Section 158BD

Section 158BD — the law in short

What the courts have decided on section 158BD, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Calcutta Knitwears Supreme CourtHelps department
  When must the satisfaction note be recorded before proceedings are taken against a third party?
  Before the seized records are handed over. It may be recorded at any of three stages — with the initiation of proceedings against the searched person, during them, or immediately after they are completed — but the note itself is a sine qua non.
• ACIT v A.R. Enterprises Supreme CourtHelps department
  I paid advance tax for the year but had not filed my return when the search took place. Can the department still call that income undisclosed?
  Yes. The Supreme Court held that payment of advance tax is not disclosure of income. Advance tax is paid on an estimate of current income; disclosure of total income happens only in a return. Where the due date under section 139(1) had passed and no return had been filed by the date of search, section 158BB(1)(c) requires the returned income to be taken as nil, and the officer was right to conclude the assessee would not have disclosed the income. Tax deducted at source is no different, being computed on the same estimated basis. The Revenue's six appeals were allowed with costs.
• Manish Maheshwari v ACIT Supreme CourtHelps taxpayer
  What has to happen before a search at someone else's premises can be used against you?
  Three things, in order: satisfaction recorded that the undisclosed income is yours, the seized material handed to your Assessing Officer, and only then proceedings begun against you. They are conditions precedent, not formalities.
• Pepsi Foods Pvt Ltd v ACIT High CourtHelps taxpayerSuperseded by amendment
  The satisfaction note says the officer is satisfied and nothing else. Is that enough to found a s.153C notice?
  On s.153C as it stood before 1 June 2015. No. Anything found during a search is presumed by law to belong to the person searched. Before the Assessing Officer of the searched person can say a document belongs to somebody else, he must rebut that presumption on cogent material, and the satisfaction note itself must show the reasons. A note that only recites the word 'satisfied' fails the first step, and everything built on it goes. Read the decision only against that older wording: with effect from 1 June 2015 s.153C was widened to cover books or documents that 'pertain to' the other person or contain information 'relating to' him, and in ITO v. Vikram Sujitkumar Bhatia (SC, 2023) the Supreme Court held the amended provision applies even where the search was conducted before that date. The 'belongs to' analysis in this case is therefore not the current test.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.