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TMI Blog2012 (4) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the learned CIT(A) is erroneous and is not tenable on facts and in law. 4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 2. Facts, in brief, as per relevant orders are that a search u/s 132 of the Income-tax Act, 1961 (hereinafter referred to as the Act) was conducted in the premises of K.C. Group of cases on 5.10.2001. During the search beside cash of Rs. 2,16,500/- and stock worth Rs. 53,21,218/- ,a number of incriminating documents and books of accounts were seized. Moreover, a number of undisclosed bank accounts came to the notice. Consequently, a notice u/s 158BC of the Act was served upon these assessees on 8th October, 2002. In response, these assessees filed return for the block period ending 5th October, 2001 on 10th December, 2002 declaring nil undisclosed income. Immediately thereafter on 11.12.2002, applications u/s 245C(1) of the Act were filed before the Settlement Commission, disclosing income of Rs. 10,00,000/- in the hands of each of the aforesaid four persons i.e an amount of Rs. 40,00,000/- @2% of the turnover of Rs. 20 crores. These applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the unaccounted business would be unjustified. It is seen that while making the offer of additional income the applicants have taken the net profit rate of 6%. On the facts and in the circumstances of the case the adoption of the net profit rate by the applicants at 6% appears to be fair and reasonable and is accepted. 7. As regards the third issue, i.e. estimation of the working capital, it is seen that the CIT in the report under Rule-9 has taken 10% of the total turnover as the unexplained investment of the group for the block period. We find that neither in the report under Rule-9 nor in the course of hearing any basis for the estimation at 10% of the total turnover has been provided. The applicants have offered a sum of Rs.20 lac as the seed money and have claimed that the said capital was adequate to generate the .unaccounted turnover of the business. Their argument is that they availed of the credit facility from the suppliers and also ploughed back the profits earned into the business. Having taken into consideration the facts we are inclined to accept the offer of the seed money of Rs.20 lac as adequate for generating the unaccounted turnover under reference. 8. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion vide order dated 23.10.03. In this context it is noted from the order u/s 245D( 4) that the case was heard on 24.09.09, 03.11.09, 18.11.09,19.01.10 and lastly on 02.03.10. It is also seen from para 5 of 245D(4) order that it is on 02.03.10 that the appellant had made this offer of additional income which has finally been accepted by the Settlement Commission ( para 8 of the order). The point being made by this AO is that by the offer made on 02.03.10 the appellant has revised the original application made u/s 245C. and therefore in view of such retrospective revision the assessee is also liable to pay interest u/s245D(2C) on this revised income from 01.01.04 itself, as the applicant in the opinion of the AO has defaulted in payment of the additional amount of income tax payable on the income disclosed in the original application. On the other hand submission made by the applicant on such charging of interest u/s 245D(2C) veers around the proposition that there has been no revision of original application tiled by the appellant before the Hon'ble Commission u/s 245C(1) and therefore the question of revision of additional income does not arise. That the offer of additional inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e done during the course of proceedings u/s 245D(4)as has happened in this case. On a reading of section 245D (4) of the Act it is noted that the final order passed by the Settlement Commission is after examination of records and the report of the Commissioner and after giving opportunity to the appellant and to the Commissioner to be heard. Now such an order would more often than not may result in enhancement of the initial offer of additional income made by the applicant under section 245C(1). Such enhancement can take various forms. There can be a case where upon elaborate hearing and argument it is the applicant himself who may be called upon further offer additional income which is more than that disclosed in his original application and it is this offer which is finally accepted by the Commission in its order u/s 245D (4).There could be an another Illustration where the Commission upon hearing both the parties determines the additional income by itself which is more than the amount offered by the applicant in his original application. Now in both these situations can it be said that in the first case there would being charging of interest u/s 245D(2C)) on the premise that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct: While coming to the above conclusion the following observations made by IT AT Mumbai in ACIT v. Smt. Leonie M. Almeida 129 TTJ 747 have also been relied upon.- "4.3. There are also provisions for charge of interest in the scheme of Chapter XIX-A of the IT Act relating to the settlement of a case by Settlement Commission. The assessee under section 245C of the Act may file an application for settlement disclosing particular income. The Commission after following procedure prescribed may proceed to deal with the application or may reject the application and therefore the demand raised by the AO ,in the assessment does not get vacated only on filing of application before the Settlement Commission. The Settlement Commission has jurisdiction over the assessee only when it decides to proceed with the application and admits the application under section 245D(1). Once the application is admitted, the assessee is required to pay the additional demand on the basis of income disclosed in the application within 35 days of the order of the Commission under section 245D(1) and in case the demand is not paid within the time allowed interest at prescribed rate is chargeable under 245D(2C). Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A(2) of the Act being mandatory in nature, could not be waived and therefore, the Settlement Commission directed the AO to charge interest as per law. Nowhere in the said order, Settlement Commission directed levy of interest u/s 245D(2C) of the Act, the ld. AR added. Inter alia, the ld. AR relied upon the decision dated 26.03.2009of the ITAT, Mumbai "A" Bench in ACIT v. Smt. Leonie M. Almeida, 129 TTJ (Mum)747. 7. We have heard both the parties & gone through the facts of the case as also the aforesaid decision relied upon by the ld. AR. At the out set, we may refer to the relevant extant provisions of section 245D of the Act, which read as under:- "245D.Procedure on receipt of an application under section 245C. (1) On receipt of an application under section 245C, the Settlement Commission shall call for a report from the Commissioner and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission, shall, where it is possible, by order, reject the application or allow the application to be proceeded with within a period of one year from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2C), be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered, in accordance with the provisions of Chapter XVII, by the Assessing Officer having jurisdiction over the assessee. (3) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. (4) After examination of the records and the report of the Commissioner received under sub-section (1), and the report, if any, of the Commissioner received under sub-section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settle ..... 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For the removal of doubts, it is hereby declared that nothing contained in section 153 shall apply to any order passed under sub-section (4) or to any order of assessment, re-assessment or re-computation required to be made by the Assessing Officer in pursuance of any directions contained in such order passed by the Settlement Commission and nothing contained in the proviso to sub-section (1) of section 186 shall apply to the cancellation of the registration of a firm required to be made in pursuance of any such directions as aforesaid. 7.1 As is apparent from the aforesaid provisions, the procedure laid down in section 245D of the Act, envisages that on receipt of the application under section 245C(1) of the Act, the Settlement Commission is required to forward a copy of the application filed in the prescribed form (No. 34B), containing full details of issues for which application for settlement is made, the nature and circumstances of the case and complexities of the investigation involved, except the annexures, referred to in item No. 11 of the form and to call for a report from the CIT within a period of 45 days from the date of communication by the Settlement Commission. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand at any stage during the proceedings. In nutshell, in the scheme of Chapter XIX-A, there is no stipulation for revision of an application filed under section 245C(1) of the Act and thus, the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said section in the prescribed form. Moreover sub-section(5) of sec. 245D mandates that the materials brought on record before the Settlement Commission shall be "considered" by the members before passing any final order under sub-section (4). The word "consideration" means an independent examination of the evidence and materials brought on record before the ITSC by the members and application of mind thereto with a view to independently assess the materials and evidence, whether adduced by the assessee-applicant or by the CIT and come to a conclusion by themselves. Here we may point out that the Hon'ble Apex Court in Ajmera Housing Corporation v. CIT, 193 Taxman193(SC) held that in the scheme of Chapter XIX-A, there is no stipulation for revision of an application filed under section 245C(1) of the Act . 7.2 As is e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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