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TMI Blog2016 (8) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 04.02.2015 passed by the Income Tax Settlement Commission ['Settlement Commission' for short] under Section 245D(4) of the Income Tax Act, 1961 ['the Act' for short] concerning respondent-assessee for assessment years 2011-12 to 2013-14. 2. Brief facts are as under: Respondent No.1-assessee is a partnership firm. The Income Tax department conducted a survey under Section 133A of the Act at the project site of the firm on 11.01.2013 which continued till 12.01.2013. During the survey, statements of manager and one of the partners of the firm were recorded. Authorities also seized and impounded documents and other materials. 3. On 21.01.2014, the firm filed an application before the Settlement Commission for the assessment years 2011-12 to 2013-14 requesting for settlement of the case. On 29.01.2014, the Settlement Commission passed order under Section 245D(1) of the Act allowing the application to proceed further. On 12.03.2014, the Settlement Commission passed a further order under Section 245D(2C) of the Act. On 16.06.2014, the Commissioner of Income Tax filed a report under Rule 9 of the Income Tax Rules, 1962. On 19.01.2015, the petitioner filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in 326 ELT 493. 6. On the other hand, learned counsel Mr. J.P.Shah for the assessee opposed the petition contending that the assessee had made further disclosures at the suggestion of the Settlement Commission keeping in mind the spirit of settlement. This would not imply that the disclosures essentially made for the settlement were inaccurate. In this respect, he relied on the decision of learned Single Judge of Kerala High Court in case of Commissioner of Income Tax vs. Settlement Commission (IT WT) and anr reported in 369 ITR 606. 7. Counsel further submitted that the Settlement Commission has given sufficient reasons. The scope of judicial review in the writ petition against the order of Settlement Commission is extremely narrow. This Court would not act as an appellate forum. 8. Having thus heard learned counsel for the parties and having perused the documents on record, we may take up the question of disclosures made by the assessee. Chapter XIX-A introduced in the Act w.e.f. 01.04.1976 pertains to settlement of cases. An assessee, at any stage of the case relating to him could make an application for settlement as provided under sub section (1) of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 245C of the Act. 10. We have noticed that during the course of hearing of the settlement application, at the stage of Section 245D(4) of the Act, the assessee had made further offer in following terms: 1. Increasing the turnover (on-money) by an amount of ₹ 1.25 crores. 2. Apportionment of the enhanced turnover of ₹ 1.25 Crores in the same ratio as offered by the applicant in the SOF for various years. 3. Increasing the profit rate applied at the level of profit before allowance of interest and remuneration to partners to 15%. 11. As recorded by the Settlement Commission in the impugned order, the effect of this proposal translated into the following further declaration of income. A.Y Turn over as per books On money estimate d in the SOF Further increase in the on money Total Profit @ 15% before interest Remune ration (Col 5*15%) Profit before interest + remuner ation as already disclosed Further additional income (6-7) (1) (2) (3) (4) (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard voluntary for further offer by increasing the receipts by an amount of ₹ 1.25 crores and also by applying a higher net profit rate of 15% at the level of profit before allowance of interest and remuneration to partners. Keeping in view the extent of business operation of the applicant and the higher estimation of turnover, the revised net profit rate is considered quite reasonable and hence accepted. We are of the view that the order of additional income (including the further additional offer made during the course of this proceeding) is true and full. Hence, the issue, thus get settled. 14. It can thus be seen that the Settlement Commission permitted the assessee to revise its disclosure of income previously not disclosed during the course of hearing of the application under Section 245D (4) of the Act primarily on two grounds. Firstly, that such revision was offered keeping in mind the discussions during the course of hearing and in spirit of settlement. Secondly, that it was difficult to arrive at an exact undisclosed income from the impounded documents. We may recall, the initial disclosure of undisclosed income of the assessee alongwith the application for settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessarily to be with reference to the income disclosed in the application filed under that section. Revision of income would tantamount to revision of application, not contemplated in the scheme. We are conscious that in the said decision, the assessee had made multiple revised disclosures which were drastic in nature as compared to the initial disclosure made in the application for settlement. Nevertheless, the Supreme Court frowned upon any revision in disclosures initially made which would tantamount to the initial disclosure being not true and full disclosure. It was observed as under: 35. Before addressing the other issues, at the outset, we record our disapproval with the view of the High Court that it would not be proper to set aside the proceedings before the Settlement Commission even though it was convinced that the assessee had not made full and true disclosure of their income while making application under Section 245C of the Act. As stated above, in its earlier order dated 28th July, 2000 while declaring order dated 17th November, 1994, as ab initio void and setting aside order dated 29th January, 1999, the High Court had remitted the case to the Settlement Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g so regarded; to do so is not to prefer form to substance, or substance to form. It is the task of the court to ascertain the legal nature of any transactions to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions, intended to operate as such, it is that series or combination which may be regarded. 36. We are convinced that, in the instant case, the disclosure of ₹ 11.41 crores as additional undisclosed income in the revised annexure, filed on 19th September, 1994 alone was sufficient to establish that the application made by the assessee on 30th September, 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. 16. In case of Commissioner of Income Tax vs. Settlement Commission (IT WT) and anr, the learned Single Judge of Kerala High Court was of the opinion that in every case, where the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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