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2010 (5) TMI 659 - HC - Income TaxWhether the writ petition is not maintainable for want of clearance from the Committee On Disputes - prayer of the petitioners in this writ petition is to quash the impugned order Held that - Final outcome in this writ petition will not have any bearing on the second respondent. There is no prayer against the second respondent - lis is not between petitioners and the second respondent - Writ petition is maintainable. Immunity from penalty and prosecution - Order of the Assessing Officer bringing the concealed income to tax, disallowing depreciation claimed, correcting certain anomalies in the accounting procedure, after levying penalty Held that - Burden is on the first respondent to prove that concealment did not arise from any fraud or any gross or willful neglect on their part - No such evidence placed by the first respondent before the Settlement Commission - It is necessary that the Settlement Commission shall record a finding whether there is deliberate concealment or not. There is no such finding in the impugned order - Order in so far as it relates to granting immunity from penalty and prosecution is liable to be quashed.
Issues Involved:
1. Maintainability of the writ petition for want of clearance from the Committee On Disputes (COD). 2. Authority of the first respondent to file the writ petition. 3. Jurisdiction of the Settlement Commission to admit and entertain the application under section 245C of the Income-tax Act after detection and discovery of the concealed income. 4. Legality of the impugned order passed by the Settlement Commission. Issue-wise Detailed Analysis: On Point No. I: The court examined whether the writ petition required clearance from the Committee On Disputes (COD). The court held that the lis (dispute) is between the petitioners and the first respondent, not the second respondent. Since the second respondent is only a formal party and there is no dispute between two wings of the Central Government, clearance from the COD is unnecessary. The writ petition is maintainable without COD clearance. On Point No. II: The court evaluated if the first respondent had the authority to file the writ petition. The first petitioner, being the Commissioner of Income-tax, and the second petitioner, the Union of India, were parties before the Settlement Commission. The impugned order at annexure G is final and binding, and any aggrieved party can challenge it under article 227 of the Constitution of India. The Commissioner of Income-tax, in his pivotal position, has implied powers to file the writ petition to protect the Government's revenue interests. Therefore, the writ petition is maintainable by the first petitioner. On Point No. III: The court analyzed whether the Settlement Commission had jurisdiction to entertain the application under section 245C of the Income-tax Act after the detection of concealed income. The court reviewed the legislative background and amendments to Chapter XIX-A of the Income-tax Act, which established the Settlement Commission. The amendments in 1991 and 2007 changed the role of the Commissioner of Income-tax, limiting their power to object to the application on the grounds of concealment. The court held that the assessee could approach the Settlement Commission at any stage, even after detection by the Assessing Officer. The object of the Settlement Commission is to allow for compromise and settlement, and denying jurisdiction after detection would defeat this purpose. Hence, the Settlement Commission has jurisdiction to entertain the application. On Point No. IV: The court reviewed the legality of the impugned order passed by the Settlement Commission. The contention that the first respondent disclosed negative income was dismissed. The Settlement Commission directed the first respondent to pay tax on undisclosed income with interest. However, the court found the reasoning for granting immunity from penalty and prosecution to be vague and contrary to the established principles of law. The first respondent failed to provide convincing evidence that the concealment did not arise from fraud or willful neglect. The Settlement Commission did not record a finding on deliberate concealment, making the grant of immunity from penalty and prosecution illegal. The court quashed the impugned order regarding immunity from penalty and prosecution and remanded the matter to the Settlement Commission for reconsideration of penalty and prosecution issues. Order: (i) The writ petition is partly allowed. (ii) The impugned order dated February 4, 2008, annexure G, is quashed concerning immunity from penalty and prosecution and the annulment of the Assessing Officer's penalty order. (iii) The matter is remanded to the Settlement Commission to reconsider penalty, prosecution, and the Assessing Officer's penalty order. (iv) Ordered accordingly.
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