Vijay Kumar v. Assistant Commissioner Of Income Tax, Central Cirlce 28, Delhi & Anr

$~34, 35, 40 & 41 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 10609/2023 & CM APPL. 41177/2023 (Stay) VIJAY KUMAR ..... Petitioner Through: Ms. Ragini Handa, Mr. Ajay Wadhwa & Mr. Ujjwal Jain, Advs. versus 35+ ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRLCE 28, DELHI & ANR. ..... Respondents Through: Mr. Gaurav Gupta, SSC with Mr. Shivendra Singh & Mr. Yojik Pareek, JSCs. W.P.(C) 10611/2023 & CM APPL. 41181/2023 (Stay) VIJAY KUMAR ..... Petitioner Through: Ms. Ragini Handa, Mr. Ajay Wadhwa & Mr. Ujjwal Jain, Advs. versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI & ORS. ..... Respondents Through: Mr. Gaurav Gupta, SSC with Mr. Shivendra Singh & Mr. Yojik Pareek, JSCs. 40+ VIJAY KUMAR W.P.(C) 10631/2023 & CM APPL. 41247/2023 (Stay) ..... Petitioner Through: Ms. Ragini Handa, Mr. Ajay Wadhwa & Mr. Ujjwal Jain, Advs. versus ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28, DELHI & ANR. ..... Respondents Through: Mr. Gaurav Gupta, SSC with Mr. Shivendra Singh & Mr. Yojik Pareek, JSCs. 41 + W.P.(C) 10637/2023 & CM APPL. 41266/2023 (Stay) VIJAY KUMAR ..... Petitioner Through: Ms. Ragini Handa, Mr. Ajay Wadhwa & Mr. Ujjwal Jain, Advs. versus ASSISTANT COMMISISONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI & ANR. ..... Respondents Through: Mr. Gaurav Gupta, SSC with Mr. Shivendra Singh & Mr. Yojik Pareek, JSCs. CORAM:HON'BLE MR. JUSTICE YASHWANT VARMAHON'BLE MR. JUSTICE AMIT BANSALO R D E R 24.05.2024 % 1.These writ petitions have been preferred against the impugned notices dated 22 August 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Years’ [“AYs’”] 2012-13 [W.P.(C) 10609/2023], 2013-14 [W.P.(C) 10611/2023], 2010-11 [W.P.(C) 10631/2023] and 2011-12 [W.P.(C) 10637/2023] and all consequential proceedings. 2.Bearing in mind the undisputed fact that notices under Section 153C were dated 22 August 2022, 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 onthe basis of which the commencement date for computation of thesix year or the ten year block is deemed to be the date of receipt ofbooks of accounts by the jurisdictional AO. The identification ofthe starting block for the purposes of computation of the six and theten year period is governed by the First Proviso to Section 153C,which significantly shifts the reference point spoken of in Section153A(1), while defining the point from which the period of the“relevant assessment year” is to be calculated, to the date of receiptof the books of accounts, documents or assets seized by the-jurisdictional AO of the nonsearched person. The shift of therelevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is nolonger res integra and stands authoritatively settled by virtue of thedecisions of this Court in SSP Aviation and RRJ Securities as wellas 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 firstlyidentify the FY in which the search was undertaken and whichwould lead to the ascertainment of the AY relevant to the previousyear of search. The block of six AYs’ would consequently be thosewhich immediately precede the AY relevant to the year of search.In the case of a search assessment undertaken in terms of Section153C, the solitary distinction would be that the previous year ofsearch would stand substituted by the date or the year in which thebooks of accounts or documents and assets seized are handed overto the jurisdictional AO as opposed to the year of search whichconstitutes the basis for an assessment under Section 153A. F. While the identification and computation of the six AYs’ hingesupon the phrase “immediately preceding the assessment yearrelevant to the previous year” of search, the ten year period wouldhave to be reckoned from the 31st day of March of the AY relevantto the year of search. This, since undisputedly, Explanation 1 ofSection 153A requires us to reckon it “from the end of theassessment year”. This distinction would have to necessarily beacknowledged in light of the statute having consciously adopted thephraseology “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.Furthermore, bearing in mind the undisputed fact that the Satisfaction Note dated 16 August 2022 of the petitioner relates to incriminating material for AY 2015-16, it is ex facie evident that no incriminating material for the aforenoted AYs’ has been found. The AO also fails to 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. 5.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 interpretor construe Section 153C as envisaging incriminating materialpertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment orreassessment 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 theformer, a notice would inevitably be issued the moment a search isundertaken or documents requisitioned, whereas in the case of thelatter, the proceedings would be liable to be commenced only uponthe AO having formed the opinion that the material gathered islikely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to bemade based upon the material recovered is an aspect which wouldmerit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfiedthat the documents, data or asset recovered is likely to “have abearing on the determination of the total income”. It is only oncean opinion in that regard is formed that the AO would be legallyjustified in issuing a notice under that provision and which in turnwould culminate in the abatement of pending assessments orreassessments as the case may be. 65.We would thus recognize the flow of events contemplatedunder Section 153C being firstly the receipt of books, accounts,documents or assets by the jurisdictional AO, an evaluation andexamination of their contents and an assessment of the potentialimpact that they may have on the total income for the six AYs' immediately preceding the AY pertaining to the year of search andthe “relevant assessment year”. It is only once the AO of the non-searched entity is satisfied that the material coming into itspossession is likely to “have a bearing on the determination of thetotal 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 wouldhave to necessarily be preceded by the satisfaction spoken of abovebeing 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 itrelates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, documentor asset recovered in the course of a search or on the basis of arequisition made would justify abatement of only those pendingassessments or reopening of such concluded assessments to whichalone it relates or is likely to have a bearing on the estimation ofincome. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year ofsearch or the “relevant assessment year” would not justify asweeping or indiscriminate invocation of Section 153C. 68.The jurisdictional AO would have to firstly be satisfied that thematerial received is likely to have a bearing on or impact the totalincome of years or years which may form part of the block of six orten AYs' and thereafter proceed to place the assessee on noticeunder Section 153C. The power to undertake such an assessment would stand confined to those years to which the material mayrelate or is likely to influence. Absent any material that may eithercast a doubt on the estimation of total income for a particular yearor years, the AO would not be justified in invoking its powersconferred 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.” 6.Accordingly, and for reasons assigned in our decision in Ojjus Medicare and Saksham Commodities Limited, we allow the instant writ petitions and quash theimpugned notices dated 22 August 2022 issued under Section 153C of the Act and all consequential proceedings arising therefrom. YASHWANT VARMA, J MAY 24, 2024/kk AMIT BANSAL, J