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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3958     OF 2014 (SPECIAL LEAVE PETITION(C.)NO.10542 OF 2011)  

COMMISSIONER OF INCOME TAX - III            APPELLANT

                VERSUS

M/S.CALCUTTA KNITWEARS, LUDHIANA            RESPONDENT

WITH C.A.NO.3959    OF 2014 @ S.L.P.(C)NO.11943 of 2011 WITH C.A.NO.3960    OF 2014 @ S.L.P.(C)NO.17662 of 2011 WITH C.A.NO.3961    OF 2014 @ S.L.P.(C)NO.17656 of 2011 WITH C.A.NO.3962    OF 2014 @ S.L.P.(C)NO.17661 of 2011 WITH C.A.NO.3963    OF 2014 @ S.L.P.(C)NO.2804 of 2012 WITH C.A.NO.3964    OF 2014 @ S.L.P.(C)NO.2805 of 2012 WITH C.A.NO.3965    OF 2014 @ S.L.P.(C)NO.5264 of 2012 WITH C.A.NO.3966    OF 2014 @ S.L.P.(C)NO.5265 of 2012 WITH C.A.NO.3967    OF 2014 @ S.L.P.(C)NO.5266 of 2012 WITH C.A.NO.3968    OF 2014 @ S.L.P.(C)NO.7574 of 2012 WITH C.A.NO.3969    OF 2014 @ S.L.P.(C)NO.7575 of 2012 WITH C.A.NO.3970    OF 2014 @ S.L.P.(C)NO.7576 of 2012 WITH C.A.NO.3971    OF 2014 @ S.L.P.(C)NO.7577 of 2012 WITH C.A.NO.3972    OF 2014 @ S.L.P.(C)NO.9721 of 2012 WITH C.A.NO.3973    OF 2014 @ S.L.P.(C)NO.11460 of 2012 WITH C.A.NO.3974    OF 2014 @ S.L.P.(C)NO.12111 of 2012 WITH C.A.NO.3975    OF 2014 @ S.L.P.(C)NO.12886 of 2012 WITH C.A.NO.3976    OF 2014 @ S.L.P.(C)NO.12887 of 2012 WITH C.A.NO.3977    OF 2014 @ S.L.P.(C)NO.15207 of 2012 WITH C.A.NO.3978    OF 2014 @ S.L.P.(C)NO.15209 of 2012 WITH C.A.NO.3979    OF 2014 @ S.L.P.(C)NO.16266 of 2012 WITH C.A.NO.3980    OF 2014 @ S.L.P.(C)NO.16265 of 2012 WITH C.A.NO.3981    OF 2014 @ S.L.P.(C)NO.16319 of 2012 WITH C.A.NO.3982    OF 2014 @ S.L.P.(C)NO.16782 of 2012 WITH C.A.NO.3983    OF 2014 @ S.L.P.(C)NO.19491 of 2012 WITH C.A.NO.3984    OF 2014 @ S.L.P.(C)NO.19492 of 2012 WITH C.A.NO.3985    OF 2014 @ S.L.P.(C)NO.20626 of 2012 WITH C.A.NO.3986    OF 2014 @ S.L.P.(C)NO.21459 of 2012 WITH C.A.NO.3987    OF 2014 @ S.L.P.(C)NO.21460 of 2012 WITH C.A.NO.3988    OF 2014 @ S.L.P.(C)NO.30192 of 2012

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WITH C.A.NO.3989    OF 2014 @ S.L.P.(C)NO.36559 of 2012 WITH C.A.NO.3990    OF 2014 @ S.L.P.(C)NO.12130 of 2013 WITH C.A.NO.3991    OF 2014 @ S.L.P.(C)NO.15368 of 2013

AND WITH  

S.L.P.(C)NO.7741 of 2013

O R D E R

1.Delay,  if  any,  in  filing  and  refiling  the  Special  Leave Petitions is condoned.

2.Leave granted.

3.The  issue  that  falls  for  our  consideration  and  decision in all these appeals is: at what stage of the  proceedings  under  Chapter  XIV-B  does  the  assessing  authority  require  to  record  his  satisfaction  for  issuing a notice under Section 158BD of the Income Tax  Act, 1961 ('the Act' for short).

4.Since the issue is common in all these appeals, after  hearing the learned counsel for the parties to the  lis, we dispose of all these appeals by this common  order.

5.For the purpose of disposal of these appeals, we take  the  Civil  Appeal@  Special  Leave  Petition  (Civil)

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No.10542 of 2011 as the lead case. Civil Appeal No.3958  of 2014 @S.L.P.(C)No.10542/2011:

6.The respondent in this appeal is a firm engaged in  manufacturing hosiery goods in the name and style of  M/s. Calcutta Knitwears.

7.A search operation under Section 132 of the Act was  carried  out  in  two  premises  of  the  Bhatia  Group,  namely, M/s. Swastik Trading Company and M/s. Kavita  International  Company  on  05.02.2003  and  certain  incriminating  documents  pertaining  to  the  assessee  firm were traced in the said search.

8.After  completion  of  the  investigation  by  the  investigating agency and handing over of the documents  to the assessing authority, the assessing authority  had completed the block assessments in the case of  Bhatia Group. Since certain other documents did not  pertain to the person searched under Section 132 of  the Act, the assessing authority thought it fit to  transmit  those  documents,  which  according  to  him,  pertain  to  the  “undisclosed  income”  on  account  of  investment element and profit element of the assessee  firm and require to be assessed under Section 158BC

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read  with  Section  158BD  of  the  Act  to  another  assessing  authority  in  whose  jurisdiction  the  assessments  could  be  completed.  In  doing  so,  the  assessing authority had recorded his satisfaction note  dated 15.07.2005.

9.The  jurisdictional  assessing  authority  for  the  respondent-assessee had issued the show cause notice  under Section 158BD for the block period 01.04.1996 to  05.02.2003,  dated  10.02.2006  to  the  assessee  inter  alia directing the assessee to show cause as to why  should  the  proceedings  under  Section  158BC  not  be  completed.  After  receipt  of  the  said  notice,  the  assessee firm had filed its return under Section 158BD  for the said block period declaring its total income  as Nil and further filed its reply to the said notice  challenging  the  validity  of  the  said  notice  under  Section  158BD,  dated  08.03.2006.  The  assessee  had  taken the stand that the notice issued to the assessee  is (a) in violation of the provisions of Section 158BD  as  the  conditions  precedent  have  not  been  complied  with  by  the  assessing  officer  and  (b)  beyond  the  period  of  limitation  as  provided  for  under  Section

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158BE read with Section 158BD and therefore, no action  could  be  initiated  against  the  assessee  and  accordingly, requested the assessing officer to drop  the proceedings.

10. The assessing authority, after due consideration of  the reply filed to the show cause notice, has rejected  the aforesaid stand of the assessee and assessed the  undisclosed income as Rs. 21,76,916/- (Rs.16,05,744/-  (unexplained  investment)  and  Rs.5,71,172/-  (profit  element))  by  order  dated  08.02.2008.  The  assessing  officer is of the view that Section 158BE of the Act  does not provide for any limitation for issuance of  notice and completion of the assessment proceedings  under Section 158BD of the Act and therefore a notice  could  be  issued  even  after  completion  of  the  proceedings of the searched person under Section 158BC  of the Act.

11. Disturbed by the orders passed by the assessing  officer, the assessee firm had carried the matter in  appeal before the Commissioner of Income Tax (Appeal- II)  (for  short  'the  CIT(A)’).  The  CIT(A),  while  rejecting  the  stand  of  the  assessee  in  respect  of

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validity  of  notice  issued  under  Section  158BD,  has  partly allowed the appeal filed by the assessee firm  and  deleted  the  additions  made  by  the  assessing  officer  in  its  assessments,  by  his  order  dated  27.08.2008.

12. The  Revenue  had  carried  the  matter  further  by  filing appeal before the Income Tax Appellate Tribunal  (for short 'the Tribunal') and the assessee has filed  cross objections therein. The Tribunal, after hearing  the parties to the lis, has rejected the appeal of the  Revenue and observed that recording of satisfaction by  the assessing officer as contemplated under Section  158BD  was  on  a  date  subsequent  to  the  framing  of  assessment under Section 158BC in case of the searched  person, that is, beyond the period prescribed under  Section  158BE(1)(b)  and  thereby  the  notice  issued  under Section 158BD was belated and consequently the  assumption of jurisdiction by the assessing authority  in the impugned block assessment would be invalid, by  order dated 23.04.2009.  

13. Aggrieved by the order so passed by the Tribunal,  the Revenue had carried the matter in appeal under

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Section 260A of the Act before the High Court. The  High Court, by its impugned judgment and order dated  20.07.2010,  has  rejected  the  Revenue's  appeal  and  confirmed the order passed by the Tribunal.  

14. That  is  how  the  Revenue  is  before  us  in  this  appeal.

15. We have heard Shri Rupesh Kumar learned counsel for  the Revenue and Shri R.P.Bhatt, Shri Ajay Vohra, Shri  Santosh  Krishan,  learned  counsel  and  other  learned  counsel for the respective assessees-respondents.

16. Shri Rupesh Kumar, learned counsel for the Revenue  would  contend  that  the  assessing  authority,  after  completion of the assessment proceedings against the  searched  person  under  Section  158BC,  being  of  the  opinion that the other documents which have surfaced  at the time of the search under Section 132 of the Act  belong to a person other than the searched person had  recorded  his  satisfaction  in  the  said  respect  and  transmitted the papers to the jurisdictional assessing  officer for the assessments of such person other than  the searched person. Further, he would submit that the

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assessing officer has complied with the requirements  of  Section 158BD  of the  Act in  its entirety  while  preparing the satisfaction note and transmitting the  documents to the jurisdictional assessing officer and  therefore, the Tribunal and the High Court were not  justified in holding that the satisfaction note ought  to have been prepared by the assessing officer before  the completion of the assessment proceedings of the  searched person under Section 158BC of the Act and  that  the  notice  issued  under  Section  158BD  was  belated.

17. Per contra, Shri Bhatt, learned senior counsel and  Shri  Ajay  Vohra  and  Shri  Santosh  Krishan  learned  counsel  for  the  assessees  would  state  that  a  satisfaction note requires to be made by the assessing  officer before the seized documents were transmitted  to another assessing officer in whose jurisdiction the  person other than the searched person is assessed and  submit  that  the  said  satisfaction  note  should  be  recorded  before  the  assessment  proceedings  of  the  searched person are completed under Section 158BC of  the  Act  and  not  later  in  time.  By  saying  so,  the

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learned counsel would justify the reasoning and the  conclusion reached by the Tribunal as well as the High  Court.

18. In  order  to  resolve  the  controversy,  certain  provisions of the Act require to be noticed by us.

19. Chapter XIV-B of the Act is a special provision  carved out by the legislature for the purpose of the  assessments in cases pertaining to Sections 132 and  132A of the Act. The said chapter was introduced by  the Finance Act, 1995 with effect from 01.07.1995 and  comprises  Sections  158B  to  158BH  of  the  Act.  The  provisions under this Chapter were made inapplicable  in  case  of  search  initiated  under  Section  132  or  Section 132A after 31.05.2003 by introduction of an  amendment to the Chapter as Section 158BI vide the  Finance Act, 2003 with effect from 01.06.2003. The lis  before us requires examination of the provisions of  the said Chapter, particularly Section 158BD.

20. Section 158B of the Act is the dictionary clause.  It provides for the definition of “block period” and  “undisclosed income”. For the purpose of this case, a

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reference  to  the  definition  of  the  “undisclosed  income”  as  provided  for  in  Section  158B(b)  is  necessary and, therefore, it is noticed.  The same  reads as under:

“Undisclosed  income"  includes  any  money,  bullion,  jewellery or other valuable article or thing or any income  based  on  any  entry  in  the  books  of  account  or  other  documents  or  transactions,  where  such  money,  bullion,  jewellery, valuable article, thing, entry in the books of  account or other document or transaction represents wholly  or partly income or property which has not been or would  not have been disclosed for the purposes of this Act [or  any expense, deduction or allowance claimed under this Act  which is found to be false]”.   

21. Sections 158BC and 158BD of the Act are machinery  provisions.  Section  158BC  of  the  Act  provides  the  procedure for block assessment and Section 158BD of  the Act provides for assessments in the case of an  undisclosed  income  of  any  other  person.  The  said  sections are relevant for the purpose of this case  and,  therefore,  they  are  extracted.  They  read  as  under:

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“Section 158BC. PROCEDURE FOR BLOCK ASSESSMENT. Where any search has been conducted under section 132 or  books  of  account,  other  documents  or  assets  are  requisitioned  under  section  132A,  in  the  case  of  any  person, then, -

[(a) The Assessing Officer shall, (i) In respect of search initiated or books of account or  other documents or any assets requisitioned after the 30th  day of June, 1995 but before the 1st day of January, 1997  serve a notice to such person requiring him to furnish  within such time not being less than fifteen days;

(ii) In respect of search initiated or books of account or  other documents or any assets requisitioned on or after  the  1st  day  of  January,  1997,  serve  a  notice  to  such  person requiring him to furnish within such time not being  less than fifteen days but not more than forty-five days,  as  may  be  specified  in  the  notice  a  return  in  the  prescribed  form  and  verified  in  the  same  manner  as  a  return under clause (i) of sub-section (1) of section 142,  setting forth his total income including the undisclosed  income for the block period:

Provided that no notice under section 148 is required to  be  issued  for  the  purpose  of  proceeding  under  this  Chapter:  

Provided further that a person who has furnished a return

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under this clause shall not be entitled to file a revised  return;] (b) The Assessing Officer shall proceed to determine the  undisclosed income of the block period in the manner laid  down in section 158BB and the provisions of section 142,  sub-sections (2) and (3) of section 143 [section 144 and  section 145]shall, so far as may be, apply; (c)  The  Assessing  Officer,  on  determination  of  the  undisclosed income of the block period in accordance with  this  Chapter,  shall  pass  an  order  of  assessment  and  determine the tax payable by him on the basis of such  assessment; (d) The assets seized under section 132 or requisitioned  under section 132A shall be dealt with in accordance with  the provisions of section 132B.]  

***               ***              ***

Section 158BD. UNDISCLOSED INCOME OF ANY OTHER PERSON.

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 or 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  Assessing  Officer  having  jurisdiction  over  such  other  person  and  that Assessing Officer shall proceed [under section 158  BC] against such other person and the provisions of this

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Chapter shall apply accordingly.”

22. Section 158BC speaks of procedure for assessment of  a  person searched  under Section  132 of  the Act  or  books  of  accounts,  other  documents  or  assets  are  requisitioned under section 132A. The limitation for  the purpose of completion of the block assessments for  the purpose of Section 158BC of the Act is as provided  under Section 158BE(1)(a) of the Act, that is the time  limit for completion of block assessment.

23. Section 158BD of the Act provides for “undisclosed  income”  of  any  other  person.  Before  we  proceed  to  explain  the  said  provision,  we  intend  to  remind  ourselves  of  the  first  or  the  basic  principles  of  interpretation of a fiscal legislation. It is time and  again reiterated that the courts, while interpreting  the provisions of a fiscal legislation should neither  add nor subtract a word from the provisions of instant  meaning of the sections. It may be mentioned that the  foremost  principle  of  interpretation  of  fiscal  statutes in every system of interpretation is the rule  of strict interpretation which provides that where the

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words  of  the  statute  are  absolutely  clear  and  unambiguous, recourse cannot be had to the principles  of interpretation other than the literal rule (Swedish  Match AB v. Securities and Exchange Board, India, AIR  

2004 SC 4219, CIT v. Ajax Products Ltd. [1965] 55 ITR  

741 (SC)).  

24. We  may  gainfully  refer  to  The  Cape  Brandy  Syndicate v. Inland Revenue Commissioners [1921] 1 KB  64 at 71 which involved the Finance (No. 2) Act 1915  which  imposed  excess  profits  duty  on  trade  or  businesses commenced after the outbreak of the First  World War in 1914. By subjecting the legislation to a  strict literal interpretation, Rowlatt J. held that  the Finance (No. 2) Act 1915, in isolation, did not  apply to businesses that commenced after the outbreak  of war in 1914 and observed as follows:

“… the principle in favour of a strict literal approach …  simply means that in a taxing Act one has to look merely  at  what  is  clearly  said.  There  is  no  room  for  any  intendment. There is no equity about a tax. There is no  presumption as to a tax. Nothing is to be read in, nothing  is to be implied. One can only look fairly at the language  used.”

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25. In Commissioner of Stamp Duties (NSW) v. Simpson,  (1917) 24 CLR 209 Barton J., citing Viscount Haldane  in  Lumsden v Inland Revenue Commissioners, [1914] AC  877, stated the following:

“The duty of Judges in construing Statutes is to adhere to the literal construction unless  the context renders it plain that such a construction cannot be put on the words. This rule is  

especially important in cases of Statutes which impose taxation.”

The  Court  in  Simpson  case  (supra)  sought  to  determine  whether  a  deed  poll  constituted  a  settlement  for  the  purposes  of  Section  49  of  the  Stamp  Duties  Act,  1898  (NSW). Section 3 which defined the word ‘settlement’ as  meaning  ‘any  contract  or  agreement’  was  examined.  The  Court by adopting a strict literal approach held that only  a contract or an agreement could constitute a settlement  and  that  Section  49  providing  for  deed  poll  was  not  applicable and therefore, the taxpayer did not have to pay  any stamp duty.

26. Lord Granworth in Grundy v. Pinniger, (1852) 1 LJ  Ch 405 has observed that:

“To adhere as closely as possible to the literal meaning  of the words used, is a cardinal rule from which if we de-

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part we launch into a sea of difficulties which it is not  easy to fathom.”

That is to say, once the literal rule is departed, then  any number of interpretations can be put to a statutory  provision, each Judge having a free play to put his own  interpretation as he likes. This would be destructive of  the edifice of fiscal legislations which impose economic  duties and sanctions.  

27.In  taxing  statutes,  even  if  the  literal  interpretation  results in hardship or inconvenience,  it  has  to  be  followed (G.P.  Singh's  Principles  of  Statutory Interpretations, 12th Ed, 2010, Lexis Nexis  

Butterworths  Wadhwa  Nagpur;  Bennion  on  Statutory   

Interpretation, 5th Ed., Lexis Nexis, p. 863; Vepa P.  

Sarathi, Interpretation of Statutes, 5th Ed., Easter  

Book  Company,  Chapter  VIII,  Taxing  Statutes). This  Court in CIT v. Keshab Chandra Mandal, AIR 1950 SC 265  has held that hardship or inconvenience cannot alter  the  meaning  of  the  language  employed  by  the  legislature  if  such  meaning  is  clear  and  apparent.  Hence departure from the literal rule should only be  done in very rare cases, and ordinarily there should

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be judicial restraint to do so.(Pandian Chemicals Ltd.  v. C.I.T.,  2003(5) SCC 590, Narsiruddin v. Sita Ram  

Agarwal,  AIR 2003 SC 1543, Bhaiji v. Sub-Divisional  

Officer,  Thandla, 2003(1)  SCC  692,  J.P.  Bansal  v.  

State of Rajasthan and Anr., AIR 2003 SC 1405, State  

of Jharkhand and Anr. v. Govind Singh : JT 2004(10) SC  

349, Jinia Keotin v. K.S. Manjhi, 2003 (1) SCC 730,  

Shiv  Shakti  Co-operative  Housing  Society  v.  Swaraj  

Developers, AIR  2003  SC  2434,  Grasim  Industries  

Limited v. Collector of Customs,  2002 (4) SCC 297 and  

Union of India v. Hamsoli Devi, 2002 (7) SCC 273)  

28.The Australian High Court in  Federal Commissioner of  Taxation  v.  Westraders  Pty  Ltd,  (1980)  144  CLR  55  considered the scope of Section 36A of the Income Tax  Assessment  Act,  1936(Cth),  which  on  a  literal  interpretation allowed the taxpayer to make a profit  and  still  claim  a  loss  for  tax  purposes.  The  Commissioner argued the taxpayer’s conduct amounted to  a  tax  avoidance  scheme  and  should  therefore  be  disallowed  under  Section  260  of  the  Income  Tax  Assessment Act, 1936(Cth). The Court held that under a  literal  interpretation  Section  36A  could  apply  to

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allow  the  taxpayer  to  claim  a  loss.  Barwick  CJ,  speaking for the majority relied on the decision in  Inland  Revenue  Commissioners  v.  Westminster  (Duke),  [1936] AC 1 which advocated the literal approach be  applied  when  interpreting  taxation  legislation  and  stated the following:

“It is for the Parliament to specify, and to do so, in my opinion, as far as language will  permit, with unambiguous clarity, the circumstances which will attract an obligation on the  

part  of  the  citizen  to  pay  tax.  The function  of  the  court  is  to  interpret  and  apply  the  

language in which the Parliament has specified those circumstances. The court is to do so  

by determining the meaning of the words employed by the Parliament according to the  

intention of the Parliament which is discoverable from the language used by the Parliament.  

It is not for the court to mould or to attempt to mould the language of the statute so as to  

produce  some  result  which  it  might  be  thought  the  Parliament  may  have  intended  to  

achieve, though not expressed in the actual language employed”

29. In Cooper Brookes (Wollongong) Pty Ltd v. Federal  Commissioner of Taxation (1981) 147 CLR 297 it is held  that  in  a  taxing  statute  if  the  language  is  unambiguous, departing from the literal approach ‘may  lead  judges  to  put  their  own  ideas  of  justice  or  social policy in place of the words of the statute’.  Similar view was espoused in C & J Clark Ltd v. Inland  Revenue  Commissioners, [1975]  1  WLR  413  and  BP  Refinery  (Westernport)  Pty  Ltd  v.  Hastings  Shire,  

(1977) 180 CLR 266.

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30. In  Hepples v. FCT, (1991) 173 CLR 492, the High  Court  of  Australia  unequivocally  favoured  the  principle that taxation legislation should be subject  to  a  strict  literal  interpretation  and  opined  that  such  an  approach  was  supported  by  ‘common  sense’.  Therein, the taxpayer, on ceasing to be employed, was  paid  $40,000  by  his  employer  in  exchange  for  the  taxpayer agreeing that he would not carry on or be  interested in certain businesses and would not divulge  any  trade  secrets.  The  issue  before  the  Court  was  whether or not such payment would form part of the  taxpayer’s assessable income for the purposes of  the  Income Tax Assessment Act, 1936(Cth). It was held that  since the Act did not provide for such payments to  form  part  of  a  taxpayer’s  assessable  income,  the  payment would not be assessable.

31. This Court in  Tata Consultancy Services v. State  of Andhra Pradesh has ascribed plain meaning to the  terms  computer  and  computer  programme  in  a fiscal statute and reiterating the proposition laid

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down  in  Inland  Revenue  Commissioner case  (supra),  observed that  a court should not be over zealous in  searching ambiguities or obscurities in words which  are plain.  

32. In Prakash Nath Khanna v. C.I.T., 2004 (9) SCC 686,  this Court has explained that the language employed in  a  statute  is  the  determinative  factor  of  the  legislative  intent.  The  legislature  is  presumed  to  have  made  no  mistake.  The  presumption  is  that  it  intended to say what it has said. Assuming there is a  defect  or  an  omission  in  the  words  used  by  the  legislature, the Court cannot correct or make up the  deficiency. Where the legislative intent is clear from  the  language,  the  Court  should  give  effect  to  it  (Delhi Financial Corporation v. Rajiv Anand, 2004 (11)  

SCC 625; Government of Andhra Pradesh v. Road Rollers  

Owners Welfare Association, 2004(6) SCC 210).

33. In B. Premanand and Ors.v. Mohan Koikal and Ors., (2011)4 SCC 266 this Court has observed as follows:

“32. The literal rule of interpretation really means that  there  should  be  no  interpretation.  In  other  words,  we

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should read the statute as it is, without distorting or  twisting its language.

33. We may mention here that the literal rule of inter- pretation is not only followed by Judges and lawyers, but  it is also followed by the lay man in his ordinary life.  To give an illustration, if a person says "this is a pen- cil", then he means that it is a pencil; and it is not  that when he says that the object is a pencil, he means  that it is a horse, donkey or an elephant. In other words,  the literal rule of interpretation simply means that we  mean what we say and we say what we mean. If we do not  follow  the  literal  rule  of  interpretation,  social  life  will become impossible, and we will not understand each  other. If we say that a certain object is a book, then we  mean it is a book. If we say it is a book, but we mean it  is a horse, table or an elephant, then we will not be able  to  communicate  with  each  other.  Life  will  become  im- possible. Hence, the meaning of the literal rule of inter- pretation is simply that we mean what we say and we say  what we mean.”

34. Thus,  the  language  of  a  taxing  statute  should  ordinarily be read understood in the sense in which it  is  harmonious  with  the  object  of  the  statute  to  effectuate the legislative animation. A taxing statute  should be strictly construed; common sense approach,  equity, logic, ethics and morality have no role to

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play.  Nothing  is  to  be  read  in,  nothing  is  to  be  implied; one can only look fairly at the language used  and nothing more and nothing less.  (J. Srinivasa Rao  v. Govt.  of  A.P.  and  Anr. 2006(13)  SCALE  27,  Raja  

Jagadambika  Pratap  Narain  Singh  v. C.B.D.T.,  [1975]  

100 ITR 698(SC))

35. It  is  also  trite  that  while  interpreting  a  machinery  provision,  the  courts  would  interpret  a  provision in such a way that it would give meaning to  the  charging  provisions  and  that  the  machinery  provisions are liberally construed by the courts. In  Mahim Patram Private Ltd. v. Union of India (UOI) and  

Ors., (2007) 3 SCC 668 this Court has observed that:  “20. A taxing statute indisputably is to be strictly con- strued. [See  J. Srinivasa Rao v. Govt. of Andhra Pradesh  and Anr., 2006(13)SCALE 27 ]. It is, however, also well- settled  that  the  machinery  provisions  for  calculating  the tax or the procedure for its calculation are to be con- strued by ordinary rule of construction. Whereas a liabil- ity has been imposed on a dealer by the charging section,  it is well-settled that the court would construe the stat- ute in such a manner so as to make the machinery workable.

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21. In J. Srinivasa Rao (supra), this Court noticed the de- cisions of this Court in Gursahai Saigal v.Commissioner of  Income-tax, Punjab,  [1963] 1 ITR 48(SC) and Ispat Indus- tries  Ltd.  v. Commissioner  of  Customs,  Mumbai,  2006(202)ELT561(SC).In Gursahai Saigal (supra), the ques- tion which fell for consideration before this Court was  construction  of  the  machinery  provisions  vis-à-vis  the  charging  provisions.  Schedule  appended  to  the  Motor  Vehicles Act is not machinery provision. It is a part of  the charging provision. By giving a plain meaning to the  Schedule appended to the Act, the machinery provision does  not become unworkable. It did not prevent the clear inten- tion of the legislature from being defeated. It can be  given an appropriate meaning.”

36.A reference to the observations of this Court in J.K.  Synthetics Limited and Birla Cement Works and another  

v. Commercial Taxes Officer  and another,(1994) 4 SCC  

276 would be apposite:

“13. It is well-known that when a statute levies a tax it  does so by inserting a charging section by which a liabil- ity  is  created  or  fixed  and  then  proceeds  to  provide  the machinery to make the liability effective. It, there- fore, provides the machinery for the assessment of the li- ability already fixed by the charging section, and then  provides the mode for the recovery and collection of tax,  including penal provisions meant to deal with defaulters.  … Ordinarily the charging section which fixes the liabil-

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Wealth Tax,  Meerut  v.  Sharvan  Kumar  Swarup  &  Sons,  

(1994) 6 SCC 623; CIT v. National Taj Traders, (1980)  

1  SCC  370;  Associated  Cement  Company  Ltd.  v.  

Commercial Tax Officer, Kota and Ors., (48) STC 466).  Francis  Bennion  in  Bennion  on  Statutory Interpretation,  5th Ed.,  Lexis  Nexis in  support of the aforesaid  proposition put forth as an  illustration that since charge made by the legislator  in procedural provisions is excepted to be for the  general  benefit  of  litigants  and  others,  it  is  presumed that it applies to pending as well as future  proceedings.

38. Having said that, let us revert to discussion of  Section  158BD of  the Act.  The said  provision is  a  machinery provision and inserted in the statute book  for  the  purpose  of  carrying  out  assessments  of  a  person other than the searched person under Sections  132 or 132A of the Act. Under Section 158BD of the  Act, if an officer is satisfied that there exists any  undisclosed income which may belong to a other person  other than the searched person under Sections 132 or  132A of the Act, after recording such satisfaction,

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may transmit the records/documents/chits/papers etc to  the assessing officer having jurisdiction over such  other  person.   After  receipt  of  the  aforesaid  satisfaction and upon examination of the said other  documents  relating  to  such  other  person,  the  jurisdictional assessing officer may proceed to issue  a  notice  for  the  purpose  of  completion  of  the  assessments under Section 158BD of the Act, the other  provisions of XIV-B shall apply.

39. The opening words of Section 158BD of the Act are  that  the  assessing  officer  must  be  satisfied  that  “undisclosed income” belongs to any other person other  than the person with respect to whom a search was made  under Section 132 of the Act or a requisition of books  were  made  under  Section  132A  of  the  Act  and  thereafter,  transmit  the  records  for  assessment  of  such other person. Therefore, the short question that  falls for our consideration and decision is at what  stage of the proceedings should the satisfaction note  be prepared by the assessing officer: whether at the  time of initiating proceedings under Section 158BC for  the  completion  of  the  assessments  of  the  searched

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person under Section 132 and 132A of the Act or during  the course of the assessment proceedings under Section  158BC  of  the  Act  or after  completion  of  the  proceedings under Section 158BC of the Act.  

40. The Tribunal and the High Court are of the opinion  that  it  could  only  be  prepared  by  the  assessing  officer  during  the  course  of  the  assessment  proceedings under Section 158BC of the Act and not  after  the  completion  of  the  said  proceedings.  The  Courts below have relied upon the limitation period  provided in Section 158BE(2)(b) of the Act in respect  of the assessment proceedings initiated under Section  158BD, i.e., two years from the end of the month in  which the notice under Chapter XIV-B was served on  such other person in respect of search initiated or  books of account or other documents or any assets are  requisitioned on or after 01.01.1997. We would examine  whether the Tribunal or the High Court are justified  in coming to the aforesaid conclusion.

41. We  would  certainly  say  that  before  initiating  proceedings  under  Section  158BD  of  the  Act,  the

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assessing officer who has initiated proceedings for  completion of the assessments under Section 158BC of  the  Act  should  be  satisfied  that  there  is  an  undisclosed income which has been traced out when a  person was searched under Section 132 or the books of  accounts were requisitioned under Section 132A of the  Act. This is in contrast to the provisions of Section  148 of the Act where recording of reasons in writing  are a sine qua non. Under Section 158BD the existence  of cogent and demonstrative material is germane to the  assessing  officers’  satisfaction  in  concluding  that  the seized documents belong to a person other than the  searched person is necessary for initiation of action  under Section 158BD. The bare reading of the provision  indicates that the satisfaction note could be prepared  by  the  assessing  officer  either  at  the  time  of  initiating proceedings for completion of assessment of  a searched person under Section 158BC of the Act or  during  the  stage  of  the  assessment  proceedings.  It  does not mean that after completion of the assessment,  the assessing officer cannot prepare the satisfaction  note  to  the  effect  that  there  exists  income  tax  belonging to any person other than the searched person

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in respect of whom a search was made under Section 132  or requisition of books of accounts were made under  Section 132A of the Act. The language of the provision  is  clear  and  unambiguous.  The  legislature  has  not  imposed  any  embargo  on  the  assessing  officer  in  respect of the stage of proceedings during which the  satisfaction is to be reached and recorded in respect  of the person other than the searched person.  

42. Further, Section 158BE(2)(b) only provides for the  period  of  limitation  for  completion  of  block  assessment under section 158BD in case of the person  other than the searched person as two years from the  end  of  the  month  in  which  the  notice  under  this  Chapter was served on such other person in respect of  search carried on after 01.01.1997. The said section  does neither provides for nor imposes any restrictions  or  conditions  on  the  period  of  limitation  for  preparation the satisfaction note under Section 158BD  and consequent issuance of notice to the other person.

43.  In  the  lead  case,  the  assessing  officer  had  prepared a satisfaction note on 15.07.2005 though the  assessment  proceedings  in  the  case  of  a  searched

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person,  namely,  S.K.  Bhatia  were  completed  on  30.03.2005. As we have already noticed, the Tribunal  and the High Court are of the opinion that since the  satisfaction note was prepared after the proceedings  were completed by the assessing officer under Section  158BC of the Act which is contrary to the provisions  of  Section  158BD  read  with  Section  158BE(2)(b)  and  therefore, have dismissed the case of the Revenue. In  our considered opinion, the reasoning of the learned  Judges of the High Court is contrary to the plain and  simple  language  employed  by  the  legislature  under  Section  158BD  of  the  Act  which  clearly  provides  adequate  flexibility  to  the  assessing  officer  for  recording the satisfaction note after the completion  of proceedings in respect of the searched person under  Section 158BC. Further, the interpretation placed by  the Courts below by reading into the plain language of  Section 158BE(2)(b) such as to extend the period of  limitation to recording of satisfaction note would run  counter  to  the  avowed  object  of  introduction  of  Chapter to provide for cost-effective, efficient and  expeditious  completion  of  search  assessments  and  avoiding or reducing long drawn proceedings.

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44. In the result, we hold that for the purpose of  Section 158BD of the Act a satisfaction note is sine  qua non and must be prepared by the assessing officer  before he transmits the records to the other assessing  officer who has jurisdiction over such other person.  The satisfaction note could be prepared at either of  the following stages: (a) at the time of or along with  the  initiation  of  proceedings  against  the  searched  person under Section 158BC of the Act; (b) along with  the assessment proceedings under Section 158BC of the  Act;  and  (c)  immediately  after  the  assessment  proceedings are completed under Section 158BC of the  Act of the searched person.

45. We are informed by Shri Santosh Krishan, who is  appearing in seven of the appeals that the assessing  officer  had  not  recorded  the  satisfaction  note  as  required under Section 158BD of the Act, therefore,  the  Tribunal  and  the  High  Court  were  justified  in  setting aside the orders of assessment and the orders  passed by the first appellate authority. We do not  intend to examine the aforesaid contention canvassed

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by  the  learned  counsel  since  we  are  remanding  the  matters to the High Court for consideration of the  individual cases herein in light of the observations  made by us on the scope and possible interpretation of  Section 158BD of the Act.  

46. With these observations, the appeals are disposed  of. The matters are remanded to the respective High  Courts for deciding the matters afresh after affording  an opportunity of hearing to the parties.

Ordered accordingly.

In C.A.NO.3959    OF 2014 @ S.L.P.(C)NO.11943 of 2011 C.A.NO.3960    OF 2014 @ S.L.P.(C)NO.17662 of 2011 C.A.NO.3961    OF 2014 @ S.L.P.(C)NO.17656 of 2011 C.A.NO.3962    OF 2014 @ S.L.P.(C)NO.17661 of 2011 C.A.NO.3963    OF 2014 @ S.L.P.(C)NO.2804 of 2012 C.A.NO.3964    OF 2014 @ S.L.P.(C)NO.2805 of 2012 C.A.NO.3965    OF 2014 @ S.L.P.(C)NO.5264 of 2012 C.A.NO.3966    OF 2014 @ S.L.P.(C)NO.5265 of 2012 C.A.NO.3967    OF 2014 @ S.L.P.(C)NO.5266 of 2012 C.A.NO.3968    OF 2014 @ S.L.P.(C)NO.7574 of 2012 C.A.NO.3969    OF 2014 @ S.L.P.(C)NO.7575 of 2012 C.A.NO.3970    OF 2014 @ S.L.P.(C)NO.7576 of 2012 C.A.NO.3971    OF 2014 @ S.L.P.(C)NO.7577 of 2012 C.A.NO.3972    OF 2014 @ S.L.P.(C)NO.9721 of 2012 C.A.NO.3973    OF 2014 @ S.L.P.(C)NO.11460 of 2012 C.A.NO.3974    OF 2014 @ S.L.P.(C)NO.12111 of 2012 C.A.NO.3975    OF 2014 @ S.L.P.(C)NO.12886 of 2012 C.A.NO.3976    OF 2014 @ S.L.P.(C)NO.12887 of 2012 C.A.NO.3977    OF 2014 @ S.L.P.(C)NO.15207 of 2012 C.A.NO.3978    OF 2014 @ S.L.P.(C)NO.15209 of 2012

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C.A.NO.3979    OF 2014 @ S.L.P.(C)NO.16266 of 2012 C.A.NO.3980    OF 2014 @ S.L.P.(C)NO.16265 of 2012 C.A.NO.3981    OF 2014 @ S.L.P.(C)NO.16319 of 2012 C.A.NO.3982    OF 2014 @ S.L.P.(C)NO.16782 of 2012 C.A.NO.3983    OF 2014 @ S.L.P.(C)NO.19491 of 2012 C.A.NO.3984    OF 2014 @ S.L.P.(C)NO.19492 of 2012 C.A.NO.3985    OF 2014 @ S.L.P.(C)NO.20626 of 2012 C.A.NO.3986    OF 2014 @ S.L.P.(C)NO.21459 of 2012 C.A.NO.3987    OF 2014 @ S.L.P.(C)NO.21460 of 2012 C.A.NO.3988    OF 2014 @ S.L.P.(C)NO.30192 of 2012 C.A.NO.3989    OF 2014 @ S.L.P.(C)NO.36559 of 2012 C.A.NO.3990    OF 2014 @ S.L.P.(C)NO.12130 of 2013

AND WITH C.A.NO.3991 OF 2014 @ S.L.P.(C)NO.15368 of 2013:

In view of the order passed in Civil Appeal @ S.L.P. (C)No.10542 of 2011, these appeals are also disposed of in  the  same  terms,  conditions,  observations  and  directions  contained therein. Ordered accordingly.

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S.L.P.(C)No.7741/2013: De-tag and list separately.

Ordered accordingly.

.......................J. (H.L. DATTU)

.......................J. (S.A. BOBDE)

NEW DELHI; MARCH 12, 2014