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TMI Blog2022 (4) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings before the ITSC fail on the ground of non fulfilment of conditions laid down under section 245 of the Act by the assessee, AO is required to decide the issue independently and is not permitted to make addition merely on the basis of suo-moto disclosure made by the assessee before the ITSC, which is undisputedly on adhoc basis. More particularly, when no incriminating material was found or seized during the search and seizure operation carried out on the basis of which assessment has been framed, any addition made otherwise is not sustainable. We are of the considered view that the Ld. CIT(A) has erred in upholding the addition made by the AO in the absence of any incriminating material, merely on the basis of suo-moto disclosure made by the assessee before the ITSC, as the said proceedings got aborted due to non fulfilment of conditions by the assessee, no addition is sustainable in the eyes of law. So the question framed is decided in favour of the assessee and against the Revenue. Consequently, addition made by the AO and confirmed by the Ld. CIT(A) is ordered to be deleted. Hence, appeal filed by the assessee allowed. - ITA No.274/M/2021 - - - Dated:- 5-4-2022 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000 1,17,620 26,17,620 2015-16 25,00,000 50,000 25,50,000 2016-17 25,00,000 50,000 25,50,000 2017-18 25,00,000 25,00,000 2018-19 25,00,000 25,00,000 TOTAL 1,7500,000 3,17,620 1,78,17,620 3. The aforesaid application filed by the assessee has been rejected by the ITSC on the ground that conditions under section 245C(1) were not fulfilled and the matter was returned to the Assessing Officer (AO). 4. Subsequently, a search and seizure operation was conducted on Hisaria Group under section 132 of the Income Tax Act, 1961 (for short the Act ) on 16.11.2017. The assessee is also one of the flagship concerns of Hisaria Group. Apart from assessing the total income offered by the assessee duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made disclosure before the ITSC purely on ad-hoc basis just to buy peace of mind and to avoid litigation and relied upon the decision rendered by Hon ble Bombay High Court in case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. and Anr. reported in 374 ITR 645, decision rendered by Hon ble Delhi High Court in case of CIT vs. Kabul Chawla reported in 380 ITR 573 and the decision rendered by co-ordinate Bench of the Tribunal in case of DCIT vs. Shivali Mahajan and vice-versa along with others (ITA No.5585/Del/2015 and CO No.447/Del/2015 dated 19.03.2019 Anantnadh Constructions and Farms (P.) Ltd. vs. DCIT (166 ITD 83). 9. However, on the other hand, the Ld. D.R. for the Revenue to repel the argument addressed by the Ld. A.R. for the assessee, relied upon the order passed by the Ld. CIT(A) and contended that the AO was well within his right to use the material brought before the ITSC by the assessee under section 245HA(3) of the Act. 10. In the backdrop of the aforementioned facts and circumstances of the case and argument addressed by the Ld. A.Rs for the parties to the appeal the sole question arises for determination in this case is: As to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade any inquiry that assessee has earned additional income of ₹ 5 lakhs as brokerage income. In the instant case, after reopening the assessment order, the AO had not made any inquiry and not examined the material which was before him that how this income was declared by the assessee and addition has been made simply relying upon the declaration made in the application before the Settlement Commission under section 245D. The AO was in possession of the paper relating to the income but in absence of any material no addition can be made. The Hon ble Gujarat High Court in the case of Commissioner vs. Maruti Fabrics 47 Taxmann.com 297 has held that whatever material is produced along with application by the assessee before Settlement Commission or result of inquiry held or evidence recorded by the Settlement Commission in course of proceedings before it can be used by the adjudicating authority as if same had been produced before such Central Excise Officer. Once application or proceedings before Settlement Commission fails, Central Excise Officer is required to adjudicate entire proceedings and show cause notice and Hon ble Gujarat High Court has held as under: Conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Excise Act this section is parallel to section 245C of the Income Tax Act. One primary condition mentioned in section 32E for filing central excise settlement petition is a show cause notice for recovery of duty issued by Central Excise Officer has been received . In Income Tax Act section 245C requires some pendency of proceedings. The Central Excise application is allowed or rejected vide order under section 32F(1). This section is parallel to section 245D(1). Section 32L gives the powers and procedure of Central Excise Settlement Commission. This section is similar to section 245F of the Income Tax Act. Section 32L gives the powers of the Settlement Commission to send the case back to the Central Excise Officer. Section 32L reads as under: 32L(1) The Settlement Commission may, if it is of opinion that any person who made an application for settlement under section 32E has not co-operated with the Settlement Commission in the proceedings before it, send the case back to the Central Excise Officer having jurisdiction who shall thereupon dispose of the case in accordance with provisions of the Act as if no application under section 32E had been made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ₹ 1 lakh. The Settlement Commission has further held that when admitting the petition of the assessee for assessment year 2005-06, this aspect was overlooked and that they are rectifying the apparent error by excluding assessment year 2005-06 of the assessee from the process of settlement. Thus, the case of the assessee for assessment year 2005-06 cannot be considered to have been admitted for the process of settlement under section 245D(1) of the Act. Consequently, the confidential information disclosed in the Annexure to the Settlement application could not have been used by the Assessing Officer against the assessee to make the impugned addition. Therefore, the addition to the income made by the Assessing Officer in assessment year 2005-06 which is based only on the disclosure made in the Annexure to the Settlement Commission is not valid in law. Consequently, the imposition of penalty on the basis of such invalid addition cannot be sustained. In view of the above conclusion, we do not wish to go into the other alternate argument of the learned counsel for the assessee regarding abatement of proceedings before Settlement Commission and use of confidential information dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence recorded by the Settlement Commission in the course of 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. 21. Thus, when a proceedings before the Settlement Commission abates, it reverts to the income-tax authority before whom it was pending at the time of making the application for settlement and the incometax autho-rity has to dispose of the case in accordance with the provisions of the Act as if no application for settlement had been made and for that purpose, it is entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it. 19. We find from the above proposition of law by Hon ble Gujarat High Court and Tribunal that simply relying upon the declaration made before the Settlement Commission no addition can be made. In this group case, the search was conducted in the business premises of Lodha Gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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