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TMI Blog2014 (2) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... h if it is shown in proceedings before the ITSC after being confronted with adverse reports, to which it had no answer – Relying upon Ajmera Housing Co-operation and another v. CIT [2010 (8) TMI 35 - SUPREME COURT OF INDIA] - the fact that the assessee kept revising its application for settlement by disclosing higher income in the revised applications established that it did not make a full and true disclosure of income which it did not disclose to the assessing authority - the assessee cannot be said to have “co-operated” in the proceedings before the ITSC - The assessee ought to have offered the entire amount being the bogus purchases of cement and steel - It was only at that stage, when cornered and when it was unable to rebut the evidence and the facts established by the evidence, that the assessee came forward with the additional income which when added in the settlement applications – thus, the assessee has failed to satisfy the twin conditions of Section 245H (1) and was, therefore, not entitled to the immunity. Power to review the order of ITSC – Held that:- The decision in R.B. Shreeram Durga Prasad v. Settlement Commission [1989 (1) TMI 4 - SUPREME Court] followed - Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Under section 245(1), the assessee may, at any stage of a case relating to him, make an application in such form and in such a manner as may be prescribed, and containing a 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, the additional amount of income tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission ............ and such an application shall be disposed of by the Settlement Commission in the manner provided in the Chapter. Section 245B(3) provides for appointment of members of the ITSC from among persons of integrity and outstanding ability, having special knowledge of, and experience in, problems relating to direct taxes and business accounts . The power to grant immunity from prosecution and penalty is granted by section 245H(1) and is circumscribed by two conditions as will be evident by the sub-section which is as under : Power of Settlement Commission to grant immunity from prosecution and penalty. 245H. (1) The Settlement Commission may, if it is satisfied that any person who made the application for settlem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4. In the course of the proceedings before the ITSC, a report was submitted by the CIT under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1999 on 24.9.2012. In this report the CIT sought a direction from the ITSC to conduct further enquiries and investigation as contemplated by sub-section (3) of section 245D and furnish a report. It would appear that the CIT in his letter dated 2.2.2012 had referred to certain enquiries made which revealed that the parties from whom the applicant had claimed to have made purchases of cement and steel were not trading in those goods at all; it was also pointed out that one Ashok Oberoi, the proprietor of all those concerns had stated on oath to this effect and had also admitted that they had issued bogus bills of steel, cement and TMT bars to the assessee without actually supplying those materials and that they had charged commission from the assessee at the rate of 10 to 15 paise per hundred rupees for issuing those bills. The report further pointed out that the address of the account holders mentioned in the bank statement of the five firms were found to be fictitious as also the names of the persons who introduced the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some cases the registration numbers were found to be of those vehicles registered with the transport authorities later than the relevant period in which they were claimed to have transported the goods. Some of the transport operators also stated, on cross verification with them, that they did not transport any material for the assessee. 8. When the ITSC took up the matter for hearing on 10.1.2013, the applicant was not able to controvert any finding recorded in the reports submitted by the CIT under section 245D(3). When it was asked by the ITSC to support its claim regarding transport of the goods, the assessee expressed its inability to do so on the ground that the matter was old and the records were not maintained. However, the assessee submitted certificates by a chartered engineer and a registered valuer in respect of some of the buildings constructed by it, on the basis of which it was argued that the cement and steel actually consumed in the construction was less than what was shown in the books of account by only 15% and therefore the additional income disclosed by it in the settlement application would cover such excess consumption. 9. After examining the above aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the income. Further, it is evident from the above discussion that the applicant has tried its best till end during the settlement proceedings also to justify its stand, however, the Ld. CIT has demonstrated and establishing that the applicant has claimed bogus expenditure of Rs.117.98 crores in its books of account as against admitted disallowance of Rs.39.58 in its SA. Hence, it can be concluded that the applicant has not offered Rs.78.45 crores voluntarily, however it has done so when it has no option except to do so. Thus, consequential disallowance of Rs.78.45 crores was made. 11. The revenue assails the majority opinion expressed by the ITSC on the ground that it is contrary to the parameters laid down in Section 245H(1). It is contended that the ITSC has taken a perverse view of the facts and the evidence brought on record and, therefore, it is permissible for this Court, in writ proceedings, to upstage the majority opinion granting immunity to the assessee from penalty and prosecution. 12. On behalf of the assessee it is submitted that the assessee has made a full and true disclosure of the income which it did not disclose before the assessing officer, in the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling valuation reports before the ITSC to show that the inflation of the expenses on purchase of cement and steel was only in the order of 15% of the actual consumption, which difference would be taken care by the offer of additional income of Rs.43.78 crores. 14. The aforesaid factual position shows that the assessee took a chance - sat on the fence, so to say - by not coming clean in the settlement application and not disclosing income which it did not disclose before the assessing officer - and when the CIT s reports exposed its conduct in the proceedings before the ITSC, it was advised by the ITSC, in a spirit of settlement to offer the entire amount of bogus purchase of Rs.117.98 crores, which it accepted. We fail to see any spirit of settlement; that spirit ought to have been exhibited by the assessee in the application filed before the ITSC, as the law requires, and it is not enough if it is shown in proceedings before the ITSC after being confronted with adverse reports, to which it had no answer. In Ajmera Housing Co-operation and another v. CIT, (2010) 326 ITR 642, the Supreme Court held that the fact that the assessee kept revising its application for settlement b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 245H (1) and was, therefore, not entitled to the immunity. The majority view expressed by the ITSC, with respect, goes contrary to the evidence on record and fails to take note of the contumacious conduct of the assessee despite an opportunity afforded by Chapter XIX-A of the Income Tax Act to errant assessees to come clean and turn a new leaf. The spirit of settlement was absolutely lacking; it may not be without justification to say that the assessee was indulging in abuse of a well-intentioned statutory provision. It is certainly open to the ITSC to grant immunity to an applicant from penalty and prosecution. This power, however, has to be exercised only in accordance with law i.e. on satisfaction of the conditions of Section 245H(1). We are constrained to observe that the majority view taken by the ITSC in the present case reflects a somewhat cavalier approach, perhaps driven by the misconception that granting of immunity from penalty and prosecution was ritualistic, once the assessee discloses the entire concealed income, ignoring the vital requirement that it is the stage at which such income is offered that is crucial and that the applicant cannot be permitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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