TMI Blog2021 (4) TMI 1038X X X X Extracts X X X X X X X X Extracts X X X X ..... e are additional disclosures of income during the pendency of the Settlement Commission, which were not made available at the time of application by the assessee under Section 254C of the Act there is a sufficient cause to reject the application under Section 245C of the Act. The very spirit of the provision is that the application must contain full and true disclosure of income. Once it is established that the application dose not contain full disclosure of income and additions are made during the pendency of the application, it is sufficient to arrive a conclusion that the application made by the assessee is not in consonance with the provisions of Section 245C of the Act and therefore, the same is liable to be rejected in limine. Contrarily, in the present case, the Settlement Commission travelled beyond the scope of Section 245C of the Act and adjudicated the additional income disclosed and further gone to the extent of settling the issues based on the additional income, which were not disclosed at the time of filing of an application under Section 245C of the Act. It is established that the assessee has not approached the Settlement Commission with clean hands. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd respondent cited the judgments in support of his arguments that no writ can be entertained against the order of the Settlement Commission, if the facts in detail were adjudicated by the Settlement Commission with reference to the documents and evidences produced by the parties along with the application filed under Section 245C of the Income Tax Act. In this regard, the learned counsel for the second respondent cited the judgment in the case of J YOTENDRASINHJI vs. S.I.TRIPATHI reported in [1993] 68 Taxman 59(SC). The Apex Court formulated a principle stating that whether only ground upon which either High Court under Article 226 or Supreme Court under article 32 or 136 can interefere with an order of Settlement Commission is that the order of Settlement Commission is contrary to the provisions of the Act and that such contravention has prejudiced assessee - held yes . Therefore, only in the event of violation of the provisions of the Income Tax Act, the High Courts are empowered to entertain the writ under Article 226 and with reference to the factual details, no such writ proceedings can be entertained at all. It is contended that the factual aspects were elaborately co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the second respondent that the writ petition is not maintainable deserves no merit consideration. 5. This Court is of the considered opinion that the maintainability of the writ petition is to be considered at the first instance as the same has been raised by the second respondent. All the writ petitions are entertainable under Article 226 of the Constitution of India. No writ petition can be dismissed as not-maintainable. The powers of the High Court under Article 226 of the Constitution of India are wider enough to provide complete justice to the litigants, who are all approaching the High Court. Thus, the concept of non-maintainability of the writ petition is to be examined with reference to the mixed question of law and facts and not merely on the ground that the Settlement Commission under the Income Tax Act passed an order. This being the scheme of constitution under Article 226, this Court is of the considered opinion that on the mere ground that an order was passed by the Settlement Commission settling the disputes between the parties, no writ petition needs to be dismissed as not-maintainable. 6. The learned Senior Standing Counsel cited the judgment of this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered opinion that Section 245(C) of the Income Tax Act enumerates that An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing] Officer, the manner in which such income has been derived, the additional amount of income- tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided . 10. A reading of the section portrays that it is a special provision contemplated enabling the assessee to settle the disputes in a peaceful manner with the Department, if they have come out with full and true disclosure of income. Such special provisions are enacted with an intention to provide an opportunity to the assessee to settle the issues, in order to rectify certain omissions, commission, mistakes etc., by the Assessee. In view of the complex nature of business by the Entrepreneurs, it is possible for such omission, commission, mistakes etc., while filing income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can be made, if the difference between the parties are narrowed down. Undoubtedly, the Settlement Commission has got certain powers to settle the issues. However, such power of settlement is absolutely guided by the provision itself. That is the reason why the proviso clauses are provided under Section 245(C). The proviso clause stipulates that no application shall be made unless certain terms and conditions are fulfilled. But Section 245(C)(1) provides that it is a pre-condition to entertain an application that the assessee must disclose full and true facts and the evidence. Thus, Sub-clause (1) to Section 245(C) is the preliminary requirement for entertaining the application under Section 245C. 13. A question arises who will be the deciding Authority for the full and true disclosure as contemplated under Section 245C. When an application is made by the assessee for settlement, then an assessee wil1 contend that the particulars provided in the application are the full and true disclosure. However, if the Department raises an objection regarding such full and true disclosure made by the assessee, then the Settlement Commission is empowered to go into the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income but basically with a view to bring quietus to the matter and in the spirit of settlement. In these circumstances, we find that it cannot be said that the disclosure of income by the Applicant was not full and true. Thus the Applicant has satisfied the requisite conditions prescribed u/s.245H of the Act. Accordingly we allow the prayer of the Applicant for immunity from penalty and prosecution under the Income Tax Act only so far as the same relate to issues dealt with in this order of settlement. 16. A perusal of the above findings regarding full and true disclosure reveals that the Settlement Commission itself is doubtful about the disclosure made. Further, it reveals that some additional income and some other particulars were also adjudicated by the Settlement Commission, which were not disclosed by the assessee even at the time of filing of the application under Section 245C of the Act. 17. Thus, let us consider the scope as well as the powers of the Settlement Commission to entertain an application under Section 245(C) of the Income Tax Act. When the Section in unambiguous terms contemplates that the application in such form and in such manner as may be prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances in consonance with the provisions of the Act are permitted. However, the Settlement Commission cannot make an assessment or exercise the powers conferred on the other Authorities under the provisions of the Act. 19. As far as the original power of the Assessing Officer under Section 153(A) of the Act is concerned, the Division Bench of this Court in the case of CANARA JEWELLERS vs. SETTLEMENT COMMISSION reported in [2009] 184 Taxman 491 (Madras) held that the Settlement Commission is empowered to have all the powers which are vested in an income-tax Authority under the Act, in addition to the power conferred under Chapter XIX-A, but such power can be exercised for the purpose of procedure of settlement of application under Section 245C and not for reasssessment of tax of a particular year which is vested with the Assessing Authority . 20. Thus, the power of the Assessing Officer conferred under Section 153(A) cannot usurped by the Settlement Commission, which would defeat the very scheme of the Act nor the original powers vested on the Assessing Officer cannot be neutralized. In other words, in the event of permitting the Settlement Commission to exercise th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When such a dispute is raised, then the Settlement Commission ought to have allowed the Assessment officer to make a fresh assessment with reference to the newly recovered materials under Section 153A of the Act. It is improper to settle the issues despite the fact that there are controversies regarding the true and full disclosure of income. This being the mixed question of law and fact, the High Court is well within its powers to entertain the writ petition under Article 226 of the Constitution of India, in view of the fact that the point of jurisdiction as well as the powers of the Settlement Commission is raised as a ground for filing the present writ petition. Thus, the writ petition is maintainable and the said issue is answered in favour of the petitioner/Department. 24. Let us now consider the grounds raised in the writ petition. 25. The learned Senior Standing Counsel appearing on behalf of the writ petitioner-Department made a submission that even before filing of an application by the second respondent-assessee under Section 245C of the Act, the petitioner-Department conducted a search under Section 132 of the Act in the residential premises of the assessee and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and all these facts were placed before the Settlement Commission by the Department. In this regard, it is contended that the Settlement Commission has committed an error in adopting the decision making process, as the process adopted is totally in contravention to the facts and circumstances established by the Department and further, such facts and circumstances are not correlating with the application filed by the assessee under Section 245C of the Act. When there are discrepancies and doubt arises with regard to the true and full disclosure of income, then the natural course of action would be that the Assessing Officer must be permitted to make a regular assessment under Section 153A of the Act and settlement cannot be arrived under doubtful circumstances. In such circumstances, settlements are impermissible and cannot be construed as settlement at all. 29. The very concept of settlement is depending on the mutual consensus and in the absence of element of mutual consensus between the parties, the settlement by the Settlement Commission cannot be unilateral and in such an event, Settlement Commission is usurping the powers of the Assessing Officer under other provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the search. It was argued that credit should be given for the same. The learned AR pointed out that the physical stock in the shop at the time of the search was less than the stock recorded in the other set of books. This indicates that there must have been some sales, in respect of which bills had remained to be issued. While this explanation may perhaps be true but the fact remains that no evidence was found during the search which establishes the fact that any sales had remained to be entered in the books. Hence we are of the view that there is no clinching evidence to support the explanation for excess cash amounting to ₹ 62,71,694/-. Further disclosure to the extent of ₹ 62,71,694/- is, therefore, required to be made on this account. The learned AR vehemently argued that the sales had actually taken place and the corresponding cash received formed part of the cash found during the search. However, he stated that, in the spirit of settlement and to bring a quietus to the matter, a further amount of ₹ 62,71,694/- is also offered for taxation for the A.Y. 2013-14. 6.4. During the search, the Applicant had stated that jewellery weighing 859.300 grams f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of the search) is required to be further disclosed as unaccounted income. The learned AR stated that, even though no evidence was unearthed during the search in respect of such 'on money' payment, the Applicant wishes to bring a quietus to the matter and hence is willing to offer the following amounts:- Property at Value stated in 132(4) statement Value in Document Difference A.Y. Further disclosure Bangalore 60,00,000 43,00,000 17,00,000 2011-12 2012-13 10,00,000 7,00,000 K.K.Pudur, Stampt Duty Others 60,00,000 19,55,000 40,45,000 19,75040,64,750 2011-12 40,64,750 Ganapathy Stamp Duty others 40,00,000 12,85,000 27,15,000 1,16,690 28,31,690 2011-12 28,31,690 6.6. There is another aspect in this case which we would like to discuss. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The very spirit of the provision is that the application must contain full and true disclosure of income. Once it is established that the application dose not contain full disclosure of income and additions are made during the pendency of the application, it is sufficient to arrive a conclusion that the application made by the assessee is not in consonance with the provisions of Section 245C of the Act and therefore, the same is liable to be rejected in limine. Contrarily, in the present case, the Settlement Commission travelled beyond the scope of Section 245C of the Act and adjudicated the additional income disclosed and further gone to the extent of settling the issues based on the additional income, which were not disclosed at the time of filing of an application under Section 245C of the Act. 35. In view of the facts and circumstances, it is established that the assessee has not approached the Settlement Commission with clean hands. The assessee has not disclosed the true and full income and more specifically, the undisclosed income recovered during the search were not made available before the Settlement Commission along with the application and this would be suff ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
