9911796707
TMI Blog2014 (12) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... an individual under the provisions of the Income-Tax Act, 1961 (hereinafter referred to as "the Act"). Pursuant to a search carried out on 12.12.1995 under section 132(1) of the Act at the residential premises of the petitioner, a notice under section 158BC of the Act came to be served upon the petitioner on 15.4.1996 directing him to file return of income for the block period 1.4.1985 to 12.12.1995. In response to the notice, the petitioner filed return of income on 17.10.1996. In the meanwhile, the petitioner filed a settlement application under section 245C of the Act on 14.10.1996 declaring undisclosed income of Rs. 20 lakhs. Subsequently, by a letter dated 27.12.1996, the petitioner revised the undisclosed income by substituting a lesser income of Rs. 5 lakhs in place of the earlier declared income of Rs. 20 lakhs which was received by the Commission on 30th December, 1996. In the meanwhile, the Assessing Officer proceeded further with the block assessment and by an order dated 22.8.1997 made under section 158BC of the Act assessed the total income of the petitioner at Rs. 4,27,341/- and determined the tax payable at 60% thereof at Rs. 2,56,20,204/-. By way of abundant cautio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s case already stood admitted by the Commission, the petitioner addressed a letter dated 12.1.2001 to the Tribunal pointing out that since the Settlement Commission had already admitted its case, the appeal may be adjourned. When the matter came up for hearing on 23.1.2001, the petitioner withdrew the appeal in the light of the fact that the matter was pending before the Commission after admission of the application. 4. Later on, the petitioner also made a submission dated 20.2.2008 to the Commission stating that the tax due under section 245D(1) of the Act was Rs. 3,00,000/- and in view of the fact that the department had seized the cash of Rs. 8,42,500/-, the same stood fully paid in time. Even thereafter, there was no communication to the petitioner either from the Assessing Officer or from the office of the Settlement Commission regarding non-payment or short payment of tax payable under section 245D(2A) of the Act. Eventually, the petitioner received a notice of hearing under section 245D(2D) read with section 245HA(1)(ii) of the Act fixing the hearing on 16.9.2013, which came to be adjourned to 25.11.2013. 5. At the time of the hearing before the Settlement Commission, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the amount of Rs. 3,00,000/- payable under the order of the Commission against the amount seized by the Department as requested by the petitioner. It was pointed out that in the order under section 245D(1) of the Act, the Commission has specifically observed that if the petitioner does not pay the additional amount of income tax within the time specified in sub-section (2A) of section 245D of the Act, the amount of income tax remaining unpaid together with interest shall be recovered by the Assessing Officer in accordance with section 245D (2D) of the Act, to submit that despite the fact that the order of the Settlement Commission was made on 11th September, 1999, no steps were taken by the Assessing Officer under section 245D(2D) of the Act and as a result, the petitioner was under a bona fide impression that his request for adjusting the amount of tax payable under the order under section 245D(1) against the amount seized by the department had been accepted. That it was only after the notice came to be issued by the Commission in the year 2013, that the petitioner came to know that the Department had not adjusted the amount of tax payable under the said order against the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the respondent, invited the attention of the court to the provisions of Chapter XIXA of the Act which make provision for"Settlement of Cases". Referring to the provisions of section 245C of the Act, it was submitted that the same provide for the assessee making an application in the prescribed form containing a full and true disclosure of the 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 to have the case settled. It was pointed out that under sub-section (1) of section 245D of the Act, the Commission may either by an order in writing reject the application or allow the application to be proceeded with. Under sub-section (2D) of section 245D of the Act, where an application was made under sub-section (1) of section 245C before the first day of June, 2007 and an order under the provisions of sub-section (1) of that section, as they stood immediately before the amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order made under section 245D(1) of the Act were to be accepted, it is apparent that the petitioner had not deposited the additional tax payable on the disclosed amount together with the interest thereon, inasmuch as, the amount as computed by the petitioner is based upon the revised disclosure of Rs. 5 lakhs and not Rs. 20 lakhs. 7.2 It was further submitted that insofar as the cash seized by the Department during the course of search is concerned, before the order under section 245D(1) came to be made by the Commission on 10.9.1999, the block assessment order under section 158BC of the Act had been passed by the Assessing Officer on 22.8.1997 computing the total undisclosed income for the block period at Rs. 4,27,00,341/- and the seized cash of Rs. 8.42,500/- was adjusted on 29.9.1997 against the demand raised. The petitioner, after the order under section 245D(1) of the Act came to be made on 10.9.1999, had not paid any other amount pursuant to his disclosure of Rs. 20 lakhs declared in the settlement application dated 22.10.1996. It was submitted that in view of the noncompliance of the order made under section 245D(1) of the Act, the Commission was justified in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that it was only in the light of the provisions of section 245M, that an appeal could be restored to the Tribunal. However, in view of the deletion of the said provision from the statute book, it is no longer permissible for this court to restore the appeal to the Tribunal. 8. In support of their submissions, both the learned counsel for the respective parties had placed reliance on various decisions, reference to which shall be made at an appropriate stage. 9. From the facts and contentions noted hereinabove, two questions that arise for consideration are; firstly, as to whether the Commission was justified in holding that the proceedings before it abate in view of the non-deposit of the amount of additional tax together with interest as directed by it by the order under section 245D(D1) of the Act. If the answer to the first question is in the affirmative, the next question that would arise for consideration is as to whether the petitioner is entitled to the alternate relief prayed for in the petition, namely, for restoration of the appeal filed by it before the Tribunal against the order made by the Assessing Officer under section 158BC of the Act. 10. From the facts noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings had been accepted. It was only at the stage when the application under section 245C of the Act came up for hearing that the petitioner came to know that the statement made by him had not been accepted. At this stage, the petitioner also expressed willingness before the Commission to pay the entire amount of additional tax, however, the Commission declined to accept the proposal of the petitioner and passed the impugned order under section 245HA(1)(ii) of the Act. 11. Before adverting to the merits of the impugned order, it may be necessary to consider as to whether the petitioner can be said to have complied with the order made by the Commission under section 245D(1) of the Act. As noticed hereinabove, the petitioner, in the application under section 245C of the Act, had declared undisclosed income of Rs. 20 lakhs. However, subsequently, the petitioner filed a revised statement declaring the undisclosed amount at Rs. 5 lakhs instead of Rs. 20 lakhs. In this regard, it may be germane to refer to the decision of the Supreme Court in the case of Ajmera Housing Corporation & Anr. v. Commissioner of Income Tax, (2010) 326 ITR 642 (SC) =, wherein the court has held that disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner that the amount of cash seized by the department at the time of the search was required to be adjusted against the additional tax payable pursuant to the order under section 245D(1) were to be accepted, the amount of Rs. 8,42,500/- would not form 60% of Rs. 20 lakhs and, hence, it is apparent that the petitioner has not duly complied with the order made by the Commission under section 245D(1) of the Act. Besides, from the facts as emerging from the record, it is apparent that before the order under section 245D(1) of the Act came to be made by the Commission, the Assessing Officer had already passed the order under section 158BC of the Act and had adjusted the seized amount against the tax payable under the said order. Therefore, even otherwise, no amount remained with the Assessing Officer for adjusting the same against the additional tax payable by the petitioner pursuant to the order under section 245D(1) of the Act. In any eventuality, the petitioner has not complied with the order dated 10.9.1999 made by the Commission directing the petitioner to pay the additional amount of income tax payable on the income disclosed in the application within the time limit sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded with, has been passed before the 1st day of June, 2007, but an order under the provisions of sub-section (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007." In the light of the provisions of sub-section (2D) of section 245D of the Act, it is not permissible for the Settlement Commission to proceed with an application made under section 245C(1) of the Act on which an order under the provisions of sub-section (1) thereof had been passed before 1.6.2007, unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before 21.7.2007. Thus, in case where an order under sub-section (1) of section 245C of the Act has been made on an application made under that sub-section before 1.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C had been made. (3) For the purposes of sub-section (2), the Assessing Officer, or, as the case may be, other income tax authority, shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it, as if such material, information, inquiry and evidence had been produced before the Assessing Officer or other income tax authority or held or recorded by him in the course of the proceedings before him. (4) For the purposes of the time-limit under sections 149, 153, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or 244 or, as the case may be, Section 244A, for making the assessment or reassessment under sub-section (2), the period commencing on and from the date of the application to the Settlement Commission under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BC of the Act and, hence, the petitioner had preferred an appeal against the said order before the Tribunal. Subsequently, the Commission, by the order dated 10.9.1999, permitted the application to be proceeded with under section 245D(1) of the Act. In the light of the fact that the Commission had allowed the application made by the petitioner to be proceeded with, the Tribunal insisted upon withdrawal of the appeal preferred by the petitioner against the order under section 158BC of the Act; and by an order dated 23.1.2001, permitted the petitioner to withdraw the appeal as the application under section 245C had been admitted by the Commission and dismissed the appeal for non-prosecution. Subsequently, by virtue of the order passed under section 245HA of the Act, the proceedings before the Commission stand abated and, hence, the petitioner has prayed for the alternative relief of restoration of the appeal before the Tribunal. 19. Sub-section (2) of section 245HA of the Act provides that where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income tax authority before whom the proceeding at the time of making the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 245HA of the Act also does not have any effect on the order made by the Assessing Officer which continues to operate. Under the circumstances, despite the fact that the Commission in the operative part of the impugned order has observed that the Assessing Officer shall now dispose of the case in accordance with the provisions of sub-sections (2) (3) and (4) of section 245HA of the Act, the order under section 158BC of the Act would still subsist as there is no automatic setting aside of such order. Consequently, unless the appeal preferred by the petitioner before the Tribunal is restored, the petitioner would be rendered remediless. 22. In the light of the fact that the petitioner had challenged the order made under section 158BC of the Act before the Tribunal, which proceedings came to be withdrawn in view of the fact that the Commission had allowed the application made by the petitioner under section 245C of the Act to be proceeded with, if the appeal is not restored to the file of the Tribunal, the same would cause immense prejudice to the petitioner, inasmuch as, the assessment order made under section 158BC of the Act would attain finality and would be binding upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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