TaxTMI 
TaxTMI 
2019 (2) TMI 1143
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....rnment of India had launched the Technology Upgradation Fund Scheme ("the scheme" for short) w.e.f. 1.4.1999. Under the scheme, to encourage investment in technology upgradation in textile and jute industry, certain financial assistance was made available to domestic industry. Said benefit would be available for modernization or expansion of the existing units as also for setting up new units of textiles and jute industry. 4. The petitioner received reimbursement of interest expenses under the said scheme for assessment years 2006-07 to 2013-14, breakup of which is as under:- AY Net TUF Claim (Rupees in Crore) 06-07 1.48 07-08 4.74 08-09 5.92 09-10 8.44 10-11 13.07 11-12 15.44 12-13 18.27 13-14 12.78 TOTAL 80.15 5. The petitioner periodically filed the returns of income for all the above mentioned assessment years and offered the subsidy benefits received from Government of India under the said scheme to tax as revenue receipt. The petitioner was subjected to search operation on 11.1.2012. By that time, the petitioner's assessment for certain years were already completed under Section 143(3) of the Act. The rest were....
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....etermined by the commission. 4. Granting of immunity from prosecution under various sections of the Income Tax Act, 1961 5. Adjustment of refund against payment of taxes due as per application and also as per the order 245D(4) of the Income Tax Act, 1961 6. Adjustment of the seized cash of Rs. 64,58,000/- against tax / interest due for settlement application filed by the applicant. 7. Any other term that may be considered necessary at the time of settlement application hearing." The total income is determined for all the years as per enclosure. Interest is to be charged up to the date of passing of the order under Section 245D(1) of the Act. In view of the following decisions of the Hon'ble Supreme Court in case of Brijlal Vs. CIT (2010) 328 ITR 477 (SC). We are satisfied that there has been no attempt to conceal any material facts before us and also the applicant has fully co-operated in the proceedings before us. Therefore, immunity from Penalty under the Income Tax Act, 1961 as prayed for by the applicant is granted. For same reasons, Immunity from Prosecution under the Income Tax Act, 1961 as prayed for by the applicant is also granted. Th....
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....m (ITNS150A), Credit of taxes paid given. Demand Notice as per the provisions of section 245D(6) of the I.T. Act is issued" 9. The Assessing Officer passed similar individual orders for each assessment year covered under the settlement. It is not necessary to record contents of all of them. 10. The petitioner thereupon filed a common petition for revision before the Commissioner of Income Tax. In such revision petition, the petitioner took up the question of taxing subsidy amount received from the Government of India under the said scheme and argued that the subsidy being in the nature of capital receipt, was not liable to be taxed, both while computing the assessee's book profit under the Minimum Alternative Tax (MAT) provisions and under the normal provisions under the Act. The petitioner relied on several decisions in support of this contention. The petitioner further contended that despite such legal position, the subsidy was erroneously offered to tax during all the said assessment years. It was argued that the powers of the Commissioner under Section 264 of the Act are wide enough to entertain such contention. It was contended that the issue which was not adjudicated by....
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.... is communicated to the Assessee. 32. In the present case, the settlement commission order dated 30 August 2014. However, the time limit for making application under section 264 of the Act is to be seen from the date on which amendment is brought into statute i.e 14 May 2015. Section 2(24) of the Act is amended from 14 May 2015 (i.e date on which President given its acceptance to Finance Bill 2015 and it became Finance Act 2015). 33. By way of aforesaid amendment with prospective effect, it is being made clear that subsidy received from government is chargeable to tax as revenue receipt and the said amendment is made with prospective effect. Therefore, time limit for making application should be taken from the aforesaid date and the application is well within the time and hence, the same should be accepted and matter should be decided on merits of the case. 34. Without prejudice to above, the assessee prays before your honour to condone the delay of approximate one year from the date of settlement commission order in filing of present application (if date for counting time limit is computed from date of settlement commission order). In this regard, it is humbly submitte....
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.... by the petitioner passed final order of settlement granting immunity to the petitioner from penalty and prosecution subject to conditions. The Assessing Officer passed individual orders giving effect to the order of Settlement Commission after which the petitioner applied for revision to the Commissioner and raised dispute about taxability of the subsidy. 16. In this context, Mr. Mistri, the learned senior counsel appearing for the petitioner took us extensively through the various provisions of the Act and contended that :- I. The Commissioner of Income Tax erred in rejecting the application under Section 264 of the Act on the ground that order of the Income Tax Settlement Commission cannot be revised being an authority not subordinate to the CIT. a. Order sought to be revised is the order passed by the Assessing Officer after the order passed by Commission, therefore, CIT under Section 264 has jurisdiction to revise such an order passed by an authority subordinate to him [Section 264(1)]. b. Revision application under Section 264 is maintainable as order of the Commission is conclusive only on the issues which are decided by it. i. Section 245D(4....
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....s that notwithstanding anything contained in the earlier provisions of the said Section, the Chairman may, for the disposal of any particular case, constitute a Special Bench consisting of more than three members. Reference in this sub-section is thus "for the disposal of any particular case". Likewise proviso to sub-section 5 of Section 245BA also provides that if at any state of the hearing of any such case or matter, it appears to the Presiding Officer that the case or matter is of such a nature that it ought to be heard by a Bench consisting of three members, the case or matter may be referred by the Presiding Officer of such Bench to the Chairman for transfer to such Bench as the Chairman may deem fit. We are conscious that this proviso refers to a case as well as to a matter to which expression some elaboration will be necessary and would be made later. 19. Section 245C of the Act pertains to application for settlement of cases. Sub-section (1) to Section 245C provides that an assessee may, at any stage of a case relating to him, make an application in prescribed formant and in prescribed manner containing full and true disclosures of his income which has not been disclose....
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....rt of the [Principal Commissioner or] Commissioner. Sub-section (5) to Section 245D provides that subject to the provisions of Section 245BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the concerned Bench before passing any order under sub-section (4) and in relation to the passing of such order, the provisions of Section 245BD shall apply. Sub-section (6) of Section 245D provides that every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due under the settlement 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. Sub-section (7) of Section 245D provides that if the 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 revived from the stage at which the application was allowed to be proceeded with by the S....
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....f any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission. (5) ....... (6) ....... (7) The Settlement Commission shall, subject to the provisions of this Chapter, have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings. 22. Section 245H of the Act pertains to power of Settlement Commission to grant immunity from prosecution and penalty. Section 245HA pertains to abatement of proceeding before Settlement Commission. Sub-section (1) of Section 245HA provides for time limit for completion of settlement proceedings and if not so completed, the proceeding would abate on the specified date. Sub-section (2) of Section 245HA provides that where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income tax authority before whom the proceeding at the time of m....
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....ct to fulfillment of the conditions contained in the order. The Assessing Officer, therefore, while carrying out the terms of settlement and the order passed by the Settlement Commission, had limited jurisdiction of only giving effect to the directives contained therein. The question of correctness of taxing the subsidy income was neither raised, nor in our opinion could have been raised before him. We are conscious that the powers of the Commissioner for revision under Section 264 of the Act are not seen to be co-terminus with the powers of the Assessing Officer. The Commissioner may as well entertain a ground, a claim or a contention of the assessee which may not have been raised either in the return or before the Assessing Officer during the course of the assessment. However, the question is could the petitioner have in the present facts of the case raised the question of taxability of subsidy before the Commissioner. 26. As noted, the Act contains detail provisions in Chapter XIX-A for settlement of cases. An application for settlement can be made under sub-section (1) of Section 245C of the Act. This can be made at any stage of a case relating to the assessee. The term 'cas....
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....f our discussion, this Section 245F is of utmost importance. In clear terms, it signifies the intention of the legislature to vest jurisdiction in relation to a case in one authority; be it Assessing Officer or Settlement Commission. In relation to application for settlement filed after 1.6.2007, once it is filed, the Settlement Commission would have exclusive jurisdiction in relation to the case, the Commission would enjoy all the powers of the Assessing Authority and the Assessing Officer would have no power to deal with the assessment. This position would continue till the application for settlement is rejected, or not allowed to be proceeded further or declared invalid, or until an order is passed under Section 245D(4) of the Act. 30. Sub-section (4) of Section 245F merely provides that for removal of doubt in absence of any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of the Act in so far as they relate to any matters other than those before the Settlement Commission by virtue of Section 245F in relation to a case would be confined to matters covered in application for settlement or in t....
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....ission or an order of assessment passed by the Assessing Officer but not both. We are conscious, the proviso to sub-section (5) of Section 245BA mentions a case or a matter which can be referred to a bench of three members of the Commission. This distinction, however, can be easily explained. In a given situation a 'case' may require attention of three members. Situation may also arise where only a matter arising in a case but not the entire case may require reference. Even Mr. Mistri, learned counsel for the petitioner did not argue to the contrary. His contention, if we understand correctly was that the Settlement Commission would pass order only in respect of matters before it and no other. Therefore, the revenue authorities while giving effect to the order of Settlement Commission are bound to consider issues which are not part of settlement proceedings. 32. In our opinion, such a contention cannot be accepted. We have referred to the relevant provisions contained in Chapter XIX-A of the Act and come to the conclusion that once an application for settlement of a case is filed before the Settlement Commission and is allowed to pass through various stages under Section 245D of....
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.... Mistri would, however, contended that the sole ground on which the Commissioner has rejected the revision petition in context of this issue is that he had no power to revise the order of the Settlement Commission. He contended that order of the Commissioner can be tested only on the basis of reasons sited by him. 35. There are several difficulties in accepting this contention. Firstly, though the petitioner may have worded the prayer before the Commissioner differently, to grant the prayer of the petitioner would require the Commissioner to travel beyond the order of Settlement Commission which as held by us he could not do. His mere expression that he cannot revise the order of the Settlement Commission, therefore, would not be fatal to the order. 36. Secondly, the writ jurisdiction of the High Court cannot be put in such a straight jacket. High Court is not bound by the reasons sited by the Commissioner. If it is found that the Commissioner has no authority to grant prayer made in the revision petition filed before him, the Court would not ask him to do so merely because he has sited reasons which may not appear to be sound. 37. Thirdly the petitioner would not be satis....
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....ficer to compute the total income, interest and penalty payable in terms of the order of the Settlement Commission. The petitioner therein, was aggrieved by the demand of interest computed by the Assessing Officer on the ground that the same is not in accordance with the order of the Settlement Commission. It was in the above context that the Madras High Court had directed the petitioner therein to file a revision application under Section 264 of the Act. The facts herein are completely different. Most importantly it is not the case of the petitioner herein that the working out of the demand consequent to the order of the Settlement Commission was not in terms of the order. 40. Having thus come to our independent conclusions on the basis of the provisions contained in the Act, we may refer to certain decisions of the High Courts and the Supreme Court in the context of settlement proceedings under the said Chapter. 41. In case of CIT Vs. Express Newspapers Ltd (1994) 2 SCC 374, the facts were that the assessee had filed an application for settlement in which it had not disclosed any income earlier before the Assessing Officer but merely offered a small part of loss claimed by ....
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....kely to establish it maybe some more material is required to establish it fully. The Commission has to keep all this in mind while deciding whether to allow the application to be proceeded before it or to reject it." 42. In case of CIT Vs. Paharpur Cooling Towers Pvt Ltd (1996) 8 SCC 154 once again the provisions contained in Chapter XIX-A came up for consideration before the Supreme Court. It was observed that once an application is admitted by the Commission, the Commission takes over all the proceedings relating to that case which may be pending before any Authority under the Act. 43. In case of CIT Vs. Om Prakash Mittal (2005) 2 SCC 751, it was observed that the Commission assumes jurisdiction to deal with the matter after it decides to proceed with the application and continues to have jurisdiction till it makes an order under Section 245D. It was further observed that the object of the legislature, in introducing Section 245C is to see that protracted proceedings before the authorities or in Courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amounts statutorily payable under the Act. It was further observed....
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....5-C(1-B), 245-C(1-C), 245-D(6), 245-F(3) in addition to Sections 215(3), 234-A(4) and 234-B(4).] 31. With the filing of the settlement application and after such application is allowed to be proceeded with under Section 245-D(1), intimation under Section 143(1), regular assessment under Sections 143(3)/144 and re-assessment under Section 147 lose their existence as under Sections 245-C(1-A) and (1-B) it is only the income disclosed in the return of income before the A.O. alone which survives for consideration by the Settlement Commission for settling the amount of income which is not disclosed in the return. 35. As stated, till the Settlement Commission decides to admit the case under section 245D(1) the proceedings under the normal provisions remain open. But, once the Commission admits the case after being satisfied that the disclosure is full and true then the proceedings commence with the Settlement Commission. In the meantime, applicant has to pay the additional amount of tax with interest without which the application for settlement would not be maintainable. Thus, interest under section 234­B would be payable up to the stage of section 245­D(1). Our view is sup....
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....s order under Section 245D(4) of the Act to deal with the issues which were neither raised in the application of the petitioner nor in the report of the Commissioner submitted under Section 245D(3) of the Act. It was argued that the Settlement Commission would have no jurisdiction to travel beyond the subject matter of the application and the report of the Commissioner. This Court relied upon the decisions of the Supreme Court in the case of Express Newspapers Ltd (supra) and Brij Lal (supra) and held that the Act does not contemplate a parallel proceeding before the Settlement Commission and before the Assessing Officer, once the Settlement Commission has decided to proceed with the application under Section 245D(1) of the Act. It was held and observed as under:- "13........... Simply put, under sub-section (4) the Settlement Commission is empowered to pass orders in accordance with the provisions of the Act after examining the records and the report of the Commissioner, if any and upon examining such further evidence as may be placed before it or obtained by it. The Settlement Commission is upon the plain language of the provision not confined merely to examining the report....
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....rt of the Commissioner at two stages. The first stage arises under sub-section (2B) of Section 245D where, inter alia, an application has been allowed to be proceeded with under sub-section (1). There, the Settlement Commission shall call for a report. The second stage is under sub-section (3) of Section 245Dwhere, inter alia, the Settlement Commission has not declared an application as invalid under subsection (2C). In both the cases the report of the Commissioner is not a condition precedent for the Settlement Commission to proceed further with the settlement of the case. If the Commissioner does not submit his report to the Commission, that does not bring an end to the proceeding before the Commission. On the contrary, both the second proviso to sub-section (2C) and the proviso to sub-section (3), make it abundantly clear that the Settlement Commission is empowered to proceed further even in a situation where the Commissioner does not furnish a report within the prescribed period. Once the Settlement Commission is seized of the proceedings and an application under Section 245C has been allowed to be proceeded with under Section 245D, the Settlement Commission has exclusive juris....
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....ngs, there is no parallel assessment contemplated in law. Comprehensiveness, finality and conclusiveness are the three attributes of the function assigned to the Commission. That object is achieved when the entire assessment is completed, as part of the jurisdiction to settle a case. To dilute this position would defeat the object which Parliament intended to achieve. Once an assessee moves the Settlement Commission, the statute expressly mandates that the application cannot be withdrawn. Unless the Commission in a given case decides to reject the application, it is entitled to resolve the case by settlement. An assessee who moves the Settlement Commission cannot be allowed to be anything other than fair and candid. Nor can he assert an unqualified right that the Settlement Commission should either accept what he discloses or leave him to another round of assessment before the Assessing Officer." 46. In case of Shalibhadra Developers Vs. Secretary [2016] 74 taxmann.com 152 (Gujarat), the Division Bench of Gujarat High Court in context of the question of pendency of a case when an application for settlement is filed by the assessee has observed as under:- "32. The statutory pr....