TaxTMI 
TaxTMI 
2017 (8) TMI 127
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....dals Duplex Limited ("BDL") and the petitioner in W. P. (C) No. 5428 of 2016, Tehri Pulp and Paper Limited, are engaged in the business of manufacturing of craft paper. The other two petitioners, i.e., Swabhiman Vyapaar Private Limited, petitioner in W. P. (C) No. 5425 of 2016 and Brina Gopal Traders Private Limited, petitioner in W. P. (C) No. 5427 of 2016 are entities created by the Bindal group for providing entries to facilitate unaccounted income/funds generated by the group for unaccounted business transactions and inflation of expenses. 3. A search was undertaken on various premises of the Bindal group under section 132 of the Income-tax Act, 1961 ("Act") on March 7, 2014. Proceedings under sections 153A and 143(3) of the Act were initiated for the assessment years 2008-09 to 2014-15, and for the assessment year 2015-16, returns were filed and the assessment was pending. Pursuant to the notices issued to each of the ten companies including the present four petitioners under section 153A of the Act for the assessment years 2008-09 to 2013-14, the petitioners filed their respective returns. 4. While the assessments were pending, applications were filed by the petitioners....
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....ation to Bindal Sponge Industries Limited, Bindal Papers Mills Limited and TPPL. Inter alia, it was stated that there were unaccounted receipts in the group in different years, for which the promoters indulged in sales outside books and in suppressing production end by raising bogus bills for inflation of capital expenditure. The details of such receipts were set out. The details of non-genuine share capital and non-genuine unsecured loans introduced in different assessment years in different group companies were set out in a tabular chart as set out in para 7 of the statement. 7. Inter alia, the fact that the four petitioners herein were also beneficiaries of the unaccounted funds generated in the group and the introduction of funds in the petitioner-companies by way of accommodation entries for share capital was disclosed. In para. 12 of the application, the "manner of earning income" was given for each of the applicants. 8. On March 30, 2016, the Income-tax Settlement Commission passed an order under section 245D(1) of the Act. In para 7 of the said order, it was recorded as under : "7. We have carefully considered the contents of the settlement applications filed....
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.... companies and in most of the cases the notices were received back. Therefore, no confirmation was forthcoming even from a single person from whom the assessee claimed to have received the share capital with huge premium or unsecured loans. It was, therefore, stated that the assessee failed to establish the identity and genuineness of the share capital/unsecured loans transactions within the meaning of section 68 of the Act. Further, under the head "Other issues" in the report, it was stated that the assessee had submitted "a detailed cash flow evidently to take advantage of netting/telescoping". 11. It was further stated by respondent No. 1 in the report that the above cash flow prepared with an intention to establish non-existent availability of cash on account of unaccounted sales made in the case of Bindals Sponge Industries Ltd., where the assessee-company had huge business losses and unabsorbed depreciation allowances. The cash flow statement indicated that the closing balance was in excess of Rs. 10 crores for many financial years, which was highly improbable. It was observed that "no prudent business person would keep such amount of cash idle at his residential or busine....
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....eclared invalid since the basic requirement under section 245C for explaining the manner of deriving income offered in the settlement applications had not been satisfied." 15. At the adjourned date, i.e., May 12, 2016 the written submissions were filed by the four applicants which was noted in the impugned order. However, in the impugned order, the Income-tax Settlement Commission was not satisfied with the submissions on behalf of the four applicants/petitioners for the following reasons : (a) A consolidated cash flow was filed to explain the non-genuine share capital and non-genuine unsecured loans. Various receipts claimed as 'deemed income' were shown as receipts in the hands of the six other applicants. The non-genuine loans unexplaining credit balance, stock, unaccounted expenditure declared in the hands of four applicants in their settlement applications were "not covered by the above consolidated cash flow". (b) The petitioners had not explained the manner of deriving the undisclosed income used in acquiring such assets incurring such expenses. 16. Accordingly, it was held that the four petitioners had not satisfactorily explained the manner ....
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....reply to the above submissions, Mr. Hossain, learned counsel for the Revenue referred to the impugned order passed by the Income-tax Settlement Commission which noted, on the basis of the report of respondent No. 1, as well as the petitioners' own submissions that the petitioners were unable to establish the bona fides of the parties from whom they purportedly availed of loans. It is submitted that merely because the Income-tax Settlement Commission had directed the applications to be proceeded with earlier, did not preclude it from concluding upon a further examination that the applications did not disclose the manner of earning undisclosed income. Mr. Hossain relied upon the decision of the Supreme Court in Ajmera Housing Corporation v. CIT [2010] 326 ITR 642 (SC) ; [2010] 8 SCC 739. He submitted that the Income-tax Settlement Commission was fully within its powers to reject the applications when it had become crystal clear that the petitioners did not fulfil the requirements of a settlement proceeding. 22. Mr. Hossain submitted that in the present writ petition, the court should only be concerned with the legality of the procedure followed by the Income-tax Settlement Com....
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.... not raised by respondent No. 1 in its report. 26. A perusal of the applications filed, copies of which have been placed on record, shows that the manner of deriving disclosed and unearned income was indeed disclosed. To what extent this can be verified would be a matter for more detailed examination. There appears to be no rational basis for according a differential treatment to the four petitioners. As a result of the impugned order, while the regular assessment in respect of the four petitioners will proceed, the case of the six other companies forming part of the same group would be decided by the Income-tax Settlement Commission. Obviously, the differential treatment to four of the companies forming part of the same group results in differential treatment which does not appear to be warranted in the instant case. 27. If indeed, as contended by the Revenue, there was no full and true disclosure of facts by all ten companies, then the respondent ought to have challenged the order of the Income-tax Settlement Commission permitting the applications of the six other companies to be proceeded with. The Revenue appears to have accepted a part of this order in regard to those si....