* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 23rd May, 2011
% Judgment pronounced on: 30th May, 2011
+ 1. ITA No.582/2008
THE COMMISSIONER OF INCOME TAX XIII ..... Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
RADHEY SHYAM BANSAL ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
2. ITA No.398/2008
THE COMMISSIONER OF INCOME TAX ….. Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
ONE-UP SHARES & STOCK BROKING P. LTD… Respondent
Through: Ms. Kavita Jha, Adv.
3. ITA No.578/2008
THE COMMISSIONER OF INCOME TAX XIII ….. Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
ITA 582/2008 with connected matters Page 1 of 47
MANOJ BANSAL ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
4. ITA No.583/2008
THE COMMISSIONER OF INCOME TAX XIII ….. Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
SUKESH KUMAR GUPTA ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
5. ITA No.287/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
SUDHIR DHINGRA ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
6. ITA No.355/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Suruchi Aggarwal, Adv.
versus
ITA 582/2008 with connected matters Page 2 of 47
GULSHAN KUMAR LUTHRA ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
7. ITA No.402/2009
THE COMMISSIONER OF INCOME TAX ….. Appellant
Through: Mr. Chandramani Bhardwaj, Adv.
versus
SUKESH KUMAR GUPTA ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
8. ITA No.670/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr. Chandramani Bhardwaj, Adv.
versus
ANIL KUMAR BANSAL ..... Respondent
Through: None.
9. ITA No.711/2009
THE COMMISSIONER OF INCOME TAX XIII ….. Appellant
Through: Mr. Chandramani Bhardwaj, Adv.
versus
SADHU RAM AGGARWAL ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
ITA 582/2008 with connected matters Page 3 of 47
10. ITA No.857/2009
THE COMMISSIONER OF INCOME TAX VIII ….. Appellant
Through: Mr. Chandramani Bhardwaj, Adv.
versus
H.P. GOEL ..... Respondent
Through: None.
11. ITA No.1075/2009
THE COMMISSIONER OF INCOME TAX XIII ….. Appellant
Through: Mr. Chandramani Bhardwaj, Adv.
versus
BHARAT BHUSHAN JAIN ..... Respondent
Through: None.
12. ITA No.1279/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
S.P. BHAGAT AND SONS HUF ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
13. ITA No.149/2010
THE COMMISSIONER OF INCOME TAX ….. Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
ITA 582/2008 with connected matters Page 4 of 47
SMT. BADAMI DEVI BAFNA ….. Respondent
Through: Dr. Rakesh Gupta, Mr. Ashwani
Tanjeja, Ms. Poonam Ahuja & Mr.
Johnson Bora, ADvs.
14. ITA No.154/2010
THE COMMISSIONER OF INCOME TAX XIII ….. Appellant
Through: Mr. Abhishek Maratha, Adv.
versus
CHAMUNDA SECURITIES PVT. LTD. ….. Respondent
Through: None.
15. ITA No.748/2010
THE COMMISSIONER OF INCOME TAX XIII ….. Appellant
Through: Mr. Abhishek Maratha, Adv.
versus
VEENA GUPTA ..... Respondent
Through: None.
16. ITA No.279/2010
THE COMMISSIONER OF INCOME TAX XIII ….. Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
SANJAY RAI CHOWDHARY ..... Respondent
Through: Dr. Rakesh Gupta, Mr. Ashwani
Tanjeja, Ms. Poonam Ahuja & Mr.
Johnson Bora, ADvs.
ITA 582/2008 with connected matters Page 5 of 47
17. ITA No.1145/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
RASHMI MONGA ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
18. ITA No.196/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
MS. ANU AGGARWAL ..... Respondent
Through: None.
19. ITA No.655/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
GOLDEDGE ESTATES AND
INVESTIMENTS LTD. ..... Respondent
Through: Dr. Rakesh Gupta, Mr. Ashwani
Tanjeja, Ms. Poonam Ahuja & Mr.
Johnson Bora, ADvs.
ITA 582/2008 with connected matters Page 6 of 47
20. ITA No.1420/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Suruchi Aggarwal, Adv.
versus
RAGHUBIR SINGH GARGH ..... Respondent
Through: Dr. Rakesh Gupta, Mr. Ashwani
Tanjeja, Ms. Poonam Ahuja & Mr.
Johnson Bora, ADvs.
21. ITA No.1421/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Abhishek Maratha, Adv.
versus
SECURITIES BROKERS OF INDIA LTD. ..... Respondent
Through: None.
22. ITA No.550/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
VYOM FINANCIAL SERVICES PVT. LTD. ….. Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
ITA 582/2008 with connected matters Page 7 of 47
23. ITA No.554/2010
THE COMMISSIONER OF INCOME TAX ….. Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
VYOM FINANCIAL SERVICE PVT. LTD. ….. Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
24. ITA No.1313/2010
THE COMMISSIONER OF INCOME TAX ….. Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
MONIKA SAXENA ..... Respondent
Through: None.
25. ITA No.1326/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
MONIKA SAXENA ..... Respondent
Through: None.
ITA 582/2008 with connected matters Page 8 of 47
26. ITA No.777/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
GALLRI DEVI ..... Respondent
Through: None.
27. ITA No.75/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr. Abhishek Maratha, Adv.
versus
MADHU GUPTA ..... Respondent
Through: Mr.Manu K. Giri and Mr.Rajesh
Mahna, Advs.
28. ITA No.198/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
GAURI SHANKAR AGGARWAL ..... Respondent
Through: None.
29. ITA No.237/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Abhishek Maratha, Adv.
ITA 582/2008 with connected matters Page 9 of 47
versus
PRASAD AND CO. PVT. LTD. ..... Respondent
Through: None.
30. ITA No.374/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Abhishek Maratha, Adv.
versus
M/S SHRI CHAMUNDA SECURITIES PVT. LTD…… Respondent
Through: None.
31. ITA No.212/2011
THE COMMISSIONER OF INCOME TAX ….. Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
UDDHAN PROPERTIES LTD. ….. Respondent
Through: None.
32. ITA No.53/2009
THE COMMISSIONER OF INCOME TAX ….. Appellant
Through: Ms. Suruchi Aggarwal, Adv.
versus
SMT. KULDEEP KAUR ..... Respondent
Through: None.
ITA 582/2008 with connected matters Page 10 of 47
33. ITA No.102/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Suruchi Aggarwal, Adv.
versus
LAKHBIR SINGH (HUF) ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
34. ITA No.477/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr. Chandramani Bhardwaj, Adv.
versus
LAJ BHAGAT ..... Respondent
Through: Mr.Manu K. Giri and Mr.Rajesh
Mahna, Advs.
35. ITA No.483/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
NARENDER UPPAL ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
ITA 582/2008 with connected matters Page 11 of 47
36. ITA No.611/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
RAJAT BHANDARI ..... Respondent
Through: Mr.Manu K. Giri and Mr.Rajesh
Mahna, Advs.
37. ITA No.822/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
PARAMJIT SINGH ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
38. ITA No.996/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
ALKA BHANDARI ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
ITA 582/2008 with connected matters Page 12 of 47
39. ITA No.1064/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
V.K. NARANG HUF ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
40. ITA No.1098/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Suruchi Aggarwal, Adv.
versus
S.S. DHANJAL ..... Respondent
Through: Mr.Manu K. Giri and Mr.Rajesh
Mahna, Advs.
41. ITA No.1119/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Sanjeev Sabharwal, Adv.
versus
ANITA AGGARWAL ..... Respondent
Through: Mr. Salil Kapoor, Mr. Sanat Kapoor
and Mr.Anikit Gupta, Advs.
ITA 582/2008 with connected matters Page 13 of 47
42. ITA No.1163/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Sr. Adv. with
Mr. Ruchir Bhatia, Adv.
versus
ASHOK KUMAR AND SONS HUF ….. Respondent
Through: None.
43. ITA No.1318/2009
THE COMMISSIONER OF INCOME TAX ….. Appellant
Through: Mr. Chandramani Bhardwaj, Adv.
versus
SUNIL JAIN ..... Respondent
Through: None.
44. ITA No.1329/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: None.
versus
RENU VERMA ..... Respondent
Through: None.
45. ITA No.1373/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr. Chandramani Bhardwaj, Adv.
ITA 582/2008 with connected matters Page 14 of 47
versus
SUNIL JAIN ..... Respondent
Through: None.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJIV KHANNA
1. Whether reporters of the local papers be allowed to see the Yes
judgment?
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
DIPAK MISRA, CJ
In this batch of appeals under Section 260A of the Income Tax Act,
1961 (for brevity ‗the Act’) preferred by the revenue. ITA No.582/2008,
Commissioner of Income Tax v. Radhey Shyam Bansal has been treated as
the lead case. It is stated that the relevant facts in all appeals are
identical/similar, though details and particulars may be different. Four
questions have been set out as substantial questions of law, but in the course
of hearing, learned counsel appearing for the revenue have stated that the
real questions that emerge for consideration are as follows:
ITA 582/2008 with connected matters Page 15 of 47
―A. Whether the Assessing Officer is bound to record satisfaction
within the meaning of Section 158BD of the Act, during the
process of Assessment of the person searched under Section
158BC of the Act?
B. Whether satisfaction as contemplated in Section 158BD of the
Act has been duly recorded regard being had to be letter dated
15.7.2003 or in the assessment order, wherein undisclosed
income of the respondent-assessee has been reflected and
negation of such satisfaction by the Income Tax Appellate
Tribunal is erroneous and perverse for not accepting such
satisfaction?‖
2. At the very outset, we may set out the facts from ITA No.582/2008
for the sake of clarity and convenience. As is evincible from the narration,
there was a search under Section 132 of the Act in the premises of one
Manoj Aggarwal of Baldev Park, Delhi on 30.8.2000. In the course of the
search, several materials were seized on the basis of which a block
assessment was completed in the case of Manoj Aggarwal under Section
ITA 582/2008 with connected matters Page 16 of 47
158BC of the Act on 29.8.2002. On 15.7.2003, a letter was sent by theassessing officer of Manoj Aggarwal to the assessing officer of the
respondent – assessee, namely, Radhey Shyam Bansal to the effect that the
said assessee was acting as a mediator in transactions involving substantial
tax evasion by giving bogus accommodation entries to various persons.
3. After receipt of the communication from the assessing officer of
Manoj Aggarwal, the assessing officer of the respondent sent a notice on
22.3.2004 purportedly under Section 158B of the Act. The respondent was
called upon to file a block return within 30 days of the receipt of the notice.
The respondent, as is evident, filed the requisite return for the period from
the assessment year 1991-92 to the assessment year 2001-02 (upto the
30.8.2000, the date of search) in the prescribed form declaring the income at
Rs. Nil as undisclosed income. The assessing officer framed an order of
assessment and determined that there was undisclosed income earned by
way of commission of Rs.50,85,315/-. In addition, he also included
Rs.9,81,29,575/- as unexplained investment under Section 69 of the Act on
protective basis on the footing that the assessee had paid cash to Manoj
Aggarwal.
ITA 582/2008 with connected matters Page 17 of 47
4. Being dissatisfied with the order of assessment, the respondent
preferred an appeal before CIT (Appeals) putting forth number of
contentions including the submission that the notice under Section 158B
was barred by limitation; that the assessing officer assessing the searched
person (Manoj Aggarwal) had not recorded any satisfaction under Section
158BD; that no opportunity to cross-examine the person on the basis of
whose statement allegations were made against him; that no opportunity was
afforded to him to rebut the material collected and utilized against him; and
that the rate of commission adopted by the assessing officer was totally
exaggerated and not based on any material evidence on record.
5. The CIT (A) did not accept the contentions of the respondent –
assessee that no satisfaction was recorded by the assessing officer in the
case of the searched person. The first appellate authority took note of the
fact that the assessing officer assessing Manoj Aggarwal had communicated
vide letter dated 15.7.2003 to the assessing officer having jurisdiction over
the assessee, in which he had mentioned that the diaries seized from the
possession of Manoj Aggarwal which established that the assessee Radhey
Shyam Bansal was a mediator who had provided book entries to various
ITA 582/2008 with connected matters Page 18 of 47
beneficiaries; and that there was evidence of cash amounts were received byManoj Aggawal from Radhey Shyam Bansal. On the aforesaid basis, the
CIT(A) came to the conclusion that the communication dated 15.7.2003
amounted to the satisfaction of the assessing officer assessing the searched
person as required by Section 158BD. Be it noted, the other contentions
raised by the respondent were also negatived.
6. Grieved by the aforesaid order of the CIT(A), the respondent –
assessee approached the tribunal in IT(SS) A.No.12/Del/2007 and in the
appeal it was urged that the notice under Section 158BD was not issued
within a reasonable period of time inasmuch as a period of nearly 19 months
had elapsed from the date of completion of block assessment of Manoj
Aggarwal before the notice under Section 158BD issued; that no satisfaction
was recorded by the assessing officer assessing Manoj Aggarwal as required
under Section 158BD of the Act; that the letter dated 15.7.2003 written by
the said assessing officer to the assessing officer having jurisdiction over the
respondent -assessee was written much after the block assessment was
completed in the case of Manoj Aggarwal, which was against the statutory
provision and in any case, no satisfaction was discernible from the said
ITA 582/2008 with connected matters Page 19 of 47
letter; that the order of assessment was vitiated being violative of principleof natural justice since the assessing officer had collected material behind
the back of the assessee without confronting the assessee with the same for
rebuttal; and that the order of assessment had travelled beyond the seized
materials.
7. The aforesaid contentions of the assessee-respondent before the
tribunal was resisted by the revenue contending, inter alia, the recording of
satisfaction was in accord with the stipulations enshrined in Section 158BD
of the Act; that the initiation of the proceeding was done within a reasonable
period of time; that the principles of natural justice had been religiously
followed; and that the order of assessment did not suffer from any infirmity.
8. The tribunal, considering the contentions of the learned counsel for
the parties and upon scrutiny of the documents brought on record, posed the
question whether recording of satisfaction by the assessing officer assessing
the person searched under Section 132 of the Act that any undisclosed
income belongs to any person other than the searched person is mandatory
or not. The tribunal relying on the decision in Manish Maheshwari v.
ITA 582/2008 with connected matters Page 20 of 47
Assistant Commissioner of Income Tax & anr., (2007) 289 ITR 341 (SC),came to hold that no satisfaction had been recorded by the assessing officer
assessing Manoj Aggarwal, as there is no reflection of satisfaction in the
order of assessment, and further the notice dated 22.3.2004 issued under
Section 158BC read with Section 158BD did not refer to any satisfaction of
the assessing officer of Manoj Aggarwal. It is noteworthy that the tribunal
referred to the satisfaction note dated 22.3.2004 which is a note recorded by
the assessing officer of the assessee – respondent but not that of the
assessing officer of Manoj Aggarwal who is the searched person. The
tribunal also referred to the letter dated 15.7.2003 written by DCIT Central,
New Delhi the assessing officer having jurisdiction on Manoj Aggarwal to
the assessing officer of the respondent-assessee and came to hold that the
assessing officer of Manoj Aggarwal could not have made such a
communication after the assessment of the person searched was completed.
Be it noted, to arrive at the said conclusion the tribunal placed reliance on
the decision rendered by the Co-ordinate Bench at Chandigarh in the case of
ACIT, Yamunanagar vs. Kishore Lal Balwant Rai, Jagdhari decided on
29.6.2007. In the view of the tribunal, the assessing officer of Manoj
ITA 582/2008 with connected matters Page 21 of 47
Aggarwal had become functus officio on passing the assessment order andhence, could not have recorded any satisfaction. After so holding, the
tribunal proceeded to enquire whether the notice under Section 158B
required to be issued within a reasonable time and there was delay rendering
the whole proceeding vulnerable in law. The tribunal took note of the fact
that the block assessment of Manoj Aggarwal was completed on 29.8.2002
but the notice to the respondent-assessee under Section 158BD was issued
only on 22.3.2004, i.e., after 19 months later. The tribunal placing reliance
on the decision in Khandubhai Vasanji Desai and others v. DCIT, (1999)
236 ITR 73 (Gujarat) came to hold that notice was issued well beyond a
reasonable period.
9. Being of the aforesaid view, the tribunal set aside the order of
assessment, which had been concurred with by the first appellate authority,
and allowed the appeal preferred by the assessee.
10. Regard being had to the questions framed, we are only required to
address whether the recording of satisfaction of the assessing officer of
Manoj Aggarwal is mandatory and further whether in the facts and
ITA 582/2008 with connected matters Page 22 of 47
circumstances of the case the satisfaction has been recorded.11. In the case of Manish Maheshwari (supra), a two-Judge Bench of the
Apex Court dealt with invocation of provision of block assessment against a
person other than the person whose premises were searched under Section
132 of the Act. Their Lordships referred to Section 132 and sub-section
(1A) of Section 132, Rule 112 of the IT Rules, 1962 and came to hold as
follows:
―6. Search and seizure is to be made in terms of r.112
of the IT Rules, 1962. For the purpose of invoking the
said provision, special procedure for assessment is laid
down in Chapter XIV-B, the conditions precedent where
for as laid down must be satisfied. Secs.158BC and
158BD read as under:―158BC. Procedure for block assessment. – Where
any search has been conducted under s.132 or
books of account, other documents or assets are
requisitioned under s. 132A, in the case of any
person, then:(a) the AO shall –
(i) in respect of search initiated or books of
accounts or other documents or any assets
requisitioned after the 30th day of June, 1995 but
before the 1st day of January, 1997, serve a notice
to such person requiring him to furnish within such
time not being less than fifteen days;ITA 582/2008 with connected matters Page 23 of 47
(ii) in respect of search initiated or books of
accounts or other documents or any assets
requisitioned on or after the 1st day of January,
1997 serve a notice to such person requiring him to
furnish within such time not being less than fifteen
days but not more than forty-five days;
as may be specified in the notice a return in the
prescribed form and verified in the same manner as
a return under cl. (1) of sub-s. (1) of s.142, setting
forth his total income including the undisclosed
income for the block period:Provided that no notice under s. 148 is required to
be issued for the purpose of proceeding under this
Chapter:Provided further that a person who has furnished a
return under this clause shall not be entitled to file
a revised return;(b) the AO shall proceed to determine the
undisclosed income of the block period in the
manner laid down in s.158BB and the provisions
of s.142, sub-ss. (2) and (3) of s.143 and s.144
shall, so far as may be, apply;(c) the AO, on determination of the undisclosed
income of the block period in accordance with this
Chapter, shall pass an order of assessment and
determine the tax payable by him on the basis of
such assessment;(d) the assets seized under s.132 or
requisitioned under s. 132A shall be retained to the
extent necessary and the provisions of s.132B shall
apply subject to such modifications as may beITA 582/2008 with connected matters Page 24 of 47
necessary and the references to ‗regular
assessment’ or ‗reassessment’ in s.132B shall be
construed as references to ‗block assessment’.‖―158BD. Undisclosed income of any other person –
Where the AO is satisfied that any undisclosed
income belongs to any person, other than the
person with respect to whom search was made
under s.132 or whose books of account or other
documents or any assets were requisitioned under
s.132A, then, the books of account, other
documents or assets seized or requisitioned shall
be handed over to the AO having jurisdiction over
such other person and that AO shall proceed
against such other person and the provisions of this
Chapter shall apply accordingly.‖7. Condition precedent for invoking a block
assessment is that a search has been conducted under
s.132, or documents or assets have been requisitioned
under s.132A. The said provision would apply in the case
of any person in respect of whom search has been carried
out under s.132A or documents or assets have been
requisitioned under s.132A. Sec. 158BD, however,
provides for taking recourse to a block assessment in
terms of s.158BC in respect of any other person, the
conditions precedent where for are : (i) Satisfaction must
be recorded by the AO that any undisclosed income
belongs to any person, other than the person with respect
to whom search was made under s.132 of the Act; (ii)
The books of account or other documents or assets seized
or requisitioned had been handed over to the AO having
jurisdiction over such other person; and (iii) The AO has
proceeded under s.158BC against such other person.The conditions precedent for invoking the provisions of
ITA 582/2008 with connected matters Page 25 of 47
s.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 s.132A of the Act.8. A taxing statute, as is well-known, must be
construed strictly. In Sneh Enterprises v. Commissioner
of Customs, (2006) 7 SCC 714, it was held:―While dealing with a taxing provision, the
principle of ‘strict interpretation’ should be applied.
The Court shall not interpret the statutory
provision in such a manner which would create an
additional fiscal burden on a person. It would
never be done by invoking the provisions of
another Act, which are not attracted. It is also trite
that while two interpretations are possible, the
Court ordinarily would interpret the provisions in
favour of a tax-payer and against the Revenue.‖9. Yet again in J. Srinivasa Rao v. Govt. of A.P. and
Anr. 2006 (13) SCALE 27, it was held:―In a case of doubt or dispute, it is well-settled,
construction has to be made in favour of the
taxpayer and against the Revenue.‖10. In Ispat Industries Ltd. v. Commr. of Customs JT
2006 (12) SC 379 : 2006 (9) SCALE 652, this Court
opined:“In our opinion if there are two possible
interpretations of a rule, one which subserves the
object of a provision in the parent statute and the
other which does not, we have to adopt the former,
because adopting the latter will make the rule ultraITA 582/2008 with connected matters Page 26 of 47
vires the Act.‖11. Law in this regard is clear and explicit. The only
question which arises for our consideration is as to
whether the notice dated 06.02.1996 satisfies the
requirements of s.158BD of the Act. The said notice does
not record any satisfaction on the part of the AO.
Documents and other assets recovered during search had
not been handed over to the AO having jurisdiction in the
matter.X X X X
16. As the AO has not recorded its satisfaction, which is
mandatory; nor has it transferred the case to the AO
having jurisdiction over the matter, we are of the opinion
that the impugned judgments of the High Court cannot be
sustained, which are set aside accordingly. The appeals
are allowed. However, in the facts and circumstances of
the case, there shall be no order as to costs.‖12. On a perusal of the aforesaid decision, it is graphically clear that the
recording of satisfaction by the assessing officer of the searched person is a
condition precedent. Satisfaction must be recorded by the said assessing
officer that any undisclosed income belongs to any person, other than the
person searched. Thereafter the assessing officer of the third person can
proceed against his assessee under Section 158BC. The documents, books
of accounts or assets seized or requisitioned have to be handed over to the
assessing officer of the third person.
ITA 582/2008 with connected matters Page 27 of 47
13. Once, it is held that the recording of satisfaction as per the ratio laid
down in Manish Maheshwari (supra) is a condition precedent, it is to be
seen whether any such satisfaction of the assessing officer of Manoj
Aggarwal is perceivable from the record. Learned counsel for the revenue
has invited our attention to the order of assessment order of Manoj
Aggarwal, the letter issued by the assessing officer dated 15.7.2003 and the
note appended to the assessment order to build the edifice that the
satisfaction was recorded and the tribunal has erroneously come to hold that
there was no satisfaction. Learned counsel for the revenue has criticized the
finding of the tribunal that the assessing officer had become functus officio
after a particular stage. Mr. Salil Kapoor, learned counsel for the
respondent fairly stated that this Court may not address the issue whether
the assessing officer of Manoj Aggarwal had become functus officio or not
and may only dwell upon the issue whether there is recording of satisfaction
on the basis of the material brought on record. It is contended by him that
note dated 29.8.2002 which is purported to have been written by the
assessing officer of Manoj Aggarwal was not relied before the tribunal or by
the CIT(A). Additional/new evidence cannot be produced before the High
ITA 582/2008 with connected matters Page 28 of 47
Court for the first time without any application under Order 41 Rule 27 ofthe Code of Civil Procedure, 1908. Further this note is an antedated one and
such a finding has been recorded by the tribunal in SMC Share Brokers Ltd.
v. Deputy Commissioner of Income Tax in ITA No.250/Del/2005, (2007)
109 TTJ (Del) 700. Learned counsel would contend that the said order
passed by the tribunal was challenged before this Court, wherein the
Division Bench had dismissed the appeal and the revenue had chosen not to
challenge the finding recorded by the tribunal and, therefore, the said note
cannot be placed reliance upon. This decision of the Division Bench is
reported in Commissioner of Income Tax v. SMC Share Brokers Ltd.
(2007) 288 ITR 345 (Del).
14. To appreciate the controversy, first we shall refer to the order of
assessment framed against the Manoj Aggarwal, the person who has
searched. Learned counsel for the revenue has drawn our attention to
paragraph 2.7 to 2.10 from the order of block assessment order in case of
Manoj Aggarwal which was framed on 29.8.2008. The said paragraphs read
as under:
ITA 582/2008 with connected matters Page 29 of 47
―2.7 Apart from the admission of Sh. Manoj Aggarwal,
the various documents seized during the course of search
details of which are given below further established that
he is a name lender involved in the business of giving
accommodation entries. Sh.Manoj Aggarwal has
accepted all these papers to be related to his business of
accommodation book entries.2.8 Annexures A-16, A-18 & A-36 seized from the
premises at 5A/12, Ansari Road, Daryaganj, Delhi are
cashbooks of the business of accommodation entries.
These give details of the cash received on the receipts
side and the utilization thereof on the payments side.
2.9 Annexure A-19, A-20 & A-21 seized from the
premises at 5A/12, Ansari Road, Daryaganj, Delhi are
ledger accounts of the mediators through whom the
transactions of accommodation entries has been arranged.
These ledgers give the details of the name of the
mediator, the date on which the cheque is issued, the
name of the beneficiary, the cheque no., the amount
thereof and the bank and branch from which it is issued.
2.10 Various pages of Annexures A-1, A-8, A-10, A-
11, A-12, A-15 & A-36 seized from the premises at
5A/12, Ansari Road, Daryaganj, Delhi, various pages of
Annexure A-1 seized from the residence of Sh. Manoj
Aggarwal at C-25/2, East Baldev Park, Delhi, Annexure
A-2 seized from the office of Sh.Manoj Aggarwal at
7/22, Ansari Road, Daryaganj, Delhi are reconciliation
accounts of the various mediators. These accounts give
the details of the cash received from the mediators and
the details of the cheques issued to the various
beneficiaries.‖15. On a perusal of the aforesaid, we do not perceive any satisfaction by
ITA 582/2008 with connected matters Page 30 of 47
the assessing officer of Manoj Aggarwal that any undisclosed incomebelongs to the respondent assessee. The said satisfaction is not reflected or
stated in the said paragraphs.
16. Presently, we shall proceed to deal with the communication sent by
the assessing officer of Manoj Aggarwal to the assessing officer of the
respondent – assessee. The said letter is dated 15.7.2003. The said letter
indicates that a communication was made by the assessing officer of Manoj
Aggarwal to the assessing officer assessing the respondent-assessee to the
effect that the assessee was acting as a mediator in the transactions
involving substantial tax evasion by giving bogus accommodation entries to
various persons. It is submitted by Mr.Kapoor, learned counsel for the
assessee that the said letter does not remotely suggest any satisfaction. In
fact the revenue has also not treated this letter as recording of satisfaction,
but the letter is a mere communication.
17. The letter/communication dated 15.7.2003 by the assessing of Manoj
Aggarwal to the assessing officer of the respondent assessee reads as
follows:
ITA 582/2008 with connected matters Page 31 of 47
―1) Various diaries have been seized from the
possession of Sh. Manoj Aggarwal which establish that
Radhey Shyam Bansal is a mediator for providing
accommodation book entries by Sh. Manoj Aggarwal.
The quantum of transaction done by him as per these
documents is given in Annexure-A. Photocopies of these
paper are enclosed in Annexure-B.2) There are evidences of cash having been received
by Mr. Manoj Aggarwal from Radhey Shyam Bansal.
The summary of the amounts so received as per various
seized documents is given in Annexure-C. The
photocopies of these documents are provided as per
Annexure-D.‖18. Before we advert to and analyse whether the letter dated 15.7.2003
really conveys satisfaction as is understood in the anatomical base of the
provision and also under the backdrop of terms satisfaction mean in law we
think it appropriate to refer to Section 158BD of the Act. The said provision
has already been reproduced in the decision in Manish Maheshwari (supra).
19. On a plain reading of the aforesaid provision, it is vivid that for the
purpose of initiation of block assessment proceeding against a third person
in respect of whom search has not been conducted certain conditions
precedents are to be followed and they are mandatory. They have to be
ITA 582/2008 with connected matters Page 32 of 47
construed and complied absolutely strictly. The first pre-condition as theprovision envisages is that the assessing officer of the person searched has
to be satisfied that some undisclosed income belongs to a third person.
Thus, the relevant expressions pertaining to condition precedent are
―undisclosed income‖ and ―which belongs to a person other than the person
searched‖. As in the case at hand, we are actually concerned with the
satisfaction we think it appropriate to refer to the said terms, namely,
―undisclosed income‖ which have been defined in Section 158-B(b) which
reads as follows:
―158-B. Definitions.–In this Chapter, unless the context
otherwise requires,–(b) ―undisclosed income‖ includes any money,
bullion, jewellery or other valuable article or thing or any
income based on any entry in the books of account or
other documents or transactions, where such money,
bullion, jewellery, valuable article, thing, entry in the
books of account or other document or transaction
represents wholly or partly income or property which has
not been or would not have been disclosed for the
purposes of this Act [, or any expense, deduction or
allowance claimed under this Act which is found to be
false].‖ITA 582/2008 with connected matters Page 33 of 47
20. The aforesaid definition is on a broad canvass. It not only includes
income which has not been disclosed but income which would not have
been disclosed by a third person. It must be income and can be money,
bullion, jewellery or valuable articles or thing which has not been disclosed
by the third person and would not have been disclosed by the third person
under the Act. It can include entry in the books of account or document or
transaction which represents wholly or partly income or profit which has not
been disclosed or would not have been disclosed under the Act by the third
person. After amendment of Section 158B(b) by Finance Act 2002 with
retrospective effect from 1st July, 1995, it can also include an expense,
deduction or allowance which is found to be false.
21. The word ‗satisfaction’ has not been defined in the Act. The
‗satisfaction’ by its very nature must precede before the papers/documents
are sent by the Assessing Officer of the person searched to the Assessing
Officer of the third person. Mere use or mention of the word ‗satisfaction’
in the order/note will not meet the requirement of concept of satisfaction as
used in Section 158BD. The satisfaction has to be in writing and can be
gathered from the assessment order, if it is so mentioned/recorded, or from
ITA 582/2008 with connected matters Page 34 of 47
any other order, note or record maintained by the Assessing Officer of theperson searched. The word ―satisfaction‖ refers to the state of mind of the
Assessing Officer of the person searched, which gets reflected in a tangible
shape/form when it is reduced into writing. It is the conclusion drawn or the
finding recorded on the foundation of the material available. The word
‗satisfied’ occurs in many a statute and has its connotation. The term ―is
satisfied‖ means simply makes up its mind [per Lord Pearson in Blyth v.
Bivth (1966) 1 ALL E.R. 524 (541)]. Dixon J. has defined it as ‗actual
persuasion’. It fundamentally means a mind not troubled by doubt or to
adopt the language of Smith J. ‗a mind which has reached a clear
conclusion’ (see Angland v. Payne (1944) N.Z.L.R. 610 (626). The
Assessing Officer is satisfied when he makes his mind or reaches a clear
conclusion when he takes a prima facie view that the material available
establishes ‗undisclosed income’ of a third party. Assessing Officer must
reach a clear conclusion that good ground exists for the Assessing Officer
of the third person to initiate proceedings as material before him shows or
would establish ‗undisclosed income’ of a third person. At this stage, as the
proceedings are at the very initial state, the ‗satisfaction’ neither is required
ITA 582/2008 with connected matters Page 35 of 47
to be firm or conclusive. The ‗satisfaction’ required is to decide whether ornot block assessment proceedings are required to be initiated. But
‗satisfaction’ has to be founded on reasonableness. It cannot be capricious
satisfaction. Though, it is a subjective satisfaction, it must be capable of
being tested on objective parameters. The opinion though tentative,
however, cannot be a product of imagination or speculation. It cannot be
spacious or mercurial. It should not be a mere pretence and should be made
in good faith rather than suspicion. Reliability, credibility or for that matter
what weight has to be attached to the material, depends upon the subjective
satisfaction of the Assessing Officer but definitely it is subject to scrutiny
whether the satisfaction has a rational nexus or a relevant bearing to the
formation of satisfaction and is not extraneous or irrelevant. The
satisfaction must reflect rational connection with or relevant bearing
between the material available and undisclosed income of the third person.
The rational connection postulates and requires satisfaction of the Assessing
Officer that a third person has ‗undisclosed income’ on the basis of evidence
or material before him. The material itself should not be vague, indefinite,
distinct or remote. If there is no rational or intangible nexus between the
ITA 582/2008 with connected matters Page 36 of 47
material and the satisfaction that a third person has ‗undisclosed income’,the conclusion would not deserve acceptation. Then the satisfaction is
vitiated. It is to this limited extent that the satisfaction can be gone into and
examined. The satisfaction though subjective, must meet the aforesaid
criteria.
22. While defining the scope and ambit of Section 158BD of the Act, we
have followed the rationale and judgments of the Supreme Court under
Section 147 of the Act. Section 158BD uses the word ‗satisfaction’, while
Section 147 uses the words ‗reason to believe’. But the underline role of the
Assessing Officer and the principle, requirement or pre-conditions are the
same.
23. In view of the aforesaid legal position we can now examine the letter
dated 15th July, 2003 which was communicated by the Assessing Officer of
the searched assessee to the assessing officer of the respondent. The
question is whether the aforesaid letter can be regarded as ―satisfaction‖ as
required under Section 158BD, i.e. satisfaction of the Assessing Officer of
Manoj Aggarwal that there is material that the respondent assessee had
ITA 582/2008 with connected matters Page 37 of 47
undisclosed income. The first paragraph of the aforesaid letter states that thediary seized from the possession of Manoj Aggarwal establishes that the
respondent assessee had acted as a mediator for providing accommodation
book entries by Manoj Aggarwal. The second sentence in the first
paragraph states that the quantum of transactions as shown in the documents
were enclosed as Annexure-A and the photocopies of the papers were
enclosed as Annexure-B. The second paragraph states that there was
evidence that cash was received by Manoj Aggarwal from the respondent
and the summary of the amounts received as per the seized documents was
given in Annexure C and the photocopies of the documents were annexed as
Annexure-D. It is accepted that Annexures A, B, C & D, referred to in this
letter were not filed before the tribunal and have not been produced before
us. It is conceded by the learned counsel for the revenue that they are also
not available on the file of the Assessing Officer of the respondent. There is
no explanation forthcoming with regard to the aforesaid annexures. It is
well nigh impossible to know their content. The first paragraph of the letter
dated 15th July, 2003 states that the respondent-assessee had acted as a
mediator i.e. they had introduced Manoj Aggarwal with other persons to
ITA 582/2008 with connected matters Page 38 of 47
whom accommodation book entries were provided by Manoj Aggarwal.There is no allegation in the first paragraph that the respondent assessee was
provided with accommodation book entries or the amounts belong to the
respondent assessee. Book entries were provided to third parties. It is not
stated in this ‗satisfaction note’ that Manoj Aggarwal or third parties had
paid any amount towards commission for acting as a mediator. There is no
such allegation or statement in the ‗satisfaction note’. The second paragraph
does create some doubt but what is relevant and important is the fact that in
the first paragraph, it is accepted by the Assessing Officer of Manoj
Aggarwal that the respondent assessee was merely acting as a mediator and
nothing more. The second paragraph of the letter states that there was
evidence that cash was received by Manoj Aggarwal from the respondent
assessees. What was the evidence and material was not brought on record
before the tribunal or even before us. The said material is not mentioned in
the assessment order. It cannot be ‗ipse dixit’ without material or evidence
to satisfy the concept of requirement as engrafted under Section 158BD.
What was the material was neither highlighted before the tribunal nor before
us. Thus, the appellant-revenue has not discharged the onus that there was
ITA 582/2008 with connected matters Page 39 of 47
valid satisfaction as required under Section 158 BD. Therefore, theirresistible conclusion is the pre-requisite of ―satisfaction‖ as engrafted
under Section 158B for the purpose of initiation of block assessment
proceeding is non-existent or absent.
24. The last plank of submission of learned counsel appearing for the
revenue was a note that was recorded by the assessing officer of the Manoj
Aggarwal on the date of assessment. It is contended by Ms. Prem Lata
Bansal, learned senior counsel, Mr.Sanjeev Sabharwal, Ms. Suruchi
Aggarwal, Mr. Chandramani Bhardwaj, learned counsel for the revenue that
though the said note was not filed before the tribunal but the same should be
treated as a part of evidence on record and dealt with it. Whether that could
have been taken as an additional evidence under Order 41 Rule 27 of the
Code of Civil Procedure though such an application has not been filed. The
same is not necessary in view of the finding recorded by the tribunal in
SMC Share Brokers Ltd.(supra) in. In the said case, i.e., ITA
No.250/Del/2005, the tribunal expressed the view that a satisfaction note by
the assessing officer of the searched person recording undisclosed income of
any person within the meaning of Section 158BD could be validly recorded
ITA 582/2008 with connected matters Page 40 of 47
after completion of assessment of the searched person. In that context, thetribunal held the only requirement is that the satisfaction must be in writing.
In the said case, the tribunal was dealing with the search carried out on the
premises of Manoj Aggarwal on 3.8.2000. The present case also relates to
the said search. It is noteworthy the departmental representative in the case
of SMC Share Brokers Ltd. (supra) had pressed into service the note dated
29.8.2002 which has been sought to be pressed into service by the learned
counsel for the revenue herein. The tribunal while dealing with the said
note dated 29.8.2002 expressed their views as follows:
―14.3 As per the Departmental Representative, the
satisfaction for initiating proceedings under Section
158BD was recorded by the AO making assessment in
the case of Shri Manoj Aggarwal and M/s Friends
Portfolio (P) Ltd. on 29th Aug., 2002 also i.e. on the date
of passing assessment order dt. 29th Aug., 2002 itself.
However, the learned Counsel for the assessee has
seriously challenged the genuineness and the authenticity
of this note. According to him, this note is antedated. He
tried to substantiate his argument by demonstrating that if
the satisfaction note was recorded on 29th Aug., 2002
then there would have been no necessity to further record
the satisfaction again on 26th Nov., 2002. He also
pointed out that from the contents and language of the
alleged satisfaction note dt. 29th Aug., 2002, it is evident
that this note is subsequently prepared. He submitted that
if the satisfaction was recorded on 29th Aug., 2002, the
ITA 582/2008 with connected matters Page 41 of 47
notice should also have been issued on that date itself or
just thereafter.14.4 The learned Departmental Representative, on the
other hand, maintained that the AO had made this note on
29th Aug., 2002.15. We have carefully considered the entire material
on record and the rival submissions. With this note, a list
of beneficiaries has been appended. The name of assessee
appears at item No. 69, which is as under:69 SMC 17, Netaji Friends 30000000 The assessee has taken Sharebrokers Subhash Portfolio bogus accommodation Ltd. Marg, (P) Ltd. entry through M/s Friends Daryaganj, Portfolio (P) Ltd. and New hence satisfaction note in Delhi-02 this regard has been recorded in the case of this company and proposal for centralization of this case in this circle has been approved for taking up proceedings u/s 158BD.The last sentence in the above note indicates that the
proposal for centralization of this case in this circle has
been approved for taking up proceedings under Section
158BD. The learned Counsel pointed out before us that
no such approval was taken before 29th Aug., 2002.
According to him, the proposal is dt. 19th Sept., 2002,
i.e. after the date of the office note. The office note
cannot, therefore, mention any event, which has occurred
later on, i.e., after 29th Aug., 2002. The fact that the
proposal itself is dt. 19th May, 2002 could not be
controverted by the learned Departmental Representative.16. On going through the alleged office note available
on pp. 202 to 226, it is found that the office note has been
allegedly signed on 29th Aug., 2002 that is the date on
ITA 582/2008 with connected matters Page 42 of 47
which the assessment order in the case of M/s Friends
Portfolio (P) Ltd. was completed. On closer scrutiny of
the facts and circumstances mentioned above including
the fact regarding the mention of satisfaction note in the
case of “this company” and proposal for centralization of
the case in the circle in which the cases of searched
persons fell, as referred to above, and also in view of the
circumstances relating to this issue, we find force in the
submissions of the learned Counsel for the assessee made
before us and conclude that no satisfaction note was
prepared on 29th Aug., 2002 and this note has been
prepared even after 26th Nov.,. 2002. Our reasons for
holding so are as under:(i) Had the satisfaction been recorded on 29th Aug.,
2002, there would have been no necessity to record
another satisfaction on 26th Nov., 2002. The note refers
to the “satisfaction recorded in the case of this company”
which reference is to the satisfaction dt. 26th Nov., 2002
and hence this note has been prepared subsequent to
satisfaction note dt. 26th Nov., 2002.(ii) Had the satisfaction note been recorded on 29th Aug.,
2002 then the record pertaining to the other person not
searched should have been transferred to the AO of the
present assessee who was a different officer at that time
than the officer of the searched person.(iii) The alleged satisfaction makes mention of the
proposal and approval regarding centralization of the
case. This proposal is dt. 19th Nov., 2002 and is
subsequent to the alleged note which fact proves the
contention of the learned Counsel for the assessee that
the notice (sic-note) is antedated.ITA 582/2008 with connected matters Page 43 of 47
(iv) There is a detailed note by the AO, a copy of which
has been filed at p. 33 of the paper book. The concluding
observations of the AO in this note are as under:―In view of the facts mentioned above and the
block assessment orders of Sh. Manoj Aggarwal
and M/s Friends Portfolio (P) Ltd., undisclosed
income has arisen in the hands of M/s SMC Share
Brokers Ltd. which has been found during the
course of search and seizure operations in the case
of Shri Manoj Aggarwal and his associate
concerns. Thus, proceedings under Section 158BD
are applicable in this case.‖The date below the signatures of the AO is not legible in
this copy. Therefore, the learned Departmental
Representative was asked during the course of hearing of
the case to verify the date of this note. On verification
from the record, she informed that the note is dt. 26th
Nov., 2002. This fact has been recorded by the Bench on
p. 33 itself.
17. In view of the above, it is clear that on or before
29th Aug., 2002, the AO of M/s Friends Portfolio (P)
Limited and that of Shri Manoj Aggarwal did not record
any satisfaction. The note dt. 29th Aug., 2002 is,
therefore, not to be taken for recording satisfaction
required under Section 158BC/158BD.‖
25. We will be failing in our duty, if we do not take note of some more
facts. In the said case, there was another satisfaction note dated 26.11.2002
and referring to the said note the tribunal in SMC Share Brokers Ltd.
(supra) has held as follows:
ITA 582/2008 with connected matters Page 44 of 47
―20.1 The next plea of the assessee is that the satisfaction
note makes no reference to the seized material and thus
the proceedings under Section 158BD judged from the
satisfaction note cannot be justified. We do not find force
in this submission also. The satisfaction note dt. 26th
Nov., 2002, referred to above, is a detailed one. We have
also reproduced the concluding observations of the AO,
which indicate that he applied his mind before recording
the satisfaction. It may be pointed out that the satisfaction
note is not required to contain each and every minute
detail and to refer to each and every material relevant for
making assessment under Section 158BD. Thus, the
argument that since, in the satisfaction note, there is no
reference to seized material, the assessment made on the
basis of such satisfaction note cannot be legally
sustained, is not acceptable.‖
26. Eventually, in the said case, as no cross-examination of Manoj
Aggarwal was permitted, the appeal preferred by the assessee, apart from
other grounds, was allowed.
27. The said order was assailed before this Court in ITA No.1221/2006
wherein this Court opined as follows:
―4. The Tribunal held that the Assessing Officer was
functioning as a quasi judicial authority and was under an
obligation to adhere to the principles of natural justice.
Several requests were made by the assessed, but Manoj
Aggarwal was not made available for cross-examination.
ITA 582/2008 with connected matters Page 45 of 47
On this basis, the Tribunal set aside the block assessment
and that is why the Revenue is before us in an appeal
under Section 260A of the Act.
5. Learned Counsel for the Revenue relied upon One-
up Shares and Stock Brokers P. Ltd. vs. R. R. Singh, CIT
(2003) 183 CTR (Bom) 254 : (2003) 262 ITR 275 (Bom)
to contend that the statement of Manoj Aggarwal had
evidentiary value, as observed by the Bombay High
Court. There is no doubt that the statement of Manoj
Aggarwal had evidentiary value but weight could not be
given to it in proceedings against the assessed without it
being tested under cross-examination. In the absence of
the statement being tested, it cannot be said that it should
be believed completely to the prejudice of the assessed.
Under the circumstances, we do not think that the
judgment relied upon by learned Counsel carries him any
further.
6. We are of the opinion that the Tribunal was right
in its view that in the absence of Manoj Aggarwal being
made available for cross-examination, despite repeated
requests by the assessed, his statement could not be relied
upon to his detriment.‖
28. It is rightly submitted by learned counsel for the respondent-assessee
that the said finding of the tribunal has been given the stamp of approval by
the High Court. Learned counsel for the revenue would contend that the
appeal was preferred on a limited scope. We need not delve into that
inasmuch as the said finding of the tribunal has gone unchallenged and
ITA 582/2008 with connected matters Page 46 of 47
hence, we cannot rely on the said note dated 29th August, 2002 to come to a
conclusion that there was recording of satisfaction. The said note stands
discredited in the case of SMC Share Brokers Ltd. (supra). The said
finding is a finding of fact. We cannot, therefore, for the first time take the
said note into consideration.
29. In view of the aforesaid analysis, while we do not find there is any
substantial question of law involved in the present batch of appeals,
however, conclusion of the tribunal that the forming of an opinion has to be
along with the framing of assessment inasmuch as the assessing officer after
said date becomes functus officio is kept open to be addressed in an appeal
where the said issue is required to be dealt with.
30. Resultantly, the appeals, being devoid of merit, stand dismissed
without any order as to costs.
CHIEF JUSTICE
SANJIV KHANNA, J.
MAY 30, 2011
dk
ITA 582/2008 with connected matters Page 47 of 47
