PCIT Vs 3D Tradex Private Limited (Delhi High Court)
Summary: The Delhi High Court rejected the Revenue’s appeal against the order dated 12 February 2025 of the Income Tax Appellate Tribunal, Delhi “E” Bench, setting aside proceedings under Section 153C of the Income Tax Act, 1961. The issue was whether the Tribunal was justified in holding that the satisfaction note failed to identify the assessment years to which the incriminating material related. The Tribunal found that the alleged undisclosed income was not identifiable with any particular assessment year, that the note did not specify incriminating material relevant to AYs 2010-11 to 2015-16, and that neither the assessed income nor the purported incriminating material had been shown to have the necessary connection with those years.
On examining the satisfaction note reproduced in the Tribunal’s order, the High Court independently found that the Assessing Officer had merely recorded the seizure of a hard disk and proposed initiation of proceedings for AYs 2010-11 to 2015-16, without explaining how the material was relevant to those assessment years. Following Saksham Commodities Limited v. Income Tax Officer, (2024) 161 taxmann.com 485, the Court held that the issue was squarely covered against the Revenue. Accordingly, it rejected the appeal, leaving the Tribunal’s decision undisturbed, and disposed of all pending applications.
Cases Discussed
- Saksham Commodities Limited v. Income Tax Officer, (2024) 161 taxmann.com 485 (Delhi High Court), W.P.(C) 1459/2024 and connected matters, decided on 9 April 2024 — Followed by the Tribunal and the High Court concerning the requirement to establish the connection between incriminating material and the particular assessment years for which jurisdiction under Section 153C is assumed.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The appeal in hands is directed against order dated 12.02.2025 passed by the Income Tax Appellate Tribunal, Delhi “E” Bench: New Delhi (hereinafter referred to as „Tribunal‟).
2. The question before us, in short is, as to whether the Tribunal was justified in setting aside the proceedings under Section 153C of the Income Tax Act,1961 (hereinafter referred to as „the Act of 1961‟) holding, inter alia, that the satisfaction note does not clearly mention that the incriminating material relates to which year.
3. While allowing the assessee’s appeal in paragraph no.13.1, the Tribunal has recorded thus:
“13.1. It is evident from the ‘Satisfaction Note that the alleged undisclosed income is not identifiable with any assessment year. In the absence of any particular of incriminating material available with reference to AYs specified in the ‘Satisfaction Note’, such obscure and vague ‘Satisfaction Note’ does not entitle the AO to assume jurisdiction under s. 153C of the Act. Neither the income assessed under s. 153C of the Act appears to relate to any incriminating material nor the so called incriminating material has been shown to be attributable to different AYs 2010-11 to 2015-16. The plea of the assessee towards non-maintainability of jurisdiction under s. 153C in such facts is squarely covered in favour of the assessee by the judgment in Saksham Commodities Ltd.(supra).”
4. The aforesaid view of the Tribunal is based on judgment of this Court rendered in case of Saksham Commodities Limited v. Income Tax Officer reported in (2024) 161 taxmann.com 485.
5. We have heard learned counsel for the appellant and perused the satisfaction note, which has been reproduced by the Tribunal at page no.4 of its order. The perusal of the satisfaction note so reproduced clearly shows that the Assessing Officer had not recorded any satisfaction regarding the relatability of the incriminating material qua particular assessment year.
6. The satisfaction note simply records seizure of hard disk and that the proceedings under section 153C of the Act of 1961 is to be initiated for assessment years 2010-11 to 2015-16, without indicating anything as to how the material is relevant for those assessment years.
7. We, therefore, do not find any merit and substance in the appeal so filed by the Revenue, as the issue in hands is squarely covered by the judgment of this court in the case of Saksham Commodities Ltd. (supra).
8. The appeal is, therefore, rejected.
9. All pending applications are also disposed of accordingly.
