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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 ..... t Commission. 3. The appellant craves leave to add to, alter, amend and/or delete in all the foregoing grounds of appeal." 2. Briefly stated facts necessary for adjudication of the controversy at hand are : the assessee is into the business of trading of shares and commodities, carried out in the name and style of M/s. P.R. Enterprises being a proprietary concern. The assessee is also a partner in a firm namely M/s. H.K. Enterprises. During the year under assessment the assessee has earned income from profits and gains from business or profession and income from other sources and filed return of income on 27.09.2013 declaring total income of Rs. 32,82,420/-, which was subjected to scrutiny. Subsequently, the assessee filed an application before Hon'ble Income Tax Settlement Commission (ITSC) for A.Y. 2012-13 to 2018-19 on 27.12.2019 by disclosing following income: A.Y. Adhoc Disallowance of Business expenses Further adhoc disallowance of expenses Total Additional Income 2012-13 25,00,000 50,000 25,50,000 2013-14 25,00,000 50,000 25,50,000 2014-15 25,00,000 1,17,620 26,17,620 2015-16 25,00,000 50,000 25,50,000 2016-17 25,00,000 50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "no incriminating material" has been unearthed/seized qua the year under consideration. It is also not in dispute that the AO has made the addition on the basis of admission of the assessee qua the additional income of Rs. 25,50,000/- made before the ITSC by virtue of his application dated 27.12.2019 filed under section 245C of the Act. 8. Challenging the impugned order passed by the Ld. CIT(A), the Ld. A.R. for the assessee contended inter alia; that since "no incriminating material" has been found or seized qua the addition made by the AO the same is not sustainable in the eyes of law; that the assessee has 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 & Anan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D(1) of the Act, then the provisions are clear that confidential information can never be passed on to the AO nor can it be used in evidence against the assessee. Section 245D(4) has clearly held that admission of assessee's application under section 245(1) was incorrect. We find that any confidential information disclosed in annexure to the settlement application before Income Tax Settlement Commission can never be the basis to make the addition. We find that in the instant case, the AO has reopened the assessment under section 147. Thereafter, AO has not brought any evidence or made any inquiry that assessee has earned additional income of Rs. 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. Marut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs before the Settlement Commission fails, the Central Excise Officer is required to adjudicate the entire proceedings and show cause notice. Under the circumstances, so far as proposed question of law No.1 is concerned, the present Tax Appeals deserve to be dismissed and are, accordingly, dismissed by answering the proposed question of law No.1 against the Revenue." 14. Respectfully following the same, we hold that Hon'ble Gujarat High Court's judgment in the case of Maruti Fabrics pertains to Central Excise but if we compare central excise under section 32E of 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. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT has specifically held in para 22 which reads as under: "22. The first issue is whether the case of the assessee for assessment year 2005-06 was admitted by the Settlement Commission under section 245D(1) of the Act? On this issue, we have already seen that in the order dated 30-11-2007 under section 245D(4) of the Act, the Settlement Commission has clearly held that the assessee for assessment year 2005-06 does not satisfy the criteria of offering income on which at least an income-tax payable should exceed Rs. 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 ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C had been made. (3) For the purposes of sub-section (2), the Assessing Officer or as the case may be, other income-tax authority, shall be 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal in cases of Anantnadh Constructions and Farms (P.) Ltd. (supra) & Shivali Mahajan (supra), we are of the considered view that when the proceedings 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. 15. In view of what has been discussed above, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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