AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 179
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....r directing it to file return of income for the block period 1.4.1985 to 12.12.1995. In response thereto, the petitioner filed its return of income. Thereafter, on 22.10.1996, the petitioner filed a settlement application dated 14.10.1996 under section 245C of the Act declaring undisclosed income of Rs. 5 lakhs. Subsequently, by a letter dated 27.12.1996 addressed to the Commission, the petitioner revised the application by substituting the undisclosed income at a higher amount of Rs. 7 lakhs. During the pendency of the application under section 245C of the Act, the Assessing Officer passed an order under section 158BC of the Act on 22.8.1997. By way of abundant caution, the petitioner filed an appeal against the said order before the Income Tax Appellate Tribunal (hereinafter referred to as "the Tribunal") being ITA No.169/Ahd/1997. Thereafter, the Settlement Commission passed an order dated 10.9.1999 whereby it permitted the petitioner to proceed with the application under section 245D(1) of the Act directed the petitioner to pay the additional amount of income tax payable on the income disclosed in the application within a period of 35 days from the receipt of the said order. ....
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.... taxes and interest on the revised undisclosed income of Rs. 7,00,000/- on or before 31.03.2007. Hence, the application cannot be further proceeded with and should be abated. On behalf of the petitioner, it was pointed out to the Commission that though the petitioner had not made any payment of tax and interest after the order under section 245D(1) of the Act was passed, the amount of Rs. 4,90,000/- which was already seized and adjusted on 29.9.1997 prior to that order should be treated as tax paid and, accordingly, the application need not be abated. It was submitted that while adjusting the cash seized towards the block assessment demand on 29.9.1997, no intimation had been given by the Assessing Officer and hence, the same should be considered as an adjustment against the demand created by the order under section 245D(1) of the Act. It was also submitted that in case this proposition of cash adjustment against the order under section 245D(1) is not accepted, the petitioner is still ready to deposit the tax amount to cover for the deficiency. 5. By the impugned order dated 2.12.2013 made under section 245D(2D) read with section 245HA(1)(ii), the Commission held that the Assess....
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....tted that assuming while denying that there is no fault on the part of the Assessing Officer or the Commission, the petitioner submitted at the time of hearing under section 245D(2D) read with section 245HA(1)(ii) of the Act before the Commissioner that it was ready and willing to pay the tax on the above declared amount of Rs. 7,00,000/- but the Commission did not accept its offer. It was submitted that in the order under section 245D(1) of the Act, the Commission has specifically observed that if the petitioner does not pay the additional amount of income tax within the time specified in sub-section (2A) of section 245D of the Act, the amount of income tax remaining unpaid together with interest shall be recovered by the Assessing Officer in accordance with section 245D (2D) of the Act. It was submitted that despite the fact that the order of the Settlement Commission was made on 11th September, 1999, no steps were taken by the Assessing Officer under section 245D(2D) of the Act and as a result, the petitioner was under an impression that the payment of Rs. 4,20,000/- had been paid because the larger amount of Rs. 4,90,000/- was lying with the Department. That it was only after t....
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....propriate course of action would be to send the assessee to the Tribunal. It was, accordingly, urged that the impugned order passed by the Commission deserves to be quashed and set aside and in the alternate, the appeal preferred by the petitioner before the Tribunal is required to be restored. 7. Vehemently opposing the petition, Mr. M.R. Bhatt, Senior Advocate, learned counsel for the respondent, invited the attention of the court to the provisions of Chapter XIXA of the Act which makes provision for "Settlement of Cases". Referring to the provisions of section 245C of the Act, it was submitted that the same provides for the assessee making an application in the prescribed form containing a full and true disclosure of the 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. It was pointed out that under sub-section (1) of section 245D of the act, the Commission may either by an order in writing reject the application or allow the application to be proceed....
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....ure to 7 lakhs instead of 5 lakhs, as made in the original application. It was submitted that in view of the decision of the Supreme Court in the case of Ajmera Housing Corporation v. Commissioner of Income-tax, (2010) 8 SCC 739, a "full and true' disclosure of income, which has not been previously disclosed by the assessee being a precondition 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 11 in 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 inasmuch as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly which he cannot otherwise achieve directly and in the process rendering the provision of sub-section ....
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..... Referring to the provisions of section 245HA of the Act, it was submitted that sub-section (2) thereof provides that where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income-tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of the Act as if no application under section 245C had been made. Referring to the provisions of section 116 of the Act, it was pointed out that as to who are the income-tax authorities has been provided under the said section and that the class of income-tax authorities for the purposes of the Act does not include the Tribunal and, hence, the question of restoring the appeal to the Tribunal would not arise in the facts of the present case. It was submitted that the petitioner while making the application before the Settlement Commission has taken a calculated risk and, hence, cannot seek the benefit in equity which is contrary to the statutory provisions. Referring to the provisions of section 245M which came to be subsequently omitted, it was submitted that there being no provision of restori....
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....he petitioner declared the undisclosed income at Rs. 7 lakhs instead of Rs. 5 lakhs. The Tribunal, while passing the order under section 245D(1) of the Act, did not make any reference to the revised declaration of undisclosed income made by the petitioner. Under the circumstances, the petitioner was required to pay the additional tax on the basis of the original application under section 245C of the Act. The petitioner, instead of depositing the additional tax on the undisclosed amount, filed a statement before the Commission that in view of the fact that the Department had already with it the cash of Rs. 4,90,000/- seized in the search, the tax of Rs. 4,20,000/- being 60% of Rs. 7 lakhs disclosed, it takes it that the same stands already paid and covered by the above seized cash of Rs. 4,90,000/-. It appears that pursuant to the above statement made by the petitioner, there was no response from the Commission or from the income-tax authorities nor were any steps taken to recover the amount that the petitioner was liable to pay pursuant to the order made by the Settlement Commission in accordance with the provisions of section 245D(2D) of the Act as it stood prior to its amendment ....
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....ermitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and in the process rendering the provision of sub-section (3) of section 245C of the Act otiose and meaningless. The court was of the view that the scheme of the said Chapter is clear and admits of no ambiguity. It was held that in the scheme of Chapter XIX-A, there is no stipulation for revision of an application filed under section 245C(1) of the Act and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under that section in the prescribed form. The court was accordingly of the view that revision of the annexure to the application is tantamount to revision of the application, not contemplated in the scheme. 12. In the light of the law laid down by the Supreme Court in the above referred decision, it is apparent that it was not permissible for the petitioner to revise the application made by it under section 245C(1) of the Act. Under the circumstances, ....
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....he provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st day of June, 2007, but an order under the provisions of sub-section (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007. 14. In the light of the provisions of sub-section (2D) of section 245D of the Act, it is not permissible for the Settlement Commission to proceed with an application made under section 245C(1) of the Act on which an order under the provisions of sub-section (1) thereof had been passed before 1.6.2007, unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid o....
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....fied in sub-section (4-A) of Section 245-D expires. (2) Where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C had been made. (3) For the purposes of sub-section (2), the Assessing Officer, or, as the case may be, other income tax authority, shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the evidence had been produced before the Assessing Officer or other income tax authority or held or recorded by him in the course of the proceedings before him. (4) For the purposes of the time-limit under sections 149, 153, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or 244 or, as the case may be, Section 244A, for making the assessment or rea....
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....ommission allowing the application to be proceeded with, the Assessing Officer had already passed the assessment order under section 158BC of the Act and, hence, the petitioner had preferred an appeal against the said order before the Tribunal. Subsequently, the Commission, by the order dated 10.9.1999, permitted the application to be proceeded with under section 245D(1) of the Act. In the light of the fact that the Commission had allowed the application made by the petitioner to be proceeded with, the Tribunal insisted upon withdrawal of the appeal preferred by the petitioner against the order under section 158BC of the Act; and by an order dated 23.1.2001, permitted the petitioner to withdraw the appeal as the application under section 245C had been admitted by the Commission and dismissed the appeal for non-prosecution. Subsequently, by virtue of the order passed under section 245HA of the Act, the proceedings before the Commission stand abated and, hence, the petitioner has prayed for the alternative relief of restoration of the appeal before the Tribunal. 19. Sub-section (2) of section 245HA of the Act provides that where a proceeding before the Settlement Commission abates....
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....of the Act. Such order would continue to subsist till the same is set aside by a higher forum. The passing of the order of abatement under section 245HA of the Act also does not have any effect on the order made by the Assessing Officer which continues to operate. Under the circumstances, despite the fact that the Commission in the operative part of the impugned order has observed that the Assessing Officer shall now dispose of the case in accordance with the provisions of sub-sections (2) (3) and (4) of section 245HA of the Act, the order under section 158BC of the Act would still subsist as there is no automatic setting aside of such order. Consequently, unless the appeal preferred by the petitioner before the Tribunal is restored, the petitioner would be rendered remediless. 22. In the light of the fact that the petitioner had challenged the order made under section 158BC of the Act before the Tribunal, which proceedings came to be withdrawn in view of the fact that the Commission had allowed the application made by the petitioner under section 245C of the Act to be proceeded with, if the appeal is not restored to the file of the Tribunal, the same would cause immense prejudi....