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TMI Blog2020 (11) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating documents were seized. Subsequent to the search, the assessee was issued with notices under Sections 153A/153C/142(1) of the Act for the Assessment Years (AYs) 2005- 06 to 2011-12. 1.b) In pursuance of the said notices, the assessee filed a Settlement Application under Section 245C of the Act on 25.01.2012 before the Income Tax Settlement Commission (ITSC) disclosing additional income of Rs. 11,50,09,902/- Crores for the AYs 2007-08 to 2011-12. On 07.02.2012, the ITSC rejected the said application under Section 245D(1) of the Act for non-payment of taxes on the additional income disclosed in the Settlement Application and did not allow the same to be proceeded with. Thereafter, on 30.04.2012, the assessee filed its returns of income for the AYs 2007-08 to 2011-12. 1.c) Subsequently, on 26.11.2012, the assessee filed another Settlement Application under Section 245C of the Act before the ITSC, disclosing an additional income of Rs. 9,65,10,102/- for the AYs 2007-08 to 2011-12. By an order dated 10.12.2012, the ITSC allowed the Settlement Application to be proceeded with under Section 245D(1) of the Act. The reports under Section 245D(2B) were then called for from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication under Section 245D(1) of the Act for non-payment of taxes on the additional income disclosed in the Settlement Application and did not allow the same to be proceeded with. Thereafter, on 17.04.2012, the assessee filed its returns of income for the AYs 2005-06 to 2010-11 and the returns for the AYs 2011- 12 were filed on 28.11.2011. 2.c) Subsequently on 26.11.2012, the assessee filed another Settlement Application under Section 245C of the Act before the ITSC, disclosing an additional income of Rs. 1.67 Crores for the AYs 2007-08 to 2010-11. Though the assessee had disclosed the same total income of Rs. 1.67 crores both in the 1st and 2nd applications, an income of Rs. 47 lakhs was deferred in the second application for AYs 2007-08 to 2010-11. By an order dated 10.12.2012, the ITSC allowed the Settlement Application to be proceeded with under Section 245D(1) of the Act. The reports under Section 245D(2B) were called for from the Department and on being satisfied with the conditions stipulated in Section 245D(2C) of the Act, the ITSC held that the Settlement Application covering AYs 2005-06 to 2010-11 cannot be said to be invalid. On receipt of the report under Rule 9 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 245HA (1) (i) and the Assessing Officer is entitled to use all the material produced by the Assessee before ITSC. Therefore, when the disclosure of income in the second Settlement Application was less than the income disclosed in the first application in WP No. 34040 of 2014 and an income of Rs. 47 lakhs was deferred in the second application in WP No. 34041 of 2014, disclosure of the income cannot be construed to be a full and true disclosure. It is also his submission that since the additional amount of income tax payable on the disclosed income in the second Settlement Application has not exceeded, at least by Rs. 50 lakhs as contemplated under proviso (i) of Section 245C(1) of the Act, the second application ought not to have been entertained by the ITSC. In support of his contentions, the learned Senior Standing counsel relied on various case laws. 6. Mr. R. Sivaraman, learned counsel for the assessee submitted that the grounds raised by the petitioner are not such of those permissible exceptions to maintain a Writ Petition against the award of the ITSC. Insofar as the claim that there was no true and full disclosure in the Settlement Application is concerned, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.67 crores in the 1st and 2nd applications, an income of Rs. 47 lakhs was deferred in the second application for AYs 2007- 08 to 2010-11. 11. Section 245C of the Act enables the assessee to file an application at any stage of a case relating to him with a "full and true disclosure of his income", which income was not disclosed before the Assessing Officer. It is also mandated that the application should disclose the manner in which such undisclosed income was derived and the additional amount of income tax payable on such income requires to be disclosed. On receipt of the application, the ITSC calls for a report from the Commissioner under Section 245D(2B) of the Act and on the basis of the material contained in the report and having regard to the nature and circumstances of the case or complicity of the investigation involved therein, it can either reject an application or allow the application to be proceeded with, as provided in Section 245D(1) of the Act. 12. There is no bar for filing of a second application before the ITSC, when the earlier application was 'not allowed' to be proceeded with under Section 245D(1) of the Act. Section 245K(2) of the Act prohibits a subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36 20970917 10719875 546292 64104017 Details provided by DEPARTMENT: FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 TOTAL Below Rs. 20,000 3431645 42180414 107574758 125890241 613489 279690547 Below Rs. 20,001 4913578 31041860 20970917 24101283 722742 81750380 The details given by the department came to be accepted by ITSC and while the donations of less than Rs. 20,000/- amounting to Rs. 27,96,90,547/- was allowed, donations of above Rs. 20,000/- amounting to Rs. 8,17,50,380/- was added back for want of full and complete details. Accordingly, the first respondent's total income of Rs. 20,67,65,123/- came to be settled through the impugned award. 16. Thus, it would be seen that the ITSC, had determined the suppression in income, as well as the anonymous donations, based on the inputs of both the parties and had thus rendered a factual finding. The settlement of the additional income was also on the basis of mutual consent by both the Assessee, as well as the Department, to accept cash donations of less than Rs. 20,000/-. Such a factual finding of the ITSC, cannot be interfered with, by this Court by exercising its powers under A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application. 19. The Assessee in Ajmera Housing Corporation had revised their additional income in the application under Section 245C(1), on three occasions after their first disclosure, at different stages of the case. The mode of comparison adopted by the Hon'ble Supreme Court to determine the failure to disclose the full and true income, was between the income/revised income disclosed in the settlement application and the income disclosed in the returns filed before the Assessing Officer. In this background, the Hon'ble Supreme Court had held that there is no stipulation for revision of an application under the Scheme of Chapter XIX-A and if such revision is permitted, it would amount to withdrawal of the original application, which is impermissible in view of sub-section (3) of Section 245D. The relevant portion of the order reads thus:- "26. .... It is plain from the language of subsection (4) of Section 245D 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncomes in the application under Section 245C vis-à-vis the income declared in the returns filed by that assessee earlier, the present facts are totally divergent wherein the Department is attempting to point out the difference in the disclosures of income of the assessee, between the first and second applications. Likewise in Ajmera Housing Corporation, while the Commissioner had raised objections for non-disclosure of full and true income at the stage of Section 245D(1) proceedings, the Department in the present case, had not raised any objections, either at the stage of Section 245D(1) or 245D(2C) proceedings and such objections are now raised for the first time in these Writ Petitions. 21. Thus, when the assessee, in the second application, had disclosed such income which was not disclosed before the Assessing Officer and had set forth the manner in which such additional income has been derived and had not repeatedly revised his disclosure of income in the application during the pendency of the proceedings and the Department having failed to raise any objections for non-disclosure of full and true income, either at the stage of Section 245D(1) or 245D(2C) of the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for settlement. Being aggrieved, the Assesssee carried the issue in appeal before the Division Bench, which allowed its appeal. This by holding that the Commission had come to a finding that there is no full and true disclosure of the Assessee's income in its application for settlement. Therefore, on the basis of the above finding that there is no true and full disclosure, the Court held that the application for settlement had to be rejected. The rejection of the application for settlement by the Division Bench was not on the basis that the amounts disclosed in settlement proceedings is a ceiling for the quantum of settlement. Therefore, the basis of the Madras High Court's decision is not premised on the fact that the income of the Petitioner determined for settlement is higher then that disclosed. The submission of the Petitioner that the above decision leads to an inescapable conclusion that settlement of income at a higher figure than that disclosed in Settlement Application, is evidence of failure to make a full and true disclosure in the Settlement Application made by the Applicants, cannot be accepted. 8. In any case, if we read the Madras High Court's order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do not see any merit in the above submission on behalf of the petitioner." 25. In Commissioner of Income Tax (C) -III Vs. Gopal Gupta reported in 2014 (46) taxmann.com 312 (Delhi), a Hon'ble Division Bench of the Delhi High Court had rejected the contentions of the Department that the assessee had not given a full and true disclosure by holding that the interpretations of the assessee has been accepted by the Settlement Commission and therefore, the Hon'ble Division Bench was of the view that the contentions of the Department , that the assessee had indulged in misrepresentation and not made a full and true disclosure, was rejected. In this background, the Bombay High Court had held that such factual issues cannot be reviewed under Article 226 of the Constitution of India. The relevant portion of the order reads thus:- "15. From the above, it is evident that the Supreme Court observed that the High Court ought not to gone into a factual issue while exercising writ jurisdiction and should not have substituted its opinion against the opinion of the Settlement Commission. From all these decisions, it is abundantly clear that the scope of review under Article 226 of the Consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedural requirements of the provisions in Chapter XIX-A of the Income Tax Act, 1961, and/or violation of the rules of natural justice are made out; or (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission. The court cannot interfere either with an error of fact or error of law alleged to have been committed by the Settlement Commission." More recently, the Supreme Court in Union of India V. Indo-Swift Laboratories Ltd., [2011 (4) SCC 633] observed as follows at page 643: "An order passed by the Settlement Commission could be interfered with only if the said order is found to be contrary to any provisions of the Act. So far as the findings of 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. In the present case the order of the Settlement Commission clearly indicates that the said order, particularly, with regard to imposition of simple interest @ 10% per annum was passed in accordance with the provisions of Rule 14 but the High Court wrongly interpreted the said Rule and thereby arrived at an erroneous fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 245C. (1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed 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, Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings before it, as if such material, information, inquiry and evidence had been produced before the Assessing Officer or other income-tax authority or held or recorded by him in the course of the proceedings before him. (Emphasis supplied) 32. On a conjoint reading of Section 245HA together with Sections 245C(1) and 245D(1), an Assessing Officer, for the purpose of assessment, would be empowered to use all material, information, inquiry and evidence produced by the Assessee in his original application under Section 245C, which had abated in view of Section 245HA(1)(i), pursuant to the rejection order under Section 245D(1). While empowering so, the legislature has consciously excluded use of the 'income disclosed' by the Assessee in the earlier application under Section 245C(1), which had abated, but rather had authorized the Assessing Officer to use the 'information' produced by him before the ITSC, in support of his income disclosed at that point of time, for the purpose of the proceedings before him. Such a permission to use the 'information' cannot be or include a permission to use a 'disclosure', since 'information' and 'disclosure' are distinct. 33. While 'infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, when the Income Tax law does not empower the Assessing Officer to rely on the income disclosed in the earlier proceedings that had abated before the ITSC, the Department is not justified in making a comparison with such an income and thereby find fault with the ITSC's decision making process in the impugned proceedings. 37. To the next submission of the Department that since the additional amount of income tax payable on the disclosed income in the second Settlement Application has not exceeded, at least by Rs. 50 lakhs as contemplated under proviso (i) of Section 245C(1) of the Act, the second application ought not to have been entertained by the ITSC, the Counsel for the assessee would point out that the submission is factually incorrect since the additional income tax payable on the disclosed incomes in both the applications seems to exceed Rs. 50 lakhs. In reply, the Department did not controvert such a submission. A perusal of the impugned awards also reveal that the assesses have declared a sum of Rs. 1.65 and Rs. 1.67 crores respectively as income in their respective settlement applications before the ITSC and the additional amount of income tax payable on such income e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt 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, apart from ground of bias, fraud and malice which, of course, constitute a separate and independent category has it prejudiced the petitioner/appellant. Reference in this behalf may be had to the decision of this Court in R.B.Shreeram Durga Prasad & Fatehchand Nursing Das V. Settlement Commission [1989] 176 ITR 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 the validity of the order'. The learned Judge added 'judicial review is concerned not with the decision but with the decision making process'. Reliance was placed upon the decision of the House of Lords in Chief Constable of the N.W.Police V. Evans [1982] 1 WLR 1155. Thus, the appellate power under article 136 was equated to power of judicial review, where the appeal is directed against the orders of the Settlement Commission. For al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on had passed orders in terms of Section 245D(4), enquiries were conducted by the CBI, which revealed that there was fraud and misrepresentation of facts. It is in this background, the Hon'ble Supreme Court had held that when the order was obtained on fraud and misrepresentation of facts, it cannot be said that there was a true and fair disclosure. The relevant portion of the order reads as follows: "19.There is a purpose why the legislature has prescribed the condition relating to declaration of the order void when it is obtained by fraud or misrepresentation of facts. It cannot be said that there has been a true and fair declaration of income which is the pre- requisite for settlement by the Commission. If an orderis obtained by fraud or misrepresentation of facts, it cannot be said that there was true and fair disclosure. It was noted here that unlike Section 139 of the Act which provides for filing of revised return, there is no provision for revision of an application made in terms of Section 245C. That shows clear legislative intent that the applicant for settlement has to make a true and fair declaration from the threshold. It is on the basis of the application receive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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