TMI Blog2022 (5) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered opinion is not proper. As Assessing Officer can use all the material which is submitted before settlement commission and Assessing Officer can make the addition based on the proper evidences on concealment of income or any evidences which proves that assessee has not disclosed its proper income. In the given case, it is also fact on record that in the search, no incriminating material was found and no other material available before the Assessing Officer to sustain the addition except relying on the voluntary disclosure before ITSC. As relying on Anantnadh Constructions and Farms (P.) Ltd. [ 2017 (5) TMI 1692 - ITAT MUMBAI] we are inclined to delete the additions made by the Assessing Officer by solely relying on the information submitted before ITSC without there being any material in support of proposed addition. Accordingly, ground No. 1 and 2 are allowed. Deduction on account of education cess on the tax payable by the assessee - HELD THAT:- We observe that the Hon'ble Jurisdictional High Court has considered this issue in detail in the case of Sesa Goa v. JCIT[ 2020 (3) TMI 347 - BOMBAY HIGH COURT] and held in favour of the assessee. - ITA NO. 325/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which a show cause notice was issued to assessee on 27.02.2020 and assessee was asked to explain why the additional income offered by it in front of settlement commission should not be added to the final income. In response assessee submitted that assessee offered additional income in front of settlement commission in order to buy peace of mind and to avoid litigation. Further, it was stated that no incriminating material has been found with respect to additional income offered. Therefore, no addition would be made on the additional income offered before settlement commission. 4. Assessing Officer rejected the submissions of the assessee and made addition of ₹.51,50,000/- as additional income of the assessee which was offered before settlement commission. The Assessing Officer observed that Assessing Officer is entitled to use all the material filed before ITSC for the purpose of completing the assessment and even without incriminating material, addition can be made since assessee has offered additional income before ITSC. He observed that assessee has not brought anything on record which suggest that the income offered by the assessee should not be considered for comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.CIT(A) in Para No. 9.5 of the order and he accordingly, relied on the orders passed by the Tax Authorities below: - 8. Considered the rival submissions and material placed on record, we observed that subsequent to search action assessee has disclosed additional income before ITSC and as per the information available on record assessee has agreed for adhoc disallowance relating to business expenses to the extent of ₹.50 Lakhs. We observed that assessee has agreed for adhoc addition in order to buy peace and to cover if there is any possible deficiency in any of the evidences with respect to the business expenditure incurred by the assessee. Further, assessee agreed for additional expenses of ₹.1.5 Lakhs over and above the above business expenditure. It is fact on record Assessing Officer relied on the informations submitted before ITSC which in fact is only voluntary disclosure of adhoc expenses in order to avoid unnecessary verification and cumbersome exercise of following up with the Tax Authorities. Since settlement commission has rejected the application of the assessee, now assessee retracts the submissions made before settlement commission. The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 245D(1) of the Act? On this issue, we have already seen that in the order dated 30-11-2007 under section 245D(4) of the Act, the Settlement Commission has clearly held that the assessee for assessment year 2005-06 does not satisfy the criteria of offering income on which at least an income-tax payable should exceed Rs. 1 lakh. The Settlement Commission has further held that when admitting the petition of the assessee for assessment year 2005-06, this aspect was overlooked and that they are rectifying the apparent error by excluding assessment year 2005-06 of the assessee from the process of settlement. Thus, the case of the assessee for assessment year 2005-06 cannot be considered to have been admitted for the process of settlement under section 245D(1) of the Act. Consequently, the confidential information disclosed in the Annexure to the Settlement application could not have been used by the Assessing Officer against the assessee to make the impugned addition. Therefore, the addition to the income made by the Assessing Officer in assessment year 2005-06 which is based only on the disclosure made in the Annexure to the Settlement Commission is not valid in law. Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made. (3) For the purposes of sub-section (2), the Assessing Officer or as the case may be, other income-tax authority, shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it, as if such material, information inquiry and evidence had been produced before the Assessing Officer or other income-tax authority or held or recorded by him in the course of the proceedings before him. 21. Thus, when a proceedings before the Settlement Commission abates, it reverts to the income-tax authority before whom it was pending at the time of making the application for settlement and the income-tax authority has to dispose of the case in accordance with the provisions of the Act as if no application for settlement had been made and for that purpose, it is entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Kolkata Tribunal in the case of Kanodia chemicals Industries Ltd. v. Addl. CIT and vice versa [ITA No. 2184/Kol/2018 and 2439/Kol/2018 dated 26.10.2021 wherein it has been held that the education cess is not an allowable deduction. The Ld. DR has provided a copy of the said decision to us vide email dated 05.01.2022. 12. Ld. AR further submitted that in the said decision, Hon'ble Kolkata Tribunal has referred to the decision of the Hon'ble Supreme Court in the case of CIT v. K. Srinivasan [83 ITR 346 (1972)] to come to conclusion that the education cess is additional surcharge and therefore the same cannot be allowed as deduction while computing the income of the assessee. ln view of the decision of Hon'ble Supreme Court, the Hon'ble Kolkata Tribunal chose not to follow the decision of Hon'ble Bombay High Court in the case of Sesa Goa Ltd. (supra). 13. In this regard, he submitted that the aforesaid decision of the Hon'ble Supreme Court in the case of CIT v. K. Srinivasan (Supra) was dealing with the issue of levy of tax on the income of the assessee. The Hon'ble Court was required to decide whether the tax applicable on the salary income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of the ITO is not correct. Clause 40(a)(i0 of the IT Bill, 1961 as introduced in the Parliament stood as under: (a) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of or otherwise on the basis of, any such profits or gains. When the matter came up before the Select Committee, it was decided to omit the word 'cess' from the clause. The effect of the omission of the word 'cess' is that only taxes paid are to be disallowed in the assessments for the years 1962-63 and onwards. 3. The Board desire that the changed position may please be brought to the notice of all the ITOs so that further litigation on this account may be avoided. 17. The aforesaid circular thus clarifies the intent of the legislature that for the purpose of s. 40(a)(ii) of the Act, 'cess' would not be considered as part of the tax and therefore the same cannot be disallowed invoking s. 40(a)(ii) of the Act. The said circular is directly on the provisions of s. 40(a)(ii) of the Act relied upon by the assessee and therefore cannot be superseded by the ratio of aforesaid decisions rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific issue of allowability of 'Education Cess' while computing business income of the assessee. It is submitted that while dealing with the said issue, the Hon'ble Bombay High Court has taken into account the express intention of the legislature as elucidated in the circular dated 18.05.1967 stating that cess cannot be subjected to disallowance u/s. 40(a)(ii) of the Act. The Hon'ble High Court has also taken into account several other decisions of various high courts and Hon'ble Supreme Court while concluding that the education cess is an allowable deduction. ln fact, the Revenue had relied upon another decision of Hon'ble Supreme Court in the case of Unicorn Industries v. UOl [112 Taxmann.com 127] wherein the Hon'ble Court had held that for the purpose of levy of tax, cess is to be included since the cess is nothing but the tax. However, the Hon'ble Bombay High Court observed that the said decision was not in the context of the provisions of s. 40(a)(ii) of the Act and therefore the said decision cannot be relied upon to come to conclusion that the education cess was allowable as deduction. It is submitted that likewise, even the decision of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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