ON SONS DECORS LLP (PAN AAGFO4639P) (AS SUCCESSOR IN INTEREST OF ON SONS DECORS (P) LTD (PAN AAACO8 vs. INCOME TAX OFFICER WARD 1(1) DELHI & ORS.

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W.P.(C)/3634/2024HC DelhiDLHC01012589202421 May 2024Bench: HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV,HON'BLE MR. JUSTICE YASHWANT VARMA4 pages
AI SummaryAllowed

What did the High Court hold?

The Delhi High Court allowed the writ petitions and quashed the impugned notices dated March 31, 2023, issued under Section 153C of the Income Tax Act, 1961, along with all consequential proceedings. The Court found that the notices were ex facie beyond the ten-year window prescribed by the Act, as the assessment years 2011-12 and 2012-13 were beyond the ten-year period from the date of issuance of the notices. The Court relied on its previous decision in Principal Commissioner of Income Tax-1 vs. Ojjus Medicare Pvt. Ltd [2024 SCC OnLine Del 2439]. This decision clarified that the commencement date for computing the ten-year block under Section 153C is governed by the First Proviso, which shifts the reference point to the date of receipt of books of accounts by the jurisdictional AO. The Court reiterated that the block periods must be reckoned with reference to the date of receipt of seized documents, not the date of search. The ratio decidendi is that notices under Section 153C must be issued within the statutory time limits, and assessment years falling outside the ten-year period from the relevant date (date of receipt of seized material by AO) are invalid.

What were the facts?

The assessee, ON SONS DECORS LLP, as successor in interest to ON SONS DECORS (P) LTD, filed two writ petitions before the Delhi High Court. These petitions challenged notices dated March 31, 2023, issued under Section 153C of the Income Tax Act, 1961. The notices pertained to Assessment Years (AYs) 2011-12 and 2012-13. The core of the challenge was that the issuance of these notices for the specified AYs fell outside the permissible time limits prescribed by the Act. The petitions also sought to quash all consequential proceedings arising from these notices.

What were the issues?

1. Whether notices issued under Section 153C of the Income Tax Act, 1961, dated March 31, 2023, for Assessment Years 2011-12 and 2012-13 are barred by limitation, considering the ten-year window prescribed by the Act? (Question of law) Assessee's Contention: The assessee argued that the notices were issued beyond the maximum ten-year period allowed for issuing notices under Section 153C. The date of issuance of the notices (March 31, 2023) clearly indicated that the relevant assessment years (2011-12 and 2012-13) fell outside this permissible window. Revenue's Contention: The judgment does not record any specific contentions made by the revenue regarding the limitation period for the notices. The court's decision appears to be based on the ex facie evidence of the dates provided.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

Heard together (2 matters)

W.P.(C) 3634/2024
W.P.(C) 3635/2024

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

$~56 & 57 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 3634/2024 & CM APPL. 15009/2024 (Stay) ON SONS DECORS LLP (PAN AAGFO4639P) (AS SUCCESSOR IN INTEREST OF ON SONS DECORS (P) LTD (PAN AAACO8786C)

..... Petitioner Through: Mr. Rohit Jain and Mr. Saksham Singhal, Advocates.

versus

INCOME TAX OFFICER WARD 1(1) DELHI & ORS. ..... Respondents Through: Mr. Vipul Agrawal, Sr. Standing Counsel with Mr. Gibran Naushad and Ms. Sakashi Shairwal, Jr. Standing Counsel.

57 + W.P.(C) 3635/2024 & CM APPL. 15011/2024 (Stay) ON SONS DECORS LLP (PAN AAGFO4639P) (AS SUCCESSOR IN INTEREST OF ON SONS DECORS (P) LTD (PAN AAACO8786C)

..... Petitioner Through: Mr. Rohit Jain and Mr. Saksham Singhal, Advocates.

versus

INCOME TAX OFFICER WARD 1(1) DELHI & ORS. ..... Respondents Through Mr. Vipul Agrawal, Sr. Standing Counsel with Mr. Gibran Naushad and Ms. Sakashi Shairwal, Jr. Standing Counsel.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MS. JUSTICE TARA VITASTA GANJU 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 13:03:59

O R D E R %

21.05.2024

1.

These writ petitions have been preferred against the impugned notices dated 31 March 2023 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Years’ [“AYs”] 2011- 12 [W.P.(C) 3634/2024] and 2012-13 [W.P.(C) 3635/2024] and all consequential proceedings. 2. Bearing in mind the undisputed fact that notices under Section 153C were dated 31 March 2023, 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 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 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 13:03:59

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. 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 petitions and quash the impugned 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 13:03:59

notices dated 31 March 2023 issued under Section 153C of the Act and all consequential proceedings arising therefrom.

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 13:03:59

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