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TMI Blog2018 (8) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... heir applications both on the ground of deficiency in disclosure and on the ground of not crossing the threshold limits. Let us presume for a moment that the finding relating to not crossing the threshold limits under Section 245C is not correct. Even then the finding with regard to non-disclosure cannot be assailed - Settlement Commission was not satisfied that there was a true and full disclosure. Therefore, they did what they did and which they are entitled to do under sub-section (2C). When the Settlement Commission has recorded reasons, which we have extracted above, to come to the conclusion, after perusing the report of the Principal Commissioner submitted under sub-section (2B) that there was no true and full disclosure, there is no scope for any interference under Article 226 of the Constitution of India. Hence, all the writ petitions are liable to be dismissed. - Sri V. Ramasubramanian And Smt. T. Rajani JJ. For the Petitioner : CH Pushyam Kiran For the Respondent : G Kiranmai COMMON ORDER (per V. Ramasubramanian,J) One Public Limited Company, one Private Limited Company and the Directors of those two companies, whose applications f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that too without even an application from the respondents, (2) that no power of review is conferred upon the Settlement Commission and (3) that after having admitted the applications and passed an order under Section 245 D (1) allowing the applications to be proceeded with, the Settlement Commission could not have passed an order refusing to proceed further on the ground that there was no true and full disclosure. It is the further contention of Mr. S. Ravi, learned senior counsel that since the jurisdiction of the Settlement Commission extends even to matters not covered by the application, the Settlement Commission was not powerless to pass such order as it thinks fit under sub-section (4) and that therefore the refusal of the Settlement Commission to proceed further on the ground that there was no true and full disclosure is nothing but a facade to throw the application out at any rate. 8. A counter has been filed on behalf of the respondents 2 and 3 contending, inter alia , that the order under challenge was one passed under Section 245D (2C) and not a review of the order passed under Section 245 D (1); that the order passed earlier under Section 245 D (1) was a preliminary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fidavit that the Settlement Commission cannot entertain a case where the loss gets reduced to another figure of loss and that there should be additional net tax paid above the threshold limits during the settlement process and not merely a claim of tax credit. 9. In answer to the contents raised in the counter affidavit, the petitioners have also filed a reply. The focus of the reply is mainly upon the tax credit under Section 115JB. It is also claimed in the reply affidavit that the petitioners had fulfilled all the threshold conditions and that there was no material with the Settlement Commission to hold that the disclosure was not true and full. 10. We have carefully considered the above submissions. 11. Since the rival contentions revolve around Sections 245C and 245D of the Act, it may be necessary first to take note of the scheme of these provisions. Scheme of Sections 245 C and 245 D: 12. Section 245C (1) enables an assessee to make an application to the Settlement Commission, at any stage of a case relating to him. The application is to be made in such form and in such manner as may be prescribed. Section 245C (1) mandates that the application shall conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thinks fit not only on the matters covered by the application but on any other matter relating to the case not covered by the application, but referred to in the report of the Principal Commissioner or Commissioner. (vi) Any order passed under sub-section (4) should provide for the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective. (vii) If the terms of such settlement prescribed in sub-section (6) are not complied with, the settlement would become void. In any case if the settlement had been found subsequently to have been obtained by fraud or misrepresentation of facts, even then, the settlement will be void as per sub-section (6). (viii) If the amount of tax determined, pursuant to an order passed under sub-section (4) is not paid within 35 days, then the assessee will be liable to pay simple interest under sub-section (6A) at the rate of 1.25% per month. (ix) The Settlement Commission has power to rectify any mistake apparent from the record and a power to amend an order passed by it, subject to the conditions stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2C) Where a report of the Principal Commissioner or Commissioner called for under sub-section (2B) has been furnished within the period specified therein, the Settlement Commission may, on the basis of the report and within a period of fifteen days of the receipt of the report, by an order in writing, declare the application in question as invalid, and shall send the copy of such order to the applicant and the Principal Commissioner or commissioner: Provided that an application shall not be declared invalid unless an opportunity has not given to the applicant of being heard; Provided further that where the [Principal Commissioner or] Commissioner has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the Principal Commissioner or Commissioner. (2D) Where an application was made under sub-section (1) of Section 245C before the 1st day of June, 2007 and an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st day of Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to in the report of the Principal Commissioner or Commissioner. (4A) The Settlement Commission shall pass an order under subsection (4), -- (i) in respect of an application referred to in sub-section (2A) or sub-section (2D), on or before the 31st day of March, 2008. (ii) In respect of an application made on or after the 1st day of June, 2007 but before the 1st day of June, 2010, within twelve months from the end of the month in which the application was made; (iii) In respect of an application made on or after the 1st day of June, 2010 within eighteen months from the end of the month in which the application was made. (5) Subject to the provisions of Section 245BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the concerned Bench before passing any order under sub-section (4) and, in relation to the passing of such order, the provisions of Section 245BD shall apply. (6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the settlement became void. (8) For the removal of doubts, it is hereby declared that nothing contained in Section 153 shall apply to any order passed under sub-section (4) or to any order of assessment, reassessment or recomputation required to be made by the Assessing Officer in pursuance of any directions contained in such order passed by the Settlement Commission and nothing contained in the proviso to sub-section (1) of Section 186 shall apply to the cancellation of the registration of a firm required to be made in pursuance of any such directions as aforesaid. 15. A careful analysis of Sections 245C and 245D would show that the former deals only with the procedure to be followed by the assessee while making an application for settlement and the latter prescribes the procedure to be followed by the Settlement Commission in dealing with such applications. The requirements to be satisfied by an assessee while making an application for settlement, as indicated by Section 245C are : (1) the application should be in the prescribed form, (2) it should contain a full and true disclosure of the income, which has not been disclosed before the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x parte decision taken at the first stage is in the right direction; (3) collection of evidence through further enquiry or investigation conducted by the Commissioner; and (4) personal hearing where the applicant as well as the Commissioner are heard on the materials available on record as well as further evidence as may be collected and passing an order of settlement. For easy appreciation, we would compare these four stages to what happens in a Civil Court namely (1) the passing of an ad interim ex parte order, (2) vacating or making absolute the interim order, (3) trial and (4) arguments and judgment. Keeping in mind this scheme of Section 245D, let us now come back to the facts of the cases on hand. 19. It appears that the group of companies and individuals filed 12 settlement applications on 18-05-2016. Out of them, nine were rejected on 31-05-2016 under Section 245D (1), on account of the short-fall in payment of additional tax and interest. However, three settlement applications filed by the Maa Mahamaya Industries Limited, GVA Industries Pvt. Ltd., and Sri Ashok Kumar Agrawal, were allowed to be proceeded with by an order of Settlement Commission dated 31-05-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts stipulated in Section 245C, the Settlement Commission is not thereafter entitled to review its own order and hold that the application cannot be proceeded with. 25. The basis on which Mr. S. Ravi, learned senior counsel for the writ petitioners raised the above ground is a factual finding recorded by the Settlement Commission, in an order passed on 13-06-2016 in respect of nine individuals under Section 245D (1), holding that there was no prima facie material, which warrants the conclusion that true and full disclosure has not been made by the applicants. Therefore, it is the contention of the learned senior counsel for the petitioners that in the order dated 21-07-2016 passed under Section 245D (2C), the Settlement Commission cannot record a contrary finding, as the same may tantamount to a review of the previous order. 26. In our considered view, the above contention does not merit acceptance. As we have stated above, Section 245D prescribes a four stage procedure. The first stage referable to Section 245D (1), can be compared to the stage where a Civil Court passes an ad-interim ex parte order of injunction under Order XXXIX Rule 1 of the Code of Civil Procedure. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Commissioner fails to furnish a report, then the order passed under sub-section (1) of Section 245D remains as such and the enquiry can be proceeded with, in view of the second proviso to sub-section (2C). Therefore, the contention of the learned senior counsel that the orders impugned in the writ petitions tantamount to a review of the order passed under Section 245D (1), without there being any power of review expressly conferred upon the Settlement Commission, is unacceptable. 30. As pointed out by the Supreme Court in Ajmera Housing Corporation v. Commissioner of Income Tax (2010) 326 ITR 642 (SC) , full and true disclosure is a prerequisite even under Section 245C. The Supreme Court pointed out that in an application for settlement, the assessee is required to make (1) a full and true disclosure of the income, which has not been disclosed, before the Assessing Officer; (2) the manner in which such income has been derived and (3) the additional amount of income tax payable on such income. The Court went on to point out that full and true disclosure is a prerequisite for a valid application under Section 245C (1). In other words, an application, which does not con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the prima facie finding recorded in an order under sub-section (1) will not bar the Settlement Commission from coming to a different conclusion under sub-section (2C). 33. As a matter of fact, the proceedings before the Settlement Commission are deemed to be judicial proceedings, within the meaning of Section 193 and 228 and for the purposes of Section 196 of the Indian Penal Code. Therefore, at every stage, truth and correctness of the particulars furnished and the evidentiary value of material relied upon, can be tested by the Settlement Commission. 34. In fact, in Canara Jewellers v. Settlement Commission (2009) 315 ITR 328 (Mad) , a Division Bench of Madras High Court held that when once the income disclosed by the assessees under Section 245C is not accepted as full and true disclosure, the application under Section 245C is not maintainable. The argument on the basis of Section 245F to the effect that the Settlement Commission has all the powers of the Income Tax Authority, was rejected by holding that such a power can be exercised for the purpose of procedure of settlement under Section 245C and not for reassessment of a tax of a particular year. Irrespective o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity trading and the only proof they have filed is the ledger copy of the applicant. He stated that the sums were received in cash only. 39. From the findings recorded by the Settlement Commission as above, it is seen that the conclusion reached by the Commission that there was no true and full disclosure, cannot be termed as arbitrary or without any material worth consideration. 40. In so far as the applications of nine individuals are concerned, out of whom, eight have come up with writ petitions, the Settlement Commission rejected their applications both on the ground of deficiency in disclosure and on the ground of not crossing the threshold limits. 41. Let us presume for a moment that the finding relating to not crossing the threshold limits under Section 245C is not correct. Even then the finding with regard to non-disclosure cannot be assailed. Paragraph 16 of the order of the Settlement Commission dated 21-07-2016 in the case of these nine individuals may be usefully extracted as follows: The details of the disclosure under the head Long Term Capital Gain made by the applicants in their returns are given below with respect to assessment years involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended by the Taxation Laws (Amendment) Act, 1984 with effect from 01-04-1984. But this sub-section (1A) of Section 245D was omitted by Finance (No.2) Act, 1991 with effect from 27-09-1991. 43. Sub-section (1A) of Section 245D as inserted by Finance Act, 1979 and amended by the Taxation Laws (Amendment) Act, 1984 but omitted by Finance (No.2) Act 1991 read as follows: Notwithstanding contained in sub-section (1), an application shall not be proceeded with under that sub-section, if the Commissioner objects to the application being proceeded with on the ground that concealment all particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax or other sum chargeable or imposable under this Act has been established or is likely to be established by any Income Tax Authority, in relation to the case. Provided that where the Settlement Commission is not satisfied with the correctness of the objection raised by the Commissioner, the Settlement Commission may, after giving the Commissioner an opportunity of being heard, by order, allow the application to be proceeded with under sub-section (1) and send a copy of its order to the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement Commission interprets a particular document, even if such interpretation is not correct, it would not be a ground for interference. Though the said decision arose out of the appeals as against the orders of Settlement Commission, the principle indicated therein would apply to judicial review under Article 226 of the Constitution. 47. In Patel Desai v. Assistant Commissioner of Income Tax (2000) 243 ITR 689 , a Bench of this Court pointed out that the decision of the Settlement Commission could be interfered with, only (1) if grave procedure and defects such as violation of mandatory requirements or violation of natural justice are made out, (2) if it is found that there was no nexus between the reasons given and the decisions taken. The Court pointed out that we cannot interfere either with the error of fact or error of law alleged to have been committed by the Settlement Commission. Therefore, we will not sit in judgment over the decision of the Settlement Commission, once we find that there are some reasons for the Settlement Commission to come to the said conclusion. 48. As a matter of fact a case of the converse nature arose before a Bench of the Delhi High C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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