2013 (1) TMI 429 - HC - Income Tax

Application for settlement of cases - grievance on application of 12% gross profit rate on the ground that such gross profit rate could be applied during the course of the assessment and cannot be made part of settlement, when the same was not an issue raised by the CIT in his report submitted in terms of Rule 9 of Rules - Held that - No doubt, the CIT in his report under Rule 9 of the Rules, has not referred to gross profit rate applied by the petitioner as an objection for the settlement but the fact remains that the Commission has found that the rate of profit adopted by the assessee was in fact leading to undisclosed income and thus made an addition on the basis of the information submitted by the assessee. In fact the order passed by Delhi High Court in M/s Godwin Steels Pvt. Ltd 2012 (3) TMI 102 - DELHI HIGH COURT negates the arguments raised by the petitioner wherein court held that the Commission has to consider the material brought on record before it and that consideration means independent examination of the evidence and the material on record. The judgment in Brij Lal s case (2010 (10) TMI 8 - SUPREME COURT) has no applicability to the facts of the present case as there is no finding that the gross profit ration can be applied only during the assessment proceedings and not in the proceedings under Section 245-C - no interference in exercise of the writ jurisdiction of this Court as a part of the process of judicial review required.

Summary

Issues:
Challenge to order of Income Tax Settlement Commission applying 12% gross profit rate for settlement under Section 245-C of the Income Tax Act, 1961.

Analysis:
The petitioner contested the application of a 12% gross profit rate during settlement, arguing it was not raised by the Commissioner in the report as per Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. However, the High Court found no merit in the petition, noting that the Commission considered various facts, including the gross profit rates applied by the petitioner for different assessment years. The petitioner claimed the issue was cash credit entries, not business income, and cited precedents to support their argument. The court acknowledged that the Commissioner's report did not mention the gross profit rate issue but emphasized that the Commission independently assessed the evidence to determine undisclosed income.

The court referred to a Delhi High Court order in a similar case, emphasizing the Commission's duty to consider all relevant materials before making a decision. The judgment cited by the petitioner regarding the scope of Section 245-C was deemed inapplicable to the current case. The High Court clarified that there was no restriction on applying gross profit rates during settlement proceedings, as opposed to assessment proceedings. Since the Commission considered the available material and made a relevant finding on undisclosed income, the court concluded that there was no basis for interference in the writ jurisdiction for judicial review.

In summary, the High Court dismissed the petition, upholding the Commission's decision to apply the 12% gross profit rate for settlement under Section 245-C of the Income Tax Act, 1961. The court emphasized the Commission's duty to independently assess evidence and materials, even if not explicitly raised in the Commissioner's report, to determine undisclosed income accurately.