+ W.p.(C) 1542/2024 & Cm Appl. 6374/2024 (Interim Relief) Ambica Steels Limited (Through Director v. Assistant Commissioner Of Income Tax, Circle 1(1) Delhi & Ors

$~29 IN THE HIGH COURT OF DELHI AT NEW DELHI+ W.P.(C) 1542/2024 & CM APPL. 6374/2024 (Interim Relief) AMBICA STEELS LIMITED (THROUGH DIRECTOR) .....Petitioner AMBICA STEELS LIMITED (THROUGH DIRECTOR) .....Petitioner .....Petitioner Through: Mr. Ved Jain, Mr. Nischay Kantoor & Ms. Soniya Dodeja, Advocates versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1) DELHI & ORS. .....Respondents .....Respondents Through: Mr. Debesh Panda, SSC with Ms. Zehra Khan & Mr. Vikramaditya Singh, JSCs, Mr. Vineet Gupta, Mr. Ojaswa Pathak & Ms. Anauntta Shankar, Advocates. CORAM:HON'BLE MR. JUSTICE YASHWANT VARMAHON'BLE MR. JUSTICE RAVINDER DUDEJA O R D E R% 05.07.2024 1.This writ petition has been preferred against the impugned notice dated 14 September 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2010-11 and all consequential proceedings. 2.Bearing in mind the undisputed fact that notice under Section 153C was dated 14 September 2022, it is ex facie evident that the aforenoted AY 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 of thestarting block for the purposes of computation of the six and the tenyear period is governed by the First Proviso to Section 153C, whichsignificantly shifts the reference point spoken of in Section 153A(1),while defining the point from which the period of the “relevantassessment year” is to be calculated, to the date of receipt of thebooks of accounts, documents or assets seized by the jurisdictionalAO of the non-searched person. The shift of the relevant date in thecase of a non-searched person being regulated by the First Proviso ofSection 153C(1) is an issue which is no longer res integra and standsauthoritatively settled by virtue of the decisions of this Court in SSPAviation and RRJ Securities as well as the decision of the SupremeCourt 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. Inthe case of a search assessment undertaken in terms of Section 153C,the solitary distinction would be that the previous year of searchwould stand substituted by the date or the year in which the books ofaccounts or documents and assets seized are handed over to thejurisdictional AO as opposed to the year of search which constitutesthe 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 be 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 be acknowledged in light of the statute having consciously adopted thephraseology “immediately preceding” when it be in relation to thesix year period and employing the expression “from the end of theassessment year” while speaking of the ten year block.” 4.Furthermore, bearing in mind the undisputed fact that the Satisfaction Note dated 24 June 2022 issued by the Assessing Officer [“AO”] of the searched person refers to incriminating material for AYs 2012-13, 2013-14, 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 it is ex facie evident that no incriminating material for the aforenoted AY 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 interpret or construeSection 153C as envisaging incriminating material pertaining to aparticular AY having a cascading effect and which would warrant amechanical and inevitable assessment or reassessment for the entireblock 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 wouldinevitably be issued the moment a search is undertaken ordocuments requisitioned, whereas in the case of the latter, theproceedings would be liable to be commenced only upon the AOhaving formed the opinion that the material gathered is likely toinculpate the assessee. While in the case of a Section 153Aassessment, the issue of whether additions are liable to be madebased upon the material recovered is an aspect which would meritconsideration in the course of the assessment proceedings, underSection 153C, the AO would have to be prima facie satisfied that thedocuments, data or asset recovered is likely to “have a bearing onthe determination of the total income”. It is only once an opinion inthat regard is formed that the AO would be legally justified inissuing a notice under that provision and which in turn wouldculminate in the abatement of pending assessments or reassessmentsas the case may be. 65. We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documentsor assets by the jurisdictional AO, an evaluation and examination oftheir contents and an assessment of the potential impact that theymay have on the total income for the six AYs' immediatelypreceding the AY pertaining to the year of search and the “relevant”-assessment year. It is only once the AO of the nonsearched entityis satisfied that the material coming into its possession is likely to“have a bearing on the determination of the total income” that anotice under Section 153C would be issued. Abatement would thusbe a necessary corollary of that notice. However, both the issuanceof notice as well as abatement would have to necessarily be precededby the satisfaction spoken of above being reached by thejurisdictional 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 firmconclusion that the “incriminating material” which is spoken ofwould have to be identified with respect to the AY to which it relatesor may be likely to impact before the initiation of proceedings underSection 153C of the Act. A material, document or asset recovered inthe course of a search or on the basis of a requisition made wouldjustify abatement of only those pending assessments or reopening ofsuch concluded assessments to which alone it relates or is likely tohave a bearing on the estimation of income. The mere existence of apower to assess or reassess the six AYs' immediately preceding theAY corresponding to the year of search or the “relevant assessmentyear” would not justify a sweeping or indiscriminate invocation ofSection 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 notice underSection 153C. The power to undertake such an assessment wouldstand confined to those years to which the material may relate or islikely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, theAO would not be justified in invoking its powers conferred bySection 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 petition and quash the impugned notice dated 14 September 2022 issued under Section 153C of the Act and all consequential proceedings arising therefrom. YASHWANT VARMA, J. JULY 5, 2024/sk RAVINDER DUDEJA, J.