Settlement Commission Jurisdiction on Additional Income Tax Calculations

The Settlement Commission has jurisdiction to entertain applications in cases covered by Chapter XIV-B, despite the non obstante clause in section 158BA(1). The calculation of additional income-tax in cases initiated under section 158BC involves determining additional tax for each previous year in the block period. The time limit under section 158BE does not apply to Settlement Commission proceedings. Settlement applications admitted under section 245D(1) must continue until an order is passed, with the Assessing Officer having jurisdiction to complete proceedings under Chapter XIV-B. Additional income disclosed in an application before a search, if admitted under section 245D(1), is not considered undisclosed income under section 158B(b) and 158BA.

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Issues involved:

1. Jurisdiction of the Settlement Commission to entertain applications u/s 245C(1) in cases covered by Chapter XIV-B.
2. Calculation of additional income-tax in cases initiated u/s 158BC.
3. Applicability of the time limit prescribed u/s 158BE to the proceedings before the Settlement Commission.
4. Continuation and disposal of pending proceedings u/s 245D(1) after a search u/s 132 and filing of a separate application for block assessment.

Issue 1: Jurisdiction of the Settlement Commission

The Settlement Commission has jurisdiction to admit and deal with applications in respect of cases of block periods arising under Chapter XIV-B. The non obstante clause in section 158BA(1) does not bar the jurisdiction of the Settlement Commission. The provisions of Chapter XIX-A confer a substantive right to taxpayers to approach the Settlement Commission, and this right cannot be denied to assessees subjected to search u/s 132 after June 30, 1995.

Issue 2: Calculation of Additional Income-Tax

The additional amount of income-tax payable in respect of the additional undisclosed income disclosed in an application made u/s 245C(1), in respect of a block period for which a return has been made before the Assessing Officer u/s 158BC, shall be calculated by determining the additional tax for each of the several previous years included in the block period in accordance with the provisions of section 245C(1C)(b) read with section 245C(1B)(ii) by applying the rate of tax prescribed under section 113 of the Act. The returns filed u/s 158BC(a) will be treated as the returns referred to in proviso (a) to section 245C(1) of the Act.

Issue 3: Applicability of Time Limit u/s 158BE

The time limit specified in section 158BE will not apply to the proceedings before the Settlement Commission. The admission of any application filed u/s 245C in respect of any proceeding under Chapter XIV-B need not be kept pending till the Assessing Officer passes an order u/s 158BC.

Issue 4: Continuation and Disposal of Pending Proceedings u/s 245D(1)

(a) A settlement application admitted u/s 245D(1) for any assessment year falling within the block period should continue before the Commission till it culminates in an order u/s 245D(4) passed with reference to the disclosures contained in the application and the evidence submitted by the applicant or the Department.

(b) The Assessing Officer will have jurisdiction to complete the proceedings under Chapter XIV-B. On completion of the proceedings u/s 245D(4) by the Commission, the incomes determined by the Commission shall be taken into consideration by the Assessing Officer and the undisclosed income determined by him in the proceedings for the block period will be modified, to the extent necessary.

(c) Any additional income disclosed in an application u/s 245C filed before the date of the search, if such application has been admitted u/s 245D(1), will not be regarded as undisclosed income within the meaning of section 158B(b) and section 158BA. If the fresh settlement application filed in respect of the case under Chapter XIV-B includes the additional income disclosed in the earlier application already admitted, such income shall be disregarded in computing the additional tax u/s 245C(1A) and for the purposes of section 245D(2A).

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