TMI Blog2008 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... and 6 th January, 2007. The petitioners filed Income-tax return on 23 rd May, 2007 for the Assessment Year 2000-01 to 2007-08. On 28 th May, 2007 the petitioner filed an Application for settlement before the Settlement Commission. It is the case of the petitioner that on 21 st August, 2007 the 1 st Respondent made an order constituting the Special Bench. The Special Bench of the Settlement Commission after hearing the parties by its order dated 12 th September, 2007 was pleased to reject the application by holding that the applications for settlement did not contain a full and true disclosure of income/wealth of the petitioners. As the Application was held to be invalid the Application was dismissed. The order passed was a common order in all the Applications. It may be clarified that the Applications in Writ Petition No.2421 of 2007 and Writ Petition No.2422 of 2007 are under the provisions of the Income Tax Act whereas the Application in Writ Petition No.2423 of 2007 was under the Wealth Tax Act. 4. The case of the petitioners is that at any stage of a case it was open under the provisions of Section 245(1) of the Income Tax Act to make an application. The petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 245D as substituted by the Finance Act, 2007 have materially altered the provisions relating to the Settlement Commission. The amendment requires holding, whether an application is invalid. The expression "invalid" it is submitted, is of wide import. Reference is then made to the report submitted by the 2 nd Respondent under Section 245D(2B) which was given to the 1 st respondent on 28 th August, 2007 wherein the Respondent No.2 opposed the application made by the petitioner on the ground that there was no true and full disclosure. The other averments need not be referred to for deciding the controversy. 5. In so far as Petitioner Mrs. Rheema H. Khan is concerned, it is set out that no documents were found from her possession and as such there were no reasons to reject the application made by her under the provisions of the Income Tax Act before the Settlement Commission. 6. Similarly, it is set out that the requirement for consideration and/or ascertainment of Wealth Tax are different from that of Income Tax Act. The Settlement Commission did not address itself to this issue and along with the application under the Income Tax Act also rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate and the proceedings are still pending. There are serious allegations of cross border transactions which are to be investigated. As already pointed out in so far as the so-called seized documents they were made available to the petitioners at the direction of the respondent No.1. There is specific averment denying the allegations against respondent No.1. that they relied upon the documents which were not shown to the petitioners. The averments in the petition have been replied to parawise. 8. In the course of the hearing considering that it was orally argued that the petitioners representative was asked to leave the premises at the time of hearing and only officers of Revenue were before the Commission, a communication of 13 th September, 2007 has ben placed before us which is addressed by Alka Tyagi, Commissioner of Income Tax (DR), ITSC, ITSC, Additional Bench, Mumbai to the Commissioner of Income-Tax (Central)-I, Mumbai. It is set out therein that in respect of the documents contained in the paper book privilege was claimed and the request was also made for in-camera hearing of the submissions on the said documents. In-camera hearing was held where the Hon'ble Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. (9) At any rate it is submitted that the test for considering the Wealth Tax application are different from Income Tax Applications. The Commission applying the same yardstick to the Wealth Tax application of the petitioner in Writ Petition No.2423 of 2007 acted without jurisdiction and consequently the order rejecting the Application as invalid be set aside. 10. The Settlement Commission while rejecting the Applications noted the contention of the petitioner that the income as disclosed was from horse racing and the petitioners, contention that coming from a family of trained horse owners they were in advantageous position to make huge winnings in races. The Commission noted arguments advanced on behalf of Revenue wherein they have pointed out that the income that has been made from stake money and the various other contentions as advanced have been set out. The Commissioner agreed with the contention raised on behalf of the Petitioners that since all the taxes due on the additional income and wealth disclosed by them before them have been paid before 31 st July, 2007, the Applications are deemed to have been allowed to be proceeded with and what is to be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant, the Settlement Commission shall, within a period of fourteen days from the date of the application, by an order in writing, reject the application or allow the application to be proceeded with: Provided that where no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with. Section 245-I makes the order of settlement passed under sub-section (4) of Section 245-D conclusive as to what is stated therein. In our case the Commission did not proceed to this stage. Under Section 245-L proceedings before the Settlement Commission are deemed to be judicial proceedings for the purposes set out therein. 12. Section 245-C had come up for consideration before the Supreme Court in Commissioner of Income SC) Tax vs. Express Newspaper Ltd., 206 ITR 443 (SC). It may be mentioned that though the judgment was pronounced in the year 1994 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully. The Commission has to keep all this in mind while deciding whether to allow the application to be proceeded before it or to reject it." The Commission, therefore, would be bound by this judgment whilst considering the applications of the petitioners. The Petitioners too have come before this Court after a search was conducted and documents seized relating to foreign exchange dealings. 13. The various contentions as urged on behalf of the petitioners as to violation of principles of natural justice and fair play can now be considered. All documents relied upon considering the averments were made available though some at the stage of hearing. Secondly, the Settlement Commission may not have followed the correct procedure in hearing the application for privilege of documents by revenue, by directing the petitioners to leave the premises. In our opinion this by itself cannot vitiate the proceedings. From the letter addressed by the Commissioner of Income Tax (DR) dated 13 th September, 2007, it would be clear that revenue had sought privilege in respect of those documents and for an in-camera hearing. The Settlement Commission granted in-camera hearing without hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd denied. Except vague allegations as to violation of principles of natural justice and fair play there is no specific averment.. When a party seeks to challenge an order on the ground that he did not have an effective opportunity it must be specifically pleaded to enable the respondents to meet such a contention and for this Court to consider whether any prejudice was occasioned for failure on that count. On the contrary from the findings of the Commission we note that the petitioners have dealt with the documents which were placed by the Revenue before the Commission. In our opinion, therefore, that contention must be rejected. 15. Questions 6 and 7 as framed on the constitution of the Special Bench and the binding character of its findings can now be dealt with. The power to constitute a Special Bench is conferred on the Chairman of the Commission under Section 245BA(5A). It is, therefore, not a case of non-existence of power. The question is whether the petitioners can contend that because of the constitution of a Special Bench any prejudice has been occasioned to them. The only contention as urged is that the reasons for constitution of the Bench and the material relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication as invalid considering that the Petitioners have complied with the other requirements. The expression "invalid", it is pointed out, is used in Article 255 of the Constitution of India. Section 245D(2C) reads as under:-" 245D(2C). Where a report of the Commissioner called for under sub-section (2B) has been furnished within the period specified therein, the Settlement Commission may, on the basis of the report and within a period of fifteen days of the receipt of the report, by an order in writing, declare the application in question as invalid, and shall send the copy of such order to the applicant and the Commissioner. Provided that an application shall not be declared invalid unless an opportunity has been given to the applicant of being heard: Provided further that where the Commissioner has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the manner without the report of the Commissioner." . As the expression "invalid" is not defined in the Act, what is its true import. In K.J. Aiyar's Judicial Dictionary, "Invalid" is equated with the word "void". Referring to Black's Law Dictionary, 6 th Edition the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure during a search operation. . Reliance was placed on the Judgment in Centurion Bank of Punjab Ltd. vs. Income-tax Settlement Commission Ors., [2007] 290 ITR 555 Bom.) (Bom.). The learned Bench of this Court on the facts held that mere statement that there was no full and true disclosure is not sufficient. The learned Bench noted that the Commission proceeded on an erroneous assumption that the Commission can entertain the application only if the complexities of the investigations are involved and that a fair reading of Section 245-D(1) indicate that there are three circumstances which ought to be considered. This judgment had come up for consideration in Haji N. Abdulla vs. Income Tax Settlement Commission Ors., Writ Petition No.1427 of 2007 decided on 8 th October, 2007. Both these judgments were considering application which were made and disposed off before the Finance Act, 2007 w.e.f. 1 st June, 2007. What has to be considered now is Section 245D(2C). We have discussed what is invalid. Next reference was also made to the judgment in Shakti Metal Box and Anr. vs. Union of India Ors., 204 ITR 450 Punjab and Haryana. The issue in that case was wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, urged on that count has to be rejected. 17. Considering the rejection of this contention the Question No.5 as framed will have to be rejected as the Commission addressed itself to the question which it ought to have addressed. Once that be so the point No.5 as framed also is devoid of any merit. 18. In respect of the petitioner in Writ Petition No.2422 of 2007 it is sought to be contended that no incriminating documents were found from that petitioner and in these circumstances the Commission ought not to have rejected the application made by this Petitioner. In the instant case this petitioner is the wife of the petitioner in Writ Petition No.2421 of 2007. They share a house from which the documents were seized. These documents pertain to prima facie evasion of foreign exchange. Therefore, it cannot be said that merely because no documents were found in possession of this petitioner the documents found could not have been considered. The petitioner was disclosing income based on purported earning of horse racing. If the case of husband could not he accepted, in our opinion, it will be difficult to accept the case of this petitioner. 19. It was also contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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