TaxTMI 
TaxTMI 
2010 (8) TMI 35
X X X X Extracts X X X X
X X X X Extracts X X X X
....ised, it would be necessary to take notice of the foundational facts in greater detail. The Ajmera Group of firms, consisting of mainly 4 firms and their partners are engaged in the business of land development and building/construction. For the sake of convenience, facts relating to the main firm viz. M/s. Ajmera Housing Corporation, Bombay (hereinafter referred to as "the assessee"), in which other firms and partners have stakes, are being noticed. These are: In January, 1989 and again in December, 1992, searches were conducted at the premises of the Group under Section 132(1) of the Act and voluminous books of account, loose papers and other documents were seized during the second search. Files, loose papers and a computer together with its hard disk were seized from the residence of one B.L. Vora, Accountant of Ajmera Group. In his statement B.L. Vora admitted that he was managing secret books and documents in code words as per the instructions given to him by one Chhotalal Ajmera, who was controlling the whole Ajmera Group. On the basis of the seized documents, assessment for the assessment year 1989-90 was completed, determining the total income at Rs.18.93 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the basis of the seized books of account and documents, was submitted with the report. It appears that on 20th October, 1997, the Commissioner sent to the Settlement Commission a general note on reconciliation of various annexures to the earlier report, submitted on 30th August, 1995. 6. Hearing in the case commenced before the Settlement Commission on 6th October, 1998 and various hearings took place thereafter, but some time in the year 1999 the assessee made a further disclosure of undisclosed income of Rs.2.76 crores, apparently during the course of hearing, as no application/letter to that effect is on record. Hearings concluded on 14th October, 1998. 7. Vide his letter dated 6th January, 1999, the departmental representative furnished to the Settlement Commission some clarifications regarding the taxability of advance booking amounts received by the assessee. In the said letter, the Commissioner requested the Settlement Commission to examine the question of identifying the "so called" persons who had booked the flats because this information would be necessary in order to locate them. Instead of responding to the said issue raised by the Commissioner, the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tself on this aspect of the matter regarding subsequent disclosure of Rs. 11.41 crores and had it dealt with the question of maintainability of application under Section 245C(1), then it would not have been open for this Court to sit in appeal over the finding recorded by the Settlement Commission in this behalf. ............................................................................. ............................................................................. On the fact of the record, we find fault with decision taken by the Settlement Commission to allow the application to be proceeded with without determining the basic facts on which further jurisdiction of the Tribunal depended. We, therefore, find that the said order of the Settlement Commission suffers from non-application of mind of the facts available on record." Dealing with the grievance of the Commissioner that he was not apprised of the revised settlement application filed by the assessee on 19th September, 1994, i.e. after the hearing on the question of whether or not the assessee's application is to be proceeded with in terms of Section 245D(1) of the Act had concluded, d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... true and complete disclosure of its undisclosed income, as provided under the law. All contentions of the parties are left open to be agitated before the High Court." (Emphasis supplied by us) 10. Pursuant to and in furtherance of the order passed by this Court, the matter was heard afresh by the High Court. By the impugned judgment and order, the High Court has again set aside Settlement Commission's order dated 29th January, 1999 and has remitted the matter back to it for fresh adjudication, observing thus: "In view of the facts and the legal position noted above, even though we find that the respondents had not made full and true disclosure of their income while making applications under Section 245C, it would not be proper to set aside the proceeding. However, at the same time, the Commission appears to have misdirected itself on several important aspects while passing the final order. The Settlement Commission had not supplied the annexure dated 19.9.1994 declaring additional income of Rs.11.41crore and thus, due opportunity was not given to the Revenue to place (sic) its stand properly. Huge amount of unexplained expenses, unexplained loans and unexplaine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....veral documents, forming part of the revised confidential annexure, in particular to the last page of Commissioner's report dated 30th August, 1995 wherein, according to the learned counsel, while referring to Annexure-VII of the revised annexure, the Commissioner has determined undisclosed income at Rs.42.58 crores. It was thus, asserted that the High Court has gone wrong in equating "unaccounted income" with "unaccounted receipts" and payments of Rs.187.20 crores. On the basis of the very same annexure, learned counsel also attempted to demonstrate that the revised annexure, disclosing undeclared income of Rs.11.41 crores was, in fact, in the knowledge of the Commissioner before she had submitted her report, whereafter the Settlement Commission had decided to proceed with the assessee's application. It was pleaded that the finding of the High Court that the Commissioner had not been supplied with the annexure filed on 19th September, 1994 declaring additional income of Rs.11.41 crores and thus, due opportunity was not given to the revenue to put forth its stand properly, was erroneous and, therefore, the impugned order deserves to be set aside on this ground alone. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er and clearly in breach of principles of natural justice and, therefore, the order passed by the Settlement Commission on 17th November, 1994, deciding to proceed with the application deserves to be set aside. 17. Learned counsel contended that revision of undisclosed income from Rs.1.94 crores to Rs.11.41 crores, as projected in the revised annexure and thereafter the two voluntary disclosures during the course of hearing and finally acceptance of Settlement Commission's order determining total income at Rs.42.58 crores without demur shows that the disclosure made by the assessee in their application under Section 245C of the Act was neither full nor true and, therefore, the Settlement Commission ought to have rejected the application for settlement. It was pleaded that the piecemeal disclosures, in particular the revision of the statement of facts vide assessee's letter dated 25th January, 1999, offering an ad hoc income of Rs.1 crore for the assessment year 1992-93 and Rs.6 crores for the assessment year 1993-94 to cover up "any discrepancies and/or any unforeseen contingencies" is not contemplated in the scheme of Chapter XIX-A and, therefore, the final order passed b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roceedings under the said Chapter commence on the filing of an application by an assessee under Section 245C(1) of the Act, which reads as follows:- "245-C. Application for settlement of cases.--(1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided: ............................................................................" A bare reading of the provision would reveal that besides such other particulars, as may be prescribed, in an application for settlement, the assessee is required to disclose: (i) a full and true disclosure of the income which has not been disclosed before the assessing officer; (ii) the manner in which such income has been derived and (iii) the additional amount....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt, if any, of the Commissioner received under sub-section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application but referred to in the report of the Commissioner under sub-section (1) or sub-section (3)." 24. Since Rules 6 and 8 of the 1987 Rules have some bearing on the issues involved, for the sake of ready reference, these are extracted below: "6. Commissioner's report etc., under section 245D (1).-- On receipt of a settlement application, a copy of the said application (other than the Annexure and the statements and other documents accompanying such Annexure) shall be forwarded by the Commission to the Commissioner with the direction to furnish his report under sub-section (1) of section 245D within thirty days of the receipt of the sai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(1A) to (1D) of section 245C. 10. The details referred to in item 11 shall be given in the Annexure to this application." [Emphasis supplied by us] 26. The procedure laid down in Section 245D of the Act, contemplates that on receipt of the application under Section 245C(1) of the Act, the Settlement Commission is required to forward a copy of the application filed in the prescribed form (No. 34B), containing full details of issues for which application for settlement is made, the nature and circumstances of the case and complexities of the investigation involved, save and except the annexures, referred to in item No. 11 of the form and to call for report from the Commissioner. The Commissioner is obliged to furnish such report within a period of 45 days from the date of communication by the Settlement Commission. Thereafter, the Settlement Commission, on the basis of the material contained in the said report and having regard to the facts and circumstances of the case and/or complexity of the investigation involved therein may by an order, allow the application to be proceeded with or reject the application. After an order under Section 245D(1) is made, by the Sett....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the said question. It is plain from the language of sub-section (4) of Section 245D of the Act that the jurisdiction of the Settlement Commission to pass such orders as it may think fit is confined to the matters covered by the application and it can extend only to such matters which are referred to in the report of the Commissioner under sub-section (1) or sub-section (3) of the said Section. A "full and true" disclosure of income, which had not been previously disclosed by the assessee, being a pre-condition for a valid application under Section 245C(1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against item No. 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, Section 245C(3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said Section is instructive in as much as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid order of the High Court was put in issue before this Court and was set aside vide order dated 11th July, 2006 and the case was remanded back to the High Court for fresh consideration. Nevertheless, all points raised by the parties, including the plea of the revenue that the application filed by the assessee before the Settlement Commission was not maintainable as the assessee had not made a full and true disclosure of their undisclosed income were kept open. The High Court addressed itself on the said issue and found that the assessee had not made a full and true disclosure of their income while making the application under Section 245C(1) of the Act, yet did not find it proper to set aside the proceedings on that ground. Having recorded the said adverse finding on the very basic requirement of a valid application under Section 245C(1) of the Act, the High Court's opinion that it would not be proper to set aside the proceedings is clearly erroneous. The High Court appears to have not appreciated the object and scope of the scheme of settlement under Chapter XIX- A of the Act. At this juncture, it would be appropriate to notice a few illuminating observations in W T ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h October, 1997, in as much as, in the latter report the Commissioner had himself computed the undisclosed income at Rs. 42.52 crores, which was equivalent to the amount finally determined by the Settlement Commission. Therefore, according to the learned counsel, there was no justification for the remand of the case back to the Settlement Commission. At the first blush, the argument appears to be attractive but on a deeper scrutiny, it does not merit acceptance. In the impugned order, on a critical examination of the order passed by the Settlement Commission with reference to the said two reports, in particular the reconciliation report submitted by the Commissioner on 20th October, 1997, estimating the undisclosed income at Rs. 187.20 crores, the High Court had found that only that part of the report dated 20th October, 1997, which dealt with "on money" was highlighted before this Court, while other incomes, investments, receipts or payments were not covered in that part of the statement. The High Court also observed that the manner in which expenses had been shown, created a serious doubt about the expenditure of Rs.734.02 lakhs. The High Court has also noted that the Settlement ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ission in exercise of its power under Article 226 of the Constitution, in our opinion, the argument is stated to be rejected. Having conceded before the High Court that the assessee was not pressing the point of maintainability of the writ petition before the High Court, the assessee cannot be now permitted to resile from its earlier stand and raise the same issue before us. Even otherwise, as stated above, we have no hesitation in observing that the manner in which assessee's disclosures of additional income at different stages of proceedings were entertained by the Settlement Commission, rubbishing the objection of the Commissioner that the assessee had not made a full and true disclosure of their income in the application under Section 245C(1) of the Act, leaves much to be desired. 34. We may now evaluate the submission of learned counsel for the assessee that since the Commissioner was not entitled to receive a copy of the annexure to the application before the Settlement Commission had decided to proceed with the application, no prejudice was caused to the Commissioner because of the alleged non-supply of the revised annexure at a stage anterior to the making of or....