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Dix Francis Versus The Income Tax Settlement Commission, The Commissioner of Income Tax, (Central) Cochin, Deputy Commissioner of Income Tax

2016 (8) TMI 817 - MADRAS HIGH COURT

Application to Settlement Commission - Held that:- The contention of the petitioner that NIL return has been filed to comply with the technical requirements, cannot be countenanced. Section 245C(1) of the Act, states that an assessee may at any stage of the matter relating to him, make an application containing full and true disclosure of his income, which has not been disclosed before the Assessing Officer, explaining the manner in which such income has been derived, additional amounts of incom .....

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ome-tax payable on the income disclosed in the application exceeds one hundred thousand rupees. - Therefore, the return of income, which is contemplated under clause (a) of the proviso mandates the assessee to file a return, which he is or was required to furnish under any of the provisions of the Act and (b) the additional amount of income tax payable on the income disclosed in the application exceeds one hundred thousand rupees. Therefore, I do not agree with the learned counsel for the pe .....

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21758, 23697 & 23698, 21997 to 21999, 22041 to 22043 of 2005, W.P.No.21757 of 2005 - Dated:- 12-8-2016 - T. S. Sivagnanam, J. For the Petitioner : Mr. T. N. Seetharaman For the Respondent : Mr. T. Pramod Kumar Chopda and Mr. Raj Kumar Jhabakar ORDER In all these Writ Petitions, the petitioners have challenged the common order passed by the Additional Bench of the Income Tax Settlement Commission, Chennai, dated 26.04.2005, under Section 245D(1) of the Income Tax Act, 1961 (Act). Since the conten .....

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6 to 13.08.2002. The Settlement Application was numbered and after hearing the petitioner, the Commission passed an order under Section 245D(1) of the Act, dated 26.04.2005, rejecting the Settlement Application. Similarly, the Settlement Applications filed by the other petitioners were also rejected and challenging the same, these Writ Petitions have been filed. 3. Before I go into the contentions raised by the parties, it would be necessary to take note of the following facts:- The petitioner M .....

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, Kunnamkulam, (Petitioner) Tharakan's Royal Jewellery, Trichur, Fashion Jewellery, Chavakkad, Royal Jewellery, Chavakkad, and Wilson Jewellery Chavakkad; money lending individually and in partnership in the name and style Kottappadi Kshemodayam Co., Chavakkad, M/s.Royal Financing Company, Chavakkad and Wilson Trading Company, Chavakkad; manufacture and sale of furniture under the trade name Tharakan's Fashion Furniture, Chavakkad; Chit business under the name M/s.Bhakta Priya Kuries Pvt .....

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Act, calling upon the petitioners and others to furnish returns setting forth total income including undisclosed income for the said block period. Uniformly all the petitioners filed NIL returns in Form-2B on 09.07.2004, before the Assessing Officer and after about a month, filed Settlement Application before the Settlement Commission, offering undisclosed income as additional income. The petitioners through their authorised representative appeared before the Commission and submitted regarding .....

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ed counsel appearing for the petitioner would contend that the findings rendered by the Settlement commission stating that the case does not present any complexity of investigation, is erroneous and invited the attention of this Court to paragraphs 5 and 6 of the affidavit filed in support of the Writ Petition to demonstrate the nature of multiple business activities carried on by the group and intermingling of funds of the individuals as well as firms, to show the determination of undisclosed i .....

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make further enquiry or investigation and furnish report and this power has been conferred on the Commission in terms of sub-section (3) of 245D of the Act and therefore, factually since there is complexity of investigation, the Commission erred in not entertaining the application. Further, it is submitted that the Commission erred in observing that additional income offered in the application is not prima facie full and true without considering the facts of the case. Therefore, the learned cou .....

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to the Settlement Commission to reject the application or allow the application to be proceeded with. For arriving at any of the conclusions mentioned above, the Commission is further authorised to call a report from the Commissioner and consider such a report and having regard to the nature and circumstances of the case, to decide the complexity of this case. In the instant case, the said process has been fully followed and the Commission rightly came to a conclusion that the case does not have .....

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ts given at the time of search and seizure action. Further, it is submitted that the provisions of Section 245C(1) requires that the application contains a full and true disclosure of the income not disclosed before the Assessing Officer. Therefore, partial or untrue or false disclosure would dis-entitle the assessee to invoke the remedy before the Commission. In support of his contention, reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Express Newspap .....

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s set out in the counter affidavit, are without any basis and the order of rejection of the application by the Commission was erroneous. Further, it is submitted that a bare reading of the Section 245D(1) of the Act, clearly indicates that there are three circumstances under which the Settlement Commission can entertain an application for settlement viz., (1) on the basis of the materials contained in the Commissioner's report; (2) having regard to the nature and circumstances of the case; o .....

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d in order to determine the undisclosed income in a realistic and reasonable manner and the rejection of the Settlement Application was unwarranted. 7. Further, it is submitted that the petitioner had filed a 'NIL' return of income to comply with the technical requirement of clause (a) of the Proviso to Section 245C(1), which stipulates furnishing of a return of income as a pre-requisite for a valid Settlement Application. Further, the reasons assigned by the Commission in the impugned .....

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tituted under the provisions of the Income Tax Act, 1961. Chapter XIX-A of the Act deals with the Settlement of cases. Section 245A is the definition section, which defines case under clause (b) of the Section to mean any proceedings under the Act for the assessment or re-assessment of any person in respect of any year or years, or by way of appeal or revision in connection with such assessment or reassessment, which may be pending before the Income Tax Authority on the date on which an applic .....

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e definition of case as defined under Section 245A(b). Section 245C deals with 'Application for Settlement of cases', which provision was invoked by the petitioners, while filing their applications, dated 30.07.2004. Section 245D, stipulates the procedure to be followed by the Commission on receipt of an application under Section 245C, which reads as follows:- An Assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed .....

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ed orders, the correctness of which are being tested in these Writ Petitions. The submission made by the Department representative before the Commission that the undisclosed income could have been offered by the petitioners before the Assessing Officer, was found to be of considerable force. The Commission was of the view that determining the petitioners' income for the block period based on the aggression of their net wealth and cash flow statement does not present any complexity of investi .....

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additional income offered by the petitioners in their settlement applications is not prima facie full and true. Therefore, the applications were rejected. 12. Section 245D postulates three circumstances, which the Commission would take note for either rejecting or entertaining an application for settlement, they being (i) on the basis of the materials contained in the Commissioner's report; (ii) having regard to the nature and circumstances of the case; or (iii) the complexity of the invest .....

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in [1989] 180 ITR 585, has held that the Court should be slow in interfering with the Settlement Commission's order and can be interfered if there are grave procedural defects, such as violation of mandatory procedural requirements of the provisions in Chapter XIX of the Act and/or violation of the rules of natural justice are made out or if it is found that there is no nexus between the reasons given and the decision taken by the Commission and that the Court cannot interfere either with an .....

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ded by the Settlement Commission giving due weight to the matters mentioned therein and in Section 245D. The High Court, in a writ petition, is concerned only with the legality of the procedure followed, that is, the decision making process and not with the merits of the order passed by the Settlement Commission. 15. Bearing in mind the above legal principles, I proceed to examine the contention raised by the petitioners. The Commission, on examination of the facts, the Commissioner's report .....

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mpugned order took note of the submission of the Revenue that there was a large scale suppression of stock deducted at the time of search and unaccounted gold ornaments were seized, other documents relating to unaccounted investments were seized and the partner of Dix Francis admitted deriving undisclosed income in his sworn statement recorded at the time of search and the subsequent retraction after nearly a year, can be given no credence. Further, that despite the seizure of huge unaccounted s .....

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xamine the nature and circumstances of the case. The Commission noted the conduct of the petitioners and comparing the huge seizure of unaccounted assets at the time of search and the additional income offered in the Settlement Application is not prima facie full and true. Thus, the conclusion arrived at by the Commission stating that there is no complexity of investigation having been rendered taking note of the nature and circumstances of the case and on the basis of the materials contained in .....

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the application filed under Section 245C of the Act is to be admitted or not, would depend on the facts and circumstances of the each case and the Commission having regard that most of the controversial issues had already been settled and no pending investigation of such complex nature, as would require intervention of the Settlement Commission, the order will not be interfered by the High Court. 19. In Ashish Kumar Ahuja vs. UOI & Ors., reported in [2005] 278 ITR 399 (Delhi), the Division B .....

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Settlement Commission to proceed expeditiously with the application submitted by the petitioner under Section 245C of the Act. 20. Thus, Courts have shown restraint in the matter and refused even to direct the Commission to expedite the process. If such is the position of law as propounded in the above referred decisions, the question would be as to whether this Court should exercise its jurisdiction and interfere with the impugned order. Considering the power granted to the Commission under Se .....

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vestigation connotes a different meaning and the complexity will be decided by the Commission considering the materials, contained in the Commission's report and having regard to the circumstances of the case. This having been done by the Commission, this Court does not propose to substitute its views to that of the views recorded by the Commission. 22. The decision in the case of Centurion Bank of Punjab Ltd., vs. Income Tax Settlement Commission & Ors., (supra), referred by the learned .....

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0 crores and disputed additions and dis-allowance and the documents were admittedly lost owing to fire etc., Inspite of such being the materials contained in the Commissioner's report, the Settlement Commission rejected the petition merely on the ground that the petitioner therein had not made full and true disclosure. Thus, under the said facts and circumstances, the Division Bench of the Bombay High Court held that the Settlement Commission committed an error coming to the conclusion that .....

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k of Punjab Ltd., vs. Income Tax Settlement Commission & Ors., (supra), would fall within one of such exceptions, as the finding of the Commission had no nexus to the reasons given in the report of the Commissioner. Therefore, the said decision is clearly distinguishable and would not apply to the facts and circumstances of these cases. 24. The learned counsel for the petitioner submitted that the petitioner's had filed a NIL return of income to comply with the technical requirement of .....

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