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TMI Blog2002 (9) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... rious proceedings under the Act were pending against the petitioner-company in respect of the assessment years 1977-78 and 1978-79. Thus in entry No. 5 of this main settlement application the petitioner mentioned these two assessment years only. On December 15, 1978, the petitioner-company requested the Settlement Commission through a petition for amendment of the main settlement application to substitute against entry at serial No. 5. In place of the two assessment years 1977-78 and 1978-79, the petitioner-company wanted the following sentence to be substituted "1977-78 and 1978-79 and any other assessment year(s) which the Settlement Commission may desire to reopen". While this main settlement application was still pending and had not been admitted, the Director of Inspection conducted a search and seizure operation under section 132 of the Act upon the premises of the petitioners and others connected with the first petitioner-company. This happened on November 13, 1979. It may be mentioned that the individual persons from whom seizure of various properties were made during the search as aforesaid have since admitted through their individual affidavits before the Settlement Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application to be proceeded with. 3. The Income-tax Officer may issue tax recovery certificate to the Tax Recovery Officer in respect of arrears demands, if any, to save limitation under section 231 of the Income-tax Act, but any coercive action would be kept in abeyance till order under section 245D(4) is passed by the Commission." On August 5, 1980, the first petitioner-company filed its return of income before the Income-tax Officer for the assessment year 1979-80. Thereafter on September 8, 1980, the first petitioner-company filed yet another application under section 245C(1) of the Act before the Settlement Commission in respect of the assessment year 1979-80. The return of income for the assessment year 1979-80 filed by the first petitioner-company on September 8, 1980, was revised on September 9, 1980, so as to cover the portion of the additional income arising from the said assessment year. On January 31, 1981, the Income-tax Officer issued several notices under section 148 of the Act for making the reassessment of its income in respect of the assessment years 1972-73, 1973-74, 1975-76 and 1976-77. The legality of these notices is challenged by the petitioners by filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided: Provided that no such application shall be made unless,- (a) the assessee has furnished the return of income which he is or was required to furnish under any of the provisions of this Act; and (b) the additional amount of income-tax payable on the income disclosed in the application exceeds one hundred thousand rupees." "245D. Procedure on receipt of an application under section 245C.--(1) On receipt of an application under section 245C, the Settlement Commission shall call for a report from the Commissioner and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission, shall, where it is possible, by order, reject the application or allow the application to be proceeded with within a period of one year from the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On August 12, 1977, the Commissioner agreed to the settlement for the years 1960-61 to 1975-76 but objected to the settlement for the earlier years 1948-49 to 1959-60 on the ground that concealment in relation to those years had been upheld in appeal before the appropriate authorities. Without furnishing to the appellant any opportunity of being heard, the Settlement Commission passed an order on August 24, 1977, rejecting the application for settlement for the years 1948-49 to 1959-60. On September 20, 1977, the appellant applied to the Commission for recalling that order making certain submissions. Pending this application, the Finance Act, 1979, amended section 245D by inserting sub-section (1A), which enabled the Settlement Commission to reject the Commissioner's application. Thereafter, the matter was heard on June 18, 1987, and the Commission passed an order holding that the appellant was entitled to a rehearing, since the order dated August 24, 1977, had been made in violation of the principles of natural justice, but rejected the submission that the application for settlement would have to be rejected in its entirety if the Commissioner's objections were not to be interfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone but should be appropriately spread over all the six assessment years, viz., assessment years 1970-71 to 1975-76. For this purpose, the assessee consented to the reopening of the assessments for the assessment years 1970-71 to 1974-75. The Settlement Commission, holding, by a majority, that it had jurisdiction to do so, reopened the assessments for the earlier assessment years and passed order directing that penalty proceedings pending for those years be dropped. The court examined the validity of the order of the Commission whereby it had directed dropping of penalty proceedings relevant to the assessment years 1970-71 to 1974-75 while settling the case relevant to the assessment year 1975-76 and held that this was not a case where the Commission wanted to reopen the concluded assessments because it was found necessary or expedient to do so for the proper disposal of the case pending before it; it was a case where the assessee was requesting for a benefit and for the purpose of obtaining that benefit, it was requesting the reopening of the earlier assessments. Even this request of the assessee was for a limited purpose, viz., for spreading over the enhanced value of opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers with respect to the assessment years other than the assessment year 1975-76; so far as the assessment year 1975-76 is concerned, the Commissioner put forward no objection. Sub-section (4) of section 245D says that after examining the entire material, the Commission shall 'pass such order as it thinks fit on the matters covered by the application and any other material relating to the case not covered by the application', 'in accordance with the provisions of the Act'; in other words, the Commission has not only to act in accordance with the provisions of the Act but that its jurisdiction is confined to the matters covered by the application before it. The further words 'and any other material relating to the case not covered by the application' show that the Commission can take into consideration any other material not covered by the application but it must be one relating to the case before it. It must be remembered that this Chapter [XIX-A] prescribes a procedure which is a departure from the normal procedure provided by the Act. Once an application is admitted--an application can be made only in respect of a pending case--the Commission takes over all the proceedings relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted proceedings connected with the case before it but this power is circumscribed by the requirement expressly stated in the section that such reopening of the completed proceedings should be necessary or expedient for the proper disposal of the case pending before it, (f) There are two more limitations on this power, namely, the reopening of the completed proceedings can be done, even for the aforesaid limited purpose, only with the concurrence of the assessee and, secondly, that this power cannot extend to a period beyond eight years from the end of the assessment year to which such proceeding relates, (g) The aforesaid limitations make it clear that the section contemplates reopening of completed proceedings not for the benefit of the assessee but in the interests of the Revenue. Thus the court held, in no uncertain terms, that the jurisdiction of the Settlement Commission was limited to settling the case in respect of which the application was admitted and it could not settle the matter relating to other assessment years which are not before it. This rule however, was relaxed by section 245E to a limited extent and only if the following conditions are satisfied: "(a) suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act that the petitioner-company filed a second application offering additional income and wanted the Settlement Commission to cover the period from 1972-73 to 1979-80. Obviously, after this search and seizure the petitioner-company knew fully well that the Income-tax Officer may initiate reassessment proceedings. Obviously to avoid the same the petitioner had chosen the aforesaid course of action. Though it had withdrawn this application it still wanted the statement of facts filed therewith to be part of the first application. For the aforesaid reasons, we do not find any merit in this writ petition. It is accordingly dismissed. C.W.P. No. 990 of 1981: In this petition the order dated February 21, 1981, of the Settlement Commission is challenged on two grounds, namely, (a) not admitting the settlement application for the assessment years 1971-72 to 1974-75 and; (b) levy of penalties for concealment of income for the assessment years 1975-76 to 1978-79. In so far as the first part is concerned, this prayer has to be dismissed in view of our conclusion in C.W.P. No. 1255 of 1981 as aforesaid. The writ petition only in respect of the second relief is to be entertained which asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no question of levying penalty on the petitioner. Mere disclosure of income voluntarily would not attract penalty provisions unless concealment was also proved, learned counsel submitted. He also referred to three orders of the Commission passed in some other cases wherein no penalty was levied and on that basis submitted that on the parity of reasoning the penalty should not have been levied in respect of these years as well. In a nutshell his submissions were: (a) Merely from the fact that income was revised upward voluntarily, no penalty could be levied. It could not be presumed that there was a concealment. Therefore, no penalty could be levied for this. He referred to the judgment of CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC). (b) Where there is no concealment, no penalty could be levied (refer to CIT v. Aggarwal Pipe Co. [1999] 240 ITR 880 (Delhi)). (c) The disclosure could not be related to any specific year and on this ground also penalty could not be levied in respect of one particular year. He submitted that it was the basic principle of income-tax that income is to be assessed in the right hands and for the right year referring to the case of ITO v. Ch. Atcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the partners and their relatives and also in respect of certain items like miscellaneous expenses, repairs, investment in factory building and plant and machinery, etc. The total amount of Rs. 1,02,50,000 which was so offered to be settled, the assessee bifurcated the same over the assessment year 1971-72 to the assessment year 1980-81. The amounts so sought to be treated as income for the assessment years under appeal are Rs. 6 lakhs, Rs. 2 lakhs, Rs. 3.05 lakhs and Rs. 7.50 lakhs for the assessment years 1971-72, 1972-73, 1973-74 and 1974-75, respectively. If any of these assessments were pending at the time when the assessee moved its amended petition before the Settlement Commissioner some time in January, 1980, as it had happened in respect of the assessment year 1975-76 to the assessment years 1980-81. The result would have been that the amount so offered might have been accepted. All the same, the undisputed fact that remains is that neither the assessee nor the Revenue could pin-pointedly say that the amount so declared/surrendered and so accepted by the Revenue for these years really represented income of these years. When it could not be identified, or when it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant assessment year and therefore, was not sufficient for levying of penalty. In the earlier paragraphs during the course of bringing any arguments of counsel for the assessee, Mr. Agarwal, the observation made by the Assessing Officer in imposing the penalty has been brought out. The Assessing Officer had observed while imposing penalty that it would have been a mere matter of time before the Department would have established concealment of substantial income by the applicant firm. In other words, this scale the facts of the Revenue and also establishes that the Revenue had no evidence on record which would suggest that the income that was surrendered by the assessee really represented the incomes that were earned, the sources from which they were earned, etc. In other words, the penalty was imposed merely for the reasons that the assessee had surrendered these amounts which was so accepted by the Revenue. We are, therefore, of the opinion that the assessee had been able to offer its explanation which could not be said to be unreasonable to the effect that it had no way of pin-pointedly saying to which year the income pertains and how much pertains to which year and simultane ..... X X X X Extracts X X X X X X X X Extracts X X X X
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