ABHINAV GUPTA vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 25(1) DELHI & ORS.

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W.P.(C)/1520/2024HC DelhiDLHC01003601202427 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 impugned notice dated May 5, 2023, issued under Section 153C of the Act concerning AY 2014-15. The Court followed its prior decision in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. The Court reiterated that while the initial assessment of escaped income might be provisional, the AO must form an opinion, based on material gathered, that the ultimate computation of escaped income is likely to exceed INR 50 lakhs. This satisfaction must be reflected in the Satisfaction Note itself and based on a fair assessment, not mere speculation. The precondition of INR 50 lakhs is a cumulative benchmark for all relevant assessment years. However, the Court left it open for the AO to examine the issue afresh and draw proceedings if the escaped income is likely to exceed INR 50 lakhs in the relevant AY, provided it is otherwise permissible in law.

What were the facts?

The petitioner, Abhinav Gupta, filed a writ petition challenging a notice dated May 5, 2023, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2014-15, and all consequential proceedings. The petitioner contended that the notice was invalid because the Satisfaction Note recorded by the Assessing Officer (AO) of the searched person was dated June 24, 2022. This date indicated that the income alleged to have escaped assessment for the relevant AY did not exceed INR 50 lakhs, failing to meet the threshold requirement stipulated by the Fourth Proviso to Section 153A of the Act. The respondents, represented by the Assistant Commissioner of Income Tax, Circle 25(1) Delhi, and others, were the revenue.

What were the issues?

1. Whether the notice dated May 5, 2023, issued under Section 153C of the Income Tax Act, 1961, for AY 2014-15 is valid, considering the date of the Satisfaction Note recorded by the AO of the searched person? Assessee's Contention: The assessee argued that the notice was invalid because the Satisfaction Note, dated June 24, 2022, indicated that the escaped income did not exceed INR 50 lakhs, which is a mandatory threshold for initiating proceedings 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 [2024 SCC Online Del 2439]. Revenue's Contention: The judgment does not record any specific contentions made by the revenue in this regard, other than their role as respondents.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~38 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1520/2024 & CM APPL. 6335/2024 (Interim Relief)

ABHINAV GUPTA

..... Petitioner Through: Mr. Ved Jain, Mr. Nischay Kantoor & Ms. Soniya Dodeja, Advs.

versus

ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 25(1) DELHI & ORS. ..... Respondents Through: Mr. Ruchir Bhatia, SSC with Mr. Anant Mann, JSC.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV

O R D E R %

27.05.2024

1.

This writ petition has been preferred against the impugned notice dated 05 May 2023 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2014-15 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 24 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. 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 29/05/2024 at 11:56:36

Ltd [2024 SCC Online Del 2439]. The relevant paragraphs of the 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 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 29/05/2024 at 11:56:36

petition and quash the impugned notice issued under Section 153C of the Act dated 05 May 2023 insofar as it relates to AY 2014-15, 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.

PURUSHAINDRA KUMAR KAURAV, J. MAY 27, 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 29/05/2024 at 11:56:36

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