TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1143
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....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 not. Pending assessment under Section 153A of the Act pursuant to the search, the petit....
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....so 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. The A.O. is directed to adjust refund pending after verification while giving effect to order u/S. 245D(4) of the Income Tax Act, 1961, including adjustment of seized cash amounting to Rs. 64,58,000/-. 12. The immunity granted to the ....
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.... 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 the Settlement Commission was open to revision under Section 264 of the Act. 11. Curiously, however, the petitioner did not point out which order it wishes the Commissioner to revise. Petitioner's averments and prayers titled as "Conclusions" may be noted:- "E. Revisi....
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....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 submitted that the delay in filing the application is purely attributable to the lack of clarity under the Income Tax Act and the same was clarified by Finance Act 2015 on 14 May 2015. Hence, Assessee has sufficient cause for making delay application and the same should be condoned and it is humbly prayed that matter should be decided on merits of the....
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....6. 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) - Commission passes order only on the matters which are covered in the application made by the assessee and any other matter referred by the CIT in its report. ii. Section 245-I - Order of Commission is conclusive only on the matter which is covered by such order. iii. Section 245F(4) - All other provisions of the Act apply to the matter other than before Commission. iv. As c....
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...., 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 disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income tax payable on such income and such other particulars as may be prescribed, to have his case settled by the Settlement Commission. Sub-section (1A) of Section 245C provides that for the purpose of sub-section (1), the additional amount of income tax payable in respect of the income disclosed in an application....
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....s 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 Settlement Commission and the income tax authority concerned, may, notwithstanding anything contained in any other provisions of this Act, compete such proceedings at any time before the expiry of two years from the end of the financial year in which the settlement became void. 21. Section 245F of the Act pertains to powers and procedure of Settlement Commission and reads as under:- "(1) In addition to the powers conferred on the Settlement Comm....
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....s 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 making the application was pending, shall dispose of the case in accordance with the provisions of the Act as if no application under Section 245C had been made. 23. Section 245I of the Act pertains to order of settlement to be conclusive and reads as under:- "Every order of settlement passed under sub-section (4) of Section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall save as otherwise provided in this Chapter, be reopened in any....
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....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 'case' has been defined to mean any proceedings for assessment under this Act of any person in respect of any assessment year or assessment years which may be pending before the Assessing Officer on the date on which the application under sub-section (1) of Section 245C is made. In other words, the application for settlement can be filed as long as the proceedings for assessment of the return is pending before the Assessing Officer. The previous definition of word 'case' would cover within its scope....
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.... 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 the report of the Commission. Any other view would require the Assessing Officer to continue with the assessment minus the matters before the Settlement Commission, thus giving rise to two parallel proceedings. 31. On reading the provisions contained in Chapter XIX-A of the Act, a clear picture that emerges is that an assessee can apply for settlement of a case as long as same is pending. Once such an application is filed (and in case of application filed before 1.6.2007) allowed to proceed further, all....
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.... 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 the Act, it is only the Settlement Commission which can pass any order concerning such a case. At all stages, the Act refers to a case for which an application for settlement can be filed, a case which the Settlement Commission considers for settlement, a case the Commission either allows to be settled or does not allow to be so settled. The Act does not envisage a return of an assessee to be split into two parts, one for consideration before the Settlement Commission by way of settlement and another for n....
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....ould 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 satisfied with mere quashing of the order of the Commissioner. The petitioner in order to succeed would require substantive relief. It is in this context the petitioner after praying for quashing the revisional order of the Commissioner has further prayed as under:- "b. this Hon'ble Court may be pleased to issue a Writ of Mandamus and / or any other appropriate writ order or direction under Article 226 of the Constitution of India directing the respondents to treat the subsidy received under the said scheme as being capi....
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....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 it for the said assessment years to tax. In this context, the Supreme Court reiterated that an application under Section 254C can be made only in respect of the income not disclosed by the assessee before the Assessing Officer. It was further observed as under:- "19. The idea underlying the said words [in the main limb of subsection (I-A)] is self-evident. The disclosure under Section 245-C must be of an income not disclosed before the Assessing Officer. If the Assessing Officer (or the income tax authority) has already discov....
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....ch 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 as under:- "17. It has to be noted that the Commission exercises power in respect of income which was not disclosed before the authorities in any proceeding, but are disclosed in the petition under Section 245C. It is not that any amount of undisclosed income can be brought to the notice of the Commission in the said petition. Commission exercises jurisdiction if the additional amount of tax on such undisclosed income is more than a particular figure (which at different points of time exceeded rupees fifty thousand or rupees one hundr....
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....ettling 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 supported by the amendment made by Finance Act of 2007 w.e.f. 1.6.2007 in which interest is required to be paid for maintainability of the Application for Settlement. 39. Moreover, as stated above, under the Act, there is a difference between assessment in law [regular assessment or assessment under section 143(1)] and assessment by settlement under Chapter XIX-A. The order under section 245­D(4) is not an order of regular assessment. It is neither an order under section 143(1) or section 143(3) or section 144. Under sections 139 to 158, the proc....
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....ding 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 of the Commissioner. As seen earlier, the Commission is not constricted from proceeding further where the Commissioner does not submit a report at all. The evidence which the Commission examines is that which is placed before it or obtained by it. Evidence which is obtained by the Commission is that which emerges on the initiative or directions of the Commission. The Commission is in other words not designed to act as a passive spectator - confined to what the assessee discloses. The Commission can act proactively in gathering or obtaining evidence. The s....
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....ent 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 jurisdiction to exercise the powers and to perform the functions of an income tax authority under the Act in relation to the case. When the Settlement Commission decides to proceed with a case under Section 245D(1), it assumes exclusive jurisdiction in regard to the assessment. That is because the Settlement Commission is then seized of the case in respect of which a settlement is sought and the expression "case" itself is defined to mean any proceeding for assessment under the Act which is pending before the Assessing Officer. The Act does not contemplate a para....
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....t 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 provisions noted above manifest intention of the legislature to vest the jurisdiction to process a case of the assessee either in the Settlement Commission or in the Assessing Officer. No sooner an application for settlement is filed under sub-section(1) of section 245C of the Act, the Assessing Officer would be divested of his jurisdiction to assess the return further. The jurisdiction would vest solely and exclusively in the Settlement Commission. If for some reason as envisaged under section 245D of the Act, proceeding for settlement becomes void, under sub-section....