SHIKHI AGARWAL vs. INCOME TAX OFFICER, WARD 70(1), DELHI & ORS.

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W.P.(C)/1255/2024HC DelhiDLHC01002751202421 May 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV3 pages
AI SummaryAllowed

What did the High Court hold?

The Delhi High Court allowed the writ petition and quashed the notice issued under Section 153C of the Act dated August 3, 2022, concerning AY 2014-15. The Court held that the AY 2014-15 fell outside the permissible six preceding AYs. Furthermore, the Court relied on its earlier decision in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. The Court reiterated that the precondition of escaped income amounting to or likely to amount to INR 50 lakhs or more, as stipulated by the Fourth Proviso to Section 153A, must be reflected in the Satisfaction Note. The Court clarified that this threshold applies cumulatively or in aggregate and not necessarily for each individual assessment year. The AO was given the liberty to examine the issue afresh and initiate proceedings if the escaped income is likely to exceed INR 50 lakhs, provided it is otherwise permissible in law.

What were the facts?

The petitioner, Shikhi Agarwal, filed a writ petition challenging notices dated August 3, 2022, 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 permissible six preceding AYs. The Assessing Officer (AO) of the searched person recorded a Satisfaction Note on June 14, 2022. The judgment notes that the AY 2014-15 falls outside the six-year window. Furthermore, the Satisfaction Note indicated that the alleged escaped income for the relevant AY did not exceed INR 50 lakhs, failing to meet the threshold requirement stipulated by the Fourth Proviso to Section 153A.

What were the issues?

1. Whether the notice issued under Section 153C of the Income Tax Act, 1961, for AY 2014-15 is valid, considering it falls beyond the six preceding assessment years. 2. Whether the Satisfaction Note recorded by the Assessing Officer meets the threshold requirement of INR 50 lakhs for initiating proceedings under Section 153A/153C of the Act. Assessee's Contentions: The assessee contended that the notice under Section 153C was issued beyond the statutory period of six preceding assessment years. The assessee also argued that the Satisfaction Note did not demonstrate that the escaped income was likely to exceed INR 50 lakhs, which is a prerequisite for initiating proceedings under the Fourth Proviso to Section 153A. Revenue's Contentions: The judgment does not record specific contentions from the revenue. However, the revenue was represented by Senior Standing Counsel and Junior Standing Counsel.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~113 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1255/2024 & CM APPL. 5257/2024 (Stay)

SHIKHI 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 70(1), DELHI & ORS. ..... Respondents Through: Mr. Puneet Rai, Sr. Standing Counsel with Mr. Rishabh Nangia and Mr. Ashvini Kumar, Jr. Standing Counsel.

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 03 August 2022 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 was dated 03 August 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 Satisfaction Note dated 14 June 2022 recorded by the Assessing Officer [“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 12:56:27

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 12:56:27

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 03 August 2022 insofar as it relates to AY 2014-15, we leave it open to the AO to examine the issue afresh bearing in mind the observations appearing in para 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 12:56:27

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