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TMI Blog2012 (7) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... as prayer for issuance of a writ quashing the order dated 08.11.2011 passed by the respondent in the meantime under Section 147 read with Section 143(3) of the Act. The amended writ petition was taken on record by order dated 09.01.2012. 3. The brief facts giving rise to the filing of the writ petition may now be noted. The petitioner is a public limited company engaged in the business of real estate. It is assessed to income tax by the first respondent and falls under the administrative charge of the second respondent who is the CIT (Central)-III, New Delhi. On 22.09.2005 a search was carried out in the business premises of the petitioner under Section 132 of the Act. Thereafter the petitioner filed a return of income for the assessment year 2006-07 on 30.11.2006 declaring taxable income of Rs.89,20,76,630/-. In the return, the petitioner claimed deduction of Rs.78,99,00,509/- under Section 80IB (10) of the Act in respect of the profits of the housing projects undertaken by the petitioner. In the meantime the first respondent had issued notice on 19.04.2006 under Section 153A of the Act for the assessment years 2000-01 to 2005-06 and in response to those notices, the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as more than the limit prescribed by the Act and therefore the profits from these projects were not eligible for deduction. In paragraph 2 of the reasons recorded the Assessing Officer adverted to the order of the ITSC settling the income of the assessee for the assessment year 2006-07 at Rs.89,38,76,630/-, but stated that the ITSC "did not adjudicate the issue of allowability or otherwise of the above deduction claimed by the assessee u/s 80IB (10). The assessee also did not offer any undisclosed income in this respect". 6. The petitioner filed detailed objections by letter dated 30.07.2010, a copy of which is annexed to the writ petition. Again it is not necessary to refer to these objections in detail and suffice to note that in this letter the attention of the first respondent was drawn to Section 245I of the Act which provided that the order of settlement passed by the ITSC was conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided for, be reopened in any proceeding under the Act or under any other law for the time being in force. It was pointed out that all matters pertaining to the assessment order 2006-07 are cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 148 and the order passed by the first respondent on 03.10.2011, the reassessment order passed on 08.11.2011 in which he has disallowed and added back an amount of Rs.65,65,17,999/- under Section 80IB (10) and thereby enhancing the total income of the petitioner to Rs.155,03,94,630/- as against the total income of Rs.89,38,76,630/- computed by the ITSC under Section 245D (4). Certain further grounds have also been taken by the petitioner in the amended writ petition in addition to the grounds taken in the writ petition filed earlier. In the additional grounds the petitioner as inter alia challenged the reassessment order passed on 08.11.2011 as a "mere attempt by respondent No.1 to sit in judgment over the order passed by the Settlement Commissioner under Section 245D (4) of the Act" and has contended that it is wholly without jurisdiction. A specific prayer has also been added to the effect that the reassessment order dated 08.11.2011 may be quashed. 9. The main argument of the learned counsel for the petitioner is that once the ITSC has passed a final order of settlement for an assessment year under Section 245D (4), the assessment becomes conclusive and the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner." 10. Sub-section (6) of Section 245D provides that every order passed under sub-section (4) shall stipulate the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due in the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the ITSC that it has been obtained by fraud or misrepresentation of facts. Sub-section (7) provides that where a settlement becomes void, the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the ITSC and the income tax authority concerned may complete such proceedings at any time before the expiry of two years from the end of the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and there was no adjudication of the said claim in the order of the ITSC. It is therefore submitted that the issue relating to deduction under Section 80IB (10) is not a matter covered by the order of the ITSC, and can be reopened by the Assessing Officer. 13. We are afraid that the submission of the Revenue overlooks the fact that in the return the assessee had claimed deduction of Rs.78,99,00,509/- u/s. 80IB (10) and it was only after claiming such deduction that the net taxable income was declared at Rs.89,20,76,630/-. The Assessing Officer issued notices under Section 143(2) and 142(1) on 12.07.2007 but even before the questionnaire was issued the petitioner had approached the Settlement Commission by an application filed on 31.05.2007. Under Section 245F(1), the ITSC, in addition to the powers conferred on it under Chapter XIX-A, shall have all the powers which are vested in an income-tax authority under the Act. By virtue of the provisions of Section 245F (2) once the application for settlement was filed and an order was passed allowing the application to be proceeded with, it was the ITSC which has the exclusive jurisdiction to exercise the powers and perform the function ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a Division Bench of the Bombay High Court in Major Metals Ltd. v. Union of India and Ors., in W. P. No.397/2011 rendered on 22.02.2012, it was observed as follows: - "......Parliament intended that the entire assessment is before the Settlement Commission. The Commission completes the process of assessment - as the decision in Brij Lal holds - as part of the settlement of the case. Until the Settlement Commission is seized of the proceedings, there is no parallel assessment contemplated in law. Comprehensiveness, finality and conclusiveness are the three attributes of the function assigned to the Commission. That object is achieved when the entire assessment is completed, as part of the jurisdiction to settle a case. To dilute this position would defeat the object which Parliament intended to achieve. Once an assessee moves the Settlement Commission, the statute expressly mandates that the application cannot be withdrawn. Unless the Commission in a given case decides to reject the application, it is entitled to resolve the case by settlement. An assessee who moves the Settlement Commission cannot be allowed to be anything other than fair and candid. Nor can he assert an unqualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has to take note of both the disclosed income and the undisclosed income. This is logical because there cannot be two different total incomes for the same assessment year, i.e., disclosed total income and undisclosed total income. Aggregation of both the disclosed and undisclosed income is also necessary because in several years different rates of tax for various slabs of income are provided. By way of an illustration, it may be said that supposing the disclosed income is rupees two lakhs and the undisclosed income is five lakhs, the rate of tax levied on rupees two lakhs may be one but may be different for an income of rupees seven lakhs and the undisclosed income is five lakhs, the rate of tax levied on rupees two lakhs may be one but may be different for an income of rupees seven lakhs. For the purpose of computation of taxes, there is a requirement to club both the disclosed and undisclosed income. But that does not empower the Commission to deal with the disclosed income before deciding to proceed with the petition." 18. In order to appreciate the impact of the observations it is necessary to read the entire paragraph in which the observations appear in light of the plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his plea that the matter relating to the deduction under Section 80IB (10) could not have been before the ITSC. The observations of the Supreme Court in Damani Brothers (supra) clarifying the observations of the Court in Express Newspapers Ltd. (supra) only mean that the ITSC does not deal with the disclosed income of the assessee even before it decides to proceed with the case by passing an order under Section 245D (1). It does not however imply that once an order is passed under the aforesaid provision, the ITSC does not deal with both the disclosed and undisclosed incomes of the assessee. On the contrary, it would inevitably follow that once a settlement application is allowed to be proceeded with, the entire case stands transferred to the ITSC and thereafter it is the ITSC alone which shall have exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority under the Act in relating to the case, as emphatically stated in sub-section (2) of Section 245F of the Act. In Damani Brothers (supra) the Supreme Court was explaining the position during the pendency of the settlement application till an order is passed under Section 245D (1) allowing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended under Section 154 or Section 155 or reopened under Section 148 only by him, and by no other income-tax authority. Similarly, an assessment by way of settlement of a case, which is made by the ITSC, can be reopened only by the ITSC and that too only in certain circumstances. Applying this general principle that runs through the Act, an assessment by way of a settlement order passed by the ITSC cannot be reopened by a different authority, viz., the Assessing Officer. The fact that the ITSC has not been designated as an "income-tax authority" under Section 116 of the Act makes the position "a fortiori‟. Section 147 of the Act does not employ language that permits him to do so, nor are the powers and orders of the ITSC made subject to the provisions of Section 147. Section 147 does not appear to fit into the general scheme of Chapter XIX-A, which has been held to be a self contained code by the Supreme Court in Brij Lal and Ors. v. CIT, Jalandhar, (2010) 328 ITR 477 (SC). 21. For the above reasons, we quash the impugned notice issued by the first respondent under Section 148 of the Act for the assessment year 2006-07 and also the reassessment order passed under Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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