TMI Blog2021 (9) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. In Brij Lal ors.[ 2010 (10) TMI 8 - SUPREME COURT] the Settlement Commission passes the order which is a complete code in itself. It is a quasi-judicial authority and there is no provision for the Settlement Commission to remand the matter back to the AO - contention of the petitioner solely based on the observations made in different context by the Supreme Court and the High Court of Madras and Bombay that the Settlement Commission should have rejected his application cannot be sustained once the Settlement Commission has reached to the conclusion that there is no full and true disclosure of income. The stage is no more available for the petitioner. Once the Settlement Commission has ceased with the matter and has proceeded to take on record the reports and has reached to the conclusion that additional income is required to be added to the income as purportedly submitted to be the full and true undisclosed income, the option is not available for the applicant-petitioner, who has approached the Settlement Commission, to withdraw his application and ask for assessment to be done by the regular AO. This Court finds that the Settlement Commission had, in-fact, directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er restored back. - S. B. Civil Writ Petition No. 8677/2014 S. B. Civil Writ Petition No. 8699/2014 - - - Dated:- 25-8-2021 - HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA For the Petitioner : Ms. Sakshi Srivastava, Adv. With Mr. Bhrigu Sharma, Adv. For the Respondent : Mr. Anil Mehta, AAG with Mr. Siddharth Bapna ORDER 1. Both these writ petitions have been preferred by the petitioners assailing the order dated 19/12/2013 passed by the Income Tax Settlement Commission while exercising the powers under Section 245D(4) of the Income Tax Act, 1961 (for short, IT Act) as also the orders dated 18/06/2014 21/02/2014 respectively passed under Section 245D(6B) of the IT Act. 2. The petitioner-company which is a private limited company has filed the first writ petition while Mr. Rajendra Gupta, who is Managing Director of the petitioner-company, has also filed separately the second writ petition. 3. Both the petitioners by way of these writ petitions have challenged the legality, validity and propriety of the order dated 19/12/2013 passed by the Income Tax Settlement Commission while exercising the powers under Section 245D(4) of the IT Act whereby the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application and the proof of such payment is attached with the application.] [Explanation.-For the purposes of clause (ia),- (a) the applicant, in relation to the specified person referred to in clause (ia), means,- (i) where the specified person is an individual, any relative of the specified person; (ii) where the specified person is a company, firm, association of persons or Hindu undivided family, any director of the company, partner of the firm, or member of the association or family, or any relative of such director, partner or member; (iii) any individual who has a substantial interest in the business or profession of the specified person, or any relative of such individual; (iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the specified person or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case referred to in clause (i) of that subsection, the amount of tax calculated under that clause; (b) in a case referred to in clause (ii) of that subsection, the amount of tax calculated under that clause as reduced by the amount of tax calculated on the total income returned for that year; (c) * * * * * (1D) Where the income disclosed in the application relates to more than one previous year, the additional amount of income-tax payable in respect of the income disclosed for each of the years shall first be calculated in accordance with the provisions of sub-sections (1B) and (1C) and the aggregate of the amount so arrived at in respect of each of the years for which the application has been made under sub-section (1) shall be the additional amount of income-tax payable in respect of the income disclosed in the application. (1E) * * * * * (2) Every application made under sub-section (1) shall be accompanied by such fees as may be prescribed. (3) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. [(4) An assessee shall, on the date on which he makes an application under sub-section (1) to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Commissioner], and the [Principal Commissioner or Commissioner] shall furnish the report within a period of thirty days of the receipt of communication from the Settlement Commission. (2C) Where a report of the [Principal Commissioner or Commissioner] called for under sub-section (2B) has been furnished within the period specified therein, the Settlement Commission may, on the basis of the report and within a period of fifteen days of the receipt of the report, by an order in writing, declare the application in question as invalid, and shall send the copy of such order to the applicant and the [Principal Commissioner or Commissioner]: Provided that an application shall not be declared invalid unless an opportunity has been given to the applicant of being heard: Provided further that where the [Principal Commissioner or Commissioner] has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the [Principal Commissioner or Commissioner]. [Provided alsothat where in respect of an application, an order, which was required to be passed under this sub-section on or before the 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007, 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]. (4A) The Settlement Commission shall pass an order under sub-section (4),- (i) in respect of an application referred to in subsection (2A) or sub-section (2D), on or before the 31st day of March, 2008; (ii) in respect of an application made on or after the 1st day of June, 2007 [but before the 1st day of June, 2010], within twelve months from the end of the month in which the application was made;] [(iii) in respect of an application made on or after the 1st day of June, 2010, within eighteen months from the end of the month in which the application was made.] [(5) Subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Commissioner or Commissioner an opportunity of being heard.] (7) Where a settlement becomes void as provided under sub-section (6), the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the incometax authority concerned, may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the end of the financial year in which the settlement became void. [(8) For the removal of doubts, it is hereby declared that nothing contained in section 153 shall apply to any order passed under sub-section (4) or to any order of assessment, reassessment or recomputation required to be made by the [Assessing Officer] in pursuance of any directions contained in such order passed by the Settlement Commission [and nothing contained in the proviso to sub-section (1) of section 186 shall apply to the cancellation of the registration of a firm required to be made in pursuance of any such directions as aforesaid.] 6. Brief facts of the case as not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination done by the Forensic Science Laboratory (hereinafter referred to as FSL) in respect of certain documents seized from the premises of the Director of the petitioner and Shri Rajesh Jain of Mayura Group. The respondent No.2 vide its report dated 06/12/2013 submitted that the report from FSL was unlikely to be received before the limitation for passing order under Section 245D(4) in GTPL group i.e. 31/12/2013. 8. It was further contended that the Settlement Commission by going beyond its jurisdiction and without appreciating that the Settlement and adjudication/assessment proceedings are two alternative modes of dispute resolution and the scope and process of both are fundamentally different, passed the impugned order dated 19/12/2013 under Section 245D(4) of the Act in a manner that the Settlement Applications were disposed of by the Settlement Commission by assuming role as of an Assessing/Adjudicating Officer instead of statutory role as a Settlement Commission. 9. It was further stated that from the findings of the Settlement Commission, it is prima facie evident that the Commission disbelieved the true and full disclosure and assumed the role of Assessing Officer an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt vide order dated 24/08/2018 and Commissioner of Income Tax Central-II Vs. Income Tax Settlement Commission Ors.. 12. Per-contra, learned counsel for the Revenue supported the order impugned and submitted that once the petitioners have surrendered themselves before the Settlement Commission, the Settlement Commission has complete and full right to additionally look into the other incomes which may not have been disclosed by them and it can also proceed to assess itself the income of the petitioners. The contention, therefore, of the petitioners has been opposed with the submission that the Settlement Commission has a jurisdiction much wider. 13. Learned counsel for the Revenue relies on the law laid down by the Supreme Court in Brij Lal ors. Vs. Commissioner of Income Tax, Jalandhar: (2011)1 SCC 1 in support of his contentions. 14. Learned counsel for the Revenue has also filed written submissions wherein it has been stated that the writ petitions should be dismissed also on account of suffering from delay, latches and acquiescence. It is stated that the writ petition has been filed on 11/07/2014 against the final order which was passed on 19/12/2013. It is further s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala Ors.: (2002) 1 SCC 633 and Brij Lal ors. Vs. Commissioner of Income Tax, Jalandha (supra). However, the issue raised before this Court in the present writ petitions has not been examined by the Supreme Court on both the aforesaid cases. In Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala Ors. (supra) the question, which arose for consideration, was Whether the Settlement Commission constituted under Section 245B of the Act has the jurisdiction to reduce or waive the interest chargeable under Section 234A, 234B and 234C of the Act while passing orders under Section 245D(4) of the Act . In Brij Lal ors. Vs. Commissioner of Income Tax, Jalandhar (supra), the questions re-framed by the Constitutional Bench were Whether Section 234B of the Act applies to the proceedings of Settlement Commission under Chapter XIX-A of the Act? and second if yes, What is the terminal point for levy of such interest- whether such interest should be computed up to the date of the order under Section 245D(1) or up to the date of the order of the Commission under Section 245-D(4)? and third Whether the Settlement Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since Rules 6 and 8 of the 1987 Rules have some bearing on the issues involved, for the sake of ready reference, these are extracted below: 6. Commissioner's report etc., under Section 245C(1).-- On receipt of a settlement application, a copy of the said application (other than the Annexure and the statements and other documents accompanying such Annexure) shall be forwarded by the Commission to the Commissioner with the direction to furnish his report under Sub-section (1) of section 245D within thirty days of the receipt of the said copy of the application by him or within such further period as the Commission may specify. 8. Commissioner's further report.--Where an order is passed by the Commission under Sub-section (1) of section 245D allowing the settlement application to be proceeded with, copy of the Annexure to the said application, together with a copy of each of the statements and other documents accompanying such annexure, shall be forwarded to the Commissioner along with a copy of the said order with the direction that the Commissioner shall furnish a further report within ninety days of the receipt of the said Annexure (including the statements and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) or Sub-section (3) of the said Section. A full and true disclosure of income, which had not been previously disclosed by the assessee, being a pre-condition for a valid application under Section 245C(1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against item No. 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, Section245C(3) 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 Section245C of the Act otiose and meaningless. In our opinion, the scheme of said Chapter is clear and admits no ambiguity. 36. It is trite law that a taxing statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to set aside the proceedings is clearly erroneous. The High Court appears to have not appreciated the object and scope of the scheme of settlement under Chapter XIX- A of the Act. 21. The aforesaid judgments clearly show the intent of the Apex Court to mean that this Court would have to set aside the proceedings before the Settlement Commission if it reaches to a conclusion that the assessee had not made full and true disclosure of its income. However, in Ajmera Housing Corporation Anr. Vs. Commissioner of Income Tax (supra), the case was different to the facts of the present case. In that case, while the assessee in his application moved under Section 245C of the Act disclosed the income which was made a basis for the decision of the Settlement Commission, in the present case, the assessee had disclosed the income which was not found to be full and true disclosure of income by the Settlement Commission and the Settlement Commission on the basis of the report submitted by the Commissioner of Income Tax, proceeded to make assessment and passed orders. Thus, the disclosure made by the petitioners was not accepted by the Settlement Commission. The petitioners, therefore be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of tax, penalty or interest. 23. Descriptively, it can be stated that assessment in law is different from assessment by way of settlement. If one reads Section 245D(6) with Section 245I, it becomes clear that every order of settlement passed under Section 245D(4) shall be final and conclusive as to the matters contained therein and that the same shall not be re-opened except in the case of fraud and misrepresentation. Under Section 245F(1), in addition to the powers conferred on the Settlement Commission under Chapter XIX-A, it shall also have all the powers which are vested in the income tax authority under the Act. In this connection, however, we need to keep in mind the difference between procedure for assessment under Chapter XIV and procedure for settlement under Chapter XIX-A (see Section 245D). Under Section 245F(4), it is clarified that nothing in Chapter XIX-A shall affect the operation of any other provision of the Act requiring the applicant to pay tax on the basis of self-assessment in relation to matters before the Settlement Commission. 25. Our detailed analysis shows that though Chapter XIX- A is a self-contained Code, the procedure to be followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, there is a difference between assessment in law [regular assessment or assessment under Section 143(1)] and assessment by settlement under Chapter XIX-A. The order under Section 245D(4) is not an order of regular assessment. It is neither an order under Section 143(1) or 143(3) or 144. Under Sections 139 to 158, the process of assessment involves the filing of the return under Section 139 or under Section 142; inquiry by the A.O. under Sections 142 and 143 and making of the order of assessment by the A.O. under Section 143(3) or under Section 144 and issuing of notice of demand under Section 156 on the basis of the assessment order. The making of the order of assessment is an integral part of the process of assessment. No such steps are required to be followed in the case of proceedings under Chapter XIX-A. The said Chapter contemplates the taxability determined with respect to undisclosed income only by the process of settlement/ arbitration. Thus, the nature of the orders under Sections 143(1), 143(3) and 144 is different from the orders of the Settlement Commission under Section 245D(4). 40. Even in Commissioner of Income Tax v. Anjum M.H. Ghaswala and Ors. MANU/SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application for settlement. As stated above, under the Act, procedure for assessment falls in Chapter XIV (in which Section 154 falls) which is different from procedure for settlement in Chapter XIX-A in which Sections 245C and 245D fall. Provision for levy of interest for default in payment of advance tax under Section 234B falls in Chapter XVII [Section F] which deals with collection and recovery of tax which as stated above is incidental to the liability to pay advance tax under Section 207 (which is also in Chapter XVII) and to the computation of total income in the manner indicated under Chapter XIX-A vide Sections 245C(1B) and 245C(1C) read with the provisos to Section 245C(1) on the additional income tax payable on the undisclosed income. 45. Further, if one examines the provisions of Sections 245C(1B) and 245C(1C), one finds that various situations are taken into account while computing the additional amount of tax payable, viz., if the applicant has not filed his returns, if he has filed but orders of assessment are not passed or if the proceedings are pending for re-assessment under Section 147 (again in Chapter XIV) or by way of appeal or revision in connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must proceed in carriage of the cases brought before it are circumscribed by statutory provisions. All these provisions have been enacted in order to subserve the object which Parliament intended to fulfill in enacting the provisions which are conceived in the public interest. The Commission must scrupulously adhere to the statute: a body which traces its origin and jurisdiction to the statute must not transcend the limits subject to which the statute confers jurisdiction. 13. Hence, on considering the report of the Commissioner in pursuance of a direction under subsection 2B of Section 245D, the Commission is empowered to reject an application as invalid after giving an opportunity of being heard to the applicant. Where an application has not been declared to be invalid under sub-section 2C, sub-Section 3 of Section 245D empowers the Commission to call for the records from the Commissioner. After examination of the records, if the Commission is of the opinion that any further inquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made a further inquiry or investigation and to furnish a report on the matters covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntation. 24. Keeping in view above, if this Court examines facts of the present case, the petitioner, who is an assessee, is coming up with the arguments that he has disclosed in his application the income which has not been accepted by the Settlement Commission and therefore, the Settlement Commission ought to have rejected the application and allowed the petitioner to take up his matter before the Assessing Officer under Section 143 or 144 of the IT Act. It is his submission that the Commission ought not have accepted the report of the Commissioner of Income Tax and proceed further. The second submission of the petitioner is that once the Settlement Commission had sent the documents for verification to the FSL, it should have waited for result of the FSL and proceed thereafter. 25. As regards the first contention, this Court finds that the petitioner himself submitted an application stating therein true and full disclosure of his income which was found to be incorrect. A person, who himself has not come out with clean hands, cannot take the benefit of the law for his own purposes. It is noticed that the Settlement Commission, after having taken note of the report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter and passed the impugned order. The petitioner was also not given opportunity of hearing. 29. Thus, the principles of Audi-alteram-partem, which are imbibed and inherent in the entire procedure relating to Settlement Commission which is akin to arbitration proceedings, have been violated. This Court is not convinced with the submission of learned counsel for the Revenue that the petitioner is estopped to challenge the decision of the Settlement Commission after having made the requisite payments in 15 installments. There is no estoppel against the law. The Settlement Commission, which is a quasi-judicial body, is required to adhere to the principles of law in stricto sensu. 30. The contention of learned counsel for the Revenue that the petition deserves to be dismissed on the ground of acquiescence is noticed for rejection. In cases relating to Revenue, the law of acquiescence would have no application because the orders are of mandatory nature where a person is bound to comply with the orders of the AO/Settlement Commission. If the assessee has deposited the revenue as assessed, he cannot be said to have acquiesced to the findings arrived at for computing the amount. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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