TaxTMI 
TaxTMI 
2019 (8) TMI 996
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent Years (AYs) 2009-2010, 2010-2011 and 2011-2012 issued by the Assistant Commissioner of Income Tax, Central Circle-13, New Delhi (Respondent No.2). A further challenge is to the impugned letter and notice dated 4th July, 2017 issued by Respondent No.2 under Section 142(1) of the Act for the aforementioned AYs calling for further information from the two Assessees. Background facts 3. The background facts are that PRG Consultants Private Limited ('PRGCPL') the Petitioner in WP(C) No. 6060/2017 was incorporated on 9th September, 2008. Its entire share capital was held by Mr. Rohit Kumar Gupta, the Petitioner in WP (C) No. 6054/2017, along with his family members. PRGCPL was established with the main business object of providing consultancy services and acting as an advisor and consultant to technical industries. 4. Mr Rohit Kumar Gupta was a full time Director with M/s BSBK Engineers Private Limited ('BSBK') and M/s. Macawber Beekay Private Limited ('MBPL'). Both BSBK and MBPL are related concerns and are referred to by the Petitioners as the BSBK group. It is stated that the primary source of income of Mr. Gupta was derived from the BSBK group. It is stated that PRGCPL i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....80 lakh in AY 2009-10, AY 2010-11 and AY 2011-12 respectively. Regarding the manner of deriving such income, the AR was required to explain whether such income was disclosed in the statement u/s. 132(4) by the applicant or any confirmation from M/s. Macawar Beekay (P) Ltd., the employer was available. The AR was also required to clarify whether during the course of search in the applicant's premises or at the premises of M/s. Macawar Beekay (P) Ltd. any evidence was found regarding the payment of incentive to the applicant, The AR was further required to explain whether there is any other basis to b, justify the payment of incentive by the employer to the applicant. The AR replied that providing reply to all the above queries would not only require substantial time but also would need examination of the entire seized material recovered in the search in the group cases. The AR accordingly submitted that he may not be able to provide this information in the short time and therefore may be permitted to withdraw the application with liberty to file it again along with the clarifications on the above points. 3.3 After considering the arguments of the AR that settlement appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....war Beekay (P) Ltd. has provided any certificate/ confirmation regarding payment of incentive nor allowed access to the seized material to the applicant. Consequently the applicant has not been able to obtain any evidence in this regard. The applicant has however been able to obtain balance sheet of M/s. Macawar Beekay (P) Ltd. for FYs 2006-07, 2007-08 and 2008-09 copy of which have been enclosed with the Statement of Fact filed by the applicant. The AR argued that because of the efforts put in by the applicant, profit of M/s.Macawar Beekay (P) Ltd. increased tremendously which was evidence from the following figures. FY Profit before tax 31.03.2007 Rs. 6,57,61,851 31.03.2008 Rs. 12,39,56,948 31.03.2009 Rs. 24,21,57,466 The AR further mentioned that it is gathered that M/s. Macawar Beekay (P) Ltd. and M/s. BSBK Engineers Pvt. Ltd., the two main concerns of the group, have also filed settlement applications and have disclosed substantial unaccounted income. The AR argued that Sh.Rohit Kumar Gupta has been working with M/s.Macawar Beekay (P) Ltd. for the last 20 years and is the key personnel of the group. It is stated by the Assessee because of his e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me in this case is not full and true. Accordingly, the settlement application of Sh. Rohit Kumar Gupta is admitted and allowed to be proceeded with u/s 245D(1)." 16. As regards the application of PRGCPL it was held by the ITSC in the same common order dated 7th April 2015 as under: 4.1 The AR stated that the deficiency of payment of tax and interest as noted in the order u/s. 245D (1) dated 05.03.2015 has been removed as the required amount of tax and interest has been paid. The AR further explained that m/s. PRG Consultants Pvt. Ltd. is related to Sh. Rohit Kumar Gupta as Sh. Gupta holds 40% voting power in the applicant company. The AR stated that the applicant company has earned additional income from consultancy services which has been offered in the settlement application in the 3 assessment years. The AR stated that the application of the company satisfies all necessary conditions and should be admitted. 4.2 After considering the arguments of the AR, the settlement application and the facts and materials therein, we are of the opinion that the application of M/s. PRG Consultants Pvt. Ltd. satisfies all the conditions of a valid application as mentioned in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....valid' and therefore, are allowed to be proceeded with further." 19. Thereafter the ITSC called the PCIT to submit a report under Rule 9 of the Settlement Commission Procedure Rules, 1997. A report was submitted by PCIT dated 7th August, 2015 pointing out that the BSBK Group had itself filed petitions under Section 245(C) before the ITSC and neither the PRGCPL nor Mr. Gupta nor the BSBK have made a full and true disclosure of their incomes before the ITSC. Mr. Gupta, in reply to the Report submitted by the PCIT under Rule 9 filed a rejoinder clarifying that he had no other source of income other than salary from BSBK group. 20. On 16th March, 2016 the ITSC passed an order under Section 245D (3) of the Act allowing PCIT to conduct verification/investigation on the "issue of incentive received by the applicant from BSBK Engineers Pvt. Ltd. and Macawar Beekay (P) Ltd. from the seized documents of these companies." Thereafter, a notice dated 7th April, 2016 was issued by the AO directing each of the Petitioners to participate in the verification/investigation process as directed by the ITSC by order dated 16th March 2016. A reply was submitted by Mr. Gupta on 25th April, 2016....
X X X X Extracts X X X X
X X X X Extracts X X X X
....It is requested that Macawar Beekay (P) Ltd. and was BSBK Pvt. Ltd. may be asked by the Hon'ble Settlement Commission to furnish details in respect of cash incentive paid to Shri Rohit Kumar Gupta and other persons /employees and the decision on this issue may be taken on a holistic basis in all the concerned cases." 22. The Petitioners thereafter submitted replies under Section 245D (3) of the Act. In the reply it was stated that the AO had exceeded the scope of investigation. It was also clarified by the Petitioners that as and when cash incentives were received from BSBK, they were injected in the form of share capital in PRGCPL within a day or two. Orders of the ITSC under Section 245 D (4) of the Act 23. Thereafter by a common order dated 4th August, 2016 under Section 245D (4) of the Act, the ITSC rejected the settlement applications filed by Mr. Gupta and PRGCPL holding that the essential condition under Section 245 C (1) of the Act that the Petitioners should make a "full and true disclosure" was not satisfied. 24. As far as the application of Mr. Gupta was concerned, it was held that in view of the denial from the employer about payment of cash incentives a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ired on 10th October, 2016 and pursuing the writ petitions would have merely been of academic interest. Impugned notices under Section 143 (3) read with Section 153 A 27. Thereafter on 6th April, 2017, the Respondent No. 2 issued notices under Section 143 (3) read with Section 153A of the Act for AYs 2009-10, 2010-11 and 2011-12. The Petitioner's raised objections by the letter dated 24th April, 2017 stating that there were no valid assessment proceedings pending before the Respondent No. 2 after 10th October, 2016. This was rejected by the Respondent No. 2 by letters dated 4th July, 2017. On the same date, notices were issued under Section 142 (1) of the Act for the aforementioned AYs. 28. On 12th July 2017, the Petitioners again objected to the assessment proceedings on the ground that they were time-barred. Thereafter the present petitions were filed on 15th July 2017. 29. On 19th July 2017, while directing notice to issue in these petitions, this Court stayed further proceedings pursuant to the impugned notices issued by Respondent No.2 under Sections 143 (3) read with Section 153 A of the Act. The interim order was made absolute on the next date i.e. 5th September ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cannot be an order under Section 245D (4) of the Act. This was also what was held in Ajmera Housing Corporation v. Commissioner of Income Tax (2010) 8 SCC 739. (vi) The legislature has specifically provided time limit under Section 153B for framing assessment in cases where search had been initiated. As such Section 153 of the Act cannot be applied since it is of general nature. Inasmuch as Section 153B begins with the non obstante clause, it overrides all other provisions providing time limits in the Act. Even in terms of the the proviso to Section 153B(3) as inserted by the Finance Act, 2017 with effect from 1st June 2016 it is plain that it requires assessment to be completed in accordance with the provisions of 'this' Section i.e. Section 153B as it stood immediately before its substitution by the Finance Act, 2016.' Thus it is plain that the time limit as provided under Section 153B has to be applied and not the time limit which is provided under Section 153. (vii) The 1 year time limit under Section 153B was inserted only with effect from 1st April 2017. Prior thereto there was no such period of 1 year available to the Revenue. In other words, the legislative intent th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CIT v. ITSC [2014] 360 ITR 407 and order dated 15th May 2017 in WP(C) 5185 of 2016 (Viswanath Gupta v. Pr. Commissioner of Income Tax). (iii) Section 245HA (iiia) too anticipates a final order by the ITSC rejecting a settlement application being passed under Section 245 D (4) of the Act. In such situations the proceedings before the ITSC abates. (iv) At the relevant time the only provision which directly dealt with the limitation in such case of abatement was the further proviso to Section 153 inserted by the Finance Act, 2007 and applicable from 1st June 2007. The legislative intent was clear from the explanatory notes to the above provision since it expressly mentions Section 153B while extending the period of limitation to 1 year where such period is less than 1 year from the date of abatement of settlement proceedings. (v) The fact that by the Finance Act, 2017 the above proviso was amended to delete the reference to Section 153B while simultaneously amending Section 153B to insert it strengthens the argument of the Revenue that in the present case it is the further proviso to Section 153 of the Act that would have applied. (vi) If in terms of the above provision t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....015 fresh applications were filed. 37. On 7th April 2015 the ITSC passed an order under Section 245D (1) and allowed the application to be proceeded with. This is a crucial stage of the proceedings before the ITSC. In order to appreciate the nature of the order passed at this stage it is necessary to refer to the provisions that governed the filing and processing of applications before the ITSC. 38. Section 245C (1) of the Act states that an Assessee, at any stage making an application has to fulfil the essential condition of the section, 'containing a full and true disclosure of his income which has not been disclosed before the AO'. In addition to making the full and true disclosure the Assessee has to also indicate 'the manner in which such income has been derived.' These are, therefore, the two requirements which have to be mandatorily complied with if such application is to be entertained by the ITSC. 39. Section 245C (1) of the Act also states that along with the application, the Applicant has to remit the additional amount of income tax payable on such income. As rightly pointed out by the Revenue, Section 245C (1) does not contemplate any order being passed by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... rejected under 245C (1) read with 245D (4) of the Act." 43. It is the contention of both the Petitioners that although this final order dated 4th August 2016 states the orders to be under Section 245D (4) of the Act they are in fact to be treated as orders under Section 245D (1) of the Act. This is because according to the Petitioners the only order that can be passed under Section 245D (4) of the Act is an order 'on the matters covered by the application and any other matter relating to a case not covered by the application, but to refer to with the report of the Commissioner'. Further, according to them, under Section 245D (6) every order 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 a settlement effective and 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 the facts.' The contention, therefore, is that the collective reading of Section 245D(4) and (6) makes it apparent that the order passed unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lement with mandatory words like in accordance with the provisions of this Act the width of the term settlement becomes subject to the mandate found in that Section, which would mean that while a Commission has sufficient elbow-room in assessing the income of the applicant under Section 245D(4) it cannot make any order with a term of the settlement which would be in conflict with the mandatory provisions of the Section like in the quantum and payment of tax and/or interest." 45. The above decision interprets Section 245D (4) as a substantive provision from where the powers of the ITSC to pass 'such order as if it thinks fit' arises. The next question that arises is whether the expression 'such orders if it thinks fit' would include the power to pass an order rejecting an application. If the interpretation placed by the Petitioners on this provision is accepted it would mean that after having allowed the applications to be proceeded with in terms of its order passed under Section 245D (1) of the Act, the ITSC cannot at this stage, after the report of the Commissioner has been submitted to it pursuant to an order under Section 245D (2C) of the Act, dismiss the application at all a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ucted in the premises of the group of firms, which comprised the Appellant, orders were passed determining the total concealed income of the group for AYs 1989-90 to 1991-92 and 1993-94. Thereafter, the Assessee filed an application before the ITSC. 48.2 Before the ITSC could decide whether or not to proceed with the application, the Assessee filed a revised settlement application disclosing confidential annexure and related papers. The ITSC then decided by an order under Section 245D (1) to proceed with the application and called for a report. Ultimately, the ITSC passed an order determining the total income of Assessee @ Rs. 42.58 crores and imposed a token penalty. The High Court annulled the ITSC's order in a writ petition filed by the department. 48.3 The Supreme Court set aside the order of the High Court on the ground that the High Court did not take into account a second report filed by the CIT. On remand the High Court again set aside the ITSC's order and remitted the matter to the ITSC for a fresh adjudication. The Assessee then filed an appeal before the Supreme Court contending inter alia that the order made by the ITSC under Section 245D (4) was conclusive as to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was observed as under: "In fact, the Settlement Commission may, at any stage till it passes a final order under Section 245 D (4), examine the issues and if there is sufficient material on record, determine the question of full and true disclosure and the manner in which the undisclosed income was derived conclusively and, depending on such a decision, the applications may be thrown out or they may be proceeded with further." 50. In Viswanath Gupta v. Pr. Commissioner of Income Tax (supra) it was held likewise. Consequently, this Court is unable to agree with the contention of Mr. Aggarwal that in the present case the order passed on 4th August 2016 by the ITSC rejecting the Petitioners' applications on the ground of failure to make a full and true disclosure should be construed as orders passed not under Section 245D (4) of the Act but under Section 245D (1) of the Act. 51. That brings us to the next question of whether the notices issued on 6th April 2017 to both Petitioners under Section 143(3) of the Act are barred by limitation. Here the case of the two Petitioners is that excluding the time during which the settlement applications of the two Petitioners were p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the terms of settlement; or (iv) in respect of any other application made under section 245C, an order under sub-section (4) of section 245D has not been passed within the time or period specified under sub-section (4A) of section 245D, the proceedings before the Settlement Commission shall abate on the specified date. Explanation.-For the purposes of this sub-section, "specified date" means- (a) in respect of an application referred to in clause (i), the day on which the application was rejected; (b) in respect of an application referred to in clause (ii), the 31st day of July, 2007; (c) in respect of an application referred to in clause (iii), the last day of the month in which the application was declared invalid; (d) in respect of an application referred to in clause (iv), on the date on which the time or period specified in sub-section (4A) of section 245D expires. (2) 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 ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t stood prior thereto which takes it back to Section 153 itself and in particular the second proviso below the Explanation 1. 56. The second proviso to Section 153 of the Act was inserted by the Finance Act 2008 with retrospective effect from 1st June 2007 and it reads as under: "Provided also that where a proceeding before the Settlement Commission abates under section 245HA, the period of limitation available under this section to the Assessing officer for making an order of assessment or reassessment, as the case may be, shall, after the exclusion of the period under sub-section (4) of section 245HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year; and for the purposes of determining the period of limitation under sections 149, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or section 244 or, as the case may be, section 244A, this proviso shall also apply accordingly." 57. The submission of learned counsel for the Revenue drawing attention to the fact that this further proviso was inserted by the Finance Act, 2008 was part of legi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r falling within six assessment years and for the relevant assessment year or years referred to in clause (b) of sub-section (1) of section 153A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed; (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed'. Explanation.-In computing the period of limitation for the purposes of this section,- (i) the period during which the assessment proceeding is stayed by an order or injunction of any court; or ...... (iv) in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on hand where the proceedings under Section 153 A of the Act commenced long prior to the said amendment. 63. The submission that for determining the limitation for completion of an assessment under Section 153 A, the only provision that can be examined is Section 153 B of the Act and that no other provision of the Act can be referred to is based on a restricted understanding of the scope of a non-obstante clause. A non obstante clause is meant to give an overriding effect to certain provisions or others in the same statute or some other statute which are inconsistent. In Vishin N.Khanchandani. v. Vidya Lachmandas Khanchandani (supra), the Supreme Court observed as under: "There is no doubt that by non-obstinate clause the Legislature devices means which are usually applied to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other statute. In other words such a clause is used to avoid the operation and effect of all contrary provisions. The phrase is equivalent to showing that the Act shall be no impediment to measure intended. To attract the applicability of the phrase, the whole of the se....