TMI Blog2022 (1) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... eason to interfere with such findings as the said findings are candid and convincing and in consonance with the provisions of the Income Tax Act. In view of the fact that the application submitted by the petitioner under Section 254C was rejected as not maintainable in view of the non-compliance of the Mandatory conditions stipulated under the provisions and the petitioner/assessee could not able to establish that he has filed an application with true and full disclosure of facts. Thus, the petitioner is not entitled for any relief as such sought for in the present writ petition. - W.P. No.36950 of 2016 And W.M.P.Nos.31747 & 31748 of 2016 - - - Dated:- 3-9-2021 - Hon'ble Mr. Justice S.M.Subramaniam For the Petitioner : Mr.Palani Selvaraj for Mr.R.G.Narendhiran For the Respondents : Mr.A.P.Srinivas Senior Standing Counsel for IT ORDER The lis on hand is instituted challenging the order passed by the Income Tax Settlement Commission on 30.09.2016 and further relief is sought for forbearing the fourth respondent from proceeding with the Assessment proceedings. 2.The petitioner is a company engaged in the business of purchase and sales of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed facts which all are raised between the parties. One hand, it is submitted that the petitioner has filed an application with true and full disclosure of Income and further submitted application declaring additional income. The petitioner clarified the doubts raised by the Settlement Commission and participated in the adjudicatory process. Inspite of the co-operation extended by the petitioner, the Settlement Commission, rejected the applications as not maintainable, on the ground that the petitioner has not disclosed all the material facts fully and truly in order to substantiate and the petitioner has stated that the details regarding the investments, profits and loss and other Books of Accounts were submitted before the Income Tax Settlement Commission. 6.It is contended that the Director General of Income Tax (Investigation), took charge as Vice-Chairman subsequent to the search conducted in the premises on 17.07.2013. Thus, the subsequent proceedings based on the search operations were initiated within the knowledge of the Vice-Chairman of the Income Tax Settlement Commission and the Administrative circulars and directions were also made with his knowledge. Thus, there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the material facts fully and truly. 8.The learned Senior Standing Counsel objected the contentions raised on behalf of the petitioner by stating that the powers of the Settlement Commission and the scope of settling the issues between the assessee and the Department are clearly enumerated under the provisions of the Income Tax Act. Once the settlement Commission could able to arrive a conclusion that the assessee has not disclosed all material facts fully and truly, then a petition for settlement under Section 247 (1) of the Income Tax Act is not maintainable at all. The findings in this regard made in the impugned order would reveal that the petitioner has not only suppressed certain facts but not produced all the materials truly and fully. Whenever, the Department confronted with the assessee, he made declaration in piecemeal and therefore, the Settlement Commission arrived a conclusion that the issues cannot be settled and accordingly, rejected the application as not maintainable. Thus, there is no infirmity as such in respect of the order passed by the Settlement Commission. 9.Considering the arguments as advanced by the respective learned counsel appearing on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Certain pre-conditions are also stipulated. Thus, the Settlement Commission cannot enter into the venture of assessment, which is the power of an Assessing Officer under Section 153A of the Act. Therefore, this Court is of an opinion that in the absence of any true and full disclosure, the Settlement Commission cannot go beyond the scope of Section 245C of the Act and adjudicate the additional income found by the Department during seizure, which is admittedly not disclosed in the application filed at the first instance by the assessee. 12.It is not in dispute that for entertaining an application for settlement under Section 245C of the Income Tax Act, the assessee must disclose true and full income enabling the Commission to settle the issues. If any non-disclosure is identified during the course of proceedings, that itself is sufficient to reject the application as not maintainable. The Commission is not empowered to proceed further as in the event of identifying non-disclosure of income, since the Assessing Officer is the Authority to proceed with reassessment. In the present case, action has been initiated under Section 147 148 of the Act. 13.Therefore, this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso cold storage facility. According to the seized material enclosed to the AO's report dated 19.09.2016 it was involved in FYs 2007-08 2008-09 in syrup production. These documents are enclosed in pages 70 to 79 of this order. It has also disclosed the expenditure under the head Machinery Maintenance in syrup unit in these two Asst years. This is seen as per the seized material. The applicant admits that it was involved in syrup production earlier but it was discontinued in the intervening two years and again started from March 2011. The applicant claimed nearly ₹ 55 Crores of Sec.80IB(11A) deduction for the AYs.2012-13, 2013-14 and 2014-15. The Department objected to this claim. Detailed report of the AO was enclosed by the C.I.T. Sec.80IB(11A) reads as follows: Section 80IB(11A): [(11A) The amount of deduction in a case of [an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or [meat and meat products or poultry or marine or dairy products or] from] the integrated business of handling, storage and transportation of foodgrains, shall be hundred per cent of the profits and gains d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the applicant that stock was produced in the month March, 2011. Hence, even in the past years i.e.-A.Y2011-2012 and earlier, there was production from out of the machinery in the factory. Moreover, imported syrup was being processed and packaged and sold for the past five years. According to the Section, the commencement of the production is not the criteria but is is the commencement of business that is the criteria. The business was already being carried on since few years and this cannot be denied. The unit was in existence and the addition of new machinery of ₹ 2.8 crores cannot be said to form a new unit. 7.9.2.It appears that the applicant while filing the Excise returns under the new amended provisions thought of this idea to claim 80IB deduction under I.T.Act. This is not sufficient in order to claim 80IB deduction. The applicant itself pointed out the amended provisions in the Exice Act according to which even on the packaged products excise duty was to be paid. This is referred above. IT is admitted that there is no raw materials/production register except for the excise record. 7.9.5.No additional staff were employed and there was no additional re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enterprise as if the undertaking or the enterprise were a distinct entity. It is clearly seen that in the case of the applicant this condition is not fulfilled. The adhoc apportionment made is not acceptable. Moreover, the unit is not a new unit. Just because there is a change in Excise law the applicant cannot change its mind and claim this benefit. There was production even in the earlier years and there was business of processing and packaging of dates and also syrup even in the earlier years. For once of the years, the return is filed belatedly and as per the judgment of the Supreme Court referred to by the AR this Commission has no power to take action u/s. 119 Sec 80AC is applicable. 7.9.8.Thus it is clearly seen that on account of 80IB deduction, figures that were submitted are being altered after the department pointed out the same. In all, the applicant withdrew ₹ 12.07 crores for the 3A.Ys and disclosed it as additional income on account of withdrawal of deduction u/s.80IB to that extent. Thus on the same facts, additional income is disclosed now before the Commissioner at the last stage when confronted by the department. The Department cited the case of Majo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheets were filed, basic registers such as raw materials / production were not maintained, expenditure were incurred in common with other business activities, depreciation etc. were also not strictly ascertainable and hence the claim of Sec. 80IB(11A) is not valid. There is no case made out to claim deduction u/s. 80IB for all the years. On he belated return no benefit can be extended to the applicant. It is also to be noted that this business activity was commenced long back i.e. in the year 2001 or 2002 according to AR. The applicant was involved in processing and packaging of dates and also packaging of imported syrup. Addition made of just ₹ 2.8 crores on account of machinery out of total machinery of ₹ 7,36,55,743/- cannot be the basis to claim that new unit has been started from 10 CCB shows only machinery of ₹ 1 Crore is used in this unit whereas AR claimed over ₹ 3 Crores of machinery is involved. 7.9.14.One more abnormality is that the profit with respect to Sec. 80IB unit is disclosed at 54% or so whereas in the regular activity it is of the order of 12%. This was starting point for investigation. The applicant itself admitted the mistakes / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96,34,201 2009-10/2010-11 2,64,84,500 7,97,54,158 10,62,38,658 2010-11/2011-12 -- 8,75,95,837 8,72,95,837 2011-12/2012-13 1,59,02,082 4,88,89,901 6,47,91,983 2012-13/2013-14 6,68,866 3,11,27,981 3,17,96,847 5,26,89,649 24,70,67,878 29,97,57,527 When this was pointed out by the Department, a letter with Annexures was filed by the applicant on 29.09.2016 which is enclosed in part, to this order. Herein for A.Yr 2010-11, an amount of ₹ 8,55,03,998 an for A.Yr.2011-12, an amount of ₹ 4,29,17,481, totaling to ₹ 12,84,21,479 is disclosed as additional income on account of inflation of purchases. 9.8.The department clearly argued its case stating that penalty should be levied as per Major Metals Ltd. Mumbai High Court Judgement. The disclosure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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