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2015 (7) TMI 921 - BOMBAY HIGH COURT

2015 (7) TMI 921 - BOMBAY HIGH COURT - [2015] 376 ITR 360 (Bom) - Application for settlement of pending proceedings rejected - application for settlement as filed is not valid for failure to pay taxes on the additional declared income as contended by the Commissioner of Income Tax(Central) (Commissioner) resulted in the pending proceeding of the Petitioner for Assessment Years 2007-08 to 20014-15 being restored to the Assessing officer - whether the dismissal of the Petitioner's application for .....

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tire refund to satisfy a demand on account of interest of an equivalent amount of ₹ 8.85crores. These facts when brought to notice of the Commission at the hearing should have led the Commission to make some enquiry into it and not accept the Commissioner's report as unimpeachable. This is particularly so as a rejection at a stage when the petitioner has made full and true disclosure in the spirit of settlement, without proper examination does cause prejudice to the petitioner. A rejection .....

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lso raise questions about its authenticity. Thus an unjustified rejection without proper enquiry into the stand of the Revenue would cause prejudice to the assessee as all the information made available during the settlement proceedings would be capable of use by the Assessing officer to the prejudice of the applicant in regular assessment proceedings. Therefore non enquiry into issues which were suspicious, by the Commission, before rejecting the application for settlement evidences a flaw in t .....

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mission before deciding the application at the stage of Section 245(2C) of the Act.

The Commissioner in its report dated 5th May, 2015 before the Commission, had categorically stated that there is no refund due to the Petitioner for Assessment Year 2012-13. However, the Assessing Officer on receipt of the Petitioner's application for rectification of Intimation, has by a letter dated 22nd June, 2015 informed the Petitioner that charging of interest under Section 234B, prima facie appe .....

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(L) No. 1800 of 2015 - Dated:- 9-7-2015 - M. S. Sanklecha And N. M. Jamdar,JJ. For the Appellant : Mr J D Mistry, Sr. Adv. with Mr Mandar Vaidya For the Respondents : Mr Tejveer Singh JUDGMENT (Per: Sanklecha, J) Rule. Rule made returnable forthwith. Respondent waives service. 2. By consent the Petition taken up for final disposal. 3. This Petition under Article 226 of the Constitution of India challenges the order dated 12th May, 2015 passed under Section 245D (2C) of the Income Tax Act, 1961 .....

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ng restored to the Assessing officer. 4. On 23rd March, 2015, the Petitioner filed an application before the Commission under Section 245C(1) of the Act, seeking to settle its pending assessments for the Assessment Years 2007-08 to 2014-15. In its application, the Petitioner disclosed an additional income, aggregating to ₹ 13.64Crores for the Assessment Years 2007-08 to 2014-15 which was not disclosed before the Assessing Officer. The additional income tax payable along with interest there .....

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held that the application for settlement is in respect of pending assessments satisfying all technical requirements, including the disclosure of additional income being above the threshold requirements for settlement, payment of additional taxes on the additional income and interest thereon. Thus admitting the Petitioner's application for Settlement. 6. Thereafter, the Commissioner, namely the Respondent No.2, under Section 245D(2B) of the Act filed its report dated 5th.May 2015 before the C .....

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ainability of the application before the Commission. 7. It was only later i.e. on 7th May, 2015, the Petitioner was served with an intimation dated 2nd January, 2014 under Section 143(1) of the Act, for the Assessment Year 2012-13 by the Assessing Officer. The Intimation, inter alia, reflected that the Petitioner was entitled to a refund of ₹ 8.85Crores for Assessment Year 2012-13. However, the same was set off against interest payable by the Petitioner of the identical amount of ₹ 8 .....

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e to the Petitioner to meet the demand of interest. In the meantime on 11May 2015, the Petitioner filed its reply to the report of the Commissioner. In its reply, the Petitioner pointed out that for the Assessment Year 2012-13, it was entitled to a refund and the Intimation under Section 143(1) of the Act contained error apparent from the record inasmuch as, after holding that the Petitioner is entitled to a refund of ₹ 8.85Crores, sets off the same against the interest demanded under Sect .....

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e entitled to claim adjustment of the refund due against additional tax payable on the further disclosure of income tax. In the result, the Petitioner's application for settlement was dismissed as invalid. 10. Consequent to the above, on 22nd June, 2015, the Petitioner received a communication from the Assessing Officer, disposing off the Petitioner's application for rectification dated 18th June, 2015 interalia holding as under: " …. …. …. …. As far as y .....

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mend the Petition and to annex the communication dated 22nd June, 2015 of the Assessing officer to the Petition. No reply to the Petition was filed by the Commissioner or the Assessing officer. 12. Mr. Mistry, learned Senior Counsel appearing for the Petitioner submits as under: (a) Once the application for settlement has been admitted under Section 245D(1) of the Act, it is not open to the Commission to declare the application invalid/ defective on account of nonpayment of tax on the additional .....

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43(1) of the Act in the body of the report to suggest that no refund is due but does not annex to the report a copy of the Intimation but only a computer print out from its office. Moreover, the Intimation reflects that the Petitioner was entitled to a refund of ₹ 8.85Crores and the same stood adjusted by equal amount of interest charged under Section 234B of the Act. This intimation itself contains an error and calls for rectification; and (c) On 5th May 2015 the date when the Commissione .....

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2015 of the Assessing officer, holding that, prima facie, the Petitioner's claim for refund for Assessment Year 2012-13 is correct. Thus the entire exercise of the Commission in not applying its mind to the report of the Commissioner makes the decision making process vulnerable. In the above circumstances it is submitted that the order of the Commission dated 12 May 2015 be set aside and the application be restored to the Commission for fresh disposal. 13. As against the above, Mr. Tejveer S .....

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be paid by the Petitioner while approaching the Commission for settlement; and (b) Restoring the application to the Commission for fresh disposal would run contrary to the statutory provision viz. Section 245K (2) of the Act. In terms of the above Section where an application for settlement has been allowed to be proceeded with under Section 245(D1) of the Act, then such a person is not entitled to make any further application under Section 245C of the Act. Thus, as the Application for Settlemen .....

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of its activities by disclosing the income not disclosed and paying the tax thereon, is the likely immunity from prosecution and penalty. The statute however expects an assessee who approaches the Commission for settlement to make a true and full disclosure of its undisclosed income and the manner in which such income has been earned and pay the taxes. However, such an application for settlement can only be entertained, subject to various preconditions being satisfied, such as pending proceeding .....

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the assessment of the person in respect of the assessment years it has been approached. However in case the application for settlement is rejected at any time for any reason, the proceedings (dispute) goes back to the Assessing officer for completion of Assessment in regular proceedings entitling the Assessing officer to utilize all the information disclosed by the assessee in the Settlement proceedings. Till such time the Commission is seized of the proceedings, the Assessing officer shall cea .....

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f the Act merely on the ground of the Commissioner's report dated 5 may 2015 was justified particularly when on the face of it the assertion of the Commissioner required some investigation. 16. The Petitioner made an application for settlement on 23 March 2015 for the Assessment year 2007-08 to 2014-15. The petitioner appears to have prima facie satisfied the condition precedent for a valid application for Settlement. This is evident from the order of the Commission dated 31st March, 2015 un .....

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the Revenue and/or the Commission are barred from contending that the conditions precedent to invoke the provisions for Settlement are not satisfied. The requirement of paying the taxes on the additional income disclosed is a jurisdictional requirement. Absent satisfaction of the same the Commission would have no jurisdiction to entertain the application for Settlement and this issue could be noticed at any point of time by the Commission either on its own or at the instance of one of the partie .....

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t been paid and therefore could not have been entertained. This the report stated was in view of the fact that no refund as claimed or any part thereof was due to the Petitioner from the Revenue. In the body of its report, the Commissioner placed reliance upon Intimation issued under Section 143 (1) of the Act to the Petitioner for Assessment Year 2012-13. However, what is annexed to the report is not intimation under Section 143(1) of the Act but a computer print out which shows a ledger balanc .....

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titioner that it is entitled to refund of ₹ 8.85crores has adjusted the entire refund to satisfy a demand on account of interest of an equivalent amount of ₹ 8.85crores. These facts when brought to notice of the Commission at the hearing should have led the Commission to make some enquiry into it and not accept the Commissioner's report as unimpeachable. This is particularly so as a rejection at a stage when the petitioner has made full and true disclosure in the spirit of settle .....

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ner after over one year of its purported issue and after the Commissioner's report also raise questions about its authenticity. Thus an unjustified rejection without proper enquiry into the stand of the Revenue would cause prejudice to the assessee as all the information made available during the settlement proceedings would be capable of use by the Assessing officer to the prejudice of the applicant in regular assessment proceedings. Therefore non enquiry into issues which were suspicious, .....

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ked into and prima facie your claim that the refunds will arise in A. Y. 2012-13 appears to be correct." Possibly if this enquiry was done by the Commission which at the relevant time was seized of the proceeding for Assessment year 2012-13, the proceedings before the Commission may have taken a different turn. 21. The Petition in substance questions the conduct of the Commissioner in filing a report indicating that the petitioner is not entitled to refund, even though according to Petition .....

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tioner before the Commission to seek a set off of the refund due to it against the additional tax payable for the purpose of settling pending assessments before the Commissioner. The payment has to be made into the treasury and not by set off/adjustments. This is contested by the Petitioner and it is submitted that there are numerous orders of the Commission itself allowing such adjustments of the tax payable out of refund due. We venture no opinion on the issue. This is for the reason that it i .....

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