TaxTMI 
TaxTMI 
2011 (3) TMI 277
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....t viz., (i) M/s. Chandragiri Construction Company, (ii) M/s. Chandragiri Construction Co., (iii) M/s. Padhoor Plantations Private Limited, (iv) M/s. Hotel Periyar Ltd. (v) M/s. Vintage Hotels Private Limited, (vi) T. B. Kunhimahin Haji, (vii) S. L. P. Kunhibi, (viii) K. M. Muhammed Sherief, (ix) K. M. Mohideen Kunhi, (x) K. M. Ahammed Nizar, (xi) K. M. Thahira, and (xii) K. M. Arifa. (a) It is stated that a search was conducted by the respondent-Department in the premises of the petitioner and other family businesses on June 21, 2001 and no adverse materials except certain share certificates of the companies were seized. The Department considered the accounts of M/s. Chandragiri Construction Company for the year 1995-96 as one period and accounts of the said company and other assessees constituting 12 assessees in one block period for the period from 1996-97 to 2001-02. (b) After the search was made, the second respondent submitted a report as per rule 9 of the Income-tax Settlement Commission (Procedure) Rules, 1997 with various contentions ra....
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....books, that the petitioner made misrepresentation of fact regarding the purchase of Vintage Hotel property in Bangalore and that the duplicate audited accounts seized from the auditors of the assessee-company show that there are two sets of audited reports. It was, based on the same the first respondent issued the impugned notice dated February 8, 2010, directing the petitioner to offer explanation. 3. The notice issued by the first respondent, the Settlement Commission, is challenged on the ground that there is no reason for the proposed reopening of the settlement which was effected by the first respondent on March 4, 2008, since the materials which are relied upon by the second respondent for reopening were already very much available at the time when the original settlement order was passed on March 4, 2008 ; that the first respondent having passed the settlement order has no jurisdiction since while passing the order on March 4, 2008, the first respondent considered all the relevant material facts and therefore, the notice itself is a harassment ; that the impugned notice also does not disclose as to how two certificates issued by the petitioner dated April 15, 1994 and Apr....
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....roperties were routed through a large number of undisclosed bank accounts and on that basis, the assessees' balance-sheets as on 31st March of financial years 1995-96 to 2000-01 were recast and therefore, the undisclosed income of Rs. 39.31 crores was based on the above evidence as stated in the report filed under rule 9. (c) It is stated that the value of work-in-progress for the years ended March 31, 1994 and March 31, 1995 was taken as per the certificates produced by the executive engineer with his letters dated March 24, 2003 and January 9, 2009 as Rs. 1,53,08,199 and Rs. 1,49,13,635 as against the assessees' claim of Rs. 11,95,00,000 and Rs. 7,15,00,000 which was based on false/forged certificates dated April 15, 1994 and April 18, 1995. (d) It was informed by the executive engineer in the letter dated January 9, 2009 that the certificates of work-in-progress showing amounts of Rs. 11,95,00,000 and Rs. 7,15,00,000 for the years ended March 31, 1994 and March 31, 1995, which were produced by the assessee were not produced by the Office of the Executive Engineer, Karapuzha Project Division, Kalpetta and the correct work-in-progress was informed to be Rs.1,53....
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.... 87.29 lakhs and Rs. 116.77 lakhs in one set and in the other set, it was shown as Rs. 350.14 lakhs and Rs. 391.24 lakhs and a complaint was made to the Institute of Chartered Accountants of India and charges were proved against the auditor and the matter was referred to the Kerala High Court for removal of the name of the auditor from the register of members of chartered accountants. 5. The main contention of Mr. R. Krishnamurthy, learned senior counsel for the petitioner against the impugned show-cause notice is that the show-cause notice is without jurisdiction and has been passed/issued with total non-application of mind. (a) It is his submission that there is no jurisdiction on the part of the first respondent to reopen the settlement award effected on March 4, 2008 for the reasons that all the materials were available before the respondents, especially the executive engineer's report dated March 24, 2003 and that the assessment order dated March 31, 2003 for the year 1995-96 became final and hence there is no reason for reopening the settlement. (b) It is his submission that even otherwise such reasons would not tilt the conclusion of the Commission dated ....
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.... Vicco Laboratories [2008] 2 CTC 511 apart from Siemens Ltd. v. State of Maharashtra [2007] 1 CTC 844 to show that there must be acceptable materials for the purpose of reopening the settlement proceedings before the Settlement Commission. 6. On the other hand, it is the contention of the learned counsel for the respondents that the writ petition as such is not maintainable since it is only a show-cause notice which is challenged and the petitioner has got every right to submit its explanation and unless and until the first respondent passes a final order, the writ petition should be declared as premature. 7. I have considered the rival submissions made by the learned senior counsel for the petitioner and the learned counsel appearing for the Department and given my anxious thoughts to the issue involved in this case. 8. Section 245D of the Income-tax Act (in short, the Act) which provides for the procedure to be followed by the Settlement Commission on an application filed under section 245C with full and true disclosure which were not disclosed before the Assessing Officer in the case to be settled, enables the Settlement Commission, after giving an opportu....
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....e said powers conferred under the said provision at the instance of the application filed by the group of firms of the petitioner under section 245C of the Act on June 2, 2003, the Settlement Commission passed the final order on March 4, 2008. The first and major issue relates to the undisclosed income in the computation of the amount of Rs. 39.31 crores, as indicated in the report filed by the second respondent under rule 9. The next issue relates to the understatement of value of work-in-progress (WIP). While the value given in the report filed under rule 9 of the Income-tax Settlement Commission (Procedure) Rules, 1997 (in short, "the Rules") by the second respondent as on March 31, 1994 and March 31, 1995 was Rs. 1,53,08,199 and Rs. 1,49,13,635, the petitioner claimed that the same would be Rs. 11,95,00,000 and Rs. 7,15,00,000 respectively. The other issue is relating to the purchase of Vintage Hotel land at Bangalore and as per the report under rule 9, it was stated to have been purchased for Rs. 9,09,20,200 while the claim of the petitioner was that the same was purchased for Rs. 1,20,22,970. 12. It is no doubt true that in respect of these issues, the second respon....
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....that the value of building is mentioned at Rs. 7,18,200 in the seized paper and even as per the balance-sheet of the applicant-company as on March 31, 1997 the value of building is shown as Rs.2.55 crores (APB 46) and thus the piece of paper has no evidentiary value at all. The authorised representative also submitted thatthe cost of construction of the hotel building as accounted by theapplicant company as per the audited balance-sheet as on March 31, 2001 is Rs.5.17 crores (APB 70) as against Rs. 3.43 crores (APB 94) asper the Departmental valuation report. The Department has notbrought for-ward any corroborative material to support their contention regarding the value of land. Considering the submissions of theapplicant, we do not see any reason to make adjustment on this account." 14. The Settlement Commission has also given further direction for payment of tax for undisclosed income as arrived at by the Commission however, stating at the end of the order that the settlement would be declared void if it is subsequently found that the same has been obtained by fraud or misrepresentation of facts and the relevant portion of the order is as follows : "20. This ....
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....to produce the same before the Settlement Commission earlier was that the Commission had given time to the second respondent only between February 6, 2008 and February 20, 2008 and therefore there was no sufficient time to go into the correctness or other-wise of the case. However, the second respondent has chosen to specifically state that after the Commission passed the order on March 12, 2008, summons were issued by the Department to the Executive Engineer, Kalpetta on October 3, 2008 and based on that, the executive engineer in his letter dated January 9, 2009 disclosed certain facts which are elicited as follows : "8. In response to summons dated October 3, 2008 issued by the ADIT, the Executive Engineer, Irrigation, Karapuzha Project Division, Kalpetta vide his letter dated January 9, 2009 (copy enclosed), based on measurement books, has submitted that the amount of work-in-progress as on March 31, 1994 and March 31, 1995 was Rs.1,53,08,199 and Rs. 1,49,13,635 respectively as against the figures of Rs. 11,95,00,000 and Rs. 7,15,00,000 as on March 31, 1994 and March 31, 1995 mentioned in the certificates filed by the assessee." 16. It is, on the basis of subsequen....
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....ame final for the year 1995-96. But the question is as to whether at this stage, when what is given is only a show-cause notice, this court can decide about the nature of documents relied upon by the second respondent-Department, whether they are forged or not. That is well within the realm of the authorities under the Income-tax Act and not for this court. Therefore, the efforts taken by the learned senior counsel appearing for the petitioner to show that there is no basis to arrive at a conclusion that the certificates issued by the executive engineer dated April 15, 1994 and April 18, 1995, regarding work-in-progress should be construed to be not genuine, cannot be appreciated at this stage. The question of relevancy or otherwise of those documents for the purpose of adjudication or necessity of such documents for running the affairs of the group of firms to offer as security also cannot be gone into by this court at this stage. 20. The Supreme Court in Kusheshwar Prasad Singh v. State of Bihar [2007] 11 SCC 447 dealt with the Bihar Land Reforms (Fixation of Ceiling Area and Acquisition of Surplus Land) Act, 1961, which contemplates a duty to issue final statement with....
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....le with the Department at the time when the original settlement proceedings were going on and no whisper was made about the genuineness of those documents, especially about the certificates issued by the executive engineer dated April 15, 1994 and April 18, 1995, including a slip which is stated to have been seized containing the price of the Vintage Hotel land. According to the learned senior counsel, the second respondent having not raised such objection at the earliest point of time, cannot now raise such point after the settlement was concluded and therefore, the impugned notice is affected for want of jurisdiction. I am unable to agree with the said contention of the learned senior counsel for the reason that it is not the case of the second respondent in the application filed before the Commission for revoking the earlier settlement that the certificates of the executive engineer dated April 15, 1994 and April 18, 1995 were not available with them, but it is the case of the second respondent that the Department believed their contents to be true and it was only after summons were sent and after the Settlement Commission passed orders, the Department entertained a doubt about ....
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....ons of the Bom- bay Provincial Municipal Corporation Act, 1949, there was a direction to make payment of cess immediately in respect of supply made to the party. Inasmuch as it was found that the Department had already made up its mind in respect of quantum of amount payable, nothing remains for an enquiry to quantify the amount. The law on the said aspect has been elucidated by the Supreme Court in the following paragraphs : "10. Although ordinarily a writ court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause unless the same inter alia appears to have been without jurisdiction as has been held by this court in some decisions including State of U. P. v. Brahm Datt Sharma, AIR 1987 SC 943, Special Director v. Mohd. Ghulam Ghouse [2004] 120 Comp Cas 467 ; [2004] 3 SCC 440 and Union of India v. Kunisetty Satyanarayana [2006] 12 Scale 262, but the question herein has to be considered from a different angle, viz., when a notice is issued with premeditation, a writ petition would be maintainable. In such an event, even if the court directs the statutory authority to hear the matter afresh, ordinarily such hearin....
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....abundantly clear that in every paragraph the first respondent has only narrated as to what has been pointed out by the second respondent/assessing authority in the application filed under section 245D(6) of the Act and it is certainly open to the petitioner to raise all its objections to the allegations raised by the second respondent before the Settlement Commission. Therefore, it cannot be said that the Settlement Commission has no jurisdiction to declare its order as void in the light of the provision of section 245D(6) of the Act. 26. At the risk of repetition, it is to be reiterated that the statutory authorities are presumed to perform their functions in a fair manner and by issuance of the impugned show-cause notice, there is nothing to come to the conclusion that the first respondent, who is the authority to decide under the provisions of the Income-tax Act has predetermined the issue. Such predetermination on the part of the assessing authority/second respondent is immaterial for, it is the first respondent who is ultimately to perform the quasi-judicial functions as per the provisions of the Act to decide about the correctness or otherwise of the allegations mad....