Pen Drive cannot be Incriminating Material: Delhi HC sets aside Notice issued u/s 153C of Income Tax Act [Read Order]

The Delhi High Court set aside the notice issued under section 153 C of the Income Tax Act, 1961 holding that the Pen Drive contains information regarding transactions of bogus invoices that cannot be incriminating material.

Panch Tatva Promotors Private Limited, the petitioner has filed the petition, inter alia, impugning a notice dated 28.08.2024 [the impugned notice] issued under 153C of the Income Tax Act, 1961 [the Act] as well as the proceedings for reassessment of the petitioner’s income in respect of Assessment Year [AY] 2019-20.

Want a deeper insight into the Income Tax Bill, 2025? Click here

The impugned notice is premised on the satisfaction note of the Assessing Officer [AO] of Mr. Samir Modi and Ms. Shivani Modi (searched persons), which recorded that documents containing information pertaining to the petitioner were found during the search conducted in the case of searched persons on 03.02.2021. 

No S.153B Limitation Relief for Invalid Indo-Swiss DTAA Reference Made Under Amended Article 26: Delhi HC [Read Order]

Admittedly, the satisfaction note does not contain any information that may have a bearing on determining the petitioner’s income assessable in the AY 2019-20. The note indicates that during the course of the search, a pen drive was found, which contained certain information regarding transactions entered into by HGEL (High Ground Enterprises Ltd.) with companies that had provided accommodation entries through generation of bogus invoices. 

In so far as the petitioner is concerned, information allegedly found was regarding a purported transaction of ₹70,78,680/-, which was allegedly supported by bogus invoice. However, the said transaction pertains to the Financial Year 2014-15.

It is evident that the information provided in the satisfaction note dated 28.08.2024 entered by the AO of the assessee could not possibly lead to the conclusion that the income of the Assessee for AY 2019-20 had escaped assessment. The pen drive found cannot be considered as containing any incriminating material pertaining to the petitioner in respect of AY 2019-20. Thus, the petitioner’s assessment for the said year could not be reopened under Section 153C of the Act.

Know Practical Aspects of Tax Planning, Click Here

GST officials must Specify Exact Provisions of GST Act and Rules allegedly violated in SCN: Delhi HC directs to Circulate Copy of Order to all Delhi GST offices [Read Order]

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 that 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.

A division bench of Justice Vibhu Bakhru and Justice Tejas Karia Vibhu Bakhru allowed the petition and set aside the impugned notice issued under Section 153C of the Act in respect of AY 2019-20. 

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates