2021 (4) TMI 545 - HC - Income Tax

Income Tax Settlement order under section 245D( 4) - second respondent has come to a conclusion that the 1st respondent in their respective writ petitions have made adequate disclosures for settling the case and therefore has granted a waiver to the first respondent in the respective writ petitions, from payment of penalty and immunity from the prosecution in terms of section 245H of the Income Tax Act, 1961 - HELD THAT - There is no scope for interference under Article 226 of the Constitution of India. Though, this Court exercise vide power Article 226 of the Constitution of India. its jurisdiction is narrow. The court is really not concerned with the ultimate decision of the 2nd respondent, Income Tax Settlement Commission, but only with the decision-making process. The Court can interfere only where there is perversity and arbitrariness in the order impugned before it. Question the regarding true and full disclosure of income for the purpose of settling the case before the 2nd respondent Income Tax Settlement Commission is a question of fact. The Income Tax Settlement is the final fact find authority. Therefore, to that extent, the impugned order settling the cases of the 1st respondent in the respective writ petition covering the period covered by section 153A of the Income Tax Act, 1961, there is no merit in the writ petition. The petitioner has also not demonstrated any extraordinary circumstances, which warrants interference on the issues arising of the facts determined by the second respondent Income Tax Settlement Commission. Whether the Settlement Commission can direct payment of interest? - There two distinct stages under Chapter XIX-A and that the legislature has not contemplated the levy of interest between the order under Section 245-D(1) stage and Section 245-D(4) stage. Interest under Section 234-B will be chargeable till the order of the Settlement Commission under Section 245-D(1) i.e. admission of the case. In the impugned order, the 2nd respondent Income Tax Settlement Commission has directed the interest under Section 234A to be charged for the delay in filing of the original return under section 139/153 A/153C. The impugned order to the extent it is contrary to the decision of the Honourable Supreme Court in the above case in Brij Lal Vs Commissioner of Income Tax 2010 (10) TMI 8 - SUPREME COURT is liable to be there for modified. The officers under the jurisdiction of the 1st respondent are therefore directed to give effect to the order of the second respondent Income Tax Settlement Commission in terms of the order of the Hon ble Supreme Court in Brij Lal Vs Commissioner of Income Tax. These writ petitions are partly allowed to the extent - i. The impugned orders passed by the 2nd respondent Income Tax Settlement Commission in the respective Writ Petitions to the extent it settles the case of the 1st Respondent in the respective Writ Petitions for the Assessment Year 2012-13 are set aside. ii. The jurisdictional officer, Income Tax Officer or Assistant Commissioner of Income, as the case shall therefore finalize the assessment for the Assessment Year 2012-13 within a period of 3 months from the date of receipt of a copy of this order. Orders to be passed shall be in accordance with law and in compliance with the procedural law as it prevailed during the period in dispute. iii. The impugned orders passed by the 2nd respondent, Income Tax Settlement Commission in the respective Writ Petitions are set aside to the extent it directs payment of interest contrary to the decision of the Honourable Supreme Court in Brij Lal Vs Commissioner of Income Tax 2010 (10) TMI 8 - SUPREME COURT iv. The officers of the Income Tax Department shall finalise the interest strictly in accordance with the decision of the Hon ble Supreme Court in Brij Lal Vs Commissioner of Income Tax .

Summary

Issues Involved:

1. Adequacy of disclosures made by the first respondent for settling the case under Section 245D(4) of the Income Tax Act, 1961.
2. The validity of the waiver of penalty and immunity from prosecution granted under Section 245H.
3. The determination of total income by the Income Tax Settlement Commission (ITSC).
4. The acceptance of the first respondent’s claims regarding deemed dividends under Section 2(22)(e).
5. The direction for payment of interest contrary to the Supreme Court’s decision in Brij Lal vs. CIT.
6. The settlement of cases for the assessment year 2012-13 without additional income disclosure.

Detailed Analysis:

1. Adequacy of Disclosures:
The second respondent, Income Tax Settlement Commission (ITSC), concluded that the first respondent had made adequate disclosures for settling the case. The ITSC determined the total income for various assessment years, resulting in a consolidated additional income of ?10,36,63,982/-. However, the petitioner argued that no additional income was disclosed for the assessment year 2012-13, thus failing to meet the statutory requirement under Section 245C. The court agreed with the petitioner, stating that the first respondent did not satisfy the statutory requirement for the assessment year 2012-13, making the settlement for that year invalid.

2. Waiver of Penalty and Immunity from Prosecution:
The ITSC granted a waiver from payment of penalty and immunity from prosecution under Section 245H of the Income Tax Act, 1961. The court did not find any grounds to interfere with this part of the ITSC’s order, as it was within the commission’s discretion to grant such relief based on the disclosures made.

3. Determination of Total Income:
The ITSC determined the total income for the first respondent for multiple assessment years, resulting in substantial additional income offered for tax. The court found no merit in the challenge to the ITSC’s determination of income for the years covered under Section 153A notices, as the first respondent satisfied the statutory requirement of disclosing additional income exceeding ?50 lakhs.

4. Deemed Dividends under Section 2(22)(e):
The petitioner contended that the amount received by Dr. Chandralekha from M/s. Palani Medical Centre Private Limited should be considered as deemed dividends under Section 2(22)(e) of the Income Tax Act, 1961. The court held that there was no scope for interference under Article 226 of the Constitution regarding this issue, as it involved factual determinations made by the ITSC.

5. Direction for Payment of Interest:
The ITSC directed the payment of interest contrary to the decision of the Supreme Court in Brij Lal vs. CIT. The court held that the ITSC’s direction to charge interest under Section 234A for delays in filing the original return and under Section 234B till the date of the order under Section 245D(1) was incorrect. The court modified the ITSC’s order to align with the Supreme Court’s decision, stating that interest under Section 234B would be payable only up to the stage of the order under Section 245D(1).

6. Settlement for Assessment Year 2012-13:
The court found that the ITSC erred in settling the case for the assessment year 2012-13, as no additional income was disclosed for that year by the first respondent. The court set aside the ITSC’s order for the assessment year 2012-13 and directed the jurisdictional officer to finalize the assessment for that year within three months in accordance with the law.

Conclusion:
The court partly allowed the writ petitions, setting aside the ITSC’s orders to the extent they settled the case for the assessment year 2012-13 and directed payment of interest contrary to the Supreme Court’s decision in Brij Lal vs. CIT. The jurisdictional officers were instructed to finalize the assessment and interest calculations in accordance with the law and the Supreme Court’s guidelines. No costs were awarded, and connected miscellaneous petitions were also closed.