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TMI Blog2009 (7) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... ne. They are all engaged in the business of land developers, builders and contractors. The main business was run by Ajmera Housing Corporation, Bombay and had undertaken development and construction of majority projects in Shastri Nagar, Andheri, Bombay. The project was under development and construction in phases since 1986. In January, 1989 and again in December, 1992, searches were conducted in the premises of the Ajmera group under section 132(1) and voluminous books of account, loose papers and other documents were seized during the second search. 16 such files and loose papers were seized during search of the residence of one B. L. Vora, accountant of this Ajmera group, who was their confidant. A computer was also found at the residence of the said Vora from which hard disc was taken out and seized. Papers were seized including the trial balance dated August 31, 1992, which was allegedly prepared in the normal course on the basis of information in the hard disc. Another trial balance-sheet was prepared on the basis for the period on November 17, 1992, on the basis of receipts and expenses accounts from April 1, 1981 to November 17, 1992. At the time of search, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain discrepancies or other disputable additions to the revised additional income as per annexure dated September 19, 1994, to settle the case. As per this final revision, besides the amount of income shown in the returns, an amount of Rs. 21.17 crores as additional income on completed projects and further an amount of Rs. 20.36 crores on incomplete projects was disclosed/offered. 4. The Settlement Commission passed the final order under section 245D(4) on January 29, 1999, accepting the disclosures and additions made by the respondents and worked out details for different assessment years, as per annexures A1 to A5 with the said order and accordingly, tax liability was fixed on the basis of on-money received for the completed projects and directed that on-money received on the uncompleted projects, shall be deemed to be advance receipts and the same shall be adjusted as on money as and when the said projects would be completed. The Settlement Com-mission imposed a token penalty of Rs. 50 lakhs as against the minimum leviable penalty of Rs. 562.87 lakhs as per its own calculations, in view of co-operation given by the respondents in the proceedings. Penalty was also to be distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h these contentions, the Revenue prayed for setting aside and quashing the order passed by the Settlement Commission. 6. Before proceeding with the matter, it will be useful to state that earlier this court, by the judgment dated July 28, 2000, had allowed this writ petition and had set aside the order of the Settlement Commission on the ground, besides other things, that the Settlement Commission had not given any findings as to whether there was full and true disclosure of the income. As a result, the matter was remanded back to the Settlement Commission for reconsideration of the matter keeping all the questions open. The judgment of this court was challenged by the respondents in group of appeals and by the order dated July 11, 2006, the Supreme Court set aside the order of this court and remanded back the petition for fresh hearing mainly on the ground that the senior counsel appearing for the assessees had pointed out that though the second report submitted by the Commissioner on October 20, 1997 estimating undisclosed income of Rs.42.5 crores approximately coincides and equals to the figure arrived at by the Settlement Commission in the final order and that report had not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te dated October 20, 1997, undisclosed income was shown to be Rs. 187.2 crores. The learned counsel for the Revenue pointed out that after the initial report under section 245D(1) was submitted by the Commissioner, the matter was heard on September 12, 1994. The order admitting the application was passed on November 17, 1994. After the date of the last hearing and before the admission order, on September 19, 1994, a revised confidential annexure declaring an additional income of Rs. 11.41 crores was submitted. It is contended that the confidential annexure dated September 19, 1994, was never made available to the Commissioner of Income-tax and he could not go through the information provided by the assessee in the said disclosures and he also could not submit his report effectively. It is contended that this was in violation of section 245D and the rules made thereunder. 9. Section 245C(1) provides that an assessee may make an application in such a format and in such a manner as has been prescribed and containing full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, an additional am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their earlier application with confidential annexure disclosing an additional income of Rs. 11.41 crores. In fact, this was a revision of the original application and, therefore, this revised application should have been sent to the Income-tax Commissioner for his report under section 245D(1) but this was not done and the admission order was passed on November 17, 1994. It is vehemently contended on behalf of the Revenue that the revised application and the confidential annexures dated September 19, 1994, were never made available to the Commissioner and this was violation of rules 6 and 9 and thus, the Revenue did not get sufficient opportunity of hearing in proceeding. There appears substance in this contention. In our opinion, non-furnishing of that application and confidential annexures to the Commissioner amounted to violation of rule 9 and on this count, it can be held that the Revenue did not get sufficient opportunity to contest the application. 10. The learned counsel for the assessee harped upon the statement made before the Supreme Court that in the second report submitted by the Commissioner was admitted on October 20, 1997, undisclosed income was estimated at Rs. 42. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the extra money paid to the employees of that concern for the work done for the applicants/respondents. It is impossible to believe that the respondents got the works done from certain employees of a sister concern and for that purpose, payment was made without necessary receipts, vouchers or acknowledgments. Paragraph 15.2 of the order of the Settlement Commission shows a summary of trial balances as on November 17, 1992,. As per that summary, the amount of Rs. 734.02 lakhs was shown as allowable expenses and the amount of Rs. 36.64 lakhs was shown as expenses not allowable. It is difficult to understand how the amount of Rs. 734.02 lakhs could be treated as allowable expenses. It appears that the consideration amount to the extent of 40 per cent. to 60 per cent. was received as on-money in cash while the remaining amount was received by cheque or by receipts apparently to evade income-tax on that part of income. But it is difficult to understand why the expenses were also made without any record. The manner in which expenses have been shown creates serious doubt about the expenditure of Rs. 734.02 lakhs. Besides this, the said summary of trial balances reveals loans treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he undisclosed income as required under section 245C(1) and the huge income was concealed by them. Section 271(1)(c) provides that if the Assessing Officer is satisfied that any person has concealed particulars of the income or had furnished inaccurate particulars of such income, he may direct such person to pay penalty which shall not be less than but which shall not exceed three times the amount of the tax sought to be evaded by reason of the concealment of the income. In the present case, huge amount of income was concealed by the respondents. Even though the amount of about Rs.14 crores, as pointed out above, was not taken into consideration and several other investments were not considered by the Settlement Commission, the Settlement Commission came to the conclusion that leviable penalty would be Rs. 562.87 lakhs. Possibly this was the amount equal to the amount of tax which was sought to be evaded by not disclosing the income. If further amount of Rs. 14 crores or any other amount would be added in the income, tax amount would substantially increase. As per the provisions of section 271(1)(c), penalty could be equal to the tax amount or three times of the same. It is true th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosure of its income while making the application under section 245C and on that count itself, application made by the respondents for settlement should have been rejected. He tried to find support from the judgment of this court in Writ Petition No. 1427 of 2007 Haji N. Abdulla v. Income-tax Settlement Commission [2008] 299 ITR 119 decided on October 8, 2007, wherein this court had upheld the order passed by the Settlement Commission rejecting the second application, after rejection of the first, on the ground that he had not made true and full disclosure of his income in the first application. In the present case, though we find substance in the contention of the learned counsel for the Revenue that the respondents had not made true and full disclosure of the income at the first instance while making application under section 245C and on that ground, application could have been rejected by the Settlement Commission, we find difficulties in rejection of the application at this stage. The Settlement Commission admitted the application for further proceedings and settlement by its order dated November 17, 1994. That order was never challenged by the Revenue and that order was act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the application to be proceeded with, annexure was forwarded to the Com-missioner as per rule 9 and thus, the confidential information became available to the Commissioner. When the second disclosure was made on September 11, 1994, it was also accompanied by the annexure. However, according to the Revenue, the annexure with the second application was not made available to the Commissioner. However, the fact remains that all these documents including confidential information supplied in 1993 as well as in 1994 is now available to the Revenue as that information has become public because of the reference of the same in the writ petitions before this court. If the order passed by the Settlement Commission on November 17, 1994, allowing the application to be proceeded with is set aside, all the confidential information, being available with the Income-tax Commissioner may be utilised for taking action as per law. That information was submitted by the respondents because of assurance under the Rules and the provisions of the Act that the information would not be used by the income-tax authorities for taking any action against them and would be used only for the purpose of the settle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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