1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 18TH DAY OF MAY 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE M. NAGAPRASANNA I.T.A. NO.234 OF 2011 BETWEEN: 1. COMMISSIONER OF INCOME TAX-III CENTRAL REVENUE BUILDINGS QUEENS ROAD BANGALORE-560001. 2. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(2) BANGALORE. APPELLANTS (BY SRI.E.I.SANMATHI, ADV.) AND: SHRI. N. RAMAKRISHNAN NO.3, KRISHNA SINGH LANE ULSOORPET, BENGALURU-560002 SINCE DEAD BY LR. SMT. MOHANAMBAL AGED ABOUT 59 YEARS NO.29, 19TH CROSS, 1ST MAIN LALJI NAGAR, LAKKASANDRA 2 BANGALORE-560030 (RELATED TO DECEASED WIFE). RESPONDENT (SERVED V/O DT. 24.7.19 THROUGH PAPER PUBLICATION RESPONDENT - UNREPRESENTED) THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 04.03.2011 PASSED IN IT(SS)AA NO.62/(BANG)/2007, FOR ASSESSMENT YEAR 01/04/1981 TO 29/05/2011, PRAYING TO FORMULATE SQL STATED THEREIN AND TO SET ASIDE APPELLATE ORDER DATED 04.03.2011 PASSED IN IT(SS)AA NO.62/(BANG)/2007 DATED 04.03.2011 AS SOUGHT FOR IN THIS APPEAL. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act ) has been filed by revenue. subject matter of this appeal pertains to block period from 01.04.1981 to 29.05.2001. Appeal was admitted by bench of this Court by order dated 17.10.2019 on following substantial question of law: 3 (i) Whether Tribunal is justified in law on facts and in circumstances of case in holding that assessment order passed under Section 148BD read with Section 158BC is not valid and is void ab initio on ground that assessing officer of person searched has not recorded satisfaction before completion of block assessment proceedings under Section 158BC relying upon decision of Apex Court in case of Manish Maheswari (289 ITR 341) without appreciating fact that assessing officer in case of person searched as assessing officer who initiated proceedings under Section 158BD in case of respondent assessee is same person and also that satisfaction was recorded in case of respondent- assessee before issue of notice under Section 158BD? 4 2. Facts leading to filing of this appeal briefly stated are that search under Section 132 of Act was carried out in residence of Mr.Syed Farahatullah alias Javed, one of partners of M/s Domicile Developers. During course of search, memorandum of understanding entered by him with one Ramakrishnan for purchase of land measuring 1 acre 11 guntas forming part of Sy.No.56/17, Hongasandra Village, Begur Hobli, Bangalore South was seized. As per memorandum of understanding dated 29.05.1995, total sale consideration was fixed at Rs.1,92,00,000/- and out of aforesaid amount, sum of Rs.1,12,00,000/- was paid to aforesaid N.Ramakrishnan payment of which was duly acknowledged. Thereafter, survey was conducted in premises of N.Ramakrishnan on 15.06.2001 and certain documents were impounded. impounded documents revealed that property was sold to one Akram Khan and as per agreement dated 04.12.1998, total sale consideration was Rs.2,12,00,000/-, 5 out of which amount of Rs.1,83,00,000/- was already paid to Mr.N.Ramakrishnan. Mr.N.Ramakrishnan did not disclose this transaction to Income Tax department. 3. In order to bring aforesaid amount to tax, notice under Section 158BD read with Section 158BC of Act was issued on 09.07.2003 which was served on assessee on 14.07.2003. assessee filed return of income for block period on 06.11.2003 declaring undisclosed income as NIL . assessing officer by order dated 29.07.2005 inter alia held that assessee had entered into agreement for sale of property in question and had received entire sale consideration as on date of agreement and handed over possession. Therefore, transfer of property had taken place within meaning of Section 2(47)(v) of Act and capital gains arising out of transfer is chargeable to tax for block period. Accordingly, Assessing Officer held 6 that net sum of Rs.1,13,67,594/- is payable as tax on capital gain. interest and penalty under Section 158BFA(1) and 158BFA(2) were initiated separately. Being aggrieved, assessee filed appeal before Commissioner of Income Tax (Appeals), who by order dated 28.09.2007 dismissed appeal. Being aggrieved, assessee approached Income Tax Appellate Tribunal. Tribunal by order dated 04.03.2011 inter alia held that before completion of block assessment proceedings under Section 158BC of Income Tax Act, assessing officer has to come to conclusion whether undisclosed income belongs to persons searched or any other person. It was further held that even if Assessing Officer is same person in case of both person searched as well as other person, recording of satisfaction has to be before completion of block assessment proceeding in case of person searched. It was also held that since, Assessing Officer did not record 7 satisfaction before completion of proceeding under Section 158BC which should be reflected in notice under Section 158BD of Act, order of assessment is ab initio void. Accordingly, same was quashed and appeal was allowed. Being aggrieved, Revenue is in appeal before us. 4. Learned counsel for revenue submitted that proceedings under Section 158BD were completed in case of Javed on 30.05.2003 and thereafter, satisfaction was recorded by Assessing Officer. However, Income Tax Appellate Tribunal, without examining appeal on merits, has allowed appeal simply on ground that satisfaction was not recorded in case of Javed before completion of assessment proceedings. It is further submitted that aforesaid finding is contrary to law. In this connection, reliance has been placed on decision of Supreme Court in case of CIT Vs. CALCUTTA 8 KNITWEARS (2014) 362 ITR 673 (SC). None has appeared on behalf of respondents despite service of notice. 5. We have considered submissions made by learned counsel for revenue and have perused record. issue which arises for consideration before Supreme Court in case of CALCUTTA KNITWEARS, supra, was at what stage of proceedings under Chapter 14- D, Assessing Authority is required to record his satisfaction for issuing notice under Section 158BD of Act. aforesaid issue has been answered in paragraph 44 of judgment by Supreme Court which is reproduced below for facility of reference: 44. In result, we hold that for purpose of section 158BD of Act satisfaction note is sine qua non and must be prepared by Assessing Officer before he transmits records to other Assessing Officer who has jurisdiction over such other 9 person. satisfaction note could be prepared at either of following stages: (a) at time of or along with initiation of proceedings against searched person under Section 158BC of Act; (b) along with assessment proceedings under Section 158BC of Act; and (c) immediately after assessment proceedings are completed under Section 158BC of Act of searched person. 6. Thus, from perusal of aforesaid paragraph, it is evident that satisfaction can even be recorded immediately after completion of assessment proceedings under Section 158BC of Act. In instant case, admittedly, satisfaction has been recorded after completion of proceedings under Section 158BC of Act. However, order passed by Assessing Officer as well as Commissioner of Income Tax (Appeals) has been set aside by Tribunal merely on ground that satisfaction has not been recorded before completion of assessment proceedings. aforesaid finding is 10 contrary to law laid down by Supreme Court in case of CALCUTTA KNITWEARS, supra. Therefore, same cannot be sustained in eye of law. 7. In view of preceding analysis, substantial question of law framed by this Court is answered in negative. In result, impugned order passed by Tribunal dated 04.03.2011 is hereby quashed and matter is remitted to Tribunal to deal with appeal on merits expeditiously in accordance with law. In result, appeal is allowed. Sd/- JUDGE Sd/- JUDGE SS/RV Commissioner of Income-tax-III, Bangalore / Assistant Commissioner of Income-tax Central Circle 2(2), Bangalore v. N. Ramakrishnan since dead by LR. Mohanambal