TMI Blog2022 (7) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... f certiorari can be issued by the High Court under Article 226 of the Constitution of India, when an administrative or a quasi-judicial authority, in the decision making process considers irrelevant materials by ignoring the relevant materials to draw its conclusion, the order can be interfered with. In the case before us, the applications have been rejected by an order under 245D(4) for the reasons that the appellants have failed to truly and fully disclose the particulars and that they have not co-operated with the commission. There is no quarrel about the preposition that the failure to truly and fully disclose the particulars and the manner of derivation of the additional income is the primordial requisite for an application to be entertained. In the present case, the Learned Senior Counsel for the appellants has, referring to the applications, annexures and other particulars filed before the commission, contended that the appellants have truly and fully disclosed all the particulars within their knowledge and also the manner in which the additional income has been derived and that satisfies the requirements under Sections 245C and 245D of the Act. What constitutes true a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort under section 245D(3). When no time is prescribed a reasonable time must be granted to the assessee. To a report under Rule 9, the assessee is granted 15 days time under Rule 9A to submit his objections, which in the opinion of this court is a reasonable period. The period of 3 days granted by the commission is not a reasonable period, more particularly when the commissioner has been allowed to file a report after the statutory period - as per Section 245D (4), it is mandatory grant a personal hearing after receipt of the report under sub-section 3, which in the present case was not granted. Hence, the procedure contemplated under the Act is violated. The judgment relied upon by the Learned Senior Counsel for the appellants in Automotive tyre manufacturers Association v. Designated Authority and others, [ 2011 (1) TMI 7 - SUPREME COURT] is squarely applicable. When the provisions lay down that a particular procedure is to be followed, there cannot be any deviation from the same. It is needless to state that the date for personal hearing is to be fixed after the objections are filed by the assessee. We have no hesitation to hold that the order has been passed in violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arayana Prasad For the Appellant : Mr. R.V. Easwar (WA.No.2629/2021) And Mr.N.L.Rajah (WA No.2632/2021) Senior Advocates for Mr. Suhrith Parthasarathy For the Respondents : Mr. A.P. Srinivas Senior Standing Counsel in both the Writ Appeals COMMON JUDGMENT R. MAHADEVAN, J. Both these intra-court appeals are filed as against a common order dated 03.08.2021 passed by the learned Judge in WP Nos.33431 and 33432 of 2017. 2. The appellants have preferred the aforesaid writ petitions for issuance of a Writ of Certiorarified Mandamus, calling for the records of the first respondent contained in its order bearing No.TN/CN51/2015-16/34 35/IT dated 06.12.2017 and to quash the same as arbitrary, unjust and illegal and to consequently direct the first respondent to reconsider the applications filed by the appellants bearing No.TN/CN-51/2015-16/34 35/IT and pass a fresh order under section 245D(4) of the Income Tax Act, 1961, after affording sufficient opportunities of being heard to the appellants in accordance with law. 3. For the purpose of disposal of these appeals, it is essential to look into the common averments made in the affidavits filed in support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellants submitted reply on 18.09.2013 narrating the above facts. They also appeared before the officials of the Income Tax Department in connection with the enquiry conducted on 22.01.2015. During such enquiry, the appellants were questioned about the transactions through the company called Moon Mist Enterprises, the reason for the closure of the said company during 2011 etc. Thereafter, the appellants filed a revised return for the assessment years 2005-2006 to 20122013 on 21.05.2015. On receipt of the revised returns, a notice under Section 148 of the Act was issued on 29.05.2015. On receipt of the notice dated 29.05.2015, the appellants also submitted their return on 01.06.2015. 4.3. In the above circumstances, the appellants filed applications under Section 245C of the Act in Form 34B before the second respondent Settlement Commission for settlement of all the pending cases by making a full and true disclosure of the facts in relation to the income earned by them for the assessment years 2005-2006 to 2014-2015, as, at that time, the assessment for the said assessment years was pending. The appellants also paid a sum of Rs.18,30,00,000/- towards income tax together with int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Principal Commissioner of Income Tax that the appellants have not produced the opening and closing forms of various accounts and therefore, he could not effectively conclude his investigation. Objecting to the report dated 11.11.2016, the appellants sent separate letters dated 22.11.2016 narrating the sequences of facts supported by documentary proof. On consideration of the reply dated 22.11.2016, the first respondent passed an order on the same day viz., 22.11.2016 under Section 245D (2C) of the Act stating that all prescribed conditions have been fulfilled by the appellants for entertaining the said applications. Accordingly, the settlement applications of the appellants were allowed with a direction to the Principal Commissioner of Income Tax to submit a report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, within 45 days of receipt of the said order. Accordingly, a report dated 08.02.2017 was submitted to the effect that an enquiry is required to be conducted under Section 245D (3) through FT TR, a division of the CBDT to find out the nature of credit and debit appearing in the foreign bank accounts disclosed by the appellants and other transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner in which such income has been derived, it may not be possible for the Settlement Commission to complete the process of determination of income. Therefore, the learned Judge refused to interfere with the order passed by the Settlement Commission and dismissed the writ petitions. 6.1. Mr.R.V.Easwar, learned senior counsel appearing for the appellant in WA.No.2629 of 2021 submitted that Section 245 (D3) provides that if an application for settlement is treated as valid, then the Settlement Commissioner shall allow such application and call for further report or records from the Commissioner or Principal Commissioner of Income Tax, as the case may be. In this case, on receipt of the application of the appellants, reports have been called for from the Principal Commissioner of Income Tax and various reports have been furnished to the Settlement Commissioner. After receipt of such reports, the Settlement Commissioner has to give opportunity of hearing to the appellants as provided in Section 245D (4) of the Act. In the present case, a notice dated 15.11.2017 was issued to the appellants directing them to appear for an enquiry on 23.11.2017 at 11.30 am. On the date of hearing na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any particulars for consideration. While so, without following the provisions under sub-section (4) of Section 245D of Income Tax Act, 1961, the first respondent proceeded to pass the order of rejection. In effect, it is the submission of the learned senior counsel that as stipulated under sub-section (4) of Section 245D of the Act, sufficient opportunity was not afforded to the appellant and therefore, he prayed for remanding the matter back to the first respondent for fresh consideration. 6.3. It is also submitted by the learned senior counsel that the timelimit for completion of the settlement proceedings expired only on 31.03.2018. Yet, the appellant was served with a report by the Principal Commissioner of Income Tax dated 22.11.2017 on 23.11.2017 and was expected to file a response thereto on 27.11.2017 i.e., barely one and half working days. As such, the order dated 06.12.2017 was passed without affording sufficient opportunities to the appellant to respond to the report of the PCIT, the contents of which represent the chief reasoning offered by the first respondent. The learned senior counsel placed reliance on the decision in the case of Automotive tyre manufacturers As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided to aid bilateral dispute resolution and to provide a fast and effective means of settling disagreements in complicated cases that might otherwise result in an unwarranted strain on the investigative resources of the tax department. By this process, the assessee can pay the tax and interest on admitted income before filing the application for settlement itself. However, the Settlement Commission failed to exercise its statutory powers to arrive at a settlement with the appellant on technicalities. 6.5. The learned senior counsel further submitted that the Settlement Commission has been abolished by virtue of the notification dated 10.08.2021 with effect from 01.02.2021 and in its place, an Interim Board for settlement has been constituted. The Interim board has been formed to consider the pending applications and it has the powers to resolve the tax dispute raised by the appellants. While so, the discontinuance of the Settlement Commission will have no bearing in the case of the appellants and the Interim Board has the powers to adjudicate the dispute in the place of the Settlement Commission in the event of the matter being remanded back to the Interim Board. The learned se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not afford an opportunity of hearing to the appellant, but passed the order dated 06.12.2017 rejecting the settlement application of the appellant. Therefore, the learned senior counsel would submit that the order, which was impugned before the learned Judge, has been passed without affording proper and sufficient opportunity to the appellant. 7.2. The learned senior counsel would further contend that the counter affidavit filed by the Department in these writ appeals was solely on merits. On the other hand, the appellant is not inclined to venture into the merits of the case, but only require sufficient opportunity to be given to put forth his submissions. It is also submitted that the appellant had fully and truly disclosed the income and any other details are wholly extraneous to the determination of an application for settlement. The appellant had fully cooperated with the first respondent for conclusion of the proceedings, which stands testimony to the fact that the Department, in the various reports filed before the first respondent, do not indicate any non-cooperation on the part of the appellant. However, while passing the order, which was impugned before the learned Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccretion on account of foreign exchange fluctuations have to be brought to tax. 8.3. The learned Senior Standing Counsel also submitted that the Income Computation and Disclosure Standard-VI relating to the effects of changes in foreign exchange rates and also Accounting Standards AS-11 provides that exchange differences arising on foreign currency transactions should be recognised as income or as expenses in the period during which they arise. All monies received abroad are commission receipts to be treated as business receipts, which have been used for investing in funds, bonds etc., and earned income therefrom, which are trading receipts in the revenue account as has been held by the Honourable Supreme Court in the case of Sutlej Cotton Mills Limited vs. CIT [116 ITR 1]. In the present case, the appellants have followed accrual basis of accounting in respect of the income received from ABN Amro Bank but in respect of a commission income, the appellants followed 'cash basis' accounting. The amounts are already lying in the bank account and whatever benefit arises out of the foreign exchange gain is already available in the bank accounts itself and hence taxable in eith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunities were provided to the appellants by the Settlement Commissioner before passing the order rejecting their applications. In any event, the appellants have not complied with the requirements contained under Section 245C of the Act by truly and correctly disclosing all the material particulars in relation to the income earned by them. The provisions under subsection (4) of Section 245D of Income Tax Act, 1961 stipulates that there must be full and final disclosure of the documents. There are several information withheld by the appellants. This was pointed out by the Settlement Commission as mentioned below: When questioned during the hearing, the AR stated that the applicant is not aware of any company by name Moon Water Limited and the salary income mentioned in the account opening form was filed up just like that. Later, the applicants took a position in the further submissions dated 27.11.2017, that it represents the salary income of AED 3,50,000/- per month, coming to approx Rs.6.8 crores per annum earned in India. The applicant also submitted that Shri Arun Mammen was never an employee of the so called company Moon water Limited and the applicant was also not aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided: Provided that no such application shall be made unless,- (i) in a case where proceedings for assessment or reassessment for any of the assessment years referred to in clause (b) of sub-section (1) of section 153A or clause (b) of sub-section (1) of section 153B in case of a person referred to in section 153A or section 153C have been initiated, the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees, (ia) in a case where- A) the applicant is related to the person referred to in clause (i) who has filed an application (hereafter in this sub-section referred to as -specified person?); and (B) the proceedings for assessment or re-assessment for any of the assessment years referred to in clause (b) of sub-section (1) of section 153Aor clause (b) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (2D) Where an application was made under sub-section (1) of section 245C before the 1st day of June, 2007 and an order under the provisions of sub-section (1) of this section, as they stood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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 sub-section (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 to the provisions of section 245BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the concerned Bench before passing any order under subsection (4) and, in relation to the passing of such order, the provisions of section 245BD shall apply. (6) Every order passed under sub-section (4) shall prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned, 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. Power of Settlement Commission to reopen completed proceedings. 245E. If the Settlement Commission is of the opinion (the reasons for such opinion to be recorded by it in writing) that, for the proper disposal of the case pending before it, it is necessary or expedient to reopen any proceeding connected with the case but which has been completed under this Act by any income-tax authority before the application unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding anything contained in sub-section (2) and in the absence of any express direction to the contrary by the Settlement Commission, nothing contained in this section shall affect the operation of any other provision of this Act requiring the applicant to pay tax on the basis of self-assessment in relation to the matters before the Settlement Commission. (4) For the removal of doubt, it is hereby declared that, in the absence of any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission. (5) [* * *] (6) [* * *] (7) The Settlement Commission shall, subject to the provisions of this Chapter, have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings. Inspection, etc., of reports. 245G. No person shall be entitled to inspect, or obtain copies of, any reports made by any income-tax authority to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereupon the provisions of this Act shall apply as if such immunity had not been granted. (2) An immunity granted to a person under sub-section (1) may, at any time, be withdrawn by the Settlement Commission, if it is satisfied that such person had, in the course of the settlement proceedings, concealed any particulars material to the settlement or had given false evidence, and thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the settlement and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had not such immunity been granted. Abatement of proceeding before Settlement Commission. 245HA. (1) Where- (i) an application made under section 245C on or after the 1st day of June, 2007 has been rejected under sub-section (1) of section 245D; or (ii) an application made under section 245C has not been allowed to be proceeded with under sub-section (2A) or further proceeded with under subsection (2D) of section 245D; or (iii) an application made under section 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 243 or 244 or, as the case may be, section 244A, for making the assessment or reassessment under sub-section (2), the period commencing on and from the date of the application to the Settlement Commission under section 245C and ending with specified date referred to in sub-section (1) shall be excluded; and where the assessee is a firm, for the purposes of the time-limit for cancellation of registration of the firm under sub-section (1) of section 186, the period aforesaid shall, likewise, be excluded. Credit for tax paid in case of abatement of proceedings. 245HAA. Where an application made under section 245C on or after the 1st day of June, 2007, is rejected under sub-section (1) of section 245D, or any other application made under section 245C is not allowed to be proceeded with under sub-section (2A) of section 245D or is declared invalid under sub-section (2C) of section 245D or has not been allowed to be further proceeded with under sub-section (2D) of section 245D or an order under sub-section (4) of section 245D has not been passed within the time or period specified under sub-section (4A) of section 245D, the Assessing Officer shall allow the credit for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in subsection (2B) of Section 245D, to the Commission and one copy to the applicant simultaneously. Filing of affidavit. 8. Where a fact, which is not borne out by or is contrary to the record relating to the case, is alleged in the settlement application (including the annexure and the statement or other documents accompanying such annexure), it shall be stated clearly and concisely and supported by a duly sworn affidavit. Commissioner's further report 9.(1) Where an application has not been declared invalid under sub-section (2C) of Section 245D or an application has been allowed to be further proceeded with under sub-section (2D) of Section 245D, the information contained in the annexure and in the statements and other documents accompanying such annexure shall be sent to the Commissioner by the Commission with the direction that the Commissioner shall furnish a further report in seven copies within forty-five days of the receipt of said annexure or within such extended period as may be allowed by the Commission on a request made by the Commissioner. (2) If the Commissioner fails to furnish his report on or before the expiry of the specified period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order under Section 245D (2C) declaring the application as valid or not and to proceed further. The commission, after an order is passed under 245D(1) if is of the opinion that further investigations are necessary or particulars are to be called for, it can ask the commissioner to submit a report. The report is to be furnished within 45 days as per Rule 9 and if in case, the report is not furnished in time or if no extension is granted, then the commissioner cannot file any report and the settlement commission has to proceed further and pass orders without such report. The time period specified under Rule 9 is mandatory as because there is no provision to extend the outer time limit of 18 months, even in case any extension in filing the report under Rule 9. As per Rule 9A, the assessee is to file his objections within 15 days or within such extended period. Thereafter, considering the report, objections to the report of the assessee and after granting a personal hearing to the applicant, the commission is to pass an order under Section 245D (4) as it deems fit on the matters covered by the application and also by the report. The power is not only to lay down the terms of settlemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should for ever remain closed. In the administration of fiscal laws, whose primary objective is to raise revenue, there has to be room for compromise and settlement. A rigid attitude would not only inhibit a one-time tax-evader or an unintending defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigational resources of the Department in cases of doubtful benefit to revenue, while needlessly proliferating litigation and holding up collections. We would, therefore, suggest that there should be a provision in the law for a settlement with the taxpayer at any stage of the proceedings. In the United Kingdom the confession method has been in vogue since 1923. In the U.S. law also, there is a provision for compromise with the tax payer as to his tax liabilities. A provision of this type facilitating settlement in individual cases will have this advantage over general disclosure schemes that misuse thereof will be difficult and the disclosure will not normally breed further tax evasion. Each individual case can be considered on its merits and full disclosures not only of the income but of the modus operandi of its buildup can be insisted on, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us) Pursuant to the aforesaid recommendation, Chapter XIXA consisting of Sections 245A to 245K for settlement of cases was introduced into the Act by the Taxation Laws Amendment Act 1973. 13. At this juncture, it will be useful to refer to the judgments of the Apex Court, wherein the scope of proceedings by the Settlement Commission has been discussed and laid down, as follows: (i) CIT v. Om Prakash Mittal, (2005) 2 SCC 751 : 2005 SCC OnLine SC 376: 14. The Commission's power of settlement has to be exercised in accordance with the provisions of the Act. Though the Commission has sufficient elbow room in assessing the income of the applicant, it cannot make any order with a term of settlement which would be in conflict with the mandatory provisions of the Act, like in the quantum and payment of tax and the interest. The object of the legislature, in introducing Section 245-C is to see that protracted proceedings before the authorities or in courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amounts statutorily payable under the Act. 16. The foundation for settlement is an applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . That shows clear legislative intent that the applicant for settlement has to make a true and fair declaration from the threshold. It is on the basis of the application received that the Commission calls for report to decide whether the application is to be rejected or permitted to be continued. The declaration contemplated in Section 245-C is in the nature of voluntary disclosure of concealed income, but as noted above it must be true and fair disclosure. Voluntary disclosure and making a full and true disclosure of the income are necessary preconditions for invoking the Commission's jurisdiction. 19. In the aforesaid background it would be proper to direct the Commission to rehear the matter. It shall be open to the parties to place any further material which they may choose to place for consideration in support of their respective stands. The Commission shall decide the matter afresh keeping in view the observations made above. It is, however, made clear that we have not expressed any opinion on the facts of the case. (ii) Brij Lal v. CIT, (2011) 1 SCC 1 : 2010 SCC OnLine SC 1192: 18. Coming to Chapter XIX-A which deals with settlement of cases, it may be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application was allowed to be proceeded with by the Settlement Commission and the Income Tax Authority may complete the proceedings within the period mentioned therein. Thus, Section 245-D(7) brings out the difference between Section 245-D(1) stage and Section 245-D(4) stage. Under Section 245-D(6), it is laid down that every order under Section 245-D(4) shall provide for the terms of settlement including any demand by 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 245-D(6) with Section 245-I, it becomes clear that every order of settlement passed under Section 245-D(4) shall be final and conclusive as to the matters contained therein and that the same shall not be reopened except in the case of fraud and misrepresentation. Under Section 245-F(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 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 AO under Sections 142 and 143 and making of the order of assessment by the AO 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 245-D(4). 42. The order of the Settlement Commission under Section 245-D(4) shall be final and conclusive under Section 245-I subject to two qualifications under which it can be recalled viz. fraud and misrepresentation but even here it is important to note that under Section 245-D(7) where the settlement becomes void on account of fraud and misrepresentation the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 144 or under Section 147 [see Section 245-C(1-B)]. The point to be noted is that in computation of additional income tax payable by the assessee, there is no mention of Section 154. On the contrary, under Section 245-I the order of the Settlement Commission is made final and conclusive on matters mentioned in the application for settlement except in the two cases of fraud and misrepresentation in which case the matter could be reopened by way of review or recall. Like ITAT, the Settlement Commission is a quasijudicial body. Under Section 254(2), ITAT is given the power to rectify but no such power is given to the Settlement Commission. Thus, we hold that the Settlement Commission cannot reopen its concluded proceedings by invoking Section 154 of the Act. 14. Following the above decisions and considering various other judgments, a Division Bench of the Delhi High Court, while considering the scope of proceedings before the Settlement Commission in Agson Global Pvt Ltd Others v. Income Tax Settlement Commission Others [(2016) SCC Online Del 49] held as under: 14. It is, therefore, clear that the powers and functions of an income tax authority which are to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (3) of that section, have exclusive jurisdiction to exercise the powers and perform the functions of the Income Tax Authority under the Act in relation to the case. In essence, the Commission assumes jurisdiction to deal with the matter after it decides to proceed with the application1 and continues to have the jurisdiction till it makes an order under Section 245-D. Section 245-D(4) is the charging section and sub-section (6) prescribes the modalities to be adopted to give effect to the order. It has to be noted that the language used in Section 245-D is order and not assessment . The order is not described as the original assessment or regular assessment or reassessment. In that sense, the Commission exercises a plenary jurisdiction. (emphasis supplied) 16. In Brij Lal v. CIT [(2011) 1 SCC 1], the Hon'ble Supreme Court held as under: 23. Descriptively, it can be stated that assessment in law is different from assessment by way of settlement. If one reads Section 245-D(6) with Section 245-I, it becomes clear that every order of settlement passed under Section 245-D(4) shall be final and conclusive as to the matters contained therein and that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure for assessment falls in Chapter XIV (in which Section 154 falls) which is different from the procedure for settlement in Chapter XIX-A in which Sections 245-C and 245-D fall. Provision for levy of interest for default in payment of advance tax under Section 234-B 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 245-C(1-B) and 245-C(1-C) read with the provisos to Section 245-C(1) on the additional income tax payable on the undisclosed income. (emphasis supplied) 17. The Supreme Court, in Brij lal (supra), made a clear distinction between assessment in law (regular assessment under Chapter XIV) and assessment by way of settlement. It clearly held that there is a difference between procedure for assessment under Chapter XIV and procedure for settlement under Chapter XIX-A. In fact, it reiterated that under the said Act, there is a clear difference between assessment in law [regular assessment or assessment un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total income as computed in accordance with the provisions of the Act. Thus, Section 143(3) provision is sought to be incorporated in Section 245-C. When Parliament uses the words as if such aggregate would constitute total income , it presupposes that under the special procedure the aggregation of the returned income plus income disclosed would result in computation of total income which is the basis for the levy of tax on the undisclosed income which is nothing but assessment . Similarly, Section 245-C(1-C) provides for deductions from the total income computed in terms of Section 245-C(1-B). 27. Thus, the special procedure under Sections 245-C and 245-D in Chapter XIX-A shows that a special type of computation of total income is engrafted in the said provisions which is nothing but assessment which takes place at Section 245-D(1) stage. However, in that computation, one finds that provisions dealing with a regular assessment, selfassessment and levy and computation of interest for default in payment of advance tax, etc. are engrafted. [See Sections 245C(1-B), 245-C(1-C), 245-D(6), 245-F(3) in addition to Sections 215(3), 234-A(4) and 234-B(4).] (emphasis supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions which are in the exclusive jurisdiction of the settlement commission are circumscribed by the object and role which has been ascribed to the settlement commission, which is to settle the case in terms of the procedure stipulated in Chapter XIX-A. Since assessment of the type contemplated under section 143(3) is outside the purview of settlement proceedings, a special audit under section 142(2A), which is in aid of assessment, would also be beyond the scope of settlement proceedings. The other decisions referred to by the learned counsel for the revenue do not militate against the view we have taken. 15. The powers therein are not akin to the powers of an assessing authority making regular assessment or revision of assessment to accept or deny the explanation offered by the assessee but rather the scope of enquiry would be confined to the true and full disclosure, co-operation with the commission and the manner in which such income has been derived. The powers are to be exercised keeping in mind the object of the settlement scheme provided under the Act for speedy disposal of the disputes. The proceedings are similar to arbitration, whereby the commission is not to delve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c test laid down by Lord Justice Atkin, as he then was, in King v. Electricity Commissioners [(1924) 1 KB 171] and followed by this Court in more than one decision clearly brings out the meaning of the concept of judicial act: Wherever any body of persons having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially, act in excess of their legal authority they are subject to the controlling jurisdiction of the King's Bench Division exercised in these writs. Lord Justice Slesser in King v. London County Council [(1931) 2 KB 215, 243] dissected the concept of judicial act laid down by Atkin, L.J., into the following heads in his judgment: Wherever any body of persons (1) having legal authority (2) to determine questions affecting rights of subjects and (3) having the duty to act judicially (4) act in excess of their legal authority - a writ of certiorari may issue . It will be seen from the ingredients of judicial act that there must be a duty to act judicially. A tribunal, therefore, exercising a judicial or quasi-judicial act cannot decide against the rights of a party without giving him a hearing or an opport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a writ of certiorari under Article 226 has been frequently considered by this Court and the true legal position in that behalf is no longer in doubt. A writ of certiorari can be issued for correcting errors of jurisdiction committed by inferior courts or tribunals: these are cases where orders are passed by inferior courts or tribunals without jurisdiction, or is in excess of it, or as a result of failure to exercise jurisdiction. A writ can similarly be issued where in exercise of jurisdiction conferred on it, the Court or Tribunal acts illegally or properly, as for instance, it decides a question without giving an opportunity, be heard to the party affected by the order, or where the procedure adopted in dealing with the dispute is opposed to principles of natural justice. There is, however, no doubt that the jurisdiction to issue a writ of certiorari is a supervisory jurisdiction and the Court exercising it is not entitled to act as an appellate Court. This limitation necessarily means that findings of fact reached by the inferior Court or Tribunal as result of the appreciation of evidence cannot be reopened or questioned in writ proceedings. An error of law which is apparent on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases the findings arrived at are vitiated. (iv) Sawarn Singh v. State of Punjab, [(1976) 2 SCC 868], wherein, it was held by the Hon'ble Supreme Court as follows: 12. Before dealing with the contentions canvassed, it will be useful to notice the general principles indicating the limits of the jurisdiction of the High Court in writ proceedings under Article 226. It is well settled that certiorari jurisdiction can be exercised only for correcting errors of jurisdiction committed by inferior courts or tribunals. A writ of certiorari can be issued only in the exercise of supervisory jurisdiction which is different from appellate jurisdiction. The Court exercising special jurisdiction under Article 226 is not entitled to act as an appellate court. As was pointed out by this Court in Syed Yakoob case, this limitation necessarily means that findings of fact reached by the inferior court or tribunal as a result of the appreciation of evidence cannot be reopened or questioned in writ proceedings. An error of law which is apparent on the face of the record can be corrected by a writ, but not an error of fact, however grave it may appear to be. 13. In regard to a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commission to consider and overrule the Commissioner's objection. He also very fairly, in our opinion and [ Vide Corrigendum No. F.3/Ed. B.J./61 dated 21-8-1989] rightly accepted the position that the appellant was entitled to be heard on the Commissioner's objections. It appears to us, therefore, if that is the position then, in our opinion, the appellant was entitled to be heard on the objections of the Commissioner. As mentioned hereinbefore, the only short ground which was sought to be canvassed before us was whether after the amended Act the order had been rightly set aside and whether the appellant had a right to be heard on the objections of the Commissioner. Mr Harish Salve, counsel for the appellant contends that it had a right to be heard. On the other hand Dr. V. Gauri Shankar, learned counsel for the respondents submitted that the order proceeded on the assumption that the objections had been heard. He did not, in fairness to him it must be conceded, contest that in a matter of this nature the appellant had a right to be heard. Reading the order, it appears to us, that though the appellant had made submissions on the Commissioner's objections but there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and recorded the findings of fact, those findings are binding on this Court or the High Court. By process of judicial review we cannot appreciate the evidence and record our own findings of fact. If the findings are based on no evidence or based on conjectures or surmises and no reasonable man would, on given facts and circumstances, come to the conclusion reached by the appellate authority on the basis of the evidence on record, certainly this Court would oversee whether the findings recorded by the appellate authority is based on no evidence or beset with surmises or conjectures. Giving of reasons is an essential element of administration of justice. A right to reason is, therefore, an indispensable part of sound system of judicial review. Reasoned decision is not only for the purpose of showing that the citizen is receiving justice, but also a valid discipline for the Tribunal itself. Therefore, statement of reasons is one of the essentials of justice. 11. The contention of Shri Chatterjee that it is the duty of the appellant to produce the record to repudiate the findings recorded by the appellate authority is without substance. In a quasi-judicial enquiry it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Article 226. This is not a limitation inherent in Article 136; it is a limitation which this Court imposes on itself having regard to the nature of the function performed by the Commission and keeping in view the principles of judicial review. Maybe, there is also some force in what Dr Gauri Shankar says viz., that the order of the Commission is in the nature of a package deal and that it may not be possible, ordinarily speaking, to dissect its order and that the assessee should not be permitted to accept what is favourable to him and reject what is not. According to learned counsel, the Commission is not even required or obligated to pass a reasoned order. Be that as it may, the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee and may waive interest, penalties or prosecution, where it thinks appropriate. Indeed, it would be difficult to predicate the reasons and considerations which induce the Commission to make a particular order, unless of course the Commission itself chooses to give reasons for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals, since a wrong interpretation of a deed of trust cannot be a violation of the provisions of the Income Tax Act. It is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in proceedings relating to other assessment years. (viii) Dharamraj v. Chhitan, [(2006) 12 SCC 349 : 2006 SCC OnLine SC 1153], wherein, it was held as follows: 18. It is well-settled position of law by a catena of decisions of this Court that in the writ jurisdiction of the High Court, it is always permissible for it to correct the decision of the consolidation authorities or to declare the law on the basis of facts and proof of such facts. For this proposition, we may usefully refer to a decision of this Court in Mukunda Bore v. Bangshidhar Buragohain [(1980) 4 SCC 336 : 1982 SCC (Tax) 143 : AIR 1980 SC 1524] in which this Court indicated as to when the High Court can interfere with the orders of quasi-judicial authority. This observation may be quoted which is as follows: (SCC pp. 339-40, para 16) 16. While on facts the order of the Board under appeal is not impeccable, we must remember that under Article 226 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourselves to agree with the learned counsel for the assessee that there was no justification for the order of remand by the High Court and that the order passed by the Settlement Commission should have been affirmed. We are satisfied that under the given scenario, the High Court was correct in making the order of remand and no good ground is made out for interference in exercise of our jurisdiction under Article 136 of the Constitution. (x) Union of India v. Asahi India Safety Glass Ltd., [(2015) 11 SCC 451 : 2015 SCC OnLine SC 518], wherein, it was held as follows: 14. From the aforesaid it becomes clear that the High Court has not interfered with the facts which were recorded by the Settlement Commission. On the contrary, the facts noted above remained undisputed. On those facts the High Court has simply stated the correct legal position where the Settlement Commission had gone wrong in law. Thus, the High Court has simply applied the correct principle of law on the admitted facts. This, according to us, was well within the powers of the High Court while exercising its jurisdiction under Article 226 of the Constitution. Such remand of the High Court has been held permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs are considerable; its determination affects the rights of parties; its obligations are quasi-judicial; the orders it makes at every stage have tremendous impact on the rights and liabilities of parties. xxxxxxxxx In short, Settlement Commissions are Tribunals. The preliminary point fails. Thus the Settlement Commission is held to be a Tribunal. That being the position, the petitioner is entitled to seek judicial review of the order of the Settlement Commission in a petition under Articles 226 and 227 of the Constitution of India. For these reasons, we answer the first question in the affirmative. 15 .. In our opinion, many of the grounds on which arbitration award could be set aside, would not be available in view of the nature and jurisdiction of the Settlement Commission. We are of the view that a decision of Settlement Commission could be interfered with only. (i) if grave procedural defect such as violation of the mandatory procedural requirements of the provisions in the Chapter XIX-A and/or violation of Rules of natural justice is made out; (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this aspect, it will not have the jurisdiction to pass any order on the matter covered by the application. (ii) ACE Investment Ltd v. Settlement Commission (2003) 264 ITR 571 (Mad), in which it was held as follows: 10.This is more so, since the petitioners, having filed the application had no option even to withdraw the application in terms of s. 245C(3) of the Act. The power of judicial review of this Court is not barred when the validity of an order of the Settlement Commission is questioned on the ground that the application itself is not maintainable and any decision on the application is also without jurisdiction. When, once it is held that an application filed for settlement of cases is not maintainable on the ground that the applicant has not made a true and full disclosure of the income, proceeding with such application and deciding the issue would be outside the power of the Settlement Commission, as the application itself is not in conformity with s. 245C(1) of the Act. Merely because the petitioners have participated in the proceedings, the petitioners are not prevented from questioning the jurisdictional issue that too on the well settled law by the apex C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercise its writ jurisdiction. Therefore, the petitioner has not come with clean hands. In the present case, we are of the view that there was suppression of facts in the petition which was material to the issue at hand. Therefore, we see no reason to entertain this petition on the above ground also. 20. There is no quarrel about the preposition that the failure to truly and fully disclose the particulars and the manner of derivation of the additional income is the primordial requisite for an application to be entertained. In the present case, the Learned Senior Counsel for the appellants has, referring to the applications, annexures and other particulars filed before the commission, contended that the appellants have truly and fully disclosed all the particulars within their knowledge and also the manner in which the additional income has been derived and that satisfies the requirements under Sections 245C and 245D of the Act. What constitutes true and full disclosure in the context of Chapter XIX-A is to be explored before we proceed further. 21. An assessee is entitled to approach the settlement Commission only when there is an undisclosed income that escaped assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disclose fully and truly all material facts necessary for his assessment for that year . It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise - the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be infer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law he would draw from the primary facts. 11. If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn? 12. It may be pointed out that the Explanation to the sub-section has nothing to do with inferences and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income Tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose inferences to draw the proper inferences being the duty imposed on the Income Tax Officer. 13. We have therefore come to the conclusion that whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that year. The notice in the instant case did not indicate whether it was a case covered by clause (a) or clause (b). On our finding that clause (a) was not invokable, the power under clause (b) could be called in aid under Section 149(1)(b) of the Act within four years from the end of the relevant assessment year. Admittedly, the notice has been issued beyond a period of four years and, therefore, the notice itself was beyond the time provided under the law. On the facts appearing in the case the High Court overlooked to consider this aspect of the matter. Since the proceedings before the High Court were under Article 226 of the Constitution and not by way of reference under the Act, the jurisdiction of this Court is not advisory and confined to the questions referred for opinion. On the facts we are satisfied that ends of justice require our intervention and we would accordingly allow the appeal of the assessee by holding that the notice under Section 148 of the Act cannot be sustained in law for the reasons indicated below. 24. Upon perusal of applications and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c findings, more particularly when allegations of principles of natural justice and violation of the procedures, are alleged. Even if the Learned Judge was to disagree with the contentions, all the contentions ought to have been discussed and specific findings ought to be given. However, the learned Judge has merely reproduced the order of the Settlement Commission and recorded that the conditions stipulated have not been satisfied, without considering whether the opportunities as contemplated under the provisions, have been granted in the light of the specific contentions. 25. At this stage, we are concerned with the legality of the procedure. The applications were originally filed on 10.07.2015. The order of remand was passed by this Court on 21.06.2016. The order under Section 245D(3) was passed on 11.05.2017. The report ought to have been filed with 90 days or within such extended period. No records are produced before this Court to show that the time to file the report has been extended by the commission. By the impugned order, it is evident that the proceedings were held on 06.10.2017 and 23.11.2017. The report of the commissioner was produced on 23.11.2017 and the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jections is required to be passed by the competent authority after the personal hearing is granted. The respondents had filed an affidavit dated 17-7-2018 before the High Court wherein it was stated that the reply given vide letter dated 15-72011 does not indicate the decision/order/predetermination of the competent authority. The competent authority had informed the objectors to remain present with all material documents at the time of personal hearing, the date of which would be notified later. At the time of arguments before this Court, it was sought to be contended by the Additional Solicitor General for the Union of India that the letter dated 15-7-2011 was an order passed under Section 20-D(2) of the Act. We find that the stand taken by the respondents before the High Court and this Court is completely contradictory, and does not commend acceptance. 31. In any event, the order under Section 20-D(2) cannot be passed prior to the personal hearing. The mandate of the law is that the order must be passed after the grant of personal hearing, and after any further enquiry is made by the competent authority. The whole process of granting a personal hearing would be reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended by which the Settlement Commission ceased to exist, and interim Board was substituted. The Amendment Act came into force on 01/04/2021. By the amended provisions, initially, the Interim Board was entitled to entertain only applications which were pending. 27. Section 245A(eb) defined the word Pending applications defined as follows: Pending application means an application which was filed under section 245C and which fulfils the following conditions, namely: - (i) it was not declared invalid under sub-section (2C) of section 245D; and (ii) no order under sub-section (4) of section 245D was issued on or before the 31st day of January, 2021 with respect to such application. 28. By the amendment, it was made clear that no application will be entertained after 01.02.2021. Thereafter, the Central Government has constituted Interim Board for Settlement vide Notification no. 91 of 2021 dated 10.08.2021. Subsequently, the following press release dated 07.09.2021 was issued by the Central Board of Direct Taxes. Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, 7th September, 2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o withdraw such applications as per the provisions of section 245M of the Act. Further, the taxpayers who have already filed application for settlement on or after 01.02.2021 as per the direction of the various High Courts and who are otherwise eligible to file such application, as per para 3 above, on the date of filing of the said application shall not be required to file such application again. Legislative amendments in this regard shall be proposed in due course. (Surabhi Ahluwalia) Commissioner of Income Tax (Media Technical Policy) Official Spokesperson, CBDT 29. The said press release was issued after several High Courts issued directions to entertain the applications for settlement. It was further stated that the assessees who were eligible to file an application as on 31.01.2021 and where assessments are pending would be eligible to file their application till 30th September 2021. It was also made clear that the applications filed by the assessees based on the directions of the High Courts would be entertained. Following the press release, an order under Section 119 (2) (b) of the Act which reads as follows: ORDER Civic Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application for settlement. 5. The Hindi version of the order shall follow. 30. The above order has been issued by exercising the powers under Section 119 in line with the press release dated 07.09.2021. In the case before us, the order of the Settlement Commission rejecting the applications has been passed on 06.12.2017, the challenge to the same was accepted by this Court. The writ petitions were pending, when the Settlement Commission was abolished and Interim Board was brought into operation. This court is of the view that the restrictive circumstances under which an Interim Board can entertain an application is applicable, only when an application is filed afresh or pending and not applicable to cases, where the High Court in exercise of its powers under Article 226 of the Constitution of India, set asides an earlier order and remands back the matter for fresh consideration. The powers of the High Court which emanate from the Constitution, cannot be curtailed by a law made by the legislature, such law being subordinate to the Constitution. It is not out of place to mention here that it is evident from the press release which was followed by the order dated 28.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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