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TMI Blog2024 (4) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... C to examine all such questions and render its decision, enabling the assessee to obtain closure of all disputes. Viewed in that light, it would be wholly incorrect for the writ petitioner to assert that the respondent had failed to make a full and true disclosure. What the law proscribes is an applicant seeking to either amend an application or taking contrarian positions in proceedings before the ITSC. As was explained by the Supreme Court in Ajmera Housing [ 2010 (8) TMI 35 - SUPREME COURT] , the sine qua non for a settlement order being entered is a full and true disclosure of income being made by the applicant. As the Supreme Court explained, what is impermissible is a revision of a disclosure. A particular contention with respect to taxability and which is made in order to invite a conclusive pronouncement from the ITSC cannot possibly be viewed as a revision of the application made. In our considered opinion, therefore, in the facts of the present case, the test of full and true disclosure had clearly been met. We note that the ITSC while accepting the surrender of income, has not indicted the respondent-assessee. It has taken note of the perceived conflict in versions which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SHWANT VARMA, J. 1. The Principal Commissioner of Income Tax [PCIT] seeks to invoke our jurisdiction conferred by Article 226 of the Constitution and impugns the order passed by the Income Tax Settlement Commission [ITSC] dated 26 March 2014. In terms of the aforesaid order, the ITSC has settled the total liabilities payable by the respondent-assessee for the block assessment period of 1995-96 to 25 May 2000. In addition to settling the total tax liability, it has also accorded immunity to the respondent from prosecution and penalties imposable under the Income Tax Act, 1961 [Act]. 2. The principal ground of challenge which was addressed before us flowed from the manner of disclosure made by the respondent and insofar as it related to the purchase of a land parcel admeasuring 20 acres. The petitioner principally asserts that since the respondent had failed to surrender the amount representative for the aforenoted transaction to tax in the statement filed before the ITSC, the acceptance of settlement is clearly vitiated and the order passed by the ITSC liable to be quashed on this ground alone. It was their contention that the petitioner had struck contradictory stands before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was received. The failure of the agreement is attributed to various practical obstacles which the respondent faced, including the refusal of clearance by the Airport Authority of India. 7. Dealing specifically with the aforesaid transaction, the assessee had taken the following stand before the ITSC: - "It may be explained that the applicant company was incorporated with the main objective of installation of LPG Bottling Plant. For the installation of the plant, land measuring about 20 acres was purchased near the Calcutta Airport. However, keeping in view the explosive nature of the business activity and land being very near to the Airport, Airport Authority of India has denied permission to the applicant company for installation of the said plant. In view of the above, it was decided by the management for disposing off the said land and an agreement was first entered into in 1996 with M/s Spring Field. However, due to certain unavailable circumstances, the deal was not materialised and another agreement was later entered into with Sh. S.K. Jain through his associated concern M/s P.K. Jain and Associates for sale of the land for a total consideration of Rs. 5.10 crore vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Commissioner of Income Tax [CIT]. The CIT in its report while dealing with the asserted sale with respect to the land in question had submitted as under: - "…Search and seizure operation u/s 132(1) of the IT Act 1961 was carried out in this case on 25.05.2000 and concluded on 13.07.2000. Notice u/s 158-BC was served on the assessee on 03.05.2001 to file the return within 15 days of the service of the notice. The return of income in Form No. 2 B for the block period from 01.04.1990 to 25.05.2000 relevant for the A. Yrs. 1991-92 to 2001-02 had been filed by the assessee on 11.06.2001 declaring undisclosed income of NIL. The income of the assessee for the block period has been assessed at Rs. 24751000/- vide order u/s 158-BC dated 31.07.2002. Against the order of the AO the assessee has moved an application before the Income tax Settlement Commission, New Delhi and the application has been admitted and the order u/s 245-D(1) has been passed admitting the application to be processed with for the block period as also for the A.Ys. 2001-02 and 2002-03. The prime issue for consideration in this case is regarding the nature of transaction on account of which the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained through the mediator Sh. Dinesh Sharma. [Copy of account placed at page-29 of the paper book]. III. The statement of Sh. S.K. Jain reproduced at page 21 to 23 of the assessment order wherein he has clearly stated to be engaged in the business of providing accommodation entries. (Copy of statement is placed at pages 13 to 28 of the paper book.) IV. The statement of A K Goel, Director of Aasheesh Securities Ltd. reproduced at pages 17 to 21 of the assessment order wherein he has explained the modus operandi followed in providing accommodation entries and has categorically stated that M/s PK Jain & Associates and M/s Royal Investment were used by Sh. S.K. Jain for providing accommodation entries. (The copy of statement of Sh. A.K. Goel is placed at pages 31 to 46 of the paper book.) V. The agreement to sell dated 18.02.1999 is an after thought and cannot be relied upon for reasons mentioned at pages 30 to 37 of the assessment order and summarized in Para-5 above. It is seen from the back of the Stamp paper that overwriting has been done at S. No., of the Register of Stamp Vendor. The address of the Stamp vendor is not available/legible and the Department is not in a positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent that the amount was received as advance on account of sale of land. c. There are entries in one seized diary where the cash has been shown as received and the cheques were issued. The Commission has gone through the contention of the CIT through Ld. CIT (DR) and found the same not without merit. The Commission has also observed that the applicant has not been able to give a satisfactory explanation regarding this allegation. Accordingly, the view of the Commission was confronted to the applicant for his comments. The applicant has thereafter offered voluntarily to surrender the said amount along with the amount of entry charges @1% on the amount of entry. Hence amount of Rs. 2,33,50,000/- plus Rs. 2,33,500/- are being incorporated in the hands of the applicant for the block period. Hence total addition of Rs. 2,35,83,500/- is being made in addition to the amounts declared in ROI and SOF. 4.7 The applicant, in this regard, has submitted a letter dated 06.03.2014 in which he has offered the above discussed amount for settlement of the case. The said letter is reproduced as under: "...1. Honorable Commission was please to hear the above matters under section 245D(4) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent past practice of the Honourable Commission in excluding the period from the date of filing of the application upto 35 days of the order under section 245D(4) while charging of interest u/s 220(2), it is prayed that the said precedence may kindly be followed. 4. Waiver of interest and penalties, if exigible, u/s 158BFA of the Income tax Act, 1961. 5. That the applicant may kindly be allowed to capitalize the income brought to tax. It may be mentioned that the amount of Rs. 2,33,50,000/- stands paid to M/s P.K. Jain & Associates as per the books of the company between 11.10.2001 to 20.12.2001. 6. That the penalties under various provisions of the Income Tax Act, 1961 levied/leviable may kindly be deleted/waived in the case of the applicant. 7. Immunity from prosecution under any of the relevant provisions of Income-tax Act, 1961 and any other Central Acts. 8. Release of assets, books of account, documents, papers etc. seized upon payment of taxes. 9. To grant the liberal installments to the applicant for payment of the additional demand arising out of the above settlement.. 5. The income of the applicant is settled as under: Name of the applicant A.Y. Income as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the application and it can extend only to such matters which are referred to in the report of the Commissioner under sub-section (1) or sub-section (3) of the said section. 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 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 inasmuch 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 which he cannot otherwise achieve directly and in the process rendering the provision of sub- section (3) of Section 245-C of the Act otiose and meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mr. Srivastava also submitted that the ITSC had on an overall consideration of the issues relating to the amounts received from S.K. Jain, borne in consideration the fact that the respondent-assessee had cooperated fully, voluntarily surrendered the said amount and agreed to the same being taxed in its hands. In view of the above and bearing in mind the limited scope of interference which is warranted with an order passed by the ITSC, Mr. Srivastava submitted that the challenge as raised by way of the present writ petition is liable to be negatived. 17. Having noticed the rival submissions so addressed, we at the outset deem it apposite to take note of the following salient provisions which stand incorporated in Chapter XIX-A and which regulates the subject of settlement. We, in this regard deem it appropriate to extract Sections 245C, 245D, 245F and 245I of the Act hereunder: - "245C Application for settlement of cases.--(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 manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial interest in the business or profession of the specified person, or any relative of such individual; (iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the specified person or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the specified person; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; (vi) any person who carries on a business or profession,-- (A) where the specified person being an individual, or any relative of such specified person, has a substantial interest in the business or profession of that person; or (B) where the specified person being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach of the years for which the application has been made under sub- section (1) shall be the additional amount of income tax payable in respect of the income disclosed in the application. (1E) [***] (2) Every application made under sub-section (1) shall be accompanied by such fees as may be prescribed. (3) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. (4) An assessee shall, on the date on which he makes an application under sub-section (1) to the Settlement Commission, also intimate the Assessing Officer in the prescribed manner of having made such application to the said Commission.] [(5) No application shall be made under this section on or after the 1st day of February, 2021.] xxxx xxxx xxxx 245-D. Procedure on receipt of an application under Section 245- C.-- (1) On receipt of an application under Section 245-C, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant, the Settlement Commission shall, within a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been given to the applicant of being heard: Provided further that where the [Principal Commissioner or Commissioner] has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the [Principal Commissioner or Commissioner]. [Provided also that where in respect of an application, an order, which was required to be passed under this sub-section on or before the 31st day of January, 2021, has not been passed on or before the 31st day of January, 2021, such application shall deemed to be valid.] (2-D) Where an application was made under sub-section (1) of Section 245-C before the 1st day of June, 2007 and an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st day of June, 2007, but an order under the provisions of sub-section (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31st day of March, 2008; (ii) in respect of an application made on or after the 1st day of June, 2007 [but before the 1st day of June, 2010], within twelve months from the end of the month in which the application was made.] [(iii) in respect of an application made on or after the 1st day of June, 2010, within eighteen months from the end of the month in which the application was made.] (5) Subject to the provisions of Section 245-BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the Bench concerned before passing any order under sub-section (4) and, in relation to the passing of such order, the provisions of Section 245-BD shall apply. (6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts. (6-A) Where any tax payable in pursuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer in pursuance of any directions contained in such order passed by the Settlement Commission and nothing contained in the proviso to subsection (1) of Section 186 shall apply to the pursuance of any such directions as aforesaid. [(9) On and from the 1st day of February, 2021, the provisions of sub-sections (1), (2), (2-B), (2-C), (3), (4), (4-A), (5), (6) and (6-B) shall apply to pending applications allotted to Interim Board with the following modifications, namely:-- (i) for the words "Settlement Commission", wherever they occur, the words "Interim Board" shall be substituted; (ii) for the word "Bench", the words "Interim Board" shall be substituted; (iii) for the purposes of this section, the date referred to in subsection (2) of Section 245-M shall be deemed to be date on which the application was made under Section 245-C and received by the Interim Board; [(iv) where the time-limit for amending any order or filing of rectification application under sub-section (6-B) expires on or after the 1st day of February, 2021, but before the 1st day of February, 2022, such time-limit shall be extended to the 30th day of September, 2023.] (10) On and from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 245-D; or (ii) an application is not allowed to be proceeded with under subsection (2-A) of Section 245-D, or, as the case may be, is declared invalid under sub-section (2-C) of that section; or (iii) an application is not allowed to be further proceeded with under sub-section (2-D) of Section 245-D, the Settlement Commission, in respect of such application shall have such exclusive jurisdiction up to the date on which the application is rejected, or, not allowed to be proceeded with, or, declared invalid, or, not allowed to be further proceeded with, as the case may be.] (3) Notwithstanding anything contained in sub-section (2) and in the absence of any express direction to the contrary by the Settlement Commission, nothing contained in this section shall affect the operation of any other provision of this Act requiring the applicant to pay tax on the basis of self-assessment in relation to the matters before the Settlement Commission. (4) For the removal of doubts, it is hereby declared that, in the absence of any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the aforesaid power as conferred, the Principal Commissioner/Commissioner is obliged to undertake a further inquiry or investigation and submit a report in respect of all matters covered by the application as also any other matter relating to the case. Sub-Section (4) of Section 245D of the Act envisages the ITSC passing final orders upon the application taking into consideration the report submitted by the Principal Commissioner/Commissioner, an examination of all the evidence that may have been placed before it and proceed to pass a final order on matters covered by the application as well as any other matter relating to the case. 19. It becomes significant to note that in terms of Section 245D(4) of the Act, the ITSC stands enabled to pass orders not only in respect of matters covered by the application, but also "other matter relating to the case not covered by the application, but referred to in the report of the Principal Commissioner or Commissioner". 20. The ITSC apart from exercising its adjudicatory function upon the application as made, is also empowered by law to reopen any proceedings connected with the case pending before it and which may have been completed. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass an order after examination of the records and the report submitted by the Commissioner, after hearing the applicant and the Commissioner, or their authorized representatives and examining any further evidence before it. 5.3. Section 245H of the Act bestows upon the Settlement Commission, discretion to grant immunity to an applicant from prosecution for any offence under the Act or under the Indian Penal Code, or from the imposition of any penalty under the Act, with respect to the case covered by the settlement. The grant of such immunity is subject to such conditions which the Commission may think it fit to impose. The precondition for granting immunity is that the applicant must have co-operated in the proceedings before the Commission and made a "full and true disclosure" of his income and the manner in which such income has been derived. xxxx xxxx xxxx 6. On a close reading of the provisions extracted hereinabove, it emerges that under section 245H(1) if the Settlement Commission is satisfied that any assessee who makes the application for settlement under section 245C, has co-operated with the Settlement Commission in the proceedings before it and has mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case, in its application to the Settlement Commission has brought only the case pursuant to notices under section 153A admittedly issued to it, but the powers of the Settlement Commission under section 245D(4) to pass such order as it thinks fit are not confined to matters covered by the application but also extend to "any other matter relating to the case not covered by the application, but referred to in the report of the Principal Commissioner or Commissioner" presented to the Settlement Commission under section 245D(3) of the Act. (B) We have thus enquired from the counsel, whether the Principal Commissioner/Commissioner, in the present case, in response to the application of the petitioner to the Settlement Commission, has submitted any report and if so, whether in the said report the aforesaid aspect of violation of section 269ST of the Act has been reported ; if it is so, the Settlement Commission would have jurisdiction to pass orders with respect to violation alleged of section 269ST also. However neither counsel has instructions on the said aspect. (C) It is not deemed necessary to adjourn the hearing to enable counsel to take instructions on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prosecutions referred to in section 245F and section 245H are with respect to assessment of undisclosed income only, but (i) section 245F vests exclusive jurisdiction in the Settlement Commission, to exercise the powers and perform the functions "of an Income-tax authority under this Act in relation to the case" ; and (ii) section 245H vests the Settlement Commission with the power to grant immunity from "imposition of any penalty under this Act with respect to the case covered by the settlement". The words "of an Income-tax authority under this Act in relation to the case" and "immunity from imposition of any penalty under this Act with respect to the case covered by the settlement" are without any limitation of imposition of penalty and immunity with respect thereto only in the matter of undisclosed income and in our view would cover also penalties under other provisions of the Act, detection whereof has the same origin as the origin of undisclosed income. (H) Not only so, the words "in relation to the case" and "with respect to the case" used in the aforesaid provisions, are words of wide amplitude and which, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kalyana Mandapam Association v. Union of India [2004] 267 ITR 9 (SC) ; (2004) 5 SCC 632, National Textile Corporation (MN) Ltd. v. Durga Trading Company (2015) 12 SCC 558 and Maxopp Investment Ltd. v. CIT [2018] 402 ITR 640 (SC) ; (2018) 15 SCC 523." 25. Reverting then to the facts of the present case, we find that the respondent had clearly alluded to the transaction with S.K. Jain in the application which was made before the ITSC. It had essentially questioned the stand taken by the respondent of the aforesaid land transaction being merely an accommodation entry. It had asserted that the transaction was genuine and that the receipt of a sum of INR 234.50 lakhs represented the consideration received by it from S.K. Jain for a proposed sale of land. It was also its case that the transaction ultimately could not fructify since various clearances and approvals could not be obtained. This was therefore not a case where a disclosure in respect of a transaction had not been made. 26. However, and in our opinion, the procedure as contemplated under Chapter XIX-A does not detract from the right of an assessee to question an addition or view that may have been taken by the taxing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... govern while considering a challenge to orders passed by the ITSC. The scope and extent of interference warranted with orders made by the ITSC were succinctly explained by the Supreme Court in Jyotendrasinhji v. S.I. Tripathi and Others 1993 Supp (3) SCC 389 in the following words: - "16. It is true that the finality clause contained in Section 245-I does not and cannot bar the jurisdiction of the High Court under Article 226 or the jurisdiction of this Court under Article 32 or under Article 136, as the case may be. But that does not mean that the jurisdiction of this Court in the appeal preferred directly in this Court is any different than what it would be if the assessee had first approached the High Court under Article 226 and then come up in appeal to this Court under Article 136. A party does not and cannot gain any advantage by approaching this Court directly under Article 136, instead of approaching the High Court under Article 226. This is not a limitation inherent in Article 136; it is a limitation which this Court imposes on itself having regard to the nature of the function performed by the Commission and keeping in view the principles of judicial review. Maybe, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess". 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 : (1982) 3 All ER 141] . 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 all the above reasons, we are of the opinion that the only ground upon which this Court can interfere in these appeals is that the order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant. The main controversy in these appeals relates to the interpretation of the settlement deeds -- though it is true, some contentions of law are also raised. The Commission has interpreted the trust deeds in a particular manner. Even if the interpretation placed by the Commission on the said deeds is not correct, it would not be a ground for interference in these appeals, since a wrong interpretation of a deed of trust cannot be a violation of the provisions of the Income Tax Act. It is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed its discretion under section 245H having regard to the bona fide conduct of the assessee of offering additional income for tax, apart from the income disclosed in the return of income. 13. Before parting with the record, we may add that having regard to the legislative intent, frequent interference with the orders or proceedings of the Settlement Commission should be avoided. We have already indicated the limited grounds on which an order or proceeding of the Settlement Commission can be judicially reviewed. The High Court should not scrutinize an order or proceeding of a Settlement Commission as an appellate court. Unsettling reasoned orders of the Settlement Commission may erode the confidence of the bona fide assessees, thereby leading to multiplicity of litigation where settlement is possible. This larger picture has to be borne in mind." 32. On an overall conspectus of the aforesaid and when we apply the tests as propounded by the Supreme Court in the aforenoted decisions, we find ourselves unable to hold that the procedure adopted by the ITSC was either palpably incorrect or manifestly erroneous. The decision ultimately rendered by it also cannot possibly be characteriz ..... X X X X Extracts X X X X X X X X Extracts X X X X
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