CBDT Circular On Recording Of Satisfaction Note U/s 158BD/153C Of Income-tax Act

The CBDT has issued Circular No. 24/2015 dated 31.12.2015 in which it has explained the law relating to recording of satisfaction note by the AO under sections 158BD/153C of the Income-tax Act. The CBDT has drawn attention to the verdict of the Supreme Court in CIT vs. Calcutta Knitwears 362 ITR 673 (SC) in which the stages at which the satisfaction note has to be prepared have been set out. The CBDT has further clarified that even if the AO of the searched person and the “other person” is one and the same, then also he is required to record his satisfaction as has been held by the Courts. The CBDT has also directed that pending litigation with regard to recording of satisfaction note under section 158BD /153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.


CIRCULAR NO. 24/2015

F.No.279/Misc./140 /2015/ITJ

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

New Delhi, 31st December, 2015

Subject: Recording of satisfaction note under section 158BD/153C of the Act – reg.-

The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation.

2. The Hon’ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.2014(available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon’ble Court held that “the satisfaction note could be prepared at any of the following stages:

(a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person.”

3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon’ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT.

4. The guidelines of the Hon’ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the “other person” is one and the same, then also he is required to record his satisfaction as has been held by the Courts.

5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD /153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.

(Ramanjit Kaur Sethi)

DCIT (OSD) (ITJ), CBDT, New Delhi.


8 comments on “CBDT Circular On Recording Of Satisfaction Note U/s 158BD/153C Of Income-tax Act
  1. Bobjee Kurien says:

    Hats off. Wisdom at last dawns on CBDT.

  2. bobjee kurien says:

    If I were to narrate the the facts in my case you would next left wondering how low the beareaucrats in power can stoop to save a fellow colleague against whom the chief justice of the high court passed strictures on a commissioner .They disregarded the directions of the High court and also disregarded all norms for delivery of justice.The commissioner disregarded the written directions of a chief commissioner.Well over and above all the facts are known to the board members through right from 1995 and decisions of the supreme court on the issues the are on records of the board.Still they turn a blind eye.Perhaps the cases that were dealt by me were monitored by the board for 23 YEARS AND ALL THE DIRECTIONS WERE FOLLOWED TO THE T.This being the case they are trying to find a fig leafto hide their Incompetence.Thanks Balakrishnan for the words of encouragement.The IO report is on their table for the past four years.It sounds amusing to read directions of yhe board to the AOs to completethe asst in four hearings!!!!

  3. whenever government fails in its duty under Art 51A Part IVA of the constitution, any one incurs any kind of suffering,due to government dereliction, he can move under Art 226 r/w 227 for quashing of such government order.

    i saw Mr Bobjee Kurien observation, if one takes after seven years some so called ‘sanction of FM’, on the observation of hon SC, without government approval none can take action on the said govt officer, it is obvious the govt failed under art 51A, and Bobjee Kurien can move contempt of court proceedings, as i believe in civil issues limitation acts under law of limitation.
    Obviously, the so called sanction s in fact a ‘non est’ and the department head could be punishable by the hon court, even by the hon high court concerned, for the department had tried to upset the hon SC judgement.

    Bobjee K could move the high court.

    I would say like in USA, the sanctity of jury system could be reintroduced in india, as we all know jury system in india was abolished after Nanavati v Union of india.

    A few days back justice Soto Mayor of USSC wrote opinion in 8-1 judgement ‘setting aside’ the Florida SC judgement on capital punishment trials, as judge bypassed the view of jury not convicting the condemned to death convict.

    It should be clear ‘Jury’ need to be introduced even in things like , obtaining ‘sanction’ issues too;

    similarly, i would recommend, parliamentary jury system may be introduced in India, as parliamentarians being politician legislator law makers, ‘peoples jury’ should be introduced whenever some law is being proposed by the government, so that there would be control over the parliament too. Else, law makers might make RIP kind of statutes that would heartlessly affect the people – citizens – in the times to come.

    Law is a heartless product, for it lacks emotional intelligence once passed and it sits on judgement on emotionally packed humans, after all heart is a reflection of emotions, law is not, that led to the ‘judicial activism’ under ‘judicial review’ system that is recognized by every constitution, as the ‘Constitutions’ are ’emotions’ based document unlike statutes.

    Justice WOD of USSC observed in Ex parte Quinn 317 U.S.1(1941) in saboteur case -the sentence would be susceptible of the interpretation that it would have been ‘unlawful’ for the Executive to have disposed of the petitioners summarily without trial by a tribunal…. He said if he had to vote he would have dissented.

    ‘The Germans had landed several saboteurs by submarine with orders to destroy American factories. All had been captured quickly and tried by a military commission. The court confirmed the right of the President to have the men tried by military rather than civil court, and CJ Mr.Stone omitted the sentence WOD found objectionable.

    what it shows here is court need to have ’emotional intelligence’ and it should apply judicial review is the substance, unlike a rude statute.

    Any way people should assert their own rights as citizens is the substance of my thought line.

    Today Royal Bank of Scotland said Economy all over crumbling, after china failed to contain 10% fall in its economy, means, handling of economy too by the people jury system is better than leave some blessed finance ministers or a few economists, after all citizens have robust ‘common sense’ than just law makers in the guise of legislators.

    People need to rethink is the base line here, at least by the next general elections, if not earlier.

    ii is always to have many heads rather than just a few ‘heads’ decide the fate of the Nation.

  4. recording satisfaction is vital, else the AO fails and his notice is void abinitio

  5. government suffers from problem of superiority perception. i think honorable constitutional courts need to use contempt of court action and sometimes send the secretary of ministry to civil prison to ensure the law of the land prevails.

    • bobjee kurien says:

      The CBDT DOES NOT BOTHER ABOUT THE SUPREME COURT VERDICT.IN MY OWN CASE CHARGE SHEET REQUIRED APROVAL OF THE FINANCE MINISTER.THAT WAS TO BE OBTAINED AFTER ISSUING ME A SHOW CAUSE NOTICE.NO SHOW CAUSE NOTICE WAS ISSUED.A SLOPPY CHARGE SHEET WAS SERVED ON ME FULL OF CONCOCTED LIES PROVEN BY RECORDS AVAILABLE IN THE OFFICE IN THE CBDT.THE SUPREME COURT HAD HELD THAT WHERE THE CHARGE SHEET IS TO BE ISSUED THE DA HAS TO OBTAIN THE APPROVAL OF THE FM.THEY SERVE ON ME A CHARGE SHEET SEVEN YEARS AFTER RETIREMENT SAYING THAT THE FMS APPROVAL IS OBTAINED .THIS AMMENDED CS WAS SERVED ON ME AFTER THE INQUIRY REPORT WAS SUBMITTED AND THE DISCIPLINARY OFFICERS REPORT WAS COMMUNICATED TO ME.IN REPLY TO THE DISCIPLINARY AUTHORITIES COMMUNICATION In FEB 2015 I MENTIONED THAT I MAY BE INFORMED IF THE FM S APPROVAL SOUGHT IN LINE WITH THE SUPREME COURTS VERDICT IN 2013.

      I CONCUR WITH BALAKRISHNANS OBSERVATION ON THE ISSUE.

  6. Paras Chhajed says:

    Honourable Supreme Court rendered decision in early 2014 and it took around 2 years by CBDT to accept the decision of honourable Apex Court. Once the Honourable Supreme Court decides an issue it becomes the law of land but delay in acceptance of the decision of honourable Supreme Court clearly shows rigidness of CBDT and its honour towards the honourable court.

    • Bobjee Kurien says:

      The CBDT just dilly dallies the action in the process also fails to honour the decision of the Supreme court.The Supreme court held that with out the sanction of the Finance Minister no group A officer can be issued a charge sheet . That decision was delivered in 2013 and was kept under wraps for two years The sister department took cognizance of the decision and dropped all proceedings which were in cases where the charge sheet was issued with out the F M approval .The CBDT does not honor the decision of the supreme court .This action does show that the present set up in the board is getting back to the basics of adhering to the decision of the courts . A good start . May the law of the land as decided by the highest court be honored and in doing so let there not be any delay.Let the peoples faith in the law be strengthened

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