2022 (9) TMI 56 - HC - Income Tax

Scheme of settlement commission - Order granting partial immunity to the petitioner from penalty u/s 245H(1) - petitioner Income Tax Authorities have challenged the impugned order of the settlement commission granting partial immunity to the petitioner u/s 245H(1) by way of imposing lesser amount of penalty - HELD THAT - Settlement Commission itself has recorded that attitude of the assessee respondent was not acceptable to it and that it runs contrary to the settlement scheme and in its order settlement commission also recorded and came to the finding that the assessee s professional receipts were much higher than the requisite monetary limit and he was statutorily obliged to maintain proper record and books of accounts as per Section 44AA yet the respondent assessee had continued with the default of not maintaining books of accounts of the four relevant assessment years and that such conduct of the assessee respondent was deliberate and intentional. It is strange that in spite of such finding of the learned Settlement Commission how it has granted partial immunity from penalty to the petitioner u/s 245H(1) of the Act which is contrary to the spirit of the settlement scheme. Impugned order of the Settlement Commission to the extent of granting partial immunity to the petitioner from penalty under Section 245H(1) inspite of specifically recording that it was evident to the Settlement Commission that the respondent assessee had not come forward with full and true disclosure before it and that the attitude of the assessee respondent was not acceptable and runs contrary to the spirit of the Settlement Commission and by also recording that default in non maintenance of books of accounts u/s 44AA was deliberate and intentional on the part of the petitioner, the impugned order of settlement commission is bad, illegal and not sustainable in law and is contrary to the aims and objects of the settlement commission under Chapter XIXA of the Income Tax Act and accordingly the impugned order of the settlement commission is quashed to the extent it has granted partial immunity from penalty to the assessee respondent and in view of quashing of the impugned order.

Summary

Issues:
Challenge to settlement commission's order granting partial immunity under Section 245H(1) of the Income Tax Act, 1961.

Analysis:
The petitioner, Income Tax Authorities, challenged the settlement commission's order granting partial immunity under Section 245H(1) of the Income Tax Act. The petitioner argued that the order was contrary to the scheme of the settlement commission. They relied on a judgment of the Delhi High Court, emphasizing the importance of full and true disclosure of income. The respondent, the assessee, opposed the petition, claiming full and true disclosure had been made. The settlement commission found that the petitioner had not disclosed income fully and truly, and the attitude of the assessee was not in line with the settlement spirit.

The settlement commission granted partial immunity despite finding discrepancies in the disclosure of income and deliberate non-maintenance of proper records by the assessee. The commission noted that the professional receipts of the assessee exceeded the limit and deliberate non-maintenance of accounts indicated intentional conduct. The commission levied penalties for concealment of income and non-maintenance of accounts. Despite these findings, the commission granted partial immunity from penalty under Section 245H(1) of the Act, subject to conditions.

The court, after reviewing the settlement commission's findings and relevant provisions of the law, held that the commission's decision to grant partial immunity was incorrect. The court found that the commission's order was illegal and not sustainable in law, as it contradicted the aims and objectives of the settlement commission under Chapter XIXA of the Income Tax Act. Consequently, the court quashed the settlement commission's order granting partial immunity from penalty to the assessee, leading to the legal consequences following the quashing of the order.

In conclusion, the court disposed of the writ petition by allowing it to the extent of quashing the settlement commission's order granting partial immunity from penalty to the assessee. The judgment emphasizes the importance of full and true disclosure of income and cooperation with the settlement commission, highlighting that deliberate non-compliance with statutory obligations can impact the grant of immunity from penalties.