AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 229
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....ted in filing the present Writ Petition. i) Survey operation under Section 133-A of the Income Tax Act,1961, was conducted on 24.08.2015 at the residential and business premises of the petitioner. A CPU and 5 pen drives were impounded. Subsequently, a search and seizure operation was initiated under Section 132 of the said Act on the very same day at the residential and business premises of the petitioner. Certain documents were seized and sworn statements were recorded on various dates. The petitioner approached the 1st respondent, Settlement Commission and filed an application under Section 245C of the Act for settling the following issues. a) To settle the issue of the undisclosed income of the applicant for AY's 2010-11 to 2016-17 arising out of the materials seized/found/impounded pursuant to search proceedings initiated u/s 132 of the IT Act 1961 on 24-08-2015, at the residence of the applicant at No.34, Amman Kovil Street, Chicken Market, Chennai-1 and the business premises of the applicant at 34 & 35, Amman Kovil Street, Chicken Market, Chennai-1 and also to determine the consequential tax and interest thereon payable under the Act. b) The applicant be granted imm....
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....see derives share of profit from a firm M/s. A.R.Rahman Biryani, besides rental receipts for the property situated at Ernavur. The assessee is the brother of one Abdul Samad, who is the Founder-Director of SS Hyderabad Biryani Private Limited. A search and seizure operation was conducted in the business premises of the assessee as part of search operation in the case of SS Hyderabad Biryani Private Limited group on 24.08.2015. Consequent to search, a notice under section 153-A dated 20.06.2017 was issued and served on 24.06.2017 requiring the assessee to file a true and correct return of income. The assessee filed his returns. A notice under Section 142(1) dated 13.12.2017 was issued to the assessee calling for certain details. Further, a show cause notice dated 15.12.2017 was issued and served on the assessee on 18.12.2017, through which, it was brought to the notice of the assessee that an analysis of the impounded material showed that the assessee had, for various Assessment Years, made unaccounted purchases, suppressed sales, inflated purchases and expenses etc., totaling to the tune of Rs. 9,29,98,552/-. The assessee was not able to explain the sources for purchase of gold jew....
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.... Rs. 9,29,98,552/-. Therefore, the 1st respondent Commission, rightly not allowed the applicant's settlement application to be proceeded with and treated the same as invalid. 4. Mr.R.Sivaraman, learned counsel for the petitioner made his submissions. He also filed written submissions. The sum and substance of the submissions made on behalf of the petitioner are as follows: The 1st respondent treated the application as invalid under section 245D (2C) of the Income Tax Act on the reason that the application has not satisfied the primary condition as to the true and full disclosure and the manner of earning the income. The fact of true and full disclosure of income need not be examined at the threshold of the proceedings and can be kept open to be examined at a later stage. The Settlement Commission may at any stage, till it passes the final order under section 245D(4), examine the issues regarding the full and true disclosure of income and the manner, in which, an undisclosed income was derived conclusively. Therefore, throwing out the petitioner at the threshold stage without providing any sufficient opportunity and without any evidence is absolutely wrong. The report by the ....
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....mmission. In other words, when the Settlement Commission is empowered to reject the application for want of full and true disclosure at any stage either under Section 245D(2C) or under sections 245D(3) and 245D(4), the petitioner is not entitled to canvass that the Settlement Commission ought to have rejected the application at the threshold under Section 245D(1) itself, since he is barred from filing further application as per Section 245K, if such application was rejected under any of the other provisions as stated supra. The petitioner has not made any attempt to prove that there is full and true disclosure of income in the application. The petitioner was provided sufficient opportunity by forwarding the report of the Principal Commissioner and that he has also filed his reply to such report. Therefore, it is incorrect to contend that no sufficient opportunity was provided to the petitioner. There need not be any further enquiry under section 245D(3), when there are sufficient and hand full materials available before the Commission to reject the application at the stage under section 245(2C) itself. In other words, only when the application successfully crosses the stage of Sect....
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....a period of fifteen days of the receipt of such report, by an order in writing, declare the application in question as invalid, after affording an opportunity of hearing to the applicant. Needless to say that such rejection is based on the report received from revenue and on satisfaction that what is disclosed in the application is not true and full disclosure. 11. On the other hand, as contemplated under section 245D(3), if an application has not been declared invalid under sub-section (2C), the Settlement Commission may call for records from the Principal Commissioner or Commissioner and after examination of such records, it may direct the Principal Commissioner or Commissioner to make such further enquiry or investigation and furnish a further report on the matters covered by the application and any other matter relating to the case. The Principal Commissioner or Commissioner, thus, shall furnish such report within a period of ninety days. After examination of the records and the report of the Principal Commissioner or Commissioner and after giving an opportunity of hearing to the applicant and to the Principal Commissioner or Commissioner and after examining such further evide....
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....er. (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 sub-section, may call for the records from the Principal Commissioner or 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 Principal Commissioner or 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 the case, and the Principal Commissioner or Commissioner shall furnish the report within a period of ninety days of the receipt of communication from the settlement Commission. (4) After examination of the records and the report of the Principal Commissioner or Commissioner, if any, received under - (i) sub-section (2B) or sub-section (3), or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after giving....
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....itional income derived has been explained. Undoubtedly, such observation of the Settlement Commission is based on prima facie view on the averments and details furnished in the application, in the absence of any other contra materials in its possession, which warrants contra view that the true and full disclosure has not been made by the applicant or that he has not disclosed the manner of earning such income. It is relevant to note at this juncture that the prima facie view expressed by the Settlement Commission resulting out of the said order passed under section 245D(1) in allowing the Settlement Application to be proceeded with further, was based solely on the materials placed by the petitioner and in the absence of any contra materials available with the Commission. Thus, the said order passed under section 245D(1) is indisputably an exparte order, in so far as the revenue is concerned, that too, expressing only a prima facie view in allowing the Settlement Application to be proceeded further with. Admittedly, at this stage, the Revenue is neither put on notice nor heard. Therefore, any prima facie view expressed by the Settlement Commission for allowing the application to be ....
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.... Settlement Commission. On the other hand, it has been found that the assessee's representative failed to explain the facts on the impounded materials viz., CPU and pen drives and the failure in not disclosing the same in the Statement of facts before the Commission. The Settlement Commission has also found that the assessee's representative merely stated that the contents of the pen drive and hard disc are only an estimate prepared for bank purposes and that he could not explain the figures satisfactorily, even though the specific query was put to him that the figures are not round sum but accurate and that inflation and boosting of certain figures were made clear. Therefore, the Settlement Commission found that the estimate of additional income of Rs. 40 lakhs is made without any basis and there is clear suppression of facts relating to undisclosed income in the statement of facts. The Settlement Commission also found that the suppression of basic facts relating to income and misrepresentation of facts to full and true disclosure of additional income were brought to the knowledge of the Commission by the Revenue. The Settlement Commission specifically pointed out that eve....
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....(4), after directing the Revenue to furnish records and thereafter to conduct an investigation or enquiry. In all these stages, the satisfaction of the Commission with regard to true and full disclosure of income must continue to exist so as to carry over the proceedings from one stage to another and finally, to pass an order determining the terms of settlement as provided under Section 245D(6). In other words, true and full disclosure is the life line, satisfaction of the same should remain to live in the mind of the Commission till the final order is passed. On the other hand, if the Commission finds, at any stage of the proceedings under Section 245D that the applicant has not come before the Commission with clean hands and by disclosing true and full income, it is empowered to reject the application, thereby driving the applicant to face the regular assessment proceedings. The applicant cannot, as a matter of right, seek the Commission to carry over the application from one stage to another, notwithstanding the fact as to whether true and full disclosure of income was made or not. In other words, the applicant who approaches the Commission, bypassing the regular assessment proc....
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....rved that the settlement application passes through several stages before the final order provided for the terms of settlement and that the orders under section 245D(1), 245D(2C) are not final orders and they are subject to final orders that may be passed under section 245D(4) and that the issue of full and true disclosure on the part of the applicant's therein and the manner, in which, undisclosed income was derived is still open for discussion and debate. Therefore, it is clear that in that case the Settlement Commission has not only formed a prima facie opinion exparte at the stage of 245D(1) to proceed further with the application and also satisfied, further under section 245D(2C) as well about the true and full disclosure. But in the present case, it is vice versa. The Settlement Commission though initially found prima facie that there was true and full disclosure while dealing with the application under Section 245D(1), has however subsequently, after hearing the Revenue through their report, has categorically found against the applicant at the stage of 245D(2C) with regard to full and true disclosure of income. Thus, the Settlement Commission has chosen to reject the app....
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....t of the shares of voting rights at any time, or any firm or association of persons or body of individuals in which such person is entitled to more than fifty per cent of the profits at any time, or any Hindu undivided family in which such person is a karta; (ii) Where such person is a company, any individual who held more than fifty per cent of the shares or voting right sin such company at any time before the date of application before the Settlement Commission by such person; (iii) Where such person is a firm or association or persons or body of individuals, any individual who was entitled to more than fifty per cent of the profits in such firm, association of persons or body of individuals, at any time before the date of application before the Settlement Commission by such person; (iv) where such person is a Hindu undivided family, the karta of that Hindu undivided family. 20. A careful perusal of the above said provision of law would indicate that two categories are referred to therein for imposing bar on subsequent application for settlement in respect of those cases. Sub-section (1) of Section 245K(1) deals with first category consisting of three types of cases i.e., ....
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....efore the Assessing Officer etc. Therefore, the bar provided under section 245K(2) for making subsequent application under section 245C is to be construed as a bar in respect of such assessment year, which is already the subject matter in the earlier application, and not in respect of any future application in respect of any other assessment year/years, being not the subject matter of the application already filed under section 245C, which was allowed to be proceeded with under sub-section (1) of Section 245D. 23. At this juncture, it is useful to refer to the observation made by the Apex Court in C.I.T. vs. Express Newspaper Ltd., reported in 206 ITR 443, as follows: Once the application is allowed to be proceeded by the Commission, the proceedings pending before any authority under the Act relating to that assessment year have to be transferred to the Commission and the entire case for that assessment year will be dealt with by the Commission itself. The words at any stage of a case relating to him only make it clear that the pendency of proceedings relating to that assessment year, whether before the Assessing Officer or before the appellate or revisional authority, is no bar....