2015 (2) TMI 1184 - HC - Income Tax

Court Allows Settlement Commission to Proceed, Upholds Disclosure Authority

Commissioner of Income-Tax-I, Versus M/s. Asian Natural Resources India Ltd. & Anr.

The court vacated the interim stay order, permitting the Settlement Commission to continue with the case. It affirmed the Settlement Commission's ... Matter pending before the Settlement Commission - Held that:- Since the matter is pending before Settlement Commission and it has to decide as to whether full disclosure was made or not, it is not for the court to enter into it and petitioner is at liberty to raise all objection regarding the maintainability of the application before the commission. With the aforesaid observations, we vacate the ad-interim order dated 9.1.2015 by allowing appeal filed by the respondent No.1. It may be mentioned that we have not decided any issue on merits of the case and any observation made in the order will not in any way affect the subject matter pending for consideration before the settlement Commission. Issues Involved:1. Validity of the Settlement Commission's order under Section 245D(1) of the Income Tax Act, 1961.2. Pendency of assessment proceedings and their stay by the Supreme Court and High Court.3. Adequacy of taxes and correctness of additional tax interest paid by the respondent.4. Jurisdiction and procedural propriety of the Settlement Commission.5. Full and true disclosure of income by the respondent.6. Maintainability of the application before the Settlement Commission.Detailed Analysis:1. Validity of the Settlement Commission's Order under Section 245D(1):The income tax department challenged the order dated 18.08.2014 by the Settlement Commission admitting the application under Section 245D(1). The Settlement Commission had processed the application and called for a report under Section 245D(2B) from the Commissioner of Income Tax, who furnished the report on 18.09.2014 without objecting to the application's validity.2. Pendency of Assessment Proceedings and Their Stay:The respondent company was subject to search and seizure operations on 25.09.2007. Assessment proceedings for various years were pending due to stays granted by the Supreme Court and the High Court. Specifically, the Supreme Court stayed proceedings for the assessment years 2007-08 and 2008-09, and the High Court stayed proceedings for subsequent years, including 2009-10 and 2010-11.3. Adequacy of Taxes and Correctness of Additional Tax Interest Paid:The respondent disclosed additional income of Rs. 18,93,19,340 before the Settlement Commission, with corresponding tax and interest payments verified and found in order. The Commissioner of Income Tax did not comment on the adequacy of the disclosed income, suggesting that comments on merits regarding the adequacy of the quantum of disclosed income should be called from the Transfer Pricing Officer (TPO).4. Jurisdiction and Procedural Propriety of the Settlement Commission:The Settlement Commission followed the prescribed procedure under the Income Tax Act. The Commissioner of Income Tax did not declare the application invalid but requested that proceedings be kept in abeyance due to pending court cases. The Settlement Commission proceeded as there was no mandate in the Act to keep the proceedings in abeyance.5. Full and True Disclosure of Income by the Respondent:The respondent argued that the Settlement Commission has jurisdiction to determine whether the disclosure was full and true. The Supreme Court and various High Courts have held that the Settlement Commission can examine the issue of full and true disclosure at the final hearing stage under Section 245D(4).6. Maintainability of the Application before the Settlement Commission:The respondent's application was maintained as the Settlement Commission followed the procedure prescribed under the Act. The Supreme Court and High Courts have consistently held that the Settlement Commission's order to proceed with the application does not preclude the department from raising objections at the final hearing stage.Conclusion:The court vacated the interim stay order dated 09.01.2015, allowing the Settlement Commission to proceed with the case. The court emphasized that the Settlement Commission has the authority to examine the full and true disclosure issue at the final hearing stage. The court did not decide on the merits of the case, leaving it to the Settlement Commission to address all objections raised by the department.