SHILPA GUPTA vs. ACIT CENTRAL CIRCLE-27, DELHI

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W.P.(C)/1489/2024HC DelhiDLHC01003450202422 May 2024Bench: HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV,HON'BLE MR. JUSTICE YASHWANT VARMA3 pages
AI SummaryPartly Allowed

What did the High Court hold?

The Delhi High Court allowed the writ petition and quashed the impugned notice issued under Section 153C of the Income Tax Act, 1961, dated August 22, 2022, specifically concerning AY 2016-17. The Court relied on its previous judgment 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 form an opinion, with reasons duly recorded, that the ultimate computation of escaped income is likely to exceed INR 50 lakhs. This satisfaction must be based on a fair assessment of material gathered, not mere speculation. The precondition of INR 50 lakhs is a sine qua non for initiating action for the extended block period and must be borne out from the Satisfaction Note. The Court clarified that this threshold applies cumulatively or in aggregate, not necessarily for each individual assessment year. The AO is permitted to examine the issue afresh if they are of the opinion that the escaped income is likely to exceed INR 50 lakhs in the relevant assessment year, and if otherwise permissible in law.

What were the facts?

The petitioner, Shilpa Gupta, filed a writ petition challenging a notice dated August 22, 2022, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2016-17, and all consequential proceedings. The notice was issued by the ACIT Central Circle-27, Delhi. A key fact is that the Satisfaction Note recorded by the Assessing Officer (AO) of the searched person was dated May 10, 2022. The petitioner argued that the income alleged to have escaped assessment did not exceed INR 50 lakhs, failing to meet the threshold requirement of the Fourth Proviso to Section 153A.

What were the issues?

1. Whether the notice dated August 22, 2022, issued under Section 153C of the Income Tax Act, 1961, for AY 2016-17 is valid, considering the alleged escaped income does not exceed INR 50 lakhs, thereby not fulfilling the threshold requirement of the Fourth Proviso to Section 153A. Assessee's Contention: The petitioner argued that the income alleged to have escaped assessment did not exceed INR 50 lakhs, which is a mandatory threshold for initiating proceedings under Section 153C, as per the Fourth Proviso to Section 153A. The Satisfaction Note dated May 10, 2022, indicated this lack of fulfillment. Revenue's Contention: The judgment does not explicitly record the revenue's specific arguments beyond their role as the respondent opposing the writ petition. However, the court's reasoning implies a consideration of the revenue's position regarding the AO's satisfaction and the potential for escaped income.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~76 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1489/2024 & CM APPL. 6144/2024

SHILPA GUPTA

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

versus

ACIT CENTRAL CIRCLE-27, DELHI ..... Respondent Through: Mr Shlok K. Chandra, SSC with Ms. Madhavi Shukla, JSC, Ms. Priya Sarkar, JSC and Mr. Sudharshan Roy, 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 22 August 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 10 May 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 12:59:26

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 12:59:26

153C of the Act dated 22 August 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 12:59:26

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