A satisfaction note is essential for invoking Section 158BD of the Income Tax Act, and its absence in original proceedings does not invalidate subsequent actions if properly recorded later.

Judgment :

1. The appellant has preferred the present D.B. Income Tax Appeal under Section 260A of theIncome Tax Act, 1961 against the judgment dated 23.02.2007 passed by the Income Tax Appellate Tribunal, Jodhpur for the assessment years 1990-1991 to 2000-2001.

2. A search operation was carried out on 29.07.1999 under Section 132 (1) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act of 1961’) in the case of Satish Chand Dhussa (hereinafter referred to as ‘assessee’). It is stated by the learned counsel for the appellant that at the time of search, the appellant- Suresh Kumar Chawla was also found present in the house of the assessee, as he was the brother-in-law of the assessee. A bag containing certain loose papers was found and seized from the possession of assessee. The assessee clarified during assessment proceedings under Section 158BC that the bag and documents were not related to him. The learned Assistant Commissioner of Income Tax, Circle-2, Bikaner vide his letter No. 1213 dated 10.01.2003 informed the then DCIT, Sriganganagar that action under Section 158BD was to be taken against the appellant- Suresh Kumar Chawla. Pursuant to it, the assessment order dated 21.03.2005 was passed by the Assessing Officer against appellant whereafter, an appeal was preferred and the same was partly allowed by the Learned Commissioner of Income Tax (Appeals), Bikaner vide order dated 31.08.2005.

3. Learned counsel for the appellant makes a clear submission that for the proceeding under Sections 158BC and 157BD, it is a mandatory condition for the Assessing Officer to reach and record a satisfaction in respect of the person, other than the person with respect of whom search is made, in order to proceed under Section 158BC against such other person.

3.1 Learned counsel for the appellant has relied upon the judgment passed by the Hon’ble Supreme Court in case of Manish Maheshwari vs. Assistant Commissioner of Income Tax & Anr. reported in 2007 (3) SCC 794 . The relevant part of the above judgment is reproduced hereunder:-

“158-BD. Undisclosed income of any other person. Where the assessing officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section 132-A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the assessing officer having jurisdiction over such other person and that assessing officer shall proceed against such other person and the provisions of this Chapter shall apply accordingly.”

Condition precedent for invoking a block assessment is that a search has been conducted under Section 132, or documents or assets have been requisitioned under Section 132-A. The said provision would apply in the case of any person in respect of whom search has been carried out under Section 132 or documents or assets have been requisitioned under Section 132-A. Section 158-BD, however, provides for taking recourse to a block assessment in terms of Section 158-BC in respect of any other person, the conditions precedents wherefor are: (i) satisfaction must be recorded by the assessing officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the Act; (ii) the books of accounts or other documents or assets seized or requisitioned had been handed over to the assessing officer having jurisdiction over such other person; and (iii) the assessing officer has proceeded under Section 158-BC against such other person.”

3.2 Learned counsel for the appellant also draws the attention of this Court to Paragraph No. 19 of the impugned order, which reads as follows:-

“19. After perusing the entire records either available before us, or called from the records of the department, other evidence towards which our attention was drawn, we are satisfied