TaxTMI 
TaxTMI 
1996 (3) TMI 5
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....assessee at Calcutta, Bombay and Delhi. The assessee's factories and the residential premises of the managing director, sales manager, directors and their associates were also searched simultaneously. A number of documents were seized. On June 24, 1977, the assessee approached the Settlement Commission (commission) with an application under section 245C of the Act. The application was made in the prescribed proforma. Against column No. 5 "assessment years in connection with which the application for settlement is made", the assessee stated, "assessment year 1975-76 and any other proceeding that may be decided by the Settlement Commission (now pending before the Income-tax Officer)". Against column No. 8, "particulars of the matters to be settled", the assessee stated, "assessment of total income for the assessment year 1975-76 and any other matter that may be decided by the Settlement Commission". The application made by the assessee was forwarded to the Commissioner of Income-tax for his report under section 245D(1). In his report dated July 6, 1977, the Commissioner stated that "he has no objection to the application for settlement being processed with in respect of the ass....
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....on the Commissioner to file his response to the aforesaid "statement of facts" filed by the assessee. In hit response/report dated January 3, 1978, the Commissioner stated, inter alia, "the applicant .. asked for settlement in respect of the assessment year 1975-76, but in the statement of facts now submitted, it is stated that the amount now offered for settlement will have effect on earlier five years' assessments ... all these assessments have long been completed and in none of these years, the undervaluation of stock, as now offered, was considered for assessment/reassessment . . . There is absolutely no material in the file in support of this contention of the applicant". The Commissioner further submitted that since the assessee's original application was for settlement in connection with the assessment year 1975-76, the assessee's prayer in para 13 of the statement of facts for issuing stay orders in respect of penalty proceedings pertaining to the earlier assessment years is unwarranted, more particularly when the said penalty proceedings do not relate to undervaluation of stock but to other matters some of which were not even contested in appeal. To this response/report, t....
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..... Counsel submitted that the application for settlement pertained only to the assessment year 1975-76 and not to the said earlier assessment years. The assessee did disclose certain additional income for the assessment year 1975-76 requesting at the same time that the said additional income be spread over all the six assessment years 1970-71 to 1975-76. The assessee had so requested and had given its consent for reopening the said earlier assessment years for the limited purpose of spreading over/distributing the said additional income over the six years, which was a request made in his own self-interest. He did not want the entire additional income to be added to his income in the assessment year 1975-76 which would have enhanced his tax liability. The request to reopen the assessments of the said earlier assessment years was, said learned counsel, for the limited purpose of giving due and appropriate relief for the assessment year 1975-76. The advantage he was asking for could not be granted except by reopening the assessments for the said earlier assessment years for the limited purpose of adding certain amounts as a consequence of "spreading over". There was no request or concu....
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....ority opinion of the commission is, therefore, the correct one both on facts and in law. The scheme and the object underlying Chapter XIX-A supports the said interpretation. Learned counsel submitted further that the penalty proceedings are corelated to the amount of concealment. Once the amount concealed undergoes a change by virtue of additions made in the said earlier assessment years on account of spreading over [of the value of opening stock] in each of the relevant accounting years, the penalty proceedings become automatically unsustainable in law. They cannot proceed further. Fresh penalty proceedings have to be initiated on the basis of the revised figure of concealment and that can be done only by the commission and not by the Income-tax Officer. Relevant provisions of law : For a proper appreciation of the questions arising herein, it is necessary to notice the relevant provisions in Chapter XIX-A as they were obtaining at the relevant time. The definition of the expression "case" in clause (a) of section 245A reads : " ' case ' means any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act for or in connection with the assessment or r....
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....conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an income-tax authority under this Act". Sub-section (2) provides that "where an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall, until an order is passed under sub-section (4) of section 245D, have, subject to the provisions of subsection (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under this Act in relation to the case". Section 245H empowers the commission to grant immunity from prosecution under the Indian Penal Code or any other Central Act to an applicant if it is satisfied that he has made a full disclosure of his income and has fully co-operated with the commission. Section 245-I declares that "every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force." Considerat....
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....e sheet anchor of the majority opinion, empowers the commission to reopen any completed proceedings connected with the case before it but this power is circumscribed by the requirement expressly stated in the section that such reopening of completed proceedings should be necessary or expedient for the proper disposal of the case pending before it. There are two other limitations upon this power, viz., that this reopening of the completed proceedings can be done, even for the aforesaid limited purpose, only with the concurrence of the assessee and secondly that this power cannot extend to a period beyond eight years from the end of the assessment year to which such proceeding relates. These two features make it abundantly clear that the section contemplates reopening of the completed proceedings not for the benefit of the assessee but in the interests of the Revenue. It contemplates a situation where the case before the commission cannot be satisfactorily settled unless some previously concluded proceedings are reopened which would normally be to the prejudice of the assessee. It is precisely for this reason that the section says that it can be done only with the concurrence of the ....
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....sment years, viz., assessment years 1970-71 to 1975-76. This he requested because, doing so would have reduced his overall tax liability. It is for this purpose that he gave his consent/concurrence for reopening the assessments of the earlier assessment years. It was, therefore, not a situation contemplated by section 245E. This was not a case where the commission wanted to reopen the concluded assessments because it was found necessary or expedient to do so for the proper disposal of the case pending before it ; it was a case where the assessee was requesting for a benefit and for the purpose of obtaining that benefit, he was requesting the reopening of the earlier assessments. Even this request of the assessee was for a limited purpose, viz., for spreading over the enhanced value of opening stock disclosed by him over the said six assessment years. It was not a request or concurrence to reopen the entire assessment and penalty proceedings relating to the said earlier assessment years. [As a matter of fact, penalty proceedings for the said earlier assessment years were pending on the date of filing of the application for settlement and its admission. As pointed out by the chairman....
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....or that penalties be waived in respect of the said assessment years. The interpretation placed by the chairman upon section 245E is the correct one and not the interpretation placed by the majority. We are also not impressed by the argument of Sri Poddar, learned counsel for the assessee, that inasmuch as the quantum of penalty depends upon the quantum of the income assessed and because the income assessed for the said earlier assessment years was bound to undergo a change on account of the "spreading over" aforesaid, the earlier penalty proceedings fall to the ground automatically and that, thereafter penalties, if any, can be levied only by the Settlement Commission. There is a clear fallacy in the said submission. The penalty proceedings related to certain other concealments, i.e., other than the two concealments disclosed in the assessee's application for settlement and which were sought to be spread over backwards. The said penalty proceedings could not, therefore, have been affected or rendered nugatory by the addition to the total income resulting from the aforesaid "spreading over". It is difficult to see any connection, much less an intimate connection, between the said....