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Pr. Commissioner of Income Tax (Central) Versus Maa Vaishno Real Estate and Another, S.S. Associates & One Another, S.T. Associates & One Another, Saakar Reality & One Another

2016 (9) TMI 817 - MADHYA PRADESH HIGH COURT

Matter pending before the Settlement Commission - Held that:- As the matter is still pending before the Settlement Commission, the Settlement Commission has to decide whether the full disclosure is made or not. The petitioner is certainly at a liberty to raise all issues and grounds before the Commission. The Settlement Commission has to proceed the matter in accordance with Section 245D (2B), 245 D(3), 245D(4), 245D(4A),245D(5),245D(6), 245D(6A) of the Act. Thereafter, after examination of reco .....

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provided for dealing with Settlement applications and the said mechanism is a complete code in itself and merely because of the fact that an interim admission order has been passed under Section 245(D)(2C), it does not mean that any irreparable loss has been caused to the Income Tax Department. - In the considered opinion of this Court, as the matter is pending before the Settlement Commission and no final order has been passed and as the Commission is now seized with the matter, all the gr .....

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utory provisions as contained under the Income Tax Act. - W.P.No.1491/2016, W.P.No.1492/2016, W.P.No.1493/2016, W.P.No.1494/2016 - Dated:- 30-8-2016 - S. C. Sharma And Ved Prakash Sharma, JJ. ORDER As Per S. C. Sharma, J :- Regard being had to the similar controversy involved in above cases, they have been heard analogously together with the consent of the parties and a common order is being passed in the matter. Facts of W.P.No.1491/2016 are narrated as under:- 2. The petitioner before this Cou .....

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he Income Tax Act on 21/09/2012 at the premises of M/s. Saakar Reality, its partners and family members. The other major firms of the Group are M/s. S.T. Associates, M/s Maa Vaishno Real Estate and M/s S.S. Associates. 4. It has been further stated that group is owned, managed and controlled by Shri Gopal Goyal and Shri Sanjay Dasot. Shri Gopal Goyal and Shri Sanjay Dasot partners of the firm have voluntarily admitted additional undisclosed income of ₹ 30 crores on behalf of Saakar Group d .....

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as passed under Section 245 D(1) on 31/03/2015. 6. It has been further stated that on receipt of order of the ITSC, the Principal Commissioner of Income Tax (Central), Bhopal submitted a detailed report under Section 245D (2B) on 05/05/2015 and prayed for that the Additional Income disclosed before the Settlement Commission cannot be held as full and true disclosure and the settlement application of the respondent assessee be rejected. 7. It has been further stated that the Settlement Commission .....

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Shri Sanjay Dasot and the assessee's total estimated income comes to ₹ 289.16 crores and the settlement commission is proceeding ahead in the matter by taking into account a meager amount of ₹ 19.08 crores. The other grounds have also been raised by the petitioner. However, Shri Sumit Nema appearing on behalf of respondent No.1 has vehemently argued before this Court that the order dated 18/05/2015 passed by the Settlement Commission under Section 245D(2C) of the Income Tax Act i .....

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s a complete code in itself and merely because an interim admission order has been passed under Section 245D(2C), it does not mean any irreparable loss has been caused to the Income Tax Department. 10. It has also been argued that the petition has been filed after nine months and therefore, it deserves to be dismissed on the ground of delay and latches. It has also been stated that the issue involved in the present case stands concluded as an identical writ petition has been decided by the Divis .....

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uted facts reveal that respondent No.1 was subjected to Search and Seizure operations conducted by the Investigating Wing under Section 132 of the Income Tax Act on 21/09/2012. It has also been an admitted fact that the Group has voluntarily admitted additional disclosed income of ₹ 30 crores. 13. It is also an undisputed fact that respondent No.1 has submitted an application before the Settlement Commission on 23/03/2015 and the matter was processed by the Settlement Commission,. The Prin .....

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e department's only objection was relating to declaration made by the applicants was riot true and full. In this case the department has not adduced any evidence which could conclusively prove that the information submitted by the applicants was incorrect, false or applicants had withheld certain information to the detrimental interest of the revenue. On the other hand the applicants stated that they have made the declaration true and full before the Commission. We are conscious that at the .....

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information either at our level or any such information has been provided by the department. Hence as of now we hold that the information and department. Hence as of now we hold that the information and the facts given by the applicants are true and full on the basis of which the income offered by them was to the best belief of the applicants true and full. Therefore, we hold these applications to be not invalid and allow them to be proceeded with further. 14. In light of the aforesaid order, t .....

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he procedure followed by the Department is unsustainable and in support thereof reliance is placed on the cases of Bombay High Court and Delhi Court: Commissioner of Income Tax (Central) Vs. Income Tax Settlement Commissioner (ITSC), (2014) 267 CTR 0007 (BOM); and, Marc Bathing Luxuries Limited Vs. Income Tax Settlement Commission and Another, (2013) 94 DTR 0241 (DEL), to say that the order passed under section 245-D(2C) without taking note of the Report of the Department is unsustainable and th .....

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d, therefore, the Department can raise all such question before the Settlement Commissioner, where the matter is pending and the Settlement Commissioner can still take note of the same. 5- Further reliance is placed on a Division Bench Judgment of this Court in the case of Commissioner of Income Tax, Indore Vs. Asian Natural Resources India Limited, (2015) 63 taxman.com 169 (MP), wherein similar question was considered and an order was passed admitted an application under section 245-D(1), chall .....

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nding before the Settlement Commissioner, the petitioner can raise all the grounds before the Settlement Commissioner, including the objection as are raised in the writ petition, and it is for the Settlement Commissioner to look into this aspect of the matter and proceed in accordance with law. This is the principle which we find from the order passed by the Supreme Court in the case of K. Jayaprakash Narayanan (supra) and the law laid down by a Coordinate Bench of this Court, in the case of Asi .....

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he objections before the Settlement Commissioner, who has been directed to proceed in the matter in accordance with law. 9- Accordingly, finding no ground to interfere in the matter, we dispose of the writ petitions with liberty to the petitioner/Revenue to raise the grounds before the Settlement Commissioner, who shall before deciding the matter consider and proceed in accordance with law. 15. The matter has also been considered by the Hon'ble Supreme Court of India in the case of K.Jaiprak .....

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nd declaration cannot be the ground for admitting the application under Section 245D. Since this Special Leave petition is filed only against the order of the Settlement Commission admitting the application of the assessee under Section 245D, we do not wish to interfere at this Stage. However, we make it clear that on the point of maintainability of the Application, it would be open to the Department to raise the contention before the Settlement Commission who would be entitled to examine that q .....

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:- 22. From the above, it is clear that in True Woods Pvt. Ltd. (supra), a specific argument had been raised on behalf of the Revenue that it was incumbent upon the Settlement Commission to record a specific finding to the effect that the applicant had made a full and true disclosure before it admitted the application or took any further steps on the basis thereof. This argument was rejected by the Division Bench. The Division Bench was of the view that while the foundation for settlement was a .....

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in which the Commission may not be able to, at the stage of admission of the application, record a finding with any amount of certainty. It is in such a situation that it would be permissible for the Commission to keep the question open to be examined at a later stage or at the stage of disposal of the application. As in the case of True Woods Pvt. Ltd. (supra), this is exactly what has happened in the present case. The Settlement Commission has noted the rival contentions of the Revenue and the .....

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s of the material on record and the report submitted by the Commissioner of Income-tax that the applications were not maintainable under Section 245C(1) of the said Act. In fact, the Settlement Commission may, at any stage till it passes a final order under Section 245D(4), examine the issues and if there is sufficient material on record, determine the question of full and true disclosure and the manner in which the undisclosed income was derived conclusively and, depending on such a decision, t .....

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upon by the learned counsel for the petitioner. In fact, the learned counsel for the petitioner went to the extent of submitting that in view of the decision of the Supreme Court in Ajmera Housing (supra), the orders/decisions in K. Jayaprakash Narayanan (supra) and True Woods Pvt. Ltd. (supra) would no longer be good law. 25. In Ajmera Housing (supra), an order had been passed by the Income Tax Settlement Commission under Section 245D(1) on 17.11.1994, allowing the settlement application filed .....

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e on the part of the assessee/applicant. The Bombay High Court also held that the order dated 17.11.1994 passed under Section 245D(1) of the said Act was void and remitted the case to the Settlement Commission for a decision afresh and kept all the questions open. The applicant/assessee, being aggrieved by the said decision of the Bombay High Court, went up in appeal before the Supreme Court which, by an order dated 11.07.2006, set aside the Bombay High Court order and remitted the matter to the .....

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ould not be proper to set aside the proceeding. However, at the same time, the Commission appears to have misdirected itself on several important aspects while passing the final order. The Settlement Commission had not supplied the annexure Dated 19.9.1994 declaring additional income of ₹ 11.41crore and thus, due opportunity was not given to the Revenue to place (sic) its stand properly. Huge amount of unexplained expenses, unexplained loans and unexplained surplus, total of which is more .....

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the fact that the respondents had failed to make true and full disclosure initially as well as at the time of second disclosure, we do not find any justifiable reasons to reduce or waive the amount of penalty so drastically. Taking into consideration all these circumstances, in our considered opinion, it will be in the interest of justice to set aside the final order passed by the Settlement Commission and to remand the matter back to the Settlement Commission for hearing parties afresh and to p .....

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espondents 3 and 4 filed on 23.11.2012 ought not to have been entertained. In our opinion, the learned counsel for the respondents 2 to 5 has given a complete answer to this argument. He has referred to Section 245K(2) of the said Act which stipulates that where a person has made an application under Section 245C on or after the first day of June, 2007, and if such application has been allowed to be proceeded with under Section 245D(1), such person shall not subsequently be entitled to make an a .....

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itional tax and interest due. Prima facie, we are in agreement with the submission made by the learned counsel for the respondents. However, since we are not inclined to interfere with the impugned orders, we feel that this issue can also be left open to be decided by the Settlement Commission at the time of further proceedings till the order under Section 245D(4) is passed. For all these reasons, we agree with the learned counsel for the respondents 2 to 5 that this is not the stage at which th .....

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s to costs. 22. Similar view is taken by the Bombay High Court in the case of Commissioner of Income Tax (Central) Pune v/s. Income Tax Settlement Commission (ITSC), 2013 (40) taxmann.com 201 (Bombay) which reads as under :- The Commissioner of Income Tax (Central), Pune has challenged an order passed by the Settlement Commission on 29 August 2013 under the provisions of sub-section (2C) of Section 245D of the Income Tax Act 1961. By the order which has been impugned, the Settlement Commission h .....

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atements thereof, the law will take its own course. 2. The Commission has accordingly held that the application filed by the Second Respondent is not an invalid application and should be allowed to be proceeded with further. Following the order which was passed by the Settlement Commission on 29 August 2013, further hearings took place before the Commission on 19 September 2013 and 7 October 2013. The grievance of the Petitioner is that the Commission has without ordering an enquiry by the Commi .....

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y the application to the Settlement Commission. 3Section 245D(3) provides as follows : (3) The Settlement Commission, in respect of- (i) an application which has not been declared invalid under sub-section (2C); or (ii) an application referred to in sub-section (2D) which has been allowed to be further proceeded with under that sub-section, may call for the records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry .....

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ommission may proceed to pass an order under subsection (4) without such report. 4. The provisions of sub-section (3) of Section 245D would make it clear that where an application has not been declared to be invalid by the Settlement Commission under sub-section (2C), the Commission is empowered to call for records from the Commissioner and upon the examination of such records, if it is of the opinion that a further enquiry or investigation in the matter is necessary, it may direct the Commissio .....

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rievance of the Petitioner, is that on 19 September 2013 at a hearing before the Commission it wasindicated that the department would be heard on the issue relating to a Section 245D(3) enquiry on 7 October 2013, but as a matter of fact the Commission has not applied its mind to whether an enquiry under Section 245D(3) should be ordered. 5. The learned senior counsel appearing on behalf of the Second Respondent on the other had has submitted that the issue as to whether an enquiry under Section .....

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ssary. 6. Sub-section (4) of Section 245D provides as follows : (4) After examination of the records and the report of the Commissioner, if any, received under - (I) sub-section (2B) or sub-section (3), or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examini .....

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y, received under sub-section (2B) or sub-section (3), as the case may be, (or under sub-section (1) as it stood before the Finance Act 2007); (iii) examine such further evidence as may be placed before it or obtained by it. The Settlement Commission is also required to furnish an opportunity to the applicant and to the Commissioner to be heard before it passes an order under sub-section (4). A reading together of the provisions of sub-section (3) and sub-section (4) would indicate that the Sett .....

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Undoubtedly, if the Settlement Commission holds that a further enquiry or investigation is necessary under sub-section (3), such an enquiry or investigation has to be ordered by the Commissioner because subsection (3) confers jurisdiction on the Commissioner to conduct the enquiry or the investigation, as the case may be. Equally, it is evident both from the language of subsection (3) and the terms of subsection (4) that the Settlement Commission is not required in every case to cause an enquiry .....

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Evidence obtained by the Commission would include evidence which the Commission has obtained under its own authority. In that sense the powers of the Settlement Commission are wide. Finally, it may be necessary to note that under subsection (4) the Settlement Commission has to pass an order in accordance with the Act as it thinks fit on matters covered by the application. The Settlement Commission may also pass an order on any other matter relating to the case not covered by the application, but .....

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perform the functions of the Income Tax authority under the Act, where an application made under Section 245C has been allowed to be proceeded with under Section 245D, until an order is passed under sub- section (4) of Section 245D. This is, however, made subject to the provisions of subsection (3). Consequently, where the Commission in the course of its jurisdiction under Section 245D(3) has ordered an enquiry or investigation by the Commissioner, the exclusive nature of its jurisdiction is sub .....

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roceedings at this stage, save and except to clarify that the Settlement Commission shall during the course of its proceedings specifically bring to bear its consideration on whether an enquiry under Section 245D(3) should be ordered particularly having regard to the circumstances which have been set out in the letter of the Commissioner of Income Tax dated 3 October 2013. Since the proceedings are pending before the Settlement Commission, it would not be appropriate for this Court to entertain .....

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the application is whether a prima facie case is made out or not and in that context only subsequent amendments which have been brought in Sections 245C and 245D of the Act had dispensed with even issuing a preliminary notice to the Commissioner of Income Tax leaving it to the absolute discretion of the Settlement Commission to entertain a case or not for its consideration. The reasons for giving such discretion to the Commission cannot be lost sight particularly keeping in view of the objects .....

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dmission and also at the stage of passing of the final order, we find, as a matter of fact, ample opportunity was given to the Department to file their objections and also the representatives of the department were heard before passing the orders and in that view of the matter, we are unable to concur with the contention of the learned counsel for the petitioner that the order is vitiated on account of violation of principles of natural justice. Inasmuch as we are satisfied that it was within th .....

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iew of the matter, we do not see any reasons to order the amendment petition. Accordingly, the W.P.M.P.No.28188 of 2002 is dismissed. 24. In the case of Commissioner of Income-tax vs. Income Tax Settlement Commission, 2013 (33) taxmann.com 313 (Gujarat) para 6 is relevant which reads as under :- 6. We are of the opinion that by such order, the Settlement Commission did not finally decide the merit or demerit of the rival contentions. It only allowed the application to be proceeded with. All cont .....

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2C) regarding admitting the application for settlement filed by the respondent No.1 and department has only received a notice by which they came to know about it. He has also drawn our attention to the relevant provisions of the Act and definition as defined in Chapter XIX and submitted that application must contained a full and true disclosure of the income of the assessee, which has not been disclosed before the assessing officer, the manner in which such income has been derived as required un .....

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mp; Anr., 118 ITR 461 (SC), CIT v/s. Anjum M.H. Ghaswala & Ors., 252, ITR 1 (SC), CIT v/s. Express Newspapers Ltd, 1994 (206) 443 (SC), Ajmera Housing Corpn. v.s CIT, 2010 (193) Taxman 193 (SC), Kuldeep Industrial Corporation v. Income-tax Officer & Ors., 223 ITR pg 840 (SC), Commissioner of Income Tax (Central) Pune v/s. Income Tax Settlement Commission (ITSC), 2013 (40) taxmann.com 201 (Bombay), Commissioner of Incometax v/s. Godwin Steels P. Ltd, 2013 (353) ITR 353 (Delhi), Hassan Ali .....

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otice to either side is required at the time of considering the application. The rule of the department will start one the application is accepted and notice is issued to them. At the time of admission no objection of any kind was raised as is evident from the report which has been reproduced in the preceding paragraph and submits that interest of the department is well protected. The department just to linger on the proceedings before the Settlement Commission has filed this writ petition where .....

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ther full disclosure was made or not, it is not for the court to enter into it and petitioner is at liberty to raise all objection regarding the maintainability of the application before the commission. With the aforesaid observations, we vacate the ad-interim order dated 9.1.2015 by allowing I.A.No.378/2015 filed by the respondent No.1. 29. It may be mentioned that we have not decided any issue on merits of the case and any observation made in the order will not in any way affect the subject ma .....

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