TMI Blog2020 (9) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... invalid at the said stage, as the issue requires adjudication, which can be done only when the application is decided under Section 245D(4) of the Act. Decision relied on by the Revenue in the case of Mr.Hassan Ali Khan [2008 (1) TMI 20 - HIGH COURT, BOMBAY] would, in fact, support the conclusion, which we have arrived at in the preceding paragraph. It has been held that the Settlement Commission can treat the application as invalid meaning thereby non est, if the applicant is not made a full and true disclosure and further must disclose how the income has been derived. The expression invalid will have to be given a meaning of non est , in other words, as if not made on and from the inception. If on the material, it arrives at a conclusion even prima facie that there was no true and full disclosure, it has then a right to declare the application as 'invalid'. As rightly pointed out by the Hon'ble Division Bench, there is a prima facie opinion formed by the Commission at the (2C) stage and this can never substitute an order under sub-Section (4) of Section 245D. The issues, which were requested to be settled by the 1st respondent before the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey by the 1st appellant during October, 2017 pursuant to which, the 1st respondent/writ petitioner received a show cause notice calling for details pertaining to offshore supplies made by them and they were given three days time to respond by 29.12.2017. According to the 1st respondent/writ petitioner, since their German Head Office was closed from 23rd December, 2017 till 1st January, 2018 for Christmas, the 1st respondent/writ petitioner submitted details to the extend available with them on 29.12.2017. The 2nd appellant passed a draft assessment order dated 31.12.2017 under Section 144C of the Act. The 1st respondent/writ petitioner filed a writ petition in W.P.No.1248 of 2018 challenging the same, inter alia contending that there has been gross violation of principles of natural justice. The writ petition was entertained and an order of interim stay was granted on 22.01.2018. However, the 1st respondent/writ petitioner took a decision to withdraw the writ petition and submitted their objections to the draft assessment order before the Dispute Resolution Panel (DRP). Further, the 1st respondent/writ petitioner is stated to have taken a decision to approach the Settlement Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the application under Section 245C of the Act and precisely that was done by the Settlement Commission after affording opportunity to the 1st respondent/writ petitioner. Therefore, the learned Writ Court ought not to have interfered with the order passed by the Settlement Commission. 6.It is submitted that the learned Single Bench had relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. Express Newspapers Limited [(1994) 206 ITR 443 (SC)], which decision was rendered in the context of Section 245D, as it stood then. However, after the amended provision in 2007, providing for three stages to the applicant to prove the validity of their application, the said decision cannot be applied to the facts and circumstances of the 1st respondent/writ petitioner's application. 7..The learned Senior Counsel placed reliance on the decision of the High Court of Delhi in Omaxe Ltd., vs. ACIT [(2012) 25 taxmann.com 190] and submitted that the decision taken by the Settlement Commission is in consonance with the law laid down in the said decision. Further, it is submitted that the learned Single Bench ought to have followed the decision relied on by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een allowed to be proceeded under Section 245D(2C). It is further submitted that in terms of sub-Section (4) of Section 245D, the Commission is entitled to adjudicate the matter and pass orders as it deems fit on the matters covered in the application. Thus, it is submitted that the learned Single Bench rightly considered the scheme of Section 245D and allowed the writ petition. 11.On the merits of the matter, the learned Senior Counsel submitted that the Settlement Commission without appreciating the scope of the contracts, arrived at the conclusion that the contracts are composite in nature. To demonstrate that this finding is incorrect, the learned counsel had referred to Annexure-D, Item-4 of the application and submitted that there is no artificial splitting up of a contract and the bids invited and the contracts awarded were independent contracts. 12.After elaborately hearing the learned counsels for the parties, we are of the considered view that the learned Single Bench was right in interfering with the order passed by the Commission and allowing the writ petition. We support such conclusion with the following reasons. 13.The application filed by the 1st respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the [Principal Commissioner or ] Commissioner. Section 245D(4):- (4) After examination of the records and the report of the [Principal Commissioner or] 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 [Principal Commissioner or] 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 [Principal Commissioner or] Commissioner. 16.The power to be exercised by the Commission under sub-Section (2C) of Section 245D is within a period of fifteen days' fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omposite and it was a separate composite and the same was done by NTPC was held to be not fully true. In other words, the Settlement Commission appears to have accepted the fact that the contracts were bifurcated by NTPC, the entity which invited the tender, but the Commission would state that the bifurcation done by NTPC was only for financial reasons. The question is whether such a finding could lead to an application being declared as invalid under Section 245D(2C) on the ground that the 1st respondent/writ petitioner has failed to make full and true disclosure of income. In our considered view, the answer to the question should be a definite no, as this issue could not have been decided without an adjudication. 20.To decide whether a contract is a composite contract or separate contracts, a deeper probe in to the factual scenario as well as the legal position is required. If such is the fact situation in the case on hand, the application of the 1st respondent/writ petitioner could not have been declared as invalid on account of failure to fully and truly disclose its income. Thus, what was required to be done in the instant case was to allow the application to be proceeded w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how the income has been derived. The expression invalid will have to be given a meaning of non est , in other words, as if not made on and from the inception. If on the material, it arrives at a conclusion even prima facie that there was no true and full disclosure, it has then a right to declare the application as 'invalid'. As rightly pointed out by the Hon'ble Division Bench, there is a prima facie opinion formed by the Commission at the (2C) stage and this can never substitute an order under sub-Section (4) of Section 245D. The issues, which were requested to be settled by the 1st respondent before the Commission qua , the report of the CIT cannot obviously be an issue for a prima facie decision at the (2C) stage. 23.For all the above reasons, we find that the appellant-Revenue has not made out any ground to interfere with the order passed by the learned Single Bench. 24.Accordingly, the appeal filed by the appellant-Revenue is dismissed. The learned Single Bench fixed an outer time limit of twelve weeks for the Commission to pass orders. After the writ petition was allowed, the CIT had filed a report in terms of Rule 9 of the Income Tax Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X
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