Dr. Satish Chandra, J.:— All the appeals have been filed under section 260A of the Income-tax Act, 1961, against the common judgment and order dated April 29, 2009, passed by the Income-tax Appellate Tribunal, Lucknow, in various appeals for the assessment years mentioned above. As the facts and circumstances in all the appeals are identical, so all the appeals are decided by this common judgment for the sake of convenience.

2. All the appeals were admitted with the following substantial questions of law by various orders including the order dated February 24, 2010:

(i) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Appeals) by incorrect interpretation of section 153C of the Income-tax Act which only prescribes the procedure to be adopted in a situation where the Assessing Officer having the books of account of other person does not have the jurisdiction over such person whereas in the case of the assessee the books were already handed over to the Assessing Officer who issued the notice after recording satisfaction thereby, meeting all the substantive requirements of law?

(ii) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal has wrongly relied on the judgment of the apex court in Manish Maheshwari v. Asst. CIT reported in [2007] 289 ITR 341 (SC) where the Assessing Officer of the person searched and the Assessing Officer of the other person were different whereas in the instant case the Assessing Officer of the person searched and the other person are one and the same and, therefore, the requirement of handing over the books to the Assessing Officer of the other person has no relevance?

(iii) Whether the order of the Income-tax Appellate Tribunal is perverse inasmuch as it is contrary to the decision of the jurisdictional High Court in the case of Digvijay Chemicals Ltd. v. Asst. CIT, [2001] 248 ITR 381 (All) wherein the court has clearly held that the even recording of satisfaction in writing for initiating proceedings under section 158BD which is identical with the provisions of section 153C, is not mandatory?

(iv) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal is perverse inasmuch as it has not adjudicated the ground taken by the Revenue in appeal questioning the jurisdiction of the Assessing Officer by the assessee much after the time permitted under section 124(3)(b) of the Income-tax Act?”

3. The brief facts of the cases are that the assessee is a registered firm consisting of two partners, namely, Sri Siraj Iqbal and Smt. Farjana Siraj engaged in the business of running of hospital, building and educational institutions. On November 10, 2005, a search was conducted at the business premises of Sri Siraj Iqbal as well as at various business premises of the assessees. On September 28, 2006, the books of account were handedover to the Assessing Officer to pass assessment orders. The Assessing Officer issued notice under section 153C of the Act. Later, the assessment orders were passed for the assessment years mentioned above under section 153C/143(3) of the Act. Aggrieved with the assessment orders, the assessees have filed the first appeals before the Commissioner of Income-tax (Appeals) who, vide his orders including the order dated December 19, 2008, quashed the assessment orders. Being aggrieved, the Department filed second appeals, which were dismissed. Still not being satisfied, the Department has filed these appeals.

4. With this background Sri Prashant Kumar, learned counsel for the Revenue justified the order passed by the Assessing Officer. On the other hand, Sri Mudit Agarwal, counsel for the assessee, relied on the orders passed by the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal. No valuable contribution has been made by either the counsel.

5. After hearing both the parties and on perusal of record, it appears that the action under section 132 of the Act was carried out simultaneously in the case of (1) M/s. F.I Builders (P.) Ltd., (2) M/s. Azad Educational Society, and (3) M/s. F.I Hospital, and (4) M/s. Classic Enterprises. At the time of search, i.e, November 10, 2005, the jurisdiction over all the respondent-assessees was with the Joint Commissioner of Income-tax, Range II, Lucknow, whereas over the case of Mr. Siraj Iqbal (searched person) was with the Additional Commissioner of Income-tax, Range-VI, Lucknow. Jurisdiction in the case of the assessee and others was transferred from the Joint Commissioner of Income-tax, Range-II, Lucknow, to the ACIT CC-I, Lucknow, on October 31, 2006, as per the letter F. No. 81-C/Cent/Decent/CIT-I/Tech/2006-07, dated October 31, 2007, whereas the jurisdiction in the case of Mr. Siraj Iqbal was transferred from the “Additional Commissioner of Income-tax, Range-VI, Lucknow, to the ACIT, CC I, Lucknow, on October 19, 2007, as per File No. T-33.CIT-II/Lucknow/TRANS/04-05/Vol. I/617, dated October 19, 2007. The Deputy Commissioner of Income-tax, Lucknow, after recording the reasons for issuing notices under section 153C of the Act, issued notices to all the assessees. The reply was furnished on December 28, 2007.

6. Further, section 153C only prescribes the procedure to be adopted for initiating proceedings under section 153A against a person who has not been searched, that too, in a situation where the Assessing Officer having the jurisdiction over the other persons (not searched) is different from the Assessing Officer having jurisdiction over the person searched.

7. In the case of Monish Maheshwari v. Asst. CIT, [2007] 289 ITR 341 (SC), the hon'ble Supreme Court observed that in the case of block assessment, the Assessing Officer had to (i) record his satisfaction that any undisclosed income belonged to the company; and (ii) hand over the books of account, other documents and assets seized to the Assessing Officer having jurisdiction against the company.

8. Thus, it was observed by the hon'ble Supreme Court that the Assessing Officer has not recorded his satisfaction, which is mandatory; nor has he transferred the case to the Assessing Officer having jurisdiction over the matter. So, the order of the High Court was set aside. But, in the instant case, the Assessing Officer has recorded his satisfaction and after recording the satisfaction on September 28, 2006, handed over the books of account and seized material. Thus, the facts of both the cases are quite different. So, the ratio laid down in the case of Manish Maheshwari (supra) is not applicable in the instant case.

9. In the instant case, another admitted substantial question of law was pertaining to the applicability of the ratio laid down by the jurisdictional High Court in the case of Digvijay Chemicals Ltd. v. Asst. CIT, [2001] 248 ITR 381 (All), where it was observed that (headnote):

“(i) the explanation and the affidavit filed by the appellant relating to undisclosed and unexplained advance was not found acceptable, and the Tribunal had relied in detail on the evidence in support of this finding. It was not necessary that there must be always cross-examination of a witness before discharging his evidence.

(ii) It was evident from the order of the Tribunal that the Deputy Commissioner of Income-tax, Amritsar, was satisfied that the undisclosed income mentioned in the seized documents pertained to the appellant. There was no error in this finding. Findings of fact by the Tribunal could not be interfered with.”

10. This ratio is applicable in the instant case as on September 28, 2006, the books of account were handed-over to the Assessing Officer, after being satisfied that the books belongs to the assessee. After recording the satisfaction, a notice under section 153C was issued and the assessee replied too. So, assessment order was completed on December 28, 2007, under section 153C/143(3) of the Act.

11. Regarding the satisfaction, it may be mentioned that in the case of The Commissioner Of Income Tax Xiii v. Radhey Shyam Bansal, [2011] 337 ITR 217 (Delhi), it was observed that in order to initiate block assessment proceedings against a third person in respect of whom search has not been conducted, certain conditions precedent are to be followed and they are mandatory. After the amendment of section 158B(b) by the Finance Act, 2002, with retrospective effect from July 1, 1995, it can also include an expense, deduction or allowance which is found to be false. The word “satisfaction” has not been defined in the Act. The “satisfaction” by its very nature must precede before the papers/documents are sent by the Assessing Officer of the person searched to the Assessing Officer of the third person. Mere use or mention of the word (satisfaction) in the order/note will not meet the requirement of the concept of satisfaction as used in section 158BD. The satisfaction has to be in writing and can be gathered from the assessment order, if it is so mentioned/recorded, or from any other order, note or record maintained by the Assessing Officer of the person searched. The word “satisfaction” refers to the state of mind of the Assessing Officer of the person searched, which gets reflected in a tangible shape/form when it is reduced into writing. It is the conclusion drawn or the finding recorded on the foundation of the material available. The Assessing Officer is satisfied when he makes up his mind or reaches a clear conclusion when he takes a prima facie view that the material available establishes “undisclosed income” of a third party. The Assessing Officer must reach a clear conclusion that good ground exists for the Assessing Officer of the third person to initiate proceedings as material before him shows or would establish “undisclosed income” of a third person. At this stage, as the proceedings are at the very initial state, the “satisfaction” is neither required to be firm or conclusive. The “satisfaction” required is to decide whether or not block assessment proceedings are required to be initiated. But “satisfaction” has to be founded on reasonableness. It cannot be capricious satisfaction. Though, it is a subjective satisfaction, it must be capable of being tested on objective parameters. The opinion though tentative, however, cannot be a product of imagination or speculation. The satisfaction must reflect rational connection with or relevant bearing between the material available and undisclosed income of the third person. The rational connection postulates and requires satisfaction of the Assessing Officer that a third person has undisclosed income on the basis of evidence or material before him. The material itself should not be vague, indefinite, distinct or remote.

12. Further, in the case of CIT v. Panchajanyam Management Agencies and Services, [2011] 333 ITR 281 (Ker), it was held that on the facts there was no necessity for transferring the file from one officer to another, because the person searched was the managing partner and based on the materials gathered during the search the assessment was made by the same officer on the assessee-firm, wherein the searched assessee was the managing partner. So much so, issuance of notice under section 158BD read with section 158BC was sufficient for initiation of assessment which in this case was admittedly done and the assessee had filed reply in terms of notice issued.

13. From the above, it is clear that the Tribunal erred not to consider the ratio laid down by this court in the case of Digvijay Chemicals (supra)

14. In the light of above discussion and by considering the totality of the facts and circumstances of the case, we find no reason to sustain the order passed by the Tribunal.

15. Hence, we set aside the impugned order passed by the Tribunal and remand the matter back to the Tribunal who is directed to decide all the appeals strictly on the merits expeditiously say within a period of three months, as the matter is too old. The answer to the substantial question of law (supra), which are interlinked, is against the assessee and in favour of the Revenue.

16. All the appeals filed by the Revenue are allowed.