TMI Blog2019 (8) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... the said notice was rightly rejected by the Respondent No.2 by the second impugned order dated 4th July, 2017. The ground on which the impugned orders dated 4th August 2016 of the ITSC are assailed are that they did not account for the numerous interlocutory orders earlier passed by the ITSC in the same matter that prima facie found in favour of the Petitioners. As already discussed earlier, the impugned final order dated 4th August 2016 of the ITSC u/s 245 D (4) was passed after a detailed report was received from the PCIT. This was a comprehensive report which provided more than adequate justification for the decision of the ITSC to conclude that there had not been a full and true disclosure by the Petitioners of all relevant facts. The impugned order dated 4th August 2016 of the ITSC calls for no interference. The period during which the present petitions were pending in this Court shall stand excluded for calculating the period within which the impugned assessments have to be completed. - W.P.(C) 6054/2017 And 6060/2017 - - - Dated:- 19-8-2019 - JUSTICE S. MURALIDHAR And JUSTICE TALWANT SINGH Petitioner: Mr. C.S. Aggarwal, Senior Advocate wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Income Tax Department (Department) to Mr. Gupta as well as PRGCPL. In response thereto both Petitioners i.e. Mr. Gupta and PRGCPL filed respective returns of income for AYs 2009-2010 to 2011-2012. 7. The Assessing Officer (AO) (Respondent No.2) picked up their returns for scrutiny and on 25th September 2014 issued notices to each of the Petitioners under Section 143 (2) of the Act. One of the contentions of the Department was that PRGCPL had introduced bogus share capital of ₹ 5.30 crores with hefty a premium from various fictitious concerns. 8. During the pendency of the above assessment proceedings both Mr. Gupta and PRGCPL filed applications with the ITSC under Section 245C of the Act on 26th February, 2015 for settlement of their cases for the aforementioned AYs 2009-2010 to 2011-2012. Mr. Gupta stated in his application that he had received ₹ 5.60 crores in cash from his employer i.e. BSBK Group and the said sum had been utilised in raising share capital of PRGCPL. 9. Mr. Gupta disclosed that incentives of ₹ 2.40 crores in each of the AYs 2009-2010 and 2010-2011 and ₹ 80 lacs in AYs 2011-2012 had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlement application und has also not been able to bring the clarification on the queries raised. We are of the opinion that the essential condition of a valid application u/s. 245C (1) namely full and true disclosure of manner of deriving additional income has not been satisfied. We therefore reject the application of Sh. Rohit Kumar Gupta with liberty that he may file it again. 12. As regards the PRGCPL application, it was held by the ITSC as under: 4.3 After considering the arguments of the AR, the settlement application and the facts/materials therein, we are satisfied that the applicant has not paid the amount of tax and interest payable on the basis of income disclosed in the settlement application as required by section 245C (l) and therefore essential condition of a valid application is not been satisfied. We therefore reject the application of M/s. PRG Consultants Pvt. Ltd. with liberty that it may file application again. 13. Liberty was granted to the PRGCPL as well as Mr. Gupta to file fresh applications. 14. On 26th March, 2015 both Mr. Gupta and PRGCPL again filed fresh applications in the ITSC under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar Gupta has been working with M/s.Macawar Beekay (P) Ltd. for the last 20 years and is the key personnel of the group. It is stated by the Assessee because of his efforts that his employer M/s. Macawar Beekay (P) Ltd. has progressed and has earned more and more income year after year. The AR argued that the applicant is deriving salary income and has disclosed the additional incentive income which is also derived from the same source even though it was not disclosed earlier. He argued that both the applicant and M/s. Macawar Beekay (P) Ltd. are before the Principal Bench of the Commission and therefore matter could be inquired in the settlement proceedings in these two cases to establish the correctness of incentive received by the applicant. He stated that in case source of income of the applicant was found to be false, immunity from penalty and prosecution may not be given to him. The AR argued that the applicant has made a full and true disclosure of his income and the manner of deriving such income. The AR stated that all facts have been disclosed correctly and nothing has been withheld. The AR urged that the application may be admitted. 3.4 We have consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the settlement application and the facts and materials therein, we are of the opinion that the application of M/s. PRG Consultants Pvt. Ltd. satisfies all the conditions of a valid application as mentioned in Section 245C(1) and 245D(l). The tax and interest due on the basis of the additional income disclosed have been paid. The manner of deriving the additional income has been explained. There is no adverse information available on record as of now to prove that the disclosure of income in this case is not full and true. Accordingly, the settlement application of M/s. PRG Consultants Pvt. Ltd. is admitted and allowed to be proceeded with u/s 245D(1). 17. In both cases reports were called for by the ITSC under Section 245 D (2B) of the Act from the Principal Commissioner of Income Tax (PCIT). The PCIT submitted reports on 7th May, 2015 objecting to the validity of both applications on the ground that full and true disclosure of undisclosed income had not been made by each of the Petitioners. Orders of the ITSC under Section 245 D (2C) of the Act 18. On 20th May, 2015 the ITSC passed a further order under Section 245D (2C) holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of these companies. Thereafter, a notice dated 7th April, 2016 was issued by the AO directing each of the Petitioners to participate in the verification/investigation process as directed by the ITSC by order dated 16th March 2016. A reply was submitted by Mr. Gupta on 25th April, 2016 to the AO stating that he was unable to provide any confirmation from the BSBK group regarding payment of incentives on account of strained relations . It was also submitted by Mr. Gupta that, copies of applications and submissions filed by BSBK Group with ITSC had not been made available to him. Report of investigation of the PCIT 21. Thereafter report of investigation conducted pursuant to the directions of the ITSC was submitted by the PCIT stating inter alia as under: 8. As already mentioned earlier no evidence of cash incentive is available in the seized documents of WS BSBK Engineers P. Ltd. and was Macawar Beekay (P) Ltd. It may not be out of place to mention here that Macawar Beekay (P) Ltd. and other companies of BSBK group are also before Hon'ble Settlement Commission. It is found from their statement of facts that all these compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C rejected the settlement applications filed by Mr. Gupta and PRGCPL holding that the essential condition under Section 245 C (1) of the Act that the Petitioners should make a full and true disclosure was not satisfied. 24. As far as the application of Mr. Gupta was concerned, it was held that in view of the denial from the employer about payment of cash incentives and the report of the PCIT which stated that in the seized material, there was no evidence in that regard and considering his other sources, including business income and capital gain from sale of immovable properties/shares, the said Applicant did not satisfy the twin requirement of full and true disclosure of additional income declared in the settlement application. It was further held that the detailed breakup of ₹ 60 lacs cash stated to have been received as consultancy charges from the BSBK Group was not explained. 25. As far as PRGCPL was concerned, it was held by the ITSC as under: The applicant company was incorporated in 2008 with the object of acting as consultants and advisors. Sh. Rohit Kumar Gupta and his family members are the only shareholders in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2th July 2017, the Petitioners again objected to the assessment proceedings on the ground that they were time-barred. Thereafter the present petitions were filed on 15th July 2017. 29. On 19th July 2017, while directing notice to issue in these petitions, this Court stayed further proceedings pursuant to the impugned notices issued by Respondent No.2 under Sections 143 (3) read with Section 153 A of the Act. The interim order was made absolute on the next date i.e. 5th September 2017. Thereafter counter affidavits of the Respondents were filed on 14th September 2017 to which rejoinders were filed on 15th January 2018. 30. Counsel for the Petitioners filed two written notes of argument on 10th July 2018 and 4th September 2018. Rejoinder written submissions were filed on 24th July 2019. 31. Counsel for the Respondents filed two written notes of arguments on 23rd and 26th July 2019. Submissions on behalf of the Petitioners 32. Mr C.S. Aggarwal, learned senior counsel for the Petitioners submitted as under: (i) In terms of Section 153B (b) of the Act, the time limit for completion of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53B(3) as inserted by the Finance Act, 2017 with effect from 1st June 2016 it is plain that it requires assessment to be completed in accordance with the provisions of this Section i.e. Section 153B as it stood immediately before its substitution by the Finance Act, 2016. Thus it is plain that the time limit as provided under Section 153B has to be applied and not the time limit which is provided under Section 153. (vii) The 1 year time limit under Section 153B was inserted only with effect from 1st April 2017. Prior thereto there was no such period of 1 year available to the Revenue. In other words, the legislative intent that is expressed is that where notices under Section 153A have been issued prior to 1st June 2016 it is only the unamended Section 153B that would apply. This is also stated in the memorandum explaining the provisions of the Finance Bill, 2017 as provided in 391 ITR 201 (ST). It is only by the said amendment that the reference to Section 153B in the second proviso below the Explanation (1) to Section 153 has been omitted. This further strengthens the argument that Section 153 has no application at all to assessments to be made under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in such case of abatement was the further proviso to Section 153 inserted by the Finance Act, 2007 and applicable from 1st June 2007. The legislative intent was clear from the explanatory notes to the above provision since it expressly mentions Section 153B while extending the period of limitation to 1 year where such period is less than 1 year from the date of abatement of settlement proceedings. (v) The fact that by the Finance Act, 2017 the above proviso was amended to delete the reference to Section 153B while simultaneously amending Section 153B to insert it strengthens the argument of the Revenue that in the present case it is the further proviso to Section 153 of the Act that would have applied. (vi) If in terms of the above provision the limitation for completing the assessment could be extended by 1 year from 4th August 2016, the date of the order of the ITSC under Section 245D (4) of the Act rejecting the application of the Assessee, the impugned notice dated 6th April 2017 cannot be said to be time barred. (vii) Section 245D (6) was, as explained in CIT Mumbai v. Anjum Ghaswala (2001) 252 ITR 1 (SC) merely procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to the provisions that governed the filing and processing of applications before the ITSC. 38. Section 245C (1) of the Act states that an Assessee, at any stage making an application has to fulfil the essential condition of the section, containing a full and true disclosure of his income which has not been disclosed before the AO . In addition to making the full and true disclosure the Assessee has to also indicate the manner in which such income has been derived. These are, therefore, the two requirements which have to be mandatorily complied with if such application is to be entertained by the ITSC. 39. Section 245C (1) of the Act also states that along with the application, the Applicant has to remit the additional amount of income tax payable on such income. As rightly pointed out by the Revenue, Section 245C (1) does not contemplate any order being passed by the ITSC. However, a reading of the Section 245D (1) indicates that it is under that provision that the ITSC is required to pass an order in writing either rejecting the application or allowing the application to be proceeded with. The proviso to Section 245 D (1) further states that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act to be treated as orders under Section 245D (1) of the Act. This is because according to the Petitioners the only order that can be passed under Section 245D (4) of the Act is an order on the matters covered by the application and any other matter relating to a case not covered by the application, but to refer to with the report of the Commissioner . Further, according to them, under Section 245D (6) every order 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 a settlement effective and 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 the facts. The contention, therefore, is that the collective reading of Section 245D(4) and (6) makes it apparent that the order passed under Section 245D(4) of the ITSC cannot be an order that rejects the settlement application for failure to make a full and true disclosure or to disclose the manner in which the undisclosed income was earned. This is, therefore, one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mean that while a Commission has sufficient elbow-room in assessing the income of the applicant under Section 245D(4) it cannot make any order with a term of the settlement which would be in conflict with the mandatory provisions of the Section like in the quantum and payment of tax and/or interest. 45. The above decision interprets Section 245D (4) as a substantive provision from where the powers of the ITSC to pass such order as if it thinks fit arises. The next question that arises is whether the expression such orders if it thinks fit would include the power to pass an order rejecting an application. If the interpretation placed by the Petitioners on this provision is accepted it would mean that after having allowed the applications to be proceeded with in terms of its order passed under Section 245D (1) of the Act, the ITSC cannot at this stage, after the report of the Commissioner has been submitted to it pursuant to an order under Section 245D (2C) of the Act, dismiss the application at all and that it would necessarily have to pass an order providing for the terms of settlement. However, this does not appear to be a correct understanding of the ambit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermining the total concealed income of the group for AYs 1989-90 to 1991-92 and 1993-94. Thereafter, the Assessee filed an application before the ITSC. 48.2 Before the ITSC could decide whether or not to proceed with the application, the Assessee filed a revised settlement application disclosing confidential annexure and related papers. The ITSC then decided by an order under Section 245D (1) to proceed with the application and called for a report. Ultimately, the ITSC passed an order determining the total income of Assessee @ ₹ 42.58 crores and imposed a token penalty. The High Court annulled the ITSC s order in a writ petition filed by the department. 48.3 The Supreme Court set aside the order of the High Court on the ground that the High Court did not take into account a second report filed by the CIT. On remand the High Court again set aside the ITSC s order and remitted the matter to the ITSC for a fresh adjudication. The Assessee then filed an appeal before the Supreme Court contending inter alia that the order made by the ITSC under Section 245D (4) was conclusive as to matters stated therein and no matter covered by such order could be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact, the Settlement Commission may, at any stage till it passes a final order under Section 245 D (4), examine the issues and if there is sufficient material on record, determine the question of full and true disclosure and the manner in which the undisclosed income was derived conclusively and, depending on such a decision, the applications may be thrown out or they may be proceeded with further. 50. In Viswanath Gupta v. Pr. Commissioner of Income Tax (supra) it was held likewise. Consequently, this Court is unable to agree with the contention of Mr. Aggarwal that in the present case the order passed on 4th August 2016 by the ITSC rejecting the Petitioners applications on the ground of failure to make a full and true disclosure should be construed as orders passed not under Section 245D (4) of the Act but under Section 245D (1) of the Act. 51. That brings us to the next question of whether the notices issued on 6th April 2017 to both Petitioners under Section 143(3) of the Act are barred by limitation. Here the case of the two Petitioners is that excluding the time during which the settlement applications of the two Petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made under section 245 C, an order under sub-section (4) of section 245 D has been passed not providing for the terms of settlement; or (iv) in respect of any other application made under section 245C, an order under sub-section (4) of section 245D has not been passed within the time or period specified under sub-section (4A) of section 245D, the proceedings before the Settlement Commission shall abate on the specified date. Explanation.-For the purposes of this sub-section, specified date means- (a) in respect of an application referred to in clause (i), the day on which the application was rejected; (b) in respect of an application referred to in clause (ii), the 31st day of July, 2007; (c) in respect of an application referred to in clause (iii), the last day of the month in which the application was declared invalid; (d) in respect of an application referred to in clause (iv), on the date on which the time or period specified in sub-section (4A) of section 245D expires. (2) Where a proceeding before the Settlement Commission abates, the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the ITSC. What this abatement does to the limitation period under Section 153B has been spelt out, not by the provisions as it stands after 1st January, 2016 but the provision as it stood prior thereto which takes it back to Section 153 itself and in particular the second proviso below the Explanation 1. 56. The second proviso to Section 153 of the Act was inserted by the Finance Act 2008 with retrospective effect from 1st June 2007 and it reads as under: Provided also that where a proceeding before the Settlement Commission abates under section 245HA, the period of limitation available under this section to the Assessing officer for making an order of assessment or reassessment, as the case may be, shall, after the exclusion of the period under sub-section (4) of section 245HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year; and for the purposes of determining the period of limitation under sections 149, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or section 244 or, as the case may be, section 244A, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 by the Finance Act 2017. It reads thus: 153 B Time limit for completion of assessment under Section 153 A (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,- (a) in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b) of sub-section (1) of section 153A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed; (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed . Explanation.-In computing the period of limitation for the purposes of this section,- (i) the period during which the assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the assessment under Section 153 A, where there had been an abatement of the proceedings before the ITSC, was Clause (v) to Explanation 1 to Section 153 of the Act and not Section 153 B of the Act which made no reference to abatement of the proceedings before the ITSC by virtue of an order passed under Section 245 D (4) of the Act. The change brought about by the Finance Act 2017 does not apply to the case on hand where the proceedings under Section 153 A of the Act commenced long prior to the said amendment. 63. The submission that for determining the limitation for completion of an assessment under Section 153 A, the only provision that can be examined is Section 153 B of the Act and that no other provision of the Act can be referred to is based on a restricted understanding of the scope of a non-obstante clause. A non obstante clause is meant to give an overriding effect to certain provisions or others in the same statute or some other statute which are inconsistent. In Vishin N.Khanchandani. v. Vidya Lachmandas Khanchandani (supra), the Supreme Court observed as under: There is no doubt that by non-obstinate clause the Legislature devices ..... X X X X Extracts X X X X X X X X Extracts X X X X
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