2017 (4) TMI 770 - HC - Income Tax

Application under Section 245C for settlement - Held that - Either all the Assessment Years mentioned in the application are to be settled or none at all. It cannot be split so as to settle the dispute for some of the Assessment Years and reject the others. In view of the above, the impugned order of the Commission to the extent it has rejected / not entertained, the petitioner s application for settlement for the Assessment Years 2007-08 to 2013-14 for not disclosing additional income in its application, prima facie appears to be incorrect. In the above view, the Assessing Officer is restrained from issuing notices and initiating proceedings under the normal provisions of the Act for Assessment Years 2007-08 to 2013-14. The petitioner undertakes to cooperate with the Revenue in proper disposal of the Assessment for all the above assessment years i.e. Assessment Years 2007-08 to 2013-14 in case the occasion arises. So far as the Assessment Year 2014-15 is concerned, the petitioner had declared in its application for settlement an amount of ₹ 4.99 cores as being the additional income sought to be settled. The amount of tax payable on the assessment of ₹ 4.99 crores has already been paid. The impugned order has enhanced the settlement by further amount of ₹ 1.28 crores. According to the petitioner, the impugned order suffers from non-consideration of the submissions made and, therefore, the decision making process has not been properly followed. However, as the impugned order has determined a further amount of income of ₹ 1.28 crores, the tax payable thereon according to petitioner, would be approximately an amount of ₹ 38.40 lakhs, as basic tax (without surcharge) which is still payable. This, Mr. Jain, on instructions, states will be paid to the Revenue on or before 31st March, 2017. However, on being asked Mr. Jain mentioned to us that along with surcharge the tax payable would be ₹ 42 lakhs (approximately). We direct the petitioner to pay the amount of ₹ 42 lakhs to the Revenue on or before 31st March, 2017. This payment would be without prejudice to its rights and contentions in this petition. On the petitioner depositing the amount of ₹ 42 lakhs, there shall be a stay of the impugned order dated 29th July, 2016. In case, the amount of ₹ 42 lakhs is not deposited on or before 31st March, 2017 with the Revenue, the protection available under this order would come to an end and the Revenue would be free to adopt such proceedings as are available in law in respect of all the Assessment Years i.e. Assessment Years 2007-08 to 2014-15.

Summary

Issues:
Challenge to order of Income Tax Settlement Commission under Section 254D(4) of the Income Tax Act, 1961 for settlement application covering Assessment Years 2007-08 to 2014-15.

Analysis:
1. The petition contested the order of the Income Tax Settlement Commission dated 29th July, 2016, settling the petitioner's application under Section 245C for the years 2007-08 to 2014-15. The order enhanced taxable income for 2014-15 but rejected settlement for the years 2007-08 to 2013-14 due to lack of additional income disclosure for those years in the application.

2. The Commission's order was based on the requirement of declaring additional taxable income for each assessment year in a settlement application. The petitioner argued that this basis contradicted the decision of a five-member Special Bench in Airtech Pvt. Ltd. case, stating that such a requirement was not necessary. The petitioner contended that the Commission's action was judicial indiscipline and violated the Rule of Law.

3. Subsequently, the Chairperson of the Commission referred a question to a seven-member Special Bench regarding the necessity of disclosing additional income for each assessment year in a settlement application. The seven-member bench reaffirmed the law established in the Airtech Pvt. Ltd. case, stating that no such mandatory disclosure was required for each year covered in the application.

4. The petitioner emphasized that an application for settlement should be considered as a whole, settling all mentioned assessment years or none at all. The rejection of settlement for some years while accepting for others was deemed incorrect. The petitioner agreed to cooperate for assessment proceedings for the years in question if the entire application was accepted or rejected as a whole.

5. Concerning the tax payable on the enhanced income for 2014-15, the petitioner acknowledged the amount and agreed to pay the due tax. The Court directed the petitioner to pay the specified amount to the Revenue by a set date, with a stay on the impugned order upon payment. Failure to pay by the deadline would result in the end of the protection granted by the order.

6. Due to the potential impact of the petition on the petitioner's assessments for multiple years, the Court expedited the hearing, scheduling it for final hearing on a specific date. The respondent was given a deadline to file a reply to the petition.

7. The judgment concluded with a direction to stand over to the specified date for further proceedings in the case.