The main legal point established in the judgment is that the conditions precedent for invoking the provisions of Section 158BC of the Income Tax Act, 1961 must be strictly satisfied, and the Assessing Officer's satisfaction and transfer of the case to the appropriate jurisdictional officer are mandatory for initiating block assessment proceedings.

JUDGMENT

S.B. SINHA, J :

1. Leave granted.

2. Interpretation of the provision Section 158BC of the Income Tax Act, 1961 (for short, the Act) is in question in these appeals which arise out of judgments and orders dated 28.09.2004 and 14.03.2005 passed by a Division Bench of the Indore Bench of the Madhya Pradesh High Court in I.T.A. Nos. 60 and 105 of 1999.

3. Before embarking on legal issues, we may notice the fact of matter from Civil Appeal arising out of Special Leave Petition (Civil) NO.9751 of 2005.

4. The assessee M/s Indore Construction Company (Pvt.) Ltd. (for short, the Company) is a company registered and incorporated under the Companies Act, 1956 (for short, the Act). One Shri Rameshwar Maheshwari is of one of its Directors. Shri Maheshwari, apart from being a Director of the said Company, is also a tax consultant.

A search was conducted, as contemplated under Section 132 of the Act, in the premises of the said Maheshwari and his wife Smt. Lalita Oevi on 21.11.1995. Several incriminating documents relating to the business of the Company were seized. A proceeding was initiated against the Company purported to be under Section 158BC of the Act. The order of assessment was passed on 29.11.1996. The Tribunal in an appeal preferred by the assessee there against opined that the Assessing Officer had no jurisdiction to proceed against the assessee for making the block assessments in terms of Chapter XIV-B of the Act, as no search was conducted in terms of Section 132 of the Act, stating:

"28. Perusal of the assessment order would go to reveal that the A.O. did not do so. Instead of determining the undisclosed income on the basis of the materials seized from the residence of the Co.s Director, he embarked upon a roving enquiry in respect of completed assessments by referring three apartments to the Valuation Cell to ascertain the correct investment made by the assessee and on receipt of the reports of the Valuation Cell proceeded to compute the income under Section 69 as unexplained investment, adding thereto further undisclosed profit earned on sale of flats. To our mind, what the A.O. did is beyond the scope of Section 158BD. No addition can be made in any of the assessment year of the block period regarding which no material or information is available with the A.O. In a case, where any material or information is found during search, the A.O. has to co-relate such material/information with regard to the regular assessment which have already been completed. At the cost of repetition we may state that Chapter XIV-B does not authorize the A.O. to review the assessment competed unless and until there is any direct or indirect or clinching evidence to indicate that the assessee has withheld or had not disclosed any income. No additions can be made merely on the basis of presumption or hypothesis. This is what the A.O. had actual done."

5. An appeal preferred by the respondent herein before the High Court, as noticed hereinbefore, there against under Section 260A of the Act, has been allowed, holding that the Assessing Officer had the requisite jurisdiction in terms of Section 158BD of the Act read with Section 2(31) thereof. The Block Assessment Period is 1987-88 to 1995-96. The search was conducted on 21.11.1995, where for a warrant of authorization was issued on 15.10.1995 in the following terms:

"If a summons under sub-section (1) of Section 131 of the Income Tax Act, 1961 or under sub section (1) of Section 142 of the Income Tax Act, 1961 is issued to Shri Rameshwar R. Maheshwari, Smt. Lalita Devi. To produce, or cause to be produced, books of accounts or other documents of the institution or relevant proceedings under the Income Tax Act, 1961 he would not produce or cause to be produced, such books of accounts or other documents as required.

Shri Rameshwar H. Maheshwari, Smt. Lalita Devi any person is in possession of any money, bullion, jewellery or other valuable article or things and such money, bullion, jewellery or other val