Misha Gupta Vs ACIT Central Circle 26 (Delhi High Court)
Summary: The Delhi High Court considered a writ petition challenging notices dated 29 June 2022 issued under Section 153C of the Income Tax Act, 1961 for Assessment Year 2016-17 and the consequential proceedings. The Court noted that the Satisfaction Note recorded by the jurisdictional Assessing Officer was dated 23 June 2022 and held that, on that basis, AY 2016-17 fell beyond the window of six preceding assessment years contemplated under Section 153C. The Court further examined the Satisfaction Notes recorded by the Assessing Officer of the searched person and the jurisdictional Assessing Officer and found that the income alleged to have escaped assessment for the relevant assessment year did not exceed INR 50 lakhs. The jurisdictional Assessing Officer had also failed to record satisfaction that the escaped income was likely to exceed INR 50 lakhs or more cumulatively for the relevant assessment year so as to fulfil the threshold requirement under the Fourth Proviso to Section 153A.
The Court relied upon its decision in Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. [2024 SCC Online Del 2439], which had examined the statutory threshold and held that although the ₹50 lakh requirement is a substantive precondition for invoking the extended ten-year block, the Assessing Officer may form a provisional opinion at the initiation stage; however, where the identified asset is below ₹50 lakhs, the Assessing Officer must record reasons showing that the ultimate escaped income is likely to exceed ₹50 lakhs.
Such satisfaction must arise from the material gathered and cannot rest upon mere ipse dixit, speculation or conjecture. Applying these principles, the High Court allowed the writ petition and quashed the impugned notice under Section 153C insofar as it related to AY 2016-17. At the same time, it left it open to the jurisdictional Assessing Officer to examine the issue afresh. If the Assessing Officer forms the requisite opinion, supported by recorded reasons, that the income alleged to have escaped assessment is likely to exceed INR 50 lakhs in the relevant assessment year, fresh proceedings may be drawn if otherwise permissible in law.
Cases Discussed
- Principal Commissioner of Income Tax Central – 1 vs. Ojjus Medicare Pvt. Ltd. [2024 SCC Online Del 2439]
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This writ petition has been preferred against the impugned notices dated 29 June 2022 issued under Section 153C of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2016-17 and all consequential proceedings.
2. Bearing in mind the undisputed fact that the Satisfaction Note recorded by the jurisdictional Assessing Officer [“AO”] was dated 23 June 2022, it is ex facie evident that the aforenoted AY would fall beyond the window of six preceding AYs’ as provided under Section 153C. An ex facie perusal of the aforenoted Satisfaction Note 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.
3. 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:-
““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.
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 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.
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.”
4. 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 29 June 2022 insofar as it relates to AY 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.
5. 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.
