2019 (11) TMI 812 - HC - Income Tax

Income Tax Settlement Commission order u/s 245D(4) - undisclosed foreign income and assets - whether the Settlement Commission lacked the jurisdiction to decide the applications under section 245C? - HELD THAT - As compared to the amount of income disclosed, the additional amount offered was only ₹ 8.64 crores which comes to approximately 6.7% of the total amount of income disclosed and is, therefore, only a fraction of the total income disclosed. This offer to pay additional amount by the contesting respondents has to be considered keeping in mind the fact that the proceedings before the Settlement Commission are in the nature of settlement proceedings. If for the reason that in respect of issues which pertained to very old period and could not be reconciled due to lack of want of further evidence, the contesting respondents, with a view to bring about a settlement, agreed to pay a higher amount as proposed by the revenue, it certainly cannot be termed as a revision of the original disclosure made under section 245C inasmuch as, there is no further disclosure but an acceptance of additional liability based on the disclosure already made before the Settlement Commission. On a conjoint reading of section 3 and section 2(9) of the Black Money Act, one thing is clear namely that undisclosed foreign income or asset become chargeable to tax from assessment year 2016-17. However, insofar as undisclosed foreign asset is concerned, while it becomes chargeable to tax from assessment year 2016-17 onwards, the date of acquisition of such asset may relate to any assessment year prior to assessment year 2016-17. Therefore, even after the coming into force of the Black Money Act, insofar as assessment years prior to assessment year 2016-17 are concerned, the undisclosed foreign income would be chargeable to tax under the relevant provisions of the Income Tax Act. Adverting to the facts of the present case, as noticed earlier, the contesting respondents have not resiled from their stand in the application made under section 245C of the IT Act. The contesting respondents have also not made any further disclosure during the course of settlement proceedings but have only agreed to pay additional tax on the basis of the computation made by the revenue in respect of the disclosure made by them. In the present case, it is not possible to state that the impugned order passed by the Settlement Commission is in any manner contrary to any provisions of the IT Act. Insofar as the findings of fact recorded by the Settlement Commission to the effect that there has been no wilful attempt to conceal material facts in these cases are concerned, the same cannot be gone into by this court while exercising writ jurisdiction in absence of any challenge to such findings on the ground of perversity. Under the circumstances, there is no warrant for exercise of powers under articles 226 or 227 of the Constitution of India. Another aspect of the matter is that it is an admitted position that prior to the presentation of this petition, the order of the Settlement Commission came to be fully implemented. Though the Settlement Commission had granted one year s time to pay the amount determined by it, after the order of the Settlement Commission was given effect to, the revenue authorities issued notices of demand and recovered the same from the contesting respondents. At the time when the petition came to be filed, the order of the Settlement Commission has been fully implemented. However, there is not even a whisper in this regard in the memorandum of petition. Not only that, despite having fully executed the impugned order, by way of interim relief it has been prayed that the execution and operation of the order dated 30.1.2019 passed by the Settlement Commission under section 245D of the IT Act be stayed. The learned counsel for the contesting respondents is, therefore, wholly justified in contending that the petition suffers from suppression of material facts. In the light of the above discussion, this court does not find any infirmity in the impugned order passed by the Settlement Commission so as to warrant interference. The petition, therefore, fails and is, accordingly, dismissed. Notice is discharged with no order as to costs. The interim relief granted earlier stands vacated. At this stage, the learned advocate for the petitioner has requested that the operation of this judgment be stayed for a period of two weeks so as to enable the petitioner to approach the higher forum.

Issues Involved:
1. Jurisdiction of the Settlement Commission under the Income Tax Act vs. the Black Money Act.
2. Full and true disclosure by the contesting respondents under section 245C of the Income Tax Act.
3. Maintainability of the petition under Articles 226 and 227 of the Constitution of India.
4. Suppression of material facts by the petitioner.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Settlement Commission:
The petitioner contended that the Settlement Commission lacked jurisdiction to pass an order under the Income Tax Act in relation to undisclosed foreign income and assets, which should be governed by the Black Money Act. The Black Money Act is a special legislation enacted to deal with undisclosed foreign income and assets, and it should prevail over the Income Tax Act. The petitioner argued that sections 3, 4, 10, 59, and 72 of the Black Money Act form a complete regime for assessment under that Act, and sub-section (3) of section 4 explicitly excludes such income from the purview of the Income Tax Act.

The court, however, noted that the Black Money Act covers undisclosed foreign income from assessment year 2016-17 onwards, while the undisclosed foreign assets are chargeable to tax irrespective of the date of acquisition. The court found that the contesting respondents were not covered by the definition of "assessee" under the Black Money Act at the time the Settlement Commission passed the order. The court also observed that the petitioner had invited the Settlement Commission to proceed with the applications under section 245C of the Income Tax Act, indicating that the revenue authorities were aware of the jurisdictional overlap and chose to proceed under the Income Tax Act for the relevant years.

2. Full and True Disclosure:
The petitioner argued that the contesting respondents did not make a full and true disclosure of their foreign income and assets, as they revised their declaration during the settlement proceedings. The Settlement Commission, however, recorded satisfaction that there was no willful attempt to conceal material facts and accepted the additional income offered by the respondents during the proceedings. The court noted that the additional amount offered was only a fraction of the total income disclosed and was made to settle the issues in the spirit of settlement. The court distinguished the case from Ajmera Housing Corporation, where a significant revision of disclosure was made, and held that the respondents had not resiled from their original stand.

3. Maintainability of the Petition:
The court held that the finality clause in section 245-I of the Income Tax Act does not bar the jurisdiction of the High Court under Article 226 of the Constitution of India. The court's scope of inquiry is limited to whether the order of the Settlement Commission is contrary to any provisions of the Income Tax Act. The court found that the Settlement Commission had followed the due procedure under section 245D of the Income Tax Act and that the petitioner had not pointed out any specific provision that was violated.

4. Suppression of Material Facts:
The court noted that the petitioner had fully implemented the order of the Settlement Commission before filing the petition, but did not disclose this fact in the memorandum of petition. The court held that the petition suffers from suppression of material facts and dismissed it on this ground as well.

Conclusion:
The court dismissed the petition, holding that the Settlement Commission had the jurisdiction to decide the applications under section 245C of the Income Tax Act, the contesting respondents had made a full and true disclosure, and the petition was not maintainable due to suppression of material facts. The court also refused to stay the operation of its judgment.

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