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

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W.P.(C)/17394/2024HC DelhiDLHC01094545202420 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 Delhi High Court allowed the writ petition and set aside the impugned notice dated 28.08.2024 issued under Section 153C of the Income Tax Act, 1961, in respect of AY 2021-22. The Court reasoned that the information found during the search, which pertained to a transaction in FY 2014-15, could not possibly lead to the conclusion that the petitioner's income for AY 2021-22 had escaped assessment. The Court emphasized that the material found must have a bearing on or impact the total income of the assessment years for which reassessment is sought. Invoking Section 153C is only justified if there is material that casts doubt on the estimation of total income for a particular year. The Court relied on its decision in Saksham Commodities Ltd. v. Income Tax Officer Ward 22 (1), Delhi & Anr., which followed the Supreme Court's ruling in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society. The ratio decidendi is that the satisfaction of the AO for issuing a notice under Section 153C must be based on material relevant to the assessment year in question, and a notice cannot be issued for a later year based on material pertaining to a much earlier year.

What were the facts?

The petitioner, Panch Tatva Promoters Private Limited, filed a writ petition challenging a notice dated 28.08.2024 issued under Section 153C of the Income Tax Act, 1961, and the consequent reassessment proceedings for Assessment Year (AY) 2021-22. The notice was based on a satisfaction note of the Assessing Officer (AO) for searched persons, Mr. Samir Modi and Ms. Shivani Modi, who were searched on 03.02.2021. The satisfaction note indicated that documents pertaining to the petitioner were found during the search. However, the information found, specifically a pen-drive containing data from FY 2014-15 to FY 2020-21, detailed a purported transaction of ₹70,78,680/- with the petitioner for FY 2014-15, allegedly supported by bogus invoices. The AO of the petitioner issued the notice under Section 153C for AY 2021-22 based on this information.

What were the issues?

1. Whether the notice dated 28.08.2024 issued under Section 153C of the Income Tax Act, 1961, and the consequent reassessment proceedings for AY 2021-22 are valid, given that the incriminating material found pertains to AY 2014-15 and not AY 2021-22? Assessee's Contention: The petitioner argued that the information found during the search of Mr. Samir Modi and Ms. Shivani Modi, specifically a pen-drive detailing transactions from FY 2014-15 to FY 2020-21, could not possibly lead to the conclusion that the petitioner's income for AY 2021-22 had escaped assessment. The transaction highlighted, amounting to ₹70,78,680/-, pertained to FY 2014-15, and therefore, Section 153C could not be invoked for AY 2021-22. The petitioner relied on the Supreme Court decision in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society and this Court's decision in Saksham Commodities Ltd. v. Income Tax Officer Ward 22 (1), Delhi & Anr. 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

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W.P.(C) 17394/2024

Page 1 of 4 $~61 * IN THE HIGH COURT OF DELHI AT NEW DELHI %

Date of Decision: 20.05.2025 + W.P.(C) 17394/2024 and CM APPL. 74046/2024 & 74047/2024

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) 2021-22. 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 searched persons on 03.02.2021. Digitally Signed By:RAM KUMAR Signing Date:23.05.2025 17:57:34 Signature Not Verified

W.P.(C) 17394/2024

Page 2 of 4 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 2021-22. 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”

5.

It is clear from the above that the information provided in the Digitally Signed By:RAM KUMAR Signing Date:23.05.2025 17:57:34 Signature Not Verified

W.P.(C) 17394/2024

Page 3 of 4 satisfaction note dated 28.08.2024 entered by the AO of the assessee could not possibly lead to the conclusion that the income of the Assessee for AY 2021-22 had escaped assessment. The pen drive found cannot be considered as containing any incriminating material pertaining to the petitioner in respect of AY 2021-22. 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:RAM KUMAR Signing Date:23.05.2025 17:57:34 Signature Not Verified

W.P.(C) 17394/2024

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 2021-22 is set aside. 9. The pending application is also disposed of.

VIBHU BAKHRU, J

TEJAS KARIA, J MAY 20, 2025 RK

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Digitally Signed By:RAM KUMAR Signing Date:23.05.2025 17:57:34 Signature Not Verified

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