2017 (8) TMI 189 - HC - Income Tax

Settlement Commission's Decision Final: Department Cannot Tax Same Income Twice

The High Court held that the department could not tax the same income again in the hands of the present assessee. The finality of the Settlement ... Cash seized from the bank lockers of the company - assessment in whose hands - correct assessee to be taxed - deceleration to Settlement Commission - double taxation - Held that:- As seen that the sum of ₹ 74 lakhs was offered to tax by Bhikhubhai N. Padsala, Director, in his settlement application. Such application has been granted by the Settlement Commission by passing order of settlement. By very statutory scheme of provisions, acceptance of such income in the hands of Bhikhubhai N. Padsala would have to be preceded by payment to tax. We have therefore proceeded on the basis that the Settlement Commission accepted the said sum as income of Bhikhubhai N. Padsala and the department has already received the tax and interest on such income. That being the position, it would not be possible for the department to tax the same income once again in the hands of the present assessee. There is nothing on record to suggest that before the Settlement Commission, the declaration of Bhikhubhai N. Padsala in this respect was opposed by the Revenue. Secondly, the Settlement Commission having accepted such settlement, with or without the opposition by the Revenue, finality of the conclusions of the Settlement Commission would attached in terms of section 245I of the Act. Thirdly, the department concedes that the order of Settlement Commission has not been challenged further. Under the circumstances, allowing the department's appeal, levying tax on the same amount from the assessee would be wholly impermissible. In fact, it also would be opposed to the observations of the Assessing Officer and those of the Tribunal that under no circumstances, the same income would be subjected to tax twice. - Decided in favour of the assessee Issues:1. Whether the Income Tax Appellate Tribunal erred in taxing undisclosed income in the hands of the assessee company when the same amount was disclosed by the Director in his application for settlement before the Settlement CommissionRs.Analysis:1. The Tax Appeals involved two assessees with similar facts, and the Income Tax Appellate Tribunal's common judgment was challenged. The substantial question of law was whether the Tribunal erred in taxing undisclosed income already disclosed in a settlement application. The assessee company had unaccounted cash seized, which the Director disclosed in a settlement application before the Settlement Commission.2. The Assessing Officer added the undisclosed cash receipt to the assessee's income. However, the order mentioned modifying the assessment if the amount was offered to tax before the Settlement Commission. At that time, the settlement proceedings were pending.3. The assessee appealed to the Commissioner, highlighting that the Director disclosed the amount in his income before the Settlement Commission. The Settlement Commission's final order accepted the amount as the Director's income, leading the Commissioner to delete the sum from the assessee's income.4. The department appealed to the Tribunal, arguing that the cash seized from the company's bank lockers should be taxed in the company's hands. Despite the Director disclosing the amount in the settlement application, the Tribunal held that the correct assessee should be taxed, rejecting the revenue neutrality argument.5. The Tribunal allowed the Revenue's appeal but ensured the amount was not taxed twice. The assessee challenged this judgment, emphasizing that the Settlement Commission accepted the amount as the Director's income, and the tax was already paid on it.6. The High Court held that the department couldn't tax the same income again in the hands of the present assessee. Finality of the Settlement Commission's conclusions, lack of opposition by the Revenue, and non-challenge to the Settlement Commission's order barred taxing the same income twice.7. The Court noted that if the Revenue believed the income belonged to the assessee and not the Director, it should have raised objections before the Settlement Commission. As both appeals had similar facts, the Court ruled in favor of the assessees, disposing of both Tax Appeals accordingly.