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TMI Blog2013 (2) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (d) to provide for the cost of this petition. 2. In the following factual background, this petition has arisen. 2.1 The petitioner is engaged in the business of real estate and construction activities and developed and constructed real estate scheme known as Samarpan Apartments in Surat. 2.2 On 12th September 1995, the Income-tax Department carried out search and seizure operations under Section 132 of the Income Tax Act, 1961 [ Act for short] and it found that the petitioner made a disclosure of ₹ 17 Lacs as undisclosed income for the block period. 2.3 The petitioner-firm made an application dated 29th October 1996 before the Settlement Commission for the assessment years 1995-96 and 1996-97 offering additional income of ₹ 23 Lacs for the block period at the time of hearing of application U/s. 245D(1) of the Act. The case of the petitioner was admitted under Section 245D [1] of the Act on 24th December 1997 and hearing was fixed under Section 245D[4] of the Act on 4th August 2003. 2.4 It is the case of the petitioner that the hearing took place before the Settlement Commission and petitioner made additional di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been passed in a completely arbitrary manner and without any definite verifiable reference point ' enhancement of additional income of ₹ 47.34 lakhs has no rationale basis particularly added on estimate basis. It is also urged by the learned advocate that in gross violation of principles of natural justice, the order impugned has been passed where no proper opportunity is made available. He urged the Court that the Settlement Commission has acted contrary to the scheme of the act and he has not dealt with particular contention of on-money receipts put forth before him at all. It is further urged that he has not given any reason while making such additions and the powers of settlement commission are too wide and if not checked, the same can create unimaginable issues for the assessees who would have no recourse when such exaggerated additions are made arbitrarily as is done in the instant case. It is further urged that the unfettered powers of the Commissioners if not checked are bound to be misused and in the instant case, when such misuse is apparent from the record, the Court needs to intervene. Learned Counsel has sought to rely upon the following authorities to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed of in the manner hereinafter provided : Provided that no such application shall be made unless,- (i) in a case where proceedings for assessment or reassessment for any of the assessment years referred to in clause (b) of sub-section (1) of section 153A or clause (b) of sub-section (1) of section 153B in case of a person referred to in section 153A or section 153C have been initiated, the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees, (ia) in a case where- (A) the applicant is related to the person referred to in clause (i) who has filed an application (hereafter in this sub-section referred to as specified person ); and (B) the proceedings for assessment or re-assessment for any of the assessment years referred to in clause (b) of sub-section (1) of section 153A or clause (b) of sub-section (1) of section 153B in case of the applicant, being a person referred to in section 153A or section 153C, have been initiated, the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees, (ii) in any other case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to have a substantial interest in a business or profession, if- (A) in a case where the business or profession is carried on by a company, such person is, on the date of search, the beneficial owner of shares (not being shares entitled to a fixed rate of dividend, whether with or without a right to participate in profits) carrying not less than twenty per cent of the voting power; and (B) in any other case, such person is, on the date of search, beneficially entitled to not less than twenty per cent of the profits of such business or profession. (1A) For the purposes of sub-section (1) of this section, the additional amount of income-tax payable in respect of the income disclosed in an application made under sub-section (1) of this section shall be the amount calculated in accordance with the provisions of sub-sections (1B) to (1D). (1B) Where the income disclosed in the application relates to only one previous year,- (i) if the applicant has not furnished a return in respect of the total income of that year, then, tax shall be calculated on the income disclosed in the application as if such income were the total income; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such report and the material contained in such report as well as on viewing overall circumstances and the complexity of the investigation involved, the Settlement Commission can either admit such application or reject the same after availing opportunity to the petitioner even at the threshold. The Settlement Commission is also empowered to call for relevant records from the Commissioner and he can also direct further inquiry or investigation; if so needed. Section 245D [4] authorizes the Settlement Commissioner to pass an order, after examining the records and reports of the Commissioner, after bipartite hearing. On due and careful examination of these materials as well as further evidence that may have been placed before it, the Settlement Commissioner in accordance with these provisions, may pass such order as he thinks fit in the matters covered by the application and in other matter 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). 6. The scope of judicial review under Articles 32 136 of the Constitution of India by the Apex Court and under Article 226 of the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has been incorporated in Section 245-D itself. The sole overall limitation upon the Commission thus appears, to be that it should act in accordance with the provisions of the Act. The scope of enquiry, whether by High Court under Article 226 or by this Court under Article 136 is also the same whether the order of the Commission is contrary to any of the provisions of the Act and if so, has it prejudiced the petitioner/appellant apart from ground of bias, fraud malice which, of course, constitute a separate and independent category. Reference in this behalf may be had to the decision of this Court in Sri Ram Durga Prasad v. Settlement Commission 176 I.T.R 169, which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji J., speaking for the Bench comprising himself and S.R Pandian, J. observed that in such a case this Court is concerned with the legality of procedure followed and not with the validity of the order.' The learned Judge added 'judicial review is concerned not with the decision but with the decision-making process. (Emphasis supplied) Reliance was placed upon the decision of the House of Lords in Chief Constable of the N.W. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation but referred to in the report of the Commissioner. The Bombay High Court referred to the case of Union of India v. Indo-Swift Laboratories Ltd. [2011] 4 SCC 635 wherein the Apex Court has held that, ..an order passed by the Settlement Commission could be interfered with only if the said order is found to be contrary to any provision of the Act. So far as the findings of the fact recorded by the Commission or question of facts are concerned, the same is not open for examination either by the High Court or by the Supreme Court. The Bombay High Court did not deem it justifiable to re-appreciate the findings of the fact, in exercise of the powers of judicial review against the findings of the Settlement Commission. 7.1 On allegation that the Settlement Commission imposed huge amount of penalty in complete disregard and violation of the principles of natural justice, the Bombay High Court found that the opportunities of hearing was made available and conclusion in respect of penalty of the commission were in consonance with the provision of law. 31. The first aspect of the matter which merits emphasis is that the petitioner moved the Settlement Commission spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome for which no records were available, without touching upon the real issues for which the applicant was being pursued by the Revenue. The Commission has, in our view, with justification come to the conclusion that the attempt on the part of the assessee was merely to create a smoke screen in order to shut out further investigation. In these circumstances, the view which has been taken by the Settlement Commission has been after complying with the principles of natural justice and after furnishing to the assessee an opportunity of being heard specifically on the issue of penalty. The Settlement Commission is bound by the mandate of the Act, which includes Section 274. The Settlement Commission has to hear the applicant on the question of penalty. The proceeding before the Settlement Commission cannot be disjointed into parts, particularly having regard to the time limit set for disposal. The Commission has furnished a reasonable opportunity of hearing to the\assessee and has heard him. No prejudice is shown. The Settlement Commission has imposed a penalty of ₹ 2.75 crores. Section 271(1)(c) provides for the imposition of a penalty where the assessee has concealed the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion made hereinabove, the facts of the instant case when examined, the petitioner made an application for settlement for the block period 1986-87 to 12.10.1995. As recorded hereinbefore, such application was made on 29th October 1996 and the same came to be admitted under Section 245D (1) of the Act on 24th December 1997. The petitioner is engaged in the business of real estate and construction activities and developed and constructed real estate scheme known as Samarpan Smrat Apartments at Surat. 11.1 Search under Section 132(1) carried out by the department on 12th September 1995 indicated from the documents seized that on-money receipts of the bookings made by the petitioner had not been recorded in the regular books of account. It appears from the decision of the Settlement Commission that it had also examined the investment in land total area of construction, nature of construction and undeclared income with reference to the on-money receipts. Total constructed area was 2000 Sq. Ft. and 4632 Sq. Ft. consisting of 88 residential flats, 10 offices and 24 shops. 11.2 The issue concerns addition of ₹ 47.34 Lacs for the block period on estimate basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hargeable under Sections 220 (2), 234A, 234B 234C of the Act, it applied the ratio laid down by the Apex Court in case of CIT v. Anjum MH Ghaswala [2013] 252 ITR 1/119 Taxman 352 and CIT v. Hindustan Bulk Carriers [2003] 259 ITR 449/126 Taxman 321 (SC) and the petitioner was granted immunity from levy of penalty and prosecution under the Income-tax Act and under the Indian Penal Code; subject to his paying the tax within stipulated time period and also subject to his fulfilment of other conditions under the statute. 12. It is reiteratively urged before us that the amount of ₹ 47.34 Lacs added by the Settlement Commissioner is completely arbitrary and there is no valid basis for such addition. It is also urged that giving such wide powers to any authority would lead to completely chaos and also would pave a way for arbitrary addition, which was never the legislative intent. 13. We are alive to the fact that core challenge essentially in this petition is to the exercise of powers and not to the amount Per Se. We are also conscious that wide powers are given to the Settlement Commission and with the powers go unfailing duty of their exercise in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nabove, in case of Jyotendrasinhji (supra), the Apex Court has noted that the Commission is required to condone the default and lapses on the part of the assessee and it may choose to wave interest, penalty or prosecution; as it may deem fit. The Court also noted that what would weigh with the Commission for making a particular Order is difficult to be predicted, unless the Commission chooses to give reasons for its order and whenever such reasons are given, the scope of inquiry would be - whether such order is contrary to the provisions of the Act and whether that had prejudiced the petitioner. 16. Applying such principles to the instant case, it will not be possible for this Court to uphold the contentions raised by the petitioner-firm that this is an act of arbitrary exercise of powers which has led to any serious bias to the case of the petitioner, warranting interference by us. Written submissions of petitioner also cannot be said to have been disregarded. Settlement Commission gave sufficiently cogent reasons based on material available and that too after availing sufficient opportunity of hearing to the parties. For a sufficiently long period in the materia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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