Wednesday 28 January 2015

Whether for purpose of Sec 158BD, a satisfaction note is sine qua non and must be prepared by AO before he transmits records to other AO who has jurisdiction over such other person - YES: HC

THE issue before the Bench is - Whether for the purpose of Section 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. YES is the answer.
Facts of the case
The assessee is, Sh. Manoj Bansal whose premises was searched which led to seizure of various documents and other materials; even the statement was recorded u/s 132. The present assessees were issued with a notice by his AO. It was alleged by the revenue that the notice was on account of opinion formation in terms of Section 158BB of Sh. Manoj Aggarwal’s AO. During the course of proceeding the matter ultimately reached the ITAT which after considering the submissions of the parties as far as the records of assessment, in the assessee’s case, held that the requirement of Section 158BB were not complied with in terms of the judgment of SC cited as Manish Maheswari V. ACIT 2007-TIOL-24-SC-IT. The order of the ITAT became the subject matter of challenge in ITA 582/2008, where HC affirmed the findings of ITAT. While doing so, the judgment in Manish Maheswari was considered, and so too were the other decisions of the SC. Thereafter the Court discussed the letter dated 15.7.2003, by the AO of Manoj Aggarwal, who wrote to the AO of the present assessee. It was observed as per the letter that various diaries had been seized from the possession of Sh. Manoj Aggarwal which establish that Radhey Shyam Bansal was a mediator for providing accommodation book entries by Sh. Manoj Aggarwal. There were evidences of cash having been received by Mr. Manoj Aggarwal from Radhey Shyam Bansal.The summary of the amounts so received as per various seized documents was given in a separate Annexure.
Held that,
++ the judgment of the SC in Calcutta Knitwear pertinently held that for the purpose of Section 158BD, a satisfaction note is sine qua non and must be prepared by 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; (b) along with the assessment proceedings u/s 158BC and (c) immediately after the assessment proceedings are completed u/s 158BC of the searched person. In the present case the revenue’s contention are not different from what they were in the main appeal, which was decided in the judgment reported as CIT V. Radhey Shayam Bansal 2011-TIOL-333-HC-DEL-IT. It is sought to be reported that the opinion formation contained in the letter dated 15.7.2003 accords with the opinion of Section 158BB. In this regard the court recollects and applies its findings in relation to the note on this aspect, in view of the aforesaid legal position we can now examine the letter dated 15th July, 2003 which was communicated by the AO of the searched assessee to the assessing officer of the respondent. The question is whether the aforesaid letter can be regarded as "satisfaction" as required u/s 158BD, i.e. satisfaction of the AO of Manoj Aggarwal that there is material that the assessee had undisclosed income;
++ the first paragraph of the aforesaid letter states that the diary seized from the possession of Manoj Aggarwal establishes that the assessee had acted as a mediator for providing accommodation book entries by Manoj Aggarwal. The second paragraph states that there was evidence that cash was received by Manoj Aggarwal from the respondent and the summary of the amounts received as per the seized documents was given in Annexure C. It is accepted that Annexures A, B, C & D, referred to in this letter were not filed before the tribunal and have not been produced before us. It is conceded by the counsel for the revenue that they are also not available on the file of the AO of the respondent. There is no explanation forthcoming with regard to the aforesaid annexures. It is well nigh impossible to know their content. The first paragraph of the letter dated 15th July, 2003 states that the assessee had acted as a mediator i.e. they had introduced Manoj Aggarwal with other persons to whom accommodation book entries were provided by Manoj Aggarwal. There is no allegation in the first paragraph that the assessee was provided with accommodation book entries or the amounts belong to the assessee. Book entries were provided to third parties. It is not stated in this "satisfaction note" that Manoj Aggarwal or third parties had paid any amount towards commission for acting as a mediator. There is no such allegation or statement in the "satisfaction note". The second paragraph does create some doubt but what is relevant and important is the fact that in the first paragraph, it is accepted by the AO of Manoj Aggarwal that the assessee was merely acting as a mediator and nothing more. The second paragraph of the letter states that there was evidence that cash was received by Manoj Aggarwal from the assessees. What was the evidence and material was not brought on record before the tribunal or even before us. The said material is not mentioned in the assessment order. It cannot be 'ipse dixit' without material or evidence to satisfy the concept of requirement as engrafted u/s 158BD. What was the material was neither highlighted before the tribunal nor before us. Thus, the revenue has not discharged the onus that there was valid satisfaction as required u/s 158 BD. Therefore, the irresistible conclusion is the pre-requisite of "satisfaction" as engrafted u/s 158B for the purpose of initiation of block assessment proceeding is non-existent or absent. For the above reasons the revenue’s submission lacks merit. Accordingly the appeal is dismissed

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