TMI Blog2013 (7) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... for revision of an application filed under Section 245-C(1) and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said section in the prescribed form. All the conclusions made by the Settlement Commission up till now are only prima facie conclusions and do not foreclose the issues raised by the Revenue - According to Section 245K(2) which stipulates that where a person has made an application under Section 245C on or after the first day of June, 2007, and if such application has been allowed to be proceeded with under Section 245D(1), such person shall not subsequently be entitled to make an application under Section 245C - This is not the stage at which this Court ought to interfere with the impugned orders and the proceedings pending before the Settlement Commission - Following the decision of Commissioner of Income Tax v. K. Jayaprakash Narayanan [2009 (2) TMI 740 - SUPREME COURT OF INDIA], Commissioner of Central Excise, Vishakapatnam v. True Woods Private Ltd. [2005 (11) TMI 12 - HIGH COURT OF DELHI] and Ajmera Housing Corporation v. Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance was placed by the learned counsel appearing for the petitioner on the Supreme Court decision in the case of Ajmera Housing Corporation v. Commissioner of Income Tax: 326 ITR 642 (SC) to contend that where there was an established case of absence of full and true disclosure on the part of the applicant, the settlement application ought to be rejected at the threshold by the Settlement Commission. 3. In this backdrop, the learned counsel for the petitioner sought to argue on the merits of the matter and to establish that there was in fact substance in his contention that the respondents 2 to 5 had not made a full and true disclosure and that they had also not indicated the manner in which the undisclosed income had been derived. At the threshold itself, the learned counsel appearing on behalf of the respondents 2 to 5 took serious objection to the maintainability of the present petition. It was contended on behalf of the respondents 2 to 5 that the writ petition challenging the order dated 24.01.2013 passed under Section 245D(2C) of the said Act as also the earlier orders dated 30.11.2012 and 28.12.2012 passed under Section 245D(1) of the said Act was not maintainable inasmuch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no occasion, according to the learned counsel for the respondents 2 to 5, to interfere with the proceedings pending before the Settlement Commission. 4. Before we examine the submissions made by the learned counsel for the parties, it would be appropriate to set out some of the facts. Respondents 2, 3 and 4 had filed settlement applications under Section 245C(1) of the said Act in respect of the Assessment Years 2006-07 to 2012-13 on 16.11.2012. The applications filed by respondents 3 and 4 who are the parents of respondent 2 were rejected by the Settlement Commission by an order dated 23.11.2012 on the ground that the applicants had not paid the full amount of the additional tax and interest which was payable on or before the filing of the applications. It was therefore held by the Settlement Commission that the said applications of respondents 3 and 4 could not be allowed to be proceeded with and accordingly the applications were rejected. On the very same day, i.e. on 23.11.2012, the respondents 3 and 4 submitted fresh applications under Section 245C(1) after allegedly paying the amount of additional tax and interest that was payable prior to the filing of the settlement a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dverse material on record to suggest otherwise. The Settlement Commission noted and observed that the issues raised by the Commissioner of Income-tax in his report dated 08.01.2013 would be open for the Bench during the course of proceedings under Section 245D(4). By virtue of the impugned order dated 24.01.2013, the Settlement Commission also directed that the confidential part of the application should be forwarded to the Commissioner of Income-tax who would have an opportunity to examine the same during the course of proceedings under Section 245D(4) of the said Act. The Settlement Commission reiterated that:- The decision to hold these SAs not invalid is without prejudice to initiation of penalty and launching of prosecution proceedings, if required, on facts available on the records at the relevant time in subsequent proceedings by the Commission. It was further clarified that the settlement applications were held to be not invalid and were allowed to be proceeded with inasmuch as the Settlement Commission was of the view that the applicants had prima facie fulfilled the conditions prescribed under Section 245C(1) and 245D(2C) of the said Act. 7. We shall now brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed within the specified period, the Settlement Commission may, on the basis of the report and within a period of 15 days of receipt of the report, by an order in writing, declare the application in question as invalid and in such eventuality, the Settlement Commission is enjoined to send a copy of such order to the applicant and the Commissioner. The first proviso to Section 245D(2C) ensures that an application shall not be declared invalid by the Settlement Commission unless an opportunity has been given to the applicant of being heard. The second proviso thereto stipulates that where the Commissioner has not furnished the report within the specified period, the Settlement Commission is enjoined to proceed further in the matter without the report of the Commissioner. 10. Under Section 245D(3), the Settlement Commission, inter alia, in respect of an application which has not been declared invalid under Section 245D(2C) of the said Act may call for the records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of settlement is passed by the Settlement Commission. The first stage is under Section 245D(1). This is followed by the next step under Section 245D(2C) and finally by the order passed under Section 245D(4). In the present case, the final order under Section 245D(4) is yet to be passed. The orders under Section 245D(1) and 245D(2C) are not final orders and they are subject to the final orders that may be passed under Section 245D(4). It is, therefore, clear that the issue of full and true disclosure on the part of the applicants and the manner in which the undisclosed income was derived is still open for discussion and debate and the Settlement Commission would have to give its final decision on these aspects before an order of settlement is passed under Section 245D(4) of the said Act. Therefore, on a plain reading of the provisions, it is apparent that the submission made by the learned counsel for the respondents 2 to 5 merits acceptance insofar as it was contended by him that the entire issue remains open and at any stage of the proceedings till the order under Section 245D(4) is passed by the Settlement Commission, the issue with regard to full and true disclosure and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 245D(1) or under Section 245D(2C), the Settlement Commission would have exclusive jurisdiction and the ongoing investigation, which the income tax authorities were conducting insofar as respondents 2 to 5 were concerned, would be stultified. We find that this argument is not available to the Department inasmuch as in the present case, it is not the passing of the order under Section 245D(1) or under Section 245D(2C) which would enable the Settlement Commission to have exclusive jurisdiction in relation to the case but, because of the proviso to Section 245F(2), it would be the date on which the application is made under Section 245C which would trigger the Settlement Commission s exclusive jurisdiction insofar as the case of the applicant is concerned. 15. For the sake of completeness, it would also be appropriate for us to refer to the second proviso to Section 245F(2) of the said Act which, inter alia, makes it clear that where an application which has been made on or after the first day of June, 2007 is rejected under Section 245D(1) or is declared invalid under Section 245D(2C), the Settlement Commission, inspite of such an application, would have exclusive jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom interfering with the order passed by the Settlement Commission inasmuch as it was only an order admitting the application of the assessee under Section 245D. The Supreme Court made it clear that even on the point of maintainability of the application, it would be open to the Department to raise the contention before the Settlement Commission which would be entitled to examine that question at the final hearing of the matter. From this, it is abundantly clear that the point of maintainability of an application under Section 245C(1) does not get foreclosed by virtue of the Settlement Commission passing an order under Section 245D(1) or Section 245D(2C) of the said Act and that such an issue could be examined by the Settlement Commission at the final hearing of the matter, that is, at the stage of passing an order under Section 245D(4) of the said Act. 18. The next decision on which strong reliance had been placed by the learned counsel for the respondents 2 to 5 was that of a Division Bench of this Court in the case of True Woods Pvt. Ltd. (supra). Though that was a case pertaining to the Customs and Central Excise Settlement Commission and was one under the Central Excise Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lications filed before it. The Revenue shall be free to urge that the applicants are not entitled to any relief as the requirement of a full and true disclosure stipulated under Section 32E remains unsatisfied. 20. Then, after referring to the Supreme Court decision in the case of Commissioner of Income-tax, Jalpaiguri v. Om Prakash Mittal, 2005 (184) ELT 3 (SC), the Division Bench, in True Woods Pvt. Ltd. (supra), observed as under:- 7. The above passage, argued the learned counsel for the petitioner, makes it incumbent upon the Settlement Commission to record a specific finding to the effect that the applicant has made a full and true disclosure before it can admit the application or take any further steps on the basis thereof. It was contended that the foundation for settlement before the Commission is an application made by the assessee which must contain a full and true disclosure of the relevant particulars required under the provisions concerned. In the absence of any such finding, argued the learned counsel, the assumption of jurisdiction by the Commission would be wholly uncalled for. 21. The argument referred to in the above extract was rejected by the Division B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench was of the view that while the foundation for settlement was an application from the assessee in which the assessee is required to make a full and true disclosure, it was equally true that such requirement need not be examined and authoritatively determined at the threshold of any proceeding initiated before the Commission. Importantly, the Division Bench observed that there may be cases where it is possible for the Commission to record a finding that the disclosure made in the application is full and true. At the same time, there could also be situations in which the Commission may not be able to, at the stage of admission of the application, record a finding with any amount of certainty. It is in such a situation that it would be permissible for the Commission to keep the question open to be examined at a later stage or at the stage of disposal of the application. As in the case of True Woods Pvt. Ltd. (supra), this is exactly what has happened in the present case. The Settlement Commission has noted the rival contentions of the Revenue and the applicants with regard to the issues of full and true disclosure and the manner of deriving the undisclosed income and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) on 17.11.1994, allowing the settlement application filed on behalf of the assessee to be proceeded with. That order was not challenged by the Revenue. The Settlement Commission proceeded with the said settlement application and passed a final order under Section 245D(4) of the said Act on 29.01.1999. That settlement order was challenged by the Revenue before the Bombay High Court which set aside the same on, inter alia, the ground that no finding had been returned by the Settlement Commission as to whether there was a full and true disclosure of income on the part of the assessee/applicant. The Bombay High Court also held that the order dated 17.11.1994 passed under Section 245D(1) of the said Act was void and remitted the case to the Settlement Commission for a decision afresh and kept all the questions open. The applicant/assessee, being aggrieved by the said decision of the Bombay High Court, went up in appeal before the Supreme Court which, by an order dated 11.07.2006, set aside the Bombay High Court order and remitted the matter to the High Court for a fresh decision. In the second round, the Bombay High Court again set aside the Income Tax Settlement Commission s order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court that it would not be proper to set aside the proceedings before the Settlement Commission even though it was convinced that the assessee had not made full and true disclosure of their income while making an application under Section 245C of the said Act. 27. In Ajmera Housing (supra), the Supreme Court considered the provisions of the said Act with regard to settlement. In the context of Section 245C of the said Act, the Supreme Court observed as under:- 27. It is clear that disclosure of full and true particulars of undisclosed income and the manner in which such income had been derived are the prerequisites for a valid application under Section 245- C(1) of the Act. Additionally, the amount of income tax payable on such undisclosed income is to be computed and mentioned in the application. It needs little emphasis that Section 245-C(1) of the Act mandates full and true disclosure of the particulars of undisclosed income and the manner in which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this aspect, it will not have the jurisdiction to pass any order on the matter covered by the application. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confined to the matters covered by the application and it can extend only to such matters which are referred to in the report of the Commissioner under sub-section (1) or sub-section (3) of the said section. A full and true disclosure of income, which had not been previously disclosed by the assessee, being a precondition for a valid application under Section 245-C(1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against Item 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, Section 245-C(3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said section is instructive inasmuch as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly which he cannot otherwise achieve directly and in the process rendering the provision of sub-section (3) of Section 245 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have amounted to Rs.562.87 lakhs. This would be clear from the observations of the Supreme Court set out hereinbelow:- 45. Ultimately the High Court observed that: (i) since the Settlement Commission had not supplied the annexure filed on 19-9-1994, declaring additional income of Rs. 11.41 crores, due opportunity had not been given to the Revenue to place its stand properly; (ii) huge amount of unexplained expenses, unexplained loans and unexplained surplus, total of which was more than Rs. 14 crores, was not taken into consideration while passing the final order; and (iii) the Settlement Commission had imposed token penalty of Rs. 50 lakhs while on its own assessment leviable penalty would have been Rs. 562.87 lakhs. Further, if the amount which had not been taken into consideration while assessing the total undisclosed income was to be taken into account, the amount of leviable penalty would have been much more. In the light of these facts, the High Court formed the opinion that it would be in the interest of justice to set aside the final order passed by the Settlement Commission and to remand the case back to it for fresh adjudication on the assessee's application. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. He has referred to Section 245K(2) of the said Act which stipulates that where a person has made an application under Section 245C on or after the first day of June, 2007, and if such application has been allowed to be proceeded with under Section 245D(1), such person shall not subsequently be entitled to make an application under Section 245C. It was contended by the learned counsel for the respondents 2 to 5 that this bar from making another application under Section 245C would only apply if the earlier application had been allowed to be proceeded with under Section 245D(1). But, in the present case, the earlier applications filed by respondents 3 and 4 had not been allowed to be proceeded with under Section 245D(1) and had been rejected at the threshold for want of payment of the full amount of the additional tax and interest due. Prima facie, we are in agreement with the submission made by the learned counsel for the respondents. However, since we are not inclined to interfere with the impugned orders, we feel that this issue can also be left open to be decided by the Settlement Commission at the time of further proceedings till the order under Section 245D(4) is passed. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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