TaxTMI 
TaxTMI 
2019 (6) TMI 996
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....mount spent on construction of new educational buildings, d) to grant benefit of amount incurred towards news channel; and e) for quashment of telescoping the benefit of cash expenses. The prayer clause of the first writ application, reads thus: "(a) By an appropriate writ, order or direction, the orders dated 30.06.2017 & 08.02.2018 passed by the Settlement Commission to the extent of (a) grant of benefit of section 11(1) (a) of the Act, (b) brought forward and carry forward of unabsorbed losses, (c) amount spent on construction of new educational buildings, (d) amount incurred towards news channel and (e) telescoping benefit of cash expenses be quashed, modified, set aside; (b) By an appropriate writ, order or direction, the respondents be directed to re-compute the total income after giving the benefit of (a) grant of benefit of section 11(1)(a) of the Act, (b) brought forward and carry forward of unabsorbed losses, (c) amount spent on construction of new educational buildings, (d) amount incurred towards news channel and (e) telescoping benefit of cash expenses; (c) By an interim order the demand against the petitioner be st....
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....of income year to year which were duly scrutinized in detail by the Income Tax department and the same were accepted as complete returns of income without any additions thereon. The officials of the Income tax department carried out a search and survey under section 132 of the Act of 1961 on 30th October, 2014, on 9 premises of the petitioner Trust. On the basis of the search, the respondent-department issued notices to the petitioner under section 153A of the assessment year 2009-10 to 2014-15 on 06th August, 2015. The petitioner filed the returns of income for the assessment year 2014-15 on 30th September, 2015. Thereafter, on 14th December 2015, a settlement application under section 245C (1) of the Income Tax Act, 1961, was filed by the petitioner before the Income Tax Settlement Commission for the assessment years 2009-10 to 2015-16. The application was admitted vide order dated 23rd Dec, 2015, under section 245D (1) of the Income Tax Act, 1961. The application aforesaid was not declared invalid and was maintainable under section 245D (2C) of the Income Tax Act, 1961. The respondent-department submitted the report under Rule 9 on 10th May, 2016. Comments under Rule 9A, were....
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....etitioner Trust filed its returns of income every year including for the assessment year 2001-02 to 2012-13 and the same were scrutinized in detail by the Income Tax Department regularly, without any addition to the returns of income submitted. 5. Learned counsel further stated that a search and survey was conducted by the officials of the Income Tax Department on 30th October, 2014, under section 132 of the Income Tax Act, 1961, on the premises of the petitioner. The petitioner filed a Settlement Application under section 245C (1) of the Act of 1961, before the Income Tax Settlement Commission on 14th December 2015, for the period of assessment years 2009-10 to 2015-16. The petitioner offered additional undisclosed income of Rs. 1,70,00,000/- (Rupees One crore seventy lacs), for the aforesaid period of assessment years and as per law; Entire tax and interest was deposited by the petitioner beforehand. The Income Tax Settlement Commission accepted the said application vide order dated 23rd December, 2015 and further stated that settlement application was not invalid and maintainable according to the disclosures made by the petitioner Trust and other relevant material found in th....
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.... treated as income of the trust while they were entitled to get the benefit under section 11 (1) (a) of the Act, and the said donations were not to be treated as income of the trust. 2.The benefit of carry forward of losses or deficit for the period of assessment year 2010-11 to 2012-13 as under section 11 (1) (a) of the Act, was not given to the petitioner trust. 3.The investment made by the petitioner trust, in the TV Channel was considered to be done so for deriving profits whereas the acquiring of the TV Channel was done in lieu with the objectives of the petitioner trust i.e. for educational purpose. 4.The depreciation in respect to the expenditure made in lieu of construction of educational buildings of Rs. 25,78,00,000/- (Rupees twenty five crores seventy eight lacs), was not accounted for by the Settlement Commission thus contrary to the provisions under section 11 (1) (a) of the Act. 9. Further, the Income Tax Settlement Commission in its order dated 30th June, 2017, held that the petitioner Trust spent an amount of Rs. 25,78,00,000/- (Rupees twenty five crores seventy eight lacs), for construction of educational buildings but failed to give t....
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....ed under section 10 (23C) (v) and 10 (23A) (via) of the Act of 1961, with retrospective effect; and further made the observation that since the registration and approval of the petitioner had been withdrawn with retrospective effect, hence, no benefit under section 11 (1) (a) of the Act of 1961, shall be admissible to the petitioner for it is not a 'charitable trust' in view of the order dated 16th Jan, 2018, of the respondents. 12. According to learned counsel the rectification application that was filed by the petitioner before the Income Tax Settlement Commission, was for rectification of the order dated 30th Oct, 2017, which ought to have been decided considering the status of the petitioner at the time of passing of the order dated 30th Oct, 2017, whereas the Income Tax Settlement Commission relied on a subsequent order of the respondent-department dated 16th Jan, 2018, in denying the rectifications pleaded and prayed for by the petitioner, which is bad in the eye of law and contrary to the provisions of the Act of 1961, itself. Furthermore, the Income Tax Settlement Commission, failed to realize that the respondent-department, does not have the power to cancel the registra....
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....of buildings and new buildings for education and acquisition of the TV Channel as well, which was not accorded contrary to the provisions of law. In order to fortify his stand learned counsel for the petitioner has relied upon the following opinions: • Assistant Commissioner of Income Tax Vs. Agra Development Authority (2018) 90 Taxman 288 • Industrial Infrastructure Development Corporation M.P. Ltd. Vs. Commissioner of Income Tax (2018) 4 SCC 494 • State of Uttar Pradesh Vs. Vam Organic Chemicals Ltd. (2010) 6 SCC 222 • Oxford Academy for Career Development Vs. Commissioner of Income Tax (2009) 315 ITR 382 • Commissioner of Income Tax Vs. Manav Vikas Avam Sewa Sansthan (2011) 336 ITR 250 • Commissioner of Income Tax Vs. Rajasthani and Gujarati Charitable Foundation (2018) 7 SCC 810 • Commissioner of Income Tax Vs. Subros Educational Society (2018) 7 SCC 548 • Commissioner of Income Tax Vs. Magarana of Mewar Charitable Foundation (1987) 164 ITR 439 • Commissioner of Income Tax Vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1995) 211 ITR 293 • Commissio....
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....itioner filed a settlement application before the Income Tax Settlement Commission under section 245C (1) of the Act of 1961, offering an amount of taxable income of Rs. 1,70,00,000/- ((Rupees One crore seventy lacs), for the assessment years 2009-10 to 2015- 16. The aforesaid settlement application was admitted by the Income Tax Settlement Commission vide order dated 23rd Dec, 2015. The settlement application of the petitioner was allowed to proceed further under section 245A (4) of the Act of 1961. Report under Rule 9 was submitted before the Income Tax Settlement Commission, counter to which, as reply, under Rule 9A was also submitted by the petitioner. The respondent-department filed counter comments to the reply of the petitioner raising several issues before the Income Tax Settlement Commission, which were decided by the Commission, vide order dated 30th June, 2017 made under section 245D (4) of the Act of 1961. 18. It was pointed out by the counsel for the respondent that the petitioner Trust was created for several charitable purposes and objects, including that of 'medical treatment and education' as per the deed of the 'Indian Medical Trust' whereas it was o....
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....00 (Rupees Forty lacs) 21. Furthermore, unexplained cash, jewelry, undisclosed investments, foreign travel and tours made out of the petitioner Trust money, were detected during the search conducted by the respondent-department and that was also tendered in evidence before the Income Tax Settlement Commission, but, the Commission failed to take note of this vital evidence. 22. Learned counsel for respondents further asserted that the petitioner Trust, to cover up the undisclosed income, unearthed by the respondent-department, came up with a lame excuse of not making required entries in the books of accounts, stating that there was a change of employees/staff in the accounts department of the petitioner Trust, and therefore, the said donations could not be recorded properly. Even the Income Tax Settlement Commission after considering the above mentioned reply of the petitioner Trust made an observation in the impugned order dated 30th June, 2017, that the donations accepted by the petitioner Trust, had no declaration of the donors, and thus, the said donations shall not form a part of the corpus of the petitioner Trust i.e. they won't be considered as corpus donations which ar....
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....ndent department to be about Rs. 79,19,00,000/- (Rupees seventy nine crore nineteen lacs). 25. Learned counsel vehemently asserted that considering the above stated facts and materials available on record, it was evident before the Income Tax Settlement Commission that the disclosure made by the petitioner Trust was neither full nor true. The claim, as stated was rejected by the Commission and determined the additional income of the petitioner Trust to be Rs. 41,08,08,869/- (Rupees Forty one crore eight lacs eight thousand eight hundred sixty nine), against the amount of Rs. 1,70,00,000/- (Rupees One crore seventy lacs). Hence, the Income Tax Settlement Commission, without application of mind and without considering the material facts submitted by the respondent-department, made the order dated 30th June, 2017, granting immunity from prosecution and penalty to the petitioner Trust. In support of his stand learned counsel for the respondents has relied upon the following opinions: • Sinhagad Technical Education Society Vs. Income Tax (2012) 343 ITR 23 (Bombay High Court) • U.P. Distillers Association Vs. Commissioner of Income Tax (2017) 399 ITR 143 (....
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....tration of a Trust, but, the legislation had no intention of giving the said provision, a retrospective effect. For in such a situation, the same would have been clearly specified in the said provision. Interpretation of the said provision has to be harmonious rather than being prejudicial to the institutions as it would instigate and create a fear of the Income Tax Department. I find support in my opinion from the following cases with reference to the issue of cancellation or withdrawal of registration with retrospective effect: A. In the case of Oxford Academy for Career Development Vs. Commissioner of Income Tax: (2009) 315 ITR 382, it was thus observed that: 16. In the instant case, the petitioner is a registered society, which was earlier granted registration under Section 12A on 1-4-1999. A survey was conducted at the business premises on 20-9-2002, from where documents were impounded. The registration was cancelled for the assessment years 2000-01 and 2001-02 for the reasons that the surplus was quite heavy. In the impugned order, it was mentioned by the CIT that there was an unusual huge margin and the petitioner was engaged in the commercial activities rather t....
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....stration that may have been granted to an assessee at any time prior to the aforesaid amendment itself. However, it does not indicate that thereby the CIT had been empowered to cancel the registration of the assessee with retrospective effect i.e., w.e.f. a date prior to the date of issuance of the order/notice to cancel the registration. 52. Clearly, the act of cancellation of registration has serious civil consequences. In absence of any legislative intent expressed to suggest that the legislature had empowered the CIT to cancel the assessee's registration under s. 12A of the Act with retrospective effect, such power could not be deemed to exist or arise or be exercised to unsettle closed/part transactions especially because in this case the ground for cancellation has not arisen out of allegation of fraud, collusion or misrepresentation. 53. Therefore, we are of the view that the cancellation of the assessee's registration under s. 12A of the Act, if at all, could be done only prospectively and not retrospectively as had been done by the CIT in this case. Thus, question No. 1 is answered in the negative that is in favour of the assessee and against the ....
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....t as it may, the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee and may waive interest, penalties or prosecution, where it thinks appropriate. Indeed, it would be difficult to predicate the reasons and considerations which induce the commission to make a particular order, unless of course the commission itself chooses to give reasons for its order. Even if it gives reasons in a given case, the scope of inquiry in the appeal remains the same as indicated above viz., whether it is contrary to any of the provisions of the Act. In this context, it is relevant to note that the principle of natural justice (audi alterant portent) has been incorporated in Section 245-D itself. The sole overall limitation upon the Commission thus appears to be that it should act in accordance with the provisions of the Act. The scope of enquiry, whether by High Court under Article 226 or by this Court under Article 136 is also the same - whether the order of the Commission is contrary to any of the provisions of the Act and if....
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....tion of India, will interfere with orders passed by the Settlement Commission under Section 245D of the Income Tax Act, 1961 and if so, to what extent? (2) Whether, on account of the offer of additional amounts by the assessees towards undisclosed income, at the instance of the Settlement Commission, it could be inferred that the assessees had not made a full and true disclosure of their income for the purposes of settlement and thereby denuded the Commission of its jurisdiction to proceed with the matter? (3) Whether, in the instant case, the Settlement Commission was justified in refusing to the department an opportunity to conduct further investigation to ascertain the exact amount of income that had been allegedly undisclosed by the assessees? (4) Whether the findings of the Settlement Commission with regard to the alleged undervaluation of closing stock by two of the assessees is liable to be interfered with? Issue 1: The first issue to be considered is the nature of the jurisdiction that is to be exercised by this court while dealing with a writ petition filed under Article 226 of the Constitution of India, challenging the orders p....
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....e and independent category, has it prejudiced the petitioner/appellant....." The Karnataka High Court in N. Krishnan (Decd. By legal representative, K. Badrinarayan, and others) v. Settlement Commission and Others - (MANU/KA/0065/1989 : 1989 (180) ITR 585) observed as follows at page 597: "The provision for settlement would show that it is in the nature of statutory arbitration to which a person may submit himself voluntarily. Hence, many of the grounds on which an arbitration award could be set aside would not be available in view of the nature and jurisdiction of the Settlement Commission. A decision of the Settlement Commission could be interfered with only (i) if grave procedural defects such as violation of the mandatory procedural requirements of the provisions in Chapter XIX-A of the Income-tax Act, 1961, and/or violation of the rules of natural justice are made out; or (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission. The court cannot interfere either with an error of fact or error of law alleged to have been committed by the Settlement Commission." More recently, the Supreme ....
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....h such income was derived. The petitioner relies heavily on the decision of the Supreme Court in Ajmera Housing Corporation and Another v. Commissioner of Income Tax - (MANU/SC/0623/2010 : 2010 (326) ITR 642 (SC)) in support of its said contention. 11. Before embarking upon a consideration of the merits of the said contention of the petitioner, I feel it would be apposite to notice the scheme of Chapter XIX-A of the I.T. Act, 1961 that deals with Settlement of Cases. As observed by a Constitutional Bench of the Supreme Court in Commissioner of Income-Tax v. Anjum M.H. Ghaswala and Others - (MANU/SC/0662/2001 : 2001 (252) ITR 1 (SC)), Chapter XIX-A of the Act was introduced by the Taxation Laws (Amendment) Act, 1975 with effect from 01.04.1976, for the purpose of quick settlement of cases, so that the tax due to the department is collected at the earliest. On a perusal of the relevant provisions under the Act, I note that the scheme provides for the preferring of an application by an assessee, that contains a full and true disclosure of his income which has not been disclosed before the assessing officer, the manner in which such income has been derived and the additional a....
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....n to proceed with an application is the filing by an applicant, of an application that that contains a full and true disclosure of his income which has not been disclosed before the assessing officer, the manner in which such income has been derived and the additional amount of income tax payable on such income. If, at any stage of the proceedings before the settlement commission, it finds that the disclosure made by the applicant is not a full and true disclosure, then the said authority cannot proceed further with the application. It gets denuded of its jurisdiction to proceed with the matter. It is in the backdrop of this fact that I must analyse the decision of the Supreme Court in the case of Ajmera Housing Corporation (Supra) that has been relied upon by the petitioner. It must, at once be noted that the provisions of Chapter XIX-A that were analysed by the Supreme Court in that case were slightly different from those under consideration in the instant case in that, it was the provisions, as they stood prior to the amendments introduced by the Finance Act, 2007, that were considered by the Supreme Court. Moreover, the Supreme Court was considering the case of an asse....
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....t an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and in the process rendering the provision of sub-section (3) of section 245C of the Act otiose and meaningless. In our opinion, the scheme of the said Chapter is clear and admits of no ambiguity. 36. We are convinced that, in the instant case, the disclosure of Rs. 11.41 crores as additional undisclosed income in the revised annexure, filed on September 19, 1994 alone was sufficient to establish that the application made by the assessee on September 30, 1993 under Section 245C(1) of the Act could not be entertained as it did not contain a "true and full" disclosure of their undisclosed income and "the manner" in which such income had been derived. However, we say nothing more on this aspect of the matter as the Commissioner, for reasons best known to him, has chosen not to challenge this part of the impugned order." 39. .................. Apart from the fact, as explained above, not contemplated in the scheme, withholding of t....
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....to a relinquishment of his claims with regard to the non-taxability of such income, it would not be a case where the assessee is resiling from his original stand as regards undisclosed income. In the latter type of cases, the Settlement Commission would be well within its jurisdiction to include such amounts in the final amount for which the case before it is settled with the assessee. In taking the said view, I am fortified by the decision of the Bombay High Court in Director of Income-Tax (International Taxation) v. Income-Tax Settlement Commission and Others - (MANU/MH/0550/2014: 2014 (365) ITR 108 (Bom.))." 32. Although reliance has been placed on the case of Ajmera Housing Corporation and Another Vs. Commissioner of Income Tax (2010) 8 SCC 739, by the respondent-department to buttress its argument to not to consider the disclosure of the petitioner Trust to be full and true for the Trust filed the settlement application with delay, informing of undisclosed income before the Income Tax Settlement Commission. To the contrary; the observations made by the Apex Court of the land in the case of Ajmera Housing (supra), cannot be construed to be a ratio decidendi in the factual ma....
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....ation of income in the year of acquisition? It was held by the Bombay HC that section 11 of the Act makes provision in respect of computation of income of the trust from the property held for charitable or religious purposes and it also provides for application and accumulation of income. On the other hand, section 28 of Act deals with charge ability of income from profits and gains of business and section 29 provides that income from profits and gains of business shall be computed in accordance with section 30 to section 40C that covers section 32(1) which provides for depreciation in respect of building, plant and machinery. Here, the Court rejected the argument of revenue that section 32 of the Act was the only section granting benefit of deduction on account deprecation, and held that normal depreciation can be considered as a legitimate deduction in computing the real income u/s 11(1) of the assessee on general principles (i.e. normal commercial manner) of the Act after providing for allowance for normal depreciation and deduction thereof from gross income of the trust although the trust may not be carrying on any business and the assets in respect whereof depreciatio....
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....n which such adjustment has been made having regard to the benevolent provisions contained in Section 11 of the Act and will have to be excluded from the income of the trust under Section 11(1)(a) of the Act. In view of the above discussion, we are of the opinion that, on the facts and in the circumstances of the case, the assessee is entitled to carry forward expenses for set off in the subsequent year. The question referred to us is, therefore, answered in the affirmative, i.e., in favour of the assessee and against the Revenue." 36. In the case of Director of Income Tax Vs. Raghuvanshi Charitable Trust (2010) SCC Online Del 2488, paras 9 to 10 reads thus: "8. It would be fruitful to refer to the discussions contained in Institute of Banking (supra), Per. Hon'ble Mr. Justice S.H. Kapadia, which is advanced before us by the learned Counsel for the Revenue to repel the same in the following words: "Now coming to question No. 3, the point which arises for consideration is: whether excess of expenditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment should be treated as application of income in the s....
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....ns in favour of the assessee and against the Revenue. 10. Before we part with, we may point out that learned Counsel for the assessee in ITA No. 589/2008 and ITA No. 25/2009 submitted that the questions involves in these two appeals are purely academic. In these cases even in the current year, more than 75%/85% (as the case may be) of the income was applied for charitable purpose and therefore, no set off was required to be claimed. Further, it is not necessary to go into this issue once we have decided the question of law in favour of the assessee." 37. Although, High Court is not required to interfere with the order dated 30th June, 2017 of the Income Tax Settlement Commission, but, in the circumstance where there is a perverse finding by the Income Tax Settlement Commission, which is apparent on the face of it, then such a finding can be set aside or rectified. In the case of Chevoit Company Ltd. Vs. Commissioner of Income Tax (2011) SCC Online Cal 1106, the Apex court of the land, held thus: "After hearing Mr. Bajoria, the learned senior Advocate appearing on behalf of the appellant and Mr. Shome, the learned senior Advocate appearing on behalf of the Reven....
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....he prosecution of research in Vedic learning and practices and to provide for matters connected therewith or incidental thereto. While holding so, it will have to be stated in uncontroverted terms that merely because such specific reference was made to prosecution of research in Vedic learnings, it could be held that the imparting of education in the Appellant University should be restricted to the said subject alone and not in any other subject. 78. In our considered view, such a narrow interpretation would be doing violence to the very basic concept of education, and would create a serious restrain on the University, where, imparting of education is the primary objective and dealing with any specific subject may be for enabling any one to acquire special knowledge on such subjects. In other words, any such restrictive interpretation would go against the basic tenets of the concept of education, which no Court can venture to state." 40. Applying the principle aforesaid, it is evident that education cannot be confined to the meaning of one subject only and keeping this precedent in mind, it is concluded that the said investment in TV Channel shall be considered to be in....
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....ttlement Commission, which are statutorily final and necessarily sacrosanct unless suffered with perversity on the face of record. Thus, the factual matrix of the case at hand is entirely different and distinguishable. Hence, the opinion has no application to the facts of the instant matter at hand. 45. In the case of Navodaya Education Trust Vs. Union of India (2018) 405 ITR 30; so referred to by the counsel for the respondents, the activities of the trust were horrendous as held by the Court as well and there were clear violations and illegalities on the face of it. The finding of Rs. 86,10,00,000/- (Rupees Eighty Six crore Ten lacs), shown in the books of record as TRF i.e. Transfer to Trustees, for building up their personal assets and other pay offs, clearly reflected the running of the said trust like a business establishment. To the contrary, in the case at hand, no such allegations were made by the respondent-department to the Income Tax Settlement Commission. Thus the facts of the case referred to and relied upon are not similar to the one at hand. Considering the issue of capitation fee and charges, the Income Tax Settlement Commission, on a consideration of the ....