TaxTMI 
TaxTMI 
2014 (8) TMI 630
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....ed by the Commissioner under section 245D(2B) of the Act. Briefly, the facts leading to the present petition are as under : (b) On January 31, 2013, the applicants filed applications for settlement before the Commission under Chapter XIX-A of the Act relating to the assessment years 2005-06 to 2012-13. In all, 42 applications for settlement were filed before the Commission by individual companies belonging to the same group. All these 42 applications were dealt with together by the applicants, the petitioner and the Commission. Even before us the submissions were made on both sides not on individual applications but as a group and thus the same is being considered by us also together as a group. (d) On February 12, 2013, the Commission, after hearing the applicants, passed an order under section 245D(1) of the Act. In the said order, the Commission recorded its prima facie opinion that full and true disclosure of its income has been made by the applicants and that there is no material on record to reject the applications. Therefore, the Commission allowed the settlement applications to be proceeded with further. (e) On February 12, 2013, itself, a copy of the order passed under....
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.... not made a true and full disclosure of its income nor the manner in which the income was earned, was dealt with by the Commission by holding that in the absence of the petitioner having access to the confidential folders, i.e., annexures to the petitioner's applications for settlement it would not be possible to hold at this stage that there was a failure to make true and full disclosure. Accordingly, the Commission held that the applications at this stage were not invalid and could be proceeded with. It was held that the objection raised by the petitioner would be considered at a subsequent stage, i.e., at the time of final hearing under section 245D(4) of the Act. (i) Thereafter, on April 17, 2013, the petitioner (the Commissioner) received the impugned order as well as the communication both dated April 8, 2013, from the Commission along with the confidential folder, i.e., annexures to the applications filed by the applicants with the Commission. The Commission required the petitioner to furnish her record and file her report on the matters covered by the settlement applications in terms of rule 9 of the Settlement Commission Procedure Rules. It was further provided that in....
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....k money and colossal tax evasion, both together using money power to prevent action against whitecollar offender, had been a terrible menace to the health and wealth of the nation. In particular, black money, whose constant companion was tax evasion, posed a challenge to the country's economy and the Wanchoo Committee was appointed to make recommendations with a view to arrest this evil. That Committee made a wealth of recommendations, but we are concerned only with Chapter 2 of the report which, under the title Black Money and Tax Evasion, proposed a compromise measure of a statutory settlement machinery where the big evader could make a disclosure, disgorge what the Commission fixes and thus buy quittance for himself and accelerate recovery of taxes in arrears by the State, although less than what may be fixed after long protracted litigation and recovery proceedings. We are not concerned with the merits of the recommendation except to state that if it works according to plan, it may 'ensure that the settlement is fair, prompt and independent', given 'a high level machinery for administering the provisions'. The risk of adverse criticism of escape by taxdodger....
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....ain full and true disclosure of income which has not been disclosed before the Assessing Officer and the manner in which such income has been derived ; and (c) declaration of the additional income-tax payable on such income. This application for settlement is made in accordance with section 245A(b) and section 245C(1) of the Act and the procedure provided under the Settlement Commission Procedure Rules and the Income-tax Rules, 1962. The application is to be made in the specified form being Form No. 34B along with annexures thereto containing particulars of the income and the manner in which income sought to be disclosed, has been derived. On an application being filed, the Commission within seven days issues a notice under section 245D(1) of the Act, calling upon the applicants to show cause as to why the applications should not be allowed to be proceeded with. At this stage, the Commission only hears the applicants and not the Revenue. The Commission is obliged to pass an order either rejecting the application or allowing it to be proceeded further within the period of 14 days from the date of the application. Where the application is allowed by the Commission to be proceeded w....
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.... of application for settlement made on or after June 1, 2010. In terms of section 245F of the Act, the Settlement Commission has been conferred with all powers which are vested in the income-tax authority under the Act having exclusive jurisdiction to exercise the powers and functions of the income-tax authority under the Act. Besides, section 245HA of the Act (introduced in 2007), inter alia, provides that when an application for settlement abates on being rejected either at the stage of section 245D(1) of the Act or at the stage of section 245D(2C) of the Act or at the stage of final hearing under section 245D(4) of the Act, the application filed by the applicants before the Settlement Commission including all other information, evidence and documents on record before the Commission could be used by the Assessing Officer as if the evidence, documents, information was produced before the Assessing Officer for the purposes of normal assessment, i.e., outside the province of Chapter XIX-A of the Act. Keeping in view the above broad conspectus of the provisions of Chapter XIX-A of the Act, we shall now record and consider the rival submissions. Mr. Khambata, learned Advocate General....
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....ome mentioned in the applications for settlement. This objection of the petitioner-Revenue was postponed to the stage of passing of order under section 245D(4) of the Act. This failure to decide the validity of an application under section 245D(2C) of the Act is in violation of the statutory provisions which cast a duty upon the Commission to decide the validity at the stage of section 245D(2C) of the Act as held by a Division Bench of this court in the matter of CIT v. ITSC (No. 1) (Writ Petition No. 3900 of 2013 rendered on June 13, 2013 [2014] 365 ITR 68 (Bom)) (hereinafter referred to as the judgment dated June 13, 2013). In view of the above, it is submitted that the impugned order dated April 8, 2013, be set aside and the matter be restored to the Commission for fresh hearing at the stage of section 245D(2C) of the Act. As against the above, Mr. Janak Dwarkadas and Dr. Milind Sathe, learned senior counsel on behalf of the applicants in support of the impugned order submit as under : (a) The petition should not be entertained in view of the fact that the petitioner has submitted herself to the jurisdiction of the Settlement Commission post the impugned order dated April 8, 2....
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.... of its income is made by the applicants. The above portion of the impugned order was in terms of the report of the Commissioner dated March 22, 2013 (filed on March 25, 2013) under section 245D(2B) of the Act read with rule 6 of the Settlement Commission Procedure Rules wherein she has herself stated that in the absence of confidential information the petitioner is unable to comment on the validity of the application. Thus, no fault can be found with the impugned order dated April 8, 2013, which has merely accepted the Commissioner (petitioner's) submissions. Therefore, there is no justification/warrant to interfere with the impugned order. (d) The petition has proceeded on a fundamentally erroneous basis that the Commission has failed to carry out the mandate of section 245D(2C) of the Act in determining the validity of the applications for settlement. This, it is submitted is not correct as the impugned order in terms records a finding in paragraph 14 thereof. "In view of the aforesaid we hold a view that applications are not invalid and allow the same to be proceeded further". Thus, there being a finding /declaration in the impugned order dated April 8, 2013, of the applic....
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....e is postponed to be done at the stage of 245D(4) of the Act. Therefore, no fault can be found with the impugned order. (g) Reliance by the petitioner upon the statement made by the directors of the applicants during the search and seizure in 2011 is not proper as the same had been retracted. In any event the statements make a reference to the cash receipts and not to the income arising out of the cash receipts. While the applications for settlement before the Commission seeks to disclose the income arrived out of the cash receipts as taxable. Therefore, the impugned order calls for no interference as it has correctly held that whether or not full and true disclosure has been made would be considered at the stage of final hearing under section 245D(4) of the Act. In the circumstances, it is submitted that the petition be dismissed. We have considered the rival submissions. The applicants have strongly contended before us that in view of the petitioner-Revenue having participated in the proceedings before the Commission post the impugned order dated April 8, 2013, it amounts to waiver of her rights to the question the jurisdiction of the Commission. We find, in view of section 245....
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....ccepted is only with a view to obtain the confidential folders/annexures to the application and use them in assessment proceedings by now challenging the impugned order dated April 8, 2013. This information contained in the confidential folders would never have been made available to the petitioner in case the applicants' applications for settlement is held invalid under section 245D(2C) of the Act. Thus, the adjudication proceeding for assessment before the Assessing Officer and authorities under the Act would have been without the evidence contained in the confidential folders of the applicants. The conduct of the petitioner-Revenue is unfair and the delay in filing the petition was only to obtain information which it would not have been entitled to had it not accepted the impugned order. Since the petitioner got the impugned order under section 245D(2C) as well as the confidential folders of the applicants on the same day, it cannot be said that the time taken, thereafter, by the petitioner for filing the petition was to obtain any unfair advantage. Besides under section 245HA of the Act even if an application is rejected under section 245D(1) or under section 245D(2C) of th....
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....ejudice, I contend that the application deserves to be declared invalid under section 245D(2C)." (emphasis supplied). According to us, the above observations have been made in the context of the Commission having allowed the settlement application to be proceeded with under section 245D(1) of the Act. In any case the petitioner in its report dated March 22, 2013, has categorically stated that the settlement application be declared invalid in terms of section 245D(2C) of the Act. Thus, it is not as though the petitioner sought deferment of the issue of true and full disclosure by the applicants before the Commission while considering the application for settlement under section 245D(2C) of the Act. On the merits of the issue, the petitioner submits that the obligation of the Commission to decide on the validity of the application at the stage of section 245D(2C) of the Act is no longer res integra in view of the decision of the Division Bench of this court in CIT v. ITSC (No. 1) Writ Petition No. 3900 of 2013-since reported in [2014] 365 ITR 68 (Bom). In the above case, the Division Bench of this court has held that the Commission is obliged at the stage of proceeding under section....
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....made a declaration that the application for settlement is not invalid under section 245D(2C) of the Act. We thus accept the petitioner's submission that the issue is no longer open to debate in view of the decision of the Division Bench of this court in CIT v. ITSC (No. 1) Writ Petition No. 3900 of 2013-since reported in [2014] 365 ITR 68 (Bom). Besides we may point out that the impugned order postpones the consideration of the issue of full and true disclosure and yet holds that the application for settlement is not invalid. Thus, the impugned order dated 8 April 2013, also suffers from the vice of being a non-speaking order inasmuch as it does not consider and deal with the objection of the petitioner as contended in its report under section 245D(2B) of the Act read with rule 6 of the Settlement Commission Procedure Rules. We do appreciate that at this stage no detailed reasoning is required to be given by the Commission while declaring the validity or invalidity of the application yet there must be some modicum of reasons which would suggest due application of mind to the objections, if any, raised by the Commissioner (petitioner) in its report under section 245(2B) of the ....
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....on (supra) and K. Jayaprakash Narayanan (supra). When it was pointed out that the above decision of the apex court were rendered in the context of the provisions existing prior to 2007, the applicants submitted that there is no difference in the provisions of Chapter XIX-A of the Act as existing prior to and the post-2007 amendment. It was pointed out that earlier, i.e., prior to the 2007 amendment, the proceedings before the Settlement Commission were two-tier proceedings, i.e., acceptance and admission of the application at the stage of section 245D(1) of the Act and the final hearing and disposal at the stage of section 245D(4) of the Act. While the post-2007 amendment the two-tier proceedings have now been converted into three-tier proceedings as under : (a) providing for acceptance of the application under section 245D(1) of the Act ; (b) admission of the application under section 245D(2C) of the Act ; and (c) final hearing of the application under section 245D(4) of the Act. It is submitted that prior to the amendment in 2007 section 245D(1) and section 245D(2C) of the Act were merged into section 245D(1) of the Act while the post-amendment these are two different and dis....
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....ument both the petitioner as well as the applicants took us through the application for settlement and the reports of the Commissioner (petitioner) under rules 6 and 9 of the Settlement Commission Procedure Rules filed before the Commission. Along with the application for settlement, attention was also drawn to confidential documents/ annexures to the application filed by the applicants to contend that there has been true and full disclosure on the part of the applicants and by the petitioner to contend exactly the opposite. We are refraining from answering this particular issue as the settlement application is seized of by the Commission. Moreover, while exercising the powers of judicial review of an order passed by the Commission, we are concerned more with the decision-making process rather than with the merits of the decision of the Commission. We find in this case the Commission has completely over looked the mandate of section 245D(2C) of the Act post-2007 amendment which requires it to consider the validity of the settlement application filed by the applicants and the consideration of it cannot be postponed to a later date. However, before parting, we wish to reiterate what....