SEEMA GUPTA vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 43(1) DELHI & ORS.

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W.P.(C)/1629/2024HC DelhiDLHC01003918202402 May 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV6 pages
AI SummaryAllowed

What did the High Court hold?

The Delhi High Court allowed the writ petitions and quashed the impugned notices dated September 29, 2022, issued under Section 153C of the Income Tax Act, 1961, along with all consequential proceedings. The Court relied on its previous decision in Saksham Commodities Limited vs. Income Tax Officer, Ward 22(1), Delhi & Anr. The reasoning was that Section 153C mandates that a notice can only be issued upon the discovery of material that is likely to "have a bearing on the determination of the total income" for specific assessment years. The Court emphasized that the AO must form an opinion and be satisfied that the material found is likely to impact the computation of income for a particular AY or AYs before issuing a notice under Section 153C. In this case, the AO's satisfaction note only related to AYs 2014-15 and 2015-16, and no such satisfaction was recorded for the AYs covered by the impugned notices. Therefore, the notices were issued without the necessary prerequisite satisfaction and were consequently quashed. The ratio decidendi is that the issuance of a Section 153C notice must be preceded by the AO's satisfaction that the discovered material has a bearing on the determination of total income for the specific AYs in question, and such satisfaction must be based on actual findings, not mere speculation or a cascading effect from other AYs.

What were the facts?

The petitioner, Seema Gupta, filed multiple writ petitions challenging notices dated September 29, 2022, issued under Section 153C of the Income Tax Act, 1961. These notices pertained to Assessment Years (AYs) 2019-20, 2013-14, 2012-13, 2017-18, 2018-19, 2010-11, 2020-21, and 2011-12. The core of the challenge was that the jurisdictional Assessing Officer's (AO) Satisfaction Note dated September 14, 2022, related to incriminating material only for AYs 2014-15 and 2015-16. The petitioner argued that no incriminating material was found for the AYs covered by the impugned notices, and the AO failed to record reasons explaining how any discovered material could impact the determination of total income for those years.

What were the issues?

1. Whether the notices issued under Section 153C of the Income Tax Act, 1961, are valid when the satisfaction note of the Assessing Officer (AO) pertains to different assessment years than those covered by the notices, and no incriminating material has been found for the subject assessment years? Assessee's Contention: The petitioner argued that the notices under Section 153C are invalid because the AO's satisfaction note, which is a prerequisite for issuing such notices, only identified incriminating material for AYs 2014-15 and 2015-16. For the AYs covered by the impugned notices (2019-20, 2013-14, 2012-13, 2017-18, 2018-19, 2010-11, 2020-21, 2011-12), no incriminating material was found. Furthermore, the AO failed to record any reasons to demonstrate how any discovered material could have a bearing on the determination of the petitioner's total income for these years. Revenue's Contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 153C

AI-generated summary — verify with the full judgment below

Heard together (3 matters)

W.P.(C) 1629/2024
W.P.(C) 1630/2024
W.P.(C) 1631/2024

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

$~22 to 29 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1629/2024 & CM APPL 6756/2024

SEEMA GUPTA

..... Petitioner

Through: Mr. Ved Jain, Mr. Nischay

Kantoor and Ms. Soniya

Dodeja, Advocates

Versus

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE

43(1) DELHI & ORS.

..... Respondents

Through: Mr. Aseem Chawla, Sr. SC

alongwith Ms. Pratishtha

Chaudhary and Mr. Naveen

Rohila, Advocates 23 + W.P.(C) 1630/2024 & CM APPL 6758/2024

SEEMA GUPTA

..... Petitioner

Through: Mr. Ved Jain, Mr. Nischay

Kantoor and Ms. Soniya

Dodeja, Advocates

Versus

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE

43(1) DELHI & ORS.

..... Respondents

Through: Mr. Aseem Chawla, Sr. SC

alongwith Ms. Pratishtha

Chaudhary and Mr. Naveen

Rohila, Advocates

24 + W.P.(C) 1631/2024 & CM APPL 6760/2024

SEEMA GUPTA

..... Petitioner

Through: Mr. Ved Jain, Mr. Nischay

Kantoor and Ms. Soniya

Dodeja, Advocates

Versus

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE

43(1) DELHI & ORS.

..... Respondents

Through: Mr. Aseem Chawla, Sr. SC 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 07/05/2024 at 11:36:12

alongwith Ms. Pratishtha

Chaudhary and Mr. Naveen

Rohila, Advocates

25 + W.P.(C) 1632/2024 & CM APPL 6762/2024

SEEMA GUPTA

..... Petitioner

Through: Mr. Ved Jain, Mr. Nischay

Kantoor and Ms. Soniya

Dodeja, Advocates

Versus

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE

43(1) DELHI & ORS.

..... Respondents

Through: Mr. Aseem Chawla, Sr. SC

alongwith Ms. Pratishtha

Chaudhary and Mr. Naveen

Rohila, Advocates 26 + W.P.(C) 1633/2024 & CM APPL 6764/2024

SEEMA GUPTA

..... Petitioner

Through: Mr. Ved Jain, Mr. Nischay

Kantoor and Ms. Soniya

Dodeja, Advocates

Versus

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE

43(1) DELHI & ORS.

..... Respondents

Through: Mr. Aseem Chawla, Sr. SC

alongwith Ms. Pratishtha

Chaudhary and Mr. Naveen

Rohila, Advocates

27 + W.P.(C) 1634/2024 & CM APPL 6766/2024

SEEMA GUPTA

..... Petitioner

Through: Mr. Ved Jain, Mr. Nischay

Kantoor and Ms. Soniya

Dodeja, Advocates

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 07/05/2024 at 11:36:12

Versus

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE

43(1) DELHI & ORS.

..... Respondents

Through: Mr. Aseem Chawla, Sr. SC

alongwith Ms. Pratishtha

Chaudhary and Mr. Naveen

Rohila, Advocates

28 + W.P.(C) 1638/2024 & CM APPL 6773/2024

SEEMA GUPTA

..... Petitioner

Through: Mr. Ved Jain, Mr. Nischay

Kantoor and Ms. Soniya

Dodeja, Advocates

Versus

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE

43(1) DELHI & ORS.

..... Respondents

Through: Mr. Aseem Chawla, Sr. SC

alongwith Ms. Pratishtha

Chaudhary and Mr. Naveen

Rohila, Advocates

29 + W.P.(C) 1641/2024 & CM APPL 6778/2024

SEEMA GUPTA

..... Petitioner

Through: Mr. Ved Jain, Mr. Nischay

Kantoor and Ms. Soniya

Dodeja, Advocates

Versus

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE

43(1) DELHI & ORS.

..... Respondents

Through: Mr. Aseem Chawla, Sr. SC

alongwith Ms. Pratishtha

Chaudhary and Mr. Naveen

Rohila, Advocates

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR

KAURAV 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 07/05/2024 at 11:36:12

O R D E R %

02.05.2024

1.

These writ petitions have been preferred against the impugned notices dated 29 September 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Years’ [“AYs’”] 2019- 20 [W.P.(C) 1629/2024], 2013-14 [W.P.(C) 1630/2024], 2012-13 [W.P.(C) 1631/2024], 2017-18 [W.P.(C) 1632/2024], 2018-19 [W.P.(C) 1633/2024], 2010-11 [W.P.(C) 1634/2024], 2020-21 [W.P.(C) 1638/2024], 2011-12 [W.P.(C) 1641/2024], and all consequential proceedings. 2. Bearing in mind the undisputed fact that the Satisfaction Note dated 14 September 2022 issued by the jurisdictional Assessing Officer [“AO”] of the petitioner relates to incriminating material for AYs’ 2014-15 and 2015-16, it is ex facie evident that no incriminating material for the aforenoted AYs’ 2010-11, 2011-12, 2012-13, 2013- 14, 2017-18, 2018-19, 2019-20, 2020-21 has been found. The AO also fails to record any reasons which may have indicated how the said material could “have a bearing on the determination of the total income of such other person” for the years in question. 3. Undisputedly, the issue now stands answered and covered in favour of the writ petitioner bearing in mind the principles that we had enunciated in Saksham Commodities Limited vs. Income Tax Officer, Ward 22(1), Delhi & Anr [2024 SCC OnLine Del 2551]. The relevant paragraphs of the said decision read as follows:- “63. On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be triggered only upon the discovery of material which is likely to “have a bearing on the determination of the total income” and would have to be examined bearing in mind the AYs' which are likely to be 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 07/05/2024 at 11:36:12

impacted. It would thus be incorrect to either interpret or construe Section 153C as envisaging incriminating material pertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the “relevant assessment year”. 64. In our considered view, abatement of the six AYs' or the “relevant assessment year” under Section 153C would follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs' that may form part of the block of ten AYs'. Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to “have a bearing on the determination of the total income”. It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case may be. 65. We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs' immediately preceding the AY pertaining to the year of search and the “relevant assessment year”. It is only once the AO of the non-searched entity is satisfied that the material coming into its possession is likely to “have a bearing on the determination of the total income” that a notice under Section 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity. 66. Therefore, and in our opinion, abatement of the six AYs' or the “relevant assessment year” would follow the formation of that opinion and satisfaction in that respect being reached. 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 07/05/2024 at 11:36:12

67.

On an overall consideration of the aforesaid, we come to the firm conclusion that the “incriminating material” which is spoken of would have to be identified with respect to the AY to which it relates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to have a bearing on the estimation of income. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year of search or the “relevant assessment year” would not justify a sweeping or indiscriminate invocation of Section 153C. 68. The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs' and thereafter proceed to place the assessee on notice under Section 153C. The power to undertake such an assessment would stand confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only be consequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments.” 4. Accordingly, and for reasons assigned in our decision in Saksham Commodities Limited, we allow the instant writ petitions and quash the impugned notices dated 29 September 2022 issued under Section 153C of the Act and all consequential proceedings arising therefrom.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. MAY 2, 2024 p’ma 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 07/05/2024 at 11:36:12

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