Chuknoo Securities Limited through its Director Sanjeev Agarwal V. Dy Commissioner of Income Tax Central Circle 28 & Ors.

W.P.(C)/289/2024

AI Insights

The case revolves around a writ petition filed by Chuknoo Securities Limited against a notice issued under Section 153C of the Income Tax Act, 1961, concerning the Assessment Year 2015-2016. The petitioner challenged the notice on the grounds that the Satisfaction Note, which was the basis for the notice, referred only to incriminating material for the Assessment Year 2016-2017 and failed to provide any incriminating material for the year 2015-2016. The court referenced its earlier decision in Saksham Commodities Limited vs. Income Tax Officer, Ward 22(1), Delhi & Anr, which clarified the application of Sections 153A and 153C, emphasizing that incriminating material must be specific to the assessment year in question to justify proceedings under Section 153C.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 683278 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 16-05-2024
• Assessment Year: misc
• Other Referred Cases: Saksham Commodities Limited vs. Income Tax Officer, Ward 22(1), Delhi & Anr [2024 SCC OnLine Del 2551]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ABHISHEK MARATHA; PARTH SEMWAL; APOORV AGARWAL; MANAV GOYAL; GAURAV SINGH; DIVYA VERMA; BHANUKARAN SINGH; NUPUR SHARMA
• Assessee Lawyers: ANKIT AGARWAL
• Keywords: Assessment Year; Income Tax; Incriminating material; Satisfaction note; Section 153C
• Section: 153C

Judgement Text

"$~26 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 289/2024 & CM APPL. 1278/2024 CHUKNOO SECURITIES LIMITED THROUGH ITS DIRECTOR SANJEEV AGARWAL ..... Petitioner Through: Mr.Ankit Agarwal, Adv. versus DY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28 & ORS. ..... Respondent Through: Mr. Abhishek Maratha, Sr.SC with Mr. Parth Semwal, Mr.Apoorv Agarwal, Jr.SCs, Mr.Manav Goyal, Mr.Gaurav Singh, Ms.Divya Verma, Mr.Bhanukaran Singh and Ms. Nupur Sharma, Advs. CORAM: HON'BLE MR. JUSTICE YASHWANT VARMA HON’BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV O R D E R % 16.05.2024 1. This writ petition has been preferred against the impugned notice dated 29 June 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2015-2016 and all consequential proceedings. 2. Bearing in mind the undisputed fact that the Satisfaction Note dated 09 June 2022 issued by the Assessing Officer of the searched person refers to incriminating material for AY 2016-17, it is ex facie evident that no incriminating material for the aforenoted AY 2015- 2016 has been found. The aforenoted Satisfaction Note also fails to 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 11:47:07 record any reasons which may have indicated how the said material could “have a bearing on the determination of the total income of such other person” for the year in question. 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 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 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 11:47:07 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. 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. 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.” 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 11:47:07 4. Accordingly, and for reasons assigned in our decision in Saksham Commodities Limited, we allow the instant writ petition and quash the impugned notice dated 29 June 2022 issued under Section 153C of the Act and all consequential proceedings arising therefrom. YASHWANT VARMA, J. PURUSHAINDRA KUMAR KAURAV, J. MAY 16, 2024/MJ 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 11:47:07 "