down by the Hon'ble Supreme Court inthe case of Manish Maheshwari (supra) shall apply with fullforce in case of initiation of proceedings u/s 153C. Theassumption of jurisdiction and framing of assessment by theAssessing Officer u/s 153C without recording suchsatisfaction is void ab initio. Applying the proposition of lawlaid down by the Hon'ble Supreme Court, as discussedabove, it is quite evident that recording of satisfaction beforeissue of notice u/s 153C is mandatory and in case where nosuch satisfaction has been recorded by the Assessing Officerin the case of searched person to the effect that someincriminating material so found belongs to some otherperson, the assessment framed u/s 153C will be liable to bequashed. However, detailed finding has been recorded by thelearned Commissioner of Incometax (Appeals) afterexamining the assessment records of the concernedperson/parties to the effect that no satisfaction has beenrecorded by the Assessing Officer of the searched person.This finding of the learned Commissioner of Income tax(Appeals) has not been controverted by the department bybringing any positive material on record. Accordingly,applying this proposition of law, the assumption ofjurisdiction and framing of assessment in the instant casesby the Assessing Officer u/s 153C were bad in law. 79 & 80 …………. 79 & 80 …………. 81. We have deliberated upon the contentions of the learnedCIT DR, Shri K.K. Singh and learned counsel for the as-sessee, Shri H.P. Verma, with regard to interpretation ofrecording of satisfaction while assuming jurisdiction u/s153C of the Act. Even in the new scheme of framing of as-sessment in case of search cases, the legislature has clearlystipulated the requirement for recording of satisfaction whileassuming jurisdiction to issue notice and frame assessmentu/s 153C of the Act which requires that satisfaction to berecorded with reference to the documents and other materi-als found during the course of search belonging to a person-other than the searched person. Prima facie, Assessing Officer of searched person should form an opinion with regardto any document, valuable, etc. as found during the course ofsearch that such document, which is declined by thesearched person, actually belongs to some other personagainst whom proceedings u/s 153C are required to put into-operation. After such recording, of satisfaction, the docu-ments so seized should be handed over to the Assessing Of-ficer of such other person. The legal requirement of recording of such satisfaction cannot be substituted by appraisalnote which is prepared by the search party after completionof search insofar as such appraisal note is a secret documentprepared by the department for their internal use, contents of-which are not conveyed to the assessee nor its copy is supplied to the assessee even on making a written request. Theappraisal note so prepared by the department is meant tomonitor after the search proceedings are over so as to ensureexhaustive assessment of all searched person with respect totheir correct income and to plan a strategy for further deepinquiry and investigation of documents found during thecourse of search. Since copy of such appraisal note is not-supplied to the assessee, it cannot be taken at par with the requirement of recording of satisfaction note as stipulated u/s153C of the Act, which is a mandatory requirement. What isthe legislative intent of such satisfaction and in what mannerit should be recorded has been dealt with in the judicial pro-nouncements in the cases of Manish Maheshwari and G.K.Drive Shaft by the Hon'ble Supreme Court. Accordingly, we-are not inclined to agree with the proposition that the appraisal note prepared by the department should be treated asa satisfaction note as required to be recorded in terms of sec-tion 153C of the Act so as to empower the Assessing Officerto assume jurisdiction to issue notice and thereafter frameassessment u/s 153A read with section 143(3) of the Act. 82. In view of the above discussion, we do not find any in-firmity in the order of the learned Commissioner of Incometax (Appeals) who has quashed the assessment framed u/s153C of the Act. Further, the detailed finding recorded bythe learned Commissioner of Incometax (Appeals) with re-spect to recording of satisfaction has not been controvertedby the department by bringing any positive material onrecord. We, therefore, do not find any infirmity in the orderof the learned Commissioner of Income tax (Appeals)quashing the assessments framed u/s 153C of the Act in thecases of all these assesses." (emphasis supplied) 5.The Tribunal, adverting to the finding of fact recorded by the First Appellate Authority on the question under consideration; andagreeing with that finding, proceeded to dismiss all the appealspreferred by the Department. In this backdrop, present sevenappeals have been filed by the Department against the commonorder of the Tribunal dated 29.12.2010. 6.These appeals have been admitted only on two substantialquestions of law, which read thus:- (emphasis supplied) 5.The Tribunal, adverting to the finding of fact recorded by the First Appellate Authority on the question under consideration; andagreeing with that finding, proceeded to dismiss all the appealspreferred by the Department. In this backdrop, present sevenappeals have been filed by the Department against the commonorder of the Tribunal dated 29.12.2010. 6.These appeals have been admitted only on two substantialquestions of law, which read thus:- “(i) Whether, on the facts and in the circumstances ofthe case, the Tribunal was justified in law in upholding theorder of the CIT(A) quashing the assessment proceedingson the ground that the AO had not recorded, his satisfactioneven which the AO making the assessment of searchedperson was himself having jurisdiction over such otherperson (i.e. the assesse) and thus was not required to recordany satisfaction for initiating proceedings u/s 153C in caseof the assesse? (ii)Whether, on the facts and in the circumstances ofthe case, the Tribunal was justified in law in upholding thequashing of the assessment proceedings u/s 153C on theground that the AO had not recorded, in writing, hissatisfaction, by placing reliance on the decision of theHon’ble Supreme Court in the case of Manish Maheshwari vs. ACIT, 289 ITR 341 which was delivered in the contextof section 158BD and not section 153C of the I.T. Act?” 7.Counsel for the Department more or less reiterated thegrounds as were pressed into service by the Department before theAppellate Authority and the Tribunal. According to the appellant,manifest error has been committed in assuming that the procedurespecified in Section 153C is identical or pari materia with theprocedure prescribed in Section 158BD of the I.T. Act. For, Section153C has been placed in Chapter XIV which deals with theprocedure for assessment, unlike Section 158BD is placed inChapter XIV-B which deals with the special procedure forassessment of search cases for block period and undisclosedincome. It is contended that in the matter of search carried out withreference to the provisions under Chapter XIV the AssessingOfficer is not required to record satisfaction that any money,bullion, jewellery or other valuable article or thing or books ofaccount or documents seized or requisitioned during search belongsor belong to a person other than the person referred to in Section153A. Inasmuch as, the said Assessing Officer cannot have accessto the information which may be germane to proceed against theperson other than the person referred to in Section 153A. Besides,explanation can be offered by the other person (other than the person referred to in Section 153A) on the basis of the returnsalready filed by him before the Assessing Officer havingjurisdiction over that person. Further, if any tentative opinion isrecorded by the Assessing Officer forwarding the material to theAssessing Officer having jurisdiction, that may result in preemptingthe discretion of the Assessing Officer having jurisdiction to formhis own view on the subject matter. It is submitted that on a barereading of Section 153C it is clear that it involves two stages. Firststage is referable to the seizure made by the Assessing Officerengaged in search of the assessee within his jurisdiction and findsthat the material (money, bullion, jewellery or other valuable articleor thing or books of account or documents seized or requisitioned)belongs or belong to a person other than the person under search. Atthis stage, the Assessing Officer carrying on the search of a personwithin his jurisdiction cannot assume that the said material has notbeen disclosed by the other person to be treated as undisclosed orescaped income of that person (other than the person referred to inSection 153A). That being a stage of investigation and enquiry, noopinion much less even tentative opinion need to be or can beexpressed by the officer carrying on the search against the personreferred to in Section 153A. The obligation of the Assessing Officer, at this stage, is merely to forward the material notbelonging to the person under search referred to in Section 153A tothe Assessing Officer having jurisdiction over the other person forfurther action. It is further submitted that other person would beserved with notice by the Assessing Officer having jurisdiction andproceeded in accordance with the provision of Section 153A wherehe would get opportunity to explain his position. It was faintlyargued that the even notice to be sent by the Assessing Officerhaving jurisdiction need not record any reason or satisfaction forresorting to procedure under Section 153A of the I.T. Act; andmoreso, in case the Assessing Officer for both the assessee iscommon, as in the present case the transaction are within the groupof persons and firms belonging to the same persons. It is submittedthat forwarding of the material by the Assessing Officer carrying onthe search of a person referred to in Section 153A does not visitwith any consequence to the other person (other than the personreferred to in Section 153A) until the issuance of notice by theAssessing Officer having jurisdiction over such person. 8.The respondent, on the other hand, has supported the opinionof the Tribunal. That, the principle underlying the mandate ofSection 158BD would apply on all fours to the procedure specified in Section 153C of the I.T. Act. Because, the purpose of both theprovisions is the same and the person against whom such notice isissued suffers the same consequence. The respondents have theninvited our attention to the finding of fact recorded by the FirstAppellate Authority and affirmed by the Tribunal that nosatisfaction has been recorded by the Assessing Officer havingjurisdiction before issuing notice under section 153C. Further, noneof the material adverted to, belong to the respondent or can be saidto belong to it. Further, no addition or even observation has beenmade by the Assessing Officer having jurisdiction in any of theorders for the concerned assessment years on the basis of thematerial found during the course of search. Even for that reason, noaction under Section 153C could have been initiated against therespondent. The respondent submits that the Assessing Officer whoseized or requisitioned the material during the search of a personreferred to in Section 153A as also the Assessing Officer havingjurisdiction over the respondent have acted without jurisdiction. 9.Reliance was placed on the judgments of the Supreme Courtand of different High Courts by the counsel appearing for theparties to buttress their arguments. The two decisions of theSupreme Court are in respect of scope of Section 158BD. In the case of Manish Maheshwari Vs. Assistant Commissioner ofIncome Tax & another1 and in the case of Commissioner of2-Income TaxIII Vs. Calcutta Knitwears. Even the Tribunal hasreferred to the decision of the Supreme Court on the scope ofSection 158BD as no direct judgment of the Supreme Court onSection 153C was referred to. Besides the Supreme Court decisionson Section 158BD, reliance has been placed on the decisions ofdifferent High Courts with reference to the same provisions onSection 158BD. To wit, Amity Hotels (P) Ltd. and others Vs.Commissioner of Income Tax and others3 dated 5.10.2004, NewDelhi Auto Finance (P) Ltd. Vs. Joint Commissioner of IncomeTax4 dated 22.2.2008, Commissioner of Income Tax Vs. DawnView Farms (P) Ltd.5 dated 16.10.2008, Commissioner ofIncome Tax Vs. Panchajanyam Management Agencies andServices6dated 15.11.2010, Commissioner of Income Tax Vs.Late Raj Pal Bhatia7 dated 29.11.2010, Commissioner of IncomeTax Vs. Bimbis Creams and Bakes8 dated 29.3.2012, Creative-Cooperative Credit Society Ltd. Vs. Amal Garg, Deputy 1 (2007) 289 ITR 341 (SC) 2 (2014) 362 ITR 673 (SC) 3 (2005) 272 ITR 75 (Delhi) 4 (2008) 300 ITR 83 (Delhi) 5 (2009) 224 CTR 504 (Delhi) 6 (2011) 333 ITR 281 (Ker) 7 (2011) 333 ITR 315 (Delhi) 8 (2012) 254 CTR 633 (Ker) 16 9Commissioner of Income-Taxdated 26.2.2014,Asstt.Commissioner of Income Tax Vs. J.B. Enterprises and others10dated 26.6.2014. Since there is no direct judgment of the SupremeCourt on Section 153C, reliance has been placed on the decisions ofdifferent High Courts on Section 153C, namely- of SSP Aviation11Ltd. Vs. Deputy Commissioner of Income-taxdated 29.3.2012,Commissioner of Income Tax Vs. Classic Enterprises CanttRoad Lucknow12 dated 17.4.2013, Commissioner of Income Tax13(Central) Vs. Gopi Apartment, dated 1.5.2014, Pepsi FoodsPvt. Ltd. Vs. Assistant Commissioner of Income Tax14dated7.8.2014, Pepsico India Holdings Pvt. Ltd. Vs. AssistantCommissioner of Income Tax and another15dated 14.8.2014 andlastly Commissioner of Income Tax Vs. Madhi Keshwani16 dated11.3.2015. 10.Having considered the rival submissions, even though, thewider issues raised on behalf of the Department may not requireconsideration in the facts of the present case; and more particularlyin the backdrop of the concurrent finding recorded by the two 9 (2014) 369 ITR 596 (Guj) 10 (2014) 24 ITJ 754 (MP) 11 (2012) 346 ITR 177 (Delhi) 12 (2013) 358 ITR 465 (All) 13 (2014) 365 ITR 411 (All) 14 (2014) 90 CCH 0017 (DelHC) 15 (2015) 370 ITR 295 (Delhi) 16 Income Tax Appeal No.108 of 2014 (All) Appellate Authorities, we may deal with the same in this judgmentas it may arise for consideration in the companion appeals heardanalogously and are being disposed of by separate judgment passedtoday with reference to the concerned assesse. 11.The moot question is: whether there is any distinction ordissimilarity between Section 158BD and Section 153C of the I.T.Act? If we accept the argument of the Department, that the purposeunderlying the two provisions is completely different, furtherinvestigation into the scope of Section 153C may becomenecessary. For the sake of convenience, therefore, we deem itapposite to advert to the relevant part of Section 153C which mayhave to be considered and juxtaposed with Section 158BD foranswering the issue. Sections 153C(1) and 158BD reads thus :- Appellate Authorities, we may deal with the same in this judgmentas it may arise for consideration in the companion appeals heardanalogously and are being disposed of by separate judgment passedtoday with reference to the concerned assesse. 11.The moot question is: whether there is any distinction ordissimilarity between Section 158BD and Section 153C of the I.T.Act? If we accept the argument of the Department, that the purposeunderlying the two provisions is completely different, furtherinvestigation into the scope of Section 153C may becomenecessary. For the sake of convenience, therefore, we deem itapposite to advert to the relevant part of Section 153C which mayhave to be considered and juxtaposed with Section 158BD foranswering the issue. Sections 153C(1) and 158BD reads thus :- 153C. [(1)] Notwithstanding any-thing contained in section 139, sec-tion 147, section 148, section 149,section 151 and section 153, wherethe Assessing Officer is satisfiedthat any money, bullion, jewelleryor other valuable article or thing orbooks of account or documents,seized or requisitioned belongs orbelong to a person other than theperson referred to in section 153A,then the books of account or docu-ments or assets seized or requisi-tioned shall be handed over to theAssessing Officer having Jurisdic-tion over such other person and thatAssessing Officer shall proceed 158BD.Where the AssessingOfficer is satisfied that anyundisclosed income belongs to anyperson, other than the person withrespect to whom search was madeunder section 132 or whose books ofaccount or other documents or anyassets were requisitioned undersection 132A, then, the books ofaccount, other documents or assetsseized or requisitioned shall behanded over to the Assessing Officerhaving jurisdiction over such otherperson and that Assessing Officershall proceed under section 158BCagainst such other person and theprovisions of this Chapter shall apply against each such other person andissue such other person notice andassess or reassess income of suchother person in accordance with theprovisions of section 153A: Provided that in case of such otherperson, the reference to the date ofinitiation of the search under section132 or making of requisition undersection 132A in the second provisoto [sub-section (1) of] section 153Ashall be construed as reference to thedate of receiving the books ofaccount or documents or assetsseized or requisitioned by theAssessingOfficerhavingjurisdiction over such other person. accordingly. 12. As the scope of Section 158BD has already been consideredby the Supreme Court, we may first advert to the decision in thecase of Manish Maheshwari(supra). After analyzing the relevantprovisions for amplifying the efficacy of Section 158BD, inParagraph No.7, the Court observed thus:- “7. Condition precedent for invoking a block assessment isthat a search has been conducted under Section 132, ordocuments or assets have been requisitioned under Section132A. The said provision would apply in the case of anyperson in respect of whom search has been carried outunder Section 132A or documents or assets have beenrequisitioned under Section 132A. Section 158BD,however, provides for taking recourse to a blockassessment in terms of Section 158BC in respect of anyother person, the conditions precedents wherefor are : (i)Satisfaction must be recorded by the AO that anyundisclosed income belongs to any person, other than theperson with respect to whom search was made underSection 132 of the Act; (ii) The books of account or otherdocuments or assets seized or requisitioned had beenhanded over to the Assessing Officer having jurisdiction over such other person; and (iii) The AO has proceededunder Section 158BC against such other person. over such other person; and (iii) The AO has proceededunder Section 158BC against such other person. The conditions precedent for invoking the provisions ofSection 158BD, thus, are required to be satisfied before theprovisions of the said chapter are applied in relation to anyperson other than the person whose premises had beensearched or whose documents and other assets had beenrequisitioned under Section 132A of the Act.” (emphasis supplied) 13.In a recent decision of the Supreme Court in the case of -Commissioner of Income TaxIII Vs. Calcutta Knitwears(supra), although the question considered was at what stage theAssessing Officer must record his satisfaction as envisaged inSection 158BD. The observed thus:- “38. Having said that, let us revert to discussion of Section158BD of the Act. The said provision is a machinery provisionand inserted in the statute book for the purpose of carrying outassessments of a person other than the searched person underSections 132 or 132A of the Act. Under Section 158BD of theAct, if an officer is satisfied that there exists any undisclosedincome which may belong to a other person other than thesearched person under Sections 132 or 132A of the Act, after-recording such satisfaction, may transmit the records/docu-ments/chits/papers etc to the assessing officer having jurisdic-tion over such other person. After receipt of the aforesaid satis-faction and upon examination of the said other documents relating to such other person, the jurisdictional assessing officermay proceed to issue a notice for the purpose of completion ofthe assessments under Section 158BD of the Act, the other pro-visions of XIV-B shall apply. 39. The opening words of Section 158BD of the Act are that“the assessing officer must be satisfied that undisclosed in-”come belongs to any other person other than the person withrespect to whom a search was made under Section 132 of theAct or a requisition of books were made under Section 132A ofthe Act and thereafter, transmit the records for assessment ofsuch other person. Therefore, the short question that falls forour consideration and decision is at what stage of the proceed-ings should the satisfaction note be prepared by the assessing officer: whether at the time of initiating proceedings underSection 158BC for the completion of the assessments of thesearched person under Section 132 and 132A of the Act or dur-ing the course of the assessment proceedings under Section158BC of the Act or after completion of the proceedings underSection 158BC of the Act. 40………… officer: whether at the time of initiating proceedings underSection 158BC for the completion of the assessments of thesearched person under Section 132 and 132A of the Act or dur-ing the course of the assessment proceedings under Section158BC of the Act or after completion of the proceedings underSection 158BC of the Act. 40………… 41. We would certainly say that before initiating proceedingsunder Section 158BD of the Act, the assessing officer who hasinitiated proceedings for completion of the assessments underSection 158BC of the Act should be satisfied that there is anundisclosed income which has been traced out when a personwas searched under Section 132 or the books of accounts wererequisitioned under Section 132A of the Act. This is in contrastto the provisions of Section 148 of the Act where recording ofreasons in writing are a sine qua non. Under Section 158BDthe existence of cogent and demonstrative material is germaneto the assessing officers’ satisfaction in concluding that theseized documents belong to a person other than the searchedperson is necessary for initiation of action under Section158BD. The bare reading of the provision indicates that thesatisfaction note could be prepared by the assessing officereither at the time of initiating proceedings for completion ofassessment of a searched person under Section 158BC of theAct or during the stage of the assessment proceedings. It doesnot mean that after completion of the assessment, the assessingofficer cannot prepare the satisfaction note to the effect thatthere exists income tax belonging to any person other than thesearched person in respect of whom a search was made underSection 132 or requisition of books of accounts were madeunder Section 132A of the Act. The language of the provisionis clear and unambiguous. The legislature has not imposed anyembargo on the assessing officer in respect of the stage ofproceedings during which the satisfaction is to be reached andrecorded in respect of the person other than the searchedperson. 42……….43………. 44. In the result, we hold that for the purpose of Section158BD of the Act a satisfaction note is sine qua non and mustbe prepared by the assessing officer before he transmits therecords to the other assessing officer who has jurisdiction oversuch other person. The satisfaction note could be prepared ateither of the following stages: (a) at the time of or along withthe initiation of proceedings against the searched person under Section 158BC of the Act; (b) along with the assessment pro-ceedings under Section 158BC of the Act; and (c) immediatelyafter the assessment proceedings are completed under Section158BC of the Act of the searched person.” (emphasis supplied) 14.Thus, as envisaged by Section 158BD, “satisfaction” of theAssessing Officer before he transmits the material/records to otherAssessing Officer having jurisdiction over such other person is sinequa non. Sans such satisfaction, the Assessing Officer cannotvalidly take recourse to the machinery provision.15.We may now turn to Section 153C. No doubt, the form ofSection 153C is dissimilar to that of Section 158BD. It is also truethat the two provisions are embedded under different chapters. For,Section 153C is in Chapter XIV providing for procedure forassessment, whereas Section 158BD is found in Chapter XIV-Bproviding for special procedure for assessment of search cases.Further, Section 153C opens with non-obstante clause. However,the non-obstante clause in Section 153C is necessitated to givepower to the Assessing Officer having jurisdiction to proceedagainst the person other than the person referred to in Section153A, inspite of the action under Section 139, 147, 148, 149, 151and 153 of the I.T. Act. However, on closer scrutiny of the twoprovisions, it is indisputable that, these provisions are machinery 22 22 provisions and have been provided for in the statute book for thepurpose of carrying out assessment of a person other than thesearched person under Section 132 or 132A of the I.T. Act inrelation to Section 158BD; and Section 153A in relation to Section153C. Notably, the purpose underlying both these provisions issimilar, even though Section 153C does not specifically refer to theexpression “undisclosed” income. However, in both the situations,the Assessing Officer engaged in carrying on search of the assesseewithin his jurisdiction, if seizes or requisitions the items (books ofaccount or other documents or any assets for Section 158BD; andmoney, bullion, jewellery or other valuable article or thing or booksof account or documents for Section 153C), is expected to handoverthose items to the Assessing Officer having jurisdiction over suchother person and thereafter the Assessing Officer havingjurisdiction has to proceed against such other person within hisjurisdiction. Even for the purpose of Section 153C, the AssessingOfficer before handing over the items to the Assessing Officerhaving jurisdiction must be “satisfied” that the items belongs orbelong to the person other than the person referred to in Section153A. That satisfaction of the concerned Assessing Officer is a sinequa non. The consequences flowing from the action to be taken on the basis of such information handed over to the Assessing Officerhaving jurisdiction, for the assesse, who is a person other than theperson referred to in Section 153A, is drastic – of assessment or re-assessment of his income falling within six assessment years. 16.Suffice it to observe that the dissimilarity of the form of twoprovisions would make no difference to the purpose underlying.The power bestowed on the Assessing Officer having jurisdiction –be it under Section 153C or Section 158BD – is identical. 17.We are not inclined to accept the argument of the Departmentthat the purpose underlying the two provisions is different. We alsofind that even the procedure is not different. The subject matter ofthe action would differ in the context of the machinery provisioninvoked, in the given case. That, however, cannot be the basis toextricate the Assessing Officer, who resorts to power under Section153C of handing over the items referred to in Section 153C to theAssessing Officer having jurisdiction, of his duty to be satisfiedabout the jurisdictional fact that the items belongs or belong to aperson other than the person referred to in Section 153A. 18.The concomitant of this conclusion, is that, the legal positionas applicable to Section 158BD regarding satisfaction in the firstinstance of the first Assessing Officer forwarding the items to the 18.The concomitant of this conclusion, is that, the legal positionas applicable to Section 158BD regarding satisfaction in the firstinstance of the first Assessing Officer forwarding the items to the Assessing Officer having jurisdiction; and in the second instance ofthe Assessing Officer having jurisdiction whilst sending notice tosuch other person (other than the person referred to in Section153A), must apply proprio vigore. The fact that incidentally theAssessing Officer is common at both the stages would not extricatehim from recording satisfaction at the respective stages. In that, theAssessing Officer is satisfied that the items referred to in Section153C belongs or belong to a person (other than the person referredto in Section 153A), being sine qua non. He cannot assumejurisdiction to transmit those items to another file whichincidentally is pending before him concerning other person (personother than the person referred to in Section 153A). The question asto whether that may influence the opinion of the Assessing Officerhaving jurisdiction over such other person, also cannot be the basisto take any other view. As a matter of fact, the other AssessingOfficer to whom the items are handed over, before issuing noticemust himself be satisfied after due verification of the items receivedand the disclosures made by the other person in the returns for therelevant period already filed by the other person before him. For thesame reason, we must reject the argument of the Department thatthe discretion of the Assessing Officer having jurisdiction will be impaired in any manner, if he were to hold a different view.Similarly, as there is no provision either express or implied (in theAct) to dispense with the requirement of satisfaction, if theAssessing Officer happens to be the same, as in this case, theargument of the Department must be negatived. 19.After receipt of the materials, the Assessing Officer havingjurisdiction is expected to conduct enquiry and due verification ofthe relevant facts; before forming hisprima facie satisfaction. TheAssessing Officer having jurisdiction will be well within his rightsto form an independent view before issuing notice to the otherperson (person other than the person referred to in Section 153A)under his jurisdiction on the basis of his own enquiry. In ouropinion, the view formed by the Assessing Officer after his ownenquiry does not entail in seating in appeal over the satisfaction ofthe first Assessing Officer, who had handed over the items to him.20.As a result, we hold that there is no infirmity in the view takenby the Tribunal on the questions under consideration. The viewtaken by us is reinforced from the decisions of other High Courtsin the cases of Commissioner of Income Tax (Central) Vs. GopiApartment (supra), Pepsi Foods P. Ltd. (supra), Pepsico IndiaHoldings P. Ltd. (supra) and lastly CIT Vs. Madhi Keshwani 26 (supra). The observations of the Delhi High Court in thecase of SSP Aviation Ltd. (supra) have been explained in thesubsequent case of Pepsico India Holdings P. Ltd.(supra). 21.We conclude that the condition precedent for resorting toaction under S