NARAYAN INDUSTRIES vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 8

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W.P.(C)/3899/2024HC DelhiDLHC01013457202429 May 2024Bench: HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV,HON'BLE MR. JUSTICE YASHWANT VARMA3 pages
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What did the High Court hold?

The Delhi High Court allowed the writ petition and quashed the impugned notice dated December 30, 2022, issued under Section 153C of the Income Tax Act, 1961, along with all consequential proceedings. The Court found that the notice was issued for AY 2011-2012, which falls beyond the maximum ten-year window prescribed under Section 153C. The Court relied on its previous judgment in Principal Commissioner of Income Tax-1 vs. Ojjus Medicare Pvt. Ltd. The reasoning emphasized that the ten-year period for Section 153C assessments is to be reckoned from the 31st day of March of the assessment year relevant to the year of search, or in the case of Section 153C, the date of receipt of books of accounts by the jurisdictional AO. Since the notice dated December 30, 2022, was issued for AY 2011-2012, it was clearly outside this ten-year period. The ratio decidendi is that notices under Section 153C must strictly adhere to the time limitations prescribed, and the reckoning of these periods is crucial for their validity.

What were the facts?

The petitioner, Narayan Industries, filed a writ petition challenging a notice dated December 30, 2022, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2011-2012. The respondent is the Assistant Commissioner of Income Tax, Central Circle 8. The core of the dispute revolves around the validity of the notice, given the assessment year and the statutory time limits prescribed under Section 153C. The petitioner contends that the notice is time-barred.

What were the issues?

1. Whether a notice issued under Section 153C of the Income Tax Act, 1961, dated December 30, 2022, for Assessment Year 2011-2012 is valid, considering the ten-year window prescribed by the provision? Assessee's Contention: The petitioner argued that the notice is ex facie beyond the ten-year period stipulated in Section 153C, making it invalid. Revenue's Contention: The judgment does not explicitly record any arguments made by the revenue on this specific point. However, the issuance of the notice implies a contention that it was within the permissible time limits or that the reckoning of the period was to be done in a manner that made it valid.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~43 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 3899/2024 & CM APPL. 16039/2024

NARAYAN INDUSTRIES

..... Petitioner

Through: Mr.Rohit Jain and Mr.Saksham

Singhal, Advs.

versus

ASSISTANT COMMISSIONER OF INCOME TAX

CENTRAL CIRCLE 8

..... Respondent

Through: Mr.Puneet Rai, Sr.SC with

Mr.Ashivini Kumar and

Mr.Rishabh Nangia, Advs.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON’BLE MR. JUSTICE PURUSHAINDRA KUMAR

KAURAV

O R D E R %

29.05.2024

1.

This writ petition has been preferred against the impugned notice dated 30 December 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2011- 2012 and all consequential proceedings. 2. Bearing in mind the undisputed fact that the notice referable to Section 153C is dated 30 December 2022, it is ex facie evident that the aforenoted AY would fall beyond the maximum window of ten years as prescribed under the aforenoted provision. 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-1 vs. Ojjus Medicare Pvt. Ltd [2024 SCC OnLine Del 2439]. The relevant paragraphs of the aforesaid 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 12:38:38

decision read as under:- “D. The First Proviso to Section 153C introduces a legal fiction on the basis of which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the “relevant assessment year” is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities as well as the decision of the Supreme Court in Jasjit Singh. The aforesaid legal position also stood reiterated by the Supreme Court in Vikram Sujitkumar Bhatia. The submission of the respondents, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted. E. The reckoning of the six AYs’ would require one to firstly identify the FY in which the search was undertaken and which would lead to the ascertainment of the AY relevant to the previous year of search. The block of six AYs’ would consequently be those which immediately precede the AY relevant to the year of search. In the case of a search assessment undertaken in terms of Section 153C, the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and assets seized are handed over to the jurisdictional AO as opposed to the year of search which constitutes the basis for an assessment under Section 153A. F. While the identification and computation of the six AYs’ hinges upon the phrase “immediately preceding the assessment year relevant to the previous year” of search, the ten year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search. This, since undisputedly, Explanation 1 of Section 153A requires us to reckon it “from the end of the assessment year”. This distinction would have to necessarily be acknowledged in light of the statute having consciously adopted the phraseology “immediately preceding” when it be in relation to the six year period and employing the expression “from the end of the assessment year” while speaking of the ten year block.” 4. Accordingly, and for reasons assigned in our decision in Ojjus 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 12:38:38

Medicare, we allow the instant writ petition and quash the impugned notice dated 30 December 2022 issued under Section 153C of the Act and all consequential proceedings arising therefrom.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. MAY 29, 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 12:38:38

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