Harish Chandra Agrawal v. Dy. Commissioner of Income Tax, Central Circle 28, Delhi

Delhi HC6 Mar 2025W.P.(C)/5733/2023

Case brief

AI extract

What is this about?

Section 153C Income Tax Act 1961; Section 153A; block assessment; satisfaction note dated 24.12.2021; incriminating material; abatement of pending assessments; AY 2016-17; AY 2014-15; AY 2020-21; AY 2013-14; AY 2015-16; Saksham Commodities Limited 2024 SCC OnLine Del 2551; Harish Chandra Agrawal; Dy. Commissioner of Income Tax Central Circle 28 Delhi; quashing of notices dated 30.12.2021 and assessment orders dated 26/27.03.2023; consequential proceedings; Delhi High Court; Yashwant Varma; Harish Vaidyanathan Shankar.

What did the court decide?

Quashing of the impugned notices dated 30 December 2021 and the impugned assessment orders dated 26 March 2023 and 27 March 2023 issued/passed under Section 153C of the Act, and of all consequential proceedings arising therefrom. ¶¶38

Harish Chandra Agrawal Vs Dy. Commissioner of Income Tax, Central… — Income Tax | Delhi HC (2025)

What the court decided

AI extract

Outcome

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Issue for consideration

Whether the impugned notices dated 30 December 2021 and the assessment orders dated 26 and 27 March 2023 passed under Section 153C of the Income Tax Act, 1961 were sustainable for AYs 2016-17, 2014-15 and 2020-21, given that the Satisfaction Note dated 24 December 2021 identified incriminating material only for AYs 2013-14 and 2015-16.

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Court's answer

Since the Satisfaction Note dated 24 December 2021 of the jurisdictional Assessing Officer related to incriminating material only for AYs 2013-14 and 2015-16, no incriminating material was found for AYs 2016-17, 2014-15 and 2020-21.

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Ratio / Principle

The issue stands answered and covered in favour of the writ petitioners in light of the principles enunciated by this Bench in Saksham Commodities Limited (2024 SCC OnLine Del 2551).

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Key takeaways

Applying the reasoning of Saksham Commodities Limited, the writ petitions are allowed and the impugned notices dated 30 December 2021 and the impugned orders dated 26 March 2023 and 27 March 2023, issued and passed under Section 153C of the Act, together with all consequential proceedings arising therefrom, are quashed.ratio¶¶38

Detailed headnote1 paragraphs

High Court of Delhi (Yashwant Varma and Harish Vaidyanathan Shankar, JJ.), order dated 06.03.2025, in W.P.(C) 5733/2023 and connected matters: writ petitions by Harish Chandra Agrawal against notices dated 30 December 2021 issued under Section 153C of the Income Tax Act, 1961 and assessment orders dated 26 and 27 March 2023 for AYs 2016-17, 2014-15 and 2020-21. The Satisfaction Note dated 24 December 2021 of the jurisdictional Assessing Officer related to incriminating material only for AYs 2013-14 and 2015-16, so no incriminating material existed for the subject AYs. Relying on the Bench's own earlier decision in Saksham Commodities Limited vs. Income Tax Officer, Ward 22(1), Delhi & Anr. [2024 SCC OnLine Del 2551] — under which, per the quoted paragraphs 63-68, initiation of Section 153C proceedings and consequent abatement must be preceded by the AO's satisfaction that the recovered material is likely to bear on the determination of total income for particular AYs — the petitions were allowed and the notices, orders and all consequential proceedings were quashed.

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$~49 to 51

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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- W.P.(C) 5733/2023

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HARISH CHANDRA AGRA	WAL		.....P	etitioner
Through:	Mr. Salil	Kapo	or, M	r. Sumit
	Lalchanda	ni,	Mr.	Tarun
	Chanana	and	Ms.	Ananya
	Kapoor, A	dvs.

¶6

versus

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DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 28, DELHI .....Respondent Through: Mr. Shlok Chandra, SSC with Ms. Madhavi Shukla and Ms. Naincy Jain, JSCs.

¶8

¶9

+ W.P.(C) 5735/2023
HARISH CHANDRA AGRA	WAL		.....	Petitioner
Through:	Mr. Salil	Kapo	or, M	r. Sumit
	Lalchanda	ni,	Mr.	Tarun
	Chanana	and	Ms.	Ananya
	Kapoor, A	dvs.

¶10

versus

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DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28, DELHI .....Respondent Through: Mr. Shlok Chandra, SSC with Ms. Madhavi Shukla and Ms. Naincy Jain, JSCs.

¶12

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W.P.(C) 5784/2023

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HARISH CHANDRA AGRA	WAL		.....P	etitioner
Through:	Mr. Salil	Kapo	or, M	r. Sumit
	Lalchanda	ni,	Mr.	Tarun
	Chanana	and	Ms.	Ananya
	Kapoor, A	dvs.

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W.P.(C) 5733/2023 & connected matters Page 1 of 4

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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 17/03/2025 at 11:23:00

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versus

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DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28, DELHI .....Respondent Through: Mr. Shlok Chandra, SSC with Ms. Madhavi Shukla and Ms. Naincy Jain, JSCs.

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CORAM: HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR

O R D E R

06.03.2025

These writ petitions have been preferred against the impugned notices dated 30 December 2021 issued under Section 153C of the Income Tax Act, 1961 [“ Act ”]and the impugned assessment orders 26 March 2023 and 27 March 2023,for Assessment Years [“ AYs ”] 2016-17 [W.P.(C) 5733/2023], 2014-15 [W.P.(C) 5735/2023], 202021 [W.P.(C) 5748/2023] and all consequential proceedings.

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Bearing in mind the undisputed fact that the Satisfaction Note dated 24 December 2021 issued by the jurisdictional Assessing Officer [“ AO ”] of the petitioners relates to incriminating material for AYs 2013-14 and 2015-16, it is ex facie evident that no incriminating material for the aforenoted AYs, namely, 2016-17, 2014-15 and 202021, has been found.

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Undisputedly, the issue now stands answered and covered in favour of the writ petitioners 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:-

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“ 63. On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be

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W.P.(C) 5733/2023 & connected matters Page 2 of 4

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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 17/03/2025 at 11:23:00

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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 construe Section 153C as envisaging incriminating material pertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the “ relevant assessment year ”.

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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 would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to “ have a bearing on the determination of the total income ”. It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case may be.

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65. We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may 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 non-searched entity is satisfied that the material coming into its possession is likely to “ have a bearing on the determination of the total 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 would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity.

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W.P.(C) 5733/2023 & connected matters Page 3 of 4

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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.

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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 it relates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to have a bearing on the estimation of income. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year of search or the “ relevant assessment year ” would not justify a sweeping or indiscriminate invocation of Section 153C.

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68. The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs' and thereafter proceed to place the assessee on notice under Section 153C. The power to undertake such an assessment would stand confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred 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.”

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Accordingly, and for reasons assigned in our decision in Saksham Commodities Limited , we allow the instant writ petitions and quash the impugned notices dated 30 December 2021 and the impugned orders dated 26 March 2023 and 27 March 2023, issued and passed under Section 153C of the Act and all consequential proceedings arising therefrom.

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YASHWANT VARMA, J.

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HARISH VAIDYANATHAN SHANKAR, J.

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MARCH 06, 2025/ akc

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W.P.(C) 5733/2023 & connected matters Page 4 of 4

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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 17/03/2025 at 11:23:00

Harish Chandra Agrawal v. Dy. Commissioner of Income Tax, Central Circle 28, Delhi

Case brief

What is this about?

What did the court decide?

Harish Chandra Agrawal v. Dy. Commissioner of Income Tax, Central Circle 28, Delhi

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Cases cited

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Procedural history

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