Delhi High Court – Orders
Anilesh Ahuja vs Union Of India & Anr on 10 March, 2025
Author: Yashwant Varma
Bench: Yashwant Varma
$~48
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 3409/2023
ANILESH AHUJA .....Petitioner
Through: Mr. Tarun Gulati, Sr. Adv. with
Mr. Kumar Visalaksh, Mr.
Arihant Tater, Ms. Akanksha
Dikshit & Mr. Ajitesh Dayal
Singh, Advs.
versus
UNION OF INDIA & ANR. .....Respondents
Through: Mr. Ashish Batra, SPC for
Resp./ UOI.
Mr. Anant Mann, JSC for Mr.
Ruchir Bhatia, SSC.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
ORDER
% 10.03.2025
1. The writ petitioner has approached this Court challenging the
final order of assessment dated 27 January 2023 pertaining to
Assessment Year1 2017-18. Consequential reliefs are also sought for
deletion of the additions which were made referable to Section 69A of
the Income Tax Act, 19612 as well as the penalty proceedings which
came to be initiated under Section 274 read along with Section
271AAC(1) of the Act.
2. We had on 20 March 2023, while entertaining the writ petition,
passed the following order:
1
AY
2
ActW.P.(C) 3409/2023 Page 1 of 13
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” W.P.(C) 3409/2023 & CM APPL. 13175/2023 [Application
filed on behalf of the petitioner seeking interim relief].
2. This writ petition assails the assessment order dated 27.01.2023
and consequent demand notice of even date i.e., 27.01.2023.
Challenge is also laid to the notice dated 31.01.2023 seeking to
impose penalty.
3. Via the impugned assessment order, the Assessing Officer (AO)
has sought to tax INR 13,22,40,752/- on the ground that this
amount constitutes unexplained money. In this context, Section
69A of the Income Tax Act, 1961 [in short “the Act‟] is taken
recourse to by the AO.
4. The petitioner has not only challenged the impugned assessment
order, but also the interest levied and penalty imposed by the AO.
5. Counsel for the petitioner says that the petitioner is a non-
resident and that he has been residing in the USA for quite some
time.
6. It is the stand of the petitioner that he had remitted a part of the
consideration, i.e., Rs 13,22,40,752, to Lodha Developers Private
Limited [in short, “Lodha”] for the purposes of purchasing two
immovable properties, i.e., flats located in Mumbai, via an account
maintained with CITI Bank in USA.
6.1 It appears that the said amount was remitted by the petitioner in
the backdrop of two separate agreements to sell of even date, i.e.,
09.12.2016, executed between him and Lodha.
6.2 It is the petitioner‟s case that the transaction did not go through,
and accordingly, two cancellation deeds dated 27.12.2018 were
executed between the petitioner and Lodha.
6.1 It is also the petitioner‟s case that after certain amount was
forfeiting Rs 3,00,00,000, the rest was remitted to the petitioner.
The fact that the transaction did not go through, according to the
counsel for the petitioner, is evident from the response that the AO
received upon notice being issued to Lodha under Section 133(6) of
the Act.
7. Mr Aseem Chawla, learned Senior Standing Counsel, will place
on record the response received from Lodha, pursuant to notice
issued under Section 143(6) of the Act.
7.1 For this purpose, list the matter on 03.05.2023.
8. We may also note that the petitioner had filed objections against
the draft assessment order dated 29.03.2022, with the Dispute
Resolution Panel (DRP). The DRP disposed of the objection via
order dated 29.12.2022. In its order, the DRP, inter alia, made the
following observations:
W.P.(C) 3409/2023 Page 2 of 13
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“4.2.2 The assessee vide letter dated 05.12.2022, has filed a
rejoinder and stated inter alia as under:
“….In this regard, as already explained earlier, the Assessee
submits that the bank account of the assessee with CITI Bank,
USA through which wire transfer payments were made to
Lodha Developers Private Limited was closed in 2018.
Therefore, obtaining bank statement of 2016 (which were
more than 5 years old) from CITI Bank, USA was taking time
and the said fact was clearly mentioned by the Assessee in its
letter dated March 17, 2022 (Kindly refer to Page no. 27 to
28 of the Paper Book filed).
14. Thus, it is not a case where the Assessee had the
documents and did not furnish the same purposefully to stall
the assessment proceedings. As soon as tile bank statements
were received by the Assessee on March 31, 2022 from CITI
Bank, USA, the same were filed with the AO vide letter dated
March 31, 2022 (Kindly refer to Page no. 42 to 47 of the
Paper Book filed).
17. Without prejudice to the above, the Assessee submits that
the bank statements of CITI Bank, USA are only
corroborative evidence to support of the return of income
filed in USA, the claim of the Assessee that the payment was
made to Lodha Developers Private Limited from foreign
income source which were duly declared in the return of
income filed in USA and the statements made by Lodha
Developer Private Limited in response to notice under
Section 133(6) of the IT Act.
18. Therefore, even without considering the said bank
statements, the Assessee had clearly established his
creditworthiness and the sources of income for investment
which was in USA. It is certainly not a case where payments
for investment in immovable properties are made out of
unaccounted / undisclosed money and therefore the proposed
addition unwarranted.
Prayer
19. In view of the above submissions, the Assessee humbly
prays to the Hon’ble DRP that:
a) Kindly admit and consider the bank statements of the
account maintained by the Assessee with CITI Bank, USA;
b) Kindly issue directions to the AO under Section 144C(5) of
the IT Act to delete the variations proposed to the total
income of the Assessee in the Draft Order passed for AY
2017- 18…….. ”
W.P.(C) 3409/2023 Page 3 of 13
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4.3 The Panel has carefully considered the rival averments as
above. The Panel takes a note that the assessee’s objection
are filed before the Panel at the draft stage of the assessment
proceedings after the assessing officer makes a proposal for
additions, as the case may be; hence, the DRP is considered
to be a superior extension of the % of the AO. Provisions of
Rule 46A are not applicable in terms of admitting the
additional evidence to the DRP and in fact, DRP proceeding
are governed by Income Tax (Dispute Resolution Panel)
Rules, 2009. The AO vide the remand report, has on various
occasions, taken a plea that the assessee did not furnish the
requisite details and evidences before the AO despite
providing ample opportunity given to him. The Panel further
takes a note of the assessee’s contention that obtaining the
requisite details and documents was taking time and as soon
as same were filed vide letter dated 31.03.2022.
In view of above, the AO is directed to consider and verify the
assessee’s contentions in light of submissions made as above
including the assessee’s rejoinder as observed by the Panel at
para no 4.2.2 above by passing a speaking and reasoned
order within the ambit of law and facts of the case. The Panel
hastens to clarify that the AO shall not conduct any fresh
inquiry in this regard; the verification shall be made on the
basis of documents/submissions available on the records. The
assessee’s objections made at all grounds of objections in this
regard, are hereby, disposed off accordingly.”
9. In the meanwhile, no precipitate action will be taken against the
petitioner.
10. Parties will act based on digitally signed copy of the order.”
3. As is evident from the recordal of facts in that order, the Court
had noticed that the petitioner was a non-resident who was staying in
the United States of America3 at the relevant time. The petitioner is
stated to have made certain investments with Lodha Developers
Private Limited, a real estate developer in Mumbai, for purchase of
two immovable properties via an account maintained with Citi Bank,
USA. The Court took note of the assertion of the writ petitioner that
the remittances were made to the real estate developer via established
W.P.(C) 3409/2023 Page 4 of 13
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banking channels and pursuant to the execution of two separate
Agreements to Sell executed on 09 December 2016. It was also the
case of the writ petitioner that since those transactions did not fructify,
the parties executed two Cancellation Deeds on 27 December 2018,
and an amount of INR 3 crores was forfeited.
4. The petitioner appears to have asserted that he was neither a
taxable entity nor could those investments be viewed as income which
had accrued or arisen in India. It had thus questioned the justification
of the respondents invoking Section 147 of the Act and the attempt of
the respondents to tax the remittances which were made. The
petitioner had also questioned the applicability of Sections 69 and 69A
of the Act since he was a non-resident and the investments thus not
qualifying either Sections 9 or 5 of the Act so as to be held as exigible
to tax.
5. It is this foundational challenge which was reiterated before us
today with submissions being led by Mr. Gulati, learned senior
counsel, who appeared for the writ petitioner. Mr. Gulati submitted
that the petitioner was undisputedly a non-resident as envisaged under
Section 6 of the Act. According to learned senior counsel, by virtue of
the provisions comprised in Section 5(2) of the Act, a non-resident
becomes liable to tax only if income is either received or is deemed to
be received in India or where it accrues or is deemed to accrue therein.
It was submitted that the investments were made based on the income
which had been earned by the writ petitioner and which had
undoubtedly accrued and arisen in USA. It was in the aforesaid light
that Mr. Gulati had contended that a remittance to India could not
3
USA
W.P.(C) 3409/2023 Page 5 of 13
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have possibly been viewed as income liable to tax.
6. Learned senior counsel submitted that though this proposition is
well settled, it would be apposite to refer to the following passages as
appearing in the judgment of this Court in Angelantoni Test
Technologies Srl vs. Assistant Commissioner of Income-tax and
Ors4 and which had essentially held that investments would not
constitute income. We deem it apposite to extract the following
paragraphs from that decision:
“6. It is settled law that investment in shares in an Indian subsidiary
cannot be treated as „income‟ as the same is in the nature of “capital
account transaction” not giving rise to any income. In Nestle
SA v. Assistant Commissioner of Income Tax (W.P.(C) No.
12643/2018), this Court held that the allegation of the Revenue that
the investment in the shares of Indian subsidiary amounted to
„income‟ is flawed. The relevant portion of the said judgment is
reproduced hereinunder:
“24. The principal objection of the Petitioner that its
investment in the shares of its subsidiary cannot be treated as
„income‟ is well founded. The decision of the Bombay High
Court in Vodafone India Services Pvt. Ltd. v. Union of
India (supra) holding such investment in shares to be a
„capital account transaction‟ not giving rise to income was
accepted by the CBDT. Para 2 of Instruction No. 2 of 2015
dated 29th January, 2015 reads thus:
“2. It is hereby informed that the Board has accepted the
decision of the High Court of Bombay in the above
mentioned Writ Petition. In view of the acceptance of the
above judgment, it is directed that the ratio decidendi of
the judgment must be adhered to by the field officers in all
cases where this issue is involved. This may also be
brought to the notice of the ITAT, DRPs and CIT
(Appeals).”
25. Therefore, the fundamental premise of the Respondent
that the above investment by the Petitioner in the shares of its
subsidiary amounted to „income‟ which had escaped
assessment was flawed. The question of such a transaction
forming a live link for reasons to believe that income had
4
2023 SCC OnLine Del 8486
W.P.(C) 3409/2023 Page 6 of 13
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escaped assessment is entirely without basis and is rejected
as such.”
7. Further, the action of the Respondents is in contravention of the
CBDT Instruction No. 2 of 2015 dated 29th January, 2015
reiterating the view expressed by the Bombay High Court
in Vodafone India Services Pvt. Ltd. v. Union of India ((2014) 368
ITR 1 (Bom)) that no income arises on investment in shares since it
is a capital account transaction.
8. In fact, the judgment of the Bombay High Court was accepted by
the Union Cabinet and a press note dated 28th January, 2015 was
issued by the Press Information Bureau, Government of India. The
relevant portion of the said press note is reproduced hereinbelow:
“Acceptance of the Order of the High Court of Bombay in
the case of Vodafone India Services Private Limited
The Union Cabinet, chaired by the Prime Minister Shri
Narendra Modi, in a major decision, has decided to accept
the order of the High Court of Bombay in the case
of Vodafone India Services Private Limited (VISPL) dated
10.10.2014. This is a major correction of a tax matter which
has adversely affected investor sentiment.
Based on the opinion of Chief Commissioner of Income-tax
(International Taxation), Chairperson (CBDT) and the
Attorney General of India, the Cabinet decided to
i. accept the order of the High Court of Bombay in WP No.
871 of 2014, dated 10.10.2014; and not to file SLP against it
before the Supreme Court of India;
ii. accept of orders of Courts/IT AT/DRP in cases of other
taxpayers where similar transfer pricing adjustments have
been made and the Courts/IT AT/DRP have decided/decide in
favour of the taxpayer.
The Cabinet decision will bring greater clarity and
predictability for taxpayers as well as tax authorities, thereby
facilitating tax compliance and reducing litigation on similar
issues. This will also set at rest the uncertainty prevailing in
the minds of foreign investors and taxpayers in respect of
possible transfer pricing adjustments in India on transactions
related to issuance of shares, and thereby improve the
investment climate in the country.
The Cabinet came to this view as this is a transaction on the
capital account and there is no income to be chargeable to
tax. So applying any pricing formula is irrelevant.
W.P.(C) 3409/2023 Page 7 of 13
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xxxxxxxxx
VISPL filed a 2nd Writ Petition in the High Court of Bombay.
The High Court, on 10.10.2014, has amongst other things
observed:
xxxxxxxxx
e) The issue of shares at a premium is on Capital account
and gives rise to no income. The submission on behalf of the
revenue that the shortfall in the ALP as computed for the
purposes of Chapter X of the Act is misplaced. The ALP is
meant to determine the real value of the transaction entered
into between AEs. It is a re-computation exercise to be
carried out only when income arises in case of an
International transaction between AEs. It does not warrant
re-computation of a consideration received/given on capital
account.”
9. Further, this Court in Divya Capital One Private Limited (Earlier
Known as Divya Portfolio Private Limited) v. Assistant
Commissioner of Income Tax Circle 7(1) Delhi, 2022 SCC OnLine
Del 1461 held that „Whether it is “information to suggest” under
amended law or “reason to believe” under erstwhile law the
benchmark of “escapement of income chargeable of tax” still
remains the primary condition to be satisfied before invoking
powers under Section 147 of the Act‟.”
7. Mr. Gulati then submitted that on a more fundamental plane, the
Assessing Officer5 was wholly unjustified in seeking to tax the
remittance and make additions by resorting to the provisions
comprised in Sections 68, 69 and 69A of the Act. It was contended
that the taxability of income of a non-resident must at the outset
qualify the pre-conditions comprised in Section 5(2) and the
provisions alluded to above enabling an AO to ordinarily make
additions to returned income not being liable to be construed as either
enlarging the scope of taxability or reinventing the threshold as
created by Section 5(2).
8. Mr. Gulati then submitted that a non-resident, in any case, is
W.P.(C) 3409/2023 Page 8 of 13
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neither under an obligation to disclose nor explain the source of
income earned outside India. It was in the aforesaid backdrop that
learned counsel submitted that the impugned orders are liable to be
quashed and set aside.
9. From the disclosures which are made in the writ petition, we
note that the proceedings themselves commenced pursuant to the
issuance of notices under Sections 148 and 142(1) of the Act and
which were dated 27 March 2021 and 02 December 2021,
respectively. It is alleged by the writ petitioner that the notice under
Section 148 and the notice referable to Section 142(1) dated 02
December 2021 were never served upon him. However, upon receipt
of the notice referable to Section 142(1) dated 10 December 2022, the
petitioner furnished detailed replies dated 28 February 2022 and 03
March 2022 through its attorney.
10. The petitioner was ultimately provided the reasons which
constituted the basis for the invocation of Section 148 under cover of a
letter dated 05 March 2022. It would be relevant to reproduce those
reasons hereinbelow:
“Reasons of reopening in case of Anilesh Ahuja for AY 2017-18
PAN:BVZPA1249L
The assessee, Anilesh Ahuja PAN – BVZPAI249L, has not
filed return of its income for the assessment year 2017-18.
2. Information available in ITS-AIR details was analyzed and it
was observed that the assessee, during the financial year 2016-17
relevant to A.Y. 2017-18 has made following transactions:
S. No. Transaction Category
Amount (Rs./-)
1. 534202362 Purchase of immovable property
(SFT-0I2)
2. 1403291 Payment made in respect of transfer
5
AO
W.P.(C) 3409/2023 Page 9 of 13
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of immovable property (TDS Form
26QB, Section 194IA)
3. It is pertinent to mention that though the assessee has made
large transactions, the assessee has chosen not to file return of its
income for the relevant year. Therefore, it appears that the assessee
is carrying on some activity which has resulted in generation of
income, but the income has escaped assessment as no ITR has been
filed by the assessee.
4. Thus, the above facts indicate that the assessee has not filed
return of income for the year under consideration. As per the
provisions of Section, 139, which is reproduced below, every
individual with taxable income is required to compulsorily file
return of income.-
“139. (1) Every person,-
(a) being a company [or a firm); or
(b) being a person other than a company [or a firm], if its
total income or the total income of any other person in
respect of which he is assessable under this Act during
the previous year exceeded the maximum amount which
is not chargeable to income-tax,
shall, on or before the due date, furnish a return of its
income or the income of such other person during the
previous year, in the prescribed form and verified in the
prescribed manner and setting forth such other particulars
as may be prescribed:”
5. In the above background and after examining the available
information, I have reason to believe that income of
Rs.53,56,05,653/- as mentioned above during the FY 2016-17
(relevant to AY 2017-18) has escaped assessment within the
meaning given in Section 147 of the Income-tax Act. Therefore, I
am of the belief that it is a fit case for the issuance of notice u/s 148
of the Act and initiation of proceedings u/s 147 of the Act. I
propose to issue notice u/s 148 of the Act for AY 2017-18 and to
assess or reassess the above mentioned income and also any other
income chargeable to tax which has escaped assessment and which
comes to my notice subsequently in the course of ‘proceedings
under section 147ofthe Act.
It would be worthwhile to submit here that in the case of Rajesh
Jhaveri Stock Brokers Pvt Ltd ACIT(2007) 291 ITR 500/161
Taxman 316 (SC), Hon’ble Supreme Court has held that:
“All that is required for the Revenue to assume valid
jurisdiction u/s 148 is the existence of cogent material that
would lead a person of normal prudence, acting
reasonably, to an honest belief as to the escapement of
income from assessment.”
W.P.(C) 3409/2023 Page 10 of 13
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It is also pertinent to mention that on similar lines, in the case of
CIT v. Nova Promoters & Finlease (P) Ltd (ITA NO. 342 of 2011),
the Hon’ble Delhi High Court, which is the jurisdictional High
Court, has held as below:
“We are aware of the legal position that at the stage of
issuing the notice under Section 148, the merits of the matter
are not relevant and the Assessing Officer at that stage is
required to form only a prima facie belief or opinion that
income chargeable to tax at escaped assessment.”
I am satisfied that the eligibility conditions for initiation of
proceedings u/s 147 as laid down by the Act and relevant case laws
are adequately fulfilled in the present case.
6. Approval u/s 151(2) of the Income-tax Act, 1961 is requested to
issue a notice u/s 148 of the Act, in order to initiate proceedings u/s
147 of the Act for AY 2017-18.”
11. As is manifest from the reasons which were assigned, the
solitary basis for invoking Section 148 was the purchase of
immovable properties and the payments made in connection therewith
by the petitioner. The AO, it becomes pertinent to note, has chosen to
record that the petitioner had not filed a Return of Income and,
therefore, “it appears that the assessee is carrying on some activity
which has resulted in generation of income, but the income has
escaped assessment as no ITR had been filed by the assessee”. It was
on this solitary basis that it proceeded to hold that it had reason to
believe that income amounting to INR 53,56,05,653/- had escaped
assessment and thus it being a fit case for issuance of notice under
Section 148.
12. In our considered opinion, nothing could have been described as
being even more gloriously vague than the AO alleging that the
petitioner was carrying on “some activity” and which had “resulted in
generation of income”. The reasons so recorded do not even allude to
the provisions of Sections 5 or 9 of the Act and which may have been
demonstrative of the AO having come to a prima facie conclusion that
W.P.(C) 3409/2023 Page 11 of 13
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income had arisen or accrued in India.
13. We note that even in these proceedings, there has been an abject
failure on the part of the respondents to establish that the primordial
conditions for invoking the provisions of the Act had been met. The
mere investment made by the petitioner in the course of its desire to
acquire immovable properties within the country could not have
possibly been construed as income having been generated in India. An
investment, in any case, as Angelantoni clearly holds, is not income
which could be said to have escaped assessment.
14. We also find ourselves at a loss to appreciate how any additions
could have been made with reference to Sections 68, 69 or 69A of the
Act. Those set of provisions would have been attracted provided the
petitioner could have been acknowledged to be an assessee subject to
the rigours of the Act and required to make disclosures to Indian
Income Tax authorities. In any event, and once it is accepted that the
investment itself was not based on any income or revenue which had
arisen or accrued in India, we find ourselves unable to sustain the
orders impugned.
15. As was rightly argued by Mr. Gulati, the various provisions of
the Act which have been invoked for the purposes of making additions
are not liable to be read as expanding the scope of income chargeable
to tax and which is governed by Sections 5 and 9. Therefore, and
unless it were established that income had arisen or accrued or could
be said to fall within the deeming provisions comprised in Section 9,
the investment as made by the writ petitioner could not have been
subjected to tax.
16. We, accordingly, and for all the aforesaid reasons, allow the
W.P.(C) 3409/2023 Page 12 of 13
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present writ petition and quash the impugned order of assessment
dated 27 January 2023. The consequential demand notice dated 27
January 2023, and the penalty notice dated 31 January 2023 are also
set aside.
YASHWANT VARMA, J.
HARISH VAIDYANATHAN SHANKAR, J.
MARCH 10, 2025/kk
W.P.(C) 3409/2023 Page 13 of 13
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