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2017 (2) TMI 861 - HC - Income TaxPenalty u/s 271D and 271E - whether Section 245H of the Act excludes Sections 271D and 271E of the Act from the benefit of immunity by the Commission - Power of Settlement Commission to grant immunity from prosecution and penalty - Held that - Mr. Setalvad very fairly states that Section 245H of the Act does not exclude the aforesaid two Sections namely Sections 271D and 271E of the Act from the province of the Commission to grant immunity under Section 245H of the Act. In the above view the mere fact that the Tribunal mistakenly records that the Respondent-Assessee is not entitled to grant immunity from levy of penalty under Sections 271D and 271E of the Act will not make the impugned order vulnerable on the above ground. This is a mistake on the face of it as there is no such exclusion from Section 245H of the Act of Sections 271D and 271E of the Act for grant of immunity. It is possibly for this reason that the Petitioner had not filed any rectification application on the above account seeking withdrawal of immunity from penalty in view of the above recording by the Commission. In fact if the entire paragraph 39 of the impugned order which deals with the issue of waiver of penalty is read it is very clear that the Commission sought to grant partial immunity in respect of penalty imposed under Sections 271D and 271E of the Act. Therefore the exercise of restoring the issue to the Commission to freshly determine the issue of penalty would in the present facts be an academic exercise. In the above view the aforesaid objections on the part of the Petitioner also does not warrant any interference.
Issues Involved:
1. Jurisdiction of the Income Tax Settlement Commission (ITSC) to settle the application. 2. Full and true disclosure of income by the Respondent-Assessee. 3. Adherence to statutory provisions, specifically Sections 37 and 40A(3) of the Income Tax Act. 4. Alleged payments to mafia and their tax implications. 5. Grant of partial immunity from penalties under Sections 271D and 271E of the Income Tax Act. Detailed Analysis: 1. Jurisdiction of the Income Tax Settlement Commission (ITSC) to Settle the Application: The court examined whether the ITSC had the jurisdiction to decide the settlement application. The petitioner argued that the ITSC lacked jurisdiction due to the Respondent-Assessee’s failure to make a full and true disclosure of income as required under Section 245C(1) of the Income Tax Act. The court clarified that it would interfere with the ITSC’s orders only if there were flaws in the decision-making process, orders contrary to the provisions of the Act, bias or malice, or perverse orders. The court found no such issues and upheld the ITSC’s jurisdiction. 2. Full and True Disclosure of Income by the Respondent-Assessee: The petitioner contended that the Respondent-Assessee did not make a full and true disclosure of income, particularly regarding parking charges and 'on money' received. The court noted that the ITSC determined the additional income at ?340 Crores against the disclosed ?245 Crores, but this alone did not prove a failure to disclose fully and truly. The court emphasized that a higher settlement amount does not automatically indicate a lack of full and true disclosure. The court found no merit in the petitioner’s argument and upheld the ITSC’s findings. 3. Adherence to Statutory Provisions, Specifically Sections 37 and 40A(3) of the Income Tax Act: The petitioner argued that the ITSC ignored statutory provisions while allowing estimated expenditures. Specifically, they cited Section 40A(3), which disallows cash payments exceeding ?20,000, and Section 37, which disallows expenditures for illegal activities. The court found no evidence that payments exceeding ?20,000 were made to a single person in a day. Moreover, the court noted that the ITSC had considered the statutory provisions and found no basis for the petitioner’s claims. 4. Alleged Payments to Mafia and Their Tax Implications: The petitioner claimed that payments to the mafia were made, which should be disallowed under Explanation-I to Section 37 of the Act. The court noted that the term 'mafia' was used loosely and not in the context of illegal activities. The court emphasized that the purpose of the payment, rather than the recipient, determines its deductibility. Since the payments were for protecting business interests and not for illegal purposes, the court found no reason to disallow them. Additionally, the court highlighted the petitioner’s delayed challenge and acceptance of the ITSC’s order, which further weakened their case. 5. Grant of Partial Immunity from Penalties under Sections 271D and 271E of the Income Tax Act: The petitioner objected to the partial immunity from penalties granted by the ITSC. The court clarified that Section 245H of the Act does not exclude Sections 271D and 271E from the ITSC’s purview for granting immunity. The court found that the ITSC had the authority to grant partial immunity and that the petitioner’s objection lacked merit. The court dismissed the petitioner's argument and upheld the ITSC’s decision. Conclusion: The court dismissed the petition, finding no merit in the petitioner’s arguments. The ITSC’s order was upheld, and the petitioner's claims were rejected on all counts. The court emphasized the importance of evidence and the limited scope of judicial review in such matters. No costs were awarded.
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