VIKAS ECOTECH LIMITED vs. ASSISSTANT COMMISSIONER OF INCOME TAX CENTAL CIRCLE-28 DELHI & ANR.

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W.P.(C)/3955/2024HC DelhiDLHC01013512202411 July 2024Bench: HON'BLE MR. JUSTICE RAVINDER DUDEJA,HON'BLE MR. JUSTICE YASHWANT VARMA5 pages

AI SummaryAllowed

What did the High Court hold?

The Delhi High Court allowed the writ petitions and quashed the impugned notices dated February 20, 2024, 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. (2024 SCC OnLine Del 2551). The reasoning was that Section 153C proceedings are triggered only upon the discovery of material that is likely to have a bearing on the determination of total income for a specific assessment year. The Court emphasized that abatement of assessments under Section 153C follows the formation of an opinion by the AO that the material received is likely to impact the computation of income for a particular AY or AYs. It is not a mechanical process. The AO must be satisfied that the material has a bearing on the total income before issuing a notice under Section 153C. In this case, since the Satisfaction Notes clearly indicated that the incriminating material related to earlier AYs (2010-11, 2011-12, 2014-15, and 2015-16) and not the AYs for which the notices were issued, the notices were deemed unsustainable. The ratio decidendi is that Section 153C can only be invoked for those assessment years to which the discovered material relates or is likely to influence the determination of income.

What were the facts?

The petitioner, Vikas Ecotech Limited, filed multiple writ petitions before the Delhi High Court challenging notices dated February 20, 2024, issued under Section 153C of the Income Tax Act, 1961. These notices pertained to Assessment Years (AYs) 2019-20, 2017-18, 2016-17, 2018-19, and 2020-21. The core of the challenge stemmed from the fact that the Satisfaction Notes issued by the Assessing Officer (AO) on February 19, 2024, related to incriminating material found for AYs 2010-11, 2011-12, 2014-15, and 2015-16. The petitioner argued that no incriminating material was found for the AYs for which the Section 153C notices were issued.

What were the issues?

1. Whether the notices dated February 20, 2024, issued under Section 153C of the Income Tax Act, 1961, for AYs 2019-20, 2017-18, 2016-17, 2018-19, and 2020-21 are valid, given that the Satisfaction Notes of the Assessing Officer pertained to incriminating material for AYs 2010-11, 2011-12, 2014-15, and 2015-16. Assessee's Contention: The petitioner argued that the notices under Section 153C were unsustainable as the Satisfaction Notes indicated that the incriminating material found related to different assessment years (2010-11, 2011-12, 2014-15, and 2015-16) and not to the assessment years for which the notices were issued (2019-20, 2017-18, 2016-17, 2018-19, and 2020-21). They relied on the principles laid down in Saksham Commodities Limited vs. Income Tax Officer, Ward 22(1), Delhi & Anr. Revenue's Contention: The judgment does not record specific arguments made by the revenue.

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) 3955/2024

W.P.(C) 3957/2024

W.P.(C) 3965/2024

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

$~51-55 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 3955/2024 & CM APPL. 16240/2024 (Stay)

VIKAS ECOTECH LIMITED

.....Petitioner

Through: Mr. Ruchesh Sinha, Adv.

versus

ASSISSTANT COMMISSIONER OF INCOME TAX CENTAL CIRCLE-28 DELHI & ANR. .....Respondents Through: Mr. Abhishek Maratha, SSC with Mr. Parth Semiwal, Mr. Apoorv Agarwal, JSCs, Ms. Nupur Sharma, Mr. Manav Goyal, Mr. Gaurav Singh, Ms. Divya Verma, Mr. Atul Sharma & Mr. Bhanukaran Singh Jodha, Advs. 52 + W.P.(C) 3957/2024 & CM APPL. 16243/2024 (Stay)

VIKAS ECOTECH LIMITED

.....Petitioner

Through: Mr. Ruchesh Sinha, Adv.

versus

VIKAS ECOTECH LIMITED

.....Petitioner

Through: Mr. Ruchesh Sinha, Adv. 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 18/07/2024 at 12:12:41

versus

VIKAS ECOTECH LIMITED

.....Petitioner

Through: Mr. Ruchesh Sinha, Adv.

versus

VIKAS ECOTECH LIMITED

.....Petitioner

Through: Mr. Ruchesh Sinha, Adv.

versus

ASSISSTANT COMMISSIONER OF INCOME TAX CENTAL CIRCLE-28 DELHI & ANR. .....Respondents Through: Mr. Abhishek Maratha, SSC 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 18/07/2024 at 12:12:41

with Mr. Parth Semiwal, Mr. Apoorv Agarwal, JSCs, Ms. Nupur Sharma, Mr. Manav Goyal, Mr. Gaurav Singh, Ms. Divya Verma, Mr. Atul Sharma & Mr. Bhanukaran Singh Jodha, Advs.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE RAVINDER DUDEJA

11.07.2024 O R D E R

These writ petitions have been preferred against the impugned notices dated 20 February 2024 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2019-20 [W.P. (C) 3955/2024], 2017-18 [W.P. (C) 3957/2024], 2016-17 [W.P.

(C) 3967/2024] and all consequential proceedings. 2. Bearing in mind the undisputed fact that the Satisfaction Notes dated 19 February 2024 issued by the Assessing Officer [“AO”] of the petitioner relates to incriminating material for AYs 2010-11, 2011-12, 2014-15 and 2015-16, it is ex facie evident that no incriminating material for the aforenoted AY has been found. 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 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 18/07/2024 at 12:12:41

likely to be 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 18/07/2024 at 12:12:41

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 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 20 February 2024 issued under Section 153C of the Act and all consequential proceedings arising therefrom. . 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.”

YASHWANT VARMA, J.

RAVINDER DUDEJA, J. JULY 11, 2024/kk 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 18/07/2024 at 12:12:41

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