TMI Blog2014 (12) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... of the original application made by him under section 245C of the Act, whereby he had declared the undisclosed income at ₹ 5 lakhs – assessee has not duly complied with the order made by the Commission u/s 245D(1) of the Act till the Commission fixed the matter for hearing on 25.11.2013 and 3.3.2014 – thus, the order of the Settlement Commission is upheld – Decided against assessee. Entitlement for alternate relief - Whether the assessee is entitled to the alternate relief prayed for in the petition, namely, for restoration of the appeal filed by it before the Tribunal against the order made by the AO u/s 158BC – Held that:- At the relevant time when the application u/s 254C(1) of the Act came to be made by the assessee, the assessment proceedings u/s 158BC of the Act were pending before the AO – relying upon Commissioner of Income-Tax v. Damani Brothers [2002 (12) TMI 11 - SUPREME Court] wherein it has been held that the scheme of Chapter XIX-A shows that the filing of application by the assessee is a unilateral act and the department may not be aware of the same - the liability under order made by the AO u/s 158BC of the Act would exist even after the Settlement Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 158BC of the Act on 22.8.1997. By way of abundant caution, the petitioner filed an appeal against the said order before the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal ) being ITA No.169/Ahd/1997. Thereafter, the Settlement Commission passed an order dated 10.9.1999 whereby it permitted the petitioner to proceed with the application under section 245D(1) of the Act directed the petitioner to pay the additional amount of income tax payable on the income disclosed in the application within a period of 35 days from the receipt of the said order. 3. Later on, when the appeal came up for hearing before the Tribunal on 10.1.2001, in view of the fact that the Settlement Commission had allowed the application to be proceeded with, the petitioner requested the Tribunal to adjourn the appeal. However, on 16.1.2001, bowing to the opinion of the Tribunal, the Chartered Accountant of the petitioner filed a letter before the Tribunal stating that in view of the admission of the matter of the petitioner by the Commission, the petitioner does not want to pursue the appeal before the Tribunal. Accordingly, the appeal came to be allowed to be withdrawn by an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the cash seized towards the block assessment demand on 29.9.1997, no intimation had been given by the Assessing Officer and hence, the same should be considered as an adjustment against the demand created by the order under section 245D(1) of the Act. It was also submitted that in case this proposition of cash adjustment against the order under section 245D(1) is not accepted, the petitioner is still ready to deposit the tax amount to cover for the deficiency. 5. By the impugned order dated 2.12.2013 made under section 245D(2D) read with section 245HA(1)(ii), the Commission held that the Assessing Officer had already adjusted the seized cash on 29.9.1997 and in the absence of any further payment, consequent to the order under section 245D(1), there has been a distinct failure on the part of the petitioner to pay the taxes and interest as provided in the amendment made by the Finance Act, 2007. That the petitioner ought to have taken due care to pay the required taxes and interest on or before 31.7.2007 so as not to be hit by the amendment made by the Finance Act, 2007. The Commission further observed that the submission of the petitioner that he is still ready to make the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax within the time specified in sub-section (2A) of section 245D of the Act, the amount of income tax remaining unpaid together with interest shall be recovered by the Assessing Officer in accordance with section 245D (2D) of the Act. It was submitted that despite the fact that the order of the Settlement Commission was made on 11th September, 1999, no steps were taken by the Assessing Officer under section 245D(2D) of the Act and as a result, the petitioner was under an impression that the payment of ₹ 4,20,000/- had been paid because the larger amount of ₹ 4,90,000/- was lying with the Department. That it was only after the notice came to be issued by the Settlement Commission in the year 2013, that the petitioner came to know that the Department had not adjusted the amount of tax payable under the order under section 245D(1) of the Act against the amount seized by it. It was submitted that even at that stage, the petitioner had expressed its willingness before the Commission to deposit the amount of tax on the total undisclosed amount of ₹ 7,00,000/-. However, the Commission did not accept the offer of the petitioner and passed the impugned order under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 245C of the Act, it was submitted that the same provides for the assessee making an application in the prescribed form containing a full and true disclosure of the 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. It was pointed out that under sub-section (1) of section 245D of the act, the Commission may either by an order in writing reject the application or allow the application to be proceeded with. Under sub-section (2D) of section 245D of the Act, where an application was made under sub-section (1) of section 245C before the first day of June, 2007 and an order under the provisions of sub-section (1) of that section, as they stood immediately before the amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the first day of June, 2007, but an order under the provisions of sub-section (4), as they stood immediately before the amendment by the Finance Act, 2007, was not pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 245C(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 245C of the Act otiose and meaningless. It was submitted that the very fact that there was an upward revision in the amount of undisclosed income makes it evident that the petitioner had not disclosed the correct amount of undisclosed income in the application made under section 245C(1) of the Act. In any case, the petitioner had not deposited any amount pursuant to the order made by the Commission under section 245D(1) of the Act and hence, the Commission was justified in disposing of the application as having abated. 7.2 It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as to who are the income-tax authorities has been provided under the said section and that the class of income-tax authorities for the purposes of the Act does not include the Tribunal and, hence, the question of restoring the appeal to the Tribunal would not arise in the facts of the present case. It was submitted that the petitioner while making the application before the Settlement Commission has taken a calculated risk and, hence, cannot seek the benefit in equity which is contrary to the statutory provisions. Referring to the provisions of section 245M which came to be subsequently omitted, it was submitted that there being no provision of restoring the appeal to the Tribunal, the alternate relief prayed for cannot be granted. Reference was made to the decision of the Supreme Court in the case of Commissioner of Income Tax, (Central), Calcutta v. B.N. Bhattachargee Another, (1979) 118 ITR 461, to point out that it was only in the light of the provisions of section 245M, that an appeal could be restored to the Tribunal. However, in view of the deletion of the said provision from the statute book, it is no longer permissible for this court to restore the appeal to the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission that in view of the fact that the Department had already with it the cash of ₹ 4,90,000/- seized in the search, the tax of ₹ 4,20,000/- being 60% of ₹ 7 lakhs disclosed, it takes it that the same stands already paid and covered by the above seized cash of ₹ 4,90,000/-. It appears that pursuant to the above statement made by the petitioner, there was no response from the Commission or from the income-tax authorities nor were any steps taken to recover the amount that the petitioner was liable to pay pursuant to the order made by the Settlement Commission in accordance with the provisions of section 245D(2D) of the Act as it stood prior to its amendment with effect from 1.6.2007. It is the case of the petitioner that it was under a bona fide belief that the statement made by it before the Commission for adjustment of the amount of additional tax payable under the order under section 245D(1) from the cash seized during the course of the search proceedings had been accepted. It was only at the stage when the application under section 245C of the Act came up for hearing that the petitioner came to know that the statement made by it had not been accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revision of an application filed under section 245C(1) of the Act 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 that section in the prescribed form. The court was accordingly of the view that revision of the annexure to the application is tantamount to revision of the application, not contemplated in the scheme. 12. In the light of the law laid down by the Supreme Court in the above referred decision, it is apparent that it was not permissible for the petitioner to revise the application made by it under section 245C(1) of the Act. Under the circumstances, it was incumbent upon the petitioner to pay the additional tax in terms of the original application made by him under section 245C of the Act, whereby he had declared the undisclosed income at ₹ 5 lakhs. However, the petitioner instead of paying the amount of taxes and interest in terms of the order under section 245D(1) of the Act, wrote a letter to the Assessing Officer and the Commission that it takes it that the amount of cash seized during the search of ₹ 4,90,000/- has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007. 14. In the light of the provisions of sub-section (2D) of section 245D of the Act, it is not permissible for the Settlement Commission to proceed with an application made under section 245C(1) of the Act on which an order under the provisions of sub-section (1) thereof had been passed before 1.6.2007, unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before 21.7.2007. Thus, in case where an order under sub-section (1) of section 245C of the Act has been made on an application made under that sub-section before 1.6.2007, the statute bars payment of the additional tax with interest thereon after 31.7.2007. The last date for payment of the additional tax with interest thereon, therefore, was 31.7.2007. The petitioner, having failed to pay the same before the time limit prescribed by the statute, the Settlement Commission had no power to allow the application to be proceeded wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him in the course of the proceedings before him. (4) For the purposes of the time-limit under sections 149, 153, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or 244 or, as the case may be, Section 244A, for making the assessment or reassessment under sub-section (2), the period commencing on and from the date of the application to the Settlement Commission under section 245C and ending with specified date referred to in sub-section (1) shall be excluded; and where the assessee is a firm, for the purposes of the time-limit for cancellation of registration of the firm under sub-section (1) of Section 186, the period aforesaid shall, likewise, be excluded. On a plain reading of the clause (ii) of sub-section (1) of section 245HA of the Act, it is manifest that in case where an application under section 245C has not been allowed to be further proceeded with under sub-section (2D) of section 245D, the proceedings before the Settlement Commission shall abate on the specified date. Specified date in respect of an application referred to in clause (ii) is 31st July, 2007. Clearly, therefore, by virtue of operation of law, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the proceedings before the Commission stand abated and, hence, the petitioner has prayed for the alternative relief of restoration of the appeal before the Tribunal. 19. Sub-section (2) of section 245HA of the Act provides that where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of the Act as if no application under section 245C had been made. In the present case, at the time when the petitioner made the application under section 245C of the Act, the assessment proceedings were pending before the Assessing Officer. However, before the Settlement Commission passed the order under section 245D(1) of the Act, the Assessing Officer had already made the order under section 158BC of the Act. 20. At this stage, reference may be made to the decision of the Supreme Court in the case of Commissioner of Income-Tax v. Damani Brothers, (2003) 259 ITR 475 wherein the court was considering the question as to whether the assessment order passed by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal, which proceedings came to be withdrawn in view of the fact that the Commission had allowed the application made by the petitioner under section 245C of the Act to be proceeded with, if the appeal is not restored to the file of the Tribunal, the same would cause immense prejudice to the petitioner, inasmuch as, the assessment order made under section 158BC of the Act would attain finality and would be binding upon the petitioner. Besides, no prejudice would be caused to the revenue, except that the appeal would be decided on merits. Under the circumstances, this court is of the view that in the light of abatement of the proceedings before the Settlement Commission by operation of the provisions of section 245HA of the Act, the interest of justice requires that the appeal preferred by the petitioner before the Tribunal be restored. The petitioner is, therefore, entitled to the alternate relief prayed for in the petition, namely, for restitution of its appeal before the Tribunal. The contention that the scheme of section 245HA does not admit of such a course of action deserves to be stated to be rejected, inasmuch as, the restoration of the appeal is not under the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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