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.
• Statutory position — section 158BD: the person who was not searched, and the two things that have changed for him CBDT Circulars & InstructionsCuts both ways
  Material seized in someone else's search has been passed to my client's Assessing Officer, who has issued a section 158BC notice. What is my client's block period, and from when does the department's time run?
  Your client's block period is not computed from his own affairs at all — it is the block period of the searched person. Where there is one specified person relevant to him, the first proviso to section 158BD makes his block period the same as that person's; where there is more than one, it is that of the specified person whose block period ends on the later date. Time for the department runs under section 158BE(3): twelve months from the end of the quarter in which the section 158BC notice was issued to your client.
• Statutory position — section 158BE: the block assessment is barred twelve months from the end of the QUARTER, not the month CBDT Circulars & InstructionsCuts both ways
  The last panchnama in my client's search is dated 9 April 2025. By when must the block assessment order be passed?
  Twelve months from the end of the QUARTER in which the last of the authorisations was executed — so, on those facts, from the end of the quarter ending 30 June 2025, which gives 30 June 2026, subject to the exclusions and extensions in the section. The old Chapter ran the period from the end of the MONTH; the substituted section 158BE runs it from the end of the quarter, which can add up to nearly three months to the department's time.
• Statutory position — s.144C(15)(b): who is an "eligible assessee", the two limbs, and the substitution by Act No. 12 of 2020 with effect from 1 April 2020 that brought in every non-resident not being a company CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer has forwarded a draft order to our partnership firm, which is non-resident but is not a company, and there is no Transfer Pricing Officer's order in the case. Is the firm an eligible assessee at all, and does it matter which assessment year we are in?
  It matters a great deal which year you are in. As s.144C(15)(b) stands on the departmental edition stamped Year 2025 it reads: "(b) 'eligible assessee' means,— (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any non-resident not being a company, or any foreign company:". Sub-clause (ii) in that form was substituted by Act No. 12 of 2020 with effect from 1 April 2020 — footnote 97 on the departmental edition stamped Year 2021 reads verbatim "Sub. by the Act No. 12 of 2020, w.e.f. 1-4-2020.", and footnote 91 on the Year 2022 edition repeats it. Before that substitution, and as printed on the editions stamped Year 2009 and Year 2019 (No. 2), sub-clause (ii) read simply "any foreign company". So a non-resident firm, a non-resident individual, a non-resident association of persons — any non-resident that is not a company — became an eligible assessee in its own right on 1 April 2020 and was not one before, unless it was brought in by limb (i). Limb (i) is independent of status: it catches ANY person, resident or not, company or not, where the variation in sub-section (1) arises as a consequence of an order of the Transfer Pricing Officer under s.92CA(3). Two things were added with effect from 1 September 2024 by Act No. 15 of 2024: a proviso to clause (b) reading "Provided that such eligible assessee shall not include person referred to in sub-section (1) of section 158BA or other person referred to in section 158BD.", and s.144C(16), "The provisions of this section shall not apply to any proceedings under Chapter XIV-B."

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.