SANJEEV AGARWAL vs. DY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28 & ORS.

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W.P.(C)/15922/2023HC DelhiDLHC01051923202316 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 notice dated June 29, 2022, issued under Section 153C of the Act for AY 2016-2017. The Court held that the issue was covered by its earlier decision in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. The reasoning, as per the cited judgment, was that while the initial quantification of escaped income in the Satisfaction Note might be provisional, the AO must still form an opinion, based on recorded reasons and a fair assessment of material, that the ultimate computation of escaped income is likely to exceed INR 50 lakhs. This precondition of INR 50 lakhs, cumulatively or in aggregate, is a sine qua non for initiating action for the extended ten-year block and must be borne out from the Satisfaction Note. The Court left it open for the jurisdictional AO to examine the issue afresh and draw proceedings if the income alleged to have escaped assessment is likely to exceed INR 50 lakhs, if otherwise permissible in law.

What were the facts?

The petitioner, Sanjeev Agarwal, filed a writ petition challenging a notice dated June 29, 2022, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2016-2017. The challenge was based on the argument that the notice and consequential proceedings were invalid. The Assessing Officer (AO) of the searched person had recorded a Satisfaction Note on June 9, 2022. The petitioner contended that the AY 2016-2017 fell outside the six preceding AYs permissible under Section 153C. Furthermore, the Satisfaction Note indicated that the alleged escaped income did not exceed INR 50 lakhs, and the jurisdictional AO had not recorded 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.

What were the issues?

1. Whether the notice dated June 29, 2022, issued under Section 153C of the Income Tax Act, 1961, for AY 2016-2017 is valid, considering it falls beyond the six preceding assessment years as stipulated by the Act? 2. Whether the AO's Satisfaction Note dated June 9, 2022, and the subsequent notice under Section 153C satisfy the threshold requirement of escaped income likely to exceed INR 50 lakhs cumulatively, as mandated by the Fourth Proviso to Section 153A of the Act? Assessee's Contentions: The petitioner argued that AY 2016-2017 was outside the six-year window for Section 153C proceedings and that the AO had failed to record the requisite satisfaction regarding the quantum of escaped income exceeding INR 50 lakhs. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions. However, it refers to a previous judgment in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd, which addressed similar issues regarding the interpretation of Section 153A and 153C.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~8 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 15922/2023 & CM APPL. 64140/2023

SANJEEV AGARWAL

..... Petitioner

Through: Mr.Ankit Agarwal,. Adv.

versus

DY COMMISSIONER OF INCOME TAX CENTRAL

CIRCLE 28 & ORS.

..... Respondents

Through: Mr.Shlok Chandra, Sr.SC with

Ms.Madhavi Shukla, Jr.SC,

Ms.Priya Sarkar, Jr.SC and

Mr.Sudarshan Roy, Adv.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON’BLE MR. JUSTICE PURUSHAINDRA KUMAR

KAURAV

O R D E R %

16.05.2024

1.

This writ petition has been preferred against the impugned notice dated 29 June 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2016-2017 and all consequential proceedings. 2. Bearing in mind the undisputed fact that the Satisfaction Note recorded by the Assessing Officer ["AO"] of the searched person, dated 09 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 of the Act. An ex facie perusal of the aforenoted Satisfaction Note 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 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 21/05/2024 at 11:48:54

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 of the Act. 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 speculation and conjecture.

I.We further hold that since the precondition of INR 50 lakhs or 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 21/05/2024 at 11:48:54

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 2016-2017, we leave it open to the jurisdictional AO to examine the issue afresh bearing in mind the observations appearing in paragraph 3 as noted 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 16, 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 21/05/2024 at 11:48:54

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