TMI Blog2020 (1) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... On perusal of the impugned order passed by the Commission, it is apparent that the application submitted by the respondent has been dealt with as per the provisions of section 245C and 245D of the Act. The Commission has observed detailed procedure while exercising powers under section 245D(4) of the Act of 1961 by examining thoroughly report submitted by the petitioner under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. The Commission has also provided proper opportunity of hearing to the respective parties and therefore the amount which has been determined by the Commission is just and proper. In view of the aforesaid decisions cited by the respondent, the Commission was right in considering the revised offer made by the respondent during the course of the proceedings in the nature of spirit of settlement. Therefore, the decision of the Apex Court in case of Ajmera Housing Corpn. (supra), would not come into operation in facts of the case. We are therefore of the opinion that order passed by the Commission does not call for any interference. In view of exercise of the powers by this Court under Article 226 of the Constitution of India, the examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was in relation to long term capital gain claimed as exempt under section 10(38) of the Act on the sale of shares of M/s. Surbhi Chemicals Ltd. 3.2) The respondent assessee filed Settlement Application under section 245C(1) of the Act of 1961 before the Commission on 1st January, 2017 offering additional income for the assessment years as under : SL. No. Assessment Year Additional income offered in the statement of claim 1 2012 2013 ₹ 1,18,029/ 2 2013 2014 ₹ 1,67,92,355/ 3 2014 2015 ₹ 6,67,26,846/ 4 2015 2016 ₹ 13,08,24,444/ 5 2016 2017 ₹ 64,38,326/ Total ₹ 22,09,00,000/ 3.3) respondent -assessee filed its statement of fact before the Commission, preparing a statement of sources and application of unaccounted income to demons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 846 7500000 229615822 (-)155388976 4 2015-16 130824444 66500000 81781162 115543282 5 2016-17 6438326 36000000 793693168 (-)751254842 Total 220900000 120000000 1132578426 (-)791678426 3.5) It was therefore, submitted before the Commission that respondent assessee did not make true and full disclosure of ₹ 79,16,78,426/ in the statement of income filed before the Commission. 3.6) The respondent submitted reply to Rule 9 report giving explanation to each of the points therein. Further, the respondent assessee disclosed additional income during the course of hearing under section 245D(4) of the Act of 1961 aggregating to ₹ 12,00,00,000/ for the five years from assessment years 2012 2013 to 2016 2017. 3.7) The Commission by impugned order 25th July, 2018 accepted the disclosu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh and further disclosures which are substantial in nature. It was therefore, submitted that additional disclosures made by the respondent -assessee before the Commission under section 245C(1) of the Act of 1961 could not have been entertained as it did not contain true and full disclosures of its undisclosed income and the manner in which such income had been derived. 5.3) Learned advocate therefore, submitted that Commission has arrived at the conclusion contrary to law inasmuch as the amount of additional income offered before the Commission were insufficient to explain the total detected unaccounted income, investment, expenditure, advances etc. It was therefore, submitted that in view of the fact that there was no true and proper disclosure by respondent assessee, the Commission could not have accepted the explanation offered by the respondent assessee in absence of any evidence or material provided by the respondent assessee as against the unaccounted income detected during the course of survey. 5.4) It was therefore, submitted that the impugned order passed by the Commission is required to be quashed and set aside. 6. Per contra, learned Senior Advocate Mr. S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icular order, unless of course the commission itself chooses to, give reasons for its order. Even if it gives reasons in a given case, the scope of enquiry in the appeal remains the same as indicated above viz., whether it is, contrary to any of the provisions of the Act. In this context, it is relevant to note that the principle of natural justice (audi alteram parterri) has been incorporated in Section 245 D itself. The sole overall limitation upon the Commission thus appears, to be that it should act in accordance with the provisions of the Act. The scope of enquiry, whether by High Court under Article 226 or by this Court under Article 136 is also the same whether the order of the Commission is contrary to any of the provisions of the Act and if so, apart from ground of bias, fraud malice which, of course, constitute a separate an independent category has it prejudiced the petitioner/appellant. Reference in this behalf may be had to the decision of this Court in RB Shreeram Durga Prasad Fatechand Nursing Das v. Settlement Commission (1989) 176 I.T.R. 169, which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji J., speaking for the Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atio of this judgment is that the true and full disclosure of the income must be made at the initial stage and large scale remissions in such disclosure itself would show that the initial disclosures were not true. 11. However, the facts of the present case are somewhat different. The applicants had initially offered on money rotation of ₹ 25 lakhs, ₹ 21 lakhs and ₹ 30 lakhs respectively and income at the rate of 12.5 per cent thereof by way of interest earned which during the course of assessment proceedings was revised to ₹ 50 lakhs, ₹ 50 lakhs and ₹ 75 lakhs respectively with rate of return at 15 per cent. With respect to revised rate of return, even counsel for the Revenue would not be in a position to argue that the same would form part of declaration of two incomes since whether rate of return should be estimated to 12.5 per cent or 15 per cent would be would be substantially in the realm of estimation of not profit. He would however, strenuously contend that revised declaration of on money should be enough to establish that initial disclosures made by the assessees were not full or true disclosures of such income. In this context, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, resultantly, the petition deserves to be dismissed. 6.3) Reliance was also placed on the decision of this Court in case of Principal Commissioner of Income- tax, Central v. Income Tax Settlement Commission reported in (2017) 249 Taxman 54 (Gujarat) dated 13th June, 2017, wherein it is held as under : 14. It is true that before the Settlement Commission, the assessees indicated that the additional disclosure of ₹ 50 lakhs each may be accounted for the assessment year 2014 15. However, we cannot lose sight of the fact that such disclosures were, as noted above, in the spirit of settlement and to put an end to the controversy. The assessees therefore cannot be pinned down to the effect of such disclosures in the year 2014 15 alone. We cannot fragment a larger picture and telescope the additional disclosures for a particular year and taking into account the comparable figures for that year decide whether such disclosures would shake the initial disclosures as to apply the ratio laid down by the Supreme Court in case of Ajmera Housing (supra) and to hold that the initial disclosures themselves were untrue projecting the additional disclosures for all yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. 51. Adverting to the facts of the present case, as noticed earlier, the contesting respondents have not resiled from their stand in the application made under section 245C of the IT Act. The contesting respondents have also not made any further disclosure during the course of settlement proceedings but have only agreed to pay additional tax on the basis of the computation made by the revenue in respect of the disclosure made by them. 6.5) Referring to the aforesaid decisions, it was submitted that in facts of the present case, the respondent -assessee has offered and disclosed further amount of ₹ 12 Crore in addition to disclosed amount of ₹ 22.09 Crore so as to put an end to the controversy and in spirit of the settlement before the Commission. The respondent has made overall additional disclosure of ₹ 12 Crore in all five years before the Commission altogether. It was therefore, submitted that in view of the aforesaid legal pronouncements and settled legal position, considering the facts of the case of the respondent before the Commission, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the application filed in the prescribed form (No. 34B), containing full details of issues for which application for settlement is made, the nature and circumstances of the case and complexities of the investigation involved, save and except the annexures, referred to in item No. 11 of the form and to call for report from the Commissioner. The Commissioner is obliged to furnish such report within a period of 45 days from the date of communication by the Settlement Commission. Thereafter, the Settlement Commission, on the basis of the material contained in the said report and having regard to the facts and circumstances of the case and/or complexity of the investigation involved therein may by an order, allow the application to be proceeded with or reject the application. After an order under Section 245D(1) is made, by the Settlement Commission, Rule 8 of the 1987 Rules mandates that a copy of the annexure to the application, together with a copy of each of the statements and other documents accompanying such annexure shall be forwarded to the Commissioner and further report shall be called from the Commissioner. The Settlement Commission can also direct the Commissioner to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) or sub section (3) of the said Section. A full and true disclosure of income, which had not been previously disclosed by the assessee, being a pre condition for a valid application under Section 245C(1) of the Act, the scheme of Chapter XIX A does not contemplate revision of the income so disclosed in the application against item No. 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, Section 245C(3) of the Act which prohibits the withdrawal of an application once made under sub section (1) of the said Section is instructive in as much as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and in the process rendering the provision of sub section (3) of Section 245C of the Act otiose and meaningless. In our opinion, the scheme of said Chapter is clear and admits no ambiguity. 27. It is trite law that a taxing statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble as the assessee had not made a full and true disclosure of their undisclosed income were kept open. The High Court addressed itself on the said issue and found that the assessee had not made a full and true disclosure of their income while making the application under Section 245C(1) of the Act, yet did not find it proper to set aside the proceedings on that ground. Having recorded the said adverse finding on the very basic requirement of a valid application under Section 245C(1) of the Act, the High Court's opinion that it would not be proper to set aside the proceedings is clearly erroneous. The High Court appears to have not appreciated the object and scope of the scheme of settlement under Chapter XIX A of the Act. At this juncture, it would be appropriate to notice a few illuminating observations in W T Ramsay Ltd. Vs. Inland Revenue Commissioners (1981) 1 All ER 865, which was considered to be a turning point in the interpretation of tax laws in England and was a significant departure from Inland Revenue Commissioners Vs. Duke of Westminster (1935) All ER Rep 259 dictum, noted in the passage extracted below : Given that a document or transaction is genuine, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttractive but on a deeper scrutiny, it does not merit acceptance. In the impugned order, on a critical examination of the order passed by the Settlement Commission with reference to the said two reports, in particular the reconciliation report submitted by the Commissioner on 20th October, 1997, estimating the undisclosed income at ₹ 187.20 crores, the High Court had found that only that part of the report dated 20th October, 1997, which dealt with on money was highlighted before this Court, while other incomes, investments, receipts or payments were not covered in that part of the statement. The High Court also observed that the manner in which expenses had been shown, created a serious doubt about the expenditure of ₹ 734.02 lakhs. The High Court has also noted that the Settlement Commission had not properly dealt with the amount of ₹ 911.51 lakhs on account of unexplained expenses, loans and surplus amount of ₹ 488.98 lakhs, while assessing the total income and thus an amount of ₹ 14.49 crores had been left out while determining the undisclosed income of the assessee. Besides, the High Court has also commented that having come to the conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r stand and raise the same issue before us. Even otherwise, as stated above, we have no hesitation in observing that the manner in which assessee's disclosures of additional income at different stages of proceedings were entertained by the Settlement Commission, rubbishing the objection of the Commissioner that the assessee had not made a full and true disclosure of their income in the application under Section 245C(1) of the Act, leaves much to be desired. 10. Thus the facts before the Apex Court were quite different than the facts of the present case as before the Apex Court revised disclosure was made whereas in the facts of the present case, additional disclosure is made to the tune of ₹ 12 Crore and therefore, judgments in case of Commissioner of Income- tax I v. Income Tax Settlement Commission (supra) dated 12th July, 2016, Commissioner of Income- tax I v. Income Tax Settlement Commission and anr. (supra) dated 2nd September, 2016, Principal Commissioner of Incometax, Central v. Income Tax Settlement Commission (supra) dated 13th June, 2017 and Principal Commissioner of Income Tax, Central v. Income Tax Settlement Commission (supra) dated 22nd October, 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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