TaxTMI 
TaxTMI 
2017 (5) TMI 829
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....ik Vashai and Virendra Ojha, DIT. ORDER 1. By order F. No. 1/190/Tech/2016/SC/3081 dated November 18, 2016, Chairperson of the Income-tax Settlement Commission, New Delhi constituted a Special Bench comprising of the following Members : 1. Smt. Archana Ranjan, Chairperson 2. Sh. F. M. Mohanty, Vice Chairman, Mumbai 3. Sh. Jayasankar Talava, Vice Chairman, Chennai 4. Sh. D. K. Gupta Vice Chairman, Kolkata 5. Sh. Dinesh Verma Member, Addl. Bench-II, New Delhi 6. Sh. H. C. Jain Member, Additional Bench, Kolkata 7. Smt. Gunjan Misra, Member, Additional Bench-II, New Delhi 2. The question of law set out in the abovementioned order dated November 18, 2016 for the consideration of the Special Bench, is as under : "Whether in an application for settlement under section 245C(1) covering more than one assessment year, the applicant must mandatorily disclose additional income not disclosed before the Assessing Officer, for each assessment year covered by the application and on such additional income there must be a liability to pay Income-tax for each such year especially in view of the amendments brought about i....
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....ed representative the entire process of settlement involves settling of a "case". The word "case" is defined in section 245A(b) to state that it covers more than one assessment year. The first argument taken by the authorised representative was that section245C(1) lays down the pre-conditions which are to be fulfilled so that an application can be admitted. The proviso speaks of the additional amount of Income-tax payable. 5.2 When we consider section 245C sub-section (1), it elaborates that at any stage of a case relating to him, an assessee can make an application in such form and in such manner as may be prescribed to the Commission, making a full and true disclosure of his income which has not been disclosed before the Assessing Officer. The provisions of section 245C of the Act do not have any explicit requirement to declare additional income for each of the assessment years mentioned in the application. 5.3 Income disclosed in the application and the additional amount of Income-tax payable on such income are the key words to be considered. Section 245C(1A) to (1D) of the Act prescribe manner of calculation of additional tax, unlike section 245C(1) of the Act, which pres....
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.... It is pointed out by the authorised representative that the question whether income is to be disclosed in every year or not was the subject matter of the decision in the case of Airtech Private Ltd. 5.8 Various amendments carried out in 1994, 2007, 2010, etc. in the relevant provisions of the Act show that these changes mainly dealt with increasing the ceiling of the threshold limit of additional tax liability, manner in which additional income need to be computed, stage at which application could be filed and eligibility of the persons who can file application before the Settlement Commission. None of these amendments had effect on primary conditions mentioned in section 245C(1) of the Act to the effect that the assessee should mandatorily disclose additional income for each of the assessment years and consequentially must result into additional tax liability for each of the assessment years covered by the application filed. 5.9 Now coming to the decision in the case of Airtech Private Ltd. he pointed out that section 245C(1D) was correctly quoted and interpreted by the Special Bench therein. It is only while elaborating sub-section (1B) of section 245C that it was misquote....
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....the Karnataka High Court in Vysya Bank Ltd. The Karnataka High Court rejected the argument that when an applicant disclosed the negative income for certain assessment years, the application is to be treated as invalid. Coming to the case of Damani Bros. the authorised representative pointed out that the power of the Assessing Officer to cause recovery before the admission of the petition by the Settlement Commission was the subject matter of this case. Hence the decision given by the co-ordinate Bench in the case of Betul Oil Ltd. incorrectly relied on the above judgments of the Supreme Court as they are not relevant to the issue on hand. 5.12 The authorised representative referred to case of Betul Oil Ltd. which laid emphasis on the changes made to Form 34B, which is filed along with the application. The changes made in the Form do not affect the issue under consideration according to him. He pointed out that Forms are subordinate legislation and cannot be interpreted in the manner in which substantive law is to be interpreted. The objection raised that under the old Form one could merely declare the aggregate figures for all the years was incorrect. The authorised representati....
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....r by exceeding the authority or by making provisions which is inconsistent with the Act. Any rule made in exercise of such delegated power has to be in consonance with the provisions of the Act." 5.17 The authorised representative also cited the case of CIT v. Taj Mahal Hotel reported in [1971] 82 ITR 44 (SC) where the hon'ble Supreme Court has held as under (page 49) : "It has been rightly observed that the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect." 5.18 According to the authorised representative, though there was amendments in 2007 and 2010 to section 245C these changes have not affected the conclusion drawn in the case of Airtech P. Ltd. 5.19 A query was raised by the Bench asking the authorised representative to cite the specific provision wherein it was explicitly expressed that even when the additional income disclosed is nil, the application can be admitted for that relevant assessment year. The authorised representative replied stating that it is nowhere mentioned so but it is also to be noted that nowhere is it mentioned in law ....
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....uction of CBDT F. No. 414/9/2012-IT (Inv-I) dated March 4, 2013 on page 165 of Handbook (page 202 of the authorised representative's paper book) does not suggest that the consequences of no additional income in some year would be abatement of petition for that year. (iv) In answer to FAQ No. 26 (page 199 of the authorised representative's paper book), it is stated that interest has to be charged under section 234B of the Act on income determined under section 245D(4) of the Act and not on the income shown in the application. This is contrary to the decision of the Supreme Court in the case of Brij Lal v. CIT [2010] 328 ITR 477 (SC) and the practice followed by various Benches. This shows that Handbook/FAQ cannot be taken as conclusive. (v) Further it is argued that the Department is also one of the parties before the Settlement Commission and hence undue importance should not be given to the Handbook, the Departmental publication. The contents of the Handbook should not be taken as gospel truth." 5.22 The authorised representative also pointed out that the word "aggregate" was used in the provisions relating to block assessment procedure under section 1....
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....t year need not result into additional income + additional liability in several instances and would not cover issues such as : "(i) Where income disclosed in application is reduced due to eligible claims for losses/depreciation resulting into no tax liability for a particular assessment year but ultimately it would result in additional tax liability above the threshold limit prescribed under section245C of the Act. (ii) There may be cases involving source of income in one year and application of income in another year. The Department may want to treat such application of income as unexplained expenditure in the year in which income earned was utilised. (iii) Issue pertaining to the year of taxability such as the year in which assessee offers income is disputed by the Department for the reason that the year in which assessee offers income results in less or nil tax liability but Department claims such income accrued in other assessment year resulting into excess tax liability. (iv) Issue pertaining to the year in which income is taxable may have to be determined in view of undated seized paper." 5.27 If for every year there should be disclosure....
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....same was introduced in the year 1954 in the 1922 Act. He referred to the legal provisions obtained in other countries such as U. K., U. S. A to state that the word "case" is given importance by them also. He also pointed out that "revision" is not permissible and the decision of the Special Bench in Airtech Private Ltd. case should have been followed even if there was any dispute. The Department should have contested the order of Airtech Private Ltd. if it considered the same as erroneous. This was not done hence the decision was followed in several cases. The rule of law should be certain and it cannot be altered frequently. 6.2 Shri Chetan Karia, fellow of chartered accountant pointed out that the words "income" and "taxes" are two separate concepts. The applicant is aware of his income that is to be disclosed and he decides on the quantum for each of the assessment years involved whereas it is the statute that fixes the liability in terms of taxes and interest. It is pointed out by the authorised representative that the applicant has no option to decide on the quantum of taxes and interest that is to be paid. According to the authorised representative, the applicant is to dec....
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.... it is sufficient that the aggregate additional Income-tax for all the assessment years for which an application has been made, exceeds the relevant limit. It is therefore clear that it is not necessary that additional income has to be offered for every assessment year for which the application has been made. In an application for multiple assessment years, additional income disclosure can pertain to one or some or all assessment years. 6.4.1 He also pointed out that even according to section 245C(1B) to (1D) there is no stipulation that for every assessment year in an application additional income should be offered. He also stated that there is no ambiguity in the provisions of the Act in this regard. Without prejudice to the submissions made that there is no ambiguity, he stated that when there are two reasonable constructions of a taxing provision possible, that construction which favours the assessee must be adopted as held by the Supreme Court in the case of CIT v. Vegetable Products Ltd. reported in [1973] 88 ITR 192 (SC). He also referred to following case law to state that judicial precedent should be followed. (a) Bharat Petroleum Corpn. Limited v. Mumbai Shramik Sangha....
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....ment are to be given assessment year-wise and hence it would mean that additional tax is to be paid for each and every year involved in the application. 7.3 Shri L. K. S. Dehiya, Commissioner of Income-tax representing the Department stated that the word "case" has also been defined in the Explanation to section 127. He also clarified that the singular would also include the plural according to the General Clauses Act but the opposite cannot be true, to say that "case" would also include different assessment years. He also said that the Wanchoo Committee had recommended the setting up of the Income-tax Settlement Commission for the purpose of collecting revenue. He further pointed out that the Income-tax Settlement Commission is not a law-making body but merely a quasi-judicial authority so the decisions of the Commission need not be followed by any one. On a specific query, he replied that the Special Bench decision of Airtech Private Ltd. quoted in various publications would apply only to the case of Airtech Private Ltd. and it need not be followed by other Benches of the Settlement Commission. He raised the query that when no income is disclosed, where is the question of sett....
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....spect to each assessment year. 8.2 The authorised representative also said that the provisions of establishing the Special Bench were introduced in the Act in section 245BA(5A). The Memorandum Explaining the Finance Act in 1991 is quoted in 190 ITR (St.) 308. The Memorandum clearly says that in order to. bring uniformity in the decisions of different Benches of the Income-tax Settlement Commission, the Chairman can constitute a Special Bench. This would mean that the decision of the Special Bench must be followed. 8.3 He pointed out that the order in the case of Airtech Private Ltd. was a speaking and a well reasoned order. The order quoted the relevant sections and sought to interpret the same. He denied that it is a cryptic order. He also pointed out that the Department has not contested this order but has allowed it to prevail for the last 22 years. In this regard, he cited Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC) to state that once a situation is permitted to prevail then it would be binding on the parties. He emphasised the importance of the golden rule of interpretation that is the literal construction of statute that must be adopted to interpret a provision. W....
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....ection (1) of section 245C is made. . ." 9.2 It is argued by both the sides that "case", is the key word involved in the procedure of settlement. The word "case" is defined to include the assessment year/years that are pending before the assessing authority, hence all the pending proceedings are to be considered when the "case" is sought to be settled and the assessee refers those pending assessment years for settlement. 9.2.1 The Explanation to section 245A(b) explains the nature of the proceedings i.e. assessment or reassessment under section 147/153A/139/142 etc. that are pending and when they are deemed to have commenced/concluded as the case may be, such that the pendency of proceedings can be ascertained. Thus the word "case" means the proceedings that are pending on the date on which an "application" under section 245C(1) is made. The amendments made in section 245A(b) in the past has been excluded from discussion as it is not material for consideration of the issue now before us. 9.2.2 Once the "case" is identified, the other conditions laid down in section 245C(1) are to be fulfilled such that the "application" is admitted and allowed to be proceeded with. It is a....
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.... filed in such form and in such manner as prescribed. It should contain full and true disclosure of income which has not been disclosed before the Assessing Officer. The manner of earning such income and the additional amount of Income-tax payable on such income are to be indicated along with such other particulars as prescribed. Only when these conditions are fulfilled, the "application" is to be admitted and the assessee can have the "case" settled. The intention of the applicant is to "have the case settled". The proviso to this section enables one to ascertain whether the threshold limit of tax is exceeded or not. Once an "application" fulfils these conditions and exceeds the requirement of the threshold limits of tax, it is to be allowed to be proceeded with. 9.3.3 So long as there is no explicit condition stating that the "application" should not contain the assessment years wherein there is no additional income that is offered, it cannot be read into the provision or inferred so. If such interpretation is to be given laying stress on the assessment year/s then the key words "case" and "application", would lose their significance. These words have their significance and ar....
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.... 2007 leads to different interpretation of section (1B) and/or (1D) is not tenable. It does not also lead to change in interpretation of the main section 245C(1). 9.4.1 The Form 34B as it existed up to 2007 shows some features which required to be pointed out. The "Note" 7 below Form 34B reads as under : "Full details of issues for which application for settlement is made, the nature and circumstances of the case and complexities of the investigation involved must be indicated against item 10. Where the application relates to more than one assessment year, these details should be furnished for each assessment year." The annexure and the Notes below the annexure read as under : "Annexure Statement containing particulars referred to in item 9 of the application under section 245C(1) of the Income-tax Act, 1961 1. Amount of income which has not been disclosed before the Income-tax Officer. 2. Additional amount of Income-tax payable on the said income. 3. Full and true statement of facts regarding the issues to be settled, including the terms of settlement sought for by the applicant. 4. The manner in which the income....
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....duction of the word "only" at a different place in the sentence has led to wrong conclusion according to the decision of the Additional Bench, Mumbai. However in the decision of the Special Bench in the case of Airtech Private Ltd. at paragraph B on page 35 of volume 209 ITR the entire provisions of section 245C(1B) to (1D) are quoted. Herein it is correctly quoted and this fact cannot be ignored. This "misquotation" at any rate is not the only basis for deriving the final conclusion. We cannot ignore the entire reasoning and basis given in the order of Airtech Private Ltd. The authorised representative clearly pointed out that this mistake is in no way fatal so as to alter the decision in the case of Airtech Private Ltd. and we are in agreement with the same. 9.6 Sub-section (1D) of section 245C reads as under : "(1D) Where the income disclosed in the application relates to more than one previous year, the additional amount of Income-tax payable in respect of the income disclosed for each of the years shall first be calculated in accordance with the provisions of sub-sections (1B) and (1C) and the aggregate of the amount so arrived at in respect of each of the years fo....
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....r there should be disclosure of additional income is only an opinion expressed. It cannot be taken as the final legal position. It is to be seen that the decision of Airtech Private Ltd. is also quoted in the same Hand Book and nothing contrary is said about the same. It is a fact that the Department has not contested the decision of Airtech Private Ltd. On the other hand the authorised representative also pointed that the same Departmental book at pages 163 to 165 encloses the letter F. No. 414/9/2012/IT (Inv-I) dated March 4, 2013 wherein it is stated that assessees admit additional income for one or two years in the SOF, but include many other years and the Department is pre-empted from making enquiry. The authorised representative referred to the letter/instruction of the Board, in this regard. However, the Hand Book cannot be taken as basis for interpreting the statute. 9.9 Judicial discipline and propriety are two significant facets of administration of justice, as has been held by the hon'ble Supreme Court on innumerable occasions. In the case of Kishore Samrite v. State of U. P. [2013] 2 SCC 398 the hon'ble Supreme Court has held that although the violation of se....
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....ntention that there is no ambiguity, it may be said that when there are two reasonable constructions of a taxing provision possible, that construction which favours the assessee must be adopted as held by the Supreme Court in the case of CIT v. Vegetable Products Ltd. reported in [1973] 88 ITR 192 (SC). 9.10 The arguments of the Department that the order in Airtech Private Ltd. is not a reasoned one is not acceptable. The Special Bench has quoted the relevant sections and also given reasoning in support of their findings hence this contention of the Department is not acceptable. The argument of the Department that the decision of Airtech Private Ltd. applies to that case alone and need not be followed as judicial precedent is not tenable. Judicial precedent is to be followed and respected. 9.11 A question has been posed in the case of Betul Oil Ltd. : "When there is no disclosure of additional income for an assessment year, then what is to be settled ?" This presupposes that additional income should be disclosed assessment year-wise and that the settlement should be there for every year which need not be so. 9.11.1 The Settlement Commission primarily deals with....
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.... 9.11.4 What we are to look at as per Chapter XIX-A is to whether the "case" is being settled or not since when the application if filed it is the intention of the applicant to have the "case" settled. This would mean that the "case" is being settled. It may involve assessment years for which additional income is disclosed for some years and no additional income is disclosed for the remaining years. Hence what is envisaged in law is that the "case" is to be settled. 9.11.5 It is also to be seen that under section 153A/153C in search cases assessment proceedings for the last six years get reopened or abated as the case may be. When an assessee wants to approach the Commission to get the case settled it is only appropriate that all the years are admitted as per application and part of the application is not sent back with respect to years where the additional income is nil. This argument is also valid. 9.11.6 The Legislature thought it fit to make changes including or excluding certain proceedings such as cases reopened under section 147 or search cases at different points of time in the past. Had it been their intention that for assessment years for which no additional income ....
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....Commission] (Special Bench) S. No. Name of the applicants Settlement Application Nos. 1. Neptune Developers and Construction Pvt. Ltd. MH-MUCC-4/024/2016-17/IT 2. Neptune Ventures and Developers Pvt. Ltd. MH-MUCC-4/025/2016-17 3. Neptune Developers Ltd. MH-MUCC-4/026/2016-17 4. Neptune Developers (Firm) MH-MUCC-4/027/2016-17/IT Dissenting decision 10. The Neptune group comprising of three companies and one firm had filed four settlement applications on November 15, 2016 before the Additional Bench-I, Income-tax Settlement Commission, Mumbai. Questioning the earlier decisions of the Additional Bench-I, Mumbai in other settlement cases on the issue of requirement of disclosure of additional income, not disclosed before the Assessing Officer, for each assessment year covered by the settlement application and the requirement of payment of additional tax in respect of each of the assessment years in the application, these applicants addressed a letter dated November 15, 2016 to the Chairperson, Income-tax Settlement Commission, New Delhi praying for constitution of a Special Bench under the provisions of 245BA(5A) on issues rai....
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....is a total of seven Benches of the Commission. Although the Special Bench comprises of seven Members no Member had been drawn from the following two Benches of the Commission : "(i) Additional Bench-I, Delhi. (ii) Additional Bench-II, Mumbai." 14. Shri Vijay Mehta, chartered accountant represented the Neptune group of the applicants. Shri S. R. Wadhwa, advocate, Shri Chetan Karia, chartered accountant, Shri J. Prabhakar, chartered accountant, Shri B. Ramakrishnan, chartered accountant appeared as interveners. The Department was represented by Shri K. S. Rajendra Kumar, Commissioner of Income-tax and Shri L. K. S. Dehiya, Commissioner of Income-tax (Appeals). The gist of the contentions/submissions made by Shri Vijay Mehta is as under : 1. The definition of "case" given in section 245A(b) of the Act covers more than one assessment year. 2. The provisions of section 245C(1) of the Act lay down the conditions which are required to be satisfied by the applicant-assessee. The provisions of section 245C of the Act do not have any explicit requirement to declare additional income for each of the assessment year mentioned in the application. The condi....
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....4 ITR 658 (Karn) ; [2011] 240 CTR 68 (pages 87 to 98 of the paper book)-the argument taken in respect of disclosure of negative income in some of the assessment years to consider the application as invalid has been expressly rejected by the High Court in paragraph 19 of the judgment in the case of Vysya Bank Ltd. [2012] 344 ITR 658 (Karn) ; [2011] 240 CTR 68 (page 97 of the paper book). Similarly the decision of the Supreme Court in Damani Brothers [2003] 259 ITR 475 (SC) (pages 99 to 109 of the paper book) is also incorrectly relied on. * The decision of the Supreme Court in Damani Brothers [2003] 259 ITR 475 (SC) (pages 99 to 109 of the paper book) is in respect of the power of the Assessing Officer to cause recovery before the admission of petition by the Settlement Commission. This is completely irrelevant. Changes made in "Form 34B" prescribed under rule have been wrongly relied on resulting into erroneous conclusion and without taking into account the following aspects : * "Form" is not the statute and it cannot be interpreted in the manner in which the statute is to be interpreted. * Even in the new Form there is no specific requi....
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....e-tax Consultants, BCAS, Institute of Chartered Accountants of India, etc. also compile such hand books expressing different views. This could not be binding like a judicial precedent. * No reasoning is given while answering FAQ No. 12 (page 196 of the paper book). This is just authors' interpretation. * Instruction of the Central Board of Direct Taxes F. No. 414/9/2012- IT (Inv-I) dated March 4, 2013 on page 165 of the Handbook (page 202 of the paper book) do not suggests that the consequences of no additional income in some year would be abatement of the petition for that year. * In answer to FAQ No. 26 (page 199 of the paper book), it is stated that interest has to be charged under section 234B of the Act on income determined under section 245D(4) of the Act and not on the income shown in the application. This is contrary to the decision of the Supreme Court in the case of Brijlal v. CIT [2010] 328 ITR 477 (SC)) and the practice followed by various Benches. This shows that the Handbook/FAQ cannot be taken as conclusive. * Except in FAQ No. 12 (page 196 of the paper book) the condition of additional income, year-wise ; is to be found nowher....
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....additional tax liability above the threshold limit prescribed under section 245C of the Act. * There may be cases involving source of income in one year and application of income in another year. The Department may want to treat such application of income as unexplained expenditure in the year in which income earned was utilised. * Issue pertaining to the year of taxability such as the year in which assessee offers income is disputed by the Department for the reason that the year in which the assessee offers income results in less or nil tax liability but the Department claims such income accrued in other assessment year resulting into excess tax liability. * Issue pertaining to the year in which income is taxable may have to be determined in view of undated seized paper. 13. If the Legislature intended that the assessee must show in the application for each assessment year the income which was not disclosed before the Assessing Officer it would have so explicitly mentioned in section 245C(1) of the Act. The condition of such disclosure for each assessment year cannot be presumed or treated as implicit when the section providing such conditions i....
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....rded if it is in conflict with the substantive provision, that there is no requirement of additional tax in respect of each assessment year included in a settlement application, that the prescribed form of settlement application would not be determinative of the substantive issue. Mr. Chetan Karia chartered accountant submitted that in the question framed for the Special Bench there are two issues which could be separated that income and tax are two separate matters, that tax is a consequence of income, that determination of tax is independent of income, that what an assessee can do is offer income, that under the provision of section 158BB an aggregate can be negative which should analogically apply to the settlement application. Shri J. Prabhakar, chartered accountant from Chennai submitted that an applicant gets its right from the substantive provision which cannot be taken away by the prescribed form. Shri B. Ramakrishnan, chartered accountant from Chennai adopted the arguments advanced by Shri Mehta and others and submitted a paper book containing judicial decisions. 15. Shri K. S. Rajendra Kumar, Commissioner of Income-tax appearing on behalf of the Department submitted as....
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....e emphasised that the Income-tax Settlement Commission is a creation of the statute but it is not an independent judicial body. The proceedings before the Income-tax Settlement Commission are deemed to be judicial proceedings as per section 245L of the Act but this deeming is only for the purposes of sections 193, 196 and 228 of the Indian Penal Code. The provisions of the Indian Penal Code only relate to punishment for giving false evidence or for making any intentional insult. Similar powers are there with the Income-tax authorities as per section 136 of the Income-tax Act. Therefore much should not be read in the powers of the Income-tax Settlement Commission to assume the powers of a court and to read up the law. 2. It may be appreciated that the Income-tax Settlement Commission has more legal powers but even the Income-tax Settlement Commission cannot supply the casus omissus as held by the Supreme Court in the case of Prakash Nath Khanna v. CIT [2004] 266 ITR 1 (SC) that casus omissus is not to be supplied except in the case of dire necessity. Further, a five-judge Bench of the hon'ble Supreme Court in the case of Padmasun dara Rao (Decd.) v. State of Tamil Nadu ....
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....der Shri Mehta reaffirmed the contentions advanced by him earlier. 17. The question posed for the Special Bench to answer has three ingredients : (a) Whether an applicant must mandatorily disclose additional income, not disclosed before the Assessing Officer for each assessment year included in the settlement application ? (b) Whether on such additional income there must be a liability to pay Income-tax for each such year ? (c) Whether, in view of the amendments brought about in section 245C(1) and its proviso read with section 245A(b) by the Finance Acts, 2007 and 2010 the decision of the Special Bench in Airtech Private Ltd. is no longer good law ? My answers to all the three ingredients are in the affirmative. Reasons 18. The first imperative is to have a close look at the provisions of section245C(1) which is the substantive and the charging section. For a proper appreciation of the provisions, I am inclined to extract material portions from the landmark judgments of the hon'ble Supreme Court and the hon'ble Bombay High Court. How the hon'ble courts have viewed and interpreted the provisions of section 245C(1) ? The hon'ble....
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....ble Bombay High Court has this to say (page 463 of 359 ITR) : "The provisions of Chapter XIX-A emphasise that the object underlying the constitution of the Settlement Commission is the settlement of cases under the Chapter. A case, as noted earlier, is defined to mean any proceeding for assessment under the Act which is pending before the Assessing Officer on the date when an application for settlement is made under section 245C. The assessment is the subject of the case which is to be settled. An applicant who moves the Settlement Commission under section 245C has to do so on the basis of a true and full disclosure of his income which has not been disclosed before the Assessing Officer. Disclosure of income which has not been disclosed before the Assessing Officer is essential to the validity of the application. The application is to have the case settled. Under sub-section (1B) of section 245C, where the income disclosed in the application relates to one previous year, if the applicant has furnished a return in respect of total income of that year, the tax has to be calculated on the aggregate of the total income returned and the income disclosed in the application as if....
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....e words "income" and "tax" have no meaning nor validity if these are divorced from the fundamental concept i.e. the assessment year. Whenever we speak of additional income disclosed in a settlement application it would certainly mean income in respect of an assessment year or assessment years as included in the settlement application. When the Act says income not disclosed before the Assessing Officer, its meaning would be income in respect of an assessment year, not any other meaning. 23.2 If we say additional income in the application as a whole, it would only mean the aggregation of assessment year-wise additional income as stated in the settlement application. Thus the additional income (i.e. in the case of more than one assessment year) in the application as a whole is derivable by way of arithmetic totalling of the respective additional income of each assessment year stated in the application. Neither in section 245C(1) nor in any other provisions of Chapter XIX-A is there any explicit mention of the words "application as a whole". Similarly there is no explicit mention in the relevant statutory provisions that the assessment years with nil disclosure can be included in....
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.... tax payment can it permit the settlement of all six assessment years in respect of application of B where five assessment years are with "nil" additional income and only one assessment year with positive additional income which exceeds the minimum statutory limit of tax payments ? An affirmative answer in this situation is inconceivable and untenable. 23.4 The second test to be applied is the fundamental test of "full and true disclosure". There is no dispute that each settlement application is tested on the touchstone of full and true disclosure. Now how can one apply this test to an assessment year with nil disclosure of additional income ? Even at a preliminary admission stage, the Commission has a statutory duty to record a finding on prima facie satisfaction about the full and true disclosure. How can it be done in respect of assessment years with nil additional income ? The concept of application as a whole does not make any sense as the fundamental unit to be settled happens to be an assessment year. The statutory definition of a case only talks of proceedings pending in relation to assessment year or assessment years which is another pre-requisite for the validation of ....
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.... relating to additional tax where the aggregation of additional tax on additional income i.e. assessment year-wise is required. In a case of the assessment year with nil disclosure, there is, needless to say, no income "not disclosed to the Assessing Officer". To take "income not disclosed to the Assessing Officer" to include nil or zero disclosure would reduce the whole of the substantive provision to absurdity. It further begs the question as to why should an applicant approach the Income-tax Settlement Commission in respect of the assessment year with nil disclosure ? If there is nothing to disclose, then what is to be settled ? Mere pending of an assessment proceeding, divorced from any undisclosed income, cannot warrant an approach to the Income-tax Settlement Commission nor can the Income-tax Settlement Commission assume jurisdiction in the absence of "income not disclosed to the Assessing Officer" as held time and again by the hon'ble apex court. There are instances in the records of the Commission where an addition made at the stage under section 245D(4) to the original disclosure made in the settlement application has been taken by certain High Courts to hold that the ....
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....tation of the substantive provision i.e. section 245C(1) the submissions of the authorised representative are devoid of merit for the following reasons : His point that in the new Form there is no specific requirement of having additional income/tax in all the years is evidently contrary to the stipulation in the said Form (vide a copy of Form 34B appended as annexure 1 to this dissenting decision). His point that note Nos. 9 and 10 in the old Form require year-wise details is an utter travesty of relevant facts. Notes Nos. 9 and 10 in the old Form read as under : "9. The additional amount of Income-tax payable on the income referred to in item 11 should be calculated in the manner laid down in sub-sections (1A) to (1D) of section 245C. 10. The details referred to in item 11 shall be given in the annexure to this application." It can be seen from the above extract that there was no stipulated requirement to state the details assessment year-wise in the old Form Note No. 10 only refers to item 11 which simply states "full and true disclosure of income which has not been disclosed before the Assessing Officer, the manner in which such income has be....
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....uires an applicant to submit details regarding pendency of proceedings, particulars of issues to be settled, nature and circumstances of the case, full and true disclosure of income which has not been disclosed before the Assessing Officer, additional amount of tax payable on undisclosed income, interest payable, manner of deriving the income in respect of the assessment years mentioned in the settlement application. There can be no imaginable conflict between this form and the substantive provision of section 245C(1). Prior to August 7, 2007, the form did not require the assessment year-wise particulars. There was no specific requirement then. The present form, substituted in August, 2007, specifically requires assessment year-wise details relevant to the provision of section 245C(1). Thus Form 34B is in harmony with section 245C(1). The authorised representative has not specifically pointed out any conflict between the form and the substantive provision. Now what is the take of the learned authorised representative on the substantive provision of section 245C(1) ? According to him there is no explicit requirements in section 245C(1) that there should be positive additional income....
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.... shall first be calculated in accordance with the provisions of sub-sections (1B) and (1C) and the aggregate of the amount so arrived at in respect of each of the years for which the application has been made under sub-section (1) shall be the additional amount of Income-tax payable in respect of the income disclosed in the application." It would be illuminating just to list out the steps stipulated in section245C(1D) as under : "Step 1 : Additional tax payable in respect of income disclosed for each of the years to be calculated in accordance with sub-sections (1B) and (1C). Step 2 : Aggregate the amount worked out as per sub-sections (1B) and (1C) Step 3 : The aggregate of the amount so arrived at in respect of each of the years For which the application has been made under sub-section (1) of section 245C- Shall be the additional amount of Income-tax payable in respect of the income disclosed in the application." It can be seen from the above that the provision of sub-section (1D) is close knit, compact, seamless. If we take the underlined expression into account, can there be even iota of doubt or even a shred of suspicion that ....
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.... provision contained in section 245C(1) ? It is nobody's case that the procedural pro visions should modify the substantive provisions. Similarly it is nobody's case that the prescribed Form 34B overrides the substantive provision 245C. The authorised representative has been misdirected in isolating important limbs of a scheme and examining such limbs in isolation. For e.g. the prescribed Form 34B is commented on in isolation. The procedural/machinery provision, i.e. section 245C(1B) to section 245C(1D) are commented on in isolation. He appears unwitting of the requirement, i.e. holistic and harmonious view of the Settlement scheme. In the holistic view, it is clearly discernible that the procedural provisions as well as the prescribed Form 34B are part of an integral whole with the substantive provision of section 245C(1). Even in the substantive provision under section 245C(1) the Legislature has purportedly embedded the expression "make an application 'in such form and in such manner as may be prescribed' ". Thus the expression "in such form and in such manner as may be prescribed" is inextricably connected with the main objective which is full and true disclosur....
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....ord Reid in Luke v. IRC [1964] 54 ITR 692 (HL) ; [1963] AC 557 where at page 577, he also observed : "this is not a new problem, though our standard of drafting is such that it rarely emerges", (underlining added for emphasis) 26.1 The above principles of interpretations and statutory construction have been reaffirmed in a subsequent decision of the hon'ble Supreme Court i.e. in the case of Prakash Nath Khanna v. CIT [2004] 266 ITR 1 (SC) (pages 9 and 10). Viewed in the light of the principle of interpretation enunciated by Maxwell (as quoted in the foregoing) and in the light of the principles of construction laid down by the hon'ble Supreme Court (as extracted above) the entire submission as well as the interpretation of the authorised representative are found to be contrary to the approved norms of statutory interpretation as well as opposed to the language of the statutory provisions under consideration. His interpretation does violence to the language used in the statutory provisions as well as to legislative intent. The authorised representative evidently desires a rewriting of the statute. In this context it is in place to quote further from the decision of the ho....
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....f statutory provisions can only be sought by way of amendment, modification or repeal of the statutory provisions through the Legislature. Further by way of section 245E the Settlement Commission prior to August 2007 (i.e. in respect of applications filed prior to that date) had power to reopen assessment years not included in the settlement application but the same power has been taken away by the Legislature with effect from August 2007. Thus the contentions of the learned authorised representative are found to be devoid of substance and merit. 27. The next question to consider is whether the requirement of additional tax payment would be in respect of all the assessment years mentioned in an application. On this point, it would be illuminating to quote at length the decision of the hon'ble Gujarat High Court in the case of Unipon (India) Ltd. v. ITSC [2014] 44 taxmann.com 250 (Guj) ; [2014] 224 Taxman 1 (Guj) as under : "Sub-sections (1B) and (1C) of section 245C, thus, provide for a special formula for arriving at an applicant's liability to pay additional tax for maintaining an application for settlement. Such special formula contains a deeming fiction. Suc....
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.... details, true and full disclosure of his income which has not been disclosed before the Assessing Officer and amount of Income-tax payable on 'such income' Reference to 'such income', thus, is the income disclosed in the settlement application which was not disclosed before the Assessing Officer. (paragraph 26) 'At a stage where the Settlement Commission is required to ascertain whether an assessee applicant has paid the additional tax with interest thereon only upon which application can be allowed to proceed further, no complex exercise or verification is envisaged. If the concept of total income contained in the Act is imported at such a stage, it can give rise to multiple disputes and lengthy debates with respect to the total income of an assessee and whether full tax on such income has been paid or not. At such a stage, the Legislature does not envisage the Commission to go into a complex exercise of ascertaining the total income of the assessee and further ascertaining his tax liability on such income. The Legislature has, therefore, provided for a simple formula possible of a simple arithmetical application. It may be that in a given case the as....
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.... (a) The provisions of section 245C are not confined to search cases. It is also applicable to survey cases as well as to non-search and non- survey cases. Hence analogical reasoning breaks down. (b) The filing of settlement application is an act of volition on the part of an applicant. There is no statutory compulsion behind filing of application as there is behind statutory procedure relating to block assessment years. Filing of settlement application is just an option/window open to an assessee. (c) The concept of block of assessment years under section 158BB is a continuous series of assessment years whereas in a settlement application an applicant chooses which assessment year to include and which assessment year not to include. Thus an application can be filed containing the assessment years 2009-10, 2012-13, 2015-16 with the intervening assessment years missing at the option of an applicant. Hence the concept of block of years breaks down. (d) The provisions relating to the scheme of settlement are special provisions aimed at settlement of cases whereas the proceedings under sections 158BB and 158BC have no such objective." 29. The contentions....
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.... Brothers. The learned authorised representative overlooks the fact that all court cases arise from issues, i.e. questions of law submitted to the courts. In their approach towards resolving an issue, the courts invariably look at the relevant statutory provisions and the meaning thereof. It is in the process of explicating the relevant statutory provisions that the courts decide the issues referred to them. Whatever may have been the issue before the hon'ble Supreme Court in the case of Express Newspapers Ltd. or in the case of Damani Brothers, in coming to a decision on such issues, the hon'ble apex court had looked at the essential provision of section 245C(1) and explicated the same and such explications are the pole star by which a quasi-judicial authority has to steer. The learned authorised representative has placed reliance on the single judge decision of the Karnataka High Court in the case of Vysya Bank Ltd. It is his case that the Karnataka High Court had distinguished the judgment in the case of Express Newspapers and rejected the stand of the Revenue as regards disclosure of negative income in some assessment years in the application. It is in place to extra....