PCIT Vs Dev Technofab Ltd. (Supreme Court of India)
In a recent judgment, the Supreme Court of India dismissed the Special Leave Petition filed by the Principal Commissioner of Income Tax (PCIT) against Dev Technofab Ltd., thereby upholding the Delhi High Court’s ruling that notices issued under Section 153C of the Income Tax Act, 1961, are invalid if not based on a proper satisfaction note.
The case originated when the Income Tax Department issued notices to Dev Technofab Ltd. for the assessment years (AY) 2014-15 to 2020-21 under Section 153C, which pertains to assessments of income of persons other than the searched person. The Delhi High Court observed that the satisfaction note referenced material related solely to AY 2019-20. Consequently, the court held that initiating proceedings for AYs other than 2019-20 was unsustainable, citing its earlier decision in Saksham Commodities Limited vs. Income Tax Officer, Ward 22(1), Delhi & Anr [2024 SCC OnLine Del 2551].
In the Saksham Commodities case, the High Court emphasized that for a valid invocation of Section 153C, the Assessing Officer (AO) must be satisfied that the seized material has a bearing on the determination of total income for specific assessment years. The court clarified that the mere existence of the power to assess or reassess six assessment years does not justify a sweeping invocation of Section 153C without identifying incriminating material pertinent to each year.
Applying this rationale, the Delhi High Court quashed the Section 153C proceedings against Dev Technofab Ltd. for AYs 2014-15 to 2018-19 and 2020-21, as the satisfaction note did not reference any incriminating material for these years. However, the court allowed the proceedings for AY 2019-20 to continue, noting that the satisfaction note contained specific observations related to that year.
The Supreme Court, after reviewing the materials on record and hearing the arguments, found no reason to interfere with the High Court’s decision and dismissed the Special Leave Petition.
Read Delhi HC Judgment in above case: Section 153C cannot extend indiscriminately to Multiple AYs: Delhi HC
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
