ORDER
Keshawprasad, A.M.:
The appeal has been directed by the assessed against the order of the assessing officer under section 158BD of the Act pertaining to block period 1-4-1986 to 29-8-1996.
2. In ground Nos. 1 and 2, the assessed has challenged the assessing officer's assumption of jurisdiction under section 158BD of the Act.
3. Briefly, the facts of the case are that the assessed is a private limited company incorporated in May, 1987 with the object of manufacturing automobile parts. A search and seizure operation under section 132 of the Act took place at the premises of M/s DD Industries Ltd. and its associated concerns on 29-8-1996. Certain documents relating to the assessed- company were also found during the course of search and seizure operation. Consequently, a survey operation under section 133A of the Act was also done at the plant and registered office of the assessed- company at B-145, Mayapuri, New Delhi. The proceedings under section 158BD of the Act were initiated by issue of notice on 18-12-1997. In response to such notice, return was filed disclosing nil income. Assessment under Chapter XIV-B was completed and certain additions were made which are challenged before us.
4. While challenging the assessing officer's assumption of jurisdiction under section 158BD of the Act, the learned counsel stated that it was mandatory for the assessing officer to record his satisfaction before issue of notice under section 158BD of the Act. Without recording his satisfaction, the issue of notice under section 158BD is illegal. The learned counsel also confirmed that in between 29-8-1996 (date of search and seizure operation at M/s DD Industries Ltd.) and 18-12-1997 (date of issue of notice under section 158BD) no enquiry/investigation on any issue was made by the assessing officer dealing with the case of assessed. It was also confirmed that no search and seizure operation under section 132(l) of the Act has taken place at the premises of the assessed. He stated that the assumption of jurisdiction under section 158BD itself was illegal, the whole assessment order was void ab initio. The reliance was placed on the decisions reported as Ved Prakash Sanjay Kumar v. Assistant Commissioner (2001) 76 ITD 107 , Suman Dhanji Zalte v. Assn. CIT (2000) 72 ITD 132 and Dr. Ajay Kumar Agarwal v. Asstt. C7 . The learned counsel also stated that as search and seizure operation took place on 29-8-1996, the assessment should have been completed by 31-8-1997. As the assessment order was passed on 31-12-1998, it was beyond the period of limitation and the assessment deserves to be annulled.
5. On the other hand, learned Departmental Representative stated that the assessment has been completed within the statutory period. He also stated that in the office note of the assessment order, the satisfaction of the assessing officer was recorded in the following words:
'M/s Kiran Engineers (P) Ltd. is a group concern of DD group (Surinder Gambhir) and was covered by search operation at various places belonging to the group companies including B-30, G.T. Karnal Road and F-1/9, Okhla Indl. Area, from where papers pertaining to the assessed- company were seized. During the search, stock inventory was prepared at the factory of the assessed through a separate survey under section 133-A by the search party and certain discrepancy was found and reported in the appraisal report. Accordingly, proceedings under section 158BD were initiated by my predecessor.'
6. The learned Departmental Representative accordingly argued that the preliminary objections raised by the learned counsel had no force and deserves to be dismissed.
7. We have considered the rival submissions. There is no dispute that section 158BD provides that 'where the assessing officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made under section 132 of the Act., the assessing officer shall proceed against such other person and provisions of this Chapter shall apply accordingly.'
8. The use of the words 'assessing officer is satisfied' clearly indicates that, before any jurisdiction under section 158BD was assumed, there should be some material with the assessing officer which led him to satisfy himself that any undisclosed income belonged to a person other than the searched person. We have, thereforee, examined as to whether there was any material with the assessing officer to satisfy himself that the provisions of section 158BD were applicable. There is no dispute that such satisfaction could be arrived at on the basis of seized documents or other documents relatable to the seized documents. We have perused the reasons recorded by assessing officer which led to his satisfaction for assuming jurisdiction under section 158BD of the Act. This recording of satisfaction has been mentioned earlier. The search and seizure operation was conducted at the premises of M/s DD Industries Ltd. During search and seizure operation at B-30, GT Karnal Road and F-1/9, Okhla Industrial Area, certain documents pertaining to the assessed- company were found and seized. Though Investigation Branch of the IT department has prepared appraisal report for the guidance of the assessing officer, the same cannot form the basis of issue of notice under section 158BD of the Income Tax Act. There is no dispute that for assuming jurisdiction under section 158BD, the assessing officer has to satisfy himself that the undisclosed income on the basis of seized documents belong to somebody else. Merely if, at some places, a document relating to third person was found, it was not enough for assuming jurisdiction under section 158BD of the Act. The assessing officer has to form his opinion that the undisclosed income mentioned in the seized documents, in fact, belongs to the third person. In this connection, we had asked the learned counsel for the assessed as to whether any enquiry/investigation was made by the assessing officer between the date of search and seizure operation and the date of issue of notice under section 158BD of the Act. The learned counsel in writing has confirmed that no enquiry/investigation was done by the assessing officer from the assessed between the period of search and seizure operation and the date of the issue of notice under section 158BD of the Act. This fact has not been rebutted by the revenue; rather the revenue has filed a letter indicating the circumstances which led to the issue of notice under section 158BD of the Act. This letter is from the present assessing officer stating under what circumstances the earlier assessing officer had issued notice under section 158BD of the Act. Even this letter does not help the revenue because in the said letter also, the assessing officer has nowhere recorded his satisfaction that the income noted on the seized document, in fact, belonged to the appellant.
9. We find that similar issue was considered by Pune Bench of the Tribunal in the case of Suman Dhanji Zalte v. Assistant Commissioner (supra). In the said case, the Bench had observed as under :
'The 'other person' mentioned in section 158BD comes into the picture only by virtue of such satisfaction of the assessing officer on the basis of material showing undisclosed income of,such other person and it is.only after such satisfaction and transmission of relevant material that the other assessing officer has to take action and proceed to issue notice under section 158BC. Thus, the powers of the assessing officer under section 158BD cannot be invoked in a light and arbitrary manner and without complying with basic prerequisites specified in section 158BD. We feel that the object underlying the provisions of section 158BD is not to give unbridled power to the assessing officer to proceed against any person without reaching satisfaction in an objective manner based on the cogent material/documents seized at the time of search. The satisfaction of the assessing officer is not a mere formality but it should be positive satisfaction that the seized material pertains to the other person and reveals undisclosed income of that other person. We feel that the provisions of section 158BD, incorporated in Chapter XIV-B dealing with special procedure for assessment of search cases, have to be construed strictly, as the same provide a launching pad for the assessing officer to assume jurisdiction and proceed against a person, other than the searched person, so as to rope him within the provisions of Chapter XIV-B. We feel that the assessing officer has to make himself sure of the correctness of the seized documents by proper examination and unless the assessing officer is fully satisfied that such document disclose undisclosed income of another person, he shall not proceed against such other person on the basis of such documents and that too without bringing them on record'.
10. Similarly, the Chandigarh Bench of the Tribunal in the case of Ved Prakash Sanjay Kumar v. Assistant Commissioner (supra) at p. 119 observed as under :
'The bare reading of this section clearly shows that the search provisions can be invoked only if assessing officer is satisfied that any undisclosed income belongs to some person other than the one with respect to whom search was made under section 132. Such satisfaction must be arrived at by the assessing officer before invoking the provisions of section 158BD on the basis of material found in the course of search of other person. Any material coming into the possession of the assessing officer after invoking the section 158BD cannot be considered for exercising such jurisdiction. In the absence of such satisfaction, the assessment made on any other person would, in our opinion, be illegal and void ab initio since jurisdiction to assess other person can be exercised validly only in accordance with provisions of section 1588D.
11. Keeping in view the facts of this case and the decisions of the Tribunal, we hold that the assessing officer has wrongly assumed jurisdiction under section 158BD of the Act as before the issue of notice under section 158BD of the Act, he has not recorded his satisfaction holding that the undisclosed income on the basis of seized documents belonged to the appellant. As the assumption of jurisdiction under section 159BD of the Act is illegal, the order passed in consequence to such notice is, thereforee, annulled.
12. As we have already annulled the assessment order, we are not going into other arguments or the grounds raised by the appellant.
13. In the result, the appeal filed by the assessed is allowed.