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TMI Blog2015 (5) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... f disclosure. Thus, the disclosure is not termed to be untrue and incomplete. What is held is whether the disclosure as made is adequate and complete would require detailed examination. A disclosure is termed as true and full but a difference in the perception of the Assessee and the Revenue has been noted. Equally, the Commission did not ignore the reports of the Commissioner as complained. There is a reference to it and the contentions of the Revenue qua them in the order dated 10th May, 2013. Thus, all statutory requirements and conditions are complied with. The admission of the Assessee's application for settlement causes no prejudice to the Revenue nor does it conclude the matter in favour of Respondent No. 2. The dissenting Member, however, concludes that the application is not maintainable for all three assessment years, but at the same time, finds force in the argument of the Commissioner that without the statement of the two bank accounts, it is not possible for the Commission to quantify the additional income as it has a direct bearing on the cash deposits made by the Assessee in the bank accounts. His contrary reasoning in para 7 of the order at pages 86 and 87 has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he meaning of the then Bombay Sales Tax Act, 1959/Central Sales Tax Act, 1956/Maharashtra Value Added Tax Act, 2002. Thus, no transaction of the nature referred to in these enactments was reported. The names of such suspicious, bogus dealers were put up on the website of the Maharashtra Sales Tax Department. 5) To verify the genuineness of purchase transactions from one such party, namely, M/s. Nutan Metals, information under section 133(6) of the IT Act was called for but the said notice was returned back. However, on 12th February, 2013, one Shri. Panchanmal Bokadia Proprietor of M/s. Nutan Metals made a statement before the Assessing Officer confirming that the said M/s. Nutan Metals issues bills for earning commission without giving delivery of goods. Accordingly, the Assessing Officer determined the highest credit balance at ₹ 28,09,288/as appearing on 10th December, 2009 in the ledger account of M/s. Nutan Metals as the peak credit and the same was thus treated as unexplained expenditure under section 69C of the IT Act and this amount was deemed to be income of the Assessee for the relevant assessment year 2010-11. 6) As per information received from the Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, filed a settlement application for assessment years 2010-11 to 2012-13 on 18th March, 2013 under section 245C of the IT Act. In this settlement application, additional income was declared as follows: Assessment Year 2010-11 1,05,25,216/ Assessment Year 2011-12 8,97,111/ Assessment Year 2012-13 41,72,337/ 10) The relevant facts, as received from the Director of Income Tax (Intelligence and Criminal Investigation) Mumbai etc., were brought to the notice of the Settlement Commission on 21st March, 2013 itself by a letter No. CIT15/ Rasiklal Co./2013-14/ 1688 dated 19th March, 2013. Copy of the assessment order for assessment year 2010-11 in the case of the Assessee firm was also before the Settlement Commission on 21st March, 2013 itself. Thus, before the date of hearing under section 245D(1) of the IT Act on 22nd March, 2013, all the relevant facts were before the Settlement Commission. The Commission was requested to take a considered view in the matter but all these were simply brushed aside and not even have been commented upon in the order of the Settlement Commission passed under section 245D(1) of the IT Act. The settlement application made under section 245 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts, the application as per settled law is liable to be thrown out by the Settlement Commission. 12) The Settlement Commission did not consider the arguments of the Petitioner and has brushed aside the case of the Petitioner. The order of the Settlement Commission dated 10th May, 2013 not declaring the application of the Assessee firm as invalid under section 245D (2C) of the IT Act is woefully silent on the objections raised by the Petitioner. The Settlement Commission, in its order passed under section 245D (2C), in its majority view, merely agreed with the Assessee firm by holding that the matter had not reached finality as yet and as such it was debatable whether the issues and the observation made by the Petitioner would apply in the facts and circumstances of the case of the Assessee firm. The dissenting note of the 3rd Member Shri. S. K. Mishra, which was in accordance with the law relating to settlement of disputes as envisaged under the IT Act, was erroneously shot down by the majority view of the Members of the Settlement Commission. It is in the above facts and circumstances that the Petitioner impugns the orders passed by the Settlement Commission. 13) Mr. Chhot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and loss account with adequate supporting evidence and by establishing the genuineness of the purchases, then, it is apparent that the adverse inference drawn must be sustained. The Settlement Commission failed to notice that if the Assessment has proceeded and resulted in an assessment order, then, the application for settlement and made to the Commission in terms of section 245C of the IT Act was not maintainable. There was no pending assessment for assessment year 2010-11, as the assessment order was already issued before the filing of the settlement application under section 245 of the IT Act. Further, notice under section 148 of the IT Act for assessment year 2011-12 was also served on the Assessee firm before the Assessee filed the application. The pendency of proceedings under the IT Act is a sine qua non for the admission of the application before the Commission. Thus, when a notice had been served and assessment order has been passed for two assessment years referred above, the Settlement Commission had no jurisdiction to accept the application. Mr. Chhotaray criticised the approach of the Commission and submitted that the Commission should have not accepted the stand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d making sales to the Assessee and that all this was known to the Department was also hidden by Respondent No. 2 from the Settlement Commission. This entire material was brought before the Settlement Commission together with supporting documents. There is also a copy of the assessment order, wherein the partner of Respondent No. 2/Assessee's admission was recorded on 1st February, 2013. This was also not in the application filed before the Settlement Commission. It is apparent from the procedure followed that an application before the Commission is in two parts. One is open and the other is confidential. The submissions of Mr.Chhotaray pertain to the open part of this application and which, according to him, is silent on the aforestated material facts. If the application was not truthful and complete, then, the Commission was not obliged to entertain it is the submission of Mr. Chhotaray. 15) In the written arguments tendered by Mr. Chhotaray, it is submitted that in the report under section 245D(2B) of the Commissioner to the Settlement Commission, the Commissioner had also highlighted that the Assessee had not made a full and true disclosure of its income in the settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. 2 (1993) 203 ITR 848 in the case of Rasik Ramji Kamani vs. S. K. Tripathi and Others. 3 (1994) 206 ITR 443 (SC) in the case of Commissioner of Income Tax vs. Express Newspapers Ltd. 4 (1999) 236 ITR 581 (Madras) in the case of V. M. Shaik Mohammed Rowther vs. Settlement Commission (IT WT) and Ors 5 (2001) 252 ITR 1 (SC) in the case of Commissioner of Income Tax vs. Anjum M. H. Ghaswala and Ors. 6 Order in Writ Petition No. 3990 of 2013 dated 13th June, 2013 passed by a Division Bench of this Court in the case of Commissioner of Income Tax (Central), Pune vs. Income Tax Settlement Commission (ITSC), Additional Bench, Mumbai. 19) On the other hand, Mr. Mistri learned Senior Counsel appearing for the original Applicant/Respondent No. 2 Assessee submits that the Writ Petition has no merit and must be dismissed. This Court cannot substitute its views with that of the Settlement Commission unless it concludes that the order of the Settlement Commission is vitiated by arbitrariness, perversity and malafides. The Settlement Commission is wholly empowered to entertain and admit the application. While admitting and entertaining it, the Commission is not obliged to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the Settlement Commission has erred in not noticing the fact that the assessment order is already passed and served on the Assessee. Secondly, the disclosure as made is not enough and in law for enabling the Settlement Commission to entertain the application/admit it. In the present case, Respondent No. 2 did not include the bank statements which formed the basis and other crucial documents in order to arrive at a true and full disclosure of income. The candid admission of the Respondent No. 2 that the bank statements were handed over to the Commission only on 25th March, 2013 confirms that the settlement application was not complete at the time of filing as vital documents were not incorporated therein. 21) Mr. Mistry has relied upon para 7 of the affidavit in reply to submit that there is no merit in the contentions of the Petitioner. It is pointed out that between 4th February, 2013 and 15th March, 2013, Respondent No. 2 has paid income tax in the sum of ₹ 66,28,053/. The breakup of the same is given in para 7, at page 94 of the paper book. It is specifically stated that till 15th March, 2013, no notice was received by Respondent No. 2 for either of the three asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Chhotaray himself has relied upon a Judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Anjum M. H. Ghaswala and Ors. reported in (2001) 252 ITR 1. The Constitution Bench of the Hon'ble Supreme Court in this case has analysed the entire chapter and held as under:Page ..... It is no doubt true that the terminology settlement has a very wide dictionary meaning and in the absence of a statutory definition generally the word settlement in subsection (4) of section 245D would give the Commission sufficient power to arrive at a settlement which it deems fit, but when the statute qualifies such expression like settlement with mandatory words like in accordance with the provisions of this Act the width of the term settlement becomes subject to the mandate found in that section, which would mean that while a Commission has sufficient elbow room in assessing the income of the applicant under section 245D(4) it cannot make any order with a term of the settlement which would be in conflict with the mandatory provisions of the section like in the quantum and payment of tax and/or interest. In this view of the matter, we are of the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral to the actual matter, which the inferior Tribunal has to try and determine. Whether it exists or not is logically and in sequence prior to the determination of the actual question which the inferior Tribunal, has to try. In such a case, in certiorari proceedings the court can enquire into the correctness of the decision of the inferior Tribunal as to the collateral fact and may reverse that decision if it appears to it on material before it to be erroneous. The certiorari jurisdiction can also be exercised if conclusions are perverse and, therefore, suffer from patent error on the face of the record. With the aforesaid principles in mind, if we turn to the scheme of Chapter XIXA of the Act then it would be clear that the said Chapter was inserted by the Taxation Law (amendment) Act, 1975, with effect from April 1, 1976. Provisions more or less similar to it contained in subsections (1A) to (1D) of section 34 of the Indian Income-tax Act, 1922, were introduced in 1954. The provisions of Chapter XIXA were, however, qualitatively different and more elaborate than the said provisions in the 1922 Act. The said Chapter thereafter went through a number of changes from the date of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs for assessment or reassessment for any of the assessment years referred to in clause (b) of subsection (1) of section 153A or clause (b) of subsection (1) of section 153B in case of a person referred to in section 153A or section 153C have been initiated, the additional amount of income tax payable on the income disclosed in the application exceeds fifty lakh rupees, and in a case where sub-clauses (A) and (B) of clause (ia) of the proviso is attracted or where clause (ii) of the proviso is attracted. Upon receipt of this application, the Commission has to deal with it in terms of the procedure set out in section 245D of the IT Act. That section has various subsections, but we are concerned with subsections (2A), (2B), (2C) and (2D). These subsections read as under: ( 2A)Where an application was made under section 245C before the 1st day of June, 2007, but an order under the provisions of subsection (1) of this section as they stood immediately before their amendment by the Finance Act, 2007, has not been made before the 1st day of June, 2007, such application shall be deemed to have been allowed to be proceeded with if the additional tax on the income disclosed in such app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 29) We are mindful of the fact that the Settlement Commission has been set up with a laudable and avowed object. That is to promote the settlement. It is not as suggested by Mr. Chhotaray to confer a right in any tax payer to be dishonest. We are further mindful of the fact that section 245C of the Act is meant for those Assessees who seek to disclose income not disclosed before the Assessing Officer including the manner in which such income has been derived, as the Hon'ble Supreme Court held in the case of Commissioner of Incometax vs. Express Newspapers Ltd. reported in (1994) 206 ITR 443 that Chapter XIXA is a part of the Income Tax Act and must be construed consistent with the overall scheme and object. Thus, it is to enable those Assessees who want to disclose income not disclosed till then together with the manner in which the same income is derived and the provisions are not meant for such Assessees who come after the event or who are guilty of a fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18th March, 2013, it cannot be said to have been made in terms of the provisions relating to the admission of the application, because it is not served on the Applicant. Thus, reliance was placed on the definition of the term 'case' as set out in section 245A(b) of the IT Act. Thus, it was asserted that proceedings for assessment under the Act in respect of the assessment years in question are pending. Para 3 of the impugned order and passed by the majority reads as under: We have considered the above argument of the AR. We find that the assessment order is signed on 18.03.2013 and has been dispatched by post to the applicant on the same date in the morning. However, it has been returned unserved by the postal authorities to the department. On the perusal of the envelope containing the assessment order it has also been noticed that the service was refused on 19.03.2013 as well as on 20.03.2013. From the above facts it is clear that although the dispatch of the assessment order has been done on 18.03.2013 (the date on which assessment order was passed), the service to the applicant was not made by 18.03.2013. If the refusal is to be accepted as service then the earliest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext will have to be read as 'served'. Therefore, for assessment year 2011-12 as well, the Commission held that the proceedings are pending. For assessment year 2012-13, the return of income was filed on 25th September, 2012, but no notice under section 143(2) has been issued. However, a notice under section 148 of the IT Act dated 15th March, 2013 has been served on the Assessee on 18th March, 2013, which is the date of filing the application before the Commission. Even with regard thereto, the Assessee's representative argued that there could not have been any reassessment proceedings where the time limit to issue notice under section 143(2) still exists and assessment is not barred by limitation. However, for our purpose, we need not dwell on this aspect in further details, as we find that the thrust of Mr. Chhotaray's submissions is that even the member who had given dissenting note has held that the application submitted under section 245C(1) for assessment years 2010-11 and 2011-12 is not maintainable and the same is treated as inadmissible but for the assessment year 2012-13, there is a inconsistent and contradictory finding by the dissenting Member. In par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the cases of K. Narasimhiah vs. H. C. Singri Gowds and Ors. Reported in AIR 1966 SC 330, R. K. Upadhyaya vs. Shanabhai P. Patel reported in AIR 1987 SC 1378, and V. Raja Kumari vs. P. Subbarama Naidu and Anr. reported in AIR 2005 SC 109. 33) Thus, we find that the Commission was not inclined to refuse the application or not entertain it or admit it only on this ground. 34) Once the second Respondent/Assessee has pointed out the course of events and date wise in para 7 of the affidavit in reply, to which we do not find any rejoinder, then, even qua assessment year 2011-12, the proceedings can be said to be pending. It is pointed out as to how the notice under section 148 and dated 15th March, 2013 is said to have been issued and served on the second Respondent on 18th March, 2013, but reliance is placed on the word 'issued' and thereafter to construe it as 'served'. There is a considerable debate about this and once the dissenting Member also has found that the application for settlement is partially admissible, then, all the more we are not inclined to interfere with the majority view. The majority view as is found to be recorded and accepting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied by the Sales Tax Department as suspicious. Their names have been published on the website of the Sales Tax Department and one of the alleged vendor stated that he had not sold any material to the second Respondent but lent only his name for the commission. Mr.Chhotaray heavily relied upon the Assessing Officer's observations and findings in the assessment order. Though the Assessee/Respondent No. 2 before us has made a statement to the contrary, yet, Mr. Chhotaray submits that the Settlement Commission was apprised of bogus purchases by two communications of the Commissioner and in that regard he relies upon Annexures 'G' and 'I' of the paper book. The Settlement Commission has completely ignored, according to Mr. Chhotaray, the reports and these communications. If it was so aware, then, the view recorded and reproduced as above is perverse. Mr. Chhotaray relies upon the opinion of the dissenting Member and which is to be found at pages 82 to 88 of the paper book. Thus, two dissenting opinions are relied upon. When we referred as above and concluded that there is no opinion contrary to the majority recorded, we were referring to the dissenting note at pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, this contradiction in the opinion of the Technical Member is enough to reject the submissions of Mr. Chhotaray. 40) We are not concerned in this case with the merits of the disclosures. We find that once the majority holds that the conditions regarding threshold limits for the quantum of tax for additional income, payment of tax and interest thereupon and pendency of proceedings all are fulfilled, then, the application was not liable to be rejected on any technical ground. The majority has taken care while observing that the disclosure of additional income at the stage at which the application was brought before it appears to be prima facie full and true. However, this aspect would require detailed examination in the subsequent proceedings and is left open. Thus, the Commission was not required to give a definite and conclusive finding at the threshold. Suffice it to hold that once it has come to the above conclusion, then, we are not required to go any further. We clarify that all observations by the majority, the dissenting Member and equally by us are tentative and prima facie. That would not prevent the Commission from dealing with the application in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld prejudice the case of both sides and it is even otherwise impermissible in our limited jurisdiction. We do not decide disputed questions of fact nor we substitute ourselves as the Settlement Commission. For, both courses are not permissible in law and to be carried out in our limited jurisdiction. In these circumstances, we have no hesitation in rejecting the contentions of Mr. Chhotaray on the third aspect of the matter. 43) The case law relied upon by Mr. Chhotaray now needs to be noticed. Mr. Chhotaray's heavy reliance is on the judgment of a Division Bench of this Court. In the case of Commissioner of Income Tax (Central), Pune vs. Income Tax Settlement Commission (ITSC), Additional Bench, Mumbai in Writ Petition No. 3900 of 2013. There, the second Respondent filed an application on 17th September, 2011 before the Settlement Commission for five assessment years and disclosed an additional income of ₹ 21.27 crores. The Commission passed an initial order on 27th September, 2012 under section 245D(1) of the IT Act allowing the application to be proceeded with and thereafter the Commissioner was called upon to furnish a report, inter alia, on the validity of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission has recorded distinct conclusions on this aspect. It noted that there is a difference in perception on the requirement of true and full disclosure of income. It does not wish to express a final opinion on the adequacy of disclosure. Thus, the disclosure is not termed to be untrue and incomplete. What is held is whether the disclosure as made is adequate and complete would require detailed examination. A disclosure is termed as true and full but a difference in the perception of the Assessee and the Revenue has been noted. Equally, the Commission did not ignore the reports of the Commissioner as complained. There is a reference to it and the contentions of the Revenue qua them in the order dated 10th May, 2013. Thus, all statutory requirements and conditions are complied with. The admission of the Assessee's application for settlement causes no prejudice to the Revenue nor does it conclude the matter in favour of Respondent No. 2. The dissenting Member, however, concludes that the application is not maintainable for all three assessment years, but at the same time, finds force in the argument of the Commissioner that without the statement of the two bank accounts, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission to be honest and truthful. We do not find how mere reliance on these observations of the Division Bench would assist Mr. Chhotaray. Equally, the Madras High Court Judgment heavily relied upon by Mr. Chhotaray in the case of V. M. Shaik Mohammed Rowther vs. Settlement Commission (IT WT) and Ors. reported in (1999) 236 ITR 581 (Madras) reveals that there the Assessee assailed the order of the Settlement Commission in rejecting the order of the settlement. The Assessee's failure to make full and true disclosure being patent, it was not necessary for the Commission to proceed with the further consideration of the application only to pass an order of rejection at the end of such further proceedings. This view again has been reached in the backdrop of the peculiar facts. That is how the Commission's order was upheld and the Assessee/Petitioner before the Madras High Court was termed as dishonest. 47) None of these Judgments can be of any assistance to Mr.Chhotaray. In the view that we have taken, it is not necessary to make any reference to the Judgments cited by Mr. Mistri or other Judgments outlining the ambit and scope of the powers of the Settlement Commission. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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