TMI Blog2020 (11) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... he part of the ITSC in adjudicating and arriving at the terms of the settlement. While Section 245C(1) refers to disclosure of income before the ITSC, Section 245HA(3) refers to the use of information produced before the ITSC. The term disclosed income is conspicuously absent in Section 245HA(3). When a taxing law, does not provide or empower the Assessing Officer to rely on or take into consideration the income disclosed by the Assessee in the earlier application that had abated in view of Section 245HA(1)(i) of the Act, the attempt of the Department to make a comparison between the income disclosed in the abated proceedings and the second settlement application to establish that the assessee has not fully and truly disclosed their income, is not based on intelligible differentia. When the Income Tax law does not empower the Assessing Officer to rely on the income disclosed in the earlier proceedings that had abated before the ITSC, the Department is not justified in making a comparison with such an income and thereby find fault with the ITSC s decision making process in the impugned proceedings. Whether additional amount of income tax payable on the disclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consent of both parties, the present Writ Petitions are heard through Video Conferencing on 15.09.2020. 1.The brief facts of the case in W.P.No.34040 of 2014 are as follows: 1.a) The first respondent herein is a Charitable Trust founded by Shri G.N.Bangaru (hereinafter referred to as the assessee ). On 02.07.2010, search and seizure operations under Section 132 of the Income Tax Act (hereinafter referred to as the ' Act ') were carried out by the Income Tax Department (hereinafter referred to as the 'Department' ) in the offices and residential premises of various members of the assessee group and during the operations, cash amounting to ₹ 13,17,00,000/-and jewelery weighing 11339.160 grams, along with incriminating documents were seized. Subsequent to the search, the assessee was issued with notices under Sections 153A/153C/142(1) of the Act for the Assessment Years (AYs) 2005- 06 to 2011-12. 1.b) In pursuance of the said notices, the assessee filed a Settlement Application under Section 245C of the Act on 25.01.2012 before the Income Tax Settlement Commission (ITSC) disclosing additional income of ₹ 11,50,09,902/- Crores for the AYs 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 132 of the Income Tax Act (hereinafter referred to as the 'Act') were carried out by the Department on the assessee and certain other related Trusts and individuals and during the operations, cash amounting to ₹ 13,17,40,000/- and jewelery weighing 11339.160 grams, along with incriminating documents were seized. Subsequent to the search, the assessee was issued with notices under Sections 153A/153C/142(1) of the Act for the Assessment Years (AYs) 2005-06 to 2011-12. 2.b) In pursuance of the said notices, the assessee filed a Settlement Application under Section 245C of the Act on 25.01.2012 before the Income Tax Settlement Commission (ITSC) disclosing additional income of ₹ 1,67,00,000/- for the AYs 2005- 06 to 2010-11. On 07.02.2012, the ITSC rejected the said application under Section 245D(1) of the Act for non-payment of taxes on the additional income disclosed in the Settlement Application and did not allow the same to be proceeded with. Thereafter, on 17.04.2012, the assessee filed its returns of income for the AYs 2005-06 to 2010-11 and the returns for the AYs 2011- 12 were filed on 28.11.2011. 2.c) Subsequently on 26.11.2012, the assessee fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Senior Standing counsel for the Department, submitted that these Writ Petitions are maintainable since the decision making process adopted by the ITSC in these cases are contrary to the procedure prescribed by the Act and hence the Writ Petitions, challenging the award of the ITSC is sustainable, which proposition has been upheld in various legal precedents. 5. Apart from this, the learned Senior Standing counsel would submit that the assessee had not made a full and true disclosure of their income in the Settlement Application, as contemplated under Section 245C(1) of the Act and hence the assessee is ineligible for settlement of income, as well as for immunity from prosecution and penalty. He further submitted that when the first Settlement Application under Section 245C (1) was rejected, the settlement proceedings abates in view of Section 245HA (1) (i) and the Assessing Officer is entitled to use all the material produced by the Assessee before ITSC. Therefore, when the disclosure of income in the second Settlement Application was less than the income disclosed in the first application in WP No. 34040 of 2014 and an income of ₹ 47 lakhs was deferred in the secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Settlement Application under Section 245C(1), the assessee had disclosed an income of ₹ 11,50,09,902/- for the assessment years 2007-08 to 2011-12, whereas in the second Settlement Application, an income of ₹ 9,65,01,102/- alone was disclosed, which is less than the total additional income disclosed in the previous Settlement Application and therefore, there was no full and true disclosure of his income as required under Section 245C of the Act, which is a pre-requisite for maintaining the application. Since due process as provided under the provisions of the Act was not adopted for making the final decision, the impugned award of the ITSC requires to be quashed. 10. Likewise, in Writ Petition No. 34041 of 2014, a similar ground of non-disclosure of full and true income has been taken, stating that, though the assessee had disclosed the same total income of ₹ 1.67 crores in the 1st and 2nd applications, an income of ₹ 47 lakhs was deferred in the second application for AYs 2007- 08 to 2010-11. 11. Section 245C of the Act enables the assessee to file an application at any stage of a case relating to him with a full and true disclosure of his income , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain amounts of anonymous voluntary donations during the relevant assessment years and that, they were later able to locate necessary proof of such anonymous donations in 400 to 500 cases and thus, these amounts were offered to tax as additional undisclosed income in the second application before the ITSC. Hence the discrepancy. 15. In order to settle this issue, the ITSC had called for estimations from both the Department as well as the assessee and the basis for arriving at such estimations. After much deliberations, it was mutually decided that donations of less than ₹ 20,000/- in cash will be accepted. Accordingly, both the parties had provided details of working as hereunder: Details provided by ASSESSEE: FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 TOTAL Below ₹ 20,000 1993426 24109581 85750999 78442045 574111 190870162 Below ₹ 20,001 2539997 29326 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f full and true particulars of undisclosed income is a pre-requisite for a valid application under Section 245C(1) and since the disclosure of additional income made in the first Settlement Application is less than the disclosure made in the second application, the assessee has failed to disclose the full and true particulars and therefore the second application ought to have been rejected by the ITSC, at the inception itself. 18. The facts involved in Ajmera Housing Corporation are that the Assessee originally filed an application under Section 245C(1) of the Act before the Commission, disclosing an income of ₹ 1.94 Crores, in addition to the income declared in the returns submitted by them earlier. The Settlement Commissioner called for a report from the Commissioner in terms of Section 245D(1) r/w. Rule 6. The Commissioner, while objecting to the entertainment of the application through settlement, claimed that the disclosure has not been full and true. The Assessee then filed a revised Settlement Application by declaring an additional income by ₹ 11.41 Crores. After an order under Section 245D(1) was passed and the cases commenced, the Assessee made a thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. .... 28. As afore-stated, in the scheme of Chapter XIXA, there is no stipulation for revision of an application filed under Section 245C(1) of the Act and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said Section in the prescribed form. 20. In the present case, the fact remains that the assessee s first application under Section 245C(1) was rejected by an order under Section 245D(1) for non-payment of additional amount of income tax on the additional income discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these three decisions, which are on the same ratio as that of the decisions of the Hon'ble Supreme Court in Ajmera Housing Corporation , may not help the Department. Incidentally, the ratio laid down in Canara Jewellers (supra) relied upon by the Department, came to be distinguished by a Hon'ble Division Bench of the Bombay High Court in Principal Commissioner of Income Tax V. Income Tax Settlement Commission (ITSC) reported in 2017 (79) taxmann.com 186 (Bombay) and rendered the proposition subsilento in the following manner:- 7. This, reading of the Madras High Court's decision in Kanara Jewellers (supra) on the part of the Petitioner does not appear to be correct as evident from the facts arising before it. The Assessee therein had filed an application for settlement, declaring undisclosed income. The Commission allowed the application for settlement by an order under Section 245D(4) of the Act while enhancing the amount declared as undisclosed income in its application for settlement. This order was challenged by the Assessee before the learned Single Judge of the Madras High Court on the ground that Commission has no jurisdiction to enhance the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Assessee in its application for settlement. It is only in such a case that tax become payable in pursuance of the order passed under Section 245D(4) of the Act, as otherwise, the Applicant has to pay tax payable on the income disclosed in its application for settlement along with interest before filing its application under Section 245-C(1) of the Act with the Commission. Thus, the decision of the Madras High Court in Kanara Jewellers (supra) having not considered the above statutory provisions is rendered subsilento. 24. As stated earlier, with regard to the discrepancy of the income declared between first and second settlement applications, the assessee had explained before the ITSC about the manner in which the income was derived, by attributing the discrepancies to anonymous voluntary donations, the proof of which were subsequently located. As such, the assessee had explained the sources of their income and such an explanation was also accepted by the ITSC. These factual issues cannot be reviewed by this Court under Article 226 of the Constitution of India. In these circumstances, a Hon'ble Division Bench of the Bombay High Court in the case of Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Settlement Commission. 16.In this context, it is to be seen that the only point urged by the learned counsel for the Revenue is that the interpretation placed on the receipts was erroneous. The interpretation which has been placed by the Settlement Commission on the documents in question, first of all, results in a finding of fact which, as we have seen, cannot be interfered with. And secondly, the interpretation is not so outlandish to be categorized as arbitrary or perverse so as to call for interference. We make it clear that the interpretation sought to be placed by the Revenue may be a possible interpretation but, so, too, would be the interpretation placed by the Settlement Commission which has also been espoused by the learned counsel for respondent No.1. In such a situation no interference with the Settlement Commission's order is warranted. 26. A similar view was also taken by the Kerala High Court in Commissioner of Income Tax (Central), Kochi V. Settlement Commission (It WT) reported in 2014 (51) taxmann.com 351 (Kerala) , by placing reliance on the decision of the Hon'ble Supreme Court and Karnataka High Court, in the following manner:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry by this Court can only be with regard to whether or not the Settlement Commission exercised a jurisdiction that it did not have or, alternatively, if it did have the jurisdiction, whether it erred in the exercise of that jurisdiction. In the latter event, this Court would also have to bear in mind the nature of the jurisdiction exercised by the Settlement Commission, which is akin to a statutory arbitration. 27. A perusal of the award of the ITSC in the present cases reveal that the procedures under Section 245C 245D of the Act have been duly followed and the terms of the Settlement have been arrived at on mutual acceptance, after perusing the offers made by the Department and the Assessee. Hence, it cannot be said that the award of the ITSC is in violation of the statutory provisions or the decision making process. If that be so, the ground raised by the Department in the present Writ Petition are merely factual in nature and since there are no procedural lapses on the part of the ITSC in adjudicating and arriving at the terms of the settlement. Hence, by applying the ratio held in the aforesaid decisions, the Writ Petitions challenging such factual aspects, cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (i) should be the income which was not disclosed to the Assessing Officer; (iii) The source of the income referred to in clauses (i) (ii); (iv) The additional amount of income tax payable on such income; and (v) Disclosure of such other particulars as may be prescribed, for the purpose of settlement. 30. Section 245C does not require or mandate the Assessee to specify the additional income disclosed in his earlier Settlement Application which was rejected and/or not allowed to be proceeded with under Section 245D(1) of the Act. 31. When the first application came to be rejected under Section 245D(1) of the Act, the proceedings before the ITSC would abate in view of Section 245HA of the Act, without deliberation on the additional income disclosed in the application. The relevant portions of Section 245HA of the Income Tax Act reads as follows: Section 245HA. (1) Where (i) an application made under Section 245C on or after the 1st day of June, 2007 has been rejected under sub-section (1) of section 245D; . the proceedings before the Settlement Commission shall abate on the specified date. (2) Where a proceedings before the Settlem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (2013) 3 SCC 196 had held: 18 . Undisclosed income is defined by Section 158B as that income which has not been or would not have been disclosed for the purposes of this Act . The legislature has chosen to define undisclosed income in terms of income not disclosed, without providing any definition of disclosure of income in the first place. We are of the view that the only way of disclosing income, on the part of an assessee, is through filing of a return, as stipulated in the Act, and therefore an undisclosed income signifies income not stated in the return filed . (emphasis supplied) 34. While Section 245C(1) refers to disclosure of income before the ITSC, Section 245HA(3) refers to the use of information produced before the ITSC. The term disclosed income is conspicuously absent in Section 245HA(3). When a taxing law, does not provide or empower the Assessing Officer to rely on or take into consideration the income disclosed by the Assessee in the earlier application that had abated in view of Section 245HA(1)(i) of the Act, the attempt of the Department to make a comparison between the income disclosed in the abated proceedings and the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation fees and the same has been offered to tax by the assessee and accepted by the Department. Apparently, the ground raised is purely a factual finding rendered by the ITSC and such factual findings is not permissible to be reviewed by this Court under Article 226 of the Constitution of India, as held in the aforesaid cited decisions. 39. In view of discussions and findings in the preceding paragraphs establishing that there was no defect on the part of ITSC in the decision making process leading to the impugned Awards, the preliminary objection raised to the Department by this Court, with the regard to the maintainability of the Writ Petition, challenging the award of a Settlement Commission, gains significance . 40. The Hon'ble Supreme Court in various cases, has delved on the ratio that a challenge to an award of the ITSC on questions of fact cannot be maintained through a Writ Petition file under Article 226 of the Constitution of India and the power of review of an award of the ITSC under Article 226 of the Constitution of India is very limited to such cases, where the award of the ITSC is in violation to the statutory provisions of Act. The following are some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds in a particular manner. Even if the interpretation placed by the Commission on the said deeds is not correct, it would not be a ground for interference in these appeals, since a wrong interpretation of a deed of trust cannot be said to be a violation of the provisions of the Act. It is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in proceedings relating to other assessment years. iii) In Union of India Vs. Ind-Swift Laboratories Ltd [2011 (9) taxmann.com 282 (SC) , the Hon'ble Supreme Court had held that findings of fact are not open for review by the High Court. Such findings are as follows: 21. An order passed by the Settlement Commission could be interfered with only if the said order is found to be contrary to any provisions of the Act. So far findings of the fact recorded by Commission or question of facts are concerned, the same is not open for examination either by the High Court or by the Supreme Court. In the present case the order of the Settlement Commission clearly indicates that the said order, particularly, with regard to the imposition of simple interest at the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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