9911796707
TMI Blog2013 (6) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... partment is that during the course of the search action, documents and papers relating to bogus purchases were seized and a systematic pattern of siphoning of money was found by inflating the purchases made by the assessee. For this purpose, it is alleged, a separate software module was developed within the software employed by the assessee by which goods inward notes and corresponding bill passing purchase vouchers were generated in respect of the items of purchase which were never issued for the business of the assessee. The case of the department is that cheques were issued on the basis of these goods inward notes and purchase vouchers to certain parties though there was no actual receipt of material in the stores. On this basis it is alleged that the assessee booked bogus purchases in the amount of Rs.97.51 crores during financial years 2005-2006 to 2009-2010. In the post search proceedings, the department initiated investigations in respect of the purchases made by the assessee from eighteen different parties which are alleged to have supplied material to the assessee. By a letter dated 21 January 2011 the assessee in order to "buy peace" with the Revenue declared on an ad-hoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her there was a true and full disclosure was open for further examination in proceedings under Section 245D(4) and if it was revealed that the applicant had deliberately, fraudulently or in a like manner concealed facts or had not disclosed its full and true income, consequences shall follow. The Commission then held that unless it is established by a competent authority that the alleged purchases are all bogus, the application at this stage cannot be held to be invalid although the department may have in its possession certain evidence indicating the fact that the income has not been truly and fully disclosed or that the quantum of the income disclosed in the application in comparison to the claim of the department is meager. The Commission has come to the conclusion that the application is not invalid and has allowed it to proceed further. 7. Counsel for the Revenue submits that Section 245C(1), prescribes three mandatory and jurisdictional requirements, these being - (i) That there must be a full and true disclosure of income which has not been disclosed before the assessing officer; (ii) That the disclosure is of the manner in which the income has been derived; and (iii) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides as follows :- "245C. (1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the assessing officer; the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided." Sub-section 1 of Section 245C mandates that an application to the Commission to have a case settled must contain : (i) a full disclosure of the income which has not been disclosed before the assessing officer; (ii) the manner in which such income has been derived; and (iii) the additional amount of income tax payable on such income, besides such other particulars as may be prescribed. The application has to be disposed of by the Commission in the manner which is provided thereafter. The course of the proceedings which the Commission must follow, is hence provided for in the succeeding provisions. The Settlement Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the report of the Commissioner in pursuance of a direction under sub-section 2B of Section 245D, the Commission is empowered to reject an application as invalid after giving an opportunity of being heard to the applicant. Where an application has not been declared to be invalid under sub-section 2C, sub-Section 3 of Section 245D empowers the Commission to call for the records from the Commissioner. After examination of the records, if the Commission is of the opinion that any further inquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made a further inquiry or investigation and to furnish a report on the matters covered by the application and any other matter relating to the case. Such a report has to be furnished by the Commissioner within ninety days of the receipt of a communication from the Commission. Next, sub-sections 4 and 6 of Section 245D are of relevance and they provide as follows : "(4) After examination of the records and the report of the Commissioner, if any, received under - (i) sub-section (2B) or sub-section (3), or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... breast of the income which has not been disclosed before the assessing officer; the manner in which it was derived and the additional amount of income tax payable on the income. Before conferring upon an applicant a locus to apply for a settlement of a case. Parliament has mandated a full and true disclosure. An applicant cannot make a partial disclosure of his undisclosed income by taking a chance that the rest will escape scrutiny or, if it does not escape scrutiny of then making another disclosure. The forum of the Settlement Commission cannot be used to employ such strategies. The requirements contained in sub-section 1 of Section 245C must be fulfilled so that the jurisdiction of the Commission can be invoked. Unless the Applicant fulfills the jurisdictional requirements, the application would not be maintainable. In fact, the proviso to Section 245C also requires the payment of tax and interest which would have been paid under the Act had the income disclosed in the application been declared in the return of the income before the assessing officer. This payment has to be effected before the date of making the application and proof of such payment must be attached with the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of proceedings under the Act. Section 245K(2) stipulates that once an application has been allowed to be proceeded with under sub-Section 1 of Section 245D, such a person shall not be subsequently entitled to make an application under Section 245C. These provisions are indicative of the importance which Parliament has ascribed to the conditions attached to proceedings for cases of settlement before the Commission. Once a case has been allowed to proceed before the Commission, the Commission has, until an order is passed under subsection 4 of Section 245D, exclusive jurisdiction to perform the functions of an income-tax authority and to exercise powers under the Act. Where an application has been rejected or declared as invalid under sub-sections 1 or 2C of Section 245D, the proceedings abate before the Commission upon which the consequence which has been envisaged in sub-sections 2 and 3 of Section 245HA would ensue. 16. The Supreme Court has held in Ajmera Housing Corporation and another Vs. Commissioner of Income Tax (2010)326-ITR-642 that disclosure of full and true particulars of undisclosed income and the manner in which such income had been derived are the prereq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which such income has been derived. On complying with those requirements the next step would be to follow the procedure under Section 245D. It is not as if the moment an application is made and there is compliance of the requirements of Section 245D that the Commission is bound to entertain the application and allow it. The Commission has then to consider whether the application is invalid under Section 245D(2C). The Commission must be satisfied from the report of the CIT and on hearing the applicant that the application is not invalid. The Settlement Commission can treat the application as invalid meaning thereby non est if the applicant has not made a true and full disclosure and further must disclose how the income has been derived. The expression "invalid" will have to be given a meaning of `non est', in other words as if not made on and from the inception. If on the material it arrives at a conclusion even prima facie that there was no true and full disclosure, it has then a right to declare the application as invalid. Read in this context, there is power conferred on the Commission based on the material before it, to form an opinion if the party has concealed facts and/or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain evidence indicating the fact that the income has not been truly and fully disclosed, or that the quantum of income disclosed in the application in comparison to the claim of the department is meager. The Commissioner had submitted his report under the provisions of sub section 2B of Section 245D. The Commission could not have declined to determine as to whether the application fulfilled the requirements or prerequisites of a valid application under Section 245C(1). We may clarify, however, that we are not for the purposes of this case inclined to hold that the Commission cannot at a later stage of the proceedings reject the application where facts come to its knowledge even subsequently that there is either a suppression of full and true material facts, a misstatement or failure on the part of the assessee to make a full and candid disclosure. The existence of such a power at a subsequent stage cannot obviate the discharge of a statutory duty to determine whether the jurisdictional requirements are fulfilled, once a report is received under sub section 2C of Section 245D. The Commission has to consider as to whether or not the application is invalid. 21. For these reasons we a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
