Soumitra Pal, J.
1. Subhash Chandra Bhaniramka, the writ petitioner, has challenged the notice dt. 31st Aug., 2007 under Section 158BD of the IT Act, 1961 (in short 'the Act') issued by the Asstt. CIT, Circle-38 Kolkata, the respondent No. 1. The facts, as stated in the petition, in brief are that the Asstt. CIT, Central Circle XXIII, Kolkata, respondent No. 2, by a notice dt. 18th Aug., 2005 requested the petitioner to prepare a true and correct return of total income including the undisclosed income in the status of a company for the block period from 1st April, 1996 to 28th Oct., 2002 under Section 158BD(a) of the Act. Accordingly, on 7th Nov., 2005 as he is assessed as an individual, the petitioner filed the return in the said status. By notice dt. 5th July, 2006 the respondent No. 2 requested the petitioner to attend before the respondent No. 2 regarding the return filed, which he attended. In continuation thereof, a notice dt. 31st July, 2007 was issued calling upon the petitioner to appear on 6th Aug., 2007, which he complied with. However, the respondent No. 2 by letter dt. 3rd Aug., 2007 intimated that since jurisdiction was with the respondent No. 1, proceedings initiated under Section 158BD of the Act on 18th Aug., 2005 had been dropped. Thereafter, the petitioner received the impugned notice dt. 31st Aug., 2007 under Section 158BD of the Act issued by the respondent No. 1 requesting him to file a return of the total income including undisclosed income in the status of a company for the same block period as mentioned in the notice dt. 18th Aug., 2005. By letter dt. 10th Dec, 2007, the petitioner requested the respondent No. 1 to furnish a certified copy of the satisfaction required for issuing the impugned notice under Section 158BD which was allegedly not furnished. Aggrieved, this writ petition was filed. At the time of moving the writ petition directions were issued for filing of affidavits. Affidavits have since been exchanged and are on record.
2. The learned advocate appearing for the petitioner reiterating the statements in the writ petition submitted that the entire exercise of the respondents culminating in the issuance of notice on 31st Aug., 2007 is without jurisdiction and illegal. Not only the status mentioned in the impugned notice is incorrect, the satisfaction recorded as evident from the affidavit in opposition is not subjective. Assuming the satisfaction recorded by the respondent No. 2 is proper, the respondent No. 1 has to record his independent satisfaction. Once pursuant to the notice dt. 18th Aug., 2005 return was filed, it was incumbent upon the respondent No. 1 to pass an order on the return. Moreover, the respondent No. 2, as evident from the letter dt. 3rd Aug., 2007, cannot decide and confer and transfer jurisdiction on the respondent No. 1. Transfer, if at all, has to be made in compliance with the provisions of Section 127 of the Act. In brief, it was submitted since none of the conditions under Section 158BD were fulfilled, the proceedings are invalid. During argument documents were furnished, which are on record, to show that the jurisdiction still vests with the respondent No. 2 as evident from the notices dt. 23rd Oct., 2007 and 25th June, 2008 for the asst. yrs. 2005-06 and 2006-07 respectively. The learned advocate relied on the following judgments in support of his submissions which are as under:
1. Mohinder Singh Gill and Anr. v. Chief Election Commissioner and Ors. : AIR 1978 SC 851;
2. Manish Maheshwari v. Asstt. CIT and Anr. : (2007) 208 CTR (SC) 97 : (2007) 289 ITR 341 (SC);
3. CIT v. Ved & Co. (2007) 209 CTR (Del) 455 : (2008) 302 ITR 328 ;
4. Hynoup Food & Oil Industries Ltd. v. Asstt. CIT : (2008) 219 CTR (Guj) 124 : (2008) 307 ITR 115 (Guj);
5. Indian Tube Co. Ltd. v. ITO : (2005) 198 CTR (Cal) 360 : (2005) 272 ITR 439 (Cal);
6. K.P. Mohammed Saltm v. CIT : (2008) 216 CTR (SC) 97 : (2008) 300 ITR 302 (SC).
3. Learned advocate appearing for the respondent submitted since mere satisfaction is enough and as the reasons are sufficient, the action is just and proper. Since Section 158BD postulates satisfaction should be of the first officer, and as jurisdiction of the AOs are determined on basis of the names of the assessees and the PIN codes, when he found he had no jurisdiction, the respondent No. 2 transferred the file to the respondent No. 1 who was having the jurisdiction. Moreover, in view of Section 158BD, the provisions contained in Section 127 of the Act are not applicable. Reliance was placed on the following judgments in support of his submission:
1. Devi Dayal Marwah v. CIT and Ors. : (1964) 52 ITR 829 (AP);
2. Khandubhai Vasanji Desai and Ors. v. Dy. CIT : (1998) 150 CTR (Guj) 577 : (1999) 236 ITR 73 (Guj);
3. Sanjay Kumar Modi v. Director of IT (Inv.) and Ors. : (2005) 199 CTR (Cal) 666 : (2005) 278 ITR 374 (Cal);
4. Digvijay Chemicals Ltd. v. Asstt. CIT : (2001) 167 CTR (All) 299 : (2001) 248 ITR 381 (All).
4. The issues to be decided are - (i) in view of the provisions contained in Section 2(31) of the Act, whether the status of the petitioner was correctly mentioned in the impugned notice dt. 31st Aug., 2007; (ii) whether the satisfaction recorded under Section 158BD of the Act, as seen from the affidavit in opposition, is proper; (iii) whether the respondent No. 1 can use and proceed on the basis of satisfaction of the respondent No. 2; (iv) whether the respondent No. 1 was justified in directing the assessee to file a fresh return; (v) whether the respondent No. 2 as evident from the intimation dt. 3rd Aug., 2007 was justified in observing that the jurisdiction of the case was with the respondent No. 1 and finally, whether assumption of jurisdiction by the respondent No. 1 as evident from the letter dt. 31st Aug., 2007, without taking recourse to the provisions stipulated under Section 127 of the Act, was proper.
5. So far as the first issue is concerned it is to be noted 'status' means 'the standing of a person before the law' [Websters Encyclopaedic Unabridged Dictionary of English Language). In the context of the case, law would mean the IT Act, 1961. In the Act the status of a person has been classified in Section 2(31), the relevant portion of which is as under:
'person' includes-
(i) an individual
(ii)...
(iii) a company
(iv)...
(v)...
(vi)...
(vii)...
Explanation....
Therefore, as seen, under the Act 'an individual' and 'a company' are separate entities. It appears from the assessment order dt. 12th Dec, 2006 for the asst. yr. 2004-05, being Annex. PI to the writ petition, the Department had accepted the status of the petitioner as an individual. However, by the impugned notice dt. 31st Aug., 2007 the petitioner was requested to file return 'as a company'. Significantly, the notice dt. 18th Aug., 2005 also described the petitioner 'as a company'. In my view, since the Revenue had accepted the status of the petitioner as an 'individual', and as the status of the petitioner has been incorrectly described in the impugned notice dt. 31st Aug., 2007, the said notice is ex facie bad and illegal.
6. While deciding the remaining issues it is necessary to refer to Section 158BD of the Act which is as under:
158BD. Undisclosed income of any other person: Where the AO 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 whose books of account or other documents or any assets were requisitioned under Section 132A, then the books of account, other documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed (under Section 158BC) against such other person and the provisions of this chapter shall apply accordingly.
(Emphasis, italicised in print, supplied)
7. In order to decide the second issue it is appropriate to refer to the satisfaction recorded, as evident from para 5(b) of the affidavit in opposition (in short 'the affidavit'), which is as under:
5(b) On 18 Aug., 2005, the Asstt. CIT/Dy. CIT, Central Circle-XXIII, Kolkata initiated proceedings under Section 158BD of the IT Act, 1961 and recorded the following reasons:
During the course of proceedings under Section 158BC in the case of Gangaram Bhaniramka that the following seized documents, jewellery, shares, bank account and cash found during the course of search on 28th Oct., 2002 belongs to Shri Subhas Chandra Bhaniramka. Shri Subhash Chandra Bhaniramka filed affidavit during the course of proceeding under Section 158BC of Shri Gangaram Bhaniramka owning up the following documents, cash etc.
------------------------------------------------------------------1. Seized documents Bearing identification marked GB/2------------------------------------------------------------------2. Inventried cash Rs. 13,200------------------------------------------------------------------3. I.V.P. Rs. 4,000------------------------------------------------------------------4. Shares Rs. Annex.4 serial Nos. 22 to 44------------------------------------------------------------------5. Bank accounts 4 to 12------------------------------------------------------------------6. Jewelleries GB/12 to GB/38------------------------------------------------------------------In view of the above, I am satisfied that the case is fit for proceedings under Section 158BD of the IT Act, 1961.
Issue notice under Section 158BD of the IT Act, 1961.
(Emphasis, italicised in print, supplied)
8. During argument relying on para 5(b) of the affidavit it was submitted by the learned advocate for the respondents since Section 158BD postulates the AO to record his satisfaction and is not required to record 'reasons' as enumerated in Section 148, satisfaction is proper. Interestingly from the affidavit it is evident that the respondent No. 2 has 'recorded the following reasons' in arriving at the satisfaction. True Section 158BD does not speak of recording of 'reasons' as postulated in Section 148. But does it mean simple statement of seized documents, jewellery, shares, bank accounts and cash found in course of search and mere reference to the affidavit sworn by the petitioner 'owning up' the 'following documents, cash etc.' mentioned in item Nos. 1 to 6? The answer has to be in the negative. Reasons are not far to see. Though the petitioner has owned up the documents mentioned in the affidavit, yet satisfaction recorded has to be independent and subjective and not a casual reference of the seized documents. Since proceedings under Section 158BD may have financial implications, such satisfaction must reveal the mental and the dispassionate thought process of the AO in arriving at a conclusion. Naturally conclusion, that is, satisfaction however, brief it may be, must contain reasons which should be the basis of initiating the proceedings under Section 158BD. Therefore, though Section 158BD contains the word 'satisfy' and does not contain the words 'record his reasons' as postulated in Section 148, however, before proceeding, the AO has to record his reasons for being 'satisfied', which in the instant case is absent. In this case as there is nothing on record to show that there was subjective and independent satisfaction, the answer to the second issue has to be in the negative.
9. In order to answer the third issue it is necessary to refer to the relevant portion of the affidavit filed by the Revenue which is as under:
I say that the satisfaction was duly arrived on 18th Aug., 2005 by Asstt. CIT, Central-XXIII, Kolkata and also by Asstt. CIT Circle-38, Kolkata on examination of available information/records, (para 12)
In para 13 of the affidavit it has been submitted as under:
I say that respondent No. 1 is fully empowered to conduct the proceeding under Section 158BD, and the notice was issued only after, Asstt. CIT Circle-38 satisfied himself that proceeding under Section 158BD is required to be initiated in this case.
Though the affidavit reveals that Asstt. CIT Circle-XXIII, the respondent No. 2, had recorded his satisfaction, there is nothing to show that the respondent No. 1 had arrived at a satisfaction. Since Section 158BD postulates that the 'AO' has to be 'satisfied', assuming respondent No. 1is the AO he cannot use the satisfaction recorded by the other officer or the respondent No. 2. Therefore, as the respondent No. 1 failed to record his satisfaction while taking action under Section 158BD, the proceeding is illegal. In Hynoup Food & Oil Industries Ltd. (supra) Court while dealing with Section 148 had observed that successor cannot issue notice under Section 148 on the basis of satisfaction of the predecessor officer because reason to believe must be of the officer issuing notice under Section 148. In view of the language in Section 158BD same analogy is applicable to the facts of this case.
10. Turning to the next issue it is an admitted fact that the petitioner pursuant to the notice dt. 18th Aug., 2005 issued by the respondent No. 2 on 7th Nov., 2005 had filed his return. However, by notice dt. 3rd Aug, 2007 the proceedings under the notice dt. 18th Aug., 2005 were dropped. The question is can the respondent No. 1 by notice dt. 31st Aug., 2007 again direct the petitioner to file return? In my view, since the earlier notice dt. 18th Aug., 2005 has not been declared invalid by any Court of law and as sought for, return was filed pursuant to the notice dt. 18th Aug., 2005 on which no assessment has been made, the respondent No. 1 cannot ask for filing of fresh or another return as directed by notice dt. 31st Aug., 2007. In this regard it is appropriate to refer to the question raised in Indian Tube Co. Ltd. (supra) which is as under:.whether the ITO could initiate fresh proceeding under Section 148 of the Act on 29th March, 1983, when pursuant to the earlier invalid notice dt. 11th Feb., 1983, the petitioner had already submitted the returns.
In the said judgment it has been held as under:.it is clear that when the petitioner filed returns in compliance with the invalid notice dt. 11th Feb., 1983, under Section 148 of the 1961 Act, those returns should be treated as 'returns' and as such before making assessment on the basis of those returns, no further notice under Section 148 of the Act could be passed.
Therefore, in view of the proposition of law as laid down in Indian Tube Co. Ltd. (supra), the respondent No. 1 was not justified in issuing the impugned notice dt. 31st Aug., 2007 requesting him to prepare a return.
11. In order to decide the issue whether the respondent No. 2 was competent to pass an order and transfer the file to the respondent No. 1, it is necessary to refer to the order dt. 3rd Aug., 2007 issued by the respondent No. 2, which is as under:
Sub: Proceedings initiated under Section 158BD of the IT Act, 1961 on 18th Aug., 2005 in your case.
The proceedings initiated under Section 158BD of the IT Act, 1961 in your case on 18th Aug., 2005 has been dropped since the jurisdiction over the case lies with Asstt. CIT, Circle-38, Kolkata.
This is for your information.
12. In their affidavit the respondents have tried to justify the transfer in the manner as under:
14. ...The proceeding under Section 158 was initially by Asstt. CIT/Dy. CIT Central Circle-XXIII, Kolkata after satisfaction for issuance of such notice but suddenly Asstt. CIT, Central Circle-XXIII, Kolkata found that he is not competent authority to issue such notice and make assessment. So he dropped the proceedings and transferred the case to Asstt. CIT, Circle38, Kolkata stating to initiate the proceedings under Section 158BD by jurisdiction authority. So notice issued by Asstt. CIT, Central Circle XXIII, Kolkata is meaningless and invalid. That's why he himself dropped the proceeding and informed to the concerned authority to initiate proceedings under Section 158BD. The PIN code jurisdiction lies with ITO, Ward 38(4), Kolkata and since notice under Section 158BD can only be issued by Asstt. CIT, Circle-38, Kolkata, the jurisdiction can automatically transfer to Asstt. CIT, Circle-38, Kolkata. Respondent No. 1 found that he is competent authority to initiate the proceedings under Section 158BD afresh. Respondent No. 1 is bound to initiate the proceedings under Section 158 by law....
15. ...I say that the PIN code jurisdiction lies with the ITO, Ward-
38(4), Kolkata and since notice under Section 158BD can only be issued by Asstt. CIT, Circle-38, Kolkata, the jurisdiction can automatically transfer to Asstt. CIT, Circle-38, Kolkata. So, notice issued to the assessee under Section 158 is legal and valid and it would not be treated as illegal assumption of jurisdiction and there is not any substantial failure of justice because respondent No. 1 has acted within his jurisdiction, time-limit and legally. All the action taken under Section 158BD by Asstt. CIT, Circle-38, Kolkata comes under the provisions mentioned in Section 158BD of the IT Act. So, the notice to the assessee is adequate, legal and valid.
13. The question is without resorting to the provisions contained in Section 127 of the Act can such transfer be effected. In K.P. Mohammed Salim (supra) the question was whether having regard to the definition of block assessment occurring in Chapter XTV-B of the Act, Section 127 thereof can have any application. Dismissing the appeal filed on behalf of the assessee the apex Court held that 'power under Section 127 can also be exercised under block assessment.' Thus, the judgment in Khandubhai Vasanji Desai and Ors. (supra) relied on behalf of the respondents is not applicable. Since the respondents are silent about the designation of the officer conducting the raid, the judgment in Digvijay Chemicals (supra) is not applicable. The principles of law in Sanjay Kumar Modi (supra) are not applicable to the facts of this case. There the proceedings under Section 158BD were held valid since it was initiated after the proceedings under Section 158BC were dropped unlike the case in hand where the respondent No. 2 had dropped the proceedings under Section 158BD for the purported lack of jurisdiction and had transferred the matter to the respondent No. 1 who had initiated proceedings under Section 158BD. Therefore, in view of statutory provision and the law as laid down, suo motu transfer of the file of the petitioner to the respondent No. 1 is arbitrary, without jurisdiction and ex facie illegal. Consequently, the assumption of jurisdiction by the respondent No. 1, as evident from the notice dt. 31st Aug., 2007, cannot be sustained and is, thus, also illegal.
14. Now from the totality of facts a question crops up whether the respondents had followed the conditions precedent for invoking the provisions of Section 158BD. In order to answer the question it is appropriate to refer to the law laid down in Manish Maheshwari (supra) where it has been held:
The condition precedent for invoking a block assessment is that a search has been conducted under Section 132, or documents or assets have been requisitioned under Section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under Section 132A or documents or assets have been requisitioned under Section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of Section 158BC in respect of any other person, the conditions precedent wherefor are: (i) satisfaction must be recorded by the AO 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; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the AO having jurisdiction over such other person; and (iii) the AO has proceeded under Section 158BC against such other person.
The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under Section 132A of the Act.
(Emphasis, italicised in print, supplied)
I find from the facts particularly from the affidavit of the respondents that none of the three conditions precedent as laid down in Manish Maheshwari (supra) for invoking the provisions of Section 158BD have been fulfilled and, thus, the impugned action of the respondent No. 1 cannot be sustained.
15. Before I conclude it is to be pointed out that the respondent No. 1 in his affidavit has furnished reasons in support of the impugned notice dt. 31st Aug., 2007. In my opinion it is impermissible in view of the law laid down by the apex Court in Mohinder Singh Gill and Anr. (supra) wherein it has been held as under:.when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to Court on account of a challenge, get validated by additional grounds later brought out. (para 8 )
16. It is evident from the affidavit in opposition particularly from paras 14 and 15 thereof that the respondents have tried to justify the impugned act by supplementing reasons in their affidavit. Law is that the validity of an order has to be judged from the order itself. If the affidavit filed by the respondents justifying the reasons is accepted, then the impugned act which is not within the parameters of Section 158BD may get validated by the additional or supplementary grounds later brought by way of affidavits which in my view, cannot be done.
17. Therefore, as the status of the petitioner was incorrectly mentioned in the impugned notice, as there was no subjective and independent satisfaction of the respondent No. 1 and as without the same the said respondent cannot proceed and as the transfer of jurisdiction by the respondent No. 2 to the respondent No. 1 and consequent assumption of jurisdiction was de hors the provisions of law, the impugned notice dt. 31st Aug., 2007 cannot be sustained and is, thus, set aside and quashed. Accordingly, consequential steps, if any, are also quashed. Hence, the writ petition is allowed.
18. No order as to costs.