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2020 (11) TMI 41 - HC - Income TaxSettlement Application u/s 245C - Maintainability of awards of the ITSC - ITSC rejected the said application under Section 245D(1) of the Act for non-payment of taxes on the additional income disclosed in the Settlement Application and did not allow the same to be proceeded with - whether the awards of the ITSC or the decision making process culminating to the award, are in violation of the provisions of the Act or not? - HELD THAT - A perusal of the award of the ITSC in the present cases reveal that the procedures under Section 245C 245D of the Act have been duly followed and the terms of the Settlement have been arrived at on mutual acceptance, after perusing the offers made by the Department and the Assessee. Hence, it cannot be said that the award of the ITSC is in violation of the statutory provisions or the decision making process. If that be so, the ground raised by the Department in the present Writ Petition are merely factual in nature and since there are no procedural lapses on the part of the ITSC in adjudicating and arriving at the terms of the settlement. While Section 245C(1) refers to disclosure of income before the ITSC, Section 245HA(3) refers to the use of information produced before the ITSC. The term disclosed income is conspicuously absent in Section 245HA(3). When a taxing law, does not provide or empower the Assessing Officer to rely on or take into consideration the income disclosed by the Assessee in the earlier application that had abated in view of Section 245HA(1)(i) of the Act, the attempt of the Department to make a comparison between the income disclosed in the abated proceedings and the second settlement application to establish that the assessee has not fully and truly disclosed their income, is not based on intelligible differentia. When the Income Tax law does not empower the Assessing Officer to rely on the income disclosed in the earlier proceedings that had abated before the ITSC, the Department is not justified in making a comparison with such an income and thereby find fault with the ITSC s decision making process in the impugned proceedings. Whether additional amount of income tax payable on the disclosed income in the second Settlement Application has not exceeded, at least by ₹ 50 lakhs as contemplated under proviso (i) of Section 245C(1) of the Act, the second application ought not to have been entertained by the ITSC? - A perusal of the impugned awards also reveal that the assesses have declared a sum of ₹ 1.65 and ₹ 1.67 crores respectively as income in their respective settlement applications before the ITSC and the additional amount of income tax payable on such income exceeds ₹ 50 lakhs. Thus, the ground raised by the Department in this regard, cannot be sustained. Amounts towards capitation fees have been disclosed and offered as voluntary contribution in the hands of the assessee - Apparently, the ground raised is purely a factual finding rendered by the ITSC and such factual findings is not permissible to be reviewed by this Court under Article 226 of the Constitution of India, as held in the aforesaid cited decisions. As there was no defect on the part of ITSC in the decision making process leading to the impugned Awards, the preliminary objection raised to the Department by this Court, with the regard to the maintainability of the Writ Petition, challenging the award of a Settlement Commission, gains significance. In the present case, it is not the stand of the department that there was fraud and misrepresentation of facts, owing to which, the disclosure requires to be treated as not true or fair. Rather, the disclosure was voluntary and the manner in which a major portion of the additional income has been derived was also explained. As a matter of fact, the department had not raised any objections during the stage of the case under Section 245D(1) or 245D(2C) of the Act. As such, the aforesaid decision is clearly distinguishable on the facts of the case, as well as the consequential ratio and hence may not be applicable. Both the impugned awards of the ITSC are neither in violation of any statutory provisions of the Income Tax Act nor is there any defect in the decision making process. As such the Writ Petitions, challenging the awards of the ITSC cannot be maintained.
Issues Involved:
1. Suppression in income admitted before Settlement Commission. 2. Anonymous donations taxable under Section 115 BBC. 3. Collection of unaccounted capitation fee. 4. Diversion of capitation fee to relatives of the founder. 5. Payment of salary in cash. 6. Bogus employment of doctors. 7. Application of accounted income of trust to benefit the relatives of the founder. 8. Violations of conditions of Section 11/Section 10(23C). 9. Deferment of income admitted before the Settlement Commission to a later assessment year. 10. Assessment of cash seized from various premises. 11. Income of the applicant as per seized records not admitted. Detailed Analysis: Issue 1: Suppression in Income Admitted Before Settlement Commission The Department argued that the assessee did not make a full and true disclosure of income in the Settlement Application as required under Section 245C(1) of the Income Tax Act. The ITSC, however, accepted the explanations provided by the assessee regarding discrepancies in income disclosure, attributing them to anonymous voluntary donations, which were later substantiated. Issue 2: Anonymous Donations Taxable Under Section 115 BBC The ITSC settled the issue of anonymous donations by accepting donations below ?20,000 as legitimate, while adding back donations above ?20,000 due to lack of complete details. This factual determination was based on mutual consent between the Department and the assessee. Issue 3: Collection of Unaccounted Capitation Fee The Department raised concerns that amounts towards capitation fees were disclosed as voluntary contributions. The ITSC found these amounts to be voluntary contributions and accepted them as such, which was also offered to tax by the assessee. Issue 4: Diversion of Capitation Fee to Relatives of the Founder The ITSC did not find substantial evidence to support the claim of diversion of capitation fees to relatives of the founder and settled the income based on the explanations provided by the assessee. Issue 5: Payment of Salary in Cash The ITSC addressed the issue of salary payments in cash by considering the explanations provided and settled the income accordingly. Issue 6: Bogus Employment of Doctors The ITSC reviewed the allegations of bogus employment of doctors and settled the income based on the evidence and explanations provided by the assessee. Issue 7: Application of Accounted Income of Trust to Benefit Relatives of the Founder The ITSC examined the application of accounted income and found no substantial evidence to support the claim that it was used to benefit the relatives of the founder. Issue 8: Violations of Conditions of Section 11/Section 10(23C) The ITSC reviewed the allegations of violations of conditions under Section 11 and Section 10(23C) and settled the income based on the findings and explanations provided. Issue 9: Deferment of Income Admitted Before the Settlement Commission to a Later Assessment Year The Department argued that the deferment of income in the second Settlement Application indicated a lack of full and true disclosure. The ITSC accepted the explanations provided by the assessee regarding the deferment and settled the income accordingly. Issue 10: Assessment of Cash Seized from Various Premises The ITSC addressed the assessment of cash seized from various premises by considering the evidence and explanations provided by the assessee and the Department. Issue 11: Income of the Applicant as per Seized Records Not Admitted The ITSC reviewed the income of the applicant as per seized records and settled the income based on the evidence and explanations provided. Conclusion: The High Court dismissed the Writ Petitions, finding no procedural lapses or violations of statutory provisions by the ITSC in the decision-making process. The Court emphasized that judicial review under Article 226 of the Constitution of India is limited to examining the legality of the procedure followed by the ITSC and not the factual determinations made. The ITSC's awards were based on mutual acceptance and thorough consideration of the evidence and explanations provided by both parties.
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