SHARPI AGARWAL vs. INCOME TAX OFFICER, WARD 34(1), DELHI & ORS.

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W.P.(C)/1024/2024HC DelhiDLHC01001975202421 May 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV4 pages
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What did the High Court hold?

The Delhi High Court allowed the writ petitions and quashed the impugned notices issued under Section 153C of the Act dated November 15, 2022, for AYs 2014-15 and 2015-16. The Court reasoned that the Satisfaction Note dated November 4, 2022, fell beyond the six-year window for Section 153C proceedings. Furthermore, the Court noted that the Satisfaction Note indicated the escaped income did not exceed INR 50 lakhs, and the AO failed to record satisfaction that the escaped income was likely to exceed INR 50 lakhs cumulatively, which is a threshold requirement under the Fourth Proviso to Section 153A. The decision was based on the judgment in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. The Court left it open for the jurisdictional AO to examine the issue afresh and draw proceedings if the escaped income is likely to exceed INR 50 lakhs in the "relevant assessment year", provided it is otherwise permissible in law.

What were the facts?

The petitioner, Sharpi Agarwal, filed two writ petitions (W.P.(C) 1024/2024 and W.P.(C) 1029/2024) challenging notices dated November 15, 2022, issued under Section 153C of the Income Tax Act, 1961. These notices pertained to Assessment Years (AYs) 2015-16 and 2014-15, respectively. The challenge was also extended to all consequential proceedings. The core of the dispute revolved around the validity of these notices, particularly concerning the satisfaction note recorded by the Assessing Officer (AO) and the amount of income alleged to have escaped assessment.

What were the issues?

1. Whether the notices issued under Section 153C of the Income Tax Act, 1961, dated November 15, 2022, for AYs 2015-16 and 2014-15 are valid, considering the date of the Satisfaction Note (November 4, 2022) and the six-year window for Section 153C proceedings. 2. Whether the Satisfaction Note recorded by the jurisdictional AO, indicating that the escaped income for the "relevant assessment year" does not exceed INR 50 lakhs, and the failure to record satisfaction that the escaped income is likely to exceed INR 50 lakhs cumulatively, renders the Section 153C notices invalid under the Fourth Proviso to Section 153A. Assessee's Contention: The assessee argued that the notices were invalid due to the AO's failure to meet the threshold requirements stipulated in Section 153C and the Fourth Proviso to Section 153A, specifically regarding the amount of escaped income and the timing of the satisfaction note. Revenue's Contention: The judgment does not explicitly record the revenue's contentions. However, the context implies the revenue sought to uphold the validity of the Section 153C notices.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

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Heard together (2 matters)

W.P.(C) 1024/2024
W.P.(C) 1029/2024

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

$~100-101 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1024/2024 & CM APPL. 4243/2024 (Stay)

SHARPI AGARWAL

..... Petitioner Through: Mr. Sumit Lalchandani, Mr. Salil Kapoor, Mr. Shivam Yadav, Mr. Tarun Chanana and Ms. Ananya Kapoor, Advocates.

versus

INCOME TAX OFFICER, WARD 34(1), DELHI & ORS. ..... Respondents Through: Mr. Indruj Singh Rai, SSC with Mr. Sanjeev Menon and Mr. Rahul Singh, JSC. 101 + W.P.(C) 1029/2024 & CM APPL. 4252/2024 (Stay)

SHARPI AGARWAL

..... Petitioner Through: Mr. Sumit Lalchandani, Mr. Salil Kapoor, Mr. Shivam Yadav, Mr. Tarun Chanana and Ms. Ananya Kapoor, Advocates.

versus

INCOME TAX OFFICER, WARD 34(1), DELHI & ORS. ..... Respondents Through: Mr. Indruj Singh Rai, SSC with Mr. Sanjeev Menon and Mr. Rahul Singh, JSC.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MS. JUSTICE TARA VITASTA GANJU

O R D E R %

21.05.2024

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 27/05/2024 at 12:58:14

1.

These writ petitions have been preferred against the impugned notices dated 15 November 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Years’ [“AYs”] 2015- 16 [W.P.(C) 1024/2024] and 2014-15 [W.P.(C) 1029/2024], and all consequential proceedings. 2. Bearing in mind the undisputed fact that the Satisfaction Note recorded by the jurisdictional Assessing Officer [“AO”] was dated 4 November 2022, 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 aforenoted Satisfaction Note and the Satisfaction Note dated 14 June 2022 recorded by the AO of the searched person further indicates that the income which is alleged 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 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 27/05/2024 at 12:58:14

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 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 15 November 2022 insofar as it relates to AYs 2014-15 and 2015-16, we leave it open to the jurisdictional AO to examine the issue afresh bearing in mind the observations appearing in paragraph 3 above. 5. In case the jurisdictional AO be of the opinion that the income 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 27/05/2024 at 12:58:14

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

TARA VITASTA GANJU, J MAY 21, 2024/RW

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 27/05/2024 at 12:58:14

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