IMPORTANT POINT
In taxing statutes, even if the literal interpretation results in hardship or inconvenience, it has to be followed

Headnote:Income Tax Act, 1961- Section 158BD- Proceedings under Chapter XIV-B- At what stage of the proceedings under Chapter XIV-B does the assessing authority require to record his satisfaction for issuing a notice under Section 158BD of Act, 1961-Held for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person- The satisfaction note could be prepared at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act or along with the assessment proceedings under Section 158BC of the Act or immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person-Instantly Assessing officer had not recorded the satisfaction note as required under Section 158BD of the Act-Hence Tribunal and High Court were justified in setting aside orders of assessment and orders passed by first appellate authority- Matters remanded to respective High Courts for deciding the matters afresh after affording an opportunity of hearing to parties-Appeals disposed of(Paras 44 to 46)
       Income Tax Act, 1961- Section 158BD- At what stage of proceedings under Chapter XIV-B does the assessing authority require to record his satisfaction for issuing a notice under Section 158BD of Act, 1961-Before initiating proceedings under Section 158BD of the Act, assessing officer who has initiated proceedings for completion of the assessments under Section 158BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under Section 132 or the books of accounts were requisitioned under Section 132A of the Act- Under Section 158BD the existence of cogent and demonstrative material is germane to the assessing officers’ satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action under Section 158BD- The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158BC of the Act or during the stage of the assessment proceedings- It does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under Section 132 or requisition of books of accounts were made under Section 132A of the Act- The language of the provision is clear and unambiguous- The legislature has not imposed any embargo on the assessing officer in respect of the stage of proceedings during which the satisfaction is to be reached and recorded in respect of the person other than the searched person(Para 41)
       Facts of the Case –
       The issue that falls for consideration and decision in all these appeals is: at what stage of the proceedings under Chapter XIV-B does the assessing authority require to record his satisfaction for issuing a notice under Section 158BD of the Income Tax Act, 1961.
       Findings of the Court –
       The Apex Court held that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act or along with the assessment proceedings under Section 158BC of the Act or immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person. Instantly Assessing officer had not recorded the satisfaction note as required under Section 158BD of the Act. Hence Tribunal and High Court were justified in setting aside orders of assessment and orders passed by first appellate authority. Matters were remanded to respective High Courts for deciding the matters afresh after affording an opportunity of hearing to parties. Appeals were disposed of

ORDER :

1. Delay, if any, in filing and refiling the Special Leave Petitions is condoned.

2. Leave granted.

3. The issue that falls for our consideration and decision in all these appeals is: at what stage of the proceedings under Chapter XIV-B does the assessing authority require to record his satisfaction for issuing a notice under Section 158BD of the Income Tax Act, 1961 ('the Act' for short).

4. Since the issue is common in all these appeals, after hearing the learned counsel for the parties to the lis, we dispose of all these appeals by this common order.

5. For the purpose of disposal of these appeals, we take the Civil Appeal@ Special Leave Petition (Civil) No.10542 of 2011 as the lead case. Civil Appeal No.3958 of 2014 @S.L.P.(C)No.10542/2011:

6. The respondent in this appeal is a firm engaged in manufacturing hosiery goods in the name and style of M/s. Calcutta Knitwears.

7. A search operation under Section 132 of the Act was carried out in two premises of the Bhatia Group, namely, M/s. Swastik Trading Company and M/s. Kavita International Company on 05.02.2003 and certain incriminating documents pertaining to the assessee firm were traced in the said search.

8. After completion of the investigation by the investigating agency and handing over of the documents to the assessing authority, the assessing authority had completed the block assessments in the case of Bhatia Group. Since certain other documents did not pertain to the person searched under Section 132 of the Act, the assessing authority thought it fit to transmit those documents, which according to him, pertain to the “undisclosed income” on account of investment element and profit element of the assessee firm and require to be assessed under Section 158BC read with Section 158BD of the Act to another assessing authority in whose jurisdiction the assessments could be completed. In doing so, the assessing authority had recorded his satisfaction note dated 15.07.2005.

9. The jurisdictional assessing authority for the respondent-assessee had issued the show cause notice under Section 158BD for the block period 01.04.1996 to 05.02.2003, dated 10.02.2006 to the assessee inter alia directing the assessee to show cause as to why should the proceedings under Section 158BC not be completed. After receipt of the said notice, the assessee firm had filed its return under Section 158BD for the said block period declaring its total income as Nil and further filed its reply to the said notice challenging the validity of the said notice under Section 158BD, dated 08.03.2006. The assessee had taken the stand that the notice issued to the assessee is (a) in violation of the provisions of Section 158BD as the conditions precedent have not been complied with by the assessing officer and (b) beyond the period of limitation as provided for under Section 158BE read with Section 158BD and therefore, no action could be initiated against the assessee and accordingly, requested the assessing officer to drop the proceedings.

10. The assessing authority, after due consideration of the reply filed to the show cause notice, has rejected the aforesaid stand of the assessee and assessed the undisclosed income as Rs. 21,76,916/-(Rs.16,05,744/- (unexplained investment) and Rs.5,71,172/- (profit element)) by order dated 08.02.2008. The assessing officer is of the view that Section 158BE of the Act does not provide for any limitation for issuance of notice and completion of the assessment proceedings under Section 158BD of the Act and therefore a notice could be issued even after completion of the proceedings of the searched person under Section 158BC of the Act.

11. Disturbed by the orders passed by the assessing officer, the assessee firm had carried the matter in appeal before the Commissioner of Income Tax (Appeal-II) (for short 'the CIT(A)’). The CIT(A), while rejecting the stand of the assessee in respect of validity of notice issued under Section 158BD, has partly allowed the appeal filed

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2014 Supreme(SC) 198

IMPORTANT POINTIn taxing statutes, even if the literal interpretation results in hardship or inconvenience, it has to be followed

Cases Referred (19)

IMPORTANT POINT
In taxing statutes, even if the literal interpretation results in hardship or inconvenience, it has to be followed