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TMI Blog2024 (7) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... r to a decision of this Court in the case of M/S Trent East West LPG Bottling Ltd. [ 2024 (4) TMI 464 - DELHI HIGH COURT] wherein, while adopting a similar view, it had been held that the ITSC has the authority to consider all aspects which arise from the application in order to extend finality to all the disputes. A Coordinate Bench of this Court in Agson Global [ 2016 (1) TMI 256 - DELHI HIGH COURT] struck a distinction between regular assessment and order passed by the ITSC. It has been held that the ITSC does not wield an authority to engage itself in the process of regular assessment, rather it passes an order on the basis of settlement between parties containing the terms of settlement. Thus the settlement provision is an enabling provision to resolve the disputes between the parties based upon a mutual consensus. However, in the said process, the ITSC cannot usurp the original power of the AO to make an assessment strictly according to the provisions of the Act as the same would be contrary to the pith and substance of the scheme of the Act to settle the disputes. In essence, the primary objective of the incorporation of the settlement provisions is to entrust upon ITSC the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. For the Respondents Through: Mr. Puneet Rai, Sr.SC with Mr. Ashvini Kumar and Mr. Rishabh Nangia, Advocates. JUDGMENT PURUSHAINDRA KUMAR KAURAV, J. 1. The present batch of writ petitions have been filed by the individuals of Dhanuka family including HUFs, assailing the common order of the Income Tax Settlement Commission [ ITSC ] dated 26.06.2019. These petitions raise a common question of law and hence, they are being decided by this common judgment. For the sake of brevity, the facts are being extracted from W.P. (C) No. 10870/2019. 2. The dispute in question appears to have been triggered with the initiation of search under Section 132 of the Income Tax Act, 1961 [ Act ] in the case of the petitioner and other family members. In pursuance of the same, proceedings under Section 153/147 of the Act were initiated for the Assessment Years [ AYs ] 2010-11 to 2015-16. While the assessment proceedings were carried out by the Revenue, the petitioner approached the ITSC with the settlement application dated 26.12.2017 disclosing additional income of Rs. 10,36,36,417/-. In the said application, it was admitted by the petitioner that it entered into certain off-market transactions commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the AYs under consideration were unabated in terms of Section 153A of the Act and no incriminating material was found qua the said addition. He, therefore, contended that any addition for the relevant AYs could have been made only on the basis of any incriminating material discovered during the course of search, which is not the case at hand. 8. While inviting our attention to the statements of M.K. Dhanuka and Raj Kumar Kedia, Mr. Vohra contended that the said persons had explicitly denied any such payment of margin or commission money in lieu of off-market transactions disclosed before the ITAT. According to him, the additions have been made on the basis of a general statement of Raj Kumar Kedia which does not specifically refer to any commission received from any member of Dhanuka family. He additionally submitted that the Dhanuka family had taken a consistent stand that they had long standing family relations with Raj Kumar Kedia and hence, he did not charge any commission for facilitating the transactions. 9. He also referred to the definition of the expression case as per Section 245A (b) of the Act to submit that the proceedings before the ITSC is for settlement of a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the ITSC on account of commission and margin money was dehors the provisions of the Act and the mandate of law prescribed in Chapter XIX-A therein? 15. In order to appreciate the rival submissions addressed at the Bar, it is germane to traverse through the exposition of law with respect to authority of the ITSC and the procedure envisaged in Chapter XIX-A of the Act to decide an application for settlement filed by an assessee. Recently, in the case of PCIT v. Pankaj Buildwell Group [W.P.(C) 8103/2015] decided on 10.04.2024 , we had an occasion to extensively deal with the said provisions and the discussion encapsulated therein is reproduced herein for reference:- Legislative mandate enshrined under Chapter XIX-A of the Act 34. The structure outlined in Chapter XIX-A of the Act was introduced by the Taxation Laws (Amendment) Act, 1975. This chapter aims to facilitate prompt and harmonious resolution of cases, ensuring the timely collection of taxes owed to the Income Tax Department. 34.1 Further, Chapter XIX-A also allows an assessee to submit an application under Section 245C (1) of the Act, provided it includes full and true disclosure of its income, the method by which it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to the [Principal Commissioner or 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 [Principal Commissioner or Commissioner]. 34.5 Such orders may be issued by the ITSC upon arriving at the satisfaction that the applicant has cooperated in the proceedings and has provided a complete and accurate disclosure of its income along with the sources therein. 16. It is discernible from the discussion reproduced hereinabove that once application for settlement is accepted by the ITSC, it is bestowed with an authority to issue an order upon examination of records and the report provided by the CIT. As per Section 245D (4) of the Act, the ITSC shall also evaluate any additional evidence brought to its notice in accordance with the provisions of the Act before passing an order on firstly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions empowering and enabling it to call for reports from the Principal Commissioner/Commissioner as also the framing of directions for further inquiry and investigation being undertaken. Chapter XIX-A in our considered opinion thus enables the ITSC to holistically examine all aspects that may be said to arise from the application submitted for its consideration and enabling it to accord a full and complete closure to all disputes. 18. A Coordinate Bench of this Court in Agson Global (supra) struck a distinction between regular assessment and order passed by the ITSC. It has been held that the ITSC does not wield an authority to engage itself in the process of regular assessment, rather it passes an order on the basis of settlement between parties containing the terms of settlement. The relevant paragraphs of the said decision are reproduced hereinafter as:- 11. Section 245F of the said Act calls for closer scrutiny as that is the provision which has been invoked by the Settlement Commission as also the learned counsel for the Revenue for supporting the order with regard to the conducting of a special audit. Sub-section (1) of section 245F stipulates that in addition to the powers c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority under the said Act in relation to the case. Does it mean that the Settlement Commission could continue with the assessment proceedings which were before the Assessing Officer and pass an assessment order under section 143 (3) by way of regular assessment as an Assessing Officer would have done ? We do not think so. The Settlement Commission does not carry out the function of assessment and does not make an assessment order. It settles the case in terms of the provisions contained in Chapter XIX-A of the said Act. Therefore, the exclusivity of jurisdiction stipulated in section 245F entails two things : (1) that from the point of time of filing of the settlement application, no Income-tax authority can exercise jurisdiction over the case and it is only the Settlement Commission which could exercise such jurisdiction ; (2) the powers and functions of the Income-tax authority which can exclusively be exercised by the Settlement Commission must have a nexus with the settlement proceedings before it. 19. The decision in Agson Global (supra) was followed by another decision of this Court in Tahiliani Design P. Ltd. v. Joint CIT [2021 SCC OnLine Del 3518], where, while recogniz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced before it or obtained by it and the Settlement Commission in the present case is still seized of the matter and would be within its rights to, if so deems apposite, also deal with the aspect of violation of section 269ST of the Act and either to grant exemption from penalty therefor or to pass such other order as it thinks fit in relation thereto as well and it is felt that the said power and jurisdiction of the Settlement Commission should not be permitted to be interdicted by the impugned order. (D) In this context we may also notice that the notices under section 153A as well as under section 271DA of violation of section 269ST, both have their origin in the search, seizure and survey conducted qua the petitioner, as evident from a bare reading of the notice under section 271DA referred to hereinabove by us for this reason. Merit is thus found in the contention of the counsel for the petitioner that both are part of the same case. (E) The counsel for the respondent, on enquiry fairly states that if the violation of 269ST of the Act is detected as a result of a search and seizure operation, as it is in the present case, then it is open to an applicant before the Settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication, pass such orders as it may think fit in relation/with respect thereto and the said powers of the Settlement Commission cannot be permitted to be interdicted by the impugned order. We reiterate that the proceedings of violation of section 269ST, as per the notice dated September 30, 2019, are a result of what was found in the search and survey qua the petitioner and are capable of being treated as part and parcel of the case taken by the petitioner by way of application to the Settlement Commission. (I) The Supreme Court, in Doypack Systems Pvt. Ltd. v. Union of India (1988) 2 SCC 299 held that the expression in relation to has been interpreted to be the words of widest amplitude and is in the nature of a deeming provision and is intended to enlarge the meaning of a particular word or to include matters which otherwise may or may not fall within the main provisions. Again, in Thyssen Stahlunion Gmbh v. Steel Authority of India Ltd. (1999) 9 SCC 334 it was held that the phrase in relation to arbitral proceedings cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator ; it would cover not only proceedings pending before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under Section 245-D. Section 245-D(4) is the charging section and sub-section (6) prescribes the modalities to be adopted to give effect to the order. It has to be noted that the language used in Section 245-D is order and not assessment . The order is not described as the original assessment or regular assessment or reassessment. In that sense, the Commission exercises a plenary jurisdiction. 21. In Canara Jewellers v. Settlement Commission and Anr. [2009 SCC OnLine Mad 2905], the Division Bench of the Madras High Court reiterated that the power conferred in Chapter XIX-A of the Act only provides for procedure of settlement of application and not for reassessment of tax for a particular year which rests upon the assessing authority. Paragraph no. 11 of the said decision reads as under:- 11. So far as section 245F is concerned, though the Settlement Commission is empowered to have all powers which are vested in an Income-tax authority under the Act, in addition to the power conferred under Chapter XIX-A, but such power can be exercised for the purpose of procedure of settlement of application under section 245C and not for reassessment of tax of a particular year which is vested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have incurred expenditure out of his own pocket for the purpose of providing accommodation entry to the Applicant. We also not that in a statement of Sh. G.D. Gupta, consultant in DhanukaAgritechLtd . recorded on 31.07.2015, he has categorically stated in response to question No. 11 that Sh. Kedia used to charge commission of around 5% on the transactions of Dhanuka Group which was paid to him in cash . Therefore, we uphold the contention of the Department that commission at the rate of 6% of the quantum of accommodation entry obtained should be additionally brought to tax, over and above the amount disclosed in the Application in the year in which the accommodation entry was obtained. 25. A perusal of the facts of the instant case would also show that the ITSC has reached the conclusion to add margin and commission money on the basis of the report submitted in accordance with Section 245D(3) of the Act which had suggested to make such an addition as the said income remained undisclosed in the Statement of Facts submitted before the ITSC. It is relevant to note that the ITSC has thwarted the argument that Raj Kumar Kedia would not have charged commission money on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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