PANCH TATVA PROMOTORS PRIVATE LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 25 DELHI AND ORS.

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W.P.(C)/17368/2024HC DelhiDLHC01094732202420 May 2025Bench: HON'BLE MR. JUSTICE VIBHU BAKHRU,HON'BLE MR. JUSTICE TEJAS KARIA4 pages
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What did the High Court hold?

The High Court held that the notice issued under Section 153C of the Income Tax Act, 1961, for AY 2020-21 was invalid and consequently set it aside. The Court reasoned that the satisfaction note, which was the basis for the Section 153C notice, did not contain any information that could possibly lead to the conclusion that the petitioner's income for AY 2020-21 had escaped assessment. The pen-drive, which contained details of transactions from FY 2014-15 to FY 2020-21, was found to have information pertaining to a transaction of ₹70,78,680/- from FY 2014-15. The Court relied on the Supreme Court's decision in CIT-III, Pune v. Sinhgad Technical Education Society and its own recent decision in Saksham Commodities Ltd. v. ITO Ward 22 (1), Delhi, which emphasize that the material found must have a bearing on the income of the assessment year for which reassessment is sought. The ratio decidendi is that Section 153C can only be invoked if the material found has a direct bearing on the income of the specific assessment year in question, and not for unrelated prior years. The impugned notice was set aside.

What were the facts?

The petitioner, Panch Tatva Promoters Private Limited, has filed a writ petition challenging a notice dated 28.08.2024 issued under Section 153C of the Income Tax Act, 1961, and the subsequent reassessment proceedings for Assessment Year (AY) 2020-21. The notice was based on a satisfaction note from the Assessing Officer (AO) of searched persons, Mr. Samir Modi and Ms. Shivani Modi, concerning a search conducted on 03.02.2021. The satisfaction note indicated that a pen-drive found during the search contained information about transactions involving accommodation entries. For the petitioner, the information pertained to a purported transaction of ₹70,78,680/- supported by a bogus invoice, but this transaction related to Financial Year 2014-15.

What were the issues?

1. Whether the notice issued under Section 153C of the Income Tax Act, 1961, for AY 2020-21 is valid, given that the incriminating material found pertains to AY 2014-15? Assessee's Contention: The petitioner argues that the satisfaction note and the material found during the search (a pen-drive) do not contain any information that could lead to the conclusion that the petitioner's income for AY 2020-21 had escaped assessment. Therefore, the invocation of Section 153C for AY 2020-21 is unjustified. Revenue's Contention: The judgment does not record any specific contentions made by the revenue in response to the petitioner's arguments. However, the issuance of the notice under Section 153C implies the revenue's belief that the material found was relevant for reassessment.

Which sections of the Income-tax Act were involved?

Section 153C

AI-generated summary — verify with the full judgment below

W.P.(C) 17368/2024 Page 1 of 4 $~56 * IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of Decision: 20.05.2025 + W.P.(C) 17368/2024 and CM APPL. 73958/2024 PANCH TATVA PROMOTORS PRIVATE LIMITED .....Petitioner Through: Mr Somil Agarwal and Mr Dushyant Agrawal, Advocates. Versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 25 DELHI AND ORS. .....Respondents Through: Mr Siddhartha Sinha, Advocate. CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRU HON'BLE MR. JUSTICE TEJAS KARIA VIBHU BAKHRU, J. (Oral) 1. The petitioner has filed the present petition, inter alia, impugning a notice dated 28.08.2024 [the impugned notice] issued under 153C of the Income Tax Act, 1961 [the Act] as well as the proceedings for re- assessment of the petitioner’s income in respect of Assessment Year [AY] 2020-21. 2. The impugned notice is premised on the satisfaction note of the Assessing Officer [AO] of Mr. Samir Modi and Ms. Shivani Modi (searched persons), which recorded that documents containing information pertaining to the petitioner were found during the search conducted in the case of Digitally Signed By:TARUN RANA Signing Date:24.05.2025 12:26:36 Signature Not Verified

W.P.(C) 17368/2024 Page 2 of 4 searched persons on 03.02.2021. 3. Admittedly, the satisfaction note does not contain any information which may have a bearing on determining the petitioner’s income assessable in the AY 2020-2021. The note indicates that during the course of the search, a pen-drive was found, which contained certain information regarding transactions entered into by HGEL (High Ground Enterprises Ltd.) with companies that had provided accommodation entries through generation of bogus invoices. 4. In so far as the petitioner is concerned, information allegedly found was regarding a purported transaction of ₹70,78,680/-, which was allegedly supported by bogus invoice. However, the said transaction pertains to the Financial Year 2014-15. Paragraph 13 of the satisfaction note is set out below: “13. Further, during the search action, several digital devices were cloned and had been annexurised. In one red SanDisk pen drive which was cloned into the Hard-Disk marked as Annexure A3, the tally data of entities had been maintained. The Managing director of High Ground Enterprises Limited i.e. Sandeep Ramkrishna Arora admitted that transactions between High Ground Enterprise Limited and companies may not be 100 percent genuine. The pen drive contains all detailed transactions done by HGEL with the companies who may provided accommodation entries through generation of bogus invoices from FY 2014-15 to FY 2020-21. Details of transaction of assessee to whom bogus service has been provided by HGEL S.NO. Name of the Assessee PAN FY Amount 1 Panch Tatva Promoters Pvt Ltd AAFCP6505P 2014-15 70,78,680 TOTAL 70,78,680” Digitally Signed By:TARUN RANA Signing Date:24.05.2025 12:26:36 Signature Not Verified

W.P.(C) 17368/2024 Page 3 of 4 5. It is clear from the above that the information provided in the satisfaction note dated 03.07.2024 entered by the AO of the searched persons could not possibly lead to the conclusion that the income of the Assessee for AY 2020-21 had escaped assessment. The pen drive found cannot be considered as containing any incriminating material pertaining to the petitioner in respect of AY 2020-21. Thus, the petitioner’s assessment for the said year could not be reopened under Section 153C of the Act. 6. Concededly, the aforesaid issue is covered by the decision of the Supreme Court in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society: [2017] 84 taxmann.com 290 as well as the recent decision of this Court in Saksham Commodities Ltd. v. Income Tax Officer Ward 22 (1), Delhi & Anr.: 2024:DHC:2836-DB. 7. It is relevant to set out paragraph 68 of the said decision which reads as under: 68. The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs’ and thereafter proceed to place the assessee on notice under Section 153C. The power to undertake such an assessment would stand confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only be consequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments. [Emphasis added] Digitally Signed By:TARUN RANA Signing Date:24.05.2025 12:26:36 Signature Not Verified

W.P.(C) 17368/2024 Page 4 of 4 8. In view of the above, the present petition is allowed and the impugned notice issued under Section 153C of the Act in respect of AY 2020-2021 is set aside. 9. The pending application is also disposed of. VIBHU BAKHRU, J TEJAS KARIA, J MAY 20, 2025 RK Click here to check corrigendum, if any Digitally Signed By:TARUN RANA Signing Date:24.05.2025 12:26:36 Signature Not Verified

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