TMI Blog2014 (12) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the application made by the assessee u/s 245C of the Act stands abated - the Settlement Commission has expressly stated what is implied in law, inasmuch as, the abatement is by virtue of the operation of the provisions of sub-section (1) of section 245HA – 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 Commission passed the order u/s 245D(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs. Subsequently, by a letter dated 27.12.1996, the petitioner revised the undisclosed income by substituting a lesser income of ₹ 5 lakhs in place of the earlier declared income of ₹ 20 lakhs which was received by the Commission on 30th December, 1996. In the meanwhile, the Assessing Officer proceeded further with the block assessment and by an order dated 22.8.1997 made under section 158BC of the Act assessed the total income of the petitioner at ₹ 4,27,341/- and determined the tax payable at 60% thereof at ₹ 2,56,20,204/-. By way of abundant caution, the petitioner preferred an appeal to the Income Tax Appellate Tribunal being ITA No.170/Ahd/1997. Thereafter, by an order dated 11.9.1999, the Settlement Commission admitted the settlement application under section 245D(1) of the Act with a direction to the petitioner to pay the additional amount of tax payable on the income disclosed in the application within 35 days of receipt of the order and furnish proof of payment to the Secretary of the Additional Bench and the Assessing Officer assessing them, within 15 days of making the said payment. The Commission further directed that if the applicant/petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- and in view of the fact that the department had seized the cash of ₹ 8,42,500/-, the same stood fully paid in time. Even thereafter, there was no communication to the petitioner either from the Assessing Officer or from the office of the Settlement Commission regarding non-payment or short payment of tax payable under section 245D(2A) of the Act. Eventually, the petitioner received a notice of hearing under section 245D(2D) read with section 245HA(1)(ii) of the Act fixing the hearing on 16.9.2013, which came to be adjourned to 25.11.2013. 5. At the time of the hearing before the Settlement Commission, the Commissioner of Income Tax representing the Department pointed out that the petitioner had not paid the tax due as per the disclosure and had, thus, violated the provisions of section 245D(2D) of the Act and resultantly the proceedings before the Commission have abated. On behalf of the petitioner, it was pointed out to the Commission that the amount was fully paid as per the revised disclosure which was communicated to the Assessing Officer as well as the Commission. During the course of hearing, the petitioner expressed willingness to deposit the difference of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2D) of the Act, to submit 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 a bona fide impression that his request for adjusting the amount of tax payable under the order under section 245D(1) against the amount seized by the department had been accepted. That it was only after the notice came to be issued by the Commission in the year 2013, that the petitioner came to know that the Department had not adjusted the amount of tax payable under the said order against the amount seized by it. It was submitted that even at that stage, the petitioner had expressed his willingness before the Commission to deposit the amount of tax on the total undisclosed amount of ₹ 20,00,000/-. However, the Commission did not accept the offer of the petitioner and passed the impugned order under section 245HA of the Act. 6.1 The learned counsel submitted that at the relevant time, the position of law was that it was permissible for an assessee to file a revised declaration before the Commission and hence, the petitioner had f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 passed before the first day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time granted by the Settlement Commission, paid on or before 31st July, 2007. It was submitted that in the facts of the present case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Commission on 10.9.1999, the block assessment order under section 158BC of the Act had been passed by the Assessing Officer on 22.8.1997 computing the total undisclosed income for the block period at ₹ 4,27,00,341/- and the seized cash of ₹ 8.42,500/- was adjusted on 29.9.1997 against the demand raised. The petitioner, after the order under section 245D(1) of the Act came to be made on 10.9.1999, had not paid any other amount pursuant to his disclosure of ₹ 20 lakhs declared in the settlement application dated 22.10.1996. It was submitted that in view of the noncompliance of the order made under section 245D(1) of the Act, the Commission was justified in holding that the petitioner was required to pay the tax on or before 31.7.2007 so as not to be hit by the amendment made in the Finance Act, 2007. Under the circumstances, the Commission was wholly justified in holding that in view of the non-compliance with the provisions of section 245D(2D) of the Act, the proceedings before it would abate in view of the provisions of section 245HA(I)(II) of the Act. It was, accordingly, urged that the impugned order passed by the Settlement Commission being in consona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontentions noted hereinabove, two questions that arise for consideration are; firstly, as to whether the Commission was justified in holding that the proceedings before it abate in view of the non-deposit of the amount of additional tax together with interest as directed by it by the order under section 245D(D1) of the Act. If the answer to the first question is in the affirmative, the next question that would arise for consideration is as to whether the petitioner 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 Assessing Officer under section 158BC of the Act. 10. From the facts noted hereinabove, it clearly emerges that pursuant to the application dated 14.10.1996 made by the petitioner under section 245C of the Act, the Commission, by an order dated 11.10.1999, admitted the appeal of the petitioner and four others under section 245D(1) of the Act whereby the petitioner was directed in accordance with the provisions of sub-section (2A) of section 245D of the Act to pay the additional amount of income tax payable on the income disclosed in the application within a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(ii) of the Act. 11. Before adverting to the merits of the impugned order, it may be necessary to consider as to whether the petitioner can be said to have complied with the order made by the Commission under section 245D(1) of the Act. As noticed hereinabove, the petitioner, in the application under section 245C of the Act, had declared undisclosed income of ₹ 20 lakhs. However, subsequently, the petitioner filed a revised statement declaring the undisclosed amount at ₹ 5 lakhs instead of ₹ 20 lakhs. In this regard, it may be germane to refer to the decision of the Supreme Court in the case of Ajmera Housing Corporation Anr. v. Commissioner of Income Tax, (2010) 326 ITR 642 (SC) =, wherein the court has held that disclosure of full and true particulars of undisclosed income and the manner in which such income has been derived are the pre-requisites for a valid application under section 245C(1) of the Act. A full and true disclosure of income, which had not been previously disclosed by the assessee, being a pre-condition for a valid application under section 245C(1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, from the facts as emerging from the record, it is apparent that before the order under section 245D(1) of the Act came to be made by the Commission, the Assessing Officer had already passed the order under section 158BC of the Act and had adjusted the seized amount against the tax payable under the said order. Therefore, even otherwise, no amount remained with the Assessing Officer for adjusting the same against the additional tax payable by the petitioner pursuant to the order under section 245D(1) of the Act. In any eventuality, the petitioner has not complied with the order dated 10.9.1999 made by the Commission directing the petitioner to pay the additional amount of income tax payable on the income disclosed in the application within the time limit stated therein. 13. The Commission, in the impugned order, was of the considered opinion that the revised application dated 27.12.1996 which reduced the quantum of declaration from ₹ 20 lakhs to ₹ 5 lakhs is not a valid application permissible under law and that the first application filed on 22.10.1996 being the only valid application, had been referred to by the Commission in the order passed under section 245D( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady granted by the Settlement Commission, paid on or before the 31st day of July, 2007. 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 with. 15. At this juncture reference may be made to the provisions of section 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings 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 prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, 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 of the Act 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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