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| DATE: | April 1, 2014 (Date of publication) |
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| Click here to download the judgement (calcutta_knitwear_158BD_satisfaction.pdf) |
S. 158BC/ 158BD: Law on how & when “satisfaction” has to be recorded by AO to attain jurisdiction over non-searched person explained
A search u/s 132 was carried out in the premises of the Bhatia Group on 05.02.2003 and certain incriminating documents pertaining to the assessee firm were found. The assessment on the Bhatia group was completed on 30.03.2005. Thereafter, on 15.07.2005, the AO recorded his “satisfaction” that the seized papers revealed the undisclosed income of the assessee and the said papers were passed on to the AO of the assessee for making an assessment u/s 158BC read with s. 158BD. The assessee argued that the proceedings initiated again him were invalid as the said “satisfaction note” was prepared after the proceedings in the case of the searched party were completed. The AO and CIT(A) rejected the assessee’s claim though the Tribunal and the High Court upheld it. The Tribunal & High Court held that as the recording of satisfaction by the AO as contemplated u/s 158BD was on a date subsequent to the framing of assessment u/s 158BC in case of the searched person, that is, beyond the period prescribed u/s 158BE(1)(b), the notice issued u/s 158BD was belated and consequently the assumption of jurisdiction by the AO in the block assessment was invalid. On appeal by the department to the Supreme Court HELD by the Supreme Court allowing the appeal:
(i) While it is true that before initiating proceedings u/s 158BD, the AO who has initiated proceedings for completion of the assessments u/s 158BC should be satisfied, on the basis of cogent and demonstrative material, that the seized documents belong to a person other than the searched person, the said satisfaction note could be prepared by the AO either at the time of initiating proceedings for completion of assessment of a searched person u/s 158BC or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the AO cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person. The language of the provision is clear and unambiguous. The legislature has not imposed any embargo on the AO 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. Further, s. 158BE(2)(b) only provides for the period of limitation for completion of block assessment u/s 158BD in case of the person other than the searched person as two years from the end of the month in which the notice under this Chapter was served on such other person in respect of search carried on after 01.01.1997. The said section does neither provides for nor imposes any restrictions or conditions on the period of limitation for preparation the satisfaction note u/s 158BD and consequent issuance of notice to the other person;
(ii) The result is that for the purpose of s. 158BD a satisfaction note is sine qua non and must be prepared by the AO before he transmits the records to the other AO who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person u/s 158BC of the Act; (b) along with the assessment proceedings u/s 158BC of the Act; and (c) immediately after the assessment proceedings are completed u/s 158BC of the Act of the searched person.
i wonder whether AOs understand honorable appex court rulings ; Besides time limitation bars AO’s jurisdiction but these worthies are more worthier in ‘misunderstanding interpretation of statues’ by hon courts. AOs cannot every time change his reasons but he does; worse still he allows his superior to guide him in his own jurisdiction limits .. there are so many; so humble advice to CBDT when it makes AOs mostly from rank n file by deptl promotions, these AOs to be very well trained in their jobs, as tax payer accepts anything less thant merited work of revenue; Else very future of Revenue is bleak;
I understand Ministry of law has not provided any financial allocations to tribunals and tribunals have to work by application of stare desis or Art 141 supported rulings of Apex courts ;sad is it seems there is no government in place now, very sad to say so sir!
Even if the Supreme Court has ruled that there is no bar in recording satisfaction after completion of the assessment in the case of searched person, propriety requires that there should not be such an inordinate delay in recording the satisfaction and thereafter initiate action under S. 158BD, as it takes already two years since the date of serach and thereafter another two years to completet the assessmetn, viewed from the facts given below.
The Additional Director, who initially goes through the seized material to advise the assessing officer on further action with reference to the same, is very much aware which material relates to the searched person and which material relates to others. Hence ADIT could always pass on the material of other person to the jurisdictional officer within sixty days of its seizure and the A O having jurisdiction could very well take action on that basis to initiate proceedings under S. 158BD.
It is only in the case of any material, which the searched person claims to belong to another person, then the A O of the searched person has to give a finding whether it belongs to another person and this finding has to be given definitely when he completes the assessment. Therefore there is no reason to withhold the finding for another day even being communicated to the jurisdictional A O.
Even if the A O of the searched person considers that material to belong to the searched person on a protective basis, then again there appears to be no reason to withhold the finding for another day even being communicated to the jurisdictional A O.
In the light of the delay of 4 months in initiating the proceedings in the lead case, with due respect, it is felt that it would have been better if the Supreme Court had considered this aspect and set a reasonable time that may be taken by the A O of the other person to initiate the proceedings under S. 158BD, as it would otherwise tend to give room funreasonable delay on the part of the A O to initiate the proceedings, as he would eagerly await the outcome of the appeal before the Tribunal on the protective assessment made in the case of the searched person, which may not be less than another year or two from the date of the assessment of the searched person, and thereafter initiate the proceedings under S. 158BD on that basis.
i agree with KEB. Rangarajan.
Unfortunately unnecessary cumbersome proceedings are on the Assessee ;
There must be time limit on all big or small; err is human in the case of assesses as their main work is business not just taxation only but the Ld AO is meant for taxation purposes. so i believe he should do things with in stipulated periods only, that is called Limitation.
If assesses are to concentrate only on taxation what would happen to him to do his business as businesses only give some tax to government as unearned revenue income;
if AOs fail in their assigned work with a stipulation of time limit then these worthies would take happy time as they decide and such situation encourages all kinds of corruption as assesses bogged down with their businesses they would tend to corrupt the AOs!
That way corruption gets built in by very Act itself that has to be viewed by hon SC too in the absence of proper sensible Act in place;
it is like a fisherman to fish in the tank or river or sea or any where, can he hope to bait all fishes in the location he is fishing, so he is happy with what he got as he was not the man as God who created the fish in the location of fishing; similarly revenue without promptness of professional skill of assessing within a stipulated time limit then he should be willing to lose what he could not net, that is natural justice of natural order as Revenue never earned the taxes by itself but getting its illegal share as it stipulates by some finance act or the other, so it is vital to note a principle what
United Irish Man said .. ‘WHERE THE FREEDOM IS , THERE SHOULD OUR COUNTRY BE’ why without trust no citizen can or would like to function with any government which never trusts its citizens… many chose would definitely cheat as you are treated by your government that as Assesse that ‘you are a cheat’ that way the statutes and laws are made, no law trusts any citizen as a citizen how compliance could be possible is law of Nature;
Any amount of pressure would bring in any amount off devious methods so governance per force work on trust that way the thought of “No taxation without Representation ‘ surfaced in Boston, MA USA
Laws are for compliance in volition principle of cooperation not by any kind of threat(s);
If Revenue loses by not following sensible limitation principle then let it lose, after all you cannot citizen – assesses who are the life blood of any nation.. without their proprietary rights on their intellectual property how a business could be run how an assessee he could become if he does not earn the relevant income is the principle every law maker need know that is why our principle of natural justice surfaced world over;
Kings and monarchs who went gung ho on people had to pat price like King John in England opened for Magna Carta, the French Revolution which killed the King of France then, so too risings now in Egypt, Libya and else where, the honorable Supreme courts need to give credence to peoples psyche;
Without people there cannot be any economy at all, what ever Baghirata prayatna government does!
LAW DEFINITELY NEED RESPECT PEOPLE AT ALL COSTS, I WOULD GO ONE MORE EXTREME ABOLISH ALL PENALTIES IN INCOME TAX ACT AS IT FOSTERS ALL KINDS OF CORRUPTION THAT WAY JUDICIAL REVIEWS NEED BE IS MY VIEW SIRs!
Hon SC did a proper order; see in CEBON INDIA AND AVIT OIL INDIA DECISIONS ARE TAKEN ON THE BASIS OF SERVING NOTICES ONLY STATUTES MAY BE POOR IN READING ENGLISH CORRECTLY ASS WELL EXPLAINED BY PATNA HC VERY CANDIDLY BY TS FULL BENCH BY REFERRING DICTIONARIES INCLUDING NEW ILLUSTRATED DICTIONARY WHEN ANALYZING THE CIT V SREE KUMARI DEVI 157 ITR 13 PAT (FB);
ALL SAID AND DONE TODAY ENGLISH ABILITY IN INDIANS ARE UNLIKE IN THE DAYS PRE INDEPENDENCE ERA;
BY SIMPLY EGOISTIC WOULD NOT BE OF ANY AVAIL; YOU WILL ONLY INSULT THE CITIZENS BY HALF KNOWLEDGE AFTER ALL VERY WORD SATISFACTION FIRST NEED BE UNDERSTOOD PROPERLY;
THAT DOES NOT MEAN TODAY WE DO NOT HAVE HIGHLY CAPABLE JUDGES TO READ BETWEEN LINES; HOW GREAT INDIANS AS CITIZENS TOLERATE HALF KNOWLEDGEABLE!
TOLERANCE OF CITIZENS CANNOT BE TAKEN FOR GRANTED BY PARLIAMENT OR LEGISLATURES IS THE MESSAGE TIME AND AGAIN APEX AS ALSO SOME EMINENT HCs SAY IN MOST UNCERTAIN TERMS THAT IS GIFT OF GIVING US VERY GOOD CONSTITUTIONAL COURTS;
IN TODAY’S INTERNET ENGLISH LANGUAGE HAS GONE DOWN AND YET WE NEED TO PRESERVE THE PRISTINE GLORY OF ALL LANGUAGES IN A PROPER PERSPECTIVES, IS MY VIEW SIRS!
What do we mean by Law of cooperation and we developed cooperative societies under what premise of thought?
All laws need necessary be people oriented that is vital for any governance if to be meaningful is my another thought too;
public servant mean one should necessarily respect people not just some so called minister, when he is against principle of Good citizenship and principle of sovereignty of State, people on their own volition want the territorial integrity not just one man said but by their own basic willingness that willingness only helped build defense forces, foreign affairs, and other areas of cooperation between people as citizens and the state!
Without peoples cooperation nothing could survive is the principle of philosophy of life of man, why even philosophy state, so people are needed be treated Divine may be a few devils might be there; but yet majority of people are indeed divine.. without farmers who really till soil, you can never get food, whatever technology you might talk about.
State is a thought not some material and if that thought is against life of man, that would become a great demon that should be resisted at all costs by people, as democracy is for people by people to people is it not!
So every law making needs a sense of balance is my view!