TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 826
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.... who is taxed for its income by the Mumbai Income Tax Commissionerate, the Petitioner before us. It is this second Respondent who approached the Respondent No. 1 Commission seeking its intervention and under the statutory scheme. This statutory scheme is evolved within the framework of the Income Tax Act, 1961 (hereinafter referred to as "the IT Act"). We shall make a reference to this scheme a little later. 4) From the record, it appears that in the assessment year 2010-11, a scrutiny assessment was undertaken, in which it was noticed that the second Respondent (for short "the Assessee") had purchased materials/goods from various parties. Some parties, whose names appeared in the list, were suspicious. It is alleged that they issued bogus bills. There was no delivery of goods nor was there a transaction described and defined as "sale" within the meaning of the then Bombay Sales Tax Act, 1959/Central Sales Tax Act, 1956/Maharashtra Value Added Tax Act, 2002. Thus, no transaction of the nature referred to in these enactments was reported. The names of such suspicious, bogus dealers were put up on the website of the Maharashtra Sales Tax Department. 5) To verify the genuineness of ....
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..../served respectively on the Assessee firm before the Assessee filed application before the Settlement Commission under section 245C of the IT Act. Annexure 'B' is the copy of the notice issued under section 148 of the IT Act dated 15th March, 2013, Annexure 'C' is the copy of reasons recorded for issuance of notice under section 147 of the IT Act, Annexure 'D' is the copy of acknowledgment of service of notice under section 148 of the IT Act and Annexure 'E' is the copy of acknowledgment of the assessment order. 9) The Assessee firm, knowing fully well that the bogus purchases shown by the Assessee had been detected by the Income Tax Department for all the years, namely, assessment year 2010-11 to 2012-13 and also that concealed income in the form of cash deposits had been detected by the Department, filed a settlement application for assessment years 2010-11 to 2012-13 on 18th March, 2013 under section 245C of the IT Act. In this settlement application, additional income was declared as follows: Assessment Year 2010-11 1,05,25,216/ Assessment Year 2011-12 8,97,111/ Assessment Year 2012-13 41,72,337/ 10) The relevant facts, as received from the ....
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....he IT Act, which was much more than the undisclosed income declared by the Assessee firm. It was pointed out to the Settlement Commission that even the copies of the detected bank accounts were not submitted by the applicant in the application for settlement and thus, the application did not disclose relevant crucial material facts. Hence, the Assessee firm had not fulfilled one of the main requirements for availing the jurisdiction of Settlement Commission under section 245(1), which was to make a full and true disclosure of its income which has not been disclosed before the Assessing Officer and to specify the manner in which such income has been derived. It is submitted that if at any stage including the stage of admission or otherwise, the Department could demonstrate that the Assessee has failed on any of these counts, the application as per settled law is liable to be thrown out by the Settlement Commission. 12) The Settlement Commission did not consider the arguments of the Petitioner and has brushed aside the case of the Petitioner. The order of the Settlement Commission dated 10th May, 2013 not declaring the application of the Assessee firm as invalid under section 245D (....
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....pliance. On 2nd January, 2013, Shri.Dinesh Joshi C. A. attended and stated that all the details called for were filed but it was noticed that the notice under section 133(6) issued to this party was returned back by postal authorities. Therefore, the Assessee was directed by a letter in writing to attend the proceedings on 11th February, 2013 and that is how the Assessee's representative attended along with the proprietor of M/s. Nutan Metals. The summons was issued and served on the proprietor of Nutan Metals and Mr. Chhotaray relies upon the answers given by this person to some of the questions posed during the course of assessment proceedings. Mr.Chhotaray relied upon para 5.3 of the assessment order to urge that if the Assessee fails to substantiate any expenditure debited to the trading/profit and loss account with adequate supporting evidence and by establishing the genuineness of the purchases, then, it is apparent that the adverse inference drawn must be sustained. The Settlement Commission failed to notice that if the Assessment has proceeded and resulted in an assessment order, then, the application for settlement and made to the Commission in terms of section 245C of....
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....ed in these bank accounts as far as capital and profit from the undisclosed trading. He offered the amounts to tax. However, copies of the accounts did not form part of the settlement application. The disclosure of undisclosed income for assessment year 2010-11 of Rs. 1,05,25,216/, of Rs. 8,97,111/for assessment year 2011-12 and Rs. 41,72,337/for assessment year 2012-13 was much less than what had already been detected by the Department as bogus purchases and concealed income by way of cash deposit. Further, the inquiry which was made by the Directorate of Intelligence and Criminal Investigation, Mumbai, which included recording of statement of both, of the Assessee Applicant and his accomplice, were not disclosed before the Settlement Commission. The fact that M/s. Nutan Metals had denied making sales to the Assessee and that all this was known to the Department was also hidden by Respondent No. 2 from the Settlement Commission. This entire material was brought before the Settlement Commission together with supporting documents. There is also a copy of the assessment order, wherein the partner of Respondent No. 2/Assessee's admission was recorded on 1st February, 2013. This wa....
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.... it made the settlement application. Yet, it did not make a disclosure of these transactions in the settlement application. The Settlement Commission also was aware through the two captioned reports of the Commissioner and at the hearing about these bogus purchases before it considered the applications for passing the orders under sections 245D(1) and 245D(2C). Still it held by a majority view that full and true disclosure has been made. As rightly held by the third dissenting Member, the Assessee had not made a full and true disclosure of income and the manner of earning the income. 18) In support of the above contentions, Mr. Chhotaray relies upon the following decisions: 1 (1979) 4 SCC 121 in the case of Commissioner of Income Tax (Central) vs. B. N. Bhattacharjee and Another. 2 (1993) 203 ITR 848 in the case of Rasik Ramji Kamani vs. S. K. Tripathi and Others. 3 (1994) 206 ITR 443 (SC) in the case of Commissioner of Income Tax vs. Express Newspapers Ltd. 4 (1999) 236 ITR 581 (Madras) in the case of V. M. Shaik Mohammed Rowther vs. Settlement Commission (IT & WT) and Ors 5 (2001) 252 ITR 1 (SC) in the case of Commissioner of Income Tax vs. Anjum M. H. Ghaswala and Ors. 6 ....
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....n the matter proceeds further, the Revenue can point out to the Settlement Commission that on the basis of the disclosures made, no relief be granted to the present Respondent No.2/Assessee/Applicant. Mr. Mistri, therefore, relies upon the stand taken by the Respondent No. 2 in the affidavit and the findings of the Settlement Commission, to urge that the Writ Petition has no merits and must be dismissed. 20) In the rejoinder, Mr. Chhotaray submits that the present Writ Petition questions the jurisdiction of the Settlement Commission to entertain the application and which was not meeting the requirements set out in law. If the statutory requirements are not complied with, then, the Settlement Commission must dismiss the application at the threshold. In the present case, the Settlement Commission has erred in not noticing the fact that the assessment order is already passed and served on the Assessee. Secondly, the disclosure as made is not enough and in law for enabling the Settlement Commission to entertain the application/admit it. In the present case, Respondent No. 2 did not include the bank statements which formed the basis and other crucial documents in order to arrive at a t....
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....o accept the notice under section 148 of the IT Act as alleged in the affidavit in reply. Therefore, Mr. Mistry would submit that this is a case where none of the submissions and canvassed on behalf of the Petitioner deserve to be accepted. It is urged that there is no merit in the Writ Petition and it deserves to be dismissed. 23) With the assistance of the learned Counsel appearing for both sides, we have perused the Writ Petition and its all Annexures and the affidavits placed on record. 24) At the outset, it must be indicated that there are limits on this Court's jurisdiction under Article 226 of the Constitution of India, in entertaining a Writ Petition challenging a preliminary or prima facie opinion of the Settlement Commission. 25) Mr. Chhotaray himself has relied upon a Judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Anjum M. H. Ghaswala and Ors. reported in (2001) 252 ITR 1. The Constitution Bench of the Hon'ble Supreme Court in this case has analysed the entire chapter and held as under:Page "..... It is no doubt true that the terminology "settlement" has a very wide dictionary meaning and in the absence of a stat....
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....d be something more than a mere error; it must be one which must be manifest on the face of the record. The principles are well settled when the writ jurisdiction should be exercised. It should be issued in grave cases where the subordinate Tribunals, bodies or officers act wholly without jurisdiction or in excess of it, or in violation of principles of natural justice or refuse to exercise jurisdiction vested in them. There is an error apparent on the face of the record. Whether there is an excess exercise of jurisdiction may depend upon the existence of some facts in each case. There are cases where jurisdiction of the inferior Tribunal depends upon fulfilment of some conditions precedent upon existence of some particular fact. Such a fact is collateral to the actual matter, which the inferior Tribunal has to try and determine. Whether it exists or not is logically and in sequence prior to the determination of the actual question which the inferior Tribunal, has to try. In such a case, in certiorari proceedings the court can enquire into the correctness of the decision of the inferior Tribunal as to the collateral fact and may reverse that decision if it appears to it on material....
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....245C is made. The application for settlement of case is contemplated by section 245(1) and which provides that an Assesse 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. The proviso to this sub section states that no such application shall be made unless in a case where proceedings for assessment or reassessment for any of the assessment years referred to in clause (b) of subsection (1) of section 153A or clause (b) of subsection (1) of section 153B in case of a person referred to in section 153A or section 153C have been initiated, the additional amount of income tax payable on the income disclosed in the application exceeds fifty lakh rupees, and in a case where sub-clauses (A) and (B) of clause (ia) of the p....
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....said period, the Settlement Commission shall proceed further in the matter without the report of the Principal Commissioner or Commissioner. (2D) Where an application was made under subsection (1) of section 245C before the 1st day of June, 2007 and an order under the provisions of subsection (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 subsection (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." 29) We are mindful of the fact that the Settlement Commission has been set up with a laudable and avowed object. That is to promote the settlement. It is not as suggested by Mr. Chhotaray to confer a right in any tax payer to be d....
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....10-11, the notice under section 143(2) was issued as above, but the Assessee's representative pointed out that the Assessing Officer passed the order on 18th March, 2013 and on the date on which the application before the Settlement Commission was filed, a copy of the order has not been served on the Applicant/Second Respondent. Then, the Settlement Commission found that reliance has been placed on para 61.2 of Circular No. 3 of 2008 dated 12th August, 2008 issued by the CBDT. Then, reliance was placed upon certain orders of the Settlement Commission in the case of ABG Shipyard Ltd. and Shivkumar Chaturmal Acharya passed in the month of January, 2012 emphasising that though the assessment order was claimed to have been passed on 18th March, 2013, it cannot be said to have been made in terms of the provisions relating to the admission of the application, because it is not served on the Applicant. Thus, reliance was placed on the definition of the term 'case' as set out in section 245A(b) of the IT Act. Thus, it was asserted that proceedings for assessment under the Act in respect of the assessment years in question are pending. Para 3 of the impugned order and passed by ....
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....h, 2013. The Commission also, therefore, noted the arguments of the Assessee's representative that the effective date of commencement of the reassessment proceedings and which would debar the second Respondent from approaching the Settlement Commission needs consideration. He submitted that the explanation for the purpose of clause (b) of section 245A(i) refers to proceedings for reassessment and they shall be deemed to have commenced from the date on which a notice under section 148 is issued. The argument before the Commission was that the word 'issued' should be interpreted as 'served'. After noticing this argument and other contentions, the majority concluded that the word 'issued' in the present context will have to be read as 'served'. Therefore, for assessment year 2011-12 as well, the Commission held that the proceedings are pending. For assessment year 2012-13, the return of income was filed on 25th September, 2012, but no notice under section 143(2) has been issued. However, a notice under section 148 of the IT Act dated 15th March, 2013 has been served on the Assessee on 18th March, 2013, which is the date of filing the application bef....
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.... either of the expressions 'give' or 'send' or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. The act of giving a notice is not complete on mere dispatch of the notice and further that the word 'issued' is also used in the same sense as 'served'. All this has been emphasised by the Hon'ble Supreme Court in several decisions and for illustration, we refer to Judgments of the Hon'ble Supreme Court in the cases of K. Narasimhiah vs. H. C. Singri Gowds and Ors. Reported in AIR 1966 SC 330, R. K. Upadhyaya vs. Shanabhai P. Patel reported in AIR 1987 SC 1378, and V. Raja Kumari vs. P. Subbarama Naidu and Anr. reported in AIR 2005 SC 109. 33) Thus, we find that the Commission was not inclined to refuse the application or not entertain it or admit it only on this ground. 34) Once the second Respondent/Assessee has pointed out the course of eve....
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....ation in the subsequent proceedings before us and, therefore, is left open." 37) However, we do not find that the dissenting member has specifically made any comment on the above in his first note dated 26th March, 2013 (see page 66 and 67) 38) Mr. Chhotaray would submit that there is no disclosure much less true and full. In the oral arguments as also in his detailed note Mr. Chhotaray has urged that the second Respondent has not made a full and true disclosure of its income and the manner of earning such income. Mr. Chhotaray's emphasis is that one very important aspect of the investigation carried out by the Department was bogus purchases made by the second Respondent from parties who have been identified by the Sales Tax Department as suspicious. Their names have been published on the website of the Sales Tax Department and one of the alleged vendor stated that he had not sold any material to the second Respondent but lent only his name for the commission. Mr.Chhotaray heavily relied upon the Assessing Officer's observations and findings in the assessment order. Though the Assessee/Respondent No. 2 before us has made a statement to the contrary, yet, Mr. Chhotaray sub....
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....communication addressed to the third party and that third party Mahendra S. Vora appearing before the Assessing Officer and having his statement recorded. In such circumstances, it could not have been held by the dissenting member that the requirement of full and true disclosure and in regard to the income and the manner in which it is generated is not satisfied or fulfilled by the Assessee. How that finding can be common for all three assessment years. More so, when for one assessment year the findings are that there is already an assessment order made and duly served, and secondly, there is a notice under section 148 of the IT Act issued and which must be construed as served for the assessment year 2011-12. Hence, this contradiction in the opinion of the Technical Member is enough to reject the submissions of Mr. Chhotaray. 40) We are not concerned in this case with the merits of the disclosures. We find that once the majority holds that the conditions regarding threshold limits for the quantum of tax for additional income, payment of tax and interest thereupon and pendency of proceedings all are fulfilled, then, the application was not liable to be rejected on any technical gro....
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....t the Settlement Commission performed its function and upon scrutiny of the relevant materials rightly concluded that prima facie the disclosure as made is true and complete, it pertains to the income not disclosed before the Assessing Officer, the manner in which it is derived. The duty and obligation on the Settlement Commission regarding recording a preliminary jurisdictional conclusion is duly discharged. Any further probe and inquiry is unwarranted and unnecessary. 42) It is not for us to go into the adequacy or sufficiency of these findings and at the threshold merely because Mr. Chhotaray wants us to go into the reports of the Commissioner. We are of the view that any exercise of this nature would prejudice the case of both sides and it is even otherwise impermissible in our limited jurisdiction. We do not decide disputed questions of fact nor we substitute ourselves as the Settlement Commission. For, both courses are not permissible in law and to be carried out in our limited jurisdiction. In these circumstances, we have no hesitation in rejecting the contentions of Mr. Chhotaray on the third aspect of the matter. 43) The case law relied upon by Mr. Chhotaray now needs to....
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....ure is open in the proceedings under subsection (4) of section 245D of the IT Act. Thus, para 20 is heavily relied upon by Mr. Chhotaray. 45) However, the distinction lies in the fact that in the present case, the Commission has recorded by a majority that disclosure of additional income at this stage appears to be prima facie full and true and at present there is no material to reject the contentions of the second Respondent. However, this would require detailed examination in the subsequent proceedings and therefore, it is left open. We also find that the majority has made separate orders and for assessment years 2010-11 to 2012-13. In paras 8 and 9 of its order dated 26th March, 2013, the Commission has recorded distinct conclusions on this aspect. It noted that there is a difference in perception on the requirement of true and full disclosure of income. It does not wish to express a final opinion on the adequacy of disclosure. Thus, the disclosure is not termed to be untrue and incomplete. What is held is whether the disclosure as made is adequate and complete would require detailed examination. A disclosure is termed as true and full but a difference in the perception of the ....