TMI Blog2020 (2) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... posed before it, the first of which is, whether at all the income from offshore supply is liable to tax in India. The question of full and true disclosure and the discharge of tax liability at all stages prior to final hearing, should be seen only in the context of the issues offered for settlement and the remittances of additional tax thereupon. Issues decided by the Commission and liability arising therefrom, will be payable only at the stage of such determination, which, in my considered view, is the stage of final hearing under Section 245D(4). Thus a final order passed by the SC will provide for the terms of settlement that can include any demand by way of tax, penalty or interest as well. Evidently, this demand raised after final settlement, can only refer to such issues as has been decided by the Commission over and above the additional income disclosed and tax paid by the assessee at the time of filing of application. This been envisaged and provided for in the statutory scheme of settlement under the Act. The scheme of Chapter XIX A is to provide a wholistic resolution of issues that arise from an assessment in the case of an assessee that has approached the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say that BGRE had sub-contracted a portion of the scope of work under three contracts to its joint venture company BGR Boilers Private Limited (BGRB), which, in turn, subcontracted a portion of the same to the petitioner. 5. One of the contentions raised by the petitioner on merits was that the scope of work under each of the contracts is separate and distinct in all respects including the delineation of the work itself, the modes of execution of the contract and the payments therefor. For this reason, the petitioner had taken the stand that the income from offshore supplies would not be liable to tax in India and this stream of revenue thus did not figure in its return of income or accompanying financials. 6. Returns of income had thus been filed by the petitioner in respect of Assessment Years (AY) 2015-16, 2016-17, 2017-18 and 2018-19 offering to tax the income from onshore supply and services only. 7. The contention of the Revenue on merits is that the scope of work entrusted to the petitioner remains indivisible and that the bifurcation of the same between offshore supply on the one hand and onshore supply and services on the other was artificial and solely for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing terms: 7. On examination of the SOF and related material and on thoughtful consideration of the facts as discussed during the course of hearing, we find that technical parameters in the Application with regard to pendency of assessment proceedings, tax liability exceeding the threshold limit, payment of application fee of ₹ 500/- and intimation to the Assessing Officer have been duly fulfilled by the applicant. The applicant has also explained the manner in which the additional income is derived in the SOF. On the basis of the material placed before us we are of the view that at present, there is prima facie no material which warrants the conclusion that true and full disclosure has not been made by the applicant or it has not disclosed the manner of earning such income. Hence, all the requirements laid down u/s 245C(1) have been fulfilled by the applicant. We accordingly hold that the above application is fit to be allowed to be proceeded with further. This order is being accordingly passed and is without prejudice to the finding that may be given in the later stage of proceedings. 8. In view of the above, we allow the above Settlement Application to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional tax liability upon the petitioner. This demand however can be raised only once a decision has been rendered in terms of Section 245D(4) by the Commission on the issues posed before it, the first of which is, whether at all the income from offshore supply is liable to tax in India. The question of full and true disclosure and the discharge of tax liability at all stages prior to final hearing, should be seen only in the context of the issues offered for settlement and the remittances of additional tax thereupon. Issues decided by the Commission and liability arising therefrom, will be payable only at the stage of such determination, which, in my considered view, is the stage of final hearing under Section 245D(4). 18. In fact, Section 245D (6) clarifies this point, as follows: 245D. Procedure on receipt of an application under section 245C (6) Every order passed under sub- section (4) shall provide for the terms of settlement including any demand by way of 2 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 settlement shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer. The disclosure contemplated by Section 245- C is thus in the nature of voluntary disclosure of concealed income. Unless the income so disclosed exceeds ₹ 50,000, the application under Section 245-C is not maintainable. It is equally evident that once an application made under Section 245-C is admitted for consideration (after giving notice to and considering the report of the Commissioner of Income Tax as provided by Section 245-D) the Commission shall have to withdraw the case relating to that assessment year (or years, as the case may be) from the assessing/appellate/revising authority and deal with the case, as a whole, by itself. In other words, the proceedings before the Commission are not confined to the income disclosed before it alone. Once his application is allowed to be proceeded with by the Commission, the proceedings pending before any authority under the Act relating to that assessment year has to be transferred to Commission and the entire case for that assessment year will be dealt with by the Commission itself. The words at any stage of a case relating to him only make it clear that the pendency of proceedings relating to that assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of this Court in the case of Abdul Rahim V. ITSC ((2018) 96 Taxmann.com 571). The facts in that case are different and distinguishable from the one before me. A preliminary order of admission under section 245D(1) was passed on the application of the assessee therein. The Commissioners report however brought to light certain materials including a pen drive and compact discs that had not been duly disclosed by the petitioner in his application. Thus when the matter was taken up for admission by the Commission, it was contested by the Revenue on the ground that there was no full and true disclosure by the petitioner. This was accepted by the Court in the light of the patent non-disclosure by the assessee therein to have disclosed the pen drive and compact discs, rending the application invalid , a term that has not been defined, but in respect of which one would have to assign its natural meaning, as used in common parlance. 27. In the light of the discussion as above, I am of the categoric view that the impugned order of the Settlement Commission is beyond the scope of Section 245D(2C) having been passed on the merits of the issue raised and set aside the same. This Wr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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