AKSHAT MITTAL vs. INCOME TAX OFFICER WARD 30(1), DELHI & ANR.

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W.P.(C)/2329/2024HC DelhiDLHC01007083202428 May 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV3 pages
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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 Act dated January 17, 2023, concerning AY 2014-15. The Court held that the notice was ex facie beyond the window of six preceding AYs as provided under Section 153C. Additionally, the Court noted that the Satisfaction Note did not reflect the requisite satisfaction that the escaped income was likely to exceed INR 50 lakhs, a threshold for initiating proceedings under the Fourth Proviso to Section 153A. The Court's reasoning was guided by its prior decision in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. The Court clarified that the precondition of INR 50 lakhs applies cumulatively or in aggregate for the 'relevant assessment year'. The jurisdictional AO was left open to examine the issue afresh and draw proceedings if the escaped income is likely to exceed INR 50 lakhs, if otherwise permissible in law.

What were the facts?

The petitioner, Akshat Mittal, filed a writ petition challenging a notice dated January 17, 2023, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2014-15. The petitioner argued that the notice was issued beyond the six preceding AYs permitted by Section 153C. The Satisfaction Note recorded by the Assessing Officer of the searched person on June 24, 2022, indicated that the income alleged to have escaped assessment for the relevant AY did not exceed INR 50 lakhs. The petitioner contended that the jurisdictional Assessing Officer (AO) failed to record satisfaction that the escaped income was likely to exceed INR 50 lakhs, a threshold requirement under the Fourth Proviso to Section 153A.

What were the issues?

1. Whether the notice issued under Section 153C of the Income Tax Act, 1961, dated January 17, 2023, for AY 2014-15 is valid, considering it falls beyond the six preceding AYs stipulated by the Act? 2. Whether the Satisfaction Note recorded by the AO of the searched person, indicating escaped income not exceeding INR 50 lakhs, and the failure of the jurisdictional AO to record satisfaction that escaped income is likely to exceed INR 50 lakhs, vitiates the notice issued under Section 153C, in light of the Fourth Proviso to Section 153A? Assessee's Contentions: The assessee argued that the notice under Section 153C was issued beyond the permissible period of six preceding AYs. Furthermore, the Satisfaction Note did not meet the threshold requirement of escaped income likely to exceed INR 50 lakhs, as mandated by 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. Revenue's Contentions: The judgment does not record specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~41 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 2329/2024 & CM APPL. 9637/2024

AKSHAT MITTAL

..... Petitioner

Through: Mr.Sumit Lalchandani, Mr.Salil

Kapoor, Mr.Shivam Yadav,

Ms.Ananya Kapoor and

Mr.Tarun Chanana, Advs.

versus

INCOME TAX OFFICER WARD 30(1), DELHI & ANR. ..... Respondents

Through: Mr.Gaurav Gupta, Sr.SC with

Mr.Shivendra Singh and

Mr.Yojit Pareek, Jr.SCs.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR

KAURAV

O R D E R %

28.05.2024

1.

This writ petition has been preferred against the impugned notice dated 17 January 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 notice under Section 153C is dated 17 January 2023, it is ex facie evident that the aforenoted AY would fall beyond the window of six preceding AYs’ as provided under Section 153C. An ex facie perusal of the Satisfaction Note recorded by the Assessing Officer of the searched person dated 24 June 2022 it is noted that the income which is alleged 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 01/06/2024 at 12:38:39

to have escaped assessment for the “relevant assessment year” does not exceed INR 50 lakhs. The jurisdictional AO has also failed to record its satisfaction that the escaped income is likely to exceed INR 50 lakhs or more cumulatively for the “relevant assessment year”, and thereby 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 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 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 01/06/2024 at 12:38:39

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 153C of the Act dated 17 January 2023 insofar as it relates to AY 2014-15, we leave it open to the jurisdictional AO to examine the issue afresh bearing in mind the observations appearing in para 3 above. 5. In case the jurisdictional 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 28, 2024/MJ 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 01/06/2024 at 12:38:39

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