Mg Metalloy Private Limited v. Assistant Commissioner of Income Tax Central Circle 2 & Ors.

Delhi HC7 Jan 2026W.P.(C)/9769/2024

Case brief

AI extract

What is this about?

Income tax; Section 148 notice quashed; Explanation to Section 14A; Finance Act, 2022 / Amendment Act, 2022; prospective vs retrospective application; AY 2017-18, 2018-19, 2019-20; disallowance of expenditure with no exempt income; Section 148A(d) reasons set aside; MG Metalloy Private Limited v. Assistant Commissioner of Income Tax Central Circle-2; relied on Era Infrastructure (ITA 204/2022, 20.07.2022); Department's SLP in Supreme Court pending with notice issued; writ petitions allowed by Delhi High Court on 07.01.2026.

What did the court decide?

The notices dated 26.04.2024 and 28.12.2023 impugned in the petitions, and the corresponding reasons under Section 148A(d), were quashed and set aside. ¶¶20

Mg Metalloy Private Limited Vs Assistant Commissioner of Income Tax… — Income Tax | Delhi HC (2026)

What the court decided

AI extract

Outcome

The notices dated 26.04.2024 and 28.12.2023 impugned in the petitions, and the corresponding reasons under Section 148A(d), were quashed and set aside.

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Issue for consideration

Whether the Assessing Officer could validly issue the Section 148 notices dated 26.04.2024 and 28.12.2023 for assessment years 2017-18, 2018-19 and 2019-20 in reliance on the Explanation to Section 14A of the Income Tax Act, 1961 inserted by the Finance Act, 2022. +1 more

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Court's answer

The respondent no.1-Assessing Officer could not have issued notice to the petitioner relying upon the Explanation to Section 14A of the Act of 1961, which was inserted by the Finance Act, 2022.

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Ratio / Principle

It is a settled proposition that unless a provision specifically makes it operational from a retrospective date, any provision including an Explanation cannot be given retrospective effect; and the judgment in Era Infrastructure is categoric on this point.

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Detailed headnote1 paragraphs

Delhi High Court (Dinesh Mehta and Vinod Kumar, JJ.) allowed writ petitions W.P.(C) 9768/2024, 9769/2024 and 754/2025 filed by MG Metalloy Private Limited challenging notices dated 26.04.2024 and 28.12.2023 issued under Section 148 of the Income Tax Act, 1961 for AY 2017-18, 2018-19 and 2019-20, which sought to disallow expenditure (there being no exempt income) on the basis of the Explanation to Section 14A inserted by the Finance Act, 2022. The Court held that the Assessing Officer could not have issued the notices relying on that Explanation, since it is a settled proposition that unless a provision specifically makes it operational from a retrospective date, any provision including an Explanation cannot be given retrospective effect, and noted that its earlier judgment in Principal Commissioner of Income Tax (Central)-2 v. M/s Era Infrastructure (India) (ITA 204/2022, decided 20.07.2022) is categoric on this point. The impugned notices and the corresponding reasons under Section 148A(d) were quashed and set aside.

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$~10 to 12

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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- W.P.(C) 9768/2024, CM APPL. 40095/2024 (stay)

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- W.P.(C) 9769/2024, CM APPL. 40099/2024 (stay)

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- W.P.(C) 754/2025, CM APPL. 3760/2025 (stay)

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MG METALLOY PRIVATE LIMITED .....Petitioner

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Through: Mr. Ved Jain, Mr. Nischay Kantoor and Ms. Soniya Dodeja, Advs.

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versus

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ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2, & ORS. .....Respondents Through: Mr. Ruchir Bhatia, SSC, Mr. Anant Mann, JSC and Ms. Lopamudra Mahapatra, Adv.

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CORAM: HON'BLE MR. JUSTICE DINESH MEHTA HON'BLE MR. JUSTICE VINOD KUMAR

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O R D E R % 07.01.2026

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By way of the present writ petition(s) preferred under Section 226 of the Constitution of India, the petitioner has challenged the notices dated 26.04.2024 and 28.12.2023 issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) , seeking to disallow the expenditure of the petitioner, even though there was no exempt income.

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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 12/01/2026 at 12:14:10

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The basis for which the notices impugned were issued was, the amendment brought in Section 14A of the Act of 1961 by way of Amendment Act, 2022, whereby Explanation was inserted to Section 14A of the Act of 1961.

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Learned counsel for the petitioner submitted that the explanatory memorandum issued while introducing the Amendment clearly shows that the amendment was prospective in nature and the same was to be applied from Assessment Year (AY) 2022-2023, whereas, the assessment year involved in those cases are AY 2017-18, 2018-19 and 2019-20. He relied upon the judgment of this Court in case of Principal Commissioner of Income Tax (Central)-2 v. M/s Era Infrastructure (India) in ITA 204/2022 decided on 20.07.2022.

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Learned counsel for the respondents on the other hand submitted that a look at the Explanation clearly shows that the same was introduced with the view to clarify the doubt (if any), else the position was clear. He further argued that looking to the provision, the Explanation should apply retrospectively. In relation to the judgement in the case of Era Infrastructure ( supra ), learned counsel for the respondent submitted that the Department has filed a Special Leave Petition (SLP) in the Supreme Court, wherein notice has been issued. 5. Having heard learned counsel for the parties, we are of the view that the respondent no.1-Assessing Officer could not have issued notice to the petitioner relying upon the Explanation to Section 14A of the Act of 1961, which was inserted by the Finance Act, 2022. 6. It is a settled proposition of law that unless the provisions specifically makes it operational from a retrospective date, any

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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 12/01/2026 at 12:14:10

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provision including explanation cannot be given retrospective effect. That apart, the judgment in the case of Era Infrastructure ( supra ) is categoric on this point.

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These writ petitions are, therefore, allowed. Notices dated 26.04.2024 and 28.12.2023 impugned in these petitions so also the reasons corresponding thereto, under Section 148A(d) are hereby quashed and set aside.

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DINESH MEHTA, J.

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VINOD KUMAR, J.

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JANUARY 7, 2026/ cd

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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 12/01/2026 at 12:14:10

Mg Metalloy Private Limited v. Assistant Commissioner of Income Tax Central Circle 2 & Ors.

Case brief

What is this about?

What did the court decide?

Mg Metalloy Private Limited v. Assistant Commissioner of Income Tax Central Circle 2 & Ors.

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Cases cited

Statutes considered

Procedural history

Parties & counsel

Coram

Case details

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