Delhi HC Upholds Order sets aside Income Tax Notice issued u/s 153C Beyond Six years [Read Order]

In a recent case, the Delhi High Court upheld the order which set aside the notice issued under section 153C of the IncomeTax Act, 1961 , beyond six years. It was viewed that the substantial question of law which has been proposed by the appellant/the Revenue in this petition does not arise for consideration and dismissed the appeal.

The revenue filed the appeal under Section 260A of the Income-Tax Act, 1961 (the Act) for the Assessment Year (AY) 2010-11 has been filed to challenge the order dated 30.05.2024 passed by the ITAT in favour of Pragun Finance Pvt. Ltd, the respondent.

Pursuant to search and seizure operations in the business and residential premises of Mr. Deepak Aggarwal, Mr. Mukesh Kumar and other group of cases based at Delhi, it was found that the group is an entry operator providing accommodation entries to beneficiaries. It was the case of the appellant/the Revenue that various incriminating papers/documents were found and seized during the course of search and seizure operations in both the cases and the statements recorded during the course of search and seizure operations and pre/post search operation, allegedly confirming the involvement of the group in the accommodation entry practices.

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After drawing a satisfaction note, notice under Section 153C of the Act was issued to the assessee/respondent and addition was made by the AO which has been deleted by the Commissioner of Income Tax (Appeals) [CIT(A)]. It is the order of the CIT(A) that was the subject matter of the appeal before the ITAT.

The case of the respondent before the ITAT was that the CIT(A) has rightly exercised jurisdiction under Section 153A and in that sense, the order is justified. The ITAT while dismissing the appeal filed by the Revenue has primarily relied upon the judgment of this Court in the case of Commissioner of Income-tax-7 v. RRJ Securities Ltd :

In terms of the amendment to Section 153C which came into effect on 01.04.2017, the judgment in the case of RRJ Securities Ltd. shall have no applicability. On a pointed query whether the plea sought to be urged, was taken before the ITAT, Mr. Rai, has drawn our attention to ground 2 of the grounds raised before the ITAT, which we have already reproduced above.

Mr. Rai, has not shown us anything contrary to say that the amendment of 2017 was given effect from a retrospective date. In other words, the amendment being prospective would surely have no bearing on the issue in hand as the date of search was of the year 2015 and in that sense the issue in hand is covered by the judgment of RRJ Securities Ltd. which has been relied upon by the ITAT while rejecting the appeal of the Revenue.

In the case in hand, the search having been carried out on 23.07.2015 and the notice under Section 153C having been issued on 08.10.2018 and presumption having been drawn by the CIT(A) on the same day, the material has been handed over by the AO of the person searched to the AO of the appellant and in such a situation, the year of relevance would be 2018-19 i.e., AY 2019-20 and six earlier years would be 2013-14 to 2018-19.

A division bench of Justice V. Kameswar Rao and Justice Vinod Kumar observed that the notice issued under Section 153C for AY 2010-11 is much beyond six years and the same was rightly set aside by the CIT(A), which order has been upheld by the ITAT.

It was viewed that the substantial question of law which has been proposed by the appellant/the Revenue in this petition does not arise for consideration and dismissed the appeal.

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