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2024 (7) TMI 349 - HC - Income TaxAddition made by the ITSC on account of commission and margin money - Whether no infirmity in the order of the ITAT as the petitioner had failed to make a true and full disclosure of additional income before the ITSC pertaining to commission and margin money on off-market transactions? - HELD THAT - The power of the ITSC to pass an order is not limited only to the aspects covered by the application for settlement preferred by the assessee, rather the ITSC is empowered to render a decision on such issues which find mention in the report of the Commissioner or Principal Commissioner. On this aspect, it is apposite to refer to a decision of this Court in the case of M/S Trent East West LPG Bottling Ltd. 2024 (4) TMI 464 - DELHI HIGH COURT wherein, while adopting a similar view, it had been held that the ITSC has the authority to consider all aspects which arise from the application in order to extend finality to all the disputes. A Coordinate Bench of this Court in Agson Global 2016 (1) TMI 256 - DELHI HIGH COURT struck a distinction between regular assessment and order passed by the ITSC. It has been held that the ITSC does not wield an authority to engage itself in the process of regular assessment, rather it passes an order on the basis of settlement between parties containing the terms of settlement. Thus the settlement provision is an enabling provision to resolve the disputes between the parties based upon a mutual consensus. However, in the said process, the ITSC cannot usurp the original power of the AO to make an assessment strictly according to the provisions of the Act as the same would be contrary to the pith and substance of the scheme of the Act to settle the disputes. In essence, the primary objective of the incorporation of the settlement provisions is to entrust upon ITSC the mandate to compromise with the errant taxpayers, which is strikingly different from the power of regular assessment employed by the AO in order to put an end to the protracted litigations. It is relevant to note that the ITSC has thwarted the argument that Raj Kumar Kedia would not have charged commission money on the basis of his statement dated 13.06.2014, whereby, he had categorically stated to have received 5 to 6 percent commission on the net bogus pre-arrange long term capital gains provided to Dhanuka Agritech Group promoters. Evidently, the said statement was corroborated with the statement of Ghansyam Das Gupta, working as a consultant in Dhanuka Agritech Ltd., who asserted that commission of around 5 percent in cash form was paid to Raj Kumar Kedia for carrying out transactions of Dhanuka Group companies. Therefore, a salient fact which comes to the fore is that the contested additions were not made only on the basis of assumptions, conjectures or surmises, rather it was done after a careful perusal of the report submitted to the ITSC. In the facts of the case at hand and bearing in mind the plenitude of powers assigned to the ITSC, it cannot be said that the ITSC lacked jurisdiction to make such an addition, which has also been duly recorded in the terms of settlement, to put a quietus to the litigation. Afterall, the objective of the settlement provisions is to strike a balance between the voluntary disclosure of income by the assessee and the income escaping assessment in order to expedite the closure of tax disputes. On the overall conspectus of the discussion hereinabove, under the facts of the present case, we do not find any force in the argument of the petitioner that addition on account of commission and margin money militates against the provisions of the Act, particularly with Section 153A. It is well settled that an applicant cannot assert an indefeasible right to accept the income disclosed by him. We, therefore, find ourselves unable to hold that the said addition made by the ITSC is manifestly erroneous as the ITSC has meticulously exercised its power taking into consideration the underlying intent of the settlement process.
Issues Involved:
1. Legitimacy of the addition of commission and margin money by the Income Tax Settlement Commission (ITSC). 2. Adherence to the provisions of the Income Tax Act, 1961 by the ITSC. 3. Evaluation of evidence and statements by the ITSC. 4. Jurisdiction and authority of the ITSC under Chapter XIX-A of the Income Tax Act. 5. Applicability of Supreme Court precedents on ITSC's powers. Issue-wise Detailed Analysis: 1. Legitimacy of the Addition of Commission and Margin Money by the ITSC: The petitioner challenged the ITSC's addition of Rs. 1,45,09,098/- on account of commission and margin money paid to Raj Kumar Kedia. The ITSC had accepted the petitioner's disclosure of additional income of Rs. 10,36,36,417/- but made further additions based on the commission and margin money allegedly paid for off-market transactions. The petitioner contended that the ITSC erred in making this addition as it was not supported by incriminating material found during the search under Section 132 of the Act. 2. Adherence to the Provisions of the Income Tax Act, 1961 by the ITSC: The petitioner argued that the ITSC's addition was contrary to the provisions of Chapter XIX-A of the Act. The petitioner emphasized that the ITSC does not have unbridled authority to make additions not permissible under regular assessment provisions. The petitioner relied on the Supreme Court's decision in CIT v. Anjum M.H. Ghaswala, which held that the ITSC cannot make orders conflicting with mandatory provisions of the Act. 3. Evaluation of Evidence and Statements by the ITSC: The ITSC based its decision on the statements of Raj Kumar Kedia and Ghansyam Das Gupta, who corroborated the payment of commission and margin money. The ITSC noted that Raj Kumar Kedia had admitted to receiving a 5-6% commission on bogus long-term capital gains provided to the Dhanuka family. The ITSC rejected the petitioner's argument that no commission was paid due to long-standing family relations with Raj Kumar Kedia. 4. Jurisdiction and Authority of the ITSC under Chapter XIX-A of the Income Tax Act: The court extensively discussed the ITSC's powers under Chapter XIX-A, emphasizing that the ITSC can pass orders on matters covered by the settlement application and any other matters referred to in the report of the Principal Commissioner or Commissioner. The court cited several precedents, including PCIT v. Pankaj Buildwell & Group and Pr. Commissioner Of I Tax (Central)-II v. M/S Trent East West LPG Bottling Ltd., affirming that the ITSC has wide powers to examine all aspects arising from the application to settle disputes comprehensively. 5. Applicability of Supreme Court Precedents on ITSC's Powers: The court referred to the Supreme Court's decision in Om Prakash Mittal, which held that the ITSC exercises plenary jurisdiction and its orders are not in the nature of regular assessments but settlements. The court also cited Canara Jewellers v. Settlement Commission, reiterating that the ITSC's powers are for settlement purposes and not for reassessment of tax. Conclusion: The court upheld the ITSC's addition of Rs. 1,45,09,098/- on account of commission and margin money, finding that the ITSC acted within its jurisdiction and authority under Chapter XIX-A of the Act. The court dismissed the petitions, concluding that the ITSC's decision was based on substantial evidence and was not contrary to the provisions of the Act. The reliance on the Supreme Court's decision in Anjum M.H. Ghaswala was found to be misplaced and inapplicable to the present case.
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