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TMI Blog2015 (9) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. It needs little emphasis that section 245C(1) of the Act mandates 'full and true' disclosure of the particulars of undisclosed income and 'the manner' in which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this aspect, it will not have the jurisdiction to pass any order on the manner covered by the application. Case of Ajmera Housing (2010 (8) TMI 35 - SUPREME COURT OF INDIA) differentiated. Consequently, the same in the peculiar facts of the present case, cannot be applied. Therefore we do not agree with the submission of the Petitioner that there has been a failure to disclose truly and fully undisclosed income in the settlement application in the peculiar facts of the Petitioner’s case. So far as the other objection is concerned viz failure to disclose the manner in which this income has been derived, we find that the application for settlement sufficiently explains the source of the income being declared. The application mentions how the additional income which is being disclosed as been derived i.e. on application of the ALP in respect of exports made to its Associated Enterprise viz holding company. We do not see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ias, fraud and malice which, of course, constitute a separate and independent category. Reference in this behalf may be had to the decision of this Court in Sri Ram Durga Prasad v. Settlement Commission, 176 ITR 169: (AIR 1989 SC 1038), which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji, J., speaking for the Bench comprising himself and S. R. Pandian, J observed that in such a case this Court is concerned with the legality of procedure followed and not with the validity of the order. The learned Judge added judicial review is concerned not with the decision but with the decisionmaking process. Reliance was placed upon the decision of the House of Lords in Chief Constable of N. W. Police v. Evans, (1982) 1 WLR 1155. Thus, the appellant power under Article 136 was equated to power of judicial review, where the appeal is directed against the orders of the Settlement Commission. For all the above reasons, we are of the opinion that the only ground upon which this Court can interfere in these appeals is that the order of the commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10A of the Act in respect of its profits arising from its STPI unit i.e. 95% of its entire profits. The business model of the Respondent No.2 is to provide its IT services to its holding company at cost + 10%. The capital goods i.e. equipments were purchased by the Respondent through its holding company. This has been illustrated by the parties with a figure of ₹ 100/- ( for ease of understanding) as the cost price of the equipments to the Respondent No.2. At this figure of ₹ 100/-, the equipment was recorded in the Respondent No.2 s books and also depreciation taken, was on the above value. The sales were reflected at cost i.e. ₹ 100/- + 10%. However, at the instance of the Customs department, the Respondent No.2 enhanced the value of equipments imported from 2006 onwards to ₹ 225/- i.e the Customs valuation for import and also recorded it at Customs value in its Books. This resulted not only in depreciation being taken at a higher figure but also the sales being recorded at ₹ 225/- + 10% i.e. higher than the actual/real transaction value between the Respondent No. 2 and its holding company; (b) Consequent to a search operation on 30 July 2009 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of jurisdiction that is the Commission had no jurisdiction to entertain the application for settlement made by the Respondent-Assessee. This for the reason that the Respondent-Assessee did not satisfy the two independent conditions precedent as provided under Section 245C(1) of the Act for invoking the jurisdiction of the Commission as under: (a) making full and true disclosure of its income in its application; and (b) the manner in which this income has been derived. This failure to make full and true disclosure, according to the Petitioner is evident from the fact that during the course of the hearing of the application under Section 245D(4) of the Act, the RespondentAssesssee had revised/ increased the income offered for settlement by offering ₹ 59.11 Crores and ₹ 3 Crores. This itself, according to the petitioner would warrant the dismissal of the application by the Respondent No.2 in view of the decision of the Apex Court in Ajmera Housing Corporation v. CIT 320 ITR 642. 5. The decision in Ajmera Housing (supra) has to be considered in the context of the facts arising therein. The bare facts, there were: (a) On 30 September 1993, Ajmera (Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke full and true disclosure of the income made by the Applicant in Ajmera Housing (supra) to the Settlement Commission. Thus, revision of the income offered for tax therein was suomotu. This was after the hearing had concluded and orders were awaited. Normally, the income offered for tax in an application for settlement would bind the parties concerned and any revision thereof, would prima facie, be evidence of the original application for settlement not declaring the full income in its original application. However, this is not cast in stone and will depend upon the factual context from case to case to determine whether there was any failure to disclose fully and truly the income. This is particularly so where the correct determination of income is dependant upon the application of the appropriate Transfer Pricing Rule which to an extent is subjective, as in this case. In such a case, if an additional income is declared during the course of the hearing in view of what emerges during debate before the Commission, it cannot be said that the original application did not make true and full disclosure of its undisclosed income. It is for the Commission to consider on the basis of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disclosure in its application is established, according to the petitioner, by the fact that an additional income of ₹ 150 Crores was declared before the Commission on 10 September 2007 i.e. over and above, the income declared in their application dated 5 March 2007. This additional disclosure of income on the part of the respondent itself, without anything more is a tacit admission that the original application filed on 5 March 2007 did not make a full and true disclosure of the respondents income. According to the petitioner, the issue stands concluded by the decision of the Apex Court in Ajmera Housing (supra) wherein it has been held that the Chapter XIXA of the Act does not contemplate the revision of income as disclosed in the original application. It is submitted that such revision of income amounts to withdrawing of original application and making a fresh application. The Apex Court in the matter of Ajmera Housing (supra) has observed as under: A bare reading of the provision would reveal that besides such other particulars, as may be prescribed, in an application for settlement, the assessee is required to disclose: (i) a full and true disclosure of the income w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Crores as additional undisclosed income in the revised annexure, filed on September 9, 1994 alone was sufficient to establish that the application made by the assessee on September 30, 1993 under section 245C(1) of the Act could not be entertained as it did not contain a 'true and full' disclosure of their undisclosed income and 'the manner' in which such income had been derived. However, we say nothing more on this aspect of the matter as the Commissioner, for reasons best known to him, has chosen not to challenge this part of the impugned order. 9. It would, therefore be noted that the aforesaid issue of whether or not by virtue of disclosure of additional income, there was a failure to make a true and full disclosure was not an issue for consideration before the Apex Court. This is so as it was not a subject matter of challenge by the revenue either before the High Court or before the Supreme Court. In view of the above, the above observations of the Apex Court in the Ajmera Housing (supra), cannot be said to be a ratiodecidendi of the decision. It is trite law that a decision of a Court is not to be read as a statutory provision. The observation of Court mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant is willing to offer, the disputable issues regarding the taxability of real income and book profits requires settlement. In any event on consideration of the submissions made before it the impugned order at Para 47.3 records its satisfaction in respect of all the three prerequisites for grant of immunity from penalty and prosecution. Thus the immunity from penalty and prosecution was granted only on satisfaction of the jurisdictional requirements. This satisfaction has not been shown to be perverse. 13. The last grievance of the petitioner is that the impugned order is bad on merits. It is submitted that concepts like real income have been invoked when the same has no application. In support reliance is placed upon the decision of the Apex Court in State Bank of Travancore v. CIT 158 ITR 102 and CIT v. Shiv Prakash Janak Raj Co. 222 ITR 583 [relies upon State Bank of Travancore (supra)]. The decision of the Apex Court in State Bank of Travancore (supra) was reversed to the extent it held that accrued interest is real income in UCO Bank v. CIT 237 ITR 889. Be that as it may, the Counsel for the Revenue places reliance upon the propositions set out by the Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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