Saroj Dassani V. UOI

W.P.(C)/16816/2006

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The case involves a challenge by the petitioner, Saroj Dassani, against the retrospective amendments to Section 28 and Section 80HHC of the Income Tax Act, 1961, introduced by the Taxation Laws (Amendment) Act, 2005. The petitioner argued that these amendments, along with the CBDT circular No.2 of 2002, were unconstitutional as they retroactively denied legitimate tax deductions. The Supreme Court's previous judgments, particularly in Johnson G. Ommen v. Commissioner of Income Tax and Avani Exports, which held that such amendments cannot be applied retrospectively, were pivotal in the court's decision. The Delhi High Court, referencing these precedents, ruled in favor of the petitioner, declaring the retrospective application of the amendments as unconstitutional and restraining the respondents from applying them.

• Counselvise Citation: [] 140 COUNSELVISE.COM (IT) 830339 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 13-01-2026
• Assessment Year: misc
• Other Referred Cases: Johnson G. Ommen v. Commissioner of Income Tax (Central), Commissioner of Income Tax v. Avani Exports, Union of India v. Paliwal Overseas (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RUCHIR BHATIA; ANANT MANN; LOPAMUDRA MAHAPATRA
• Keywords: CBDT Circular; Income Tax Act; Taxation Laws; Ultra Vires; Retrospective amendments
• Section: 28; 80HHC

Judgement Text

"$~77 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 16816/2006 SAROJ DASSANI .....Petitioner Through: None. versus UOI .....Respondent Through: Mr. Ruchir Bhatia, SSC, Mr. Anant Mann, JSC and Ms. Lopamudra Mahapatra, Adv. CORAM: HON'BLE MR. JUSTICE DINESH MEHTA HON'BLE MR. JUSTICE VINOD KUMAR O R D E R % 13.01.2026 1. The instant petition has been preferred with the following prayers:- “(i) declare the provisions of the Taxation laws (Amendment) Act, 2005 sofar as it relates to the retrospective amendments of section 28 and 80 HHC of the Income Tax Act, (Annexure No.1) as ultra vires the Consitution and liable to be struck down; and (ii) declare that the CBDT circular No.2 of 2002 dated 17.01.2006 (Annexure No.2) a ultra vires and unauthorised by insofar it relates to the levy of tax retrospectively on taxpayers by denying the legitimate deductions otherwise admissible. (iii) restrain the Respondents from giving effect to the retrospective amendments and CBDT Circular against the Petitioner by issuing a writ of prohibition for the purpose coupled with a writ of mandamus directing the Respondents to complete the regular assessment in accordance with law as if the retrospective amendments had not been made and CBDT Circular had not been issued by Respondents. (iv) restrain by a writ of prohibition 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 16/01/2026 at 13:15:03 Printed from counselvise.com Respondents from reopening any of the past assessments of the Petitioner to give effect to the unconstitutional retrospective amendments in sections 28 and 80 HHC of the Income Tax Act during the pendency of the present writ petition. (v) restrain the Respondents from raising any demands towards tax, interest of penalty against the Petitioner based on then retrospective amendments referred to above. (vi) grant of interim exparte stay of operation of the impugned provisions, circulars, notice and letter referred to above and direct the Respondents to be guided by them.” 2. The petitioner’s challenge is essentially to the retrospectivity given to the Amendment brought in Section 80HHC and Section 28 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’). 3. We may note that Hon’ble the Supreme Court vide its judgment in the case of Johnson G. Ommen v. Commissioner of Income Tax (Central) reported in [2023] 295 Taxman 221 (SC), while placing reliance on the judgment dated 30.03.2015 passed by Hon’ble the Supreme Court in Commissioner of Income Tax v. Avani Exports reported in [2015] 232 Taxman 357 (SC) and judgment dated 02.12.2016 in Union of India v. Paliwal Overseas (P.) Ltd. reported in [2017] 244 Taxman 195 (SC), held that the amendment cannot be given retrospective effect. Relevant part of the judgment of Johnson G. Ommen (supra) reads is reproduced hereinfra :- “11. This Court in Avani Exports(supra) held as under: ‘5.We find that in essence the High Court has quashed the severable part of third and fourth proviso to section 80-HHC(3) and it becomes clear therefrom that challenge which was laid to the conditions contained in the said provisions by respondent has succeeded. However, to make the position crystal clear, we substitute the direction of the High Court with the following 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 16/01/2026 at 13:15:03 Printed from counselvise.com direction: “Having seen the twin conditions and since section 80HHC benefit is not available after 1- 4-2025, we are satisfied that cases of exporters having a turnover below and those above Rs.10 crores should be treated similarly. This order is in substitution of the Judgment in appeal.’ 12. This position has been clarified by this Court in Union of India v. Paliwal Overseas (P) Ltd. [2017] 77 taxmann.com 35/244 Taxman 195 (SC)/[(2016) 16 SCC 697] by holding as under: “2. The only question of law to be decided is whether section 80-HHC of the Income-tax Act, 1961 as amended in 2005 is prospective in operation. It has since been settled by this Court” 4. Said judgment of the Supreme Court in the case of Johnson G. Ommen (supra) is based upon another judgment of Hon’ble the Supreme Court in the case of Avani Exports (supra), which arose from the Gujarat High Court’s judgment dated 02.07.2012 reported in [2012] 209 Taxman (Guj) wherein the Gujarat High Court had held thus : “26. On consideration of the entire materials on record, we, therefore, find substance in the contention of the learned counsel for the petitioners that the impugned amendment is violative for its retrospective operation in order to overcome the decision of the Tribunal, and at the same time, for depriving the benefit earlier granted to a class of the assessees whose assessments were still pending although such benefit will be available to the assessees whose assessments have already been concluded. In other words, in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of assessees. 27. We, accordingly, quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assessees whose export turn-over is above Rs.10 crore. In other words, the retrospective amendment should not be detrimental to any of the assessees.” 5. If the judgment dated 30.03.2015 passed by Hon’ble the Supreme 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 16/01/2026 at 13:15:03 Printed from counselvise.com Court in Avani Exports (supra) is read in conjunction with the judgement of the Gujarat High Court dated 02.07.2012, it is clear that the finding recorded in para 26, reproduced hereinabove, was upheld with some alteration in para 27 of the said judgment, that too in favour of the assessees and direction given in para 27 of aforesaid judgment was substituted by the following: “Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr. Should be treated similarly. This order is in substitution of the judgment in Appeal”. 6. The consequence of the judgment dated 30.03.2015 of Hon’ble the Supreme Court, is that irrespective of the amount involved, the amendment brought in Section 80HHC of the Act of 1961 cannot be given retrospective effect. 7. In view of the aforesaid, this writ petition is allowed in light of the aforesaid judgment dated 30.03.2015 of Hon’ble the Supreme Court rendered in the case of Avani Exports (supra). 8. Consequence to follow. 9. A copy of the order be sent to the petitioner. DINESH MEHTA, J VINOD KUMAR, J JANUARY 13, 2026/cd 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 16/01/2026 at 13:15:03 Printed from counselvise.com "