JAINCO LTD vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 31 DELHI & ORS.

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W.P.(C)/15275/2024HC DelhiDLHC01075350202429 October 2024Author: HON'BLE MR. JUSTICE VIBHU BAKHRU,HON'BLE DR. JUSTICE SWARANA KANTA SHARMA4 pages
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What did the High Court hold?

The Delhi High Court held that the controversy in the present petition is covered by its earlier decision in ARN Infrastructures India Ltd. v. Assistant Commissioner of Income Tax Central Circle-28 Delhi & Ors. The Court reiterated that the Supreme Court's observations in Abhisar Buildwell were not a carte blanche to override statutory restrictions. The liberty granted to the Revenue to initiate reassessment was subject to the fulfillment of conditions under Sections 147/148 and compliance with the reassessment chapter. The Supreme Court's intent was to ensure the Revenue was not left without a remedy when search assessments were annulled, but this power had to be exercised in accordance with law. Therefore, the contention that the time period stipulated under Section 149 of the Act is not applicable is erroneous and rejected. The petition was allowed, and the impugned notice was set aside.

What were the facts?

The petitioner, Jainco Ltd., has filed a writ petition challenging a notice dated 31.08.2024 issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2016-17. The Revenue contends that the notice, though seemingly beyond the period stipulated in Section 149(1) of the Act, is valid due to the non-obstante clause in Section 150. This is based on the Revenue's interpretation of the Supreme Court's decision in Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd., which they believe permits issuing such notices in cases related to search under Section 132, even if time-barred. The Revenue argues this Supreme Court decision constitutes a finding or direction for issuing such notices.

What were the issues?

1. Whether the Supreme Court's decision in Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. constitutes a finding and direction permitting the issuance of a notice under Section 148 of the Income Tax Act, 1961, in cases otherwise beyond the period stipulated under Section 149 of the Act? Assessee's contention: The petitioner implicitly argues that the notice is invalid as it is beyond the period stipulated in Section 149(1) and that the Revenue's reliance on the Abhisar Buildwell decision is misplaced. Revenue's contention: The Revenue argues that the impugned notice has been issued within the stipulated time by virtue of the non-obstante clause under Section 150 of the Act, premised on the 'findings and directions' in the Supreme Court's decision in Abhisar Buildwell. They interpret this decision as a directive to issue such notices in cases related to searches, even if time-barred under Section 149.

Which sections of the Income-tax Act were involved?

Section 148,Section 149(1),Section 150,Section 147,Section 132

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
$~60 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 15275/2024, CM APPL. 64212/2024 (interim relief) & CM APPL. 64213/2024 (Exemption) JAINCO LTD .....Petitioner Through: Mr. Ved Jain, Mr. Nischay Kantoor, Ms. Soniya Dodeja, Mr. Divyansh Dubey & Mr. Govind Gupta, Advocates. versus ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 31 DELHI & ORS. .....Respondents Through: Mr. Shlok Chandra, Senior Standing Counsel with Ms. Naincy Jain, JSC, MS. Madhavi Shukla, JSC & Mr. Sushant Pandey, Advocate for R- 1/Revenue. Mr. Ashish Goyal, SPC with Mr. Sandeep Tyagi, Advocate for R-4. CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRU HON'BLE MS. JUSTICE SWARANA KANTA SHARMA

O R D E R %

29.10.

2024

1.

Issue notice.

2.

The learned counsel appearing for the respondents accept notice.

3.

The petitioner has filed the present petition, inter alia, impugning notice dated 31.08.2024 (hereafter the impugned notice) issued under Section 148 of the Income Tax Act, 1961 (hereafter the Act) in respect of assessment year (AY) 2016-17. 4. The impugned notice is clearly beyond the period as stipulated under This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/11/2024 at 11:31:37

Section 149(1) of the Act. However, it is the Revenue‟s case that the impugned notice has been issued within the stipulated time by virtue of the non-obstante clause under Section 150 of the Act. The Revenue claims that the impugned notice is premised on the „findings and directions‟ as embodied in the decision of the Supreme Court in Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd.: (2024) 2 SCC 433. In the said decision, the Supreme Court had held that in certain cases, the assessing officer (AO) could exercise its powers under Section 147/148 of the Act, even in cases which are related to a search conducted under Section 132 of the Act. The Revenue construes the decision as constituting a finding or a direction for issuing such notices in respect of cases such of the assessee‟s.

5.

The question whether the decision in the case of Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. (supra) constitutes a finding and a direction for permitting the issuance of notice under Section 148 of the Act in cases, which are otherwise beyond the period as stipulated under Section 149 of the Act is no longer res integra. This Court in the case of ARN Infrastructures India Ltd. v. Assistant Commissioner of Income Tax Cental Circle-28 Delhi & Ors.: Neutral Citation No.:2024:DHC:7423-DB had rejected a similar contention. The relevant extract of the said decision is set out below:

“38. It is pertinent to note that a reference to Sections 147 and 148 of the Act in Abhisar Buildwell firstly appears in paragraph 33 of the report and where the Supreme Court observed that in cases where a search does not result in any incriminating material being found, the only remedy that would be available to the Revenue would be to resort to reassessment.

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/11/2024 at 11:31:37

39.

However, the Supreme Court caveated that observation by observing that the initiation of reassessment would be “…..subject to fulfilment of the conditions mentioned in Sections 147/148, as in such a situation, the Revenue cannot be left with no remedy”. This sentiment came to be reiterated with the Supreme Court observing that the power of the Revenue to initiate reassessment must be saved failing which it would be left with no remedy. It was thereafter observed in paragraph 36.4 of the report that insofar as completed or unabated assessments were concerned, they could be reopened by the AO by invocation of Sections 147/148 of the Act, subject to the fulfillment of the conditions “……as envisaged/mentioned under Sections 147/148 of the Act and those powers are saved”.

40.

It thus becomes apparent that the liberty which the Supreme Court accorded and the limited right inhering in the Revenue to initiate reassessment was subject to that power being otherwise compliant with the Chapter pertaining to reassessment as contained in the Act. The observations of the Supreme Court cannot possibly be read or construed as a carte blanche enabling the respondents to overcome and override the restrictions that otherwise appear in Section 149 of the Act. The observations of the Supreme Court in Abhisar Buildwell were thus intended to merely convey that the annulment of the search assessments would not deprive or denude the Revenue of its power to reassess and which independently existed. However, the Supreme Court being mindful of the statutory prescriptions, which otherwise imbue the commencement of reassessment, qualified that observation by providing that such an action would have to be in accordance with law. This note of caution appears at more than one place in that judgment and is apparent from the Supreme Court observing that the power to reassess would be subject to the fulfilment of the conditions mentioned in Sections 147 and 148 of the Act.”

6.

Plainly, the controversy involved in this petition is covered by the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/11/2024 at 11:31:37

decision of this Court in ARN Infrastructures India Ltd. v. Assistant Commissioner of Income Tax Cental Circle-28 Delhi & Ors. (supra). The contention that the time period as stipulated under Section 149 of the Act is not applicable, in the given facts, is erroneous and thus rejected.

7.

The petition is, accordingly, allowed and the impugned notice is set aside. Pending applications are also disposed of.

VIBHU BAKHRU, J

SWARANA KANTA SHARMA, J OCTOBER 29, 2024/at

Click here to check corrigendum, if any This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/11/2024 at 11:31:37

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