TMI Blog2024 (4) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and render its decision, enabling the assessee to obtain closure of all disputes. Viewed in that light, it would be wholly incorrect for the writ petitioner to assert that the respondent had failed to make a full and true disclosure. What the law proscribes is an applicant seeking to either amend an application or taking contrarian positions in proceedings before the ITSC. As was explained by the Supreme Court in Ajmera Housing [ 2010 (8) TMI 35 - SUPREME COURT] , the sine qua non for a settlement order being entered is a full and true disclosure of income being made by the applicant. As the Supreme Court explained, what is impermissible is a revision of a disclosure. A particular contention with respect to taxability and which is made in order to invite a conclusive pronouncement from the ITSC cannot possibly be viewed as a revision of the application made. In our considered opinion, therefore, in the facts of the present case, the test of full and true disclosure had clearly been met. We note that the ITSC while accepting the surrender of income, has not indicted the respondent-assessee. It has taken note of the perceived conflict in versions which were alluded to by the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax [PCIT] seeks to invoke our jurisdiction conferred by Article 226 of the Constitution and impugns the order passed by the Income Tax Settlement Commission [ITSC] dated 26 March 2014. In terms of the aforesaid order, the ITSC has settled the total liabilities payable by the respondent-assessee for the block assessment period of 1995-96 to 25 May 2000. In addition to settling the total tax liability, it has also accorded immunity to the respondent from prosecution and penalties imposable under the Income Tax Act, 1961 [Act]. 2. The principal ground of challenge which was addressed before us flowed from the manner of disclosure made by the respondent and insofar as it related to the purchase of a land parcel admeasuring 20 acres. The petitioner principally asserts that since the respondent had failed to surrender the amount representative for the aforenoted transaction to tax in the statement filed before the ITSC, the acceptance of settlement is clearly vitiated and the order passed by the ITSC liable to be quashed on this ground alone. It was their contention that the petitioner had struck contradictory stands before the authority undertaking the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement is attributed to various practical obstacles which the respondent faced, including the refusal of clearance by the Airport Authority of India. 7. Dealing specifically with the aforesaid transaction, the assessee had taken the following stand before the ITSC: - It may be explained that the applicant company was incorporated with the main objective of installation of LPG Bottling Plant. For the installation of the plant, land measuring about 20 acres was purchased near the Calcutta Airport. However, keeping in view the explosive nature of the business activity and land being very near to the Airport, Airport Authority of India has denied permission to the applicant company for installation of the said plant. In view of the above, it was decided by the management for disposing off the said land and an agreement was first entered into in 1996 with M/s Spring Field. However, due to certain unavailable circumstances, the deal was not materialised and another agreement was later entered into with Sh. S.K. Jain through his associated concern M/s P.K. Jain and Associates for sale of the land for a total consideration of Rs. 5.10 crore vide agreement dated 18.2.99. Copy of the agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s report while dealing with the asserted sale with respect to the land in question had submitted as under: - Search and seizure operation u/s 132(1) of the IT Act 1961 was carried out in this case on 25.05.2000 and concluded on 13.07.2000. Notice u/s 158-BC was served on the assessee on 03.05.2001 to file the return within 15 days of the service of the notice. The return of income in Form No. 2 B for the block period from 01.04.1990 to 25.05.2000 relevant for the A. Yrs. 1991-92 to 2001-02 had been filed by the assessee on 11.06.2001 declaring undisclosed income of NIL. The income of the assessee for the block period has been assessed at Rs. 24751000/- vide order u/s 158-BC dated 31.07.2002. Against the order of the AO the assessee has moved an application before the Income tax Settlement Commission, New Delhi and the application has been admitted and the order u/s 245-D(1) has been passed admitting the application to be processed with for the block period as also for the A.Ys. 2001-02 and 2002-03. The prime issue for consideration in this case is regarding the nature of transaction on account of which the amount of Rs. 2,33,50,000/- has been received by the applicant from Sh. S.K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the paper book]. III. The statement of Sh. S.K. Jain reproduced at page 21 to 23 of the assessment order wherein he has clearly stated to be engaged in the business of providing accommodation entries. (Copy of statement is placed at pages 13 to 28 of the paper book.) IV. The statement of A K Goel, Director of Aasheesh Securities Ltd. reproduced at pages 17 to 21 of the assessment order wherein he has explained the modus operandi followed in providing accommodation entries and has categorically stated that M/s PK Jain Associates and M/s Royal Investment were used by Sh. S.K. Jain for providing accommodation entries. (The copy of statement of Sh. A.K. Goel is placed at pages 31 to 46 of the paper book.) V. The agreement to sell dated 18.02.1999 is an after thought and cannot be relied upon for reasons mentioned at pages 30 to 37 of the assessment order and summarized in Para-5 above. It is seen from the back of the Stamp paper that overwriting has been done at S. No., of the Register of Stamp Vendor. The address of the Stamp vendor is not available/legible and the Department is not in a position to verify the genuineness of the stamp Paper. This appears to be a forged document in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the cash has been shown as received and the cheques were issued. The Commission has gone through the contention of the CIT through Ld. CIT (DR) and found the same not without merit. The Commission has also observed that the applicant has not been able to give a satisfactory explanation regarding this allegation. Accordingly, the view of the Commission was confronted to the applicant for his comments. The applicant has thereafter offered voluntarily to surrender the said amount along with the amount of entry charges @1% on the amount of entry. Hence amount of Rs. 2,33,50,000/- plus Rs. 2,33,500/- are being incorporated in the hands of the applicant for the block period. Hence total addition of Rs. 2,35,83,500/- is being made in addition to the amounts declared in ROI and SOF. 4.7 The applicant, in this regard, has submitted a letter dated 06.03.2014 in which he has offered the above discussed amount for settlement of the case. The said letter is reproduced as under: ...1. Honorable Commission was please to hear the above matters under section 245D(4) of the Income Tax Act, 1961 on 03.03.2014 and on earlier occasions. 2. During the course of hearings it transpired that the leve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D(4) while charging of interest u/s 220(2), it is prayed that the said precedence may kindly be followed. 4. Waiver of interest and penalties, if exigible, u/s 158BFA of the Income tax Act, 1961. 5. That the applicant may kindly be allowed to capitalize the income brought to tax. It may be mentioned that the amount of Rs. 2,33,50,000/- stands paid to M/s P.K. Jain Associates as per the books of the company between 11.10.2001 to 20.12.2001. 6. That the penalties under various provisions of the Income Tax Act, 1961 levied/leviable may kindly be deleted/waived in the case of the applicant. 7. Immunity from prosecution under any of the relevant provisions of Income-tax Act, 1961 and any other Central Acts. 8. Release of assets, books of account, documents, papers etc. seized upon payment of taxes. 9. To grant the liberal installments to the applicant for payment of the additional demand arising out of the above settlement.. 5. The income of the applicant is settled as under: Name of the applicant A.Y. Income as per ROI Additional income offered in SOF Further addition u/s 245D(4) Total M/s Trend East West LPG Bottling Ltd. Block period 1995-96 to 25.05.2000 Nil 3,27,000 2,35,83,500 2,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, which had not been previously disclosed by the assessee, being a precondition for a valid application under Section 245-C(1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against Item 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, Section 245-C(3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said section is instructive inasmuch as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly which he cannot otherwise achieve directly and in the process rendering the provision of sub- section (3) of Section 245-C of the Act otiose and meaningless. In our opinion, the scheme of said Chapter is clear and admits no ambiguity. 36. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untarily surrendered the said amount and agreed to the same being taxed in its hands. In view of the above and bearing in mind the limited scope of interference which is warranted with an order passed by the ITSC, Mr. Srivastava submitted that the challenge as raised by way of the present writ petition is liable to be negatived. 17. Having noticed the rival submissions so addressed, we at the outset deem it apposite to take note of the following salient provisions which stand incorporated in Chapter XIX-A and which regulates the subject of settlement. We, in this regard deem it appropriate to extract Sections 245C, 245D, 245F and 245I of the Act hereunder: - 245C Application for settlement of cases. ( 1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income 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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the specified person; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; (vi) any person who carries on a business or profession, (A) where the specified person being an individual, or any relative of such specified person, has a substantial interest in the business or profession of that person; or (B) where the specified person being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person; (b) a person shall be deemed to have a substantial interest in a business or profession, if (A) in a case where the business or profession is carried on by a company, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. (4) An assessee shall, on the date on which he makes an application under sub-section (1) to the Settlement Commission, also intimate the Assessing Officer in the prescribed manner of having made such application to the said Commission.] [(5) No application shall be made under this section on or after the 1st day of February, 2021.] xxxx xxxx xxxx 245-D. Procedure on receipt of an application under Section 245- C. (1) On receipt of an application under Section 245-C, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant, the Settlement Commission shall, within a period of fourteen days from the date of the application, by an order in writing, reject the application or allow the application to be proceeded with: Provided that where no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with.] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of an application, an order, which was required to be passed under this sub-section on or before the 31st day of January, 2021, has not been passed on or before the 31st day of January, 2021, such application shall deemed to be valid.] (2-D) Where an application was made under sub-section (1) of Section 245-C before the 1st day of June, 2007 and an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st day of June, 2007, but an order under the provisions of sub-section (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007.] [(3) The Settlement Commission, in respect of (i) an application which has not been declared invalid under subsection (2-C); or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was made.] (5) Subject to the provisions of Section 245-BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the Bench concerned before passing any order under sub-section (4) and, in relation to the passing of such order, the provisions of Section 245-BD shall apply. (6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts. (6-A) Where any tax payable in pursuance of an order under subsection (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, then whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by instalments, the assessee shall be liable to pay simple interest at [one and one-fourth per cent for every month or part of a mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to pending applications allotted to Interim Board with the following modifications, namely: (i) for the words Settlement Commission , wherever they occur, the words Interim Board shall be substituted; (ii) for the word Bench , the words Interim Board shall be substituted; (iii) for the purposes of this section, the date referred to in subsection (2) of Section 245-M shall be deemed to be date on which the application was made under Section 245-C and received by the Interim Board; [(iv) where the time-limit for amending any order or filing of rectification application under sub-section (6-B) expires on or after the 1st day of February, 2021, but before the 1st day of February, 2022, such time-limit shall be extended to the 30th day of September, 2023.] (10) On and from the 1st day of February, 2021, the provisions of sub-sections (6-A) and (7) shall have effect as if for the words Settlement Commission , the words Settlement Commission or Interim Board of Settlement had been substituted. (11) The Central Government may by notification in the Official Gazette, make a scheme, for the purposes of settlement in respect of pending applications by the Interim Board, so as to impart gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected, or, not allowed to be proceeded with, or, declared invalid, or, not allowed to be further proceeded with, as the case may be.] (3) Notwithstanding 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 doubts, 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) [Omitted] (6) [Omitted] (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. [(8) On and from the 1st da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence that may have been placed before it and proceed to pass a final order on matters covered by the application as well as any other matter relating to the case. 19. It becomes significant to note that in terms of Section 245D(4) of the Act, the ITSC stands enabled to pass orders not only in respect of matters covered by the application, but also other matter relating to the case not covered by the application, but referred to in the report of the Principal Commissioner or Commissioner . 20. The ITSC apart from exercising its adjudicatory function upon the application as made, is also empowered by law to reopen any proceedings connected with the case pending before it and which may have been completed. If the ITSC be of the opinion that for the proper disposal of a case pending before it, it would be expedient to reopen any proceedings, it may move forward in that direction with the concurrence of the applicant. This power stands placed in its hands by virtue of Section 245E of the Act. 21. Section 245F of the Act provides that in addition to the powers specifically conferred on the Settlement Commission and which are set out in Chapter XIX-A, the Settlement Commission would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case covered by the settlement. The grant of such immunity is subject to such conditions which the Commission may think it fit to impose. The precondition for granting immunity is that the applicant must have co-operated in the proceedings before the Commission and made a full and true disclosure of his income and the manner in which such income has been derived. xxxx xxxx xxxx 6. On a close reading of the provisions extracted hereinabove, it emerges that under section 245H(1) if the Settlement Commission is satisfied that any assessee who makes the application for settlement under section 245C, has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of its income and the manner in which such income has been derived, may grant immunity from prosecution or from the imposition of penalty, either wholly or in part with respect to the case covered by the settlement. The necessary ingredients for granting immunity from prosecution would be : (a) the assessee should have co-operated with the Settlement Commission in the proceedings before it ; and (b) the assessee should have made a full and true disclosure of its income and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 245D(3) of the Act. (B) We have thus enquired from the counsel, whether the Principal Commissioner/Commissioner, in the present case, in response to the application of the petitioner to the Settlement Commission, has submitted any report and if so, whether in the said report the aforesaid aspect of violation of section 269ST of the Act has been reported ; if it is so, the Settlement Commission would have jurisdiction to pass orders with respect to violation alleged of section 269ST also. However neither counsel has instructions on the said aspect. (C) It is not deemed necessary to adjourn the hearing to enable counsel to take instructions on the aforesaid aspect, because the powers of the Settlement Commission under section 245D(4) also extend to examining such further evidence as may be placed before it or obtained by it and the Settlement Commission in the present case is still seized of the matter and would be within its rights to, if so deems apposite, also deal with the aspect of violation of section 269ST of the Act and either to grant exemption from penalty therefor or to pass such other order as it thinks fit in relation thereto as well and it is felt that the said power an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immunity from imposition of any penalty under this Act with respect to the case covered by the settlement are without any limitation of imposition of penalty and immunity with respect thereto only in the matter of undisclosed income and in our view would cover also penalties under other provisions of the Act, detection whereof has the same origin as the origin of undisclosed income. (H) Not only so, the words in relation to the case and with respect to the case used in the aforesaid provisions, are words of wide amplitude and which, in our opinion, in the facts of the present case may allow the Settlement Commission to, notwithstanding the petitioner having not expressly referred to the notice dated September 30, 2019 and proceedings for violation of section 269ST pending against it in its application, pass such orders as it may think fit in relation/with respect thereto and the said powers of the Settlement Commission cannot be permitted to be interdicted by the impugned order. We reiterate that the proceedings of violation of section 269ST, as per the notice dated September 30, 2019, are a result of what was found in the search and survey qua the petitioner and are capable of bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom S.K. Jain for a proposed sale of land. It was also its case that the transaction ultimately could not fructify since various clearances and approvals could not be obtained. This was therefore not a case where a disclosure in respect of a transaction had not been made. 26. However, and in our opinion, the procedure as contemplated under Chapter XIX-A does not detract from the right of an assessee to question an addition or view that may have been taken by the taxing authorities. It could have legitimately asserted that an addition suggested or a view taken with respect to a particular item of income is incorrect or flawed. What the assessee is essentially doing in such a scenario is calling upon the ITSC to examine all such questions and render its decision, enabling the assessee to obtain closure of all disputes. Viewed in that light, it would be wholly incorrect for the writ petitioner to assert that the respondent had failed to make a full and true disclosure. 27. It must also be borne in mind that what the law proscribes is an applicant seeking to either amend an application or taking contrarian positions in proceedings before the ITSC. As was explained by the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 226 and then come up in appeal to this Court under Article 136. A party does not and cannot gain any advantage by approaching this Court directly under Article 136, instead of approaching the High Court under 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission has interpreted the trust deeds in a particular manner. Even if the interpretation placed by the Commission on the said deeds is not correct, it would not be a ground for interference in these appeals, 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. 31. More recently and dealing with the aforesaid aspect, the Supreme Court in Kotak Mahindra Bank has observed as under:- 9. In the present case, as noted above, we find that the appellant placed material and particulars before the Commission as to the manner in which income pertaining to certain activities was derived and has sought to offer such additional income to tax. Based on such disclosures and on noting that the appellant co-operated with the Commission in the process of settlement, the Commission proceeded to grant immunity from prosecution and penalty as contemplated under section 245H of the Act. The High Court ought not to have sat in appeal as to the sufficiency of the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to multiplicity of litigation where settlement is possible. This larger picture has to be borne in mind. 32. On an overall conspectus of the aforesaid and when we apply the tests as propounded by the Supreme Court in the aforenoted decisions, we find ourselves unable to hold that the procedure adopted by the ITSC was either palpably incorrect or manifestly erroneous. The decision ultimately rendered by it also cannot possibly be characterized as being contrary to any provision of the Act. As was noticed by us hereinbefore, this was not a case where the respondent had failed to make a disclosure. Details in respect of the subject transaction were duly disclosed. This was therefore not a case where a full and true disclosure had not been made. The dispute essentially was with respect to the character of the receipt. The assessee had contested the position taken by the writ petitioner of the same being an accommodation entry. The ITSC has ultimately and upon due consideration of the rival stands as struck before it, exercised its adjudicatory function bearing in mind the larger purpose and intent of the settlement process. The same consequently merits no interference under Article 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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