SUBHASH INFRAENGINEERS PRIVATE LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 22(2) DELHI & ANR.

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W.P.(C)/18867/2025HC DelhiDLHC01100679202508 January 2026Bench: HON'BLE MR. JUSTICE VINOD KUMAR,HON'BLE MR. JUSTICE DINESH MEHTA3 pages
AI SummaryRemanded

What did the High Court hold?

The Delhi High Court found that the petitioner-assessee had a plausible ground to resist the proceedings under Section 153C of the Income Tax Act, 1961. The Court noted that the foundational fact of asset creation appeared to be absent, as the amounts reflected expenditure, further supported by the deduction of Tax Deducted at Source (TDS). Consequently, the Court directed the Assessing Officer (AO) to first decide the petitioner's objections filed on June 9, 2025, and July 10, 2025, within fifteen days. The AO was mandated to pass a reasoned order by January 23, 2026, and communicate it to the petitioner. If the AO decided to proceed further, the proceedings were to be kept in abeyance until February 2, 2026, allowing the petitioner to pursue remedies. The petitioner was also permitted to file supporting judgments within seven days before the AO. No issue was expressly left undecided.

What were the facts?

The petitioner, Subhash Infraengineers Private Limited, has challenged a notice dated July 11, 2024, issued under Section 153C of the Income Tax Act, 1961, by the Assistant Commissioner of Income Tax, Circle 22(2), Delhi. The petitioner argues that the proceedings are arbitrary and without application of mind, as the notice is based on entries in another entity's ledger found during a search. The petitioner contends that TDS has been deducted for all transactions, and these are expenditures, not asset creations, which would justify proceedings under Section 153C read with the fourth proviso to Section 153A. The petitioner also highlighted a procedural delay, stating their reply dated June 9, 2025, and objections dated July 10, 2025, were not considered before a show cause notice was issued on November 4, 2025.

What were the issues?

1. Whether the notice issued under Section 153C of the Income Tax Act, 1961, is arbitrary and without application of mind, given that the underlying transactions are expenditures with TDS deducted and not the creation of an asset as contemplated by the fourth proviso to Section 153A of the Act. Assessee's Contentions: The petitioner argued that the Section 153C notice is arbitrary and lacks application of mind because it relies on ledger entries of another entity. They asserted that all transactions are expenditures, not asset creations, which is a prerequisite for initiating proceedings under Section 153C as per the fourth proviso to Section 153A. The petitioner also claimed procedural irregularities, including the AO issuing a show cause notice without considering their objections and reply. Revenue's Contentions: The revenue submitted that the petitioner rushed to the Court without awaiting the AO's final order. While admitting that the petitioner's objections had not been decided, the revenue contended that the AO would consider these objections, including jurisdictional ones, while passing the final order.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

Heard together (3 matters)

W.P.(C) 18864/2025
W.P.(C) 18867/2025
W.P.(C) 18868/2025

Read from the judgment's own cause title. This page is filed under one of them.

$~4 to 6 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 18864/2025 CM APPL. 78497/2025 + W.P.(C) 18867/2025 CM APPL. 78502/2025 + W.P.(C) 18868/2025 CM APPL. 78504/2025 SUBHASH INFRAENGINEERS PRIVATE LIMITED .....Petitioner Through: Mr. Salil Kapoor, Mr. Sumit Lalchandani, Ms. Ananya Kapoor and Mr. Anat Kapoor, Advs. versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 22(2) DELHI & ANR.

.....Respondents Through: Mr. Siddhartha Sinha, SSC CORAM: HON'BLE MR. JUSTICE DINESH MEHTA HON'BLE MR. JUSTICE VINOD KUMAR O R D E R %

08.01.2026 1. By way of present Writ Petition, the petitioner has challenged the notice dated 11.07.2024 issued to the petitioner under Section 153C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’). 2. Mr. Sumit Lalchandani, learned counsel for the petitioner argued that the proceedings under Section 153C of the Act of 1961 against the petitioner are not only arbitrary but also without application of mind inasmuch as the notice in question is based on the entries found in the ledger of other entity which was found at the premises of the searched person and the respondent No.1-Assessing Officer (hereinafter referred to as ‘AO’) has not even taken into consideration that TDS is shown to have been deducted qua all 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 13/01/2026 at 13:17:55

transactions. He added that so far as the petitioner is concerned, all transactions are expenditure and they cannot be treated as creation of asset, so as to give the AO a handle to initiate the proceedings under Section 153C of the Act of 1961, as provided in fourth proviso to Section 153A of the Act of 1961. 3. Explaining the delay in approaching the Court and arguing that there is none, learned counsel contended that in response to petitioner’s request for providing satisfaction note, the respondent provided the same on 27.01.2025, whereafter the petitioner furnished a reply on 09.06.2025 and without considering his reply dated 09.06.2025 or before deciding the petitioner’s objections dated 10.07.2025, the respondent No.1-AO has issued a show cause notice to the petitioner on 04.11.2025 and asked him to explain the transactions & produce books of accounts. 4. Learned counsel argued that the action of the respondent No.1-AO is illegal and arbitrary inasmuch as it amounts to unnecessary harassment, because the proceedings initiated by him are fundamentally without jurisdiction and baseless. 5. Learned counsel for the respondents on the other hand submitted that the petitioner has rushed to this Court without waiting for the order of the AO. While admitting that the petitioner’s objection has not been decided so far, learned counsel submitted that while passing the final order and concluding the proceedings, petitioner’s objection even in relation to jurisdiction shall be considered by the AO. 6. Having heard learned counsel for the parties and upon consideration of material available on record, we are of the view that the petitioner- assessee has a plausible ground to resist or oppose the proceedings under 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 13/01/2026 at 13:17:55

Section 153C of the Act of 1961. The foundational fact i.e. creation of an asset appears to be absent in the present case, inasmuch as the amount reflects expenditure and that too coupled with deduction of tax (TDS). 7. Such being the position, we deem it appropriate to direct the AO to firstly decide petitioner’s objections filed vide representation/reply dated 09.06.2025 and 10.07.2025 within a period of fifteen days from today. It shall be required of the respondent No.1-AO to pass a reasoned order latest by 23.01.2026. The order so passed, shall be communicated to the petitioner on its registered email ID. In case, the AO decides to proceed further, in pursuance of the notice dated 04.11.2025, he shall keep the proceedings in abeyance till 02.02.2026, so that if required, the petitioner can avail its remedies against such decision in accordance with law. 8. Needless to state that the petitioner shall be allowed to file any judgment(s) in its support within a period of seven days before the AO. 9. All the Writ Petitions, alongwith pending applications (if any) stand disposed of accordingly. DINESH MEHTA, J VINOD KUMAR, J JANUARY 8, 2026/ss 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 13/01/2026 at 13:17:55

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