NITIN GUPTA vs. ACIT CENTRAL CIRCLE-27, DELHI

PDF · subscribers
W.P.(C)/1486/2024HC DelhiDLHC01003447202422 May 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV3 pages
AI SummaryPartly Allowed

What did the High Court hold?

The Delhi High Court allowed the writ petition and quashed the notice dated November 2, 2022, issued under Section 153C of the Act for AY 2016-17. The Court followed its earlier decision in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. The Court held that while the initial assessment of escaped income in the Satisfaction Note might be provisional, the AO must have a reasoned opinion, based on material gathered, that the ultimate computation of escaped income is likely to exceed INR 50 lakhs. This satisfaction and the supporting reasons must be evident from the Satisfaction Note itself. The precondition of INR 50 lakhs is a sine qua non for initiating action for the extended block period and applies cumulatively or in aggregate, not necessarily for each relevant assessment year. The AO was given the liberty to examine the issue afresh and initiate proceedings if the escaped income is likely to exceed INR 50 lakhs, provided it is otherwise permissible in law.

What were the facts?

The petitioner, Nitin Gupta, filed a writ petition challenging a notice dated November 2, 2022, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2016-17. The notice was issued by the Assistant Commissioner of Income Tax (ACIT), Central Circle-27, Delhi. The petitioner contended that the notice was invalid because the Satisfaction Note recorded by the Assessing Officer of the searched person was dated June 1, 2022. This date indicated that the alleged escaped income did not exceed INR 50 lakhs, failing to meet the threshold requirement stipulated by the Fourth Proviso to Section 153A of the Act. The respondent revenue was represented by the ACIT.

What were the issues?

1. Whether the notice issued under Section 153C of the Income Tax Act, 1961, for AY 2016-17 is valid, considering the Satisfaction Note dated June 1, 2022, and the threshold requirement of INR 50 lakhs prescribed by the Fourth Proviso to Section 153A. Assessee's Contention: The assessee argued that the notice under Section 153C was invalid because the Satisfaction Note indicated that the escaped income did not exceed INR 50 lakhs, thus not fulfilling the mandatory threshold under the Fourth Proviso to Section 153A. The assessee relied on the judgment in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. Revenue's Contention: The judgment does not record any specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~74 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1486/2024 & CM APPL. 6139/2024 (Stay)

NITIN GUPTA

..... Petitioner Through: Mr. Gaurav Jain and Mr. Shubham Gupta, Advocates.

versus

ACIT CENTRAL CIRCLE-27, DELHI ..... Respondent Through: Mr. Gaurav Gupta, SSC with Mr Shivendra Singh, JSC, Mr. Yojit Pareek, JSC and Namit Gupta, Advocate.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE AMIT BANSAL

O R D E R %

22.05.2024

1.

This writ petition has been preferred against the impugned notice dated 02 November 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2016-17 and all consequential proceedings. 2. Bearing in mind the undisputed fact that the Satisfaction Note recorded by the Assessing Officer [“AO”] of the searched person was dated 01 June 2022, it is ex facie evident that the income which is alleged to have escaped assessment for the “relevant assessment year” does not exceed INR 50 lakhs, thereby not fulfilling the threshold requirement as prescribed by the Fourth Proviso to Section 153A. 3. The issue in any case stands answered and covered in favour of the writ petitioner in light of the judgment rendered in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd [2024 SCC Online Del 2439]. The relevant paragraphs of 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 27/05/2024 at 13:02:48

aforesaid decision read as under:- ““G. Insofar as the thresholds put in place by virtue of the Fourth Proviso to Section 153A are concerned and the argument of the writ petitioners of the condition of INR 50 lakhs being an unwavering precondition, we find ourselves unable to sustain that submission bearing in mind the indubitable fact that proceedings for search assessment commence upon the issuance of a notice and the AO at that stage having really not had the occasion to undertake a detailed or in depth examination of the evidence collected or come to a definitive opinion with respect to the total income which may have escaped assessment. Since the computation and assessment of income that is likely to have escaped assessment would at this stage be provisional, it would be incorrect to strike down initiation of action on a mere ex facie examination of the Satisfaction Note. We also in this regard bear in mind the Fourth Proviso using the expression “amounts to or is likely to amount”. The usage of the phrase “likely to” is indicative of the Legislature being conscious of the provisional character of the opinion that the AO may have formed at that stage.

H. However, and at the same time, even if the identified asset at that stage be quantified as less than INR 50 lakhs, the AO must for reasons to be duly recorded, be of the opinion that the ultimate computation of escaped income is likely to exceed INR 50 lakhs. The aforesaid satisfaction would have to be based on an assessment of the material gathered and the potentiality of the same being indicative of the escaped assessment exceeding INR 50 lakhs. The formation of opinion in this respect would have to be based not on mere ipse dixit but reflective of a fair assessment of the quantum of income likely to have escaped assessment as distinct from mere speculation and conjecture.

I. We further hold that since the precondition of INR 50 lakhs or more constitutes a sine qua non for initiating action for the extended ten year block, the aforesaid satisfaction and the reasons in support thereof would have to borne out from the Satisfaction Note itself. We are also of the opinion that the precondition of INR 50 lakhs is not liable to be viewed as being the qualifying criteria for each “relevant assessment year” that may be thrown open and that the said condition would stand satisfied if the escaped income cumulatively or in the aggregate meets the minimum benchmark of INR 50 lakhs.”

4.

Accordingly, and for reasons assigned in our decision in Ojjus Medicare Private Limited, while we allow the instant writ petition and quash the impugned notice issued under Section 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 27/05/2024 at 13:02:48

153C of the Act dated 02 November 2022 insofar as it relates to AY 2016-17, we leave it open to the AO to examine the issue afresh bearing in mind the observations appearing in para 3 above. 5. In case the AO be of the opinion that the income alleged to have escaped assessment is likely to exceed INR 50 lakhs in the “relevant assessment year”, it would be open to it to draw proceedings afresh, if otherwise permissible in law.

YASHWANT VARMA, J

AMIT BANSAL, J MAY 22, 2024/kk 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 27/05/2024 at 13:02:48

More judgments on Section 153C

All 9,619 judgments and leading authorities on Section 153C →

Recent GST High Court judgments

Search GST case law →