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TMI Blog2023 (2) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... ound to be rejected on this ground alone. The above facts clearly demonstrate that the respondents had not made a full and true disclosure before the Settlement Commission. The Settlement Commission should have noticed and examined the fact itself, as it is a pre-condition for an application under section 245C of the Act of 1961 that the applicant makes a true and full disclosure of their income which has not previously been disclosed, or at subsequent stage when further disclosure was brought to their notice at the time of filing of the application for rectification. Accordingly, we are of considered view that the application before the Commission deserved to be rejected as the respondents had not made true and full disclosure of their undisclosed income. This issue is decided in favour of the petitioner. Jurisdiction of the Settlement Commission - Validity of order of settlement commission adjusting the receipts in the account of DR A.K. Sanchan toward the income of applicants - Manipulation by the respondents and the two assessees who were not before the Commission but were part of search seizure operation is evident from the fact that appeal was filed by Dr A. K. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant on the basis of evidence and material before it. The Commission while exercising power of the assessing officer will have to make necessary inquiry or it can also direct the Commissioner of Income Tax to make necessary inquiry and inform the Commission of the outcome of such inquiry. Therefore, it is abundantly clear that the Commission while settling any matter has to do the same in accordance with the provisions of the Act and where required will have to pass necessary orders giving reasons for allowing any release or exemption in favour of the applicants. Waiver off interest in favour of the respondents - The Settlement Commission, in a mechanical manner, waived off the interest without considering whether the matter of the respondents was covered by the circulars of the Board, and waiving off the interest in such a manner, which may indicate that statutory interest payable under sections 234A, 234B and 234C has also been waived which is clearly beyond the competence and jurisdiction of the Commission. Accordingly, this issue is decided in favour of the petitioner. This Court takes a very serious view of the facts placed before it and it is expected that the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laji Charitable Trust ₹ 1,69,04,560/- 3. Shekhar Hospital (P) Ltd ₹ 4,84,46,020/- 4. The Settlement Commission on receipt of the application, decided to proceed further with the application, and sent a copy to the concerned Principal Commissioner of Income Tax seeking his response as per Rule 9 of the Income Tax Settlement (Procedure) Rules, 1997 and finally settled the matter rejecting the objections raised by Income Tax Department vide impugned order dated 19/22.8.2016. 5. Present Writ Petition was filed challenging the order of the Settlement Commission. During pendency of the present petition the Settlement Commission further proceeded at the behest of only two of the applicants to rectify the order in exercise of the powers under Section 245D(6B) of the Income Tax Act, 1961(hereinafter referred to as Act of 1961 ) and gave further benefit to the applicants by order dated 17.02.2017 which has also been assailed in the present petition, after amendment to the writ was carried out. THE PARTIES BEFORE THE SETTLEMENT COMMISSION : 6. Applications before the Settlement Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts in the said bank accounts were sought to be attributed as income of M/s Hind Charitable Trust. It was submitted that Dr A. K. Sachan was not a party before the Commission, nor did he appear before the Commission. He did not give any evidence, hence, the Commission could not have returned finding in this regard in favour of respondents. C. It was further submitted that Dr A. K. Sachan was subjected to regular assessment, and the Income Tax department had assessed the receipts found in the undisclosed account as his income, which could not have been subject matter for Settlement before the Commission as it no longer remained undisclosed income . Further it was never the stand of Dr. A. K. Sachan that the income belongs to someone else and not him. Therefore the impugned order is illegal and without jurisdiction. D. The order of Commission dated 17.02.2017 has also been assailed on the ground that while allowing the rectification application the Commission has materially altered and reviewed its initial order dated 19/22.08.2016, on the basis of newly pleaded facts, which was without jurisdiction as the Commission does not have any power of review. E. The Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent and more elaborate than the said provisions in the 1922 Act. The proceedings under this chapter commence by an application made by the assessee as contemplated by Section 245-C. Section 245-D prescribes the procedure to be followed by the Commission on receipt of an application under Section 245-C. Sub-section (4) says: After examination of the records and the report of the Commissioner, received under sub-section(1), and the report, if any, of the Commissioner received under sub-section(3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any 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). Section 245-E empowers the Commission to re-open the completed proceedings in appropriate cases, while Section 245-F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee and may waive interest, penalties or prosecution, where it thinks appropriate. Indeed, it would be difficult to predicate the reasons and considerations which induce the Commission to make a particular order, unless of course the Commission itself chooses to give reasons for its order. Even if it gives reasons in a given case, the scope of enquiry in the appeal remains the same as indicated above viz., whether it is contrary to any of the provisions of the Act. In this context, it is relevant to note that the principle of natural justice (audi alteram partem) 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/appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings the assessee had voluntarily surrendered ₹ 8.00 crores as undisclosed income in the following manner. ₹ 5.00 crore was said to be undisclosed income by Ms. Richa Mishra, ₹ 1.50 crores by Sri Balaji Charitable Trust and ₹ 1.50 crores by Shekhar Hospitals Private Limited but in the applications made before the Commission the said figures were changed. The income and disclosure was made of ₹ 1,93,16,254/- by Dr. Richa Mishra, ₹ 1,69,04,560/- and ₹ 4,84,46,020/- by M/s Balaji Charitable Trust and Shekhar Hospital, respectively. It was further stated that the applications were filed by the department on 7.7.2015 to conduct further inquiries but no orders were passed by the Commission. Finally, it was also argued that a sum of ₹ 1.20 crores the alleged receipts from Sri B. D. Agarwal with Allahabad Bank, was for the first time disclosed and considered in rectification application. This was sufficient to place the matter beyond any doubt that the respondents had not made true and full disclosures of the income and, hence, blatantly violated the statutory requirement of Section 245(C) of the Act. The receipt of ₹ 1.20 crores was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious accounts. On the basis of the material collected by the department it was of the considered view that M/s Balaji Charitable trust was not entitled for any deduction under section 10 (23-C) of the Act of 1961 as it does not fulfill the twin conditions prescribed for the application for eligibility for deduction under the said provision, in as much as, the educational institution does not exist solely for the purposes of education but for profit considering the huge amount of cash deposits received by it, and also that it's aggregate annual receipt exceeded the limit prescribed as per Rule 2 (B-C) of the Income Tax Rules. According to the records it was stated that the group is being managed and controlled by Ms. Richa Mishra and Dr A.K Sachan. 15. After examining the accounts of the M/s Balaji Charitable Trust, it was further submitted that the trust is not only engaged in profitable activities but had also diverted the funds for personal benefits of the trustees, as per the statement made by the trustee herself during the proceedings under section 132(4) of the Income Tax Act. It was urged that the entire deposits in the account should be treated as the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits in the account of Axis Bank, Indira Nagar in the name of Dr A. K. Sachan amounting to ₹ 3,57,92,000/- but has gone back on her version offered only ₹ 1,30,40,256/- as additional and total income for the assessment years 2010-11 2011-12. 18. During the search proceedings ₹ 79.00 lakhs in cash was found at the residence of Ms Richa Mishra and Dr A. K. Sachan and according to the statement made during search it was informed that the said amount was received as admission fee from the guardian of the students, but before the Settlement Commission it was stated that the said amount belongs to Hind charitable trust and the same is as per their books of accounts. It was the stand of the department that the books were prepared post the search and no evidence could be produced in support of this said cash found at the residence. 19. In the report the department had proposed income of Dr Richa Mishra to be ₹ 13,87,96,615/- while she had offered only ₹ 1,93,16,254/- and on this basis it was stated that the applicant has not made a full and true disclosure of the income for all the years, hence, the application was liable to be rejected. 20. Ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o furnish such report within a period of 45 days from the date of communication by the Settlement Commission. Thereafter, the Settlement Commission, on the basis of the material contained in the said report and having regard to the facts and circumstances of the case and/or complexity of the investigation involved therein may by an order, allow the application to be proceeded with or reject the application. After an order under Section 245D(1) is made, by the Settlement Commission, Rule 8 of the 1987 Rules mandates that a copy of the annexure to the application, together with a copy of each of the statements and other documents accompanying such annexure shall be forwarded to the Commissioner and further report shall be called from the Commissioner. The Settlement Commission can also direct the Commissioner to make further enquiry and investigations in the matter and furnish his report. Thereafter, after examining the record, Commissioner's report and such further evidence that may be laid before it or obtained by it, the Settlement Commission is required to pass an order as it thinks fit on the matter covered by the application and in every matter relating to the case not cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 245C(3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said Section is instructive in as much as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and, in the process, rendering the provision of subsection (3) of Section 245C of the Act otiose and meaningless. In our opinion, the scheme of said Chapter is clear and admits no ambiguity. x x x x 28. As afore-stated, in the scheme of Chapter XIXA, there is no stipulation for revision of an application filed under Section 245C(1) of the Act and thus the natural corollary is that determination of (1921) 1 KB 64 (2000) 6 SCC 550 1961 (2) SCR 189 income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said Section in the presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assets. In the present case, it is evident that the applicant has made certain disclosures before the income tax authorities during the search operations and has also submitted an affidavit to this effect. The income tax authorities in their report before the Commission have duly informed the Commission that the assets and receipts of the applicant are much more than what has been disclosed before the Settlement Commission. There is a huge variation in the amounts disclosed by the applicant Ms. Richa Mishra while filling the application before the Settlement Commission and all these facts were duly bought to the knowledge of the Commission. The Settlement Commission was bound to consider the material recovered during search and placed before the Commission in the reply filed by the department, and could have rejected the stand of the department, but not taking cognizance of the reply of the department and not dealing with the issue the Commission has acted arbitrarily. 25. It is further seen from the language of sub-section (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 covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TING THE RECEIPTS IN THE ACCOUNT OF DR. A. K. SACHAN TOWARD THE INCOME OF THE APPLICANTS: 27. The argument of the petitioner was that the jurisdiction of the Settlement Commission limits only to passing the orders with regard to undisclosed income of the applicants. Number of undisclosed income of Dr. A. K. Sachan was duly taken into consideration by the Assessing Officer in his assessment for the assessment year 2012-13. Once the receipts in the said accounts had been assessed as income of Dr. A. K. Sachan during regular assessment proceedings then the same could not have been considered by the Settlement Commission as undisclosed income of the respondents and such an issue could not have been considered by the Commission. There was no material before the commission for holding that the receipts in the said bank accounts held by Dr A. K. Sachan were income of M/s Shekhar Hospital (Pvt.) Ltd. 28. Submission of Sri D.D. Chopra, Senior Advocate, learned counsel for the respondents is that the Commission was within its competence to return a finding with regard to the receipts in the account of Dr. A.K. Sachan. His argument was that the said income was being claimed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider the objection raised by the department. But by not taking into consideration such objections, the Commission has acted arbitrarily and against the statutory provisions which mandate the Commission to adhere to the principles of natural justice while exercising its jurisdiction. Once the income has already been assessed at the hands of Dr. A.K. Sachan it no longer remained undisclosed income and in that regard to such an issue the Settlement Commission could not have passed any order as it was beyond its jurisdiction as per clear provisions of Section 245 of the Income Tax Act. Deciding the said issue merely at the behest and assertion of the respondents by the Commission and holding that the receipts in his bank account was income of M/s Shekhar Hospital Pvt. Ltd. is arbitrary and abuse of power vested in it. Such a procedure, and findings are clearly perverse and contrary to the settled judicial norms and beyond jurisdiction of the Commission. The impugned order is liable to the set aside on this ground alone. 32. When the matter has been duly contested by the department and material was adduced, it was incumbent upon the Commission to have examined the objections raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(6B) of the Act was preferred by the applicants on the ground that for the assessment year 2012-13 there was deposit of ₹1.20 crores which was received from the bank accounts of M/s B. D. Agarwal. As discussed, earlier 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 No. 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 instructive in as much as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Hence, the revision of income sought to be made in the application for rectification was not permissible, and the Commission has exceeded its jurisdiction by entertaining such an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the applicants. WAIVER OF INTEREST 38. The Commission has waived off interest in favour of the respondents. This issue has been settled by the Hon ble Supreme Court in Anjum M.H. Ghaswala and others' case (supra) and the other High Court in Brij Lal and others vs. Commissioner of Income Tax, Jalandhar (2011) 1 SCC 1 . In Anjum M.H. Ghaswala and others' case (supra) it was held : 35 . For the reasons stated above, we hold that the Commission in exercise of its power under Sections 245D(4) and (6) does not have the power to reduce or waive interest statutorily payable under Sections 234A, 234B and 234C except to the extent of granting relief under the circulars issued by the Board under Section 119 of the Act. 39. The Settlement Commission, in a mechanical manner, waived off the interest without considering whether the matter of the respondents was covered by the circulars of the Board, and waiving off the interest in such a manner, which may indicate that statutory interest payable under sections 234A, 234B and 234C has also been waived which is clearly beyond the competence and jurisdiction of the Commission. Accordingly, this issue is decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side, to do complete justice, we grant liberty to the department to avail of appropriate remedy against the order passed by the Commissioner of Income Tax (Appeals) dated January 17, 2019 in the appeal filed by Dr. A.K. Sachan. If any such remedy is availed of within a period of one month from the date of receipt of copy of the order, the same shall not be rejected only on account of delay and shall be considered on merits. 41. We also feel to observe that the conditions as contained in the circular issued by Central Board of Direct Taxes regarding filing or pursing the appeals at different levels may have to be revisited and certain exceptions may have to be carved out to take care of cases like the one in hand. 42. It has also been brought on record that Dr. A. K. Sachan is a Doctor working as Professor in King Georges Medical University, Lucknow. This fact has come on record as well as in the report submitted by the Commissioner of Income Tax. It is surprising that a person working in a State University is a Director of a private entity and despite huge amounts of money have been found in his personal account including cash during search operations, no action has been take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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