2016 (9) TMI 817 - HC - Income Tax

Matter pending before the Settlement Commission - Held that - As the matter is still pending before the Settlement Commission the Settlement Commission has to decide whether the full disclosure is made or not. The petitioner is certainly at a liberty to raise all issues and grounds before the Commission. The Settlement Commission has to proceed the matter in accordance with Section 245D (2B) 245 D(3) 245D(4) 245D(4A), 245D(5), 245D(6) 245D(6A) of the Act. Thereafter after examination of record after considering report of the Commissioner and the materials brought on record before the Settlement Commission the Settlement Commission has to pass a final order. The Settlement Commission has the jurisdiction to provide for the terms of settlement including demanding any tax penalty or interest. The Settlement Commission is also having jurisdiction to examine as to whether any order has been obtained by fraud or misrepresentation of facts. Thus in short a complete mechanism has been provided for dealing with Settlement applications and the said mechanism is a complete code in itself and merely because of the fact that an interim admission order has been passed under Section 245(D)(2C) it does not mean that any irreparable loss has been caused to the Income Tax Department. In the considered opinion of this Court as the matter is pending before the Settlement Commission and no final order has been passed and as the Commission is now seized with the matter all the grounds raised by the petitioner shall be looked into and shall be considered by the Settlement Commission while passing a final Order. Resultantly no case for interference is made out in the matter. However by way of abundant caution it is observed that any observation made by this Court will not affect in any way the subject matter pending for consideration before the Settlement commission. The Settlement Commission shall decide the matter strictly in accordance keeping in view the statutory provisions as contained under the Income Tax Act.

Issues Involved:
1. Validity of the order passed by the Income Tax Settlement Commission (ITSC) under Section 245D(2C) of the Income Tax Act.
2. Alleged tax evasion and the adequacy of the income disclosure by the assessee.
3. Delay and latches in filing the petition.
4. Mechanism and jurisdiction of the Settlement Commission in dealing with settlement applications.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed by ITSC under Section 245D(2C):
The petitioner, Principal Commissioner of Income Tax (Central), Bhopal, challenged the ITSC's order dated 18/05/2015, which held the applications for settlement as maintainable and allowed them to proceed further. The ITSC stated, “We find that the department's only objection was relating to declaration made by the applicants was not true and full. The department has not adduced any evidence which could conclusively prove that the information submitted by the applicants was incorrect, false or applicants had withheld certain information to the detrimental interest of the revenue.” The court reiterated that this was a prima facie order and not a final determination, thereby not causing any irreparable loss to the Income Tax Department.

2. Alleged Tax Evasion and Adequacy of Income Disclosure:
The Income Tax Department contended that the assessee's total estimated income was ?289.16 crores, whereas the Settlement Commission was proceeding with only ?19.08 crores. The court noted that the Settlement Commission is responsible for examining whether the disclosure is full and true. The court referred to previous judgments, including the Supreme Court's decision in K. Jaiprakash Narayanan, which allowed the department to raise contentions before the Settlement Commission at the final hearing.

3. Delay and Latches in Filing the Petition:
The respondent argued that the petition was filed after nine months and should be dismissed on grounds of delay and latches. The court did not specifically rule on this argument but focused on the procedural aspects and the pending status of the case before the Settlement Commission.

4. Mechanism and Jurisdiction of the Settlement Commission:
The court emphasized that the Income Tax Act provides a complete mechanism for dealing with settlement applications, which is a complete code in itself. The Settlement Commission is to proceed with the matter in accordance with Sections 245D(2B), 245D(3), 245D(4), 245D(4A), 245D(5), 245D(6), and 245D(6A) of the Act. The court cited multiple precedents, including decisions from the Bombay High Court, Delhi High Court, and the Supreme Court, affirming that the Settlement Commission has the jurisdiction to determine the adequacy of disclosures and proceed accordingly.

Conclusion:
The court concluded that as the matter is still pending before the Settlement Commission, all issues and grounds raised by the petitioner should be addressed by the Commission. The writ petition was dismissed with no order as to costs, and the Settlement Commission was directed to decide the matter strictly in accordance with the statutory provisions of the Income Tax Act.

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