TaxTMI 
TaxTMI 
2016 (9) TMI 555
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....ite parties 2 to 6 for the assessment years ranging from 2004-05 to 2010-11. The Ahluwalia group has got business in iron ore mining, sponge iron ore plant and rolling mill. This group has also business of manufacturing of cement. The statement of Sri Kamaljeet Singh Ahluwalia was recorded under Section 132(4) of the Act. During the search and seizure operation, Sri Ahluwalia has admitted undisclosed income of Rs. 150.00 crores but later on by letter dated 16.11.2009, Sri Ahluwalia retracted from the disclosure made on 12.11.2009. However, after the search and seizure operation, the opposite parties 2 to 6 filed an application before the Commission on 9.9.2011 for determination of the total income and fixation of tax liability for the assessment years 2004-05 to 2010-11. 3. The opposite parties 2 to 6, being the assessee while filed such application before the Commission, have admitted that income amounting to Rs. 141.30 crores was not disclosed before the Assessing Officer under Section 153A of the Act relating to the above assessment years. 4. It is also stated that the opposite parties 2 to 6, for the assessment years 2004-05 to 2010-11, have got additional disclosed in....
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.... (A) 75.00 2009-10 Transportation charges of rejects (B) 63.00 2010-11 Unaccounted investment in immoveable property Unaccounted cash found 1.50 0.14 Sub Total (C) 1.64 Grand Total (A+B+C) 139.64 v. M/s.Kaypee Enterprises Assessment Years Particulars Amount (In Rs.Cr) 2006-07 Unaccounted investment in immoveable property (A) 4.10 2007-08 Removal of rejects (B) 22.25 Grand Total (A+B) 26.35 6. After consideration of the report under Rule 9 of the petitioner and submission of observation and counter observation of both parties, the order was passed under Section 245D (4) of the Act by the Commission on 28.3.2012 which is under challenge in this writ petition. 7. The Commission in its report added further Rs. 110.28 crores upon the assessee group as additional income over and above the income disclosed by the assessee before the Commission. The petitioner challenges such order of the Commission by stating that the assesee has understated their income on following categories: "(i) Booking of fictitious/bogus expend....
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....e figuring in the account. Names of M/s.AMR Constructions Private Limited and M/s.Indu Projects Private Limited find place to the extent of huge amount. 10. The CIT during survey also had found that many persons against whom expenses have been booked under the head removal of rejects and transportations charges of rejects during the financial years 2007 to 2009 have never been deployed and most of their names have not been heard by the assessee group. 11. The CIT also found that M/s.Merlin Tie Up (P) Limited, M/s.Mistrose Commerce (P) Limited, M/s.Mudra Vyapaar (P) Limited, M/s.Sun Suppliers (P) Limited and M/s.Upasana Vyapar (P) Limited were alleged to have rendered service for removal of rejects, but none of the company was formed and inducted as tenants in the said building at their respective address place. The CIT found that the assessee group has engaged M/s.Violet Commercial (P) Limited and M/s.Twinkle Vanijya (P) Limited, for the services rendered to the assessee group, the CIT found from the authorized signatory of such two companies that they have not rendered any service to the assessee group and they never deployed any machinery at Barbil, the place of mining sect....
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....rt of the CIT, Sambalpur with proper perspective. It is alleged inter alia that the Commission has not taken the investigation of the CIT/Department in correct manner, rather it has felt that the investigation, wherever it is shallow, does not help in coming to a right conclusion. In spite of the report of the CIT, the Commission has observed that without having made investigation worthwhile, when evidence were received during survey, notwithstanding the statement of parties which are evidences, being not supported by any documentary evidence or evidence at site, i.e, books of accounts or records of movement of applicants vehicle or those applicants agents etc. It is stated that when the statement of the parties are evidence, the observation of the Commission with regard to the examination of the documents or books of accounts may lead to inquiry, although the said power lies with the Commission who had opined in its order that the Department must have adequate material to support the contention and should have extensively examined with reference to contract documents and other documents, but all these observations of the Commission would lead to inquiry and the powers of conductin....
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....rived. With regard to suppression of sales as reported by the CIT, the Commission has arrived about total suppression of sales in the hands of opposite party no.2 at Rs. 333.09 crores, in the hands of M/s.KJS Ahluwalia at Rs. 49.44 crores, in the hands of opposite party no.4 at Rs. 19.95 crores totaling to Rs. 402.48 crores is totally unjustified and incorrect. However, it is stated that the Commission has not resolved the issue with regard to the transfer of the amount from the account of opposite party no.3, the assessee to the dummy account. 19. With regard to unexplained cash expenditure as submitted by CIT, the Commission estimated the gross profit of the assessee group at 47% as against 44% are disclosed by the assessee group in their settlement application, but this estimate of 47% is arbitrary and not acceptable being too low in comparison to other parties. If the Commission was not satisfied with the report of the CIT, it could have directed the CIT to investigate further as per the order of the Hon'ble Bombay High Court in the case of Major Metals Limited -V- Union of India; (2012) 19 TAXMANN 179 (Bom). Thus the Commission has not taken into account the income suppress....
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....ITSC has made further addition of income while allowing the application of the assessee u/s 245C which is self-effacing, contradictory and devoid of logic; E. The Ld. ITSC has erred in granting immunity from prosecution and penalty when the assesses have not made a full and true disclosure of his income u/s 245H; F. The Ld. ITSC has erred in resorting to estimation of income, when the transactions coming forth from the books of accounts pertaining to the "bogus expenditures" are crystal clear that they are mere accommodation entries which should not be allowed, and at least an amount of Rs. 534.91 crores ought to have been disallowed. It is submitted that estimation of income has to be done on the basis of facts available on record, and not be merely a pure guess work, on the pretext that Department has not made proper investigation; G. The ITSC has failed in its duty to investigate the claim of the assessee or to direct investigation u/s 245D(3) by the Commissioner of Income Tax and has merely avoided its responsibility by observing that the Department has not examined the matter, without realizing that the AO/CIT could not make such enquiries once an ap....
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....ed that the present writ petition is not maintainable challenging the final order passed by the Income Tax Settlement Commissioner under Section 245D of the Act. The writ petition was filed on 20.1.2015 although the Commission has passed the order on 28.3.2013 and in the meantime, as per the order of the Commissioner, the Deputy Commissioner of Income Tax, Rourkela Circle, has made assessment and raised the respective demand under Section 245D(4) of the Act against the opposite parties 2 to 6 and opposite parties 2 to 6 have already paid such tax and penalty demanded as per the assessment orders. It is stated that when the order the Commissioner reached its finality, there is no scope for filing this writ petition and as such, the present writ petition is devoid of any merit. SUBMISSION 23. Mr.S.K.Acharya, learned Senior Standing Counsel for the Income Tax Department submitted that the assessee have failed to fulfill the jurisdictional requirements which are indispensable preconditions for settlement of the application and accordingly he took us to the application of the assessee where according to him no full and true disclosure income was mentioned properly. If there is no ....
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....Counsel for the Income Tax Department reiterate the pleadings made in the petition insofar as booking of fictitious/bogus expenditure, suppression of sales, unexplained cash expenditure and unexplained cash found as reported under Rule-9 by the CIT are concerned and reiterate that without considering such report, the Commission has passed the order which is detrimental to the interest of the Department. According to him the Commission has not given any opportunity to the petitioner to rebut the income disclosed by the opposite parties 2 to 6. Had there been consideration of the report of the CIT prepared under Rule-9 explaining about all above four issues, the order of the Commission could have come otherwise. In support of his contention, he relied upon the decision of the Madras High Court rendered in the case of Canara Bank Jewellers -V- Settlement Commission; 315 ITR 328 (Madras) wherein it has been held that the Commission has no jurisdiction to pass an order enhancing the income of the assessee and in the instant case, the Commission, without having jurisdictional requirements fulfilled by the assessee, added the income by ignoring the procedure. Unless the requirements of th....
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....f the decision of the Hon'ble Supreme Court rendered in the case of State of U.P. - V- Rai Bahadu Singh & Another; (1988) 8 SCC 685 wherein it has been held that there is no time limit for filing writ petition. According to him, the same view has been taken in the case of State of Karnataka -V- Y.Moideenkunhi (2009) 13 SCC 192. He also submitted that in the decision of BS Sheshagiri Shetty -V- State of Karnataka; (2015) 10 SCALE 763, the Hon'ble Supreme Court have held that substantive rights of the appellants should not be allowed to be defeated on technical grounds by taking hyper technical view of self-imposed limitations. 28. Mr.Acharya highlighted that when the Commission has no jurisdiction for passing the present impugned order, it should be quashed for the interest of substantial justice. To challenge the counter affidavit of the opposite parties, he submitted that the submission of the opposite parties that the assessment has been completed in view of the order of settlement commission is not correct because they are not assessment but only follow up action, that does not mean that the order of the Commission attains its finality. It is, therefore, prayed by Mr.Acharya ....
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....n feature and, therefore, certain amount of latitude is permissible. It is, therefore, submitted that where there is fraud or misrepresentation on the quasi judicial authority, the High Court should interfere under the writ jurisdiction to quash the same. It is also submitted that in S.P. Chengalvaraya Naidu - V- Jagannath, AIR 1994 SC 853, it has been held that Section 44 of the Evidence Act attracted whereas the previous decision is obtained by fraud and, therefore, the Court has got right to adjudicate the matter. He also relied on the decisions in the case of Lazarus Estates Limited -V- Beasley; (1956) 1 QB 702, Rex -V- Recorder of Leicester; 1947 (1) KB 726; Bahadur Dagdu Paralkar -V- State of Maharashtra, AIR 2005 SC 3330, Ram Preeti Yadav -V- U.P.Board of High School & Intermediate Education, AIR 2003 SC 4268 and Beli Ram & Brothers -V- Chaudhri Mohammad Afzal, AIR 1948 PC 168. It is essentially stated that if there is decision obtained by fraud or collusion that will not stand on the way to adjudicate the matter because the fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctr....
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....of the case because after the order of the Commission, there has been assessment of the opposite parties 2 to 6 by the Income Tax Authority and they have already paid the required taxes. On the other hand, he submitted that there is unreasonable delay in filing the writ petition and as such the delay cannot be condoned. Since the delay has not been explained properly with no sufficient grounds, the writ petition should also be dismissed being not maintainable. 33. It is also stated in the counter affidavit that the grounds taken by the petitioner in the writ petition have been already covered by the Commission in its order. As per Section 245I of the Act, the order of the Commission passed under subSection 4 of Section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwsie provided in this Chapter, be reopened in any proceeding under the Act or under any other law for the time being in force. When the order of the Commission has been accepted by the opposite parties 2 to 6, there is no reason as to challenge the assessment order passed under Section 245D of the Act by the Commission. The writ petition has been filed....
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....rovisions of law provided in the Act. 38. The Law Commission of India in its 47th report had observed that the Commission headed by Mr. Justice K.N.Wanchoo, the former Chief Justice of India who was intrusted with the task of considering indepth and comprehensively the problem pertaining to the amendment of the provision of the Income-tax Act, and that the said Commission has already made an exhaustive report in that behalf. 39. In Chapter-2, on the title "Black money and tax evasion", the committee recommended about the settlement machinery at Paragraph-32 to 34 which is quoted hereunder: "Settlement machinery 2.32. This, however, does not mean that the door for compromise with an errant taxpayer should for ever remain closed. In the administration of fiscal laws, whose primary objective is to raise revenue, there has to be room for compromise and settlement. A rigid attitude would not only inhibit a one-time tax-evader or an unintending defaulter from making a clear breast of his affairs, but would also unnecessarily strain the investigational resources of the Department in cases of doubtful benefit to revenue, while needlessly proliferating litigation and....
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.... Once a case is admitted for adjudication, the Tribunal will have exclusive jurisdiction over it and it will no longer be open to the taxpayer to withdraw the petition. The Tribunal will take a decision after hearing both the assessee and the Department. The Tribunal should be vested with full powers as regards discovery and inspection, enforcing the attendance of any person, compelling production of books of account or any other documents and issuing commissions. It should also have the power to investigate cases by itself or, in the alternative, to have investigation carried out on any specific point or generally, in any case through the Incometax Department. The terms of the award will be set down in writing and it will be open to the Tribunal to determine not only the amount of tax, penalty or interest but also to fix date or dates of payment. The quantum of penalty and interest will be in the discretion of the Tribunal. Similarly, the Tribunal may also in its discretion grant immunity from criminal prosecution in suitable cases. The award will be binding both on the petitioner and on the Department. The application of its decisions on questions of law will, however be confined....
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....ere cannot be fair, prompt and independent settlement mechanism. What is emphasized by the committee that the Tribunal under that report (Commission) would only proceed with the petition filed by the tax borrower, if the Department raise no objection so being entrusted. Besides the Committee has recommended that only person of high integrity and sense of justice and fairness should be the members of the Tribunal. Accordingly, Section 245B onwards till Section 245L have been included in the textbook. 44. In the instant case, it is relevant to quote Section 245C of the Act, which is as under: "245C. Application for settlement of cases An assessee 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 provid....
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....Settlement Commission, also intimate the Assessing Officer in the prescribed manner of having made such application to the said Commission." 45. From the above provisions, it is clear that at any stage either during assessment or before assessment or after assessment, the assessee can make application to the Commission containing 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 or additional amount of income tax payable on such income. Not only this, but also according to Sub-section 4 of Section 245C of the Act, the assessee, on the date he makes an application under Subsection 1 would intimate the Assessing Officer in a prescribed manner which is prescribed in Rule-44C(1) and the same is to be made under in Form No.34B. 46. It is profitable to quote sub-sections-2 to 4A of Section 245D of the Act which is reproduced below: "245D. Procedure on receipt of an application under section 245C Xx xx xx xx (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the Commissioner. (2A) Where an application was made under se....
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....ssed 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.] (3)The Settlement Commission, in respect of- (i) an application which has not been declared invalid under sub-section (2C); or (ii) an application referred to in sub-section (2D) which has been allowed to be further proceeded with under that subsection, may call for the records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to....
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....ecords from the Principal Commissioner or the Commission, as the case may be, or also cause to make such further inquiry and furnish a report on the matters covered by the application. Where the Principal Commissioner does not furnish a report within the period of ninety days, then the Commission will proceed in passing order under Sub-section 4. 48. The aforesaid provisions also explain that the Commission would give proper opportunity to the applicant and the Commissioner to be heard through their representative and also receive evidence after which the order will be passed under Sub-section 4. 49. Keeping in mind all these provisions, it is found from Annexure-4 that vide communication dated 26.9.2011 the Commission has passed the order to proceed with the matter as per Section 245D(1) of the Act. From the records, it appears that the Commission has submitted its report under Section 245D(1) revealing about the income disclosed and additional income. With regard to the income disclosed of different assessment years of respective individual and the firm, the Commission has considered the same. It also appears that the Commission has considered the report prepared under Rule....
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....Commission no report was made to allow further investigation. The Department's reliance on the statements recorded of the responsible officers of the management/parties, would not lead to an inference of bogus/fictitious transaction. In case the CIT/Department still felt that payments were not genuine, the recipient must have been intensively examined with reference to contract documents, if any, and having enquired what machineries/plants, human resources were deployed and for how much period? In case, the CIT/Department was of the opinion that there was shamness in the above said transactions of the rejects, the scope of enquiry/investigation must have widened enough so as to prove beyond doubt and hence to come to an inference of payments as bogus/fictitious. 36.12 Once the Department enquiry is found to be lacking on many aspects or is limited to a recording of evidence in the form of statements pointing to allegedly not carrying on any such service so as to entitle the payment of 'transportation of rejects', it would at best lead to a conclusion of inflation of expenses and call for rejection of books and hence appropriate disallowance of the claim of the applicant in....
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....15,140 2008-09 11,56,41,280 14,50,00,000 76,00,000 26,82,41,280 2009-10 12,68,21,660 4,00,00,000 1,09,00,000 17,77,21,660 2010-11 23,00,73,860 6,50,00,000 1,80,00,000 31,30,73,860 Total 79,21,69,196 25,40,00,000 4,48,00,000 109,09,69,196 (I) Shri Prasant Kumar Ahluwalia Assessment Years Income returned u/s 153A Additional amount disclosed (in Rs.) Additions made by the Bench. (Rs.) Total (Rs.) 2004-05 9,67,470 5,00,000 -- 17,67,470 2005-06 18,01,928 5,00,000 -- 23,01,928 2006-07 18,37,028 5,00,000 -- 23,37,028 2007-08 1,25,431 5,00,000 -- 6,25,431 2008-09 82,10,41,920 5,00,00,000 11,88,00,000 98,98,41,920 2009-10 87,03,61,120 50,00,000 7,40,00,000 94,93,61,120 2010-11 69,97,93,610* 7,00,00,000 13,95,00,000 90,92,93,610 Total 2,39,59,28,507 12,70,00,000 33,23,00,000 2,85,52,28,507 *Income returned u/s 139(1) (I) M/s.Kaypee Enterprises (Firm) Assessment Years Income returned u/s 153A Additional amount ....
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....tation of facts." 51. After considering the impugned order, we are convinced that the Commission, after giving appropriate opportunity to the applicant and after going through the report of the Principal Commissioner/Commissioner made under Rule-9, has passed the order under Section 245D of the Act. Section 245D(3) of the Act has empowered the Commission to make inquiry/investigation further to find out the additional income. 52. It is reported in the case of Commissioner of Income Tax V M/s.Hindustan Bulk Carriers; (2000) INSC 678 as under: The order of settlement shall provide for the terms of settlement, including any demand by way of tax, penalty or interest, the manner of payment of the sum due under the settlement, etc. It shall also provide that the settlement shall be void if it is subsequently found to have been obtained by fraud or mis-representation of facts. The Committee may, if it is satisfied that the applicant has co-operated with it in the proceedings before it and has made full and true disclosure of his income and the manner in which it has been derived, grant to the applicant immunity from prosecution and penalty. Such immunity can, however, be wi....
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....t to the present case at hand because of the peculiar facts and circumstances of the case. 57. The next contention of Mr.Acharya, learned Senior Standing Counsel is that report of the Commission has been obtained by fraud or misrepresentation. 58. It is profitable to quote sub-sections 6 to 6(B) of Section 245D of the Act: "245D. Procedure on receipt of an application under section 245C Xx xx xx xx (6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of 10[tax, penalty or interest9], the manner in which any sum due under the settlement9 shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts. (6A) Where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by insta....
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....le interest. Similarly, under Section-6B, the Settlement Commission has got power to rectify its mistake within six months from the date of order and while rectifying the mistake, it will give opportunity to both parties of being heard. Thus, the Commission has power to declare the settlement as void and also to correct the mistake, if occurred or found later on. In the instant case, when the order of the Commission was communicated to the Department, the Department could have brought to the notice of the Commission about the mistakes or to declare the same as void but instead it appears from the pleadings and arguments of both sides that the Assessing Officer has been directed to compute the tax as per law and charge the interest as available from paragraph-7 of the impugned order of the Commission and the assessee have also paid tax as per demand made by the Assessing Officer under the order of the Commission. 62. It is profitable to quote sub-section-7 of Section 245D of the Act which is as follows: "where a settlement becomes void as provided under Sub-Section(6), the proceedings with respect to the matters covered by the settlement shall be deemed to have been revi....
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....fere if there is any illegality in the procedure followed by the Commission or if the same is contrary to the provisions of the Act causing prejudice to the appellant. In the instant case, it has been already observed in the aforesaid paragraphs that the Commission has provided proper opportunity to both sides and after that passed the order under Sub-section 4 of Section 245D of the Act. Not only this but also the order has been implemented and the assessees have already paid the tax in view of the terms of the settlement as observed earlier. The authority of the Commission was not invoked by the petitioner to exercise its power under Sub-section 6 for the reasons best known to them. When the statutory authority has already been conferred with the power to declare the settlement void and it has been clearly also indicated in the order passed under Sub-section 4, the plea of the order being void or misrepresentation being not agitated before the appropriate authority cannot be agitated in this application; otherwise the statutory provision will be otiose. 65. From the foregoing discussions, we are of the view that opportunity was given to the petitioner to agitate about the matt....