TaxTMI 
TaxTMI 
2015 (9) TMI 75
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....he Apex Court in Jyotendrasinhji v/s. S. I. Tripathi & Others 201 ITR 631 - wherein the scope of judicial review from the orders under Section 245D(4) of the Act has been set out as under: " .... .... .... .... The sole overall limitation upon the Commission thus appears to be that it should act in accordance with the provisions of the Act. The scope of enquiry, whether by High Court under Article 226 or by this Court under Article 136 is also the same - whether the order of the commission is contrary to any of the provisions of the Act and if so, has it prejudiced the petitioner/appellant. Apart from ground of bias, fraud and malice which, of course, constitute a separate and independent category. Reference in this behalf may be had to the decision of this Court in Sri Ram Durga Prasad v. Settlement Commission, 176 ITR 169: (AIR 1989 SC 1038), which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji, J., speaking for the Bench comprising himself and S. R. Pandian, J observed that in such a case this Court is "concerned with the legality of procedure followed and not with the validity of the order." The learned Judge added "judicial review is co....
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....rticle 226 of the Constitution of India in mind, we will examine the grievance of the Petitioner. This in the context of the facts giving rise to this petition which are as under: (a) The Respondent No.2assessee is a company incorporated under the Companies Act, 1956 and is an subsidiary of one M/s. Jupiter Networks LLC USA (holding company). The Respondent No.2 is engaged in rendering I. T. related services to its holding company inter alia from its unit registered with the Software Technology Park of India (STPI unit) and also from its nonSTPI Units. The Respondent No.2 is exempted from tax under Section 10A of the Act in respect of its profits arising from its STPI unit i.e. 95% of its entire profits. The business model of the Respondent No.2 is to provide its IT services to its holding company at cost + 10%. The capital goods i.e. equipments were purchased by the Respondent through its holding company. This has been illustrated by the parties with a figure of Rs. 100/- ( for ease of understanding) as the cost price of the equipments to the Respondent No.2. At this figure of Rs. 100/-, the equipment was recorded in the Respondent No.2's books and also depreciation taken, was on....
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....ing that the unbilled revenue (excess sales figures at Rs. 225/- + 10%) is not genuine income as it is a mere book entry made by the applicant. The additional income was determined by virtue of Transfer Pricing Adjustment at Rs. 76.03 Crores and the impugned order also negatived the contention of the Petitioner that the benefit of Section 10A of the Act will not be available to the extent of Rs. 264 Crores being extra ordinary profits. It is the impugned order that is the subject of challenge before us. 4. The Primary challenge of the petitioner is one of jurisdiction that is the Commission had no jurisdiction to entertain the application for settlement made by the Respondent-Assessee. This for the reason that the Respondent-Assessee did not satisfy the two independent conditions precedent as provided under Section 245C(1) of the Act for invoking the jurisdiction of the Commission as under: (a) making full and true disclosure of its income in its application; and (b) the manner in which this income has been derived. This failure to make full and true disclosure, according to the Petitioner is evident from the fact that during the course of the hearing of the application under S....
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....not made full and true disclosure of their income while making an application under Sectionwpl18062015 245C(1) of the Act, yet did not find it proper to set aside the proceeding on that ground. Having recorded the said adverse finding on the very basic requirement of the valid application under Section 245C(1) of the Act, the High Court's opinion that it would not be proper to set aside the proceeding as clearly erroneous." 7. It would, therefore, be noticed that there was a clear finding of failure to make full and true disclosure of the income made by the Applicant in Ajmera Housing (supra) to the Settlement Commission. Thus, revision of the income offered for tax therein was suomotu. This was after the hearing had concluded and orders were awaited. Normally, the income offered for tax in an application for settlement would bind the parties concerned and any revision thereof, would prima facie, be evidence of the original application for settlement not declaring the full income in its original application. However, this is not cast in stone and will depend upon the factual context from case to case to determine whether there was any failure to disclose fully and truly the in....
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....er: "7 In this case, the primary objection of the petitioner as urged before us is that the application for settlement filed by the respondents does not meet the jurisdictional requirement of full and true disclosure of their income as required under Section 245C of the Act. This according to the petitioner is a statutory jurisdictional precondition that has to be satisfied before the application can be entertained by the Commission. The failure on the part of the respondent to make full and true disclosure in its application is established, according to the petitioner, by the fact that an additional income of Rs. 150 Crores was declared before the Commission on 10 September 2007 i.e. over and above, the income declared in their application dated 5 March 2007. This additional disclosure of income on the part of the respondent itself, without anything more is a tacit admission that the original application filed on 5 March 2007 did not make a full and true disclosure of the respondents income. According to the petitioner, the issue stands concluded by the decision of the Apex Court in Ajmera Housing (supra) wherein it has been held that the Chapter XIXA of the Act does not contempl....
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....s. In our opinion, the scheme of the said Chapter is clear and admits of no ambiguity." 8. The above observations of the Apex Court may at first blush seem to cover the petitioner's case completely. However before the above observations being relied upon by the petitioner can be applied to the present facts the following further observations of the Apex court should be taken note of which read as under: "We are convinced that, in the instant case, the disclosure of Rs. 11.41Crores as additional undisclosed income in the revised annexure, filed on September 9, 1994 alone was sufficient to establish that the application made by the assessee on September 30, 1993 under section 245C(1) of the Act could not be entertained as it did not contain a 'true and full' disclosure of their undisclosed income and 'the manner' in which such income had been derived. However, we say nothing more on this aspect of the matter as the Commissioner, for reasons best known to him, has chosen not to challenge this part of the impugned order." 9. It would, therefore be noted that the aforesaid issue of whether or not by virtue of disclosure of additional income, there was a failure to mak....
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.... facts filed by Respondent No.2 along with the application for settlement does mention at para 25 as under: " .... .... .... .... In so far as the income which has been disclosed as per profit and loss Account is at a higher figure and the applicant cannot reduce its income, whether it would remain taxable as such or on its being abated could a lower figure be is a circumstance which deserves consideration by the Commission. In view of such concession which the applicant is willing to offer, the disputable issues regarding the taxability of real income and book profits requires settlement." In any event on consideration of the submissions made before it the impugned order at Para 47.3 records its satisfaction in respect of all the three prerequisites for grant of immunity from penalty and prosecution. Thus the immunity from penalty and prosecution was granted only on satisfaction of the jurisdictional requirements. This satisfaction has not been shown to be perverse. 13. The last grievance of the petitioner is that the impugned order is bad on merits. It is submitted that concepts like real income have been invoked when the same has no application. In support reliance is placed ....