TMI Blog2015 (7) TMI 1031X X X X Extracts X X X X X X X X Extracts X X X X ..... deeming fiction. Such deeming fiction for the purpose of calculating additional tax payable defines term "total income" in artificial manner. In the present case, legislature has created a deeming fiction by providing that the tax of the applicant would be calculated on the aggregate of the total income returned and the income disclosed in the application as if such aggregate were the total income. this device is created for a special purpose and has a localized effect. It comes into existence only for the purpose of calculating the tax to be deposited by an applicant for settlement of a case. In such a situation, the aggregate of the total income returned and the income disclosed would be considered as total income. Under the circumstances, the contention of the Counsel for the respondent No.1 that the term "total income" should be construed as defined under Section 5 of the Act for the purpose of calculating additional tax of an applicant for settlement of a case cannot be accepted. In the present case, formula which contains a special definition for a special purpose would, therefore, have its effect only for Section 245C. Being a special provision it would prevail over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6662640 246730 2008-09 05/31/12 5875730 12957790 7082060 2009-10 05/31/12 970460 76064720 75086809 2010-11 05/31/12 11598650 92862960 81264310 2011-12 05/29/12 202032280 2020322800 183759754 5. Subsequently on 10.03.2014, the respondent No.1- assessee filed an affidavit dated 07.03.2014 requesting to treat the returns filed under Section 153A as withdrawn and also to treat the returns filed under Section 139(1) as Returns filed in compliance to notices under Section 153A . 6. Thereafter, the respondent No.1 filed a settlement application under Section 245C(1) of the Act before the Settlement Commission for settlement of its cases on 28.03.2014 claiming to show full and true estimate of undisclosed income for the years as under:- Asstt. Years A.Y. 2006- 07 A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l tax and interest thereupon, and existence of pendency of proceedings are, all, fulfilled. The applicant has also paid the requisite fees of ₹ 500/- under Section 245C(2) and the receipt for the same is also enclosed with the application. Filing of this application has also been intimated to the AO on the same day of the filing of the application. 17.1 As far as non-payment of self assessment tax on the returned income u/s. 153A is concerned no specific provision exists in the Act. However, we find straight from the decision of the ITSC, Chennai Bench in the case of M/s. Radha Realty Ltd. on this issue. In our considered opinion, admission of application u/s. 245D(1) cannot be denied. 17.2 As regards the manner of earning of income is concerned, we find that the same has been adequately explained by the A.R. and the same has also been discussed in the settlement application. As to the claim of making the true and full disclosure, we are of the considered opinion that as of now, the disclosure made is true and full as we do not have any material to hold otherwise. 18. For the above mentioned reasons, the application is admitted and allowed to be proceeded with furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me since it is far below the estimated undisclosed income of ₹ 240,04,38,487/- determined on the basis of the seized documents and enquiries conducted by the department. As a matter of fact the undisclosed income of ₹ 1,58,00,000/- offered before the Settlement Commission u/s 245C is even far below the undisclosed income of ₹ 34,74,39,663/- surrendered u/s 132(4) and suo moto offered to tax in return of income filed u/s 153A. Thus the additional income of ₹ 1,58,00,000/- disclosed u/s 245C cannot be less than the undisclosed income suo moto offered to tax u/s 153A. Thus the meagre income of ₹ 1,58,00,000/- cannot be held to be full and true disclosure u/s 245C of the Act and therefore the settlement application deserves to be rejected by the Settlement Commission. Further I would like to state that the order passed by the Settlement Commission allowing the settlement application to be proceeded with u/s 245D(1) is erroneous since the assessee had not paid the taxes and interest on the additional income declared in return of income u/s 153A and as increased by the additional income offered before the Settlement Commission. Thus on the merits of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2C) had concluded that:- As far as true and full disclosure is concerned we are of the view that the department has already taxed the income in the hands of four SPVs companies and therefore income of ₹ 240 Crores which is being proposed as belonging to the applicant company cannot be taxed again. The applicant has disclosed before us the income of ₹ 1.58 Crores which is stated to have been earned by giving machineries and equipments on hire. In these circumstances it cannot be stated that applicant has not disclosed its true and full income. We have already held in our order passed on 10-04-2014 u/s 245D(1) that what is required by the applicant, in respect of payment of taxes and interest is such payment on the income disclosed before us. The applicant has done so. In view of the above we hold that the application does not suffer from any infirmity and therefore is held not to be invalid one. It is allowed to be proceed further. 13. The submission of the learned Senior Counsel for the petitioners is that the assessee was required to make payment of taxes and interest on the additional income declared before the Settlement Commission, which is inclusive of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 139(5) read with Section 139(1) of the Act. He further submits that, in case of withdrawal and retraction of declared income during the search, no liability can be legally fastened upon the respondent unless proper and due assessment of income has been completed by the Revenue under the provisions of the Act. The Settlement Commission before passing the impugned order has given proper opportunity of hearing to the petitioners and after considering all the grounds which have been raised by the petitioners herein held that the application filed under Section 245A of the Act is not invalid one and has allowed to proceed further on merit. Thus, there is no violation of any of the mandatory provisions of Chapter XIX of the Act and prayed for dismissal of the writ petition. 16. Having thus heard learned counsel for the parties and having perused the documents on record, the facts emerged more or less as undisputed. Such undisputed facts are that assessment for the year 2006-07 to 2012-13, the respondent No.1 made an application to the Settlement Commission for settlement of the case. In such an application, the respondent declared an undisclosed income of ₹ 1.58,00,000/-. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disclosure contemplated by section 245C is thus in the nature of voluntary disclosure of concealed income. Unless the income so disclosed exceeds ₹ 50, 000/-, the application under section 245C is not maintainable. 19. The Apex Court in the case of Commissioner of Income Tax vs. Om Prakash Mittal reported in [2005] 246 (SC) has observed the following:- The foundation for settlement is an application which assessee can file at any stage of a case relating to him in such form and in such manner as is prescribed. The statutory mandate is that the application shall contain 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 fundamental requirement of the application under Section 245C is that full and true disclosure of the income has to be made, along with the manner in which such income was derived. On receipt of the application, the Commission calls for report from the Commissioner and on the basis of the material contained in the report and having regard to the nature and circumstances of the case or complexity of the investigation involved therein, it can either re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application in prescribed form and manner containing a full and true disclosure of his income which has not been disclosed, the manner in which such income has been derived, the additional amount of income tax payable on such income to the Settlement Commission to have the case settled. Proviso to sub section (1) of Section 245C inter alia requires the applicant to pay such tax and interest thereon which would have been paid under the provisions of the Act had the income disclosed in the application been declared in the return of income before the Assessing Officer on the date of application and the proof of such payment to be attached with the application. 21. Section 245D of the Act pertains to procedure on receipt of an application under Section 245C. Under sub section (1) of Section 245D on receipt of an application under Section 245C, the settlement commission, within seven days from the receipt of the application, would issue a notice to the applicant requiring him to explain why the application made by him be allowed to be proceeded with. On hearing the applicant, the Settlement Commission, within 14 days from the date of the application, pass an order in writing eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee with the temptation to avoid prosecution and penalty. These special provisions, therefore, have been made in the said Chapter in order to bring about an early end to such settlement proceedings. Different stages envisaged after an assessee makes an application for settlement of his case come with time limits. For example, as we saw, on receipt of an application under Section 245C of the Act, the Settlement Commission would, within 7 days from the date of the receipt of the application, issue a notice to the applicant. Within 14 days from the date of the application, the Settlement Commission would pass an order in writing either rejecting or allowing the application to be proceeded with. If no such order is passed within such time, the application would be deemed to have been allowed to be proceeded with. Likewise, a report called for from the Commissioner under sub section (2B) of Section 245D of the Act has to be furnished within 30 days of the communication by the Settlement Commission. Sub section (4A) of Section 245D lays down time limits for passing orders under sub section (4) in terms of Section 245HA (1) (iv). If no such order is passed within the time prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for settlement of his case, one has to calculate his total income for the purpose of the said provision by aggregating the total income returned and the income disclosed in the application. Applicant's liability to pay additional tax would be the amount of tax calculated on such total income minus the amount of tax calculated on the total income returned for that year. 28. Sub-section (1B) and (1C) of Section 245 C thus provide for a special formula for arriving at an applicant's liability to pay additional tax for maintaining an application for settlement. Such special formula contains a deeming fiction. Such deeming fiction for the purpose of calculating additional tax payable defines term total income in artificial manner. Use of the deeming fiction is the well known legislative device to give rise to an artificial situation or fiction. Such device can be created not necessarily by using the term deemed to be . The expression as if is also seen as giving rise to a deeming fiction. 29. In case of Dargah Committee V. State of Rajasthan AIR 1962 SC 574, the Supreme Court considered a regulation section which provided that any money recoverable by the committee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of various terms frequently used in the statues. The definition section usually comes with the expression unless the context otherwise provides or unless there is anything repugnant to . Such definition section defines various terms repeatedly used in a statue which would carry the meaning as contained in the definition. It is also well known that the statue defines often times terms for the special purpose of a section or even for a sub-section. Examples are replete in the Act itself where the definitions are provided only for the purposes of a particular section or even a sub-section. In the present case, this formula which contains a special definition for a special purpose would, therefore, have its effect only for Section 245C. Being a special provision it would prevail over any other general term of a concept contained in the Act. Section 245 C (1) of the Act also requires the applicant to provide besides other details, true and full disclosure of his income which has not been disclosed before the Assessing Officer and amount of income tax payable on such income . Reference to such income thus is the income disclosed in the settlement application which was not disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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