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TMI Blog2024 (2) TMI 1551X X X X Extracts X X X X X X X X Extracts X X X X ..... o the petitioner for the Assessment Years 2012-13 to 2017-18. Notice under Section 143(2) was issued on 23.09.2019 for the Assessment Year 2018-19. 2.1 The petitioner had filed Settlement Applications twice, i.e., on 26.12.2019 and 02.03.2020, respectively, before the Settlement Commission. However, the same was rejected on account of the failure of the petitioner to satisfy the criteria prescribed under Section 245(1) of the Act. Thereafter, the petitioner filed another application for the third time on 26.02.2021. Consequent to the abolition of the Settlement Commission with effect from 01.02.2021, the petitioner's application was dealt with by the Interim Board for Settlement. The petitioner, in his application dated 26.02.2021 in S A No.KL/KO51/2020-21/40-IT, admitted an undisclosed income of Rs. 44,00,000/- towards remuneration earned outside the banking channels for the Assessment Years 2013- 14 to 2018-19. 3. The Principal Commissioner of Income Tax (Central), Kochi, submitted a report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules on the Settlement Application of the petitioner. In the report, it was opined that the petitioner had not disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sand Pvt Ltd in which he had 70% share and 10% voting rights. In the same Financial Year, the petitioner received Rs. 1,20,00,000/- as a loan from M/s Metro Aggregates and Sand India Pvt Ltd, in which he is a 23% shareholder and held more than 10% of the voting right. During the Financial Year relevant to the Assessment Year 2018-19, the petitioner availed a loan of Rs. 11,54,10,055/- from M/s Delta M Sand Pvt Ltd in which he was a 70% shareholder and held more than 10% of the voting right. The Interim Board for Settlement, after considering the reply and submissions of the petitioner, had made an addition of Rs. 4,86,77,012/- as deemed dividend under Section 2(22)(e) for the Assessment Year 2014-15 and 2018-19. 4. The learned Counsel for the petitioner has submitted that no material/documents which were not seized during the search operation could have been relied on by the Settlement Commission. The Settlement Commission ought to have considered only those documents and materials which were seized during the search operation, and therefore, making additions under Section 2(22)(e) of the Act for the Assessment Year 2014-15 and 2018-19 are only without jurisdiction and the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraph 14 of the said judgment, the Supreme Court has concluded as under: "14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in two companies, i.e., M/s Delta M Sand Pvt Ltd with a 99.65% stake and M/s Delta Aggregates and Sand Pvt Ltd with 70% stake. He also holds 23% of the shares in M/s Metro Aggregates and Sand India Pvt Ltd with 10% voting rights. The petitioner has drawn loans from these companies for the Financial Year relevant to the Assessment Years 2014-15 and 2018-19. The petitioner did not produce any evidence/books of accounts regarding these loans obtained from the Companies except for the Board Resolution. In respect of the Assessment Year 2013-14, where the petitioner produced the relevant documents, the loan amount has not been treated as a 'deemed dividend' under Section 2(22)(e) of the Act. However, in respect of the Assessment Year 2014-15 and 2018-19, no evidence of the loan having been utilized for any business purposes was produced, and therefore, the same was considered as a 'deemed dividend' under the purview of the conditions stipulated in Section 2(22)(e) of the Act. It is further submitted that the impugned order is strictly in accordance with the provisions of the Act. The Settlement Commission can consider any other material and evidence that may be brought before it for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her in person or through a representative duly authorized in this behalf, and after examining such further evidence as may be 𝕛laced before it or obtained by it, the Settlement Commission may, in accordance with the provisions 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 Principal Commissioner or Commissioner." (emphasis supplied) 8.1 Section 245E empowers the Commission to re-open the completed proceedings in appropriate cases, while 245F confers all the powers of an Income Tax authority upon the Commission. Section 245H empowers the Commission to grant immunity from penalty and prosecution, with or without conditions, in cases where it is satisfied that the assessee has fully disclosed his income and its sources. 8.2 Where a proceeding before the Settlement Commission abates, the Assessing Officer or any other Income Tax Authority before whom the proceedings at the time of making the application were pending are required to dispose of the case in accordance with the provisions of the Act as if no application under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f enquiry by the High Court or Supreme Court is limited, i.e., whether the Order of the Commission is contrary to any of the provisions of the Act and, if so, has it prejudiced the applicant apart from the grounds of bias, fraud, or malice? 10.1 From the provisions of Chapter XIXA, it is clear that once the Settlement Commission admits a case for consideration, it shall have exclusive jurisdiction to exercise all powers of regular authorities under the Act to effect a settlement and recover tax penalty and interest. Once the Settlement Commission formally allows the application to be considered for "settlement", the regular assessment proceedings and recoveries initiated for tax penalty or interest pursuant thereto shall become subject to the powers of the Commission and not prior to the same. The Commission's power of settlement has to be exercised in accordance with the provisions of the Act. However, the Commission has sufficient elbow room to assess the applicant's income. The Settlement Commission cannot make an order which would conflict with the mandatory provisions of the Act like in the quantum and payment of tax and interest, as is held in Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement 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 for settlement" under Chapter XIX-A (see Section 245-D). Under Section 245-F(4), it is clarified that nothing in Chapter XIX-A shall affect the operation of any other provision of the Act requiring the applicant to pay tax on the basis of self-assessment in relation to matters before the Settlement Commission." 11.2 As mentioned above, the full and true particulars and disclosure of undisclosed income and the manner in which such income had been derived are the prerequisites for valid application under Section 245C(1) of the Act. From the plain reading of section 245D(4) of the Act, the jurisdiction of the Settlement Commission to pass such orders as it may ..... X X X X Extracts X X X X X X X X Extracts X X X X
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