2024 (2) TMI 406 - HC - Income Tax

Validity of Income Tax Settlement Commission order - as argued Commission had not considered the Rule 9 report and did not permit the filing of further enquiry report before passing the final order u/s 245D(4) - Department is also aggrieved with sufficient opportunity for hearing having not been afforded - Counsel, on the last occasion, contended that there was no order u/s 245D(2B) of the Act, wherein the Commission was under an obligation to call for a report within 30 days HELD THAT - Section 245D delineates a procedure by which the Commission has to deal with an application under Section 245(C). Within seven days from the date of receipt of the application, a notice has to be issued to the assessee to show cause as to why the application should be proceeded with and after hearing the applicant, the Commission is empowered to either reject the application by order in-writing or allow it to be proceeded with. Sub-section(2A) deals with the situation prior to the amendment by the Finance Act, 2007. Sub-section (2B) requires the Commission to call for a report from the Commissioner, with respect to applications allowed to be proceeded with. It also mandates that such report shall be placed before the Commission, within a period of 30 days from receipt of the notice. Section 245D(2C) provides that within 15 days of receipt of a report, the Commission could declare the application to be invalid, after hearing the applicant. The second proviso also requires that if no report has been furnished within the aforesaid period, the Commission shall proceed further even in the absence of the report of the Commissioner. The order u/s 245D(1) was passed on 24.11.2017 directing the application to be proceeded with. A report was called for from the Principal Commissioner of Income Tax u/s 245D(2B), which was received after the due date. Hence, Section 245D(2C) requires the application to be proceeded with in the absence of the report, which, as admitted in the supplementary counter affidavit, reached the Commission after the expiry of 30 days. Section 245D(3)(ii), however, requires an application referred to in sub-section (2D), allowed to be further proceeded with under that sub-section, to be proceeded with after calling for report from the Commissioner. The Rule 9 report with respect to the applicant was submitted by the office of the Commissioner, which has been dealt with by the Commission. Commission specifically extracted the objections raised in the Rule 9 report with respect to the respondent Nos. 2 and 3, who were individuals and respondent Nos. 4 and 5, Private Limited Companies; whose Directors were the respondent Nos. 2 and 3. It is also seen that the request for adjournment made on the ground of the officer being deputed for election duty, was considered and rejected. The Commission has specifically noticed that the report of the Assessing Officer was due on 28.02.2019, while the General Elections were announced only on 10.03.2019. Department s request to take up the case after the General Election was also found to be not permissible since the elections would be over only on 23.05.2019 and the applications were getting time barred as on 31.05.2019. The Department was also represented before the Commission. We find absolutely no reason to interfere with the same on the ground of absence of reasonable opportunity of hearing having not been afforded, especially since the Department was represented and heard as also the existence of the Rule 9 report before the Commission. As we noticed, after extracting various objections raised, the same was considered by the Commission. Valuation of a building, the valuation submitted by the Valuation Cell of the Department assessed it at 6.21% above the value shown in the books of account; which was a negligible difference not permissible of additions. The contention with respect to the gifts received from the father and brother not being genuine, was negatived finding the presence of the brother, who deposed in accordance with the submission of the applicant. The gifts were also channeled through banks and the donors were close relatives of the donee, who were working abroad and had maintained NRI accounts through which the transactions were occasioned. Payments as disclosed from an agreement of sale, which were also found to be in tune with the payments received by the respondent Nos. 2 and 3. The other issues were stated to be issues in which no adverse inference could be drawn against the applicants. As reiterated that we find absolutely no reason to interfere with the order passed, especially since the procedure under Section 245D was scrupulously followed by the Commission. We reject the writ petition leaving the parties to suffer their respective costs.

Summary

Issues involved:
The judgment involves a challenge to an order of the Settlement Commission under the Income Tax Act, specifically regarding the consideration of reports, opportunity for hearing, and procedural aspects.

Consideration of Rule 9 report and opportunity for further enquiry:
The writ petition challenged the Settlement Commission's order for not considering the Rule 9 report and not allowing the filing of a further enquiry report before passing the final order under Section 245D(4) of the Income Tax Act. The Department contended that sufficient opportunity for hearing was not afforded.

Requirement of full and true disclosure by the assessee:
The Senior Standing Counsel argued that the assessee failed to fulfill the requirements of full and true disclosure, the manner of income derivation, and additional income tax payable, as mandated for approaching the Commission.

Procedural compliance under Section 245D:
Section 245D outlines the procedure for the Commission to deal with applications. It includes timelines for issuing notices, calling for reports, and declaring applications invalid. The judgment scrutinized the Commission's compliance with these procedural requirements.

Examination of objections and findings:
The Commission extracted objections from the Rule 9 report concerning individuals and private limited companies. The judgment highlighted the Commission's consideration of objections, including issues related to building valuation, gifts received, and payments from an agreement of sale.

Valuation and genuineness of transactions:
The valuation of a building and the genuineness of gifts received were examined. The judgment noted that the valuation difference was negligible, and gifts were found to be genuine as they were channeled through banks and involved close relatives maintaining NRI accounts.

Conclusion and rejection of writ petition:
The judgment concluded that there was no reason to interfere with the Commission's order, as the procedural requirements under Section 245D were meticulously followed. The writ petition was rejected, and parties were left to bear their respective costs.