CHHARIA IMPEX PRIVATE LIMITED vs. INCOME TAX OFFICER, WARD 6-1, DELHI & ANR.

PDF · subscribers
W.P.(C)/540/2024HC DelhiDLHC01000923202421 May 2024Bench: HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV,HON'BLE MR. JUSTICE YASHWANT VARMA3 pages
AI SummaryAllowed

What did the High Court hold?

The Delhi High Court allowed the writ petition and quashed the impugned notice dated August 3, 2022, issued under Section 153C of the Act concerning AY 2014-15. The court reasoned that the AY 2014-15 fell outside the six preceding AYs from the date of the Satisfaction Note (August 1, 2022), rendering the notice invalid on this ground. Additionally, the court found that the AO had failed to record the requisite satisfaction that the escaped income was likely to exceed INR 50 lakhs, a prerequisite for initiating proceedings under Section 153A for an extended period, as stipulated by the Fourth Proviso. The court relied on its previous decision in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. The court left it open for the jurisdictional AO to examine the issue afresh and, if of the opinion that escaped income is likely to exceed INR 50 lakhs, to draw proceedings anew, if permissible by law.

What were the facts?

The petitioner, Chharia Impex Private Limited, filed a writ petition challenging a notice dated August 3, 2022, issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2014-15. The petitioner argued that the notice was invalid. The court noted that the Satisfaction Note recorded by the jurisdictional Assessing Officer (AO) was dated August 1, 2022. This date indicates that AY 2014-15 falls outside the six preceding AYs permissible under Section 153C. Furthermore, the court observed that the Satisfaction Note did not explicitly state that the escaped income for the relevant AY exceeded INR 50 lakhs, which is a threshold requirement under the Fourth Proviso to Section 153A.

What were the issues?

1. Whether the notice dated August 3, 2022, issued under Section 153C of the Income Tax Act, 1961, for AY 2014-15 is valid, considering it falls outside the six preceding assessment years from the date of the Satisfaction Note. 2. Whether the AO satisfied the threshold requirement of the Fourth Proviso to Section 153A by recording a satisfaction that the income alleged to have escaped assessment for the relevant assessment year is likely to exceed INR 50 lakhs. Assessee's Contentions: The assessee contended that the notice under Section 153C was invalid because AY 2014-15 was beyond the six-year look-back period from the date of the Satisfaction Note. The assessee also argued that the AO failed to record the necessary satisfaction regarding the quantum of escaped income exceeding INR 50 lakhs as required by the Fourth Proviso to Section 153A. Revenue's Contentions: The judgment does not record specific contentions from the revenue. However, the court's analysis addresses the validity of the notice and the AO's satisfaction note.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A

AI-generated summary — verify with the full judgment below

$~99 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 540/2024 & CM APPL. 2391/2024 (Stay)

CHHARIA IMPEX PRIVATE LIMITED ..... Petitioner Through: Mr. Sumit Lalchandani, Mr. Salil Kapoor, Mr. Shivam Yadav, Mr. Tarun Chanana and Ms. Ananya Kapoor, Advocates.

versus

INCOME TAX OFFICER, WARD 6-1, DELHI & ANR. ..... Respondents Through: Mr. Indruj Singh Rai, SSC with Mr. Sanjeev Menon and Mr. Rahul Singh, JSC.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MS. JUSTICE TARA VITASTA GANJU

O R D E R %

21.05.2024

1.

This writ petition has been preferred against the impugned notice dated 3 August 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2014-15 and all consequential proceedings. 2. Bearing in mind the undisputed fact that the Satisfaction Note recorded by the jurisdictional Assessing Officer [“AO”] was dated 01 August 2022, it is ex facie evident that the aforenoted AY would fall beyond the window of six preceding AYs’ as provided under Section 153C. An ex facie perusal of the aforenoted Satisfaction Note and the Satisfaction Note dated 24 June 2022 recorded by the AO of the 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 12:57:47

searched person 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 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 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 12:57:47

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 petition and quash the impugned notice issued under Section 153C of the Act dated 3 August 2022 insofar as it relates to AY 2014-15, we leave it open to the jurisdictional AO to examine the issue afresh bearing in mind the observations appearing in paragraph 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 the “relevant assessment year”, it would be open to it to draw proceedings afresh, if otherwise permissible in law.

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 12:57:47

More judgments on Section 153C

All 9,619 judgments and leading authorities on Section 153C →

Recent GST High Court judgments

Search GST case law →