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TMI Blog2019 (4) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... ooked into by the Settlement Commission. Department had neither laid a foundation before the Settlement Commission establishing why further enquiry or investigation ought to have been called, nor led any such grounds before us to demonstrate how the Settlement Commission committed an error in refusing to exercise the discretion, we do not find that the Department had made out a case for interference. It appears that the Department's representative had orally persisted with the Settlement Commission to pass an order u/s 245D(3) of the Act calling upon further enquiry or investigation by the Commissioner which would enable the Department to verify and establish that the disclosures made by the assessees were not true and full. In this petition, the Department had prayed that the Settlement Commission be directed to give opportunity to the petitioner to verify the transactions referred to in objections of the Department contained in the reports under Rules 9 and 9A of the Income Tax Settlement Commission Rules. Essentially, therefore, in such petition, also the Department's case was that the Settlement Commission should have called for or permitted further enquiry or investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and payment of tax and interest and pendency of assessment proceedings for the years under consideration. 6. Accordingly, we do not find any infirmity in the present application in terms of the provisions of Section 245C(1) of the Act. Accordingly, we hold that the application is maintainable and allow the same to be proceeded with further. 2.2 The settlement applications of the assessees thereafter proceeded before the Settlement Commission. The Department opposed the applications for settlement inter alia on the ground of non disclosure of additional income and lack of true and full disclosures. The Settlement Commission thereupon passed an order dated 10.5.2016 under Section 245D(2C) of the Act. Relevant portion of the order reads thus:- 9.4 Various arguments have been advanced on behalf of the Department in order to show that the applicant concerns have not made a clean breast of their affairs with reference to the full and true disclosure of their respective incomes and the manner of earning such incomes before the Commission. The alleged dishonest conduct on part of the applicants engaged in acquisition of lands for Mega City Project at Panvel and at Penn, resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Bombay High Court in CIT vs Settlement Commission in 375 ITR 483 held that, We are not concerned in this case with the merits of the disclosures. We find that once the majority holds that the conditions regarding the threshold limit for the quantum of tax for additional income, payment of tax and interest thereupon and pendency of proceedings all are fulfilled then the application was not liable to be rejected on any technical ground. In recent judgment dated 8.12.2015 in Principal CIT (Central) Vs. Settlement Commission (2016) Tax Corp. (DT) 05293 (Gujarat) , the Hon'ble High Court held that the question of fulfillment of all material requirements of a valid application for settlement would be still open for the Commission to examine in further enquiry under section (3) of S. 245D before passing of final order under section (4) of S 245D. The Hon'ble Court made a reference to a judgment of the Hon'ble Delhi High Court - CIT vs Income Tax Settlement Commission (2013) 35 Taxman Com 56 (Delhi) where it was held that from the Tove provisions, it is apparent that the settlement application passes through several stages before the final order providing for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a complex story of payments to various intermediaries including corporate entities by cheques, receiving back the cheque amounts in cash and then making further payments by cash to landlords, brokers, middle level aggregators, and also persons who claimed false tenancy rights over certain lands, without adducing any cogent evidences in support of such claims. It is the contention of the Department that a major amount of expenditures shown under various heads like purchase of land from various land owners, service charges paid to two companies of the Valuable group, payment for compensation of relinquishment of rights and brokerage and land development charges, have been excessively inflated and major portion of such expenditures have been siphoned off for the benefit of promoters and management personnel and other corporate companies of the Valuable group and, thus, the incomes shown/declared in their respective settlement applications have been grossly understated. 14.3 On a conspectus of the whole range of issues in the light of the objections raised, and the infirmities pointed out by the Department, we are of the view that notwithstanding the possibility of existence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of additional income of ₹ 18 Crores during the present proceedings will not detract from the true and full nature of the income already disclosed in their respective SOFs, and also would not dilute the manner of earning the same. Hence, we hereby settle the cases of the applicants, accordingly. 3. This order of Settlement Commission, it appears that, the Department has challenged mainly on the ground that the Settlement Commission did not pass an order under Section 245D(3) of the Act though repeatedly requested by the Department. The grounds of challenge contained in the petition revolves around this issue. Under this ground, the Department contends that the Settlement Commission ought to have ordered a further enquiry into the transactions of the assessees which were admittedly bogus. The Settlement Commission committed an error in granting immunity against penalty and prosecution without full enquiry. The Settlement Commission failed to pass a speaking order at 245D(3) stage. This deprived the Department an opportunity to submit its report on various issues covered under the settlement applications. It is contended that in Rule 9 report, it was mentioned that certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition be dismissed. 6. In order to resolve the controversy, we may peruse the statutory provisions contained in Chapter XIX-A of the Act, which pertains to settlement of cases. As is well known, an assessee desirous of having his case settled may, under subsection (1) to Section 245C, apply for the same with necessary information and details prescribed therein. The procedure to be followed once such application is filed, is prescribed under Section 245D of the Act; relevant portion of which reads as under:- 245D. (1) On receipt of an application under section 245C, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant, the Settlement Commission shall, within a period of fourteen days from the date of the application, by an order in writing, reject the application or allow the application to be proceeded with: Provided that where no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely 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 Commissioner or] Commissioner. From these provisions, one can broadly notice the procedure where once an application for settlement is filed by an assessee under Section 245C(1), in terms of Section 245D(1) of the Act, the Settlement Commission within seven days of receipt of such application, issue notice to the applicant requiring him to explain why the application should be allowed to be proceeded with. After hearing the applicant, the Settlement Commission may, within 14 days of the date of the application, pass an order in writing rejecting the application or allowing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission to pass a formal order under sub-section (3). The order may be necessary if the Settlement Commission desires to have further enquiry or investigation to be carried out by the Commissioner. The insistence of the Department, therefore, for the Settlement Commission to pass a formal order before proceeding further to the stage of Section 245D(4) of the Act was not a valid one. This, however, would not mean that the Department has no stakes in the matter. As a party to the settlement application, it has a right to oppose the application for settlement made by an assessee. It would be within the Department to urge the Settlement Commission, in a given set of circumstances, to exercise the discretion referred to in sub-section (3) and any exercise of discretion by a quasi-judicial body like the Settlement Commission must be on rational basis and for valid reasons. In a give case, therefore, if the Department was able to demonstrate that the Settlement Commission failed to exercise the discretion though the facts of the case so required, it would be open for the Department to contest such a decision of the Settlement Commission, having failed to persuade the Settlement Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Commission had scrutinized the settlement application at two stages, while passing the order under Section 245D(1) and thereafter under Section 245D(2C) of the Act. The first enquiry, of course, would be summary in nature, considering the time constraint, as well as absence of participation by the Department. The second stage enquiry under Section 245D(2C) would be more incisive. In both the orders, the Settlement Commission had been prima facie satisfied about the correctness of the disclosure made by the assessees. In both such orders, the Settlement Commission had deferred its final opinion on such issue at the time of passing the final order. We have reproduced the relevant portion of the final order. The Settlement Commission has discussed the rival contentions at considerable length, adverted to the material on record and come to the conclusion that there was no failure of full and true disclosure. These findings are not under challenge before us. In any case, as per the settled law, the jurisdiction of the Court in examining the correctness of the Settlement Commission's orders in exercise of Writ Jurisdiction is extremely narrow and would be confined to the scru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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