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TMI Blog2019 (8) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... 6th April, 2017 cannot be said to be time barred. Consequently, the objection raised by the Petitioners to the said notice was rightly rejected by the Respondent No.2 by the second impugned order dated 4th July, 2017. The ground on which the impugned orders dated 4th August 2016 of the ITSC are assailed are that they did not account for the numerous interlocutory orders earlier passed by the ITSC in the same matter that prima facie found in favour of the Petitioners. As already discussed earlier, the impugned final order dated 4th August 2016 of the ITSC u/s 245 D (4) was passed after a detailed report was received from the PCIT. This was a comprehensive report which provided more than adequate justification for the decision of the ITSC to conclude that there had not been a full and true disclosure by the Petitioners of all relevant facts. The impugned order dated 4th August 2016 of the ITSC calls for no interference. The period during which the present petitions were pending in this Court shall stand excluded for calculating the period within which the impugned assessments have to be completed. X X X X Extracts X X X X X X X X Extracts X X X X ..... led respective returns of income for AYs 2009-2010 to 2011-2012. 7. The Assessing Officer (AO) (Respondent No.2) picked up their returns for scrutiny and on 25th September 2014 issued notices to each of the Petitioners under Section 143 (2) of the Act. One of the contentions of the Department was that PRGCPL had introduced bogus share capital of ₹ 5.30 crores with hefty a premium from various fictitious concerns. 8. During the pendency of the above assessment proceedings both Mr. Gupta and PRGCPL filed applications with the ITSC under Section 245C of the Act on 26th February, 2015 for settlement of their cases for the aforementioned AYs 2009-2010 to 2011-2012. Mr. Gupta stated in his application that he had received ₹ 5.60 crores in cash from his employer i.e. BSBK Group and the said sum had been utilised in raising share capital of PRGCPL. 9. Mr. Gupta disclosed that incentives of ₹ 2.40 crores in each of the AYs 2009-2010 and 2010-2011 and ₹ 80 lacs in AYs 2011-2012 had been received. Mr. Gupta also stated that the above share capital transactions were arranged through accommodation entries arranged from fictitious companies. He disclosed before the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome has not been satisfied. We therefore reject the application of Sh. Rohit Kumar Gupta with liberty that he may file it again." 12. As regards the PRGCPL application, it was held by the ITSC as under: "4.3 After considering the arguments of the AR, the settlement application and the facts/materials therein, we are satisfied that the applicant has not paid the amount of tax and interest payable on the basis of income disclosed in the settlement application as required by section 245C (l) and therefore essential condition of a valid application is not been satisfied. We therefore reject the application of M/s. PRG Consultants Pvt. Ltd. with liberty that it may file application again." 13. Liberty was granted to the PRGCPL as well as Mr. Gupta to file fresh applications. 14. On 26th March, 2015 both Mr. Gupta and PRGCPL again filed fresh applications in the ITSC under Section 245 C (1) of the Act. It is stated that the technical discrepancy in the application of PRGCPL pointed out by the ITSC was rectified. Orders of the ITSC under Section 245 D (1) of the Act 15. On 7th April, 2015 orders were passed in both applications by the ITSC on 26th March, 2015 under Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquired in the settlement proceedings in these two cases to establish the correctness of incentive received by the applicant. He stated that in case source of income of the applicant was found to be false, immunity from penalty and prosecution may not be given to him. The AR argued that the applicant has made a full and true disclosure of his income and the manner of deriving such income. The AR stated that all facts have been disclosed correctly and nothing has been withheld. The AR urged that the application may be admitted. 3.4 We have considered the arguments of the AR, the settlement application and the material/record brought on record. We find that the applicant has disclosed additional income in the form of incentive received from the employer with whom he has been employed from the last 20 years. We also find that the substantial increase in the profits of M/s.Macawar Beekay (P) Ltd. has been demonstrated and claimed to be partly due to the efforts of the applicant. The application of M/s.Macawar Beekay (P) Ltd. has already been admitted u/s. 245D (1) and therefore the correctness of the receipt of incentive by Sh.Gupta from M/s.Macawar Beekay (P) Ltd. could be examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for by the ITSC under Section 245 D (2B) of the Act from the Principal Commissioner of Income Tax (PCIT). The PCIT submitted reports on 7th May, 2015 objecting to the validity of both applications on the ground that full and true disclosure of undisclosed income had not been made by each of the Petitioners. Orders of the ITSC under Section 245 D (2C) of the Act 18. On 20th May, 2015 the ITSC passed a further order under Section 245D (2C) holding as under: "8.1 We have heard the arguments put before by both the ld. CIT (DR) and the ld. AR of the applicants. We observed that the CIT has raised mainly the issue of manner of earning of additional income. The applicant has spelt out the manner of earning being the cash incentives received from the employer; however he expressed his inability to furnish the evidences due to the strained relationship with his employer. After examining the facts and circumstances of the case, the contentions of the AR regarding the manner of earning of additional income declared are found reasonable and tenable. 9. After careful consideration, we find that the above two applicants have fulfilled all the conditions prescribed u/s 245C (1) as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier no evidence of cash incentive is available in the seized documents of WS BSBK Engineers P. Ltd. and was Macawar Beekay (P) Ltd. It may not be out of place to mention here that Macawar Beekay (P) Ltd. and other companies of BSBK group are also before Hon'ble Settlement Commission. It is found from their statement of facts that all these companies have nowhere shown any cash incentive paid to Mr. Rohit Kumar Gupta or to any other employee of their concern. It is highly unlikely that cash incentive will be paid only to single executive and not to others. The fact that no incentive .has been shown as paid by was Macawar Beekay (P) Ltd. and other companies of BSBK group to She Rohit Kumar Gupta has major ramifications in these cases because if we agree on the assertions made by Sh. Rohit Kumar Gupta then it automatically implies that the company i.e., was Macawar Beekay (P) Ltd. has not come up with true and full disclosure before the Hon'ble Settlement Commission. On the other hand if we rely on statements of facts submitted by was Macawar Beekay (P) Ltd. before the Hon'ble Settlement Commission then it leads to a conclusion that Mr. Rohit Kumar Gupta has cooked up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 25. As far as PRGCPL was concerned, it was held by the ITSC as under: The applicant company was incorporated in 2008 with the object of acting as consultants and advisors. Sh. Rohit Kumar Gupta and his family members are the only shareholders in this company. It has been stated that the so-called cash incentive received by Sh. Rohit Kumar Gupta from his employer company M/s. Macawber Beekay (Pvt.) Ltd. has been invested in this company as Share Capital. 10. The application of Sh. Rohit Kumar Gupta has been rejected, for the reasons cited above. Thus, the source of money which is stated to have been used for investing in the Share Capital of the company is not explained. Moreover in the application, the applicant company claims to have received consultancy charges of ₹ 60 lakhs in cash from BSBK Group. No detailed breakup of ₹ 60 lakhs as consultancy charges from BSBK Group are given. The two main companies of BSBK Group, also before the Settlement Commission, have denied having paid any such consultancy charges in cash to the applicant. 11. After careful consideration of the facts discussed above and for the same reasons as in the case of Sh. Rohit Kumar G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) In terms of Section 153B (b) of the Act, the time limit for completion of assessment under Section 153A of the Act was within two years from the end of the financial year in which last of the authorization of the search under Section 132 (1) of the Act was executed. The assessment in the present case had to be completed before 31st March, 2015. (ii) In computing the period of limitation, the period commencing from the date on which they had made applications before the ITSC ending with the date on which order under Section 245D (1) of the Act was received by the PCIT in terms of Section 245D (2) of the Act, had to be excluded. With the remaining period, after exclusion of the aforementioned period, being extended to 60 days in terms of the proviso below Explanation to Section 153B (1) of the Act, the time to frame assessment got extended till 10th October, 2016. (iii) There was no other provision under Section 153B which further extended the time for completion of assessment. In particular resort could not be had to Section 153 of the Act, since the present proceedings were pursuant to a search and Section 153 B was a complete code as far as the limitation for such proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, having provided extension of the period of 60 days in the main provision of Section 153B, the further proviso in Section 153 cannot be invoked for the purpose of Section 153A of the Act. It is Clause (v) of the Explanation 1 below Section 153 as it stood at the relevant time that alone would apply. Section 153(8) and Section 245HA (4) would have no application whatsoever. (viii) According to Section 245HA(4) the period commencing from the date of application to the ITSC under Section 245C and ending with the 'specified date' shall be excluded for the purposes of determining the time limit for framing assessments under Section 153, 153B of the Act. The specified date in terms of 245HA (1) (i) is the date on which the application is rejected under Section 245D (1) of the Act. Since in the case of the Petitioner it is Section 153B that applies, there is no occasion for invoking Section 245 HA (4) read with Section 153 of the Act. Submissions on behalf of the Revenue 33. Replying to the above contentions it is submitted by Mr. Zoheb Hossain, learned Senior Standing counsel for the Revenue as under: (i) There is a fundamental flaw in the above submissions inasmuch as Clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere fact that Section 153B opens with the non obstante clause cannot ipso facto mean that the present case is governed only by that provision. As explained in Vishin N.Khanchandani v. Vidya Lachmandas Khanchandani AIR 2000 SC 2747 a non obstante clause is a device for giving overriding effect to provisions that are inconsistent with other provisions of the Act. Here there was no inconsistency between Explanation 5 below Section 153B and the further proviso below Section 153 since the former contemplated an order under Section 245D (1) of the Act whereas the latter spoke of the abatement of proceedings under Section 245HA that resulted from the rejection of the settlement application by an order under Section 245D (4) of the Act as in the present case. The contention of the Petitioner that the order under Section 245D (4) of the Act should be treated as one under Section 245D (1) is untenable. Analysis and reasons 34. The above submissions have been considered. There is no dispute about the facts in the present case namely that a search was initiated on the BSBK Group of on 24th May 2012 and that notices under Section 153A were issued to the Petitioners on 9th June 2014 for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 245C (1) of the Act, then the ITSC considers it and passes an order within 14 days failing which the application shall be deemed to have been allowed to be proceeded with. If the ITSC decides not to allow the application to be proceeded with then it rejects the application for the reasons to be stated in the order. In the present case by an order dated 7th April 2015 the ITSC passed the aforementioned order and allowed the applications to be proceeded with. 41. At the next stage of the applications filed by the Petitioners, the ITSC passed further orders under 245D (2C) of the Act, after receiving the report of the PCIT further allowing the applications to be proceeded with and observing that the applications filed were prima facie not invalid. At that stage the ITSC called for a report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. 42. At the third stage on 16th March 2016 an order was passed by the ITSC under Section 245D (3) of the Act by the ITSC calling for records and asking the Respondents to undertake a verification/investigation on the issue of incentives received by the Petitioners from the BSBK Group of cases. It is after this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s orders under Section 245 D (4) of the Act waiving or reducing the interest payable by the Assessee? The ITSC in that case answered the question in the affirmative on the basis that Section 245D (6) was a substantive provision. 44.2 The Supreme Court disagreed with this view of the ITSC and held that Section 245D (6) was only procedural in nature and that it was not a provision which empowered the ITSC either to waive or reduce the interest. The Supreme Court observed: "The substantive provision in regard to settlement in Chapter XIX-A, in our opinion, is sub-section (4) of Section 245D. It is under this provision of the Act that the Commission will have to pass orders as it thinks fit on the matters covered by the application. In our opinion, sub-section (6) of Section 245D is only procedural in nature. It provides for fixing the terms by which the amount settled in sub-section (4) will have to be paid. It is not a Section which empowers the Commission either to waive or reduce the interest. At the cost of repetition, we must point out that apart from the fact that there is no specific empowerment of waiver or reduction of tax in Chapter XIX-A, it is also clear from the use o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the CBI that the lenders from whom the Assessee claimed to have received ₹ 1.50 crores in cash had no means of financial capacity to advance such huge loans. The Revenue accordingly made an application under Section 245D (6) of the Act for declaring the settlement order to be void and for withdrawing the benefits granted. That application was rejected by the ITSC inter alia on the grounds that it would amount to reappraisal of evidence and sitting in judgment over the findings of the earlier bench. The ITSC held that it could not review its own decision. 46.2. The Revenue then filed an appeal contending that the ITSC had not kept the scope and ambit of its power exercisable under Section 245D (6) in proper perspective. It is in the above context that the Supreme Court directed the ITSC to rehear the matter after coming to the conclusion that merely because Section 245 I states that the order of the ITSC is conclusive, 'it does not take away the power of the Commissioner to decide whether the settlement order had been obtained by fraud or misrepresentation of facts.' It was also in that context that it was observed that the ITSC's power of settlement had to be exercised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, before or after the Settlement Commission has decided to proceed with the application would be most germane to the determination of the said question. 35. It is plain from the language of sub-section (4) of Section 245-D of the Act that the jurisdiction of the Settlement Commission to pass such orders as it may think fit is confined to the matters covered by the application and it can extend only to such matters which are referred to in the report of the Commissioner under sub-section (1) or sub-section (3) of the said section. A "full and true" disclosure of income, which had not been previously disclosed by the assessee, being a precondition for a valid application under Section 245-C(1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against Item 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, Section 245-C(3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said section is instructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Principal Commissioner or Commissioner under sub-section (2) of that section." 53. A plain reading of the above provision indicates that it applies only when there is a rejection by the ITSC of the application by not allowing it to be proceeded with by passing an order under Section 245D (1) of the Act. It cannot possibly apply in the case where the orders have been passed not under Section 245D (1) but under Section 245D (4) of the Act. It will be recalled that the order dated 4th August 2016 of the ITSC in the present case is passed under Section 245D (4) of the Act. 54. As a result of the said order dated 4th August 2016 of the ITSC the proceeding before it stood abated. Section 245 HA of the Act deals with situations where proceedings before the ITSC abate. Section 245HA reads as under: "245HA. (1) Where- (i) an application made under section 245C on or after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-limit under sections 149, 153, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or 244 or, as the case may be, section 244A, for making the assessment or reassessment under sub-section (2), the period commencing on and from the date of the application to the Settlement Commission under section 245C and ending with "specified date" referred to in sub-section (1) shall be excluded; and where the assessee is a firm, for the purposes of the time-limit for cancellation of registration of the firm under sub-section (1) of section 186, the period aforesaid shall, likewise, be excluded." 55. It requires to be noted that clause (iii a) to Section 245 HA (1) was inserted with effect from 1st June, 2015. It envisages abatement on the 'specified date' as a result of an order under Section 245D (4) being passed, in respect of an application under Section 245C, "not providing for the terms of settlement." This makes therefore two things clear. One is that it legislatively recognises that under Section 245D (4) an order could be passed by the ITSC "not providing for the terms of settlement". This is consistent with the judicial verdict in Aj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search in the present case took place on 24th May 2012 and notices to the two Petitioners under Section 153 A of the Act for AYs 2009-10, 2010-11 and 2011-12 were issued on 2nd June 2014. (iii) The proceedings in the ITSC at the instance of the two Petitioners were pending from 26th February 2015 till 4th August 2016. (iii) While in the normal course the assessments under Section 153 A of the Act would have had to be completed by 31st March 2015, in view of the Petitioners having approached the ITSC the period during which they were there awaiting the decision of the ITSC has to be excluded. (iv) After excluding the above period, the period remaining to complete the assessments was obviously less than one year. In terms of the second proviso to Section 153 of the Act the period of extension for completing the assessment was 'deemed' to be extended to one year. In the present case there was time till 16th August 2017 for the AO to complete the assessments. Consequently, the notices issued to the Petitioners on 6th April 2017 under Section 143 (3) read with Section 153 A of the Act, were not invalid as the limitation period for completing the assessments had not expired by then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 245 D (1) of the Act. For the reasons already noted hereinbefore, that submission is inconsistent with the plain reading of the provisions discussed, and in particular Section 245 D (4) as explained in Ajmera Housing Corporation v. Commissioner of Income Tax (supra). 61. It must be noted here that by the Finance Act 2017, with effect from 1st April 2017, the following further proviso was added to Section 153 B: "Provided also that where a proceeding before the Settlement Commission abates under section 245HA, the period of limitation available under this section to the Assessing Officer for making an order of assessment or reassessment, as the case may be, shall, after the exclusion of the period under sub-section (4) of section 245HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year." 62. Correspondingly with effect from the same date, Clause (v) to Explanation 1 to Section 153 of the Act got amended to delete the reference therein to Section 153 B of the Act. Till this change was made, the provision that was required to be referred to for determining the limitation for completing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er proviso to Section 153 below Explanation 1 that would apply. In terms thereof the notices issued to the Petitioners on 6th April, 2017 cannot be said to be time barred. Consequently, the objection raised by the Petitioners to the said notice was rightly rejected by the Respondent No.2 by the second impugned order dated 4th July, 2017. 66. The ground on which the impugned orders dated 4th August 2016 of the ITSC are assailed are that they did not account for the numerous interlocutory orders earlier passed by the ITSC in the same matter that prima facie found in favour of the Petitioners. 67. As already discussed earlier, the impugned final order dated 4th August 2016 of the ITSC under Section 245 D (4) of the Act was passed after a detailed report was received from the PCIT. This was a comprehensive report which provided more than adequate justification for the decision of the ITSC to conclude that there had not been a full and true disclosure by the Petitioners of all relevant facts. The impugned order dated 4th August 2016 of the ITSC calls for no interference. 68. The period during which the present petitions were pending in this Court shall stand excluded for calculatin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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