+ W.p.(C) v. Assistant Commissioner Of Income Tax, Central Circle 28, Delhi & Ors

$~9-15 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 16348/2023 & CM APPL. 65777/2023 (Stay) KISHORE KUMAR SHARMA ..... Petitioner Through: Ms. Ragini Handa, Adv. versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI & ORS. ..... Respondents Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal Ms. Parth Semwal, JSCs, Ms. Nupur Sharma, Mr. Gaurav Singh & Mr. Bhanu Karan Singh Jodha, Advs. 10 + W.P.(C) 16349/2023 & CM APPL. 65779/2023 (Stay) KISHORE KUMAR SHARMA ..... Petitioner Through: Ms. Ragini Handa, Adv. versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI & ORS. ..... Respondents Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal Ms. Parth Semwal, JSCs, Ms. Nupur Sharma, Mr. Gaurav Singh & Mr. Bhanu Karan Singh Jodha, Advs. 11 + W.P.(C) 16350/2023 & CM APPL. 65781/2023 (Stay) KISHORE KUMAR SHARMA ..... Petitioner Through: Ms. Ragini Handa, Adv. versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI & ORS. ..... Respondents Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal Ms. Parth Semwal, JSCs, Ms. Nupur Sharma, Mr. Gaurav Singh & Mr. Bhanu Karan Singh Jodha, Advs. 12 + W.P.(C) 16351/2023 & CM APPL. 65783/2023 (Stay) KISHORE KUMAR SHARMA ..... Petitioner Through: Ms. Ragini Handa, Adv. versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI & ORS. ..... Respondents Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal Ms. Parth Semwal, JSCs, Ms. Nupur Sharma, Mr. Gaurav Singh & Mr. Bhanu Karan Singh Jodha, Advs. 13+ W.P.(C) 16352/2023 & CM APPL. 65785/2023 (Stay) KISHORE KUMAR SHARMA ..... Petitioner Through: Ms. Ragini Handa, Adv. versus 14 + ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI & ORS. ..... Respondents Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal Ms. Parth Semwal, JSCs, Ms. Nupur Sharma, Mr. Gaurav Singh & Mr. Bhanu Karan Singh Jodha, Advs. W.P.(C) 16353/2023 & CM APPL. 65787/2023 (Stay) KISHORE KUMAR SHARMA ..... Petitioner Through: Ms. Ragini Handa, Adv. versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI & ORS. ..... Respondents Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal Ms. Parth Semwal, JSCs, Ms. Nupur Sharma, Mr. Gaurav Singh & Mr. Bhanu Karan Singh Jodha, Advs. 15 + W.P.(C) 16354/2023 & CM APPL. 65789/2023 (Stay) KISHORE KUMAR SHARMA ..... Petitioner Through: Ms. Ragini Handa, Adv. versus % ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI & ORS. ..... Respondents Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal Ms. Parth Semwal, JSCs, Ms. Nupur Sharma, Mr. Gaurav Singh & Mr. Bhanu Karan Singh Jodha, Advs. CORAM:HON'BLE MR. JUSTICE YASHWANT VARMAHON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV O R D E R 15.05.2024 1.These writ petitions have been preferred against the impugned notices dated 30.06.2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Years’ [“AYs’”] 2014-15 [W.P.(C) 16350/2023], 2015-16 [W.P.(C) 16351/2023], 2016-17 [W.P.(C) 16352/2023], 2017-18 [W.P.(C) 16354/2023], 2018-19 [W.P.(C) 16353/2023], 2019-20 [W.P.(C) 16349/2023], 2020-21 [W.P.(C) 16348/2023] and all consequential proceedings. ..... Respondents Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal Ms. Parth Semwal, JSCs, Ms. Nupur Sharma, Mr. Gaurav Singh & Mr. Bhanu Karan Singh Jodha, Advs. CORAM:HON'BLE MR. JUSTICE YASHWANT VARMAHON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV O R D E R 15.05.2024 1.These writ petitions have been preferred against the impugned notices dated 30.06.2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Years’ [“AYs’”] 2014-15 [W.P.(C) 16350/2023], 2015-16 [W.P.(C) 16351/2023], 2016-17 [W.P.(C) 16352/2023], 2017-18 [W.P.(C) 16354/2023], 2018-19 [W.P.(C) 16353/2023], 2019-20 [W.P.(C) 16349/2023], 2020-21 [W.P.(C) 16348/2023] and all consequential proceedings. 2.Bearing in mind the undisputed fact that the Satisfaction Note dated 30 June 2022 issued by the jurisdictional Assessing Officer [“AO”] of the petitioner does not refer to incriminating material for any of the aforenoted AYs’, it is ex facie evident that no incriminating material has been found for the said AYs’. A bare perusal of the record also ex facie indicates that only the AO of the searched person in his Satisfaction Note dated 21 June 2022 referred to incriminating material for one of the AYs’, i.e., of AY 2016-17. However, the same was not recorded by the jurisdictional AO and the jurisdictional AO also completely failed 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 years 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 construeSection 153C as envisaging incriminating material pertaining to aparticular AY having a cascading effect and which would warrant a mechanical 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 underSection 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' immediately preceding 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 preceded by 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 a power 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 is likely to influence. Absent any material that may either cast a doubton 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.” 4. Accordingly, and for reasons assigned in our decision inSaksham Commodities Limited, we allow the instant writ petitions and quash theimpugned notices dated 30 June 2022 issued under Section 153C of the Act and all consequential proceedings arising therefrom. YASHWANT VARMA, J. MAY 15, 2024/kk PURUSHAINDRA KUMAR KAURAV, J.