TMI Blog2019 (4) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Revenue : Smt. Sulekha Verma, CIT(DR) ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, With this appeal, the assessee has challenged the correctness of the order of the CIT(A)- 30, New Delhi dated 19.02.2015 pertaining to assessment year 2005-06. 2. With the first three grounds of appeal, the assessee has challenged the jurisdiction of the Assessing Officer in framing the assessment order u/s 153A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'. 3. Ground No. 4, with its sub grounds, challenges the disallowance of expenditure of ₹ 1.78 crores on merits of the case. 4. Since Ground Nos. 1 to 3 go to the root of the matter, we proceed to decide these grounds. 5. The under lying facts in this issue are that a search and seizure action u/s 132 of the Act was carried out in the Radico Khaitan group of cases including the assessee company on 15.02.2011. The assessee company had also been covered in an earlier search u/s 132 of the Act on 14.02.2006. 6. Pursuant to the present search, i.e. on 15.02.2011, the Assessing Officer commenced the assessment proceedings as the present A.Y is 2005-06 is one of the six A.Ys, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Settlement Commission, we are of the opinion that the income settled by the Settlement Commission is final and no interference/adjustment in the said income is needed. 11. The above challenge of the assessee did not find any favour with the Assessing Officer who was of the firm belief that the issue of amount involving ₹ 1,78,30,714/- pertaining to the transaction with M/s Count Trade Links Pvt Ltd was neither subject matter of the allegation/finding arising out of the earlier search nor a part of the assessee s disclosure made before the Income tax Settlement Commission, New Delhi as well as in the order of the Income tax Settlement Commission dated 13.03.208 passed u/s 245D(4) of the Act. Drawing support from the provisions of section 245-I of the Act, the Assessing Officer made addition of ₹ 1,78,30,714/-. 12. The assessee carried the matter before the CIT(A) but without any success. 13. Before us, the ld. AR vehemently stated that when the assessment was completed on the basis of search conducted on 14.02.2006, the A.Y under dispute was part of block assessment. The ld. AR pointed out that the quarrel was settled by the Income tax Settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 245D(4) of the Act settled the income of the appellant inter-alia for AY 2005-06 at Rs. NIL after allowing deduction under chapter VIA amounting to ₹ 5,31,20,630/-. 15.02.2011 A second search was conducted at the business premises of the appellant, alongwith various other companies of the Radico Khaitan Group 03.06.2013 The assessing officer passed assessment order under section 153 A of the Act for assessment year 2005-06. - io-l\ 194)2.2015 The CIT(A) dismissed the appeal filed by the appellant on the issue of jurisdiction and merits (impugned order). 13.07.2017 The Hon ble Delhi High Court dismissed the Writ Petition bearing W.P.(C) No. 7207 of 2008 filed by the Revenue praying for quashing of the order dated 13.03.2008 passed by the ITSC. 23.08.2018 The Hon ble Supreme Court dismissed the SLP filed by the Revenue against the order of the High Court. 17. There is no dispute in so far as the chronology of events mentioned hereinabove are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed to be proceeded with and after hearing the applicant an order shall be passed permitting or rejecting the application to be proceeded with. This has to be done within a time frame. This order is to be passed under Section 245D (1). Subsection (4) of the Section provides as under: ‐ (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 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 Commissioner. 10. Sub‐section (6) of Section 245D provides that every order passed under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter be reopened in any proceeding under this Act or under any other law for the time being in force . 12. A conjoint reading of the aforesaid provisions indicates that the ITSC is a high powered body vested with powers to settle the case of an assessee. The order of settlement is conclusive as expressly stated in Section 245I but the argument of the Revenue is that it is conclusive only with regard to matters stated in the order of settlement and in respect of matters not stated therein, the Assessing Officer has the power to reopen the assessment. It is further submitted that the assessee did not approach the ITSC with regard to settlement of its claim for deduction under Section 80IB (10) of the Act and there was no adjudication of the said claim in the order of the ITSC. It is therefore submitted that the issue relating to deduction under Section 80IB (10) is not a matter covered by the order of the ITSC, and can be reopened by the Assessing Officer. 13. We are afraid that the submission of the Revenue overlooks the fact that in the return the assessee had claimed deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent orders relating to the same assessment year and relating to the same assessee being allowed to stand. We have grave doubts whether such a result, which is likely to create chaos and confusion in the tax administration could have been intended. The order of the ITSC can be reopened only in cases of fraud and misrepresentation and in no other case. 19. The Hon'ble Delhi High Court, after considering the judgments of the Hon'ble Bombay High Court in 207 Taxmann 185 and the Hon'ble Supreme Court in 259 ITR 475 and 206 ITR 443 further observed as under: On the contrary, it would inevitably follow that once a settlement application is allowed to be proceeded with, the entire case stands transferred to the ITSC and thereafter it is the ITSC alone which shall have exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority under the Act in relating to the case. 20. The Hon'ble High Court further observed that : The question here is what would be the position when an order under Section 245D (4) is passed by the ITSC and whether such an order can be construed as one dealing with the entire gamut of the return file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Settlement Commission may make the order without such report.] (1A) 72[Omitted by the Finance (No. 2) Act, 1991, w.e.f. 27-9-1991.] (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the Commissioner. [(2A) Subject to the provisions of sub-section (2B), the assessee shall, within thirty-five days of the receipt of a copy of the order under sub-section (1) 74[allowing the application to be proceeded with], pay the additional amount of income-tax payable on the income disclosed in the application and shall furnish proof of such payment to the Settlement Commission.] [(2B) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income-tax referred to in sub-section (2A) within the time specified in that sub-section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by installments if the assessee furnishes adequate security for the payment thereof.] [(2C) Where the additional amount of income-tax is not paid within the time specified under sub-section (2A), then, whether or not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Commission shall, where it is possible, pass an order under sub-section (4) within a period of four years from the end of the financial year in which such application was allowed to be proceeded with.] [(5) 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.] (6) Every order passed under sub-section (4) shall provide for the terms of settlement79 including any demand by way of 80[tax, penalty or interest], the manner in which any sum due under the settlement79 shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts. [(6A) Where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecludes exercise of authority by the Revenue. Whilst from the Revenue's perspective, every non-disclosure or a fresh discovery of facts which might have a bearing on the assessee's returns, prima WP( C) 1451/2013 Page 15 facie, stands excluded from what is referred to a Settlement Commission, the fallacy in that argument is the Commission has a full weight and the jurisdiction of all the authorities under the Income Tax Act when it is seized of a matter. Concededly in this case, the subject matter before the Commission was the submission of the assessee to its jurisdiction with respect to AY 2006-07. Of course, the Revenue contends that the recovery of material in a third party's premises were not a subject matter of the settlement proceedings, which got concluded on 17.3.2008. However, equally its case can proceed only on the assumption that the assessee was guilty of non-disclosure or suppression of material facts which ought to have been primarily revealed to the Settlement Commission when the application was moved under Section 245Din the first place. The fallacy in the Revenue's argument is that it overlooks the remedy available for the Revenue, i.e to approach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commission was seized of AY 2006-07. Whilst exercising its authority over the application, the Commission concededly exercised the vast plenitude of its power or jurisdiction. The petitioner had made a disclosure in its application - as it was duty WP( C) 1451/2013 Page 17 bound to. What is in controversy today is that the subsequent event of search and seizure operation conducted in the premises of Shri Modi - in the contention of the Revenue - have thrown light on material that had been suppressed from the Commission. If such is the case, it would be only logical that the Commission itself should be approached for a declaration that its order of 17.3.2008 is a nullity. Allowing any other authority, even by way of a notice under Section 153C, would be to permit multiple jurisdictions which can result in chaos. After all non-disclosure or suppression of information in respect of what is required to be revealed to the concerned authorities is akin to fraud and if it has a material bearing on the outcome of the assessment, it would most certainly be misrepresentation. During the course of hearing, the learned counsel for the Revenue had voiced apprehensions that the Commission migh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Commission to decide that issue. It cannot be called by any stretch of imagination to be review of the earlier judgment or the subsequent Bench sitting in appeal over the earlier Bench's decision. Further the conclusions of the Commission regarding the genuineness of the loan transactions were arrived at without indicating reasons. WP(C) 1451/2013 Page 19 It only referred to the respective stands and the submissions of the assessee's counsel. That was not the proper way to deal with the matter. The foundation for settlement is an application which assessee can file at any stage of a case relating to him in such form and in such manner as is prescribed. The statutory mandate is that the application shall contain full and true disclosure of the income which has not been disclosed before the assessing officer, the manner in which such income has been derived. The fundamental requirement of the application under Section 245C is that full and true disclosure of the income has to be made, along with the manner in which such income was derived. On receipt of the application, the Commission calls for report from the Commissioner and on the basis of the material contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court is not impressed by the argument of the Revenue that the definition of case over which the Settlement Commission has exclusive jurisdiction excludes proceedings for reassessment, under Section 245A(i). This is because any reassessment proceedings that are sought to be excluded from the purview of case must be in respect of a Section 148 notice sent while the proceedings before the Settlement Commission are ongoing. Once the Settlement Commission has completed proceedings, its order is considered conclusive as regards matters stated therein perSection 245I and reopening any proceeding in respect of matters covered in the order would be barred. WP( C) 1451/2013 Page 21 18. For the above reasons, it is held that the impugned notice issued to the petitioner under Section 153C cannot be sustained; the said notice and all further proceedings are hereby quashed. It is open to the respondent/Revenue to move the Settlement Commission for appropriate relief of declaration that its previous order under Section 245D (6) is void, setting out the relevant facts and circumstances. In the event the Revenue approaches the Commission with an application for such relief, it shall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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