TMI Blog2017 (2) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... the above account, seeking withdrawal of immunity from penalty, in view of the above recording by the Commission. In fact, if the entire paragraph 39 of the impugned order which deals with the issue of waiver of penalty is read, it is very clear that the Commission sought to grant partial immunity in respect of penalty imposed under Sections 271D and 271E of the Act. Therefore, the exercise of restoring the issue to the Commission to freshly determine the issue of penalty, would in the present facts be an academic exercise. In the above view, the aforesaid objections on the part of the Petitioner also does not warrant any interference. - Writ Petition No. 2562 of 2015 - - - Dated:- 14-2-2017 - M. S. Sanklecha And A. K. Menon, JJ. Mr. Kevic Setalvad, Sr. Advocate with Mr. Girish Dave, Ms. Sushma Nagaraj Mr. N. C. Mohanty, for the Petitioner Mr. Janak Dwarkadas, Sr. Advocate with Mr. Sharan Jagtiani, Ms. Rishika Harish, Mr. Rahul Dwarkadas, Ms. Prachi Dhanani Mr. Yuvraj Chokshi i/b. Veritas Legal, for Respondent Principal Commissioner of Income Tax (Central) , Mumbai Versus Income Tax Settlement Commission (ITSC) Additional, M/s. Lodha Developers Pvt. Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making process by the Commission; or (b) Order contrary to the provisions of the Act ; or (c) Order revealing bias or malice on the part of the Commission; or (d) Order which is perverse. This is a self imposed restraint and does not prohibit the Court from exercising its jurisdiction in a fit case to interfere with orders of the Commission passed under Chapter XIXA of the Act, of which section 245D(4) of the Act, is a part. Therefore, only on the above broad parameters, we would exercise our Writ Jurisdiction. Further, it must be noted that if the view of the Commission in the impugned order on facts, is not perverse, then merely because on closer examination of facts, a different view is likely/ possible, the Court would not interfere. We are not an Appellate Court to examine and weigh the evidence before the Commission to reach a different conclusion, so long as the order of the Commission is not perverse. 3 The grievance of the Petitioner before us to the impugned order of the Commission is two fold as under: (a) The impugned order ignored the fact that the Respondent had not made a full and true disclosure of its income, while filing its application for sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosure made by the Respondent; (f) On 16th May, 2014, the Commission passed an order under Section 245D( 2C) of the Act, holding that there was a full and true disclosure and the applications for settlement were not invalid. It, therefore, allowed the settlement applications to be proceeded with; (g) Being aggrieved with the order dated 16th May, 2014, the Petitioner filed a writ being a Writ Petition No.2096 of 2014, challenging the same. This again on the ground that the Respondent had not made true and full disclosure of its income and, therefore, an order under Section 245D(2C) of the Act allowing the applications to be proceeded with, is bad in law; (h) On 9th October, 2014, this Court disposed of the Writ Petition No.2096 of 2014 declining to entertain the Petition by observing that the time limit for the Commission to pass an order as stipulated in Section 245D( 4A) (iii) of the Act, was to expire on 30th November, 2014. However, the order dated 9th October, 2014 of this Court made it clear that the disposal of Writ Petition No.2096 of 2014, would not come in the way of the Petitioner, raising the contention of failure to make true and full disclosure of the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent-Assessee had claimed out of the total on money' received an amount of 8% is income, as 92% of the 'on money' had been spent/expended. As against that, the impugned order found that the 78% out of the 'on money' received could only be allowed as estimated expenditure. Therefore, bringing to tax 22% of the total 'on money' received and not 8% as claimed by the Respondent-Assessee in its application; and (d) The impugned order has been passed in breach of the specific provisions of the Act as is evident from the following: (i) Section 40A( 3) of the Act provides that all payments made in cash in excess of ₹ 20,000/have to be paid through the banking channel/route. On the above basis, it must be held that the entire cash expenditure, was to be disallowed under the aforesaid Section; (ii) After recording the fact that some amount of estimated expenditure claimed by the RespondentAssesssee, was payment made to mafia, yet Explanation-I to Section 37 was not invoked to disallow the estimated expenditure on the above account; and (iii) After recording that the Respondent-Assessee is not entitled to immunity from penalty under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared in the application for settlement. Being aggrieved, the Assesssee carried the issue in appeal before the Division Bench, which allowed its appeal. This by holding that the Commission had come to a finding that there is no full and true disclosure of the Assessee's income in its application for settlement. Therefore, on the basis of the above finding that there is no true and full disclosure, the Court held that the application for settlement had to be rejected. The rejection of the application for settlement by the Division Bench was not on the basis that the amounts disclosed in settlement proceedings is a ceiling for the quantum of settlement. Therefore, the basis of the Madras High Court's decision is not premised on the fact that the income of the Petitioner determined for settlement is higher then that disclosed. The submission of the Petitioner that the above decision leads to an inescapable conclusion that settlement of income at a higher figure than that disclosed in settlement application, is evidence of failure to make a full and true disclosure in the settlement application made by the Applicants, cannot be accepted. 8 In any case, if we read the Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m made after disclosure of all facts is rejected, would not by itself result in a disclosure, not being being true and full. In this case, the Respondent-Assessee has not offered any additional income to that disclosed in its application, it is only the Commission which disallowed a part of the Respondent's claim for expenditure to determine the income for settlement. Therefore, prima facie, we found no merit in the above submission of the Petitioner. 10 We, therefore, called upon the Petitioner to respond to our prima facie view and reconcile the decision of Madras High Court in Kanara Jewellers (supra) with subsection 6A of Section 245D of the Act and granted time for the same. 11 On the next date, Mr. Setalvad, learned Senior Counsel appearing for the Petitioner accepted the fact that the decision of the Madras High Court in Kanara Jewellers (supra), would not lead to the conclusion that mere settlement of an income at a figure higher than that declared by the Applicant, would ipso facto mean a failure to make a full and true disclosure of income. However, Mr. Setalvad then changed track to submit that in the present facts, the manner in which income has been derived, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de of the manner in which such income is derived would make it false and/or incorrect. However, the Petitioner was not able to point out any evidence in support of the above submission. In fact, when no evidence is available in support of the expenditure incurred while disclosing the manner in which the income is derived and it is so stated in the application, how can the allegation of failure to make full and true disclosure of income, of the manner of deriving income can be made, much less sustained. 14 Mr. Setalvad, learned Senor Counsel appearing for the Petitioner in support of its submission relied upon the decision of this Court in Vijaykumar Bagadia v/s. Income Tax Settlement Commission 2009 (SCC) On line (Bom.) 1514. The aforesaid decision does make reference to the decision of the Madras High Court and states that it approves the observation in Kanara Jewellers (supra) that there must be a disclosure of income which has not been disclosed earlier for the application to be maintainable before the Settlement Commission. There is no dispute with regard to the above proposition. However, it does not touch the issue at hand namely failure to truly and fully disclose the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons for settlement had very clearly stated that the car parking charges are received in cheque by the Applicants though not in their names. These cheques are, thereafter discounted and the cash so obtained after discounting, is used for business purposes. The Applicants also point out that there are certain classes of sale on which no car parking charges are recoverable. However, the Applicants declared in its application that it is seeking a deduction of 10% from the amount of ₹ 258 Crores received on account of car parking charges as attributable to car parking charges not recoverable. The Revenue filed its report under Rule 9 of the Settlement Commission Rules (Commission Rules) wherein it was submitted that the Applicants have continued to receive car parking charges even after 10th January, 2011 and the same has not been disclosed as car parking charges recovered. If the same is taken into account, according to the Revenue, the car parking charges recovered should be quantified as ₹ 332 Crores. However, it is to be noted that the Commission records that the Petitioner had not been able to point out a single instance of the Respondent-Assessees having received any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in its application, the Applicants had stated that the 'on money' is utilized for business purposes. These are expenses incurred for payment to encroachers, brokerages and commission, acquisition of land, land aggregation cost etc., to the extent of 92% of the 'on money' received. During the course of the hearing, the Commission granted permission to the Petitioner on selective basis to verify whether the expenses claimed, had actually been incurred. However, the Petitioner did not bring to the notice of the Commission any information contrary to that claimed by the Respondent as its expenses. However, the Commission on the basis of profit before tax in various group companies, settled the net income at 22%. Therefore, allowing expenditure only up to 78% of 'on money' received. This finding of the Commission is not shown to be perverse. It is a possible view taken on the facts before it. 24 Similarly, during the course of submissions, Mr. Setalvad also sought to challenge the determination of 'on money' received by the Commission. This on the ground that it examined three alternative method of computing 'on money' received and adopted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. There cannot be any dispute that the order of the Commission has to be in accordance with the Act and matters cannot be settled by it dehors the provisions of the Act. 27 We, therefore, called upon Mr. Dwarkadas, learned Senior Counsel appearing for the Respondents to respond to the same. He points out that the impugned order of the Commission dated 28th November, 2014 was accepted by all the parties. The Petitioner had also accepted the payment of ₹ 23.09 Crores made by the Respondent-Assessee on various dates, the last of which was on 21st March, 2015, in pursuance of the impugned order. In fact, consequent to the impugned order dated 28th November, 2014 of the Tribunal, the Petitioner had addressed various letters to the Respondent-Assessee, demanding the amount due. This is a clear evidence of acceptance of the order on the part of the Petitioner. This Petition was filed only on 21st August, 2015 i.e. a good eight months after the passing of the impugned order dated 28th November, 2014. It was always the understanding of all the parties that the word 'mafia' used in the impugned order was used in a loose sense and in any case, the payment to the so-cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or expenditure should also be made when it is equally common practice in real estate business to borrow money in cash to incur various business expenses including getting clear title and remove encumbrances, unauthorized occupants, settling claimants etc. and there is clear indication that such expenditure is incurred. Therefore, the expenditure also should be extrapolated without insisting on evidence for making such claim. Further, reliance is placed upon paragraph 124 of the said reply which reads as under: It is wellknown that in Mumbai, the properties are really difficult to get without any disputes and settling the disputes in the court consumes almost a life period of a person which certainly is not affordable or feasible for business entities engaged in execution of projects intended to give to the buyers a title which is free from any claims. According to Mr. Setalvad, the aforesaid statements made on behalf of the Respondent-Assessee is a clear indication that the expenditure was incurred for settling their disputes or for removing encumbrances and acquiring title. It is this aforesaid expenditure, according to Mr. Setalvad, is the amount paid to the & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. The same cannot be contradicted at the bar by affidavit or by any other evidence. 32 The above principle is well settled that the statement with regard to facts as transpired at the hearing, recorded in the judgment/ order of the Court is conclusive of the facts stated therein. No one can contradict same by filing affidavit evidence or any other evidence. If the party thinks that the happening in the Court during the hearing, is wrongly recorded, then it is incumbent upon the party to move the Judges to have the record rectified to indicate the correct facts. 33 However, in the present facts, we find that the impugned order records that the amount is paid to mafia to protect the interest of the Applicant's business. This seems to summarize/ reproduce in the Applicant's submission in the Statement of Facts (SOF). Mr. Setalvad, Counsel for the Petitioner does not dispute that the word 'mafia' finds no mention in the SOF. However, according to him, reading of paragraph 19 of the impugned order does not support our understanding, but he is unable to specify the source of this fact being recorded in the impugned order. The impugned order clearly does not record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons for making the payment. If the payment is made for illegal purposes, then the payment is to be disallowed. The disallowance is on account of the purpose for which the payment is made and not upon the person to whom the payment is made. Therefore even if the payment is made to an alleged criminal, to do legal work,it is allowable. The disallowance is not person specific but expenditure specific i.e. the expenditure must be prohibited by law or must be an offence. Moreover, the scope of enquiry is as pointed out above, is very limited from the orders of the Settlement Commission. If the view taken is a possible view, we would not interfere. Therefore, no interference on this account, is warranted. Further, the payment made to mafia by itself is not shown to be an offence under any law or is prohibited by law. 37 Lastly, it was submitted on behalf of the Petitioner that the impugned order granted partial immunity from penalty under Sections 271D and 271E of the Act. The grievance is that it did so after itself recording that under Section 245H(1) of the Act, the Respondent-Assessee will be entitled to grant of immunity from penalty under Section 271(1) (c) and any other pena ..... X X X X Extracts X X X X X X X X Extracts X X X X
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