TMI Blog2013 (2) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... arisen. 2.1 The petitioner-partnership firm is engaged in the business of Project Consultancy and also acting as a Booking Agent Coordinator in real estate scheme known as Arpan Complex at Vadodara developed by Messrs. Anay Developers Private Limited. 2.2 On 23rd March 1995, the Income-tax Department carried out search and seizure operations under section 132 of the Income-tax Act, 1961 [ Act for short] and it found on-money receipts on bookings made by the petitioner. 2.3 The petitioner-firm made an application dated 12th November 1997 before the Settlement Commission for the Assessment Years 1994-95; 1995-96 1996-97 offering additional income of ₹ 6,30,325/= for settling the tax liabilities for this entire period. The case of the petitioner was admitted under section 245D [1] of the Act on 17th November 1998 and hearing was fixed under section 245D [1] of the Act on 5th March 2003. 2.4 It is the case of the petitioner that the hearing took place before the Settlement Commission and petitioner was directed to prepare a detailed working of on-money receipts on 4th February 2003. Pursuant to such direction, the petitioner filed such working of on-money rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs has no rationale basis particularly added on estimate basis. It is also urged by the learned advocate that in gross violation of principles of natural justice, the order impugned has been passed where no proper opportunity is made available. He urged the Court that the Settlement Commission has acted contrary to the scheme of the act and he has not dealt with particular contention of on-money receipts put forth before him at all. It is further urged that he has not given any reason while making such additions and the powers of settlement commission are too wide and if not checked, the same can create unimaginable issues for the assessees who would have no recourse when such exaggerated additions are made arbitrarily as is done in the instant case. It is further urged that the unfettered powers of the Commissioners if not checked are bound to be misused and in the instant case, when such misuse is apparent from the record, the Court needs to intervene. Learned Counsel has sought to rely upon the following authorities to substantiate his fervent submissions (1) Major Metals Ltd. v. Union of India [2012] 207 Taxman 185/19 taxmann.com 176 (Bom.). (2) Mahavir Rolling Mills ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years referred to in clause (b) of sub-section (1) of section 153A or clause (b) of sub-section (1) of section 153B in case of a person referred to in section 153A or section 153C have been initiated, the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees, (ia) in a case where- (A) the applicant is related to the person referred to in clause (i) who has filed an application (hereafter in this sub-section referred to as specified person ); and (B) the proceedings for assessment or re-assessment for any of the assessment years referred to in clause (b) of sub-section (1) of section 153A or clause (b) of sub-section (1) of section 153B in case of the applicant, being a person referred to in section 153A or section 153C, have been initiated, the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees, (ii) in any other case, the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees, and such tax and the interest thereon, which would have been paid under the provisions of this Act had the income disclosed in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... participate in profits) carrying not less than twenty per cent of the voting power; and (B) in any other case, such person is, on the date of search, beneficially entitled to not less than twenty per cent of the profits of such business or profession. (1A) For the purposes of sub-section (1) of this section, the additional amount of income-tax payable in respect of the income disclosed in an application made under sub-section (1) of this section shall be the amount calculated in accordance with the provisions of sub-sections (1B) to (1D). (1B) Where the income disclosed in the application relates to only one previous year,- (i) if the applicant has not furnished a return in respect of the total income of that year, then, tax shall be calculated on the income disclosed in the application as if such income were the total income; (ii) if the applicant has furnished a return in respect of the total income of that year, tax shall 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. (1C) The additional amount of income-tax payable in respect of the income disclosed in the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 245D [4] authorizes the Settlement Commissioner to pass an order, after examining the records and reports of the Commissioner, after bipartite hearing. On due and careful examination of these materials as well as further evidence that may have been placed before it, the Settlement Commissioner in accordance with these provisions, may pass such order as he thinks fit in the matters covered by the application and in other matter relating to the case, not covered by the application but referred to in the report of the Commissioner under sub-section (1) or sub-section (3). 6. The scope of judicial review under Articles 32 136 of the Constitution of India by the Apex Court and under Article 226 of the Constitution before the High Court came up for consideration in cases of Jyotendrasinhji (supra). The question was whether all the questions of fact and law as may have been decided by the Commission were open for review. The Apex Court has held thus - 16. It is true that the finality clause contained in section 245-I does not and cannot bar the jurisdiction of the High Court under Article 226 or the jurisdiction of this court under Article 32 or under Article 136, as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse, constitute a separate and independent category. Reference in this behalf may be had to the decision of this Court in Sri Ram Durga Prasad v. Settlement Commission 176 ITR 169, which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji J., speaking for the Bench comprising himself and S.R. Pandian, J. observed that in such a case this Court is concerned with the legality of procedure followed and not with the validity of the order. The learned Judge added 'judicial review is concerned not with the decision but with the decision-making process. (Emphasis supplied) Reliance was placed upon the decision of the House of Lords in Chief Constable of the N.W. Police v. Evans [1982] 1 W.L.R.1155. Thus, the appellate power under Article 136 was equated to power of judicial review, where the appeal is directed against the orders of the Settlement Commission. For all the above reasons, we are of the opinion that the only ground upon which this Court can interfere in these appeals is that order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant The main controversy in these appeals r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Supreme Court. The Bombay High Court did not deem it justifiable to re-appreciate the findings of the fact, in exercise of the powers of judicial review against the findings of the Settlement Commission. 7.1 On allegation that the Settlement Commission imposed huge amount of penalty in complete disregard and violation of the principles of natural justice, the Bombay High Court found that the opportunities of hearing was made available and conclusion in respect of penalty of the commission were in consonance with the provision of law. 31. The first aspect of the matter which merits emphasis is that the petitioner moved the Settlement Commission specifically with a request for the settlement of the entire case including the grant of a waiver of penalty under the applicable provisions of the Income-tax Act, 1961. The Settlement Commission is vested with the power under section 245H to grant an immunity wholly or in part from the imposition of any penalty under the Act where it is satisfied that any person who has made an application for settlement has co-operated with the Commission in the proceedings before it and has made a full and true disclosure of his income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunity of being heard specifically on the issue of penalty. The Settlement Commission is bound by the mandate of the Act, which includes section 274. The Settlement Commission has to hear the applicant on the question of penalty. The proceeding before the Settlement Commission cannot be disjointed into parts, particularly having regard to the time limit set for disposal. The Commission has furnished a reasonable opportunity of hearing to the\assessee and has heard him. No prejudice is shown. The Settlement Commission has imposed a penalty of ₹ 2.75 crores. Section 271(1)(c) provides for the imposition of a penalty where the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income. In such a situation the penalty shall not be less than the amount of tax sought to be evaded but shall not exceed three times the amount of tax sought to be evaded. The total income tax demand in the 'present case, according to the petitioner, which has been arrived at on behalf of the Revenue works out to ₹ 1.96 crores for AY 2008-09 and ₹ 82.40 lakhs for AY 2009-10. The total penalty of ₹ 2.75 crores has been clarified by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme was developed by Anay Developers Private Limited, who incidentally were the owners and developers of the complex. 11.1 Search under section 132(1) carried out by the department on 23rd March 1995 indicated from the documents seized that on-money receipt of the bookings made by the petitioner-firm had not been recorded in the regular books of account. Scrutiny assessment was made for the A.Y. 1995-96. For A.Y. 1994-95, the assessment was reopened under section 147 of the Act. It appears from the decision of the Settlement Commission that it had called for report of the Commissioner as provided under section 245C and it also examined the investment in land and undeclared income with reference to the on-money receipts. 11.2 The issue concerns addition of ₹ 30 Lakhs for the A.Ys. 1994-95 and 1995-96 on estimate basis. The amount of ₹ 76,30,325/= was offered by the petitioner in the settlement application, whereas the Settlement Commission determines such income at ₹ 1,06,30,325/-. 11.3 It is relevant to note that as far as on-money receipt on flat bookings were concerned, the Settlement Commission noted from the entire gamut of evidences that the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234C of the Act, it applied the ratio laid down by the Apex Court in case of CIT v. Anjum MH Ghaswala [2001] 252 ITR 1/119 Taxman 352 and CIT v. Hindustan Bulk Carriers [2003] 259 ITR 449/126 Taxman 321 and the petitioner was granted immunity from levy of penalty and prosecution under the Income-tax Act and under the Indian Penal Code; subject to his paying the tax within stipulated time period and also subject to his fulfilment of other conditions under the statute. 12. It is reiteratively urged before us that the amount of ₹ 30 Lakhs added by the Settlement Commissioner is completely arbitrary and there is no valid basis for such addition. It is also urged that giving such wide powers to any authority would lead to completely chaos and also would pave a way for arbitrary addition, which was never the legislative intent. 13. We are alive to the fact that core challenge essentially in this petition is to the exercise of powers and not to the amount per se. We are also conscious that wide powers are given to the Settlement Commission and with the powers go unfailing duty of their exercise in accordance with provisions of law and settled legal principles. At the same ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra), the Apex Court has noted that the Commission is required to condone the default and lapses on the part of the assessee and it may choose to waive interest, penalty or prosecution; as it may deem fit. The Court also noted that what would weigh with the Commission for making a particular Order is difficult to be predicted, unless the Commission chooses to give reasons for its order and whenever such reasons are given, the scope of inquiry would be - whether such order is contrary to the provisions of the Act and whether that had prejudiced the petitioner. 16. Applying such principles to the instant case, it will not be possible for this Court to uphold the contentions raised by the petitioner-firm that this is an act of arbitrary exercise of powers which has led to any serious bias to the case of the petitioner, warranting interference by us. Settlement Commission gave sufficiently cogent reasons based on contemporaneous record and that too, after availing sufficient opportunity of hearing to the parties. For a sufficiently long period in the material seized during search details of booking and on-money receipt were available. For the period for which, no data was avail ..... 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