2017 (4) TMI 1367 - HC - Income Tax

Court upholds ITSC's grant of immunity to electricity company for tax payment in instalments. Petitioner's challenge dismissed.

The court upheld the Income Tax Settlement Commission's decision to grant immunity to the respondent, a company engaged in electricity generation, upon ... Grant of immunity from prosecution - orders of settlement commission - Held that:- In the present case, as pointed out by Mr Syali, apart from the fact that there was cooperation extended by GEPL as noted in para 15 of the impugned order, what weighed with the ITSC were the facts and circumstances themselves where GEPL had offered an additional sum of ₹ 5 crores for tax. That GEPL had made a full and true disclosure of all material facts is apparent from the reading of the entire impugned order of the ITSC. In the circumstances of the case, the grant of immunity from prosecution as ordered by the ITSC cannot be said to be erroneous. No grounds have been made out for interference with the impugned order dated 18th February, 2015 passed by the ITSC. The writ petition is accordingly dismissed Issues:1. Setting aside of the order by the Income Tax Settlement Commission granting immunity to the respondent upon payment of tax in instalments.2. Adequacy of disclosure by the respondent regarding additional income and expenses.3. Lack of cooperation from the respondent in the investigation process.4. Acceptance of additional income offered by the respondent.5. Rejection of waiver of interest and capitalization request.6. Grant of immunity from prosecution and penalties.7. Delay in filing the writ petition and the plea of laches.8. Justification for granting complete immunity from prosecution by the ITSC.Detailed Analysis:1. The petitioner sought to set aside the order granting immunity to the respondent upon payment of tax in instalments. The respondent, a company engaged in electricity generation, disclosed additional income for certain assessment years. The Income Tax Settlement Commission (ITSC) directed the respondent to make payments in instalments to receive immunity from prosecution and penalties under Section 245-H(1) of the Income Tax Act, 1961.2. The adequacy of the respondent's disclosure was questioned, especially regarding expenses claimed as consultancy fees without proper documentation. The respondent's lack of cooperation in providing necessary documents for verification raised concerns about the accuracy of the disclosure.3. The respondent's failure to cooperate in the investigation process, including delays in responding to requests for information and reports, hindered the assessment of the disclosure's accuracy. The ITSC directed further investigation due to the lack of cooperation.4. The respondent offered additional income during the proceedings, which was accepted by the ITSC. This additional income was considered in settling the tax liabilities of the respondent for the relevant assessment years.5. The ITSC rejected the respondent's requests for waiver of interest and capitalization, maintaining the tax payment schedule in instalments. The settlement terms were outlined in detail, including consequences for non-compliance.6. Immunity from prosecution and penalties under the Income Tax Act was granted to the respondent based on the cooperation extended during the proceedings. The conditions for maintaining this immunity and the potential withdrawal were specified in the order.7. The delay in filing the writ petition and addressing defects led to a plea of laches by the respondent. The court found the explanation for the delay unsatisfactory, considering the impact on the respondent's actions based on the settled order.8. The justification for granting complete immunity from prosecution by the ITSC was challenged, citing a previous court decision. However, the court upheld the ITSC's decision based on the respondent's cooperation and full disclosure of material facts, dismissing the petitioner's plea for interference with the order.