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TMI Blog2021 (9) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... d respondent herein. 4. In this judgment, the parties shall be referred to as the assessee (appellant), the Revenue (first respondent) and the ITSC (second respondent). 5. The facts leading to filing of the writ petition are as hereunder: The assessee is carrying on business in jewelery and diamonds under the name and style of M/s.Suman Jewelery, Coimbatore. The assessee has been filing return of income and for the assessment years from 2007-08 to 2012-13, the returns were filed. Seizure and search operations under Section 132 of the Income Tax Act, 1961 (for short, the Act) were carried on in the business and residential premises of the assessee and her elder son on 25.9.2012 and concluded on 14.11.2012. During the seizure and search operations, several documents as well as computers and other records were seized. The assessee was issued with notices under Section 153A of the Act on 06.3.2013, pursuant to which, the assessee filed the return of income for the assessment years 2007-08 to 2011-12 on 25.3.2013 and for the assessment year 2012-13 on 13.3.2013. 6. Thereafter, the assessee filed an application on 10.4.2013 before the ITSC under Section 245D(1) of the Act. The said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been a further direction issued by the ITSC for release of documents relating to a property at Theni. 9. After the order was passed by the ITSC under Section 245D(4) of the Act dated 31.7.2013, the assessee submitted a representation dated 13.3.2014 to the Commissioner of Income Tax, Central III, Chennai-34 for release of documents. Pursuant to that, by order dated 07.4.2014, the Income Tax Officer (HQ), Central III, Chennai addressed the Deputy Commissioner of Income Tax, Central Circle II, Coimbatore stating that the Commissioner of Income Tax, Central III, Chennai-34 recorded that since the assessee paid the entire outstanding demand, permission was granted for release of the original agreement dated 14.9.2012 seized during the search on 25.9.2012 evidencing payment of Rs. 2 Crores for purchase of the property in Theni District. The Income Tax Officer (HQ), Central III, Chennai further called for a compliance report for release of the original document. 10. We are informed by the learned counsel appearing for the assessee that whatever is the tax, which has been directed to be paid, has been fully paid and the documents were also released. 11. While the undisputed facts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said writ petition and examined as to the grounds, on which, the learned Writ Court had interfered with the order passed by the ITSC. We find that the primary and main reason for interfering with the order of the ITSC was on the ground that the assessee did not make a full and true disclosure before the ITSC and therefore, the application under Section 245C of the Act ought to have been rejected. The reason for coming to such a conclusion is on account of the fact that additional disclosure of income was made by the assessee during the pendency of the settlement proceedings. 16. The question would be as to whether this could be a reason to hold that the assessee was guilty of not fully and truly disclosing the facts at the first instance before the ITSC. In our considered view, the said finding is incorrect for more than one reason. Firstly, it has to be borne in mind that the proceedings before the ITSC is a special mechanism provided under the Act. Chapter XIXA of the Act deals with settlement of cases. Therefore, the Act itself provides for a mechanism or amnesty to an assessee, who is undoubtedly a defaulter or an assessee as that of the assessee before us, who has been su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at of the ITSC unless he finds that there is a serious error in the decision making process. The learned Single Judge proceeded to hold that the observations and findings of the ITSC were utterly perverse and without jurisdiction and no prudent person could have come to such a conclusion. But, we do not find anything of that sort on a reading of paragraph 6.2.2. of the order passed by the ITSC. 20. The ITSC has given certain reasons, which appear to be plausible reasons for the course, which has been adopted by the ITSC with regard to the set of books of accounts to be reckoned while considering the case for settlement. The next aspect is as to which of the valuation methods should have been adopted by the assessee and whether they should have adopted weighted average cost method or net accretion to asset method. This aspect has been dealt with by the ITSC in paragraphs 6.2.3 and 6.2.4 of the order passed by the ITSC, which read as hereunder : "6.2.3. In these circumstances, the most appropriate and logical method to be adopted is 'net accretion to asset method'. The only undisclosed asset, which has been unearthed during the search, is the excess stock. Basically, the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for working out the undisclosed income on the 'net accretion to asset method'. It appears that the working of the undisclosed income quantified by adopting this method in the report under Rule 9 of the Department was erroneous. This is indicated by the fact that different figures have been reached by the Department by adopting the same method in the paper book submitted on 25.7.2013. We, however, find that even the new working done by the Department suffers from a number of infirmities. The Department has considered negative figures in the regular books representing sundry debtors as an asset while such figures reflected both the sundry creditors and sundry debtors grouped together and were required to be deducted. Similarly, the bank liabilities and the current liabilities already reflected in the regular books were required to be deducted on incremental basis. Even otherwise, as the other set of books are also incomplete, it would not be possible to quantify the correct figure of undisclosed income by relying upon them." 21. In the light of the above, we find that the reasons assigned by the ITSC for coming to such a conclusion as to what would be the appropriate valu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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