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TMI Blog2018 (8) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... 011. Thereafter, a return of income for the Assessment Year 2011-2012 was filed by the Public Limited Company under Section 115 JB of the Act, admitting a total income of Rs. 7,10,82,650/-. 4. Subsequently notices under Section 153A of the Act were issued for the Assessment Years 2006-2007 to 2012-2013. The petitioners made a request that the returns filed under Section 139 may be treated as the response to the notices under Section 153A. Thereafter, assessments were sought to be made and they were unsuccessfully challenged up to the Supreme Court. 5. At last, the petitioners filed separate applications in May, 2016 before the Settlement Commission. In May/June 2016, the Settlement Commission passed a speaking order under sub-section (1) of Section 245D, allowing the applications to be proceeded with further. As a consequence, the Secretary of the Settlement Commission called for reports from the Principal Commissioner of Income Tax. The Principal Commissioner submitted detailed reports in June, 2016 opposing the applications on various grounds including that there was no true and full disclosure. 6. On the basis of the said report and after giving an opportunity to the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Agrawal; that the company was originally floated as a Private Limited and later converted into a Public Limited Company, that M/s. GVA Industries Private Limited, Sri Maa Maha Power Limited and VSG Power and Ispat Private Limited are all investment companies; that though all the business activities of the group like procurement of raw materials, production, revenue generation, preparation of books of accounts etc., are carried on in Visakhapatnam, the group companies and the family members of the Chairman were filing returns at various places; that as per the provisions of Section 153A and 153C, the assessments in the group cases had to be completed on or before 31-03-2014; that the assessment proceedings were stalled by the assessees through Court orders until 04-04-2016; that on 04-04-2016, the Special Leave Petitions filed by the assessees were dismissed by the Supreme Court; that within 60 days from the date of the order of the Supreme Court, the assessment in all 14 cases had to be completed as per the Explanation (1) to Section 153B; that therefore, the assessment proceedings resumed with the issuance of a notice under Section 142 (1); and that it was at that time the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 245D can be summarized in simple terms as follows:- (i) Within seven days of receipt of the application, under Section 245C, the Settlement Commission should issue a notice to the applicant and hear him and pass an order in writing either rejecting the application or allowing the application to be proceeded with. If no order is passed within the period stipulated in sub-section (1) of Section 245D, the application shall be deemed to have been allowed to be proceeded with. (ii) After passing an order under sub-section (1), which is obviously an ex parte preliminary order, the Settlement Commission should send a copy of the order passed under sub-section (1) to the Principal Commissioner or Commissioner and call for a report from such Commissioner under sub-section (2B). (iii) After the receipt of the report from the Principal Commissioner or Commissioner and after giving an opportunity to the applicant, the Settlement Commission may pass an order either declaring the application as invalid or allowing the application to be proceeded with further. This is under sub-section (2C) of Section 245D. (iv) After the second stage prescribed in sub-section (2C) is crossed, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n writing, reject the application or allow the application to be proceeded with; Provided that where no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with. (2) A copy of every order under section (1) shall be sent to the applicant and to the Principal Commissioner or Commissioner. (2A) Where an application was made under Section 245C before the 1st day of June, 2007, but an order under the provisions of subsection (1) of this Section, as they stood immediately before their amendment by the Finance Act, 2007, has not been made before the 1st day of June, 2007, such application shall be deemed to have been allowed to be proceeded with if the additional tax on the income disclosed in such application and the interest thereon is paid on or before the 31st day of July, 2007. Explanation, -- In respect of the applications referred to in this subsection, the 31st day of July, 2007 shall be deemed to be the date of the order of rejection or allowing the application to be proceeded with under sub-section (1). (2B) The Settlement Commission shall, -- (i) in respect of an applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred 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 Principal commissioner or Commissioner and after examination of such records, if the Settlement commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Principal Commissioner or Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case, and the Principal Commissioner or Commissioner shall furnish the report within a period of ninety days of the receipt of communication from the Settlement Commission: Provided that where the Principal Commissioner or commissioner does not furnish the report within the aforesaid period, the Settlement Commission may proceed to pass an order under sub-section (4) without such report. (4) After examination of the records and the report of the Principal Commissioner or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng unpaid from the date of expiry of the period of thirty-five days aforesaid. (6B) The Settlement Commission may, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (4) - (a) at any time within a period of six months from the end of the month in which the order was passed; or (b) at any time within the period of six months from the end of the month in which an application for rectification has been made by the Principal Commissioner or the commissioner or the applicant, as the case may be: Provided that no application for rectification shall be made by the Principal Commissioner or the Commissioner or the applicant after the expiry of six months from the end of the month in which an order under sub-section (4) is passed by the Settlement Commission; Provided further that an amendment which has the effect of modifying the liability of the applicant shall not be made under this sub-section unless the Settlement Commission has given notice to the applicant and the Principal Commissioner or Commissioner of its intention to do so and has allowed the applicant and the Principal Commissioner or Commissioner an opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the Section 245C (1) itself and hence, the application, which does not fulfill this requirement, will not qualified to be a valid application under Section 245C. Keeping this in mind, let us now take another look at Section 245D. 17. The procedure prescribed in Section 245D, as we have analyzed earlier, is actually split into four stages. They are: (1) the receipt of an application, a preliminary scrutiny of the application and an order either rejecting or allowing the application to be proceeded with, (2) the serving of such a preliminary order upon the Principal Commissioner or Commissioner, calling for a report from the Principal Commissioner or Commissioner and passing an order declaring the application to be invalid, (3) calling for the records from the Principal Commissioner or Commissioner, in cases where the application has not been declared invalid in the second stage and directing the Principal Commissioner or Commissioner to make such further enquiry or investigation and to furnish a report, wherever the Commission deems it fit, after the examination of the records, (4) hearing the applicant as well as the Principal Commissioner or Commissioner, examining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45D (2C), these three applicants namely Maa Mahamaya Industries Ltd., GVA Industries Pvt. Ltd., and Sri Ashok Kumar Agarwal have come up with three writ petitions in W.P.Nos.24631, 24636 and 24641 of 2016. 22. In the meantime, on the nine applications of the individuals, which were, by order dated 13-06-2016, allowed to be proceeded with, the Settlement Commission called for a report under Section 245D (2B). The report in respect of these nine cases was received from the Principal Commissioner of Income Tax on 11-07- 2016. The copies of the reports were forwarded to the applicants and the applicants submitted replies on 21-07-2016. A personal hearing was also held on 21-07-2016 and the representatives of the applicants as well as the Departments participated. Thereafter, the Settlement Commission dismissed these applications also as invalid under Section 245D (2C), by orders dated 21-07-2016. Challenging these orders, dated 21-07-2016 rejecting the settlement applications of nine individuals, eight of them have come up with the writ petitions in W.P.Nos.26244, 26249, 26260, 26321, 26374, 26276, 26376 and 26380 of 2016. 23. Since the grounds of attack to all the orders of the Sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on after hearing both parties, does not terminate the proceedings in the main suit. But that is not the case with the order of the Settlement Commission. If a settlement application is declared as invalid, under sub-section (2C) of Section 245D, the main proceedings get terminated. But this distinction does not really matter because a lis is different from a settlement. In any case, there are also certain interlocutory applications such as those which fall under Order VII Rule 11 of the Code of Civil Procedure or under Section 8 of the Arbitration and Conciliation Act, 1996, which, if allowed, would terminate the main proceedings. 28. The point that we are trying to drive at is that the conclusion reached at the stage of Section 245D (1) without ascertaining the views of the department, does not take away the power conferred under Section (2C). Sub-section (2C) cannot be turned into a dead letter. 29. In fact, the finding recorded by the Settlement Commission in its order dated 13-06-2016 in the case of nine individuals holding that prima facie there is no material warranting the conclusion that true and full disclosure has not been made, was a one sided conclusion, which was ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 245D. 31. Drawing our attention to the observations made by the Supreme Court in Paragraph 31 of the decision reported in Ajmera Housing Corporation, it was contended by Mr. S. Ravi, learned senior counsel for the petitioners that even in cases where the Settlement Commission decides to proceed with the application, it is not denuded of its power to examine whether the assessee has made a full and true disclosure of his undisclosed income. In fact, Section 245F confers upon the Settlement Commission all the powers vested in an Income Tax Authority under the Act. Therefore, the Settlement Commission can make additions, deletions etc., as an Assessing Officer could do. Hence, it is contended by the learned senior counsel for the petitioners that even if there are contentious issues with regard to certain items of income or expenditure, the Settlement Commission could decide them finally. In such circumstances, the rejection of an application under sub-section (2C) may not be appropriate in the teeth of the scheme of the chapter. 32. But as we have pointed out earlier, Section 245D formulates a four stage process of adjudication. In the first stage, the Settlement Commission passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since the assessee had taken recourse to Section 115JB, any revision is not possible in view of the decision of the Supreme Court in Apollo Tyres Ltd., v. Commissioner of Income Tax, Kochi (2002) 255 ITR 273 (SC). 37. Though arguments were advanced on the second issue revolving around Section 115JB, we do not think that it is necessary to go into the same. At the second stage of the enquiry under Section 245D, the Settlement Commission is empowered to declare an application as invalid on the ground of failure to make true and full disclosure. Therefore, it is enough for us to see whether there was any material at all before the Settlement Commission to come to a conclusion that there was failure to make a true and full disclosure. 38. In paragraph 11.11 of its order dated 14-07-2016 in the case of Maa Mahamaya Industries Ltd., GVA Industries Pvt. Ltd., and Sri Ashok Kumar Agarwal, the Settlement Commission made the following observations "The next question raised by the CIT (DR) or the Department was the non-disclosure of manner of earning and the genuineness of the commodity trading activity and the resultant additional income disclosed. The AR was specifically asked to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een disclosed before the AO cannot be deleted or modified. Only additional income can be disclosed before this Commission as per provisions of Chapter XIXA. The Return of income filed are subjected to self assessment which is in Chapter XIV i.e. "Procedure for Assessment". There is no basis for the applicants not to disclose these sums. Alternatively, the Assets and Liabilities statement and Capital accounts of the individuals have not been filed explaining the position. The commission paid to Kolkata or Delhi parties for obtaining entries (as claimed by the applicants) is also not disclosed as additional income. Hence, there is deficiency in disclosure." 42. An argument was advanced by Mr. S. Ravi, learned senior counsel for the petitioners that a provision was inserted as subsection (1A) by Finance Act, 1979 with effect from 01-04-1979. Subsection (1A) was amended by the Taxation Laws (Amendment) Act, 1984 with effect from 01-04-1984. But this sub-section (1A) of Section 245D was omitted by Finance (No.2) Act, 1991 with effect from 27-09-1991. 43. Sub-section (1A) of Section 245D as inserted by Finance Act, 1979 and amended by the Taxation Laws (Amendment) Act, 1984 but omi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invalid. That the application does not disclose true and full particulars, can be highlighted by the Commissioner in his report under sub-section (2B). On the basis of such report, the Settlement Commission can declare the application under sub-section (2C) to be invalid. The procedure prescribed in sub-section (2B) and sub-section (2C) are not taken away even after the deletion of sub-section (1A). Therefore, the contention revolving around sub-section (1A) does not take the petitioner anywhere. 46. As rightly contended by Mrs. M. Kiranmayee, learned senior standing counsel for the department, once this Court finds that the conclusion regarding non-disclosure is based upon some material, the enquiry under Article 226 would stop there. In Jyotendrasinhji v. S.I. Tripati and others (1993) 201 ITR 611 (SC), the Supreme Court held that where the Settlement Commission interprets a particular document, even if such interpretation is not correct, it would not be a ground for interference. Though the said decision arose out of the appeals as against the orders of Settlement Commission, the principle indicated therein would apply to judicial review under Article 226 of the Constitution. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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