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TMI Blog2021 (8) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... the Managing Director and Chairman and Managing Director of MRF Limited, a renowned Corporation with worldwide reputation. 3. It is stated that in the year 2005, with a view to pursue the Consulting/Advisory Services related business activities outside India, the petitioners opened a Joint Bank Account (US Dollar Account) bearing No.18341724701 with Standard Chartered Bank, Dubai Branch. Further, a Joint Bank Account was opened with UBS AG Bank, Singapore Branch. In addition to this, various sub accounts were also opened subsequently in different currencies with the said Banks. 4. In the year 2007, it was jointly decided between the petitioners Shri Arun Mammen and Kandathil M.Mammen, the account holders, to carry on the aforementioned business activities substantially in the name of 'Moon Mist Enterprise Limited' ('Moon Mist'). 'Moon Mist' was registered in the British Virgin Island (BVI) in 2007. The said 'Moon Mist' opened the account with UBS Bank, Singapore Branch. In addition to this, various sub accounts were also opened subsequently in different currencies with the said Banks. It was decided to close the Joint Bank Accounts with Standard C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts maintained as well as the details regarding certain transactions, search was conducted and the process of assessment/reassessment was commenced. The petitioners had filed applications under Section 245C of the Income Tax Act before the Settlement Commission, seeking to settle the income tax assessment for the assessment years 2005-2006 to 2014-2015. 9. The petitioners earlier filed WP Nos.22216 to 22219 of 2015 before this Court, to set aside the order passed by the Income Tax Settlement Commission, rejecting the applications on the ground of maintainability and for remanding the matter back for fresh consideration. 10. This Court passed an order on 21.06.2016 and thereafter a common order was passed by the Settlement Commission under Section 245D(1) of the Income Tax Act, allowing the applications to be proceeded with. A report was filed on 16.11.2016 by the Principal Commissioner of Income Tax ('PCIT') under Section 245D(2B) of the Income Tax Act. A common reply was filed by the petitioners through their representatives before the Settlement Commission, setting forth the objections to the report filed by the PCIT. 11. On 22.11.2016, the Income Tax Settlement Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure made by the petitioners, which is within their knowledge and not in respect of the informations, which all are not within the knowledge of the petitioners. 14. In the present cases, the writ petitioners are ready and willing to accept such informations gathered during investigations and ready to settle the issues and pay the tax as per the demand, if any, is to be raised. This being the genuinity put forth by the petitioners-Assessees, the Settlement Commission ought to have considered the spirit of the provisions as well as the purpose of the settlement provisions and considered the objections raised by the petitioners for the purpose of settling the issues in the manner contemplated under the Act. 15. In order to substantiate the said contentions raised by the learned Senior Counsel for the petitioners, the findings made by the Settlement Commission is relied upon. The decisions elaborately made by the Settlement Commission would reveal that certain primary facts were not disclosed by the applicants in their statement of facts being submitted by them before the Settlement Commission or in written statements filed before the Income Tax Department. 16. The learned Senior Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said contentions, the learned Senior Counsel appearing on behalf of the petitioners relied on the judgment of the Hon'ble Supreme Court of India in the case of Brij Lal vs. Commissioner of Income Tax [(2011) 1 SCC 1], paragraphs 29, 33 and 34, it has been held as under:- "29. This position is clarified by Sections 140-A(1-A) and (1-B) under which inter alia interest payable for default in payment of advance tax under Section 234-A shall be computed on the amount of tax on the total income as declared in the return minus the advance tax paid. Similarly, it is clarified vide sub-section (1-B) to Section 140-A that interest payable under Section 234-B for default in payment of advance tax shall be computed on an amount equal to the assessed tax [same words are used in Section 234-B(1)] or on the amount by which the advance tax falls short of the assessed tax. However, what is "assessed tax" for the purposes of Section 140-A is explained by Explanation. It says that assessed tax will be tax on the total income as declared in the return minus the amount of tax deducted at source or collected at source in accordance with the provisions of Chapter XVII (which covers Sections 207 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r XIX-A. Since assessment of the type contemplated under section 143(3) is outside the purview of settlement proceedings, a special audit under section 142(2A), which is in aid of assessment, would also be beyond the scope of settlement proceedings. The other decisions referred to by the learned counsel for the revenue do not militate against the view we have taken. 22. In sum, we hold that the income tax settlement commission does not have the power to direct a special audit under section 142(2A) in the course of settlement proceedings under Chapter XIX-A of the said Act. Consequently, the impugned order dated 26.04.2013, to the extent it directs the conduct of a special audit, is quashed. The matter be placed before the settlement commission for further consideration of the petitioners' settlement applications in accordance with the prescribed procedure under Chapter XIX-A. The writ petition is allowed to the aforesaid extent. We are making it clear that we have not commented upon the merits of the settlement applications. The parties are left to bear their own costs." 22. The High Court of Karnataka in the case of N.Krishnan vs. Settlement Commission [ILR 1990 KAR 404], w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndetermined or when the award was indefinite, where the objection to the legality of the award was apparent on the face of the award. The Court might also set aside the award on the ground of corruption or misconduct of the arbitrator, or that a party had been guilty of fradulent concealment or wilful deception. But the Court could not interfere with the award if otherwise proper on the ground that the decision appeared to it to be erroneous. The award of the arbitrator was ordinarily final and conclusive, unless a contrary intention was disclosed by the agreement. The award was the decision of a domestic Tribunal chosen by the parties, and the Civil Courts which were entrusted with the power to facilitate arbitration and to effectuate the awards, could not exercise appellate powers over the decision. Wrong or right the decision was binding, if it be reached fairly after giving adequate opportunity to the parties to place their grievances in the manner provided by the arbitration agreement. This Court reiterated in the said decision that it was now firmly established that an award was bad on the ground of error of law on the face of it, when in the award itself or in a document act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the preliminary requirements contemplated under Section 245C of the Income Tax Act. 26. The learned Senior Standing Counsel appearing on behalf of the second respondent contended that it is a special provision contemplated for the benefit of the Assessees to settle the issues on certain circumstances. The Income Tax Authorities are empowered to investigate and initiate action for assessment or reassessment by following the procedures. However, the Assessees are granted with the benefits to settle the issues in the manner contemplated under Section 245C and the related provisions. Thus, the precondition to be complied with is important and in the event of non-compliance, the application itself is liable to be rejected and in the present cases, it was rejected by recording the findings and thus, there is no infirmity as such. 27. The learned Senior Standing Counsel, appearing on behalf of the second respondent, drew the attention of this Court with reference to the findings of the Settlement Commission in its order as well as the manner in which the petitioners had approached the Settlement Commission for settling the issues. By reading those relevant paragraphs, the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust contain full and true disclosure of the income has not been disclosed before the Assessing Officer. The third condition is that in the manner in which such income has been derived must be stated in the application and fourth condition is that the additional amount of income tax payable on such income and such other particulars also may be prescribed to the Settlement Commission. 33. In the event of complying with all the abovesaid conditions, the Settlement Commission is empowered to entertain the application and dispose of the said application by following the procedures contemplated under Section 245D of the Income Tax Act, 1961. Section 245D contemplates the procedures on receipt of an application under Section 245C. Therefore, the function of the Settlement Commission, at the first instance, would be to ascertain whether the application is filed by any Assessee in compliance with the conditions stipulated under Section 245C or not. 34. In this context, this Court has to consider the reasons for rejection of the applications submitted by the petitioners as not maintainable and the sustainability of the findings recorded by the Settlement Commission with reference to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been filing their returns regularly without declaring their income deposited in foreign bank accounts in their own name or in the names of Moon Mist Enterprises Limited and Fairwood Services Limited. Thus, the petitioners have made a clear admission that they have not at all submitted the details regarding the foreign bank accounts in their names and the connected details. Thus, it is the duty mandated on the part of the Assessees to furnish all the details relating to such foreign bank accounts and any omission or non-disclosure of true and full facts would be a ground to reject the application filed for settlement. 37. The learned Senior Counsel for the petitioners would urge this Court by stating that it is not as if the petitioners have not furnished the details. They have furnished the details which all are within their knowledge and certain informations and details, which were not within their knowledge. Thus, the details were not produced and therefore, it is to be construed that the petitioners approached the Settlement Commission with clean hands. 38. The question arose whether the petitioners have disclosed fully and truly all the informations and the materials re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal submission stage after the PCIT pointed out during 245D(4) hearing and subsequently in the Affidavit that they had running A/c Nos.2244535 Standard Chartered Bank and opened A/s No.1685646 of FGB, Dubai. The credits in the bank account No.2244535 are vital information which were not shown in the SOF to determine the correct total income for the relevant assessment years. The applicants stated that in spite of their best efforts, they were not able to gather the details of this bank account. It is the applicants own account and in order to determine their income, it is their responsibility to furnish the full facts and account details for settlement of their case. There is deliberate suppression and the applicants have not come forward do disclose fully and truly all facts. The information about bank account No.2244535 and date of credits and source of funds for all the credits including US $ 499512.37 is essential to determine the correct additional income for the Assessment Year 2005-2006. Income cannot be determined by the applicants keeping the date of transfer of A/c No.18341724701 as the basis, which is not envisaged in the provisions of Income Tax Act. It is incorrect pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exact source of investment for the same. The date of deposit as per information received from the U.A.E. Authorities is 12/02/2005. The Department's contention on this issue is that though the applicants have disclosed the proceeds of FD of USD 1,05,285 as commission income in FY 2010-2011 on the date of maturity, the amount of deposit should have been disclosed as income in FY 2004-2005 and the interest should have been declared in each year till FY 2010-2011 in accordance with the provisions of I.T. Act. Hence the applicants have not disclosed correctly and truly the unaccounted income and the manner in which such income has been earned. The applicants claimed that the F.D amount as well as the interest thereon related to commission income. Accordingly, both the year of disclosure and the nature of source of income are not disclosed truly and correctly. 6.4 According to the Department, though the applicants have filed copy of AED A/c No.10360011666284010 in FG Bank, Dubai, the transactions in the bank a/c have not been made part of the books of accounts prepared by the applicants for the purpose of disclosure before the Commission. There is a credit entry of AED 5000 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants filed a set of Statement of Affairs without including the foreign transactions and foreign bank accounts. Thus, the applicants cooperation is failing miserably, in spite of the Department's request and the direction of the Commission, to prepare a combined Statement of Affairs (including domestic and foreign income/assets) for each applicant for each assessment year. 6.13 The applicants clearly suppressed the facts relating to foreign bank accounts (Nos.2244535 of Standard Chartered Bank, Dubai and 1685646 of FGB, Dubai), trail of banking transactions with Mr.Percy Benhamin and various other aspects mentioned in earlier paragraphs such as source for the credit of 5000 AED, fixed deposits, salary income, funds from Shri Ashok Peter Jacob, source for the cash deposits and traveller cheques, unexplained credit of USD 10,00,000 etc., leading to non-disclosure of full and true facts with evidence. Further, whatever is stated in the Statement of Facts on the manner in which the income has been derived has not been corroborated with any specific evidence by the applicants. We find that in case of both the applicants, the disclosure is not full and true and the manner in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished, this Court is of the considered opinion that the 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. 43. When Section 245C of the Act without any ambiguity stipulates that the Assessee filing an application in the prescribed format under Section 245C of the Act must disclose full and true informations of his income and such informations have not been disclosed before the Assessing Officer and further it is necessary that the Assessee must inform the manner in which such income has been derived. Only if the source from which such income has been derived is informed, the Authorities Competent must be in a position to cull out the truth by examining the sources and settle the issues. 44. Therefore, the 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 Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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