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TMI Blog2019 (3) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... same were taken up for hearing and are decided by this common judgment. For the sake of convenience, reference is made to the facts as appearing in Special Civil Application No.13572 of 2018 filed by M/s Akshar Developers. 2. The facts stated briefly are that on 22.9.2015, a raid came to be carried out in the case of the petitioner under section 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") when some documents came to be seized. The partners were also searched. According to the petitioner, nothing worth the name by way of unaccounted cash, jewellery or investment was found from the above raid from the petitioner or its partners. The petitioner was advised that instead of entering the channel of long drawn litigation starting with the assessment order, it would be wise to approach the Settlement Commission. Therefore, the petitioner preferred application dated 30.11.2017 under section 245(C)(1) of the Act. The form was filled by the petitioner along with which the statement of particulars of issues to be settled, as well as the statement showing full and true disclosure came to be submitted.The matter came up for the purpose of admission and by an order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and that if there was any objection, it was for the Principal Commissioner to take such objection in the report. It was submitted that there was grave error on the part of the Settlement Commission permitting the CIT (DR) to raise objections to the admission of the application and more so in permitting him to go beyond the report. 3.2 Referring to the impugned order, it was submitted that several points which were not there in the report have been taken into consideration in the order and, therefore, the petitioner's representative naturally was not ready to reply off hand without instructions from the petitioner or its accountant. It was urged that the impugned order having gone far beyond the report of the Principal Commissioner is therefore, bad in law. 3.3 It was submitted that sub-section (2C) of section 245D of the Act mandates that, the order be passed within fifteen days of the report. It was submitted that if the report said that there was no full and true disclosure, the petitioner would have been called upon. It was submitted that the provision contemplates opportunity of hearing to the assessee in case the application is to be held to be invalid, however, if the Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt would be concerned with the decision making process of the Settlement Commission and not so much with the correctness of the order as it would be in appeal. It was submitted that in the absence of any flaw having been pointed out in the decision making process, the petition deserves to be dismissed on this ground alone. 4.1 It was submitted that the contention that the Settlement Commission could not have gone beyond the report is fallacious and contrary to the scheme of Chapter XlX-A of the Act. It was contended that the Settlement Commission has to examine the full and true nature of the disclosure of income at every stage of the settlement proceedings and if at any stage it is found that such disclosure is not full and true, the Settlement Commission is required to reject the application at that stage and send the case back to the Assessing Officer. 4.2 Next it was submitted that the contention that the Settlement Commission cannot go beyond the report, if accepted, would curtail the powers of the Settlement Commission to apply its mind independently to the facts on record. Even otherwise, the Settlement Commission has not gone beyond the report and the impugned order was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was submitted that, therefore, the Supreme Court has held that even if the statute is silent, the same does not prohibit affording an opportunity of hearing. 4.5 Reliance was also placed upon the decision of the Calcutta High Court in the case of Peerless General Finance and Investment Co. Ltd. v. Income-tax Settlement Commission, (2009) 313 ITR 206 (Calcutta), wherein the court held that the provisions of the statute prescribed the stages in which the applicant and the departmental representative are to be heard, and in section 245D(1), there is no provision for affording an opportunity of hearing to the petitioners, which has been specifically provided at a subsequent stage under section 245D(4). Giving opportunity of hearing to the incometax authorities at the time of consideration of the application for settlement, thus, constitutes a deviation from the procedure prescribed in the statute. The court held that mere deviation from a procedure prescribed by the statute would not ipso facto vitiate the order of the Settlement Commission. 4.6 It was submitted that in the facts of the present case the following facts emerge: - The report filed under section 245D(2B) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also placed upon the decision of the Bombay High Court in the case of Commissioner of Incometax v. Sai Prasad Properties Ltd., (2015) 60 taxmann.com 167 (Bombay), wherein the court has observed that the application under section 245D(2C) of the Act has to be disposed of after considering the objections raised by the revenue supported by some modicum of reasons. In the absence of some consideration of the objections, the entire exercise under section 245D(2C) of the Act would render the provisions redundant. 4.10 Reliance was also placed upon the decision of the Delhi High Court in the case of MARC Bathing Luxuries Ltd. v. Income Tax Settlement Commission, (2013) 38 taxmann.com 308 (Delhi), to point out that in the facts of the said case also, the CIT(DR) was given an opportunity of hearing at the stage of section 245D(1) of the Act. It was submitted that the above decisions have been relied upon to point out that the CIT(DR) is invariably given an opportunity of hearing by the Settlement Commission. 4.11 It was submitted that while examining the validity of any order passed by the Settlement Commission the scope of inquiry is very limited in case and that unless the Settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the applicant of being heard: Provided further that the Commissioner shall furnish the report within a period of forty-five days of the receipt of communication from the Settlement Commission in case of all applications made under Section 245-C on or after the 1st day of July, 1995 and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report. (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the Commissioner. (2-A) Subject to the provisions of sub-section (2-B), the assessee shall, within thirty-five days of the receipt of a copy of the order under sub-section (1) allowing the application to be proceeded with, pay the additional amount of income tax payable on the income disclosed in the application and shall furnish proof of such payment to the Settlement Commission. (2-B) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income tax referred to in subsection (2-A) within the time specified in that sub-section, it may extend t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub-section (1) or sub-section (3). (4-A) In every application allowed to be proceeded with under sub-section (1), the Settlement Commission shall, where it is possible, pass an order under subsection (4) within a period of four years from the end of the financial year in which such application was allowed to be proceeded with. (5) Subject to the provisions of Section 245-BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the Bench concerned before passing any order under subsection (4) and, in relation to the passing of such order, the provisions of Section 245-BD 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 make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was allowed to be proceeded with under subsection (1), in the second stage, as provided under sub-section (3) of section 245D, the Settlement Commission could call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission was of the opinion that any further enquiry or investigation in the matter is necessary, it could direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. Thereafter in view of the provisions of subsection (4), the Settlement Commission, after examination of the records and the report of the Commissioner, received under sub-section (1), and the report, if any, of the Commissioner received under sub-section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, in accordance with the provisions of this Act, could pass such order as it thought fit on the matters covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 application and the interest thereon is paid on or before the 31st day of July, 2007. Explanation.-In respect of the application referred to in this sub-section, the 31st day of July, 2007 shall be deemed to be the date of the order of rejection or allowing the application to be proceeded with under sub-section (1). (2-B) The Settlement Commission shall,- (i) in respect of an application which is allowed to be proceeded with under sub-section (1), within thirty days from the date on which the application was made; or (ii) in respect of an application referred to in subsection (2-A) which is deemed to have been allowed to be proceeded with under that sub-section, on or before the 7th day of August, 2007, call for a report from the Principal Commissioner or Commissioner, and the Principal Commissioner or Commissioner] shall furnish the report within a period of thirty days of the receipt of communication from the Settlement Commission. (2-C) Where a report of the Principal Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner shall furnish the report within a period of ninety days of the receipt of communication from the Settlement Commission: Provided that where the Principal Commissioner or Commissioner does not furnish the report within the aforesaid period, the Settlement Commission may proceed to pass an order under sub-section (4) without such report. (4) After examination of the records and the report of the Principal Commissioner or Commissioner], if any, received under- (i) sub-section (2-B) or sub-section (3), or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after giving an opportunity to the applicant and to the Principal Commissioner or Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Principal Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has allowed the applicant and the Principal Commissioner or Commissioner an opportunity of being heard. (7) Where a settlement becomes void as provided under sub-section (6), the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the income-tax authority concerned may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the end of the financial year in which 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 re-computation 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." 8.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation which has not been declared invalid, in the third stage under section 245D(4) of the Act, the Settlement Commission, may call for the records from the Principal Commissioner or Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Principal Commissioner or Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case, and the Principal Commissioner or Commissioner is required to furnish a report within a period of ninety days of the receipt of communication from the Settlement Commission. In case such report is not furnished within the specified period, the Settlement Commission may proceed to pass an order under sub-section (4) without such report. Thus, it is in the third stage that the Settlement Commission is required to call for the record of the case and after examining the same may cause a further inquiry to be made through the Commissioner who would submit a report based on such investigation/inquiry. 8.4 Under sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he report, it has been stated thus: "Therefore, at this stage, no further comments can be offered on the adequacy of additional income disclosed. In view of the above, we reserve our right to comment at later stage on the application on the basis of the material seized/impounded/found." 11. Thus, the Principal Commissioner of Income-tax has not stated in the report that there is no full and true disclosure by the assessee, but has raised certain doubts about the adequacy of the disclosure and has reserved the right to comment at a later stage of the application on the basis of the material seized. 12. From the language contained in the report and more particularly considering the fact that the Principal Commissioner has reserved the right to comment at a later stage of the application, it does not appear as if she had intended that the Commissioner should supplement the report on the basis of the material seized. If any further arguments were to be made on the basis of the available material, the Principal Commissioner would have relied upon such material at the time of preparation of the report. According to the Principal Commissioner, the comments on the adequacy of the unacc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the CIT (DR) and has thereafter proceeded to declare the application invalid based on the material pointed out by the CIT(DR) from the seized material. On a plain reading of sub-section (2C) of section 245D of the Act it is evident that it contemplates passing of order by the Settlement Commission on the basis of the report of the Principal Commissioner or Commissioner. Therefore, the scope of hearing would be limited to the contents of the report. The applicant would therefore, at this stage be prepared to deal with the contents of the report and if any submission is made outside the report, it may not be possible for the applicant to deal with the same. On behalf of the respondents it has been contended that the CIT (DR) has not relied upon any extraneous material and that the arguments are made on the basis of the seized material and the evidence on record. In the opinion of this court, insofar as the record of the case and other material on record is concerned, consideration of the same is contemplated at the third stage of the proceedings under section 245D(4) of the Act and not at the stage of subsection (2C). 15. Sub-section (2C) of section 245D of the Act contemplates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court had held that there was nothing wrong in hearing him. The said decision would have no applicability to the facts of the present case. In the opinion of this court, by permitting an application to be proceeded with under section 245D(2C) of the Act, the revenue is not adversely affected as in the third stage under section 245D(4) of the Act it has ample opportunity to object to the application being allowed. 17. Examining the issue from another angle, reference may be made to sub-section (2-C) and sub-section (4) of section 245D of the Act, which read as under: "(2-C) Where a report of the Principal Commissioner or Commissioner called for under sub-section (2-B) 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 been given to the applicant of being heard: Provided further that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the writ petitions were filed even before the making of award and interim orders have operated against the State of Tamil Nadu and, therefore, the State was not at fault in not taking physical possession of the lands concerned under acquisition. But the intention of the legislature in enacting Section 24(2) of the 2013 Act will have to be culled out from its wordings and on the basis of other relevant provisions of this Act and the relevant case law for deciding whether the period of stay/injunction is required to be excluded in computing the five years' period or not. 11. From a plain reading of Section 24 of the 2013 Act it is clear that Section 24(2) of the 2013 Act does not exclude any period during which the land acquisition proceeding might have remained stayed on account of stay or injunction granted by any court. In the same Act, the proviso to Section 19(7) in the context of limitation for publication of declaration under Section 19(1) and the Explanation to Section 69(2) for working out the market value of the land in the context of delay between preliminary notification under Section 11 and the date of the award, specifically provide that the period or periods dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reference to the record as well as other evidence of the case. 20. The Settlement Commission was, therefore, not justified in permitting the Principal Commissioner to supplement the report submitted by the Commissioner by way of oral submissions which were beyond the contents of the report. At best, if the applicant had made submissions in respect of the report, the Commissioner may have been permitted to deal with the same, but under no circumstances could the Commissioner be permitted to raise objection to the admission of the application and be heard before the assessee and that too, to supplement an incomplete report on the basis of the material and evidences on record. As already discussed hereinabove, any hearing based upon the material and evidences on record is contemplated at the stage of 245D(4) of the Act and insofar as sub-section (2C) of section 245D of the Act is concerned, the same contemplates a decision solely on the basis of the report of the Commissioner. 21. Insofar as the decisions on which reliance has been placed by the learned counsel for the respondent to point out that it is settled procedure of the Settlement Commission to provide an opportunity of he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n material other than the report, cannot be sustained. 25. The petitions, therefore, succeed and are accordingly, allowed. The impugned order dated 6.2.2018 passed by the Settlement Commission (Annexure-F to the SCA No.13598 of 2018) as well as the impugned orders dated 2.2.2018 passed by the Settlement Commission (Annexure-F to the rest of the petitions) are hereby quashed and set aside. The applications are hereby restored before the Settlement Commission at the stage of section 245D(2C) of the Act. The Commission shall proceed further at that stage in accordance with law and pass an order under section 245D(2C) of the Act within a period of fifteen days from the date of receipt of a copy of this order. It is clarified that while deciding the applications, the Settlement Commission shall in no manner be influenced by the findings recorded in the impugned orders and shall decide the same in the spirit of section 245D(2C) of the Act. Rule is made absolute accordingly with no order as to costs. 26. At this stage, Mr. M. R. Bhatt, learned counsel for the respondents has requested that the operation of this order be stayed for a period of four weeks so as to enable the respondents t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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