KAMAL PRAKASH GUPTA HUF vs. ACIT CENTRAL CIRCLE 25 DELHI

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W.P.(C)/1219/2024HC DelhiDLHC01002578202421 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 High Court allowed the writ petition and quashed the impugned notice issued under Section 153C of the Act dated June 29, 2022, insofar as it related to AY 2016-17. The court reasoned that the notice was ex facie beyond the window of six preceding AYs as provided under Section 153C. Furthermore, the court found that the AO had failed to record the necessary satisfaction that the escaped income was likely to exceed INR 50 lakhs, a threshold requirement prescribed by the Fourth Proviso to Section 153A. The court relied on its previous decision in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. The court clarified that while the precondition of INR 50 lakhs is a sine qua non for initiating action for the extended ten-year block, it is not necessarily for each relevant assessment year, but the cumulative or aggregate escaped income must meet the benchmark. The court left it open for the AO to examine the issue afresh and draw proceedings if of the opinion that the income alleged to have escaped assessment is likely to exceed INR 50 lakhs in the relevant assessment year, if otherwise permissible in law.

What were the facts?

The petitioner, Kamal Prakash Gupta HUF, filed a writ petition challenging notices dated June 29, 2022, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2016-17. The petitioner argued that the notice was issued beyond the six preceding AYs allowed under Section 153C. Furthermore, the petitioner contended that the Assessing Officer (AO) failed to record the necessary satisfaction that the escaped income for the relevant AY exceeded INR 50 lakhs, a threshold required by the Fourth Proviso to Section 153A. The revenue, represented by the ACIT Central Circle 25 Delhi, was present. The High Court noted the undisputed fact that the notice was dated June 29, 2022, making the AY 2016-17 fall outside the permissible window. The court also observed the undated Satisfaction Note of the non-searched person's AO and the Satisfaction Note dated May 12, 2022, of the searched person's AO.

What were the issues?

1. Whether the notice issued under Section 153C of the Income Tax Act, 1961, dated June 29, 2022, for AY 2016-17 is valid, considering it falls beyond the six preceding AYs stipulated by the provision? (Question of law) 2. Whether the Assessing Officer (AO) fulfilled the precondition under the Fourth Proviso to Section 153A of the Income Tax Act, 1961, by recording satisfaction that the escaped income for the relevant assessment year is likely to exceed INR 50 lakhs? (Question of mixed law and fact) Assessee's Contentions: The petitioner argued that the notice under Section 153C was issued beyond the statutory period of six preceding AYs. Additionally, the petitioner contended that the AO failed to record the requisite satisfaction that the escaped income was likely to exceed INR 50 lakhs, as mandated by the Fourth Proviso to Section 153A. Revenue's Contentions: The judgment does not record specific contentions made by the revenue. However, the presence of the revenue through Sr. Standing Counsel and Jr. Standing Counsel indicates their participation in opposing the writ petition.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~105 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1219/2024 & CM APPL. 5063/2024 (Stay)

KAMAL PRAKASH GUPTA HUF ..... Petitioner Through: Mr. Gaurav Jain and Mr. Shubham Gupta, Advocates.

versus

ACIT CENTRAL CIRCLE 25 DELHI ..... Respondent Through: Mr. Shlok Chandra, Sr. Standing Counsel with Ms. Madhavi Shukla and Ms. Priya Sarkar, Jr. Standing Counsel with Mr. Sudarshan Roy, Advocate.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MS. JUSTICE TARA VITASTA GANJU

O R D E R %

21.05.2024

1.

This writ petition has been preferred against the impugned notices dated 29 June 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year’ [“AY”] 2016-17 and all consequential proceedings. 2. Bearing in mind the undisputed fact that the notice under Section 153C was dated 29 June 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 undated Satisfaction Note recorded by the Assessing Officer [“AO”] of the non-searched person and the Satisfaction Note dated 12 May 2022 recorded by the AO of the searched person further indicates that 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 27/05/2024 at 12:56:29

income which is alleged to have escaped assessment for the “relevant assessment year” does not exceed INR 50 lakhs. The 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 27/05/2024 at 12:56:29

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 29 June 2022 insofar as it relates to AY 2016-17, we leave it open to the AO to examine the issue afresh bearing in mind the observations appearing in paragraph 3 above. 5. In case the 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

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 12:56:29

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