TMI Blog2021 (8) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... not be in a position to settle the issues. The repeated findings of the Settlement Commission that the petitioners have failed to state the source from which the income has been derived and the said non-furnishing of information resulted in rejection of application on the ground that the petitioners have suppressed the vital informations. Petitioners have not complied with the conditions stipulated under Section 245C of the Income Tax Act and when the petitioners were not complied with the conditions stipulated under Section 245C of the Act, the judgments relied on by the petitioners- Assessees have no avail to them for the purpose of considering the present writ petitions. Legislative intention is to ensure that the manner in which the income has been derived must be disclosed by the Assessee while submitting an application under Section 245C of the Income Tax Act and in the absence of furnishing all such details, settlement cannot be arrived and the authorities are bound to continue their investigation and proceed for assessment or for reassessment under the relevant provisions of the Income Tax Act. - Writ petition dismissed. - WP Nos.33431 and 33432 of 2017 And WMP Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as executed by the Settlors and the Trustees, M/s.UBS Trustees (Singapore) Ltd., Singapore. 5. The said Trust floated a company namely, Fairwood Services Limited ('Fairwood') and the beneficial owners of 'Fairwood' were the petitioners. The 'Fairwood' opened an account with UBS Bank Singapore Branch and in addition to this, 'Fairwood' also opened various sub accounts subsequently in different currencies with the said Bank. 6. It is contended that in the year 2011, 'Moon Mist' and 'Fairwood' were liquidated and the Trust was also terminated. The petitioners opened a new Joint Account with First Gulf Bank, Dubai Branch. It was decided to close Fairwood's Bank Accounts with UBS Bank, Singapore Branch and transfer the closing balance to the Joint Account in First Gulf Bank, Dubai Branch. 7. On 28.08.2013, the Deputy Director of Income Tax (Investigation Wing) issued summons under Section 131 of the Income Tax Act to produce the documents as listed in the summons. The petitioners replied to this on 18.09.2013, stating that the petitioners had no investments in assets outside India and had no direct or indirect connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed raising certain objections on 09.02.2017. Petitioners filed their reply on 23.02.2017 to the Rule 9 report. 12. On 11.05.2017, a common order was passed by the Income Tax Settlement Commission under Section 245D(3) of the Income Tax Act, allowing the applications to be proceeded with subject to such enquiries as ordered. On 11.08.2017, objections were raised regarding the report filed by the PCIT under Section 245D(3) of the Income Tax Act. The petitioners submitted their reply on 06.09.2017 and the Principal Commissioner of Income Tax, Central-1, Chennai, submitted their reply on 05.10.2017 to the Settlement Commission. In response, the petitioners submitted their reply on 10.10.2017 and further objections were also submitted by the PCIT. Fresh submissions were also submitted on 22.11.2017. For all the objections submitted by the PCIT, the petitioners submitted a written note reply to the submissions made by the PCIT. On 23.11.2017, hearing was conducted by the Settlement Commission. However, the Settlement Commission has not considered any of the objections as well as the contentions raised and rejected the application filed for settlement in the impugned proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Settlement Commission formed an opinion that the petitioners-Assessees have not furnished complete details with reference to the foreign bank accounts. However, the Settlement Commission failed to consider the fact that the Assessees had submitted the details of all the foreign bank accounts except, two accounts, which were closed. Further, it was informed by the Assessees that after closure of those two accounts, a new account was opened and the funds from the old accounts were transferred to the new accounts and therefore, the funds transferred from the old account to new account is to be taken into consideration for the purpose of determining the tax to be demanded. 17. When the petitioners-Assessees have established their bona fide and the non-availability of foreign bank accounts details which were closed, the Settlement Commission ought to have considered the case of the petitioners based on the provisions of the Income Tax Act. Contrarily, the Settlement Commission has gone to the extent of stating that the petitioners have not furnished fully, the complete details regarding their foreign accounts merely based on certain factual discrepancies identified by the Investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of total income under Sections 245- C(1-B) and (1-C), interest follows such computation. It is important to note that interest follows computation of total income. Once such computation takes place under Section 245-C(1-B) then Section 234-B(2) applies. The said sub-section deals with the situation where before determination of the total income under Section 143(1) or Section 143(3) tax is paid under Section 140-A or otherwise interest shall be calculated in accordance with Section 234- B(1) up to the date on which tax is so paid. In that sense an application under Section 245-C(1) is a return. Section 245-C(1) deals with computation of total income. 34. There is one more way of looking at the Act. Chapter XIX-A refers to the procedure of settlement [see Section 245-D(1)]. As stated above, Section 245-D(1) provides for expeditious recovery of tax by way of pre-assessment collection. Interest on default in payment of advance tax comes under Sections 234-A, 234-B, 234-C, which fall in Chapter XVII which deals with collection and recovery of tax. It is important to note that interest follows computation of additional payment of income tax under Sections 245-C(1-B) and (1-C). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Settlement Commission was not in existence earlier. This legislative step was taken on the recommendation of the Wanchoo Committee. As observed by us earlier, the Settlement Commission was to be constituted for settling the complicated claims of chronic tax evaders as an extraordinary measure, for giving an opportunity to such persons to make true confession and to have the matters settled once for all, and earn peace of mind. It is a Forum for self surrender and seeking relief and not a Forum for challenging the legality of assessment order or orders passed in any other proceedings. This is not only evident from the provision of the Act which prevents the application made, from being withdrawn as also the provision which makes the decision of the Settlement Commission final and conclusive both on question of law and fact. The power conferred on the Settlement Commission is so wide that it can take any view on any questions of law, which it considers appropriate, having regard to the facts and circumstances of a case, which would be applicable only to that case and it has also the power to give immunity against prosecution or imposition of penalty. It is in this backgro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on award could be set aside, would not be available in view of the nature and jurisdiction of the Settlement Commission. We are of the view that a decision of Settlement Commission could be interfered with only. (i) if grave procedural defect such as violation of the mandatory procedural requirements of the provisions in the Chapter XIXA and/or violation of Rules of natural justice is made out; (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission. (iii) this Court cannot interfere either with an error of fact or error of law, alleged to have been committed by the Settlement Commission. We answer the second question accordingly. 23. Relying on the abovesaid judgments, the learned Senior Counsel for the petitioners, is of an opinion that when the petitioners have approached with true disclosure of materials, in the present cases regarding the foreign bank accounts details and certain particulars, which all are not within their knowledge could not able to be produced, the Settlement Commission ought to have considered the genuinity of the petitioners- Assessees in entirety and consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the fact that the petitioners-Assessees have not approached the Settlement Commission with clean hands. 28. Considering the arguments as advanced by the learned Senior Counsel for the petitioners as well as the learned Senior Standing Counsel for the Income Tax Department, this Court is of the considered opinion that the benefit of settlement of cases are provided under the Income Tax Act for the benefit of the Assessees and therefore, the application submitted by any Assessee must be in compliance with the preconditions and ingredients contemplated under Section 245C of the Income Tax Act. 29. The dictionary meaning of the word 'Settlement' is an official agreement intended to resolve a dispute or conflict . Therefore, it is necessary that a party approaching the Income Tax Department by filing an application for settlement of cases must approach with clean hands and by complying with the preconditions stipulated for entertaining an application in the present cases under Section 245C of the Income Tax Act, 1961. 30. Let us consider the conditions stipulated for entertaining an application for settlement of cases under Section 245C of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contents of the applicants/ petitioners in their applications filed under Section 245C of the Income Tax Act, which reads as under:- The applicants stated that they have been filing their returns regularly without declaring their income deposited in foreign bank accounts in their own names or in the name of Moon Mist Enterprises Ltd and Fairwood Services Limited. Moon Mist Enterprises Ltd., is a company registered in 2007 in British Virgin Island (BVI). The applicants settled a trust known as Webster International Trust which floated a company, which is Fairwood Services Ltd. Fairwood Services Ltd opened an account with UBS Bank, Singapore Branch and funds were transferred Moon Mist Enterprises Ltd with UBS Bank from time to time to Fairwood Services Ltd with UBS Bank. The Companies Moon Mist Enterprises Ltd and Fairwood Services Ltd., were liquidated in 2011 and the Trust Webster International was terminated in 2011. Thereafter all records pertaining to the said entities were destroyed. The information relating to undisclosed foreign bank accounts/assets has come to the notice of the Department in the year 2013. The Applicants were served with notices under Section 131/131 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es may be construed as not within their knowledge. In this regard, the findings of the Settlement Commission are relevant. Close reading of the findings of the Settlement Commission under the caption 'DECISION' in paragraphs-6.1, 6.2, 6.3 and 6.4 would provide a clear picture that it is not a mere nondisclosure on the ground of lack of knowledge about the information and the non-furnishing of true and complete full facts not only established but the Settlement Commission could able to arrive a conclusion that there was suppression of facts on the part of the petitioners-Assessees. The abovesaid paragraphs are extracted for the benefit of understanding the relevancy of the findings made by the Settlement Commission:- 6.1 We have considered the submissions made by th Department, learned AR, the reports including information received from FT TR Division and the relevant records. On the fresh submissions relating to foreign bank accounts and documents, further opportunity was given to the learned AR to make their written submissions. The applicants disclosed the accumulated balances in the foreign bank accounts in the name of Moon Mist Enterprises Limited, a British Isla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of 'year in which such income or credit arose' to the applicants. Each assessment year is a separate unit/period for assessment of total income under the provisions of Income Tax Act. The learned AR during the hearing argued that once the funds transferred is disclosed, there is no need to examine further with regard to the source. This is not an acceptable proposition. We have to determine correct total income only in accordance with the provisions of Income Tax Act. We cannot shift the income from earlier year to next year or to previous year for assessment. To determine correct income in a particular assessment year, applicants should have furnished full and true date of credits or receipts of income including those in the bank account No.2244535 of Standard Chartered Bank, Dubai, which they failed. For an application to be full and true, it is imperative for the applicants to furnish complete details relating to the bank accounts. The data and information available are also incomplete to determine the correct total income in accordance with the provisions of Income Tax Act. In the absence of full and true facts in the SOF filed with the settlement application, the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hearing, the applicants have merely submitted that this deposit was out of withdrawals made from other bank accounts. This is another instance which shows that the disclosure made by the applicants are not full and true. 39. The concluding paragraph of the Settlement Commission at paragraph-6.10 deals with the manner regarding earning the additional income and the version of the applicants in statement of facts were considered. All along the petitioners have not submitted the source and figures and the manner in which the income has been derived. If the Assessee has not furnished the details regarding the income as well as the manner in which such income has been derived, it may not be possible for the Competent Authorities to complete the process of assessment/ reassessment as only if the manner in which the income has been derived is traced out. Thus, the authorities will be in a position to cross check the sources through which the income has been derived. It requires an investigation by the Income Tax Officials. In the absence of producing such details, it is the requirements contemplated under Section 245C of the Income Tax Act, the authorities may not be in a positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated. Thus, it is not possible to hold that a full and true disclosure has been made by the applicants and the manner in which the income has been derived is correct. Hence the applications are not maintainable and liable to be rejected. 6.14 To sum up, the Commission is of the view that the applicants should have disclosed all the material facts, relating to the foreign bank accounts, the trail of banking transactions and various other aspects discussed above, even if it was not favourable to them. It is not open to the applicants to selectively disclose some facts and suppress some facts. Reliance is placed in the cases of ACE Investments [2003] 264 ITR 571 (Mad), Ajmera Housing [2010] 193 TAXMAN 193 (SC) and Rashmi Infrastructure Developers Ltd vs. Income Tax Settlement Commission and Others (2017) 396 ITR 210 (Bom). Thus, on the grounds that the applications are not maintainable and the disclosure is not full and true and that there is deficiency in corroborating the manner in which the income has been earned, the terms of settlement are not provided for. With regard to all other issues raised in the earlier paragraphs such as reasonable rental value, foreign exchange ga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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