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TMI Blog2024 (4) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the ITSC restricted the additional account of on money at 20% of total money receipts and allowed claimed expenditure to the extent of 80%. It is a discretion that the ITSC exercised and there was nothing wrong in that. Whether to examine and how much to examine should be left to the discretion of the ITSC. Similarly for item (ii) cash loans, (iii) Bogus Purchase from Dwish Enterprises and (iv) Penalty and prosecution. The Apex Court in Jyotendrasinhji Vs. S. I. Tripathi [ 1993 (4) TMI 1 - SUPREME COURT] held that the order of the ITSC is in the nature of a package deal and that it may not be ordinarily possible to dissect its order and accept what is favourable and reject what is not. Moreover, it is open to the ITSC to accept an amount of tax by way of settlement and to prescribe the manner in which it is to be paid. ITSC has the discretion to condone the defaults, penalties or prosecution, where it thinks appropriate. Thus, the sole limitation upon the ITSC is to act in accordance with the provisions of the Act. Even if the interpretation placed by the ITSC on documents is not correct, it would not be a ground for interference since a wrong interpretation of documents cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to settle the disputes on behalf of the Government and it does not lie in the mouth of the Government to challenge the decision taken by their own representatives without making allegations of bias or fraud or malice. Rule discharged. Petition dismissed. - K.R. SHRIRAM DR. NEELA GOKHALE, JJ. For the Petitioner : Mr. Suresh Kumar. For the Respondent Nos. 2 to 5 : Mr. R. V. Easwar, Senior Advocate a/w Mr. K. Gopal, Mr. Om Kandalkar and Mr. Akhilesh Deshmukh. ORAL JUDGMENT (PER K. R. SHRIRAM J.) : 1. By consent, Rule. Rule made returnable forthwith and heard. 2. Petitioner, who is the Principal commissioner of Income Tax (Central)-3, Mumbai (PCIT), is impugning by this writ petition an order dated 27th September 2018 passed under Section 245D (4) of the Income Tax Act 1961 (the Act) by respondent no. 1, the Income Tax Settlement Commission (ITSC). 3. There was a search and seizure action under Section 132 of the Act on 16th December 2015 at the business premises of applicants, respondent nos. 2 to 5 (the assesses) and residential premises of key personnel of assessees. The search was concluded on 21st December 2015. No seizure of cash or jewellery was effected from the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be taxed. The ITSC, however, restricted the additional income on account of on money @20% of total on money receipts and allowed claimed expenditure to the extent of 80%. It is revenue s case that this was done without examining the details, nature and purpose of such expenses and legality of the said expenses under the provisions of the Act without any cogent reason. (ii) Cash loans:- Admittedly, the seized data revealed that applicants had received cash loan amounting to Rs .234.05 Crores during the period 1st July 2014 to 16th December 2015. According to revenue, this amount should have been added under Section 68 of the Act as unexplained income. The ITSC, however, accepted the genuineness of the loan. It is revenue s case that applicants have failed to produce a single confirmation and mere production of names, addresses and PAN of the lenders is not sufficient. Mr. Suresh Kumar submitted that the onus was upon assessee to establish the identity of the lenders, their creditworthiness and fact that it was a loan transaction or else, applicants will not be able to escape the provisions of Section 68 of the Act. The ITSC accepted the cash loans as genuine loans without direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowhere directly connected to the subscribers and the money has been invested through portfolio managers who confirmed the stand taken by applicants. Therefore, the ITSC did not find it necessary to even discuss this in the impugned order. (vii) Claim of marketing expenses:- It was applicants case that administration, selling and marketing cost, brokerage expenses for AY-2013-14 to AY-2016-17 should be allowed as deduction because it has been capitalised to work in progress in its books of accounts. The revenue had objected because according to revenue the claim was in violation of principle of consistency and matching principles as per Accounting Stand (AS)-1 and also in violation of Section 145A of the Act. In the grounds, the revenue has not even bothered to explain as to why the same was in violation of principle of consistency and matching principle as per AS-1 or in violation of Section 145A of the Act. (viii) Penalty and prosecution:- The ITSC has granted immunity from prosecution under Section 245H (1) of the Act and levy of penalty under Section 271(1)(c) of the Act. At the same time, the ITSC levied penalty of Rs. 8 crores and Rs. 2 crores under Section 271D and 271E, res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that even if the interpretation placed by the ITSC on documents is not correct, it would not be a ground for interference since a wrong interpretation of documents cannot be said to be a violation of the provisions of the Act. The Apex Court has held that the scope of enquiry by the High Court under Article 226 should be restricted to i) whether the ITSC has acted in accordance to the provisions of the Act and ii) whether the order passed by it has prejudiced assessee apart from the ground of bias, fraud and malice which constitute a separate and independent category. For ease of reference, paragraphs no. 14 and 15 of Jyotendrasinhji (supra) reads as under: 14. The first question we have to answer is the scope of these appeals preferred under Article 136 against the orders of the Settlement Commission. The question is whether all the questions of fact and law as may have been decided by the Commission are open to review in this appeal. For answering this question one has to have regard to the scheme of Chapter XIX-A. The said chapter was inserted by the Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1976. A somewhat similar provision was contained sub-sections (1A) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 245I 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. May be, there is also some force in what Dr. Gauri Shankar says viz., that the order of commission is in the nature of a package deal and that it may not be possible, ordinarily speaking, to dissect its order and that the assessee should not be permitted to accept what is favourable to him and reject what is not. According to learned counsel, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that 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 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 said to 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 proceedings relating to other assessment years. In view of the above, though it is not necessary, strictly speaking, to go into the correctness of the interpretation placed upon the said deeds by the commission, and it is enough if we confine ourselves to the question whether the order of the Commission is contrary to the provisions of the Act, we propose to, for the sake of completeness, examine also whether the order of Commission is vitiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. In Kanakia Spaces (Supra) the court has held that Section 292C (1) (ii) and Section 132 (4A) of the Act mandates that the contents of seized documents are true. Where any books of accounts or other documents are or is found in possession or control of any person in the course of a search it may be presumed that the contents of such books of account and other documents are true. The issue of income revised percentage of profit, cash loans, bogus purchases from Dwish Enterprise, etc., came up for consideration before the ITSC on the basis of documents found during the search under Section 132 of the Act. The revenue cannot raise any grievance on the acceptance of entries in the documents by the ITSC because once the contents of documents are accepted as correct, then no further inquiry was required to be carried out. Moreover, inquiry under Section 245D(3) of the Act was subject to discretion of the ITSC as it relates to question of fact and is not amenable to the jurisdiction of this court. Moreover, as held in Jyotendrasinhji (supra), even if the interpretation placed by the ITSC on the documents seized is not correct, it would not be a ground for interference since a wrong int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g giving immunity against prosecution or imposition of penalty. Therefore, the scope of interference against a decision of the Settlement Commission is very narrow. As observed in N. Krishnan (supra), it is in the nature of statutory arbitration to which a person may submit himself voluntarily and the scope of interference is much more restricted than the power of the court to interfere with an arbitration award. 29. Unsettling reasoned orders of the Settlement Commission, as noted by the Hon ble Apex Court in Kotak Mahindra Bank Ltd. (supra), may erode the confidence of bona fide assessee, thereby leading to multiplicity of litigation where settlement is possible and this larger picture has to be borne in mind. 30. Moreover, we also should note that Section 245B (3) of the Act provides that Chairman, Vice Chairman and other members of the Settlement Commission shall be appointed by the Central Government from amongst persons of integrity and outstanding ability, having special knowledge of, and, experience in, problems relating to direct taxes and business accounts. Therefore, the members of the ITSC have been appointed because of their integrity and outstanding ability and for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved in Kanakia Spaces (Supra), petitioner is in effect sitting in appeal over the decision and wisdom of the members of the ITSC. As held in Commissioner of Income Tax (Central) Vs. B. N. Bhattacharjee Anr (1979) 4 Supreme Court Cases 121, that Chapter XIXA makes it clear that the ITSC exercises many powers which affect all the rights of the parties before it and vests in it powers to grant immunity from prosecution and penalty, to investigate into many matters and to enjoy conclusiveness regarding its orders or settlement. It is further stated Chapter XIXA was inserted on the basis of recommendation by the Wanchoo Committee which was mindful of the benefits of a policy of collection of tax without protracted litigation through the machinery of the Settlement Commission. So it expressed the view that it was of paramount importance that only persons who are known for their integrity and high sense of justice and fairness are selected for appointment on the Commission. The gravity of this public policy cannot be undermined by the revenue itself by challenging the reasoned orders of the Settlement Commission. 15. In the circumstances, as it is evident from Section 245 of the Act tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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