9911796707
TMI Blog2021 (12) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been satisfactorily explained. Relevant to above, it may be noted that the present petitioner Mrs. Indu Srivastava, was subjected to search proceeding under Section 132 of the Act on 19.04.2017 and 20.04.2017, at Noida. During the course of that search, cash of Rs. 10,75,23,000/- was discovered at her residence. Of that, Rs. 10,74,91,000/- was seized. Also, jewellery, documents and certain other items were seized in the course of that search. Parallel search was also conducted in the case of the husband of the petitioner Mr. Keshav Lal on 19.04.2017 and 20.04.2017, at Kanpur. However, that search proceedings did not lead to any further seizure. During the course of the search, the statement of the present petitioner was also recorded under Section 132 of the Act with respect to the cash found and seized from her possession. At that stage, the petitioner appears to have explained the cash discovered as partly belonging to herself, partly to her daughter and partly by way of cash kept with her by certain friends/acquaintance. As to the jewellery, the petitioner claimed the same, having been received from her father-in-law and her mother-in-law. Some part of the jewellery w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cotton seed oil and palm oil. It was the further case of the petitioner that the capital to start the new business was to be contributed by the above named persons being Rs. 4 crores each to be contributed by Mr. Indravardan G. Patel and Mrs. Bindu D. Trivedi and a further Rs. 6 crores to be contributed by Mr. Pravin K. Patel. The petitioner's contribution was confined to Rs. 1 crore. Relying upon clause 3.7 of the said Memorandum of Agreement, it was further disclosed that a sum of Rs. 10 crores and 50 lakhs had been contributed by the aforesaid Mr. Indravardan G Patel, Mrs. Bindu D. Trivedi and Mr. Pravin K. Patel being Rs. 2.5 crores, 2.5 crores and Rs. 5.5 crores, in cash. That amount was disclosed to have been deposited with the petitioner for the purpose specified in the Memorandum of Agreement entered between the parties. Though, the money did not belong to the petitioner, however, as to the manner of her undeclared income arising therefrom, it was explained that the aforesaid parties who had contributed to the capital required in the new business had, disowned their connection to it, inasmuch, according to the petitioner, they were not coming forward to claim that money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has not been disclosed by the petitioner. Though, the Settlement Commission presumed that such jewellery had been generated from unknown activities. However, the manner of the unaccounted money was observed to be unexplained. As to the disclosure of cash of Rs. 10.5 crores out of total Rs. 10.75 crores discovered during the search, the same was also not disclosed by the petitioner in her return filed in response to the notice under Section 153 A of the Act. After taking note of the Memorandum of Agreement dated 27.3.2017 relied upon by the petitioner, the Settlement Commission further observed that the Memorandum of Agreement was not referred to or was not relied upon by the petitioner either during the search proceedings or during her statement recorded under Section 131 of the Act or while filing her return in response to the notice under Section 153-A of the Act. Thereafter, the Settlement Commission has proceeded to consider the possibilities and probabilities in two scenarios being (i) if the cash actually belongs to the persons, as claimed by the petitioner and (ii) what would emerge if it belongs to the petitioner. The Settlement Commission has itself chosen to use words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to contest the matter before the Commission. Thus, the Settlement Commission has prematurely terminated the proceedings without any valid reason. The observations made by the Settlement Commission in its order with respect to the income disclosed by the petitioner from M/s SIB International and jewelleries, are stated to be wholly perverse. The Commission has completely failed to examine the admitted documents in the shape of record of assessment of M/s SIB International in its bank statements etc. that establish genuine business activity of that entity. Similarly, the Settlement Commission has failed to look at the will deed which was executed by the fatherin- law of the petitioner, the affidavit of the attesting witness or the sale invoices with respect to the jewellery and has rushed to record its conclusion that the manner of earning from the aforesaid two sources was not disclosed. Such observations/findings do not arise from the relevant material existing on record. They are stated to be wholly untenable. In fact, it is the submission of learned counsel for the petitioner that the Settlement Commission was obligated to look at such material and thereafter record its tent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conduct of third parties and not by own deliberate conduct. Money that was truly not hers is now to be assessed at her hands because of the provisions of the law and the conduct of the third parties. The fact that she had not disclosed the same either in her regular return or in her return to be filed in response to Section 153-A of the Act would also be of no consequence as that return was filed prior to filing the application before the Settlement Commission. If at all, it only makes her application maintainable in law as she had never claimed that money in any income tax proceedings. Also, it has been submitted that there is no principle under the Income Tax Law that may have been offended by the petitioner. The rejection order has been passed on mere whims and fancies and not on cogent material or reasoning. Learned counsel for the Income Tax Department has submitted that there is no error in the order passed by the Settlement Commission inasmuch as the petitioner had failed to explain the manner in which the undisclosed income had been earned by the petitioner from either of the three sources disclosed. He has placed reliance on the decision of the Supreme Court in Ajmera Hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se settled and any such application shall be disposed of in the manner hereinafter provided: ............................................................................" 26. A bare reading of the provision would reveal that besides such other particulars, as may be prescribed, in an application for settlement, the assessee is required to disclose: (i) a full and true disclosure of the income which has not been disclosed before the assessing officer; (ii) the manner in which such income has been derived and (iii) the additional amount of income tax payable on such income. 27. It is clear that disclosure of "full and true" particulars of undisclosed income and "the manner" in which such income had been derived are the pre-requisites for a valid application under Section 245C(1) of the Act. Additionally, the amount of income tax payable on such undisclosed income is to be computed and mentioned in the application. It needs little emphasis that Section 245C(1) of the Act mandates "full and true" disclosure of the particulars of undisclosed income and "the manner" in which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be entertained by a Settlement Commission i.e. at the final stage, it may chose to reject the application after entertaining the report of the Principal Commissioner, if it finds the application to be invalid. Therefore, the satisfaction to be recorded is only an expression of a tentative opinion to entertain an application or to allow it to be processed further. Such a satisfaction does not and it could not determine either the rights of the parties to any extent or limit the options of the Settlement Commission to reach a different conclusion i.e. to reject the application either in part or in entirety, at a later stage. We also cannot overlook a fact that the satisfaction required to be recorded is wholly ex-parte against the revenue authority inasmuch as at this stage, the revenue authorities are not required or permitted to be heard. Therefore, unless the application filed is found to be wholly bogus or unfounded on facts or law, there may remain less reason to reject such applications outrightly. In the facts of the present case, the petitioner had supported his claim and the Settlement Commission had not reached a conclusion that the disclosure made was not full or true in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the investigation carried out after the search or in response to the notice issued under Section 153 (A) of the Act. To that extent, the reasoning of the Settlement Commission is clearly erroneous in law. As to the further reasoning offered by the Settlement Commission that the petitioner had not explained the manner of acquiring the income (cash and jewellery), the Settlement Commission has again failed to take into consideration the effect of the Memorandum of Agreement and the further claim of the petitioner that the signatories to that agreement (who had contributed Rs. 10.5 crores to set up a new business) had disowned that amount, subsequent to that search. Prima-facie, there is merit in the submissions advanced by learned Senior Counsel for the petitioner that by virtue of Section 132 (4A), Section 56 (2) (vii) and Section 292 (C), the presumption in law arose as a consequence of the action/inaction of the third party in not claiming the cash seized at the petitioner's hands as may be treated as her income. Without drawing any final conclusion to that, we find that the said aspect has not been examined and has been completely overlooked by the Settlement Commission. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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