The primary issue was the validity of the initiation of proceedings under section 158BD of the Income-tax Act, 1961, against the Assessee without a satisfaction note from the Assessing Officer of the searched person.

The revenue contended that the satisfaction note for initiating proceedings under Section 158BD against the assessee was duly recorded by the Assessing Officer of the searched person, and thus, the initiation of proceedings was valid.

The assessee argued that the initiation of proceedings under Section 158BD was invalid as there was no satisfaction note recorded by the Assessing Officer of the searched person.  Additionally, the required procedure of handing over documents by the Assessing Officer of the searched person to the Assessing Officer of the assessee was not followed.

The Hon’ble Tribunal held that the satisfaction note was not recorded by the Assessing Officer of the searched person but by the Assessing Officer of the assessee.  The Hon’ble Tribunal found that the procedure prescribed under Section 158BD, including the handing over of documents, was not followed, rendering the initiation of proceedings unauthorized and without jurisdiction.

The Hon’ble High Court affirmed the Hon’ble Tribunal’s decision, holding that the initiation of proceedings under Section 158BD by the Assessing Officer of the assessee as unauthorized and without jurisdiction due to the absence of a satisfaction note from the Assessing Officer of the searched person.  The Hon’ble High Court dismissed the revenue’s appeal, answering the substantial question of law in favor of the assessee and against the revenue. (BP. 1-4 1996 to 7-5 2002)