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COMMISSIONER OF INCOME TAX - I Versus INCOME TAX SETTLEMENT COMMISSION AND 1

2016 (7) TMI 960 - GUJARAT HIGH COURT

Income Tax Settlement order challenged - assessee has been offered immunity from penalty and prosecution - Held that:- The applicants had initially offered on money rotation of ₹ 25 lakhs, ₹ 21 lakhs and ₹ 30 lakhs respectively and income at the rate of 12.5 per cent thereof by way of interest earned which during the course of assessment proceedings was revised to ₹ 50 lakhs, ₹ 50 lakhs and ₹ 75 lakhs respectively with rate of return at 15 per cent. With respe .....

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uch income. In this context, we had called for the letter written by the applicants making such revised offers. Copies of such letters dated 6.2.2014 written by the partners of the firm are produced on record. In such letters, it was conveyed that the applicants had filed a petition for settlement in which offered a sum of ₹ 7,75,000/- at the rate of 12 per cent on peak balance of funds deployed in money lending activity. It was further stated that “the applicant during the course of heari .....

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inally to put an end to the entire dispute through settlement or in the spirit of settlement as is referred to in the said letter. This cannot be seen as accepting that original or initial declaration was not true and full disclosure thereby paving way for the application of judgment in the case of Ajmera Housing Corporation (2010 (8) TMI 35 - SUPREME COURT OF INDIA ). - Decided against revenue - SPECIAL CIVIL APPLICATION NO. 11909 of 2014 With SPECIAL CIVIL APPLICATION NO. 11910 of 2014 With SP .....

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f Income Tax Settlement Commissioner ( Settlement Commissioner for short) dated 13.2.2014 by which the Settlement Commission accepted offer of settlement made by respondent-assessee for three years 2011-12 to 2013-14. Upon the assessee paying tax as per computation of the income-tax made by the Settlement Commission in the said order, the assessee has been offered immunity from penalty and prosecution. 2. Taking us at length through the impugned order passed by the Settlement Commission, learned .....

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mitted the assessees to revise such offers as is held by the Supreme Court in the case of Ajmera Housing Corporation & another vs. Commissioner of Income Tax, reported in 326 ITR 642. 3. In addition to relying on the said case of the Supreme Court in the case of Ajmera Housing Corporation (supra), counsel referred to the following decisions: (1) Commissioner of Incometax, Jalpaiguri vs. Om Prakash Mittal, reported in 273 ITR 326 in which the full bench of Calcutta High Court observed that th .....

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e Settlement Commission while deciding whether to allow application to be proceeded with under section 245-(D)(1), the Commission would not look into material collected after date of filing of the application under section 245-C of the Act. 4. On the other hand, learned counsel Mr. Soparkar for the respondent assessee opposed the petitions contending that the Settlement Commission has given detailed reasons for passing the order. The consideration cannot be stated to be contrary to the provision .....

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ome Tax vs. S Khader Khan sons reported in 300 ITR 157 in which it was held that the statement recorded under section 133-A of the Income Tax Act during survey operation would have no evidentiary value. (3) In the case of Vishnubhai Mafatlal Patel vs. Assistant Commissioner of Income-tax, reported in (2013) 31 taxmann.com 99, in which Gujarat High Court referred to the decision in the case of Jyotendrasinhji vs. S.I.Tripathi reported in 201 ITR 611 and observed that unless the decision of the Co .....

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the Settlement Commission is quite restricted, is no longer a new or unknown proposition. It is held by series of judgments by the Supreme Court as well as by High Courts that though finality given to an order of Settlement Commission would not bar a writ petition before High Court, the scope of judicial review would be restricted to considering whether order is contrary to any provisions of the Income Tax Act. Reference in this respect made be made to the decision of the Supreme Court in the ca .....

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plicant. In the case of Saurashtra Cement Ltd. and others vs. Commissioner of Customs and another reported in 2012(3) GLH 235, Division Bench of this Court made following observations: 16. When examining the scope of judicial review in relation to a decision of Settlement Commission, we must further bear in mind that the Settlement Commission is set up under the statute for settlement of revenue claims. Its decision is given finality and it also has power to grant immunity from prosecution, of c .....

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nt factors including the nature of power exercised by the public authorities, namely, whether the power is statutory, quasi-judicial or administrative. It was observed that the power of judicial review is not intended to assume a supervisory role. The power is not intended either to review governance under the rule of law nor for the courts to step into the areas exclusively reserved by the suprema lex to the other organs of the State. The court observed that the limited scope of judicial review .....

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power of judicial review; the supervisory jurisdiction conferred on a Court is limited to seeing that the Tribunal functions within the limits of its authority and that its decisions do not occasion miscarriage of justice. (v) The courts cannot be called upon to undertake the government duties and functions. The court shall not ordinarily interfere with a policy decision of the State. Social and economic belief of a judge should not be invoked as a substitute for the judgment of the legislative .....

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e judicial review, interference would still be open. 6. With this background, we may revert to the facts of the case. The Settlement Commission had in the impugned order examined material on record in the context of the declarations made by the applicants for settlement including certain transactions of the applicants of lending their on money on short term basis. The Settlement Commission had thereafter come to the conclusion that the offers of the assessees for settlement considering their dis .....

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revising offer of settlement would essentially demonstrate that initial disclosures were not full. However, at this stage of examining legality of the order passed by the Settlement Commission, we do not see that the Settlement Commission committed breach of any provisions of the Act. The Settlement Commission has examined material on record, given its own findings and made observations and come to conclusions which cannot be said to be perverse or that the order was contrary to any of the prov .....

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e by him of his income which has not been disclosed before Assessing Officer and the manner in which such income has been derived. We may also notice that while processing such application under section 245-D of the Act, it would be open for the Settlement Commission to reject an application for settlement if it is found that the applicant has not made true and full disclosure of his income in the application for settlement. In the context of these provisions, the Supreme Court had an occasion t .....

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ommissioner in terms of section 245D(1) of the Act. The Commissioner opposed the disclosures made by the assessee as not being true and full disclosures and suggested that the income of the group assessees should not be settled at less than ₹ 223.55 crores. The arguments on the question whether Settlement Commission should allow the application to proceed further were concluded and order was reserved at which stage, the assessee filed revised settlement application declaring additional inc .....

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case commenced before the Settlement Commission. During the course of such hearing, the assessee made a further disclosure of unaccounted income of ₹ 2.76 crores. Ultimately on 29.1.1999 the Settlement Commission passed an final order determining total income of the assessee for the said assessment years at ₹ 42.58crores. 8. This order was challenged by the Commissioner before Bombay High Court. Aggrieved by the order of High Court, the assessee had approached Supreme Court. The Sup .....

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think fit is confined to the matters covered by the application and it can extend only to such matters which are referred to in the report of the Commissioner under subsection (1) of sub-section (3) of the said Section. 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 so disclosed in the application a .....

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Therefore, by revising the application, the applicant would be achieving something indirectly what 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. In our opinion opinion, the scheme of the said Chapter is clear and admits no ambiguity. 31. We are convinced that, in the instant case, the disclosure of ₹ 11.41 crores as additional undisclosed income in the revised annexure, filed on 19th Sep .....

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observations were made by the Supreme Court being conscious of the fact that the Revenue had not preferred any appeal against judgment of the High Court on the question of full and true disclosures. Despite which the Supreme Court examined the issue threadbare and made above-noted observations. 10. It can thus be seen that on the issue of true and full disclosure, stage at which such disclosures should be made and the effect of making further disclosures by revising initial offers of settlement .....

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sions in such disclosure itself would show that the initial disclosures were not true. 11. However, the facts of the present case are somewhat different. The applicants had initially offered on money rotation of ₹ 25 lakhs, ₹ 21 lakhs and ₹ 30 lakhs respectively and income at the rate of 12.5 per cent thereof by way of interest earned which during the course of assessment proceedings was revised to ₹ 50 lakhs, ₹ 50 lakhs and ₹ 75 lakhs respectively with rate o .....

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