Point of Law : satisfaction note has to be prepared either at the time of or along with the initiation of the proceedings.

JUDGMENT :

S. Muralidhar, J.

1. The challenge in the present writ petition is to an assessment order dated 29th December, 2017 passed by the Assistant Commissioner of Income Tax, Central Circle-I, Bhubaneswar (Opposite Party No.2) under Section 143(3) read with Section 153 C of the Income Tax Act, 1961 (‘Act’) for the Assessment Year (AY) 2016-17 and the second notice of demand of the same date issued by the Opposite Party No.2 under Section 156 of the Act calling upon the Petitioner to pay a sum of Rs.7,71,81,350/-.

2. On 18th June, 2018 this Court inter alia allowed two applications seeking amendment of the writ petition viz., Misc. Case No.3489 of 2018 Misc. Case No.4517 of 2018 whereby certain averments were permitted to be inserted to the effect that the Petitioner’s assessment were reopened under Section 153C of the Act for the AY 2012-13 to 2016-17 and that the Assessing Officer (AO) had not recorded a satisfaction note before initiation of the proceedings under Section 153 C of the Act.

3. I.A. No.9051 of 2018 has thereafter been filed seeking to insert para 18 to the effect that the AO had not stated that incriminating materials belonging to the Petitioner was seized from the searched persons and therefore, the proceedings were liable to be quashed.

4. For the reasons stated therein, I.A. No.9051 of 2018 is allowed.

5. This Court has heard the submission of Mr. Sidhartha Ray, learned counsel for the Petitioner and Mr. R.S. Chimanka, learned Senior Standing Counsel for the Opposite Party (IT Department).

6. The background facts are that the Petitioner firm is engaged in the business of manufacturing/processing of cashew nuts into cashew kernel. It filed its original return of income on 18th October, 2016 for the AY 2016-17 declaring the total income at Rs.8,94,1000/-. The Authorized Officer (ITO) at Keonjhar undertook a survey operation under Section 133A of the Act on 12th February, 2016. Instead of conducting a survey assessment Opposite Party No.2 invoked the jurisdiction under Section 153C of the Act for making a block assessment for the AYs 2010-11 to 2016-17. This was as a result of searches being conducted in the premises of Sri Jami Ramesh and Sri Jami Sivasai

7. Mr. S. Ray, learned counsel for the Petitioner first submits that there was no recording of satisfaction by the AO of the searched persons, Sri Jami Ramesh and Sri Jami Sivasai, that the materials seized during the said search revealed the undisclosed income of a 3rd person viz., the present Petitioner and no such note of satisfaction was transmitted to the AO having jurisdiction to assess the present Petitioner under Section 153C of the Act. He points out that even the assessment orders passed under Sections 153A in respect of the searched persons do not indicate that any incriminating materials vis-à-vis the present Petitioner was found during the course of search.

8. The above submissions have been considered. It is seen in the present case that the documents relied upon by the AO were found in the course of survey of the Petitioner and not during the search of the aforementioned two persons viz., Sri Jami Ramesh and Sri Jami Sivasai against whom the search authorization was issued under Section 132 of the Act.

9. In terms of the circular dated 31st December, 2015 issued by the Central Board of Direct Taxes (CBDT) it was explained that before initiation of the proceedings under Section 153C of the Act the following steps are imperative :

(i) a satisfaction note has to be prepared either at the time of or along with the initiation of the proceedings; or

(ii) in the course of the assessment proceeding under Section 153C of the Act; or

(iii) immediately after the assessment proceedings are completed of the search persons.

10. Section 153C of the Act has been held to be similar to Section 158 BD of the Act. Therefore, the law explained in the judgment of the Supreme Court in Commissioner of Income Tax (CIT) v. Calcutta Knitwears (2014) 362 ITR 673 SC applies. In the