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TMI Blog2015 (2) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... with his counsel. None for the respondent No.2. ORDER Per P.K. JAISWAL, J : - Heard on I.A.No.378/2015, an application for vacating the interim order dated 9.1.2015. 2. The income tax department has filed the present writ petition against the order dated 18.8.2014 passed by the respondent no.2 settlement commission under Section 245 (D(1) of the Income Tax Act, 1961 and letter dated 24.9.2014 (Annexure P/9). 3. Brief facts of the case are that on 25.9.2007, a search and seizure operation was conducted by the investigating wing of the Income Tax Department along with the cases of Bhatia Group. The search and seizure operation was carried out on the respondent No.1 company at the business premises as well as the residential premises of the Directors of Company. Thereafter, the assessment of the relevant Assessment year from 2002 03 to 2006 07 had been completed under Section 153A/153C and assessment proceedings for the Assessment Years 2007 08 and 2008 09 is pending due to stay granted by the Apex Court in Petition (S) for Special Leave to Appeal (C) No (s).18937/2012. 4. During the course of the assessment proceedings the Assessing Officer made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 2.1 has clearly mentioned under the remark that assessment proceedings were stayed by Hon'ble Supreme Court and High Court of Madhya Pradesh from the Assessment Year 2007 08 to Assessment Year 2010 11. In para 6 of the said report it is also stated that the matter is 'subjudice' . The Commissioner of Income Tax I, Indore has requested through its report to Settlement Commissioner that proceeding may kindly be kept in-abeyance till the matters are decided by the Hon'ble Apex Court and High Court. On 18.12.2014 the Settlement Commission has sent a letter to the Commissioner Income Tax I, Indore with final opportunity to furnished the report of Rule 9 of SCP Rule 1997 on or before 12.1.2015. It is also stated by the Settlement Commission in its letter that please note that, in case no report is received in this case on or before 12.1.2015, the Commission shall proceed further without the report to initiate 245D(4) proceeding . The department being aggrieved by order dated 18.8.2014 and communication dated 24.9.2014 has prayed for quashment of the same. 13. On 9.1.2015 this court issued show cause notice to the respondent No.1 and also passed an interim or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders dated 14.1.2015. 16. In respect of pendency of two SLP's the learned counsel for the respondent company has made a statement at bar that an application for withdrawal was filed in the aforesaid Special Leave Petitions and thus applications were mentioned on 28.1.2015. The Hon'ble Supreme Court directed for listing the matter on 2.2.2015 before an appropriate Bench and as per instructions received from his client, the Hon'ble Supreme Court permitted the respondent No.1 to withdraw both the SLP's. It is also submitted that both the SLP (Petitions) were pending since 2012, but no objection was filed by the department nor they brought to the knowledge of the Hon'ble Suprme Court about the order dated 18.8.2014 and 24.9.2014. He has also drawn our attention to the report dated 18.9.2014 (Annexure P/8). Para 2.0, 2.1, 3,4,5 and 7 are relevant which reads as under :- 2.0 Validity of application for the relevant years: Search u/s. 132 of the I.T. Act 1961was conducted in the case of the above mentioned assessee group namely 'Bhatia Group' on 25.9.2007. Thereafter statutory notices were issued and served upon the assessee for previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2009-10 MP High Court vide WP No.3021/2013 passed interim order dt.7.3.13 directing the assessing officer not to proceed with the assessment proceedings pursuant to the order passed by the Ld. TPO. The relevant order of the Hon'ble High Court of M.P. dated 7.3.13 is enclosed as per annexure-C. 2010-11 143(3) As above Notice u/s.143(2) for the A.Y. 2010-11 issued on 29.8.2011 A.Y. 2010-11 MP High Court vide WP No.1516/2013 passed interim order dt.28.2.2014 directing the assessing officer not to proceed with the assessment proceedings and also observed that the assessment proceeding shall not be barred by limitation on account of pendency of the writ petition. The relevant order of the Hon'ble High Court of M.P. dated 28.2.2014 is enclosed as per annexureD. 2011-12 143(3) As above Notice u/s.143(2) for the A.Y. 2011-12 on 7.8.2012 Matter is pending before the Addl. Commissioner of Income Tax (TPO), Ahemedabad, which was referred to the TPO vide letter dated: 20.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-11 46,47,15,067 2008-09 2009-10 2009-10 2010-11 Addition on account of guarantee fees proposed on account of guarantee given by assessee company for AE. 2009-10 18,94,60,000 2010-11 14,56,92,234 2009-10 2010-11 In the assessment order TPO, has made the protective addition on account of transaction related to restructuring between two AE situated at Dubai Singapore. Protective 380,33,10,000/- 4.1 On the basis of written submission made by applicant before Hon'ble Settlement Commission it is gathered that disclosed various amounts in the relevant assessment years under different sources of income are as under :- A.Y. Additional Income Offered Transfer of COAs Payment of freght Purchased and sale of coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,79,366 3,35,73,333 90,00,000 2,00,00,000 18,93,19,340 The assesses has not shown the above additional incomes in the returns of income filed u/s 153A/143(3) 139 of the Act. The above additional incomes disclosed by the assessee with the Hon'ble Settlement Commission are totally new averments against the adjustment proposed by the TPO. 5.0 Adequacy of Taxes:- It is brought to your kind notice that; the order was poassed on the basis of Transfer Pricing Officer's report, because the only issued involved was in respect of Arms Length Price (ALP) value of international transactions carried out with its Associated Enterprises. Therefore comments on merits regarding adequacy of quantum of disclosed income before Hon'ble Settlement Commission may be called from TPO-I, Ahemedabad. Hence no comments are offered on this issue. 6.0. It is further requested that the Hon'ble Supreme Court and Hon'ble High Court of M.P. through their aforesaid orders have stayed the assessment proceedings in the case. As such, the matter is sub judice. Hence, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ightly proceeded in the matter vide letter dated 24.9.2014. The two writ petitions which were pending in the High Court and the two SLP's before the Apex Court matters have been now withdrawn by the respondent No.1 and at the time of withdrawal no objection was raised by the department. At this stage, it cannot be said that respondent No.1 has not made full and true disclosure as required under the provisions of the Act. 20. The Apex Court in the case of Commissioner of Income Tax v/s. K. Jayaprakash Narayanan, reported as (2009) 184 Taxmaan 85 (SC), the Supreme Court dismissed a similar prayer by passing the following order :- ( 2. ) THIS SLP is filed against the decision of the Settlement Commission admitting the application of the assessee under s. 245D of the IT Act, 1961. It is the case of the Department that the assessee had failed to make full and true disclosure in the first instance and that the said declaration made at a later date by way of second declaration cannot be the ground for admitting the application under s. 245D. Since this SLP is filed only against the order of the Settlement Commission admitting the application of the assessee under s. 245D, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 245D(4) of the said Act. It may very well be that the Settlement Commission, at that stage, may agree with the Revenue on the basis of the material on record and the report submitted by the Commissioner of Income-tax that the applications were not maintainable under Section 245C(1) of the said Act. In fact, the Settlement Commission may, at any stage till it passes a final order under Section 245D(4), examine the issues and if there is sufficient material on record, determine the question of full and true disclosure and the manner in which the undisclosed income was derived conclusively and, depending on such a decision, the applications may be thrown out or they may be proceeded with further. 24. We are of the view that the order of the Supreme Court in K. Jayaprakash Narayanan (supra) and the decision of the Division Bench of this Court in True Woods Pvt. Ltd. (supra) clinch the issue in favour of the respondents. As such, this Court ought not to interfere with the impugned orders. However, we need to examine the decision of the Supreme Court in the case of Ajmera Housing (supra) which has been strongly relied upon by the learned counsel for the petitioner. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and unexplained surplus, total of which is more than ₹ 14 crore, was not taken into consideration while passing the final order. Thirdly, the Settlement Commission has imposed token penalty of ₹ 50 lakhs while in its own assessment leviable penalty would be 562.87 (sic ₹ 562.87). In fact if the amounts, which were not taken into consideration while assessing the total undisclosed income, are also taken into consideration, the amount of leviable penalty may be much more. Taking into consideration the multiple disclosures and the fact that the respondents had failed to make true and full disclosure initially as well as at the time of second disclosure, we do not find any justifiable reasons to reduce or waive the amount of penalty so drastically. Taking into consideration all these circumstances, in our considered opinion, it will be in the interest of justice to set aside the final order passed by the Settlement Commission and to remand the matter back to the Settlement Commission for hearing parties afresh and to pass orders as per law. Facts and circumstances noted in respect of writ petition No. 2191 of 1999 are also relevant for the remaining writ peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bombay High Court in the case of Commissioner of Income Tax (Central) Pune v/s. Income Tax Settlement Commission (ITSC), 2013 (40) taxmann.com 201 (Bombay) which reads as under :- The Commissioner of Income Tax (Central), Pune has challenged an order passed by the Settlement Commission on 29 August 2013 under the provisions of sub-section (2C) of Section 245D of the Income Tax Act 1961. By the order which has been impugned, the Settlement Commission has held as follows : In the totality of facts available to us at present, we are satisfied about the true and full nature of the disclosure made. The manner of making undisclosed income, in the facts of the case, as stated, is on sales kept outside the books resulting in understatement to sales. Needless to say, as observed by the Hon'ble High Court in this very case, that if at a later stage of the proceedings, facts come to our knowledge showing suppression of full material facts or mis-statements thereof, the law will take its own course. 2. The Commission has accordingly held that the application filed by the Second Respondent is not an invalid application and should be allowed to be proceeded with further. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation is necessary is thus vested with the Settlement Commission. In the present case, from the compilation of correspondence which is placed on the record, it is clear that on 3 October 2013, the Commissioner of Income Tax (Central) Pune had addressed a communication to the Settlement Commission setting out that an enquiry under sub-section (3) of 245D was necessary in respect of certain specific issues. The grievance of the Petitioner, is that on 19 September 2013 at a hearing before the Commission it was indicated that the department would be heard on the issue relating to a Section 245D(3) enquiry on 7 October 2013, but as a matter of fact the Commission has not applied its mind to whether an enquiry under Section 245D(3) should be ordered. 5. The learned senior counsel appearing on behalf of the Second Respondent on the other had has submitted that the issue as to whether an enquiry under Section 245D(3) should be ordered by the Settlement Commission has not been finally concluded by the Settlement Commission, and during the course of the proceedings, the Settlement Commission would apply its mind to that aspect. As we have noted earlier, by a letter dated 3 October 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation has to be ordered by the Commissioner because sub-section (3) confers jurisdiction on the Commissioner to conduct the enquiry or the investigation, as the case may be. Equally, it is evident both from the language of sub-section (3) and the terms of subsection (4) that the Settlement Commission is not required in every case to cause an enquiry or investigation to be made under sub-section (3). That is evident by the use of the words if any in sub-section (4). Moreover, under sub- section (4) the Settlement Commission, besides considering the report, if any, of the Commissioner under subsection (2B) or sub-section (3) is empowered to examine such further evidence as may be placed before it or obtained by it. Evidence placed before the Commission would include evidence which may be produced either by the assessee or by the Commissioner. Evidence obtained by the Commission would include evidence which the Commission has obtained under its own authority. In that sense the powers of the Settlement Commission are wide. Finally, it may be necessary to note that under sub-section (4) the Settlement Commission has to pass an order in accordance with the Act as it think ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Commissioner of Income-tax, Vijaywada vs. Settlement Commission (IT WT), 2014 (49) taxmann.com 165 (Andhra Pradesh). Para 24 and 26 are relevant which reads as under :- 11. As a matter of fact, what all is required by the Settlement Commission at the stage of entertaining the application is whether a prima facie case is made out or not and in that context only subsequent amendments which have been brought in Sections 245C and 245D of the Act had dispensed with even issuing a preliminary notice to the Commissioner of Income Tax leaving it to the absolute discretion of the Settlement Commission to entertain a case or not for its consideration. The reasons for giving such discretion to the Commission cannot be lost sight particularly keeping in view of the objects of establishment of Settlement Commission and to settle the disputes between the taxpayer and the department in an amicable manner. As a matter of fact, the recent legislative efforts in bringing Section 268A of the Act and in issuing various circulars whereby restraining the department officials to file appeals and further appeals in all and sundry cases recognising futility of such exercise may be noticed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication must contained a full and true disclosure of the income of the assessee, which has not been disclosed before the assessing officer, the manner in which such income has been derived as required under 245(C) (1) of the Act. 26. His next submission is that before passing of order standing counsel of the department should he heard. He also drawn our attention to the news item Annexures P/1 and P/11 and submits that the disclosure made by the respondent No.1 was not full and true and thus, the learned authority has committed an error in accepting the application. In support of the aforesaid contention he placed reliance on the following cases CIT (Central) Calcutta v/s. B.N. Bhattachargee Anr., 118 ITR 461 (SC), CIT v/s. Anjum M.H. Ghaswala Ors., 252, ITR 1 (SC), CIT v/s. Express Newspapers Ltd, 1994 (206) 443 (SC), Ajmera Housing Corpn. v.s CIT, 2010 (193) Taxman 193 (SC), Kuldeep Industrial Corporation v. Income-tax Officer Ors., 223 ITR pg 840 (SC), Commissioner of Income Tax (Central) Pune v/s. Income Tax Settlement Commission (ITSC), 2013 (40) taxmann.com 201 (Bombay), Commissioner of Income-tax v/s. Godwin Steels P. Ltd, 2013 (353) ITR 353 (Delhi), Hassan Ali ..... X X X X Extracts X X X X X X X X Extracts X X X X
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