Applicability of Supreme Court Guidelines on recording of satisfaction note under section 158BD to apply to proceedings under section 153C for the purposes of assessment of income of a person other than the person in respect of whom search is initiated under section 132 or books of account are requisitioned under section 132A [Circular No.24/2015, dated 31-12-2015]

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

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 pre-requisite and the satisfaction note must be prepared by the Assessing Officer before he transmits the record to the other Assessing Officer who has jurisdiction over such other person under section 158BD5. The Supreme 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; or

b. in the course of the assessment proceedings under section 158BC; or

c. immediately after the assessment proceedings are completed under section 158BC of the searched person.

Several High Courts have held that the provisions of section 153C are substantially similar/ pari-materia to the provisions of section 158BD and therefore, the above guidelines of the Supreme Court, apply to proceedings under section 153C, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT.

It is further clarified that even if the Assessing Officer 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.