ORNATE BUILDTECH PRIVATE LIMITED vs. INCOME TAX OFFICER WARD 19-1, DELHI & ANR.

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W.P.(C)/3178/2024HC DelhiDLHC01010173202415 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 Delhi High Court allowed the writ petition. The Court held that the notice dated September 9, 2022, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year 2016-17, was ex facie beyond the maximum window of ten years prescribed by the Act. The Court relied on its previous decision in Principal Commissioner of Income Tax-1 vs. Ojjus Medicare Pvt. Ltd, which clarified the computation of the six-year and ten-year periods under Section 153C. The Ojjus Medicare judgment established that the commencement date for computing these periods is the date of receipt of books of accounts by the jurisdictional AO, not the date of search. In the present case, the notice for AY 2016-17, issued on September 9, 2022, clearly fell outside the ten-year window. Consequently, the impugned notices and all consequential proceedings were quashed.

What were the facts?

The petitioner, Ornate Buildtech Private Limited, filed a writ petition challenging a notice dated September 9, 2022, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2016-17, and all consequential proceedings. The respondents are the Income Tax Officer, Ward 19-1, Delhi, and another authority. The core of the dispute revolves around the validity of the notice issued under Section 153C, specifically concerning the assessment year targeted. The petitioner contended that the notice was issued beyond the permissible time limits prescribed by the Act for the relevant assessment year.

What were the issues?

1. Whether the notice dated September 9, 2022, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year 2016-17 is valid, considering the period prescribed for issuing such notices. The Assessee (Petitioner) argued that the notice was issued beyond the statutory time limit. The Revenue (Respondents) did not record any specific arguments in the judgment provided, but their implicit contention would be that the notice was issued within the permissible period or that the calculation of the period was correct. The judgment relies on the decision in Principal Commissioner of Income Tax-1 vs. Ojjus Medicare Pvt. Ltd [2024 SCC OnLine Del 2439] to address the issue of reckoning the time period for Section 153C notices.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~59 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 3178/2024 & CM APPL. 13102/2024 (Stay)

ORNATE BUILDTECH PRIVATE LIMITED ..... Petitioner Through: Mr. Sumit Lalchandani, Mr. Salil Kapoor and Mr. Shivam Yadav, Advs.

versus

INCOME TAX OFFICER WARD 19-1, DELHI & ANR. ..... Respondents Through: Mr. Aseem Chawla, SSC along 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

15.05.2024 O R D E R

1.

This writ petition has been preferred against the impugned notice dated 09 September 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 notice under Section 153C was dated 09 September 2022, it is ex facie evident that the aforenoted AYs’ would fall beyond the maximum window of ten years as prescribed. 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-1 vs. Ojjus Medicare Pvt. Ltd [2024 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 11:45:27

SCC OnLine Del 2439]. The relevant paragraphs of the aforesaid decision read as under:- “D. The First Proviso to Section 153C introduces a legal fiction on the basis of which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the “relevant assessment year” is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities as well as the decision of the Supreme Court in Jasjit Singh. The aforesaid legal position also stood reiterated by the Supreme Court in Vikram Sujitkumar Bhatia. The submission of the respondents, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted. E. The reckoning of the six AYs’ would require one to firstly identify the FY in which the search was undertaken and which would lead to the ascertainment of the AY relevant to the previous year of search. The block of six AYs’ would consequently be those which immediately precede the AY relevant to the year of search. In the case of a search assessment undertaken in terms of Section 153C, the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and assets seized are handed over to the jurisdictional AO as opposed to the year of search which constitutes the basis for an assessment under Section 153A. 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 11:45:27

F. While the identification and computation of the six AYs’ hinges upon the phrase “immediately preceding the assessment year relevant to the previous year” of search, the ten year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search. This, since undisputedly, Explanation 1 of Section 153A requires us to reckon it “from the end of the assessment year”. This distinction would have to necessarily be acknowledged in light of the statute having consciously adopted the phraseology “immediately preceding” when it be in relation to the six year period and employing the expression “from the end of the assessment year” while speaking of the ten year block 4. Accordingly, and for reasons assigned in our decision in Ojjus Medicare, we allow the instant writ petition and quash the impugned notices dated 09 September 2022 issued under Section 153C of the Act and all consequential proceedings arising therefrom. .”

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. MAY 15, 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 21/05/2024 at 11:45:27

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