+ W.p.(C) 6162/2023 & Cm Appl v. Dy. Commissioner Of Income Tax Central Circle 28, Delhi

$~25 to 27 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 6162/2023 & CM APPL. 24246/2023 (Stay) MUKESH CHANDRA AGARWAL .....Petitioner Through: Mr. Salil Kapoor, Mr. Sumit Lalchandani, Ms. Ananya Kapoor, Mr. Tarun Chanana & Mr. Shivam Yadav, Advocates versus DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28, DELHI .....Respondent .....Respondent Through: Mr. Abhishek Maratha, Sr. SC with Mr. Parth Semwal & Mr. Apoorv Agarwal, Jr.SC & Ms. Nupur Sharma, Mr. Gaurav Singh, Mr. Bhanukaran Singh Jodha & Ms. Muskan Goel, Advocates for Revenue 26 + W.P.(C) 6164/2023 & CM APPL. 24250/2023 (Stay) MUKESH CHANDRA AGARWAL .....Petitioner Through: Mr. Salil Kapoor, Mr. Sumit Lalchandani, Ms. Ananya Kapoor, Mr. Tarun Chanana & Mr. Shivam Yadav, Advocates versus DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28, DELHI .....Respondent .....Respondent Through: Mr. Abhishek Maratha, Sr. SC with Mr. Parth Semwal & Mr. Apoorv Agarwal, Jr.SC & Ms. Nupur Sharma, Mr. Gaurav Singh, Mr. Bhanukaran Singh Jodha & Ms. Muskan Goel, Advocates for Revenue 27 + W.P.(C) 6271/2023 & CM APPL. 24626/2023 (Stay) MUKESH CHANDRA AGARWAL .....Petitioner Through: Mr. Salil Kapoor, Mr. Sumit Lalchandani, Ms. Ananya Kapoor, Mr. Tarun Chanana & Mr. Shivam Yadav, Advocates versus DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28, DELHI .....Respondent .....Respondent Through: Mr. Abhishek Maratha, Sr. SC with Mr. Parth Semwal & Mr. Apoorv Agarwal, Jr.SC & Ms. Nupur Sharma, Mr. Gaurav Singh, Mr. Bhanukaran Singh Jodha & Ms. Muskan Goel, Advocates for Revenue % CORAM:HON'BLE MR. JUSTICE YASHWANT VARMAHON'BLE MR. JUSTICE RAVINDER DUDEJA O R D E R04.09.2024 1.The writ petitioner impugns the initiation of proceedings referable to Section 153C of the Income Tax Act, 1961[1] and insofar as they pertain to Assessment Years[2] 2014-2015, 2017-2018 and 2018-2019. 2.From the Satisfaction Note dated 24 December 2021 which has 1 Act 2 AY been drawn by the Jurisdictional Assessing Officer[3], we find that the following material was taken note of as warranting assessment being undertaken under Section 153C for AYs 2014-2015 to 2020-2021. That Satisfaction Note is reproduced hereinbelow: “A search and seizure operation was carried out in the Alankit Group of cases on 18.10.2019 subsequently the said group was centralized to the jurisdiction of the undersigned. Accordingly, during the course of assessment proceedings u/s 153A of Alankit Group, material documents related to your case have been found. l. Annexure A-1, MCAR, page 1 to 17:- found and seized at 173, Sita Ram Apartments, IP Extension, Delhi wherein copy of Sale deed dated 26.08.2015 in favour of Shri Mukesh Chandra Agrawal found - Residential Plot Sale deed made in Agra, Uttar Pradesh, Plot no. 21, Area 166.47 Sq. Mtr. Located in Swapn Lok Kaloni Kakua, Agra by Vishal Infra Pvt Ltd for Sale to Shri Mukesh Chandra Agrawal, Total Value of Property Rs.6,00,000/-. 2. Annexure A-1, MCAR, page 30 to 46:- found and seized at 173, Sita Ram Apartments, IP Extension , Delhi wherein copy of Sale deed dated 30.05.2019 of Residential flat in favour of Shri Mukesh Chand Agrawal found - copy of Sale Deed in case of Residential Plot Area 138.28 Sq. Mtr Flat no. 173, Sitaram Apartment, I P Extention Delhi-92 in favour of Shri Mukesb Chand Agarwal and Smt Neeta Agarwal, by Shri Ajay Tiwari, F14/118, Krishna Nagar, Delhi-51.Total Value of Property Rs. l ,80,00,000/-. 3. Annexure A -1, MCAR, page 51 to 65:- found and seized at 173, Sita Ram Apartments, IP Extension , Delhi wherein copy of Sale deed dated 21.04.2014 of Residential Plot in favour of Shri Mukesh Chand Agrawal found- copy of Residential Plot Sale deed made in Mathura, Uttar Pradesh, Plot Area 166.44 Sq. Mtr. Located in Mauja Bakal pur, Mathura by Agrawal Developers for Sale of Plot 44, Agrawal developers, Mauja Bakalpur, Mathura Total Value of Property Rs.16,00,000/-. 3. Annexure A -1, MCAR, page 51 to 65:- found and seized at 173, Sita Ram Apartments, IP Extension , Delhi wherein copy of Sale deed dated 21.04.2014 of Residential Plot in favour of Shri Mukesh Chand Agrawal found- copy of Residential Plot Sale deed made in Mathura, Uttar Pradesh, Plot Area 166.44 Sq. Mtr. Located in Mauja Bakal pur, Mathura by Agrawal Developers for Sale of Plot 44, Agrawal developers, Mauja Bakalpur, Mathura Total Value of Property Rs.16,00,000/-. The said satisfaction note prepared by the AO of the person searched has been kept on record. I have also examined the above documents and the contents noted/written therein. After examination of these documents, I am also satisfied that these documents belong to the assessee. In view of the same, I am further satisfied that it is fit case for initiating proceedings u/s 153C of the Income Tax Act, 1961 for the A.Ys. 2014-15 to 2020-21. Accordingly, notice u/s 153C is issued as per provisions of the I.T. Act, 1961.” 3.As it manifest from the aforesaid, the satisfaction rested on transactions which were dated 21 April 2014, 26 August 2015 and 30 May 2019. None of those transactions pertained to the AYs in question. 4.We in this regard bear in mind the following pertinent principles which we had come to enunciate in Saksham Commodities Limited v. Income Tax Officer, Ward 22(i), Delhi & Anr[4]. The relevant paragraphs of the said decision are reproduced below:- “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 whichwould 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 Section153A assessment, the issue of whether additions are liable to bemade based upon the material recovered is an aspect which would 4 2024 SCC OnLine Del 2551 merit 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. 4 2024 SCC OnLine Del 2551 merit 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 thefirm conclusion that the “incriminating material” which is spokenof would have to be identified with respect to the AY to which itrelates or may be likely to impact before the initiation ofproceedings 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 sixAYs' 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 assessmentwould stand confined to those years to which the material mayrelate or is likely to influence. Absent any material that may either cast 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.” 5.Mr. Maratha, learned counsel for the respondent has however drawn our attention to a Show Cause Notice[5] which refers and alludes to material gathered from a laptop found and seized from the residence of an individual. He specifically draws our attention to the following recitals as appearing in the SCN dated 18 February 2023: “1. During the course of search and seizure operation, several ledgers maintained with regard to various cash payments have been obtained from accounts maintained in the name “Anarkali Complex” in Tally found in folder named DATA 24 in the laptop of Sh. Sunil Kumar Gupta found and seized from the residence of Sh. Sunil Kumar Gupta, at 3584/4, Narang Colony, Gali No. 4 Tri Nagar Delhi (Path: F:\SKGR A-32\SUNIL KUMAR GUPTA HP LAPTOP\EXTRACTED DATA\Tally\[root].1\Local Disk\ANARKALI\BACKUP\DATA24\DATA24). “1. During the course of search and seizure operation, several ledgers maintained with regard to various cash payments have been obtained from accounts maintained in the name “Anarkali Complex” in Tally found in folder named DATA 24 in the laptop of Sh. Sunil Kumar Gupta found and seized from the residence of Sh. Sunil Kumar Gupta, at 3584/4, Narang Colony, Gali No. 4 Tri Nagar Delhi (Path: F:\SKGR A-32\SUNIL KUMAR GUPTA HP LAPTOP\EXTRACTED DATA\Tally\[root].1\Local Disk\ANARKALI\BACKUP\DATA24\DATA24). 2. Copy of the relevant ledgers extracted from the laptop found and seized from the residence of Sh. Sunil Kumar Gupta at 2584/4, Narang Colony, Gali No. - 4, Tri Nagar, Delhi are enclosed with this notice. Further, during the course of search and seizure proceedings statement of Sh. Sunil Kumar Gupta was also recorded wherein he has accepted that he has noted these transaction 20/30 years before of its actual date of occurrence to disguise the authority in case of any investigation/enquiry. The relevant part of the statement of Sh. Sunil Kumar Gupta is reproduced as under:” 6.We however note that the material which is referred to the aforesaid SCN is neither noticed, examined nor considered in the satisfaction note. In view of the aforesaid, we find ourselves unable to sustain the action under Section 153 C. 7.The writ petitions are consequently allowed and the impugned notices dated 28 December 2021 issued under Section 153C and all 5 SCN consequential proceedings arising therefrom are hereby quashed. YASHWANT VARMA, J. SEPTEMBER 4, 2024/MR RAVINDER DUDEJA, J.