9911796707
TMI Blog1994 (6) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... ew Delhi, Hari Chand, Sirsa, and Messrs. Damani Bros., Bombay, were heard. One could not be heard. The first two were heard in the camp of the Special Bench at Bombay on April 12, 1994, and the third, in the same camp, on April 13, 1994. Shri C. S. Aggarwal, advocate, represented both Airteck Pvt. Ltd. and Hari Chand, Sirsa. Shri D. M. Harish, advocate, represented Messrs. Damani Bros. Dr. V. Balasubramanian, senior standing counsel of the Income-tax Department at Bombay, represented the Department on both the days of hearing. As a single common issue was to be considered in all the three cases, this common order is passed in respect of them. In his submission, Shri C. S. Aggarwal took up the contention that the only pre-condition contained in section 245C(1) was that there should be disclosure of income in respect of a case and nothing more. He pointed out that for the purpose of Chapter XIX-A, which contained the provisions relating to settlement of cases in sections 245A to 245M thereof, the term "case" had been defined. This definition which is contained in section 245A(b) is as follows : "case ' means any proceeding under this Act for the assessment or reassessment of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very year covered by the application. Shri C. S. Aggarwal then submitted that the term "income" contained in section 245C(1) should be taken as even including negative income or losses. According to him, there was no need even to declare in the application a positive income. He said that the purpose of Chapter XIX-A was to effect settlement of cases and settlements could be both regarding incomes and regarding losses. In this connection, he also drew our attention to the decision of the Supreme Court in the case of CIT v. J. H. Gotla [1985] 156 ITR 323. He stated that in this decision the Supreme Court did not agree with the view taken by the Gujarat High Court in the case of Dayalbhai Madhavji Vadera v. CIT [1966] 60 ITR 551. According to him, the Gujarat High Court had opined that for the purpose of section 16(3) of the Indian Income-tax Act, 1922, which corresponded to section 64 of the present Act, income would not include losses. Shri Aggarwal then submitted that it was enough if for some of the years covered in the application alone there was additional positive income and the aggregate tax payable for the years for which additional positive income had been disclosed was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as procured earlier out of the incomes earned in the earlier years. In such circumstances, he would approach the Commission for a settlement for the earlier years as well as for the year of search, in which case the income to be settled for the year of the search may be less than the income offered for assessment even as per the return filed by him on the basis of the statement given by him under section 132(4). Shri Aggarwal then drew our attention to a definition of the term "income" contained in section 2(24). He pointed out that income included profits and gains and claimed that the profits and gains could be positive or negative. This was only a reiteration of the claim made earlier that income included losses. Shri Aggarwal concluded his arguments by stating that what was required under section 245C(1) was only a disclosure of income (which would include losses) with the aggregate of the taxes payable for the years for which additional positive income was disclosed exceeding Rs. 50,000. Accordingly, therefore, he claimed that the answer to the issue referred to us would be that there was no requirement under section 245C(1) for the disclosure of additional income for each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to more than one previous year, was redundant in so far as section 245C(1) was concerned, as section 245C(1) related to a single assessment year. It could be relevant, he said, only for the purpose of sections 245D(2A) to (2D). This was poor drafting and nothing more and no inference could be drawn from section 245C(1D) that the aggregate of the taxes payable taking the application as a whole need only be more than Rs. 50,000. The requirement that there should be additional income disclosed for each year and the additional tax for each year should exceed Rs. 50,000 was according to him abundantly clear. The question of two views being possible did not arise, he claimed. He also stated that the provisions contained in section 245C(1) were special provisions and there should be strict conformity with these provisions. Dr. Balasubramanian did not also find any merit in the contention that income could include losses even for the purpose of settlement under Chapter XIX-A. He also perceived a situation, if the view advocated by him was not accepted, of the Settlement Commission being flooded with a large number of petty cases. The intention of the Legislature could never have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that from the form itself it was clear that what was contemplated was only a single application for a number of years. He also stated that it could be that in the procedure adopted for making assessments, etc., every assessment year had to be separately dealt with, but that would not mean that there could not be provisions in the Act under which a number of years could be taken up together. Thus though Chapter XIX-A was only a part of the Act, this part of the Act related to dealing with the matters covering a number of years together, he submitted. Shri Harish did not also find any merit in the contention that if the requirement of the additional tax being more than Rs. 50,000 was to be satisfied only for the application as a whole, there would be a flood of petty cases for settlement. He said the amount of Rs. 50,000 itself was not small. Parliament in its wisdom had decided that this would be a proper amount for limiting the number of cases to be considered by the Settlement Commission. That apart, he said, an application was just not admitted by the Settlement Commission only because the additional tax resulting from the disclosure of additional income exceeded Rs. 50,000. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lessly proliferating litigation and holding up collections. We would, therefore, suggest that there should be a provision in the law for a settlement with the taxpayer at any stage of the proceedings. " The Bill which was introduced to give effect to the Wanchoo Committee's recommendations was the Taxation Laws (Amendment) Bill, 1973. The Notes on Clauses appended to the Bill stated that the provisions proposed in the Chapter XIX-A were "mainly intended to give a statutory basis for settlement of cases which are necessitated at times in the interest of the Revenue" (Notes on Clause 58). After passing through the Select Committee of Parliament, the Bill was enacted as the Taxation Laws (Amendment) Act, 1975, and came into force with effect from April 1, 1976. Section 245C(1), as it then was read as under : " 245C. Application for settlement of cases. (1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner and containing such particulars as may be prescribed to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereafter provided. " In paragraph 45 of the Board's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h application shall be made unless, (a) the assessee has furnished the return of income which he is or was required to furnish under any of the provisions of this Act ; and (b) the additional amount of income-tax payable on the income disclosed in the application exceeds fifty thousand rupees. '' Section 245C has not undergone any further change except for the substitution of the words "Income-tax Officer" contained therein by the words "Assessing Officer". It will be seen that the requirements that there should be a disclosure of income which has not been disclosed to the Income-tax Officer (now Assessing Officer) and that the additional income-tax payable on the income so disclosed should exceed fifty thousand rupees came into effect only from October 1, 1984. This is what was stated in the Notes on Clauses in regard to the changes introduced in the Taxation Laws Amendment Bill, 1984 (see [1984] 149 ITR (St.) 59) : " The substituted sub-section (1) seeks to secure that an application for settlement shall contain, inter alia, a full and true disclosure of the applicant's income which has not been disclosed before the Incometax Officer, the manner in which such income has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s where there was disclosure of additional income. Neither the Notes on Clauses nor the departmental instructions clarify the reasons why this provision was introduced. It could be that this provision was introduced only to see that the Settlement Commission was not saddled with a large number of small cases. A plain reading of the provisions would only indicate that there should be disclosure of additional income in the application as a whole and the tax relating to such additional income should exceed fifty thousand rupees. If it had been contemplated that the requirement of additional tax should be with reference to each and every year covered in the application, that would have been made explicit in the language of proviso (b) to section 245C(1), which has not been done. In a brochure published by the Directorate of Income-tax, Taxpayers' Information Series 5 on the subject of Settlement of Cases under the Direct Taxes Acts, in paragraph 4(iii) of Chapter III thereof, this is what is stated : " While preparing the application it should be ensured that : - (i) . . . . ; (ii) . . . . ; (iii) the additional amount of tax payable on the income disclosed before the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant has not furnished a return in respect of the total income of that year in the course of such proceeding for reassessment, tax shall be calculated on the aggregate of the total income as assessed in the earlier proceeding for assessment under section 143 or section 144 or section 147 and the income disclosed in the application as if such aggregate were the total income. (1C) The additional amount of income-tax payable in respect of the income disclosed in the application relating to the previous year referred to in sub-section (1B) shall be, (a) in a case referred to in clause (i) of that sub-section, the amount of tax calculated under that clause ; (b) in a case referred to in clause (ii) of that sub-section, the amount of tax calculated under that clause as reduced by the amount of tax calculated on the total income returned for that year ; (c) in a case referred to in clause (iii) of that sub-section, the amount of tax calculated under that clause as reduced by the amount of tax calculated on the total income assessed in the earlier proceeding for assessment under section 143 or section 144 or section 147. (1D) Where the income disclosed in the application relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the years covered in the application. Much emphasis was placed by Dr. Balasubramanian on the fact that proviso (a) to section 245C(1) could only relate to a single assessment year. His argument was that accordingly proviso (b) could also relate only to a single assessment year. In the use of the term "years" in the definition of the term "case", the pendency of proceedings for a number of years is contemplated. The format of Form No. 34B in which the application is to be filed also requires the assessment years for which the application is being made to be specified. In the circumstances, it can only be stated that though the requirement of proviso (a) is to be satisfied for every single assessment year, proviso (b) can very well be applied to the application as a whole. In fact, this can be the only construction which will be harmonious with the entire scheme in regard to settlement of cases. In section 245C(1D) in regard to the aggregation of additional tax for the years for which additional incomes have been disclosed this is what has been stated : " aggregate of the amount so arrived at in respect of each of the years for which the application has been made under sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depended on the decision of the Supreme Court in CIT v. J. H. Gotla [1985] 156 ITR 323. As we can see that decision has no relevance to the provisions of the Act with which we are concerned. It is obvious that whatever might have been the purpose initially behind introducing the statutory provision for the settlement of cases, later a requirement was brought in which provided that there should be additional income disclosed in a settlement application. It is obvious that in the context in which the word "income" has been used in section 245C(1), it can only refer to a positive income and not a negative one. We, therefore, wish to express the view that though the application under section 245C need not disclose any additional income for each and every one of the assessment years comprised in it, for the application as a whole, that is, for all the years taken together, there should be additional positive income disclosed ; otherwise, it cannot be taken that there is disclosure of additional income in the application. The applications in the cases of Airteck Pvt. Ltd., New Delhi, and Hari Chand, Sirsa (Applications Nos. 2/2/92/9/I. T. and 8A/1/119/90-I. T., respectively, will now ..... X X X X Extracts X X X X X X X X Extracts X X X X
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