POOJA GUPTA vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 25 DELHI & ORS.

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W.P.(C)/256/2024HC DelhiDLHC01058221202313 May 2024Bench: HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV,HON'BLE MR. JUSTICE YASHWANT VARMA4 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 Income Tax Act, 1961, for AYs 2014-15 and 2015-16. The Court relied on its previous judgment in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. The primary reasoning was that the Satisfaction Note, dated December 13, 2022, fell outside the six preceding AYs permitted by Section 153C. Furthermore, the AO had failed to record the necessary satisfaction that the income likely to have escaped assessment would exceed INR 50 lakhs, a condition stipulated by the Fourth Proviso to Section 153A. The Court reiterated that while the AO's satisfaction at the initial stage might be provisional, it must be based on a fair assessment of material and the potentiality of escaped income exceeding INR 50 lakhs cumulatively. The Court left it open for the jurisdictional AO to examine the issue afresh if permissible in law and if the escaped income is likely to exceed INR 50 lakhs.

What were the facts?

The petitioner, Pooja Gupta, filed two writ petitions challenging notices dated March 16, 2023, issued under Section 153C of the Income Tax Act, 1961. These notices pertained to Assessment Years (AYs) 2014-15 and 2015-16. The challenge was based on the fact that the Satisfaction Note recorded by the jurisdictional Assessing Officer (AO) was dated December 13, 2022. This date fell outside the six preceding AYs stipulated by Section 153C. Furthermore, the Satisfaction Note indicated that the income alleged to have escaped assessment for the relevant AYs did not exceed INR 50 lakhs, and the AO had not recorded satisfaction that the escaped income was likely to exceed this threshold, as required by the Fourth Proviso to Section 153A.

What were the issues?

1. Whether the notices issued under Section 153C of the Income Tax Act, 1961, for AYs 2014-15 and 2015-16 are valid, considering the date of the Satisfaction Note (December 13, 2022) falls outside the permissible six preceding AYs? 2. Whether the AO satisfied the threshold requirement of recording satisfaction that the escaped income is likely to exceed INR 50 lakhs, as mandated by the Fourth Proviso to Section 153A of the Income Tax Act, 1961? Assessee's Contention: The petitioner argued that the notices were invalid because the Satisfaction Note was dated December 13, 2022, which is beyond the six preceding AYs allowed under Section 153C. Additionally, the Satisfaction Note did not reflect the AO's satisfaction that the escaped income was likely to exceed INR 50 lakhs, a prerequisite for initiating proceedings under the Fourth Proviso to Section 153A. Revenue's Contention: The judgment does not record specific contentions from the revenue. However, the presence of the revenue through their counsel indicates their participation in the proceedings.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

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Heard together (2 matters)

W.P.(C) 256/2024
W.P.(C) 279/2024

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

$~53 & 58 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 256/2024, CM APPL. 1195/2024 (Interim Stay)

POOJA GUPTA

..... Petitioner

Through: Mr. Anand Chaudhuri & Mr. Kumail Abbas, Advs.

versus

ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE- 25, DELHI & ORS. ..... Respondents

Through: Mr. Aseem Chawla, SSC with Ms. Monica Benjamin, JSC, Ms. Pratishtha Chaudhary & Mr. Naveen Rohila, Advs. 58

+ W.P.(C) 279/2024, CM APPL. 1233/2024 (Interim Stay)

POOJA GUPTA

..... Petitioner

Through: Mr. Anand Chaudhuri & Mr. Kumail Abbas, Advs.

versus

ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-25, DELHI & ORS. ..... Respondents

Through: Mr. Aseem Chawla, SSC with Ms. Monica Benjamin, JSC, Ms. Pratishtha Chaudhary & Mr. Naveen Rohila, Advs.

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 18/05/2024 at 11:40:21

O R D E R %

13.05.2024 1. These writ petitions have been preferred against the impugned notices dated 16 March 2023 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Years’ [“AYs’”] 2014- 15 [W.P.(C) 256/2024], 2015-16 [W.P.(C) 279/2024] and all consequential proceedings. 2. Bearing in mind the undisputed fact that the Satisfaction Note recorded by the jurisdictional Assessing Officer [“AO”] was dated 13 December 2022, it is ex facie evident that the aforenoted AYs’ would fall beyond the window of six preceding AYs’ as provided under Section 153C. An ex facie perusal of the aforenoted Satisfaction Note 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 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 18/05/2024 at 11:40:21

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 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 petitions and quash the impugned notices issued under Section 153C of the Act dated 16 March 2023 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 Para 3 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 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 18/05/2024 at 11:40:21

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 13, 2024/neha

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 18/05/2024 at 11:40:21

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