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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 ..... 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 of applicants or its promoters. Certain cash and jewellery were seized from the residence of certain key personnel. Admittedly, the assets found were explained. 4. Respondent Nos. 2 to 5 filed application under Section 245C (1) of the Act before ITSC-respondent no. 1, for settlement of its income for Assessment Years 2010-11 to 2016-17. Order under Section 245D (1) of the Act was passed on 5th April 2017. Order under Section 245D (2C) of the Act was passed on 12th May 2017 holding the application as not invalid. On 4th September 2017, the PCIT submitted his report under Rule 9 of ITSC (Procedure) Rules, 1997. Admittedly, after taking into consideration the Rule-9 reports and subsequent reports of the PCIT, the replies of applicants to the Rule-9 reports as well as the oral arguments from both the sides, the documents submitted along with the statement of facts, the ITSC settled all four cases as per the order dated 27th September 2018 which is impugned in this petition. Mr. Easwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity 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 directing any inquiry or identity or creditworthiness of the lenders. (iii) Bogus purchase from Dwish Enterprise:- It was revenue's case before the ITSC to bring 100% of bogus purchases made from Dwish Enterprise to tax as against 15% offered by applicants. The ITSC has brought 20% of such bogus purchases to tax. The revenue has relied upon judgment of the Apex Court in N K Proteins Ltd. Vs. Deputy Commissioner of Income Tax (2017) 250 Taxman 22 (SC). Apart from the reasons, which we would give later, court's have time and again held that only the profit element in the bogus purchases requires to be taxed and whether it is 12.5% or 15% or 20%, is a question of fact. (iv) Disallowance under Section 14A of the Act:- The ITSC brought to tax the additional income of Rs. 2.19 crores towards disallowance under Section 14A of the Act, following the decision of the ITSC in assessee's own case for A.Y. 2012-13. It is revenue's case that the ITSC should not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osecution:- 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, respectively, of the Act, in relation to cash loan taken and repaid, respectively. If one considers the entire petition, no case is even made out as to how the order passed by the ITSC is contrary to any of the provisions of the Act, except in the case of claim of marketing expenses, where Section 145A of the Act is referred to. As regards the other heads, it is not even stated as to which are the provisions to which the findings are contrary to. 6. In the case of income revised percentage of profit, data considered are documents/materials that were seized by the department. Considering the evidence and material before them and the submissions made, 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (1D) of Section 34 of the Income Tax Act, 1922 introduced in the year 1954. The provisions of Chapter XIX-A are, however, qualitatively different 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 245C. Section 245D prescribes the procedure to be followed by the commission on receipt of an application under Section 245C. 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 accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 Commission is not even required or obligated to pass a reasoned order. Be that as it may, the fact remains that it is 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 (and alteram partem) has been incorporated in Section 245D itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 vitiated by any such wrong interpretation?" (emphasis supplied) 8. In N. Krishnan vs. Settlement Commission And Others (1989) 180 ITR 585, it is held that the ITSC is the forum for self surrender and seeking relief and not a forum for challenging the legality of assessment order or orders passed in any other proceedings. The Karnataka High Court held that the power conferred on the settlement commission is so wide that it can take any view on any questions of law, which it considers appropriate having regard to the facts and circumstances of a case including giving immunity against prosecution or imposition of penalty. The Karnataka High Court further held that 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. 9. A similar matter came to be considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 interpretation of documents cannot be said to be a violation of the provisions of the Act. Further, as held in Kotak Mahindra Bank Ltd. vs. Commissioner of Income Tax & Anr. (2023) 7 NYPCTR 1353 (SC) sufficiency of the material and particulars placed before the Commission based on which the Commission proceeded to pass its orders are beyond the scope of judicial review. As held by the Apex Court in Brij Lal And Others vs. Commissioner of Income Tax (2010) 328 ITR 477 (SC) the High Court should not scrutinize an order or proceeding of the ITSC as an appellate court. 11. Therefore, in our view, ITSC was entitled to exercise discretion while passing the impugned order and has exercised its discretion. In our view, there is neither violation of any mandatory procedure prescribed under any of the sections of Chapter XIX-A of the Act nor any violation of any of the Rules of natural justice. Further, it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral 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 the special knowledge and experience in problems relating to direct taxes and business accounts. It is rather unfortunate that the Central Government questions the findings of the ITSC without explicitly and in detail explaining how the order of the Commission is contrary to the provision of the Act or there was miscarriage of justice or order has been passed without jurisdiction. More so when bias or fraud or malice is not alleged in the petition against the members of the ITSC. In the case at hand we are not satisfied that the order of the ITSC is contrary to the provisions of the Act. It is rather unfortunate that the Commissioner who has filed the Writ Petition is sitting in appeal over findings of the members of the ITSC. Chapter XIX-A was inserted to enable an assessee, at any stage of a case relating to him, to make an application containing a full and true disclosure of his incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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