TMI Blog2019 (2) TMI 1143X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner after praying for quashing the revisional order of the Commissioner has further prayed that this Hon’ble Court may be pleased to issue a Writ of Mandamus and / or any other appropriate writ order or direction under Article 226 of the Constitution of India directing the respondents to treat the subsidy received under the said scheme as being capital in nature, not eligible to tax, issue the refund of ₹ 24.01 crore with interest in accordance with law and accordingly, allow the revision application. When we find that this prayer could not have been granted by the Commissioner, even if the ground of rejection of the revision petition by the Commissioner may not be entirely convincing, quashing the order of the Commissioner would be issuing a futile writ. We do not understand which order the petitioner seeks revision of. It could not have been the order of Settlement Commission which is clearly the stand of the petitioner, though while explaining delay, the petitioner has taken the order of the Settlement Commission as the starting point for computing delay. If the petitioner seeks revision of the order passed by the Assessing Officer giving effect to the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07-08 4.74 08-09 5.92 09-10 8.44 10-11 13.07 11-12 15.44 12-13 18.27 13-14 12.78 TOTAL 80.15 5. The petitioner periodically filed the returns of income for all the above mentioned assessment years and offered the subsidy benefits received from Government of India under the said scheme to tax as revenue receipt. The petitioner was subjected to search operation on 11.1.2012. By that time, the petitioner s assessment for certain years were already completed under Section 143(3) of the Act. The rest were not. Pending assessment under Section 153A of the Act pursuant to the search, the petitioner applied to the Settlement Commission for settlement of all cases under a joint application filed on 22.10.2013. This petition did not contain the Settlement Application and accompanying documents. We had, therefore, requested the learned counsel for the petitioner to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years covered by the application. 2. Waiver of interest chargeable under any section of the Income Tax Act, 1961 3. Granting of immunity from penalty under section of the Income Tax Act,1961 in respect of the income disclosed by the applicant company and determined by the commission. 4. Granting of immunity from prosecution under various sections of the Income Tax Act, 1961 5. Adjustment of refund against payment of taxes due as per application and also as per the order 245D(4) of the Income Tax Act, 1961 6. Adjustment of the seized cash of ₹ 64,58,000/- against tax / interest due for settlement application filed by the applicant. 7. Any other term that may be considered necessary at the time of settlement application hearing. The total income is determined for all the years as per enclosure. Interest is to be charged up to the date of passing of the order under Section 245D(1) of the Act. In view of the following decisions of the Hon ble Supreme Court in case of Brijlal Vs. CIT (2010) 328 ITR 477 (SC). We are satisfied that there has been no attempt to conceal any material facts before us and also the applicant has fully co-operated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Income ₹ 19,94,46,108/- ============== Total income u/S. 115JB ₹ 56,15,14,131/- Since the tax on book profit u/S. 115JB is less than the tax on total income, the assessee is liable to pay tax on the total income computed under the normal provisions of the Act other than Section 115JB. Assessed accordingly. Calculation of Tax and interest payable are incorporated in Income Tax Computation Form (ITNS150A), Credit of taxes paid given. Demand Notice as per the provisions of section 245D(6) of the I.T. Act is issued 9. The Assessing Officer passed similar individual orders for each assessment year covered under the settlement. It is not necessary to record contents of all of them. 10. The petitioner thereupon filed a common petition for revision before the Commissioner of Income Tax. In such revision petition, the petitioner took up the question of taxing subsidy amount received from the Government of India under the said scheme and argued that the subsidy being in the nature of capital receipt, was not liable to be taxed, both while computing the assessee s book profit under the Minimum Alternative Tax (MAT) provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... you and furnish additional submissions. We will be glad to submit any further information or clarification as may be required. 12. To explain the delay in filing the revision petition, the petitioner contended that:- F. Time Limit for application under Section 264 of the Act 31. As per section 264(3) of the Act, time limit for making application under Section 264 of the Act is one year from the date on which the order in question is communicated to the Assessee. 32. In the present case, the settlement commission order dated 30 August 2014. However, the time limit for making application under section 264 of the Act is to be seen from the date on which amendment is brought into statute i.e 14 May 2015. Section 2(24) of the Act is amended from 14 May 2015 (i.e date on which President given its acceptance to Finance Bill 2015 and it became Finance Act 2015). 33. By way of aforesaid amendment with prospective effect, it is being made clear that subsidy received from government is chargeable to tax as revenue receipt and the said amendment is made with prospective effect. Therefore, time limit for making application should be taken from the aforesaid date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that the Commissioner had no power to entertain the revision petition in present set of facts and circumstances, these issues would become purely academic. We would focus our attention only on this aspect. 15. To summarize the relevant facts, the petitioner had applied for settlement of all assessment cases for the period between assessment years 2006-07 to 2013-14. The Settlement Commission after making certain additions to disclosures made by the petitioner passed final order of settlement granting immunity to the petitioner from penalty and prosecution subject to conditions. The Assessing Officer passed individual orders giving effect to the order of Settlement Commission after which the petitioner applied for revision to the Commissioner and raised dispute about taxability of the subsidy. 16. In this context, Mr. Mistri, the learned senior counsel appearing for the petitioner took us extensively through the various provisions of the Act and contended that :- I. The Commissioner of Income Tax erred in rejecting the application under Section 264 of the Act on the ground that order of the Income Tax Settlement Commission cannot be revised being an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case should be pending before the Assessing Officer is amended w.e.f. 1.6.2007, prior to which a case in terms of said definition would include also the proceedings pending before the appellate or revisional stage. 18. Section 245BA of the Act pertains to jurisdiction and powers of Settlement Commission and lays down the procedure for constitution and decision of the Settlement Commission Benches. Sub-section (5A) of Section 245BA provides that notwithstanding anything contained in the earlier provisions of the said Section, the Chairman may, for the disposal of any particular case, constitute a Special Bench consisting of more than three members. Reference in this sub-section is thus for the disposal of any particular case . Likewise proviso to sub-section 5 of Section 245BA also provides that if at any state of the hearing of any such case or matter, it appears to the Presiding Officer that the case or matter is of such a nature that it ought to be heard by a Bench consisting of three members, the case or matter may be referred by the Presiding Officer of such Bench to the Chairman for transfer to such Bench as the Chairman may deem fit. We are conscious that this proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner to be heard either in person or through a representation duly authorized in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the [Principal Commissioner or] Commissioner. Sub-section (5) to Section 245D provides that subject to the provisions of Section 245BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the concerned Bench before passing any order under sub-section (4) and in relation to the passing of such order, the provisions of Section 245BD shall apply. Sub-section (6) of Section 245D provides that every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) Notwithstanding anything contained in sub- section (2) and in the absence of any express direction to the contrary by the Settlement Commission, nothing contained in this section shall affect the operation of any other provision of this Act requiring the applicant to pay tax on the basis of self-assessment in relation to the matters before the Settlement Commission. (4) For the removal of doubt, it is hereby declared that, in the absence of any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission. (5) ....... (6) ....... (7) The Settlement Commission shall, subject to the provisions of this Chapter, have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings. 22. Section 245H of the Act pertains to power of Settlement Commission to grant immunity from prosecution and penalty. Section 245HA pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer, the manner of earning such income and truthfulness of the declaration made by the assessee. Before the Settlement Commission, the question of taxability of the subsidy income was nowhere in horizon. 25. It was pursuant to such application of the petitioner that the Settlement Commission passed the final order of settlement making certain additions to the declaration made by the petitioner and granting immunity from penalty and prosecution subject to fulfillment of the conditions contained in the order. The Assessing Officer, therefore, while carrying out the terms of settlement and the order passed by the Settlement Commission, had limited jurisdiction of only giving effect to the directives contained therein. The question of correctness of taxing the subsidy income was neither raised, nor in our opinion could have been raised before him. We are conscious that the powers of the Commissioner for revision under Section 264 of the Act are not seen to be co-terminus with the powers of the Assessing Officer. The Commissioner may as well entertain a ground, a claim or a contention of the assessee which may not have been raised either in the return or before the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction would continue upto the date on which the application is rejected, or, not allowed to proceed with or declared invalid. Sub-section (4) of Section 245F provides for removal of doubt, in absence of any express direction by the Settlement Commission, nothing contained in the Chapter shall affect the operation of the provisions of the Act in so far as they relate to any matters other than those before the Settlement Commission. 29. In the context of our discussion, this Section 245F is of utmost importance. In clear terms, it signifies the intention of the legislature to vest jurisdiction in relation to a case in one authority; be it Assessing Officer or Settlement Commission. In relation to application for settlement filed after 1.6.2007, once it is filed, the Settlement Commission would have exclusive jurisdiction in relation to the case, the Commission would enjoy all the powers of the Assessing Authority and the Assessing Officer would have no power to deal with the assessment. This position would continue till the application for settlement is rejected, or not allowed to be proceeded further or declared invalid, or until an order is passed under Section 245D(4) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion of the any authority ousting the jurisdiction of the concerned income tax authority. Where the application for settlement either abates or becomes void, the Authority before whom the proceedings were pending on the date of filing of the application for settlement would pass order in terms of provisions of the Act. The Act, thus envisages only one order concerning a case of the assessee, it may either be an order of settlement passed by the Settlement Commission or an order of assessment passed by the Assessing Officer but not both. We are conscious, the proviso to sub-section (5) of Section 245BA mentions a case or a matter which can be referred to a bench of three members of the Commission. This distinction, however, can be easily explained. In a given situation a case may require attention of three members. Situation may also arise where only a matter arising in a case but not the entire case may require reference. Even Mr. Mistri, learned counsel for the petitioner did not argue to the contrary. His contention, if we understand correctly was that the Settlement Commission would pass order only in respect of matters before it and no other. Therefore, the revenue authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e settlement was ordered by the Commission, can now urge the Assessing Officer to entertain such a question or urge the Commissioner of Income Tax to examine such an issue in exercise of revisional powers. Answer to the question has to be in the negative. Any other view, this would give rise to the two parallel proceedings in relation to the same assessment years concerning the assessee which in our opinion, the Act does not envisage. 34. Learned counsel Mr. Mistri would, however, contended that the sole ground on which the Commissioner has rejected the revision petition in context of this issue is that he had no power to revise the order of the Settlement Commission. He contended that order of the Commissioner can be tested only on the basis of reasons sited by him. 35. There are several difficulties in accepting this contention. Firstly, though the petitioner may have worded the prayer before the Commissioner differently, to grant the prayer of the petitioner would require the Commissioner to travel beyond the order of Settlement Commission which as held by us he could not do. His mere expression that he cannot revise the order of the Settlement Commission, therefore, would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner can seek relief from the Commissioner without seeking revision of any order. 39. The reliance by the petitioner upon the decision of the Madras High Court in the case of Vaata Infra Vs. I.T.O. 2015 (229) Taxmann 373 is inappropriate in the context of the facts of this case. In the above case, the Settlement Commission had accepted the revised offer of the additional income filed by the petitioner therein. However, it further directed the Assessing Officer to compute the total income, interest and penalty payable in terms of the order of the Settlement Commission. The petitioner therein, was aggrieved by the demand of interest computed by the Assessing Officer on the ground that the same is not in accordance with the order of the Settlement Commission. It was in the above context that the Madras High Court had directed the petitioner therein to file a revision application under Section 264 of the Act. The facts herein are completely different. Most importantly it is not the case of the petitioner herein that the working out of the demand consequent to the order of the Settlement Commission was not in terms of the order. 40. Having thus come to our indepen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said income is derived. It is not meant for those who come after the event, i.e., after the discovery of the particulars of income and its source or discovery of particulars of fraud perpetrated by the assessee, as the case may be nor even to those who come to the Commission to forestall the investigation/inquiries which have reached a stage where the department is in possession of material which though not sufficient to establish such concealment or fraud, is such that it is likely to establish it maybe some more material is required to establish it fully. The Commission has to keep all this in mind while deciding whether to allow the application to be proceeded before it or to reject it. 42. In case of CIT Vs. Paharpur Cooling Towers Pvt Ltd (1996) 8 SCC 154 once again the provisions contained in Chapter XIX-A came up for consideration before the Supreme Court. It was observed that once an application is admitted by the Commission, the Commission takes over all the proceedings relating to that case which may be pending before any Authority under the Act. 43. In case of CIT Vs. Om Prakash Mittal (2005) 2 SCC 751, it was observed that the Commission assumes jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XIX-A. It was observed as under:- 27. Thus, the special procedure under Section 245C and 245D in Chapter XIX-A shows that a special type of computation of total income is engrafted in the said provisions which is nothing but assessment which takes place at Section 245D(1) stage. However, in that computation, one finds that provisions dealing with a regular assessment, self-assessment and levy and computation of interest for default in payment of advance tax, etc. are engrafted. [See Sections 245-C(1-B), 245-C(1-C), 245-D(6), 245-F(3) in addition to Sections 215(3), 234-A(4) and 234-B(4).] 31. With the filing of the settlement application and after such application is allowed to be proceeded with under Section 245-D(1), intimation under Section 143(1), regular assessment under Sections 143(3)/144 and re-assessment under Section 147 lose their existence as under Sections 245-C(1-A) and (1-B) it is only the income disclosed in the return of income before the A.O. alone which survives for consideration by the Settlement Commission for settling the amount of income which is not disclosed in the return. 35. As stated, till the Settlement Commission decides to admit t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee in the return. The Settlement Commission eventually passed the order of settlement assessing total amount of ₹ 6.18 crore (rounded off) concerning two separate assessment years representing the additional income of the assessee, inter alia holding that the assessee had introduced its own money in the form of share application money. The assessee challenged the said order of Settlement Commission before the High Court arguing that the Settlement Commission had no jurisdiction while passing its order under Section 245D(4) of the Act to deal with the issues which were neither raised in the application of the petitioner nor in the report of the Commissioner submitted under Section 245D(3) of the Act. It was argued that the Settlement Commission would have no jurisdiction to travel beyond the subject matter of the application and the report of the Commissioner. This Court relied upon the decisions of the Supreme Court in the case of Express Newspapers Ltd (supra) and Brij Lal (supra) and held that the Act does not contemplate a parallel proceeding before the Settlement Commission and before the Assessing Officer, once the Settlement Commission has decided to proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer is essential to the validity of the application. The application is to have the case settled. Under sub-section (1B) of Section 245C, where the income disclosed in the application relates to one previous year, if the applicant has furnished a return in respect of total income of that year, the tax has to be calculated on the aggregate of the total income returned and the income disclosed in the application as if such aggregate were the total income. The Settlement Commission is empowered to call for a report of the Commissioner at two stages. The first stage arises under sub-section (2B) of Section 245D where, inter alia, an application has been allowed to be proceeded with under sub-section (1). There, the Settlement Commission shall call for a report. The second stage is under sub-section (3) of Section 245Dwhere, inter alia, the Settlement Commission has not declared an application as invalid under subsection (2C). In both the cases the report of the Commissioner is not a condition precedent for the Settlement Commission to proceed further with the settlement of the case. If the Commissioner does not submit his report to the Commission, that does not bring an end to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are satisfied that the Settlement Commission acted within the parameters of its jurisdiction in the present case. The position which emerges on a plain and literal construction of the language of the statute is supported by even a contextual construction. Parliament intended that the entire assessment is before the Settlement Commission. The Commission completes the process of assessment - as the decision in Brij Lal holds - as part of the settlement of the case. Until the Settlement Commission is seized of the proceedings, there is no parallel assessment contemplated in law. Comprehensiveness, finality and conclusiveness are the three attributes of the function assigned to the Commission. That object is achieved when the entire assessment is completed, as part of the jurisdiction to settle a case. To dilute this position would defeat the object which Parliament intended to achieve. Once an assessee moves the Settlement Commission, the statute expressly mandates that the application cannot be withdrawn. Unless the Commission in a given case decides to reject the application, it is entitled to resolve the case by settlement. An assessee who moves the Settlement Commission cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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