2014 (5) TMI 147 - HC - Income Tax

Court quashes notice under Section 153C, allows Revenue to seek Settlement Commission relief

M/s. Omaxe Ltd. And Another Versus Deputy Commissioner of Income Tax And Another

The court held that the notice issued to the petitioner under Section 153C cannot be sustained and quashed the notice and all further proceedings. The ... Validity of notice issued u/s 153A after search and seizure where - petitioner objected to assessment/ reassessment of income for assessment years 2004-05 to 2006-07 under the said provision since the assessments had already been concluded by the order of the Settlement Commission dated 17.03.2008. - Justification on the position of order passed u/s 245C – Held that:- Following M/s OMAXE LTD. THROUGH JAI BHAGWAN GOEL Versus ASSTT. COMMISSIONER OF INCOME TAX AND ANR [2012 (7) TMI 529 - DELHI HIGH COURT] - the applicability of any other provision of law including Section 148 had been ruled out once an order is made by the Settlement Commission - the order of settlement is conclusive as expressly stated in Section 245I – u/s 245F(1), the Income Tax Settlement Commission, in addition to the powers conferred on it under Chapter XIX-A, shall have all the powers which are vested in an income-tax authority under the Act - the finality attaches itself to Settlement Commission’s order is in respect of the matters referred to it – the orders of Settlement Commission are final and conclusive as to matters stated therein - The “matters” necessarily could comprehend disputed questions, items or heads of income, disallowance, etc. or variants of it, but always with reference to a particular assessment year - the Commission exercises power in respect of income which was not disclosed before the authorities in any proceeding, but are disclosed in the petition u/s 245C. It is not that any amount of undisclosed income can be brought to the notice of the Commission in the petition - the requirement is that there must be an income disclosed in a return furnished and undisclosed income disclosed to the Commission by a petition u/s 245C - It cannot be said that there has been a true and fair declaration of income which is the pre- requisite for settlement by the Commission - If an order is obtained by fraud or misrepresentation of facts, it cannot be said that there was true and fair disclosure - The declaration contemplated in Section 245C is in the nature of voluntary disclosure of concealed income, it must be true and fair disclosure - Voluntary disclosure and making a full and true disclosure of the income are necessary preconditions for invoking the Commission's jurisdiction – thus, the notice issued to the petitioner u/s 153C cannot be sustained - the notice and all further proceedings are hereby quashed – Decided in favour of Assessee. Issues Involved:1. Validity of the notice issued under Section 153A of the Income Tax Act.2. Reopening of assessment for AY 2006-07 under Section 148.3. Initiation of proceedings under Section 153C following a search in the premises of a third party.4. Finality of the Settlement Commission's order under Section 245D(4) and its implications.5. Jurisdiction of the Settlement Commission versus the Assessing Officer.Issue-wise Detailed Analysis:1. Validity of the notice issued under Section 153A of the Income Tax Act:The petitioner challenged the notice issued under Section 153A of the Income Tax Act. The petitioner's premises were searched, and a notice under Section 153A was issued. The petitioner reiterated its returns for the years 2000-2006 under Section 153A. The Settlement Commission was approached, which determined the petitioner's liability for the years 2004-05 to 2006-07. The court examined whether the issuance of a notice under Section 153A was valid, given that the Settlement Commission had already passed an order for the relevant assessment years.2. Reopening of assessment for AY 2006-07 under Section 148:The Assessing Officer (AO) issued a notice under Section 148 on 30.6.2010 proposing the reopening of the assessment for AY 2006-07. The petitioner objected, and the objections were rejected by the AO. The final reassessment order was passed on 08.11.2011, which the petitioner challenged. The court had previously quashed the reassessment notice under Section 147 for AY 2006-07 in WP(C) No.7975/2011, emphasizing that the Settlement Commission's order is conclusive and cannot be reopened under Section 148.3. Initiation of proceedings under Section 153C following a search in the premises of a third party:Following a search in the premises of Mr. Surinder Modi, the AO recorded a satisfaction note to initiate proceedings under Section 153C against the petitioner for AY 2004-05 to 2009-10. The petitioner objected, stating that the assessments for the years 2004-05 to 2006-07 had already been concluded by the Settlement Commission's order dated 17.03.2008. The Revenue dismissed these objections, leading to the petitioner filing detailed objections against the notice under Section 153C.4. Finality of the Settlement Commission's order under Section 245D(4) and its implications:The petitioner argued that under Section 245I, the Settlement Commission's order for AY 2006-07 is final and cannot be disturbed. The court referenced the Supreme Court's decision in Brij Lal v. Commissioner of Income Tax, which held that the Settlement Commission's orders are final and conclusive as to the matters contained therein and cannot be reopened except in cases of fraud or misrepresentation. The court reiterated that the Settlement Commission has exclusive jurisdiction over the matters once it assumes jurisdiction and makes an admission order.5. Jurisdiction of the Settlement Commission versus the Assessing Officer:The court analyzed whether the AO could issue notices under Section 153C when the Settlement Commission had already passed an order under Section 245D(4). The court emphasized that the Settlement Commission has the jurisdiction of all Income Tax authorities and its orders are final. The court noted that any non-disclosure or fresh discovery of facts should be addressed by approaching the Settlement Commission for a declaration that its previous order is void due to fraud or misrepresentation. The court rejected the Revenue's argument that the definition of 'case' under Section 245A excludes reassessment proceedings under Section 147, emphasizing that once the Settlement Commission completes its proceedings, its order is conclusive.Conclusion:The court held that the notice issued to the petitioner under Section 153C cannot be sustained, and quashed the notice and all further proceedings. The court allowed the Revenue to move the Settlement Commission for appropriate relief, setting out relevant facts and circumstances, which the Commission would decide on its merits in accordance with the law. The writ petition was allowed in these terms.