Shalimar Fincap Private Limited v. Income Tax Officer Ward 23 1 New Delhi & Anr.

Delhi HC21 May 2024W.P.(C)/1161/2024

Case brief

AI extract

What is this about?

The Delhi High Court allowed two writ petitions challenging notices under Section 153C of the Income Tax Act issued for AYs 2014-15 and 2016-17. The Court upheld the plea relying on Ojjus Medicare, quashing the notices as Income exceeded the statutory threshold and the AO failed to record necessary satisfaction based on material gathered.

What did the court decide?

The writ petitions were allowed and the impugned notice under Section 153C dated 22 June 2022 was quashed insofar as it relates to AYs 2014-15 and 2016-17.

Shalimar Fincap Private Limited Vs Income Tax Officer… — Service and Employment | Delhi HC (2024)

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$~102 & 114

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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- W.P.(C) 1161/2024 & CM APPL. 4836/2024 (Stay)

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SHALIMAR FINCAP PRIVATE LIMITED ..... Petitioner Through: Mr. Ankit Agarwal, Advocate.

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versus

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INCOME TAX OFFICER WARD 23 1 NEW DELHI & ANR.

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..... Respondents Through: Mr. Ruchir Bhatia, Sr. Standing Counsel with Mr. Anant Mann, Jr. Standing Counsel.

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114

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W.P.(C) 1319/2024 & CM APPL. 5375/2024 (Stay)

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SHALIMAR FINCAP PRIVATE LIMITED ..... Petitioner Through: Mr. Ankit Agarwal, Advocate.

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versus

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INCOME TAX OFFICER WARD 23 1 NEW DELHI & ANR.

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..... Respondents Through: Mr. Ruchir Bhatia, Sr. Standing Counsel with Mr. Anant Mann, Jr. Standing Counsel.

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CORAM:

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HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MS. JUSTICE TARA VITASTA GANJU

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O R D E R % 21.05.2024

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These writ petitions have been preferred against the impugned notices dated 22 June 2022 issued under Section 153C of the Income Tax Act, 1961 [“ Act ”] for Assessment Years’ [“ AYs ”] 2014-15 [W.P.(C) 1161/2024] and 2016-17 [W.P.(C) 1029/2024], and all consequential proceedings.

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Bearing in mind the undisputed fact that the, notices under Section 153C were dated 22 June 2022 it is ex facie evident that the

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This is a digitally signed order.

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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 27/05/2024 at 12:57:34

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aforenoted AY would fall beyond the window of six preceding AYs’ as provided under Section 153C. An ex facie perusal of the undated Satisfaction Note recorded by the jurisdictional Assessing Officer [“ AO ”] and the Satisfaction Note dated 01 June 2022 recorded by the AO of the searched person further indicates that the income which is alleged to have escaped assessment for the “ relevant assessment year ” does not exceed INR 50 lakhs. The jurisdictional AO has also failed to record its satisfaction that the escaped income is likely to exceed INR 50 lakhs or more cumulatively for the “ relevant assessment year ”, and thereby fulfilling the threshold requirement as prescribed by the Fourth Proviso to Section 153A.

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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 Central – 1 vs. Ojjus Medicare Pvt. Ltd [2024 SCC Online Del 2439]. The relevant paragraphs of the aforesaid decision read as under:-

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““ G. Insofar as the thresholds put in place by virtue of the Fourth Proviso to Section 153A are concerned and the argument of the writ petitioners of the condition of INR 50 lakhs being an unwavering precondition, we find ourselves unable to sustain that submission bearing in mind the indubitable fact that proceedings for search assessment commence upon the issuance of a notice and the AO at that stage having really not had the occasion to undertake a detailed or in depth examination of the evidence collected or come to a definitive opinion with respect to the total income which may have escaped assessment. Since the computation and assessment of income that is likely to have escaped assessment would at this stage be provisional, it would be incorrect to strike down initiation of action on a mere ex facie examination of the Satisfaction Note. We also in this regard bear in mind the Fourth Proviso using the expression “ amounts to or is likely to amount ”. The usage of the phrase “ likely to ” is indicative of the Legislature being conscious of the provisional character of the opinion that the AO may have formed at that stage.

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H. However, and at the same time, even if the identified asset at that stage be quantified as less than INR 50 lakhs, the AO must for

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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 27/05/2024 at 12:57:34

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reasons to be duly recorded, be of the opinion that the ultimate computation of escaped income is likely to exceed INR 50 lakhs. The aforesaid satisfaction would have to be based on an assessment of the material gathered and the potentiality of the same being indicative of the escaped assessment exceeding INR 50 lakhs. The formation of opinion in this respect would have to be based not on mere ipse dixit but reflective of a fair assessment of the quantum of income likely to have escaped assessment as distinct from mere speculation and conjecture.

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I. We further hold that since the precondition of INR 50 lakhs or more constitutes a sine qua non for initiating action for the extended ten year block, the aforesaid satisfaction and the reasons in support thereof would have to borne out from the Satisfaction Note itself. We are also of the opinion that the precondition of INR 50 lakhs is not liable to be viewed as being the qualifying criteria for each “ relevant assessment year ” that may be thrown open and that the said condition would stand satisfied if the escaped income cumulatively or in the aggregate meets the minimum benchmark of INR 50 lakhs.”

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Accordingly, and for reasons assigned in our decision in Ojjus Medicare Private Limited , while we allow the instant writ petition and quash the impugned notice issued under Section 153C of the Act dated 22 June 2022 insofar as it relates to AY 2014-15 and 2016-17, we leave it open to the jurisdictional AO to examine the issue afresh bearing in mind the observations appearing in para 3 above.

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In case the jurisdictional AO be of the opinion that the income alleged to have escaped assessment is likely to exceed INR 50 lakhs in the “ relevant assessment year ”, it would be open to it to draw proceedings afresh, if otherwise permissible in law.

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YASHWANT VARMA, J

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TARA VITASTA GANJU, J

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MAY 21, 2024/ RW

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This is a digitally signed order.

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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 27/05/2024 at 12:57:34

Shalimar Fincap Private Limited v. Income Tax Officer Ward 23 1 New Delhi & Anr.

Case brief

What is this about?

What did the court decide?

Shalimar Fincap Private Limited v. Income Tax Officer Ward 23 1 New Delhi & Anr.

Case brief

What is this about?

What did the court decide?

What the court decided

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