TaxTMI 
TaxTMI 
2019 (11) TMI 812
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....ncome and assets of the respondents No.2, 3 and 4 (hereinafter referred to as "the contesting respondents"). 2. The facts, as averred in the petition, are that the respondents No.2, 3 and 4 Shri Vimal Patel, Shri Samir Patel and Shri Mehul Patel respectively, are promoters in the Banco Group of Companies. One of the main companies of the group M/s. Banco Products (India) Limited is a public limited company involved in the business of manufacturing of gaskets, radiators, charged air coolers and oil coolers extensively used in the automobile industry. As per the details submitted by them before the Settlement Commission, the contesting respondents were born in Kenya and are persons of Indian origin and that at present, they are residents of UAE though they have residences in UK and Africa and all of them hold British passports. In April, 2016 in the Panama Papers expose, a company by the name of Overseas Pearl Limited, British Virgin Island, registered in the British Virgin Islands and domiciled in Jersey, belonging to the contesting respondents, was mentioned. It is the case of the petitioner that the main issue in this case was the existence of ownership by Indian Tax Residents ....
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....., Singapore, bank accounts in Habib Bank AG Zurich, Dubai and investment portfolio accounts in various foreign banks, details of which were found during the search proceedings. The disclosure of Rs. 100 crores was made by the contesting respondents as their undisclosed income over and above their regular income. 2.4 Thereafter, the matter was centralised with the Deputy Commissioner of Income-tax, Central Circle-3, Baroda and notices under section 153A of the IT Act were issued on 10.3.2017 in the group cases for assessment years 2011-12 to 2016-17. The limitation for passing the assessment order under section 153A of the IT Act was 31.12.2018. Notices under section 148 of the IT Act also came to be issued on 25.3.2017 to the contesting respondents for assessment years 2000-2001 to 2007-2008, on the basis of the information of undisclosed foreign assets and income, foreign bank accounts. 2.5 On 31.7.2017, the contesting respondents filed settlement applications under section 245C(1) of the IT Act before the Settlement Commission, Mumbai, for assessment years 2005-06 to 2013-14, assessment years 2004-05 to 2015- 16 and assessments years 2004-05 to 2015-16, respectively. Befor....
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....ettlement Commission is to be reduced from the income assessed under section 10 of the Black Money Act. The relevant part of the opinion was extracted in the said letter which reads as under: "Whether notice u/s 10 of the Act can be issued for those assessment years for which settlement proceedings are pending before the Settlement Commission? The proceedings before the Settlement Commission are under the provisions of the Income Tax Act. Thus, though notice under Section 10 can be issued for Assessment Years for which settlement proceedings are pending before the Settlement Commission, ultimately benefit will be required to be granted while computation under Section 5 of the Act." It was accordingly stated that it would be more appropriate to continue with the assessment of the income under the provisions of section 147 of the IT Act for which the assessees have already admitted the income and that if there is an income which is not assessed under the said section, then the difference would be brought to tax under the Black Money Act as per the relevant provisions thereof and the legal opinion of the Senior Standing Counsel of the Department. 2.9 Thereafter....
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....visions of sub-section (3) of section 4 of the Black Money Act, it is clear that any undisclosed foreign income and asset which is assessable under the Black Money Act does not form part of income under the Income Tax Act and as such, the Income Tax Act is not applicable to those undisclosed foreign income and asset. It was submitted that the legislature clearly wanted to exclude foreign income from the purview of the Income Tax Act. It was contended that therefore, the Settlement Commission had no jurisdiction to entertain and decide the applications made by the contesting respondents under section 245C of the IT Act. 3.3 Reference was made to sections 10, 59 and 72 of the Black Money Act, to submit that these sections form a complete regime for assessment under the Black Money Act. It was contended that insofar as domestic income and assets are concerned, it is the income tax authorities who have the jurisdiction; however, in case of undisclosed foreign income or assets, it is the authorities appointed under the Black Money Act who have the jurisdiction. 3.4 The learned Additional Solicitor General next submitted that the contesting respondents neither disclosed their forei....
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....accordingly. It was submitted that the applicability of these provisions in the case of the contesting respondents is further strengthened by the circular of the Department bearing Circular No.13 of 2015 dated 6.7.2015 in answer to FAQ No.23 and Circular No.15 of 2015 dated 3.9.2015 and in answer to FAQ No.26, which read as under: "Question No.23: A person is a non-resident. However, he was a resident of India earlier and had acquired foreign assets out of income chargeable to tax in India which was not declared in the return of income or no return was filed in respect of that income. Can that person file a declaration under Chapter VI of the Act? Answer: Section 59 provides that a declaration may be made by any person of an undisclosed foreign asset acquired from income chargeable to tax under the Income-tax Act for any assessment year prior to assessment year 2016-17. Since the person was a resident in the year in which he had acquired foreign assets (which were undisclosed) out of income chargeable to tax in India, he is eligible to file a declaration under section 59 in respect of those assets under Chapter VI of the Act." "Question 26: As per answer ....
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....Officer issued notices to them under section 10 of the Black Money Act. 3.7 It was submitted that therefore, even in terms of subsection (2) of section 2 of the Black Money Act prior to its amendment vide Finance No.2 Act of 2019, the contesting respondents would fall within the ambit of the expression assessee as defined therein. Reference was made to the definition of "assessee" under sub-section (2) of section 2 of the Black Money Act which defines assessee to mean a person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income Tax Act, by whom tax in respect of undisclosed foreign income and assets, or any other sum of money, is payable under that Act and includes every person who is deemed to be an assessee in default under the Black Money Act. It was submitted that a person who is deemed to be an assessee in default is covered by the expression "assessee" and, therefore, for the reason that they have not made any declaration of their foreign income and assets in terms of the Black Money Act, even in terms of the unamended section 2(2), the contesting respondents are assessees in default in terms of section ....
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....e clause in it. Referring to the statement of objects and reasons as well as the preamble of the Black Money Act, it was submitted that having regard to object behind the enactment, this court in judicial review may consider non providing of an overriding provision to be an omission on the part of the legislature and read such a provision therein. 3.9 It was further submitted that notices under sub-section (1) of section 10 of the Black Money Act were issued to the contesting respondents on 2.8.2018 for assessment years 2017-18 and 2018-19 during the pendency of proceedings before the Settlement Commission. It was submitted that the initial information relating to undisclosed foreign income/assets of the contesting respondents came to the notice of the Assessing Officer on 12.1.2017 (the date on which appraisal report was received by the Assessing Officer), relevant to assessment year 2017-18 and in case of disclosure before the Settlement Commission on 22.8.2017, which is the date when the applications and copies of statement of facts of the contesting respondents was received by the Assessing Officer. 3.10 It was further submitted that the proviso to subsection (1) of secti....
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....assessment year 2018-19 were issued under section 10 of Black Money Act in accordance with the provisions of section 10, that is, the year when the information pertaining to undisclosed foreign income and assets came to the notice of the Assessing Officer. 3.13 Reference was made to sub-section (12) of section 2 of the Black Money Act which defines "Undisclosed foreign income and asset" to submit that the definition nowhere mentions the years to which the undisclosed foreign income and asset pertains. It was submitted that sub-section (12) of section 2 read with sub-section (1) of section 10 shows that unlike the Income Tax Act, the Black Money Act does not limit the years for which proceedings under that Act could be initiated and that what is assessable under Black Money Act is undisclosed foreign asset when it comes to the notice of the Assessing Officer, and the value of such assets would be charged to tax as per the proviso to section 3 of the Black Money Act. 3.14 Next, it was submitted that the definition of 'assessee' under sub-section (2) of section 2 of Black Money Act has been amended by the Finance Bill No.2 2019, to bring within its ambit non-residents. It was po....
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....mmission is income for assessment years 2005- 06 to 2013-14 for Shri Vimal Patel and for assessment years 2004-05 to 2015-16 in case of Samir Patel and Mehul Patel, and not assets. It was pointed out that under the Black Money Act, undisclosed foreign income can be taxed only for assessment year 2016-17 for which the relevant previous year is 2015-16. This is so because section 3 of the Black Money Act clearly mentions the same. However, due to the effect of proviso to section 3, the undisclosed foreign asset can be taxed for any previous year and shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer. It was submitted that in this regard, it is necessary to understand the subject matter of the income offered by the contesting respondents. It was pointed out that the contesting respondents have offered their global income, that is, income earned and accrued outside India along with income arising in India for assessment years when the contesting respondents were resident in India. Therefore, the income earned during those years was chargeable to tax In India. Referring to the items of income offered to tax as menti....
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....unds, etc. as admitted by them before the Settlement Commission in the years in which they were residents. Therefore, the claim made by the contesting respondents that they have offered only income before the Settlement Commission and not any asset does not hold good because what is taxable under Income-tax Act, 1961 is the income. 3.18 It was submitted that section 5 of the Income Tax Act defines 'Scope of total Income' and specifies that 'total income' of any person who is resident in any previous year includes all income from whatever source received/deemed to have been received in India, accrues or arises/deemed to accrues or arise in India or accrues or arises to him outside India during such year. It was submitted that the scheme of the Income Tax Act is required to be understood with reference to section 69A thereof, which by deeming fiction taxes assets as income. It was submitted that section 69B of the Income tax Act also provides such deeming fiction and treats the amount of investment not fully disclosed in books of accounts as income and, therefore, even the assets which were not part of the books of account and offered to tax can be charged only as income under the....
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....sue can be raised at any stage of the proceedings. The finding of a court or tribunal becomes irrelevant and unenforceable/inexecutable once the forum is found to have no jurisdiction. Similarly, if a court/tribunal inherently lacks jurisdiction, acquiescence of party equally should not be permitted to perpetrate and perpetuate defeating the legislative animation. The court cannot derive jurisdiction apart from the statute. In such eventuality the doctrine of waiver also does not apply. 3.22 It was, accordingly, urged that merely because before the Settlement Commission, the Department had consented to proceed further with the settlement proceedings, it would not vest in the Settlement Commission the jurisdiction to entertain and decide the application under section 245C of the Income tax Act in respect of the undisclosed foreign income and asset. 3.23 The learned Additional Solicitor General further submitted that apart from the fact that the impugned order passed by the Settlement Commission is unsustainable on the ground of lack of jurisdiction, another aspect which goes to the root of the matter is that the contesting respondents had not made full and true disclosure of t....
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....Rs. 6522/- only for AY 2005-06. The Petitioner in its report dated 23.10.2018, had stated that the Respondent No. 2 has neither submitted the basis of opening balance of the aforesaid account aggregating to GBP 2,46,263/- nor submitted bank statements prior to this period. Respondent No. 2 therefore offered the entire opening balance of Rs. 1,92,21,581 (in INR) as income for AYs 2005-06 (Rs. 11,92,688/-) and 2006-07 (Rs. 1,80,28,893/-). D. Interest income of Eur 26,550 as per applicant's letter dated 08.10.2018 determined on account of reconciliation of Code 39 and 40:- During the process of verification, it was observed that the Respondents No. 2, 3 and 4 had mentioned ledger code-39 and code-40 in bank statements to which various amounts were transferred. However, on reconciliation, it was found that amount of Euro 26,550 (Rs. 15,02,199/-) could not be reconciled. Therefore, Respondents No. 2, 3 and 4 offered Rs. 15,02,199/- as interest income in AY 2005-06. E. Income offered to cover up insufficient personal household expenses for the period covered by the Settlement application filed by the Respondents No. 2, 3 and 4:- Initially, Respondents ....
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....the amount of income tax payable on such undisclosed income is to be computed and mentioned in the application. It needs little emphasis that Section 245C(1) of the Act mandates "full and true" disclosure of the particulars of undisclosed income and "the manner" in which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this aspect, it will not have the jurisdiction to pass any order on the matter covered by the application." "35.... A "full and true" disclosure of income, which had not been previously disclosed by the assessee, being a pre-condition for a valid application under Section 245C (1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application... Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the case by withdrawing the earlier application. In this regard, Section 245-C (3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) is instructive inasmuch as it manifests that an assessee cannot be permitted to resile from his stand at any sta....
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....all the issues. Therefore, the offer of additional income of Rs. 5.55 crores is accepted.' 25. Clearly, the decision of the ITSC was untenable in law. Once the assessee approached it with a certain amount, representing that it constituted full and true disclosure (and had maintained that to be the correct amount till the date of hearing) the question of "offering" another higher amount as a "full" disclosure is impermissible. Ajmera Housing (supra) clearly held that: "there is no stipulation for revision of an application filed under 245C(1) of the Act and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said Section in the prescribed form. 26. The amount offered in this case, clearly could not have been considered or accepted. The ITSC, in this regard, fell into error as there was no full and true disclosure by the assessees. Consequently, the impugned order is hereby set aside and quashed. The AO shall proceed hereafter, in accordance with law and complete the block assessments. The time taken during the pendency of proc....
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.... formal consequential orders on 18.2.2019 to recover the amount and demand notices were issued pursuant thereto and the contesting respondents were required to make payment under threat of coercion. It was submitted that, accordingly, by March 2019, the full amount in terms of the order passed by the Settlement Commission came to be paid and hence, the impugned order has been fully implemented. 4.1 Reference was made to the provisions of section 245-I of the IT Act which provides for 'Order of settlement to be conclusive', which postulates that no matter covered by the order of the Settlement Commission made under section 245D (4) of the Act will be reopened in any proceeding under the Act or any other law for the time being in force. It was submitted that section 245-I of the IT Act, not only clearly and unequivocally provides that the order of the Settlement Commission shall be final and conclusive but it also provides that no matter covered by such order shall be reopened in any proceeding under that Act or any other law for the time being in force. It was submitted that this is nothing but a nonobstante clause by virtue of which the conclusiveness and finality of the order o....
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.... any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year; as well as to section 149(1)(c) of the IT Act which provides for an outer limit of sixteen years for issuance of notice under section 148 of that Act where the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax has escaped assessment. 4.4 It was submitted that the foreign income of the contesting respondents for the period under consideration has therefore, been rightly assessed under the IT Act and not under the Black Money Act and that the Settlement Commission had the exclusive jurisdiction to tax the contesting respondents. Therefore, the order made by the Settlement Commission has to be implemented and in fact the revenue authorities have implemented such order and recovered the amount due thereunder. 4.5 Reliance was placed upon the decision of the Orissa High Court in the case of Commissioner of Income-tax, Sambalpur v. Income-tax Settlement Commission (IT & WT), (2016) 289 CTR 569 (Orissa), wherein it has been laid down that when the revenue implements and en....
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....Black Money Act contains several provisions which clearly recognize and permit the assessment of foreign undisclosed assets/income under the IT even after the coming into force of the Black Money Act on 1.7.2015. In this regard, the reference was made to sub-clause (a) of clause (ii) of subsection (1) of section 5 of the Black Money Act, which provides that in computing the total undisclosed foreign income and asset of any previous year of an assessee, any income which has been assessed to tax for any assessment year under the Income Tax Act prior to the assessment year to which the Act applies, or which is assessable or has been assessed to tax for any assessment year under the Act shall be reduced from the value of the undisclosed asset located outside India, if the assessee furnishes evidence to the satisfaction of the Assessing Officer that the asset has been acquired from the income which has been assessed or is assessable, as the case may be, to tax. It was submitted that it is very significant that section 5(1) refers to any previous year and clause (ii) (a) refers to any assessment year under the Income-tax Act prior to the assessment year to which the Black Money Act appli....
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....s not covered by the said order of the Settlement Commission. In these circumstances, there is no scope whatsoever for applying the provisions of the Black Money Act to the contesting respondents. It was contended that in any event, the order dated 30.1.2019 of the Settlement Commission cannot be challenged by the revenue by relying on the provisions of the Black Money Act. 4.9 Reference was made to sub-section (2) of section 4 of the Black Money Act, which provides that notwithstanding anything contained in sub-section (1), any variation made in the income from a source outside India in the assessment or reassessment of the total income of any previous year, of the assessee under the Income-tax Act in accordance with the provisions of section 29 to section 43C or section 57 to section 59 or section 92C of the said Act, shall not be included in the total undisclosed foreign income. It was submitted that, therefore, like section 5(1)(ii)(a), sub-section (2) of section 4 of the Black Money Act not only recognises an assessment made under the IT Act in respect of foreign income and asset, but also grants a set-off or adjustment of the same in the assessment under the Black Money Ac....
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....the contention raised on behalf of the petitioner that the contesting respondents were covered by the definition of the expression "assessee" as defined under subsection (2) of section 2 of the Black Money Act even prior to its amendment as the contesting respondents were assessees in default, the learned counsel submitted that in sub-section (2) of section 2 of the Black Money Act, the expression "assessee in default" is a deeming fiction whereby a person is deemed to be an assessee in default. Reference was made to sub-sections (4) and (5) of section 30 as well as sub-section (14) of section 32 of the Black Money Act, to submit that these are the only provisions under the Black Money Act where an assessee is deemed to be in default. It was submitted that this being a legal fiction, one can only look at these provisions and the legal fiction cannot be read into section 59 and section 72(c) of the Black Money Act as is sought to be contended on behalf of the petitioner. It was submitted that a person cannot be an assessee in default unless proceedings under the Black Money Act are initiated and concluded and demand notice is issued and not paid under section 30(4), or in the circum....
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....notice under section 10 is issued by the Assessing Officer and the provisions of this Act shall apply accordingly." 15. It could therefore be seen, that where no declaration in respect of the asset covered under the Black Money Act is made, such asset would be deemed to have been acquired or made in the year in which a notice under Section 10 is issued by the Assessing Officer and the provisions of the Act shall apply accordingly." 4.16 It was contended that if an assessee chooses not to file such declaration, the only consequences would be in terms of paragraph 15 of the above decision and such asset would be deemed to have been acquired or made in the year in which a notice under section 10 is issued by the Assessing Officer and the provisions of the Act shall apply accordingly as enshrined in section 72(c) of the Black Money Act. Therefore, under these circumstances, the failure to file declaration cannot render a person to be an assessee in default. 4.17 It was also argued that in any case, the section 59 of the Black Money Act pertains to undisclosed asset located outside India as defined in section 2(11) of the Black Money Act; whereas, in the present case, the....
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.... benefit of the full amount assessed under the IT Act is required to be given while computing the total undisclosed foreign income and asset under the Black Money Act. 4.21 As regards the contention that a full and true disclosure was not made in the applications under section 245C of the IT Act, because the contesting respondents had agreed to pay additional amount during the course of the settlement proceedings, it was submitted that no additional disclosure of undisclosed foreign income or asset was made during the course of settlement proceedings and that it was only in the spirit of settlement, to buy peace that the additional amount was offered by the contesting respondents. It was pointed out that the additional amounts offered come to only 7 or 8% of the amount of foreign income and asset disclosed in the applications under section 245C of the Act, and hence, reliance placed by the petitioner on the decision of the Supreme Court in Ajmera Housing Corporation (supra) is misconceived. It was, accordingly, urged that the petition being devoid of any merit deserves to be dismissed. 5. In rejoinder, the learned Additional Solicitor General submitted that this court has the....
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.... it would be if the assessee had first approached the High Court under Article 226 and then come up in appeal to this Court under Article 136. A party does not and cannot gain any advantage by approaching this Court directly under Article 136, instead of approaching the High Court under Article 226. This is not a limitation inherent in Article 136; it is a limitation which this Court imposes on itself having regard to the nature of the function performed by the Commission and keeping in view the principles of judicial review. Maybe, there is also some force in what Dr Gauri Shankar says viz., that the order of the Commission is in the nature of a package deal and that it may not be possible, ordinarily speaking, to dissect its order and that the assessee should not be permitted to accept what is favourable to him and reject what is not. According to learned counsel, the Commission is not even required or obligated to pass a reasoned order. Be that 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 as....
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....Rs. 90,28,25,000/-. Accordingly, the total additional income declared by the respondents No.2, 3 and 4 came to Rs. 41,37,61,593/-, Rs. 36,76,39,478/-, 50,95,82,999/- respectively, in all, Rs. 129,09,82,999/-. 6.1 By an order dated 14.8.2017 passed under section 245D (1) of the IT Act, the applications were admitted and allowed to be proceeded with. Thereafter, vide letter dated 14.11.2017, the PCIT Central Surat (the petitioner herein) filed a report under rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997 on 16.11.2017. The contesting respondents filed their replies thereto. Thereafter, further reports were filed from time to time, in response to which the contesting respondents filed their replies. During the course of the settlement proceedings, by letters dated 4.12.2017 and 21.3.2018, the PCIT Central Surat requested the Settlement Commission to make inquiry under section 245D (3) of the IT Act with respect to various foreign bank accounts and foreign assets by making a reference to Foreign Tax & Tax Research Division of the Central Board of Direct Taxes, New Delhi. According, the Settlement Commission by an order dated 25.5.2018 made under section 245D ....
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....Settlement Commission? The proceedings before the Settlement Commission are under the provisions of the Income tax Act. Thus, though notice under section 10 can be issued for the Assessment Years for which settlement proceedings are pending before the Settlement Commission, ultimately benefit will be required to be granted while computation under Section 5 of the Act." Thus, it is clear that the proceedings under Black Money Act and under Income-tax Act are not mutually exclusive to each other. Both can be legally carried out at the same time as per the provisions of both the Acts. However, the benefit of tax paid under provisions of the Income-tax Act will be provided to the assessee under Black Money Act. 2.4 It is also brought to the notice of the Hon'ble Settlement Commission that based on the SOF filed by the applicants, references have been forwarded to various foreign jurisdictions through FT&TR, CBDT for getting the details of the bank accounts and other investments, as disclosed. Now the details as sought are awaited from the foreign jurisdictions. It is important to note the provisions of section 11(1) of the Black Money Act which is reproduced ....
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....rit of settlement offered further additional income vide their submissions filed on 17.12.2018. It appears that the PCIT sought further time for conducting necessary inquiries and verification of certain intelligence inputs received by them. Accordingly, further time was granted to them till 7.1.2019; however, no further progress was reported and hence, as a last chance further time was granted till 14.1.2019 as the matters were getting time barred on 31.1.2019. Since no further progress was reported, the hearing was concluded on 14.1.2019. Thereafter, the Settlement Commission passed the impugned order dated 30.1.2019 under section 245D (4) of the IT Act. In paragraph 14 of the impugned order, the Settlement Commission ordered that the applicants shall pay the taxes including interest payable as per that order in four quarterly installments beginning March 2019 and ending in December 2019. 6.6 Subsequently, on 18.2.2019, the Assessing Officer passed orders giving effect to the order of the Settlement Commission and determined the additional tax payable, and notices of demand under section 156 of the IT Act came to be issued on the same day calling upon the contesting respondent....
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....ngs, the Department had requested the Settlement Commission to proceed further and decide the applications under section 245C of the IT Act despite the fact that notices under section 10 of the Black Money Act had been issued for assessment years 2017-18 and 2018-19. 10. In this regard, while it is true that the petitioner had specifically invited the Settlement Commission to decide the applications made by the contesting respondents under section 245C of the IT Act, nonetheless, it is equally true that if the Settlement Commission lacked the jurisdiction to decide such applications, any consent given by the petitioner would be of no avail. 11. The question that, therefore, arises for consideration is whether the Settlement Commission lacked the jurisdiction to decide the applications under section 245C of the IT Act. 12. The contentions raised on behalf of the learned counsel for the respective parties have already been noted hereinabove. To begin, it may be apposite to refer to certain provisions of the Black Money Act to understand the scheme of that Act. Section 3 of the Black Money Act is the charging section and reads thus: 3. Charge of tax.- (1) There shall....
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.... to the provisions of this Act, the total undisclosed foreign income and asset of any previous year of an assessee shall be,- (a) the income from a source located outside India, which has not been disclosed in the return of income furnished within the time specified in Explanation 2 to sub-section (1) or under sub- section (4) or sub-section (5) of Section 139 of the Income Tax Act; (b) the income, from a source located outside India, in respect of which a return is required to be furnished under Section 139 of the Income Tax Act but no return of income has been furnished within the time specified in Explanation 2 to subsection (1) or under sub-section (4) or sub-section (5) of Section 139 of the said Act; and (c) the value of an undisclosed asset located outside India. (2) Notwithstanding anything contained in sub-section (1), any variation made in the income from a source outside India in the assessment or reassessment of the total income of any previous year, of the assessee under the Income Tax Act in accordance with the provisions of Section 29 to Section 43-C or Section 57 to Section 59 or Section 92-C of the said Act shall not be included ....
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....lowable in accordance with the provisions of the Income-tax Act; (ii) any income, (a) which has been assessed to tax for any assessment year under the Income-tax Act prior to the assessment year to which that Act applies; or (b) which is assessable or has been assessed to tax for any assessment year under that Act, shall be reduced from the value of the undisclosed asset located outside India, if, the assessee furnishes evidence to the satisfaction of the Assessing Officer that the asset has been acquired from the income which has been assessed or is assessable, as the case may be, to tax. 18.1 Sub-section (2) of section 5 of the Black Money Act provides that the amount of deduction referred to in clause (ii) of sub-section (1) in case of an immovable property shall be the amount which bears to the value of the asset as on the first day of the financial year in which it comes to the notice of the Assessing Officer, the same proportion as the assessable or assessed foreign income bears to the total cost of the asset. 18.2 Thus, sub-section (2) provides for the deduction in case of immoveable property. The illustration thereunder shows the formula for....
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....r assessment or otherwise. According to the learned counsel for the petitioner, a person who does not disclose his foreign assets within the window specified by the Central Government vide notification dated 1.7.2015 wherein 30.9.2015 was notified to be the appointed date on or before which a person may make a declaration in respect of an undisclosed asset outside India and 31.12.2015 was notified as the appointed date on or before which a person shall pay tax and penalty in respect of the undisclosed asset located outside India; such person is an "assessee in default" and is, accordingly covered by the definition of assessee as it stood even prior to its amendment, inasmuch as such definition includes every such person who is "deemed to be an assessee in default" under that Act. It was further submitted that clause (c) of section 72 of the Black Money Act provides that where any asset has been acquired or made prior to the commencement of the Black Money Act and no declaration in respect of such asset is made under Chapter VI then such asset shall be deemed to have been acquired or made in the year in which notice under section 10 has been issued by the Assessing Officer and the p....
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....o be an assessee in default" has been employed. 23. Apart from sub-section (2) of section 2 of the Black Money Act, the expression "deemed to be an assessee in default" finds place in sections 30, 32 and section 44 thereof. Section 30 of the Black Money Act provides for recovery of tax dues by Assessing Officer. Sub-section (4) thereof provides that an assessee shall be deemed to be an assessee in default, if the tax arrear is not paid within the time allowed under subsection (1) or the period reduced under sub-section (2) or extended under sub-section (3), as the case may be. Subsection (5) of section 30 of the Black Money Act provides that where an assessee defaults in paying any one of the installments within the time fixed under sub-section (3), he shall be deemed to be an assessee in default in respect of the whole of the then outstanding amount. Section 32 of the Black Money Act provides for "Modes of recovery of tax dues". Subsection (4) thereof provides that the Assessing Officer or the Tax Recovery Officer may, by notice in writing, require any debtor of the assessee to pay such amount, not exceeding the amount of debt, as is sufficient to meet the tax arrear of the ass....
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....n section 59 or section 72(c) of the Black Money Act. Therefore, one cannot borrow and automatically apply the concept of "assessee deemed to be in default" to sections 59 and 72(c) of the Black Money Act, which is confined to an assessee who has not paid the tax arrear or an installment within the time fixed or a debtor of an assessee who does not make payment pursuant to a notice issued in this regard. The Black Money Act being a taxing statute is required to be interpreted in the light of what is clearly expressed. Subsection (4) of section 30 of the Black Money Act is clear and unambiguous and the deeming fiction contained in the expression "assessee in default" relates only to an assessee who has not paid the tax arrear within the time allowed in subsection (1) of section 30 or the period reduced under subsection (2) or extended under sub-section (3) thereof fails; similarly the deeming fiction under sub-section (5) of section 30 relates only to an assessee who fails to pay any installment within the time fixed under sub-section (3) of section 30; and the deeming fiction contained in sub-section (14) of section 32 of the Black Money Act applies only to any debtor of an assesse....
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....essment year prior to the assessment year beginning on 01.04.2016. Section 59 further provides, that such a declaration has to be made on or after the date of commencement of the Black Money Act, however, before the date notified by the Central Government. The Central Government, in exercise of the powers under Section 59 of the Black Money Act, published a Notification on 01.07.2015, notifying 30.09.2015 as the date on or before which a person is required to make a declaration in respect of an undisclosed asset located outside India. It also notifies 31.12.2015 as the date on or before which the person shall pay the tax and penalty in respect of such undisclosed asset located outside India. 14. It could thus be seen, that Section 59 of the Black Money Act gives an opportunity to the assessees who have acquired an asset located outside India, which is acquired from income chargeable to tax under the Income Tax Act. The assessee has been given an opportunity to declare such asset and pay the tax and penalty thereon. The consequences of the non-declaration have been provided under Section 72(c) of the Black Money Act, which reads thus: "72. Removal of doubts.- For t....
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....ney Act. By doing so, the assessees, who desired to take the benefit of one time opportunity, could have made declaration prior to 30th September, 2015 and paid the tax and penalty prior to 31st December, 2015. 20. It would further be relevant to note that subsection (3) of Section 1 of the Black Money Act, itself provides that save as otherwise provided in this Act, it shall come into force on 1 st day of July, 2015. A conjoint reading of the various provisions would reveal, that the Assessing Officer can charge the taxes only from the assessment year commencing on or after 01.04.2016. However, the value of the said asset has to be as per its valuation in the previous year. As such, even if there was no change of date in subsection (3) of Section 1 of the Black Money Act, the value of the asset was to be determined as per its valuation in the previous year. The date has been changed only for the purpose of enabling the assessee(s) to take benefit of Section 59 of the Black Money Act. The power has been exercised only in order to remove difficulties. The penal provisions under Sections 50 and 51 of the Black Money Act would come into play only when an assessee has failed t....
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....thin the ambit of the expression "assessee". In this regard, it may be noted that the expression "assessee" came to be amended on 1st August, 2019 albeit with retrospective effect from 1st July, 2015; however, as on the date when the Settlement Commission passed the impugned order viz. 30.1.2019, the contesting respondents were not assessees within the meaning of such expression as contemplated under section 2(2) of the Black Money Act and were, therefore, not covered by the provisions of that Act. Therefore, having regard to the fact that at the relevant time when the order under section 245D of the IT Act came to be passed, the contesting respondents were not assessees as contemplated under the Black Money Act, the provisions thereof did not apply to them and, therefore, the undisclosed foreign income and assets of the contesting respondents could be assessed only under the IT Act. Under these circumstances, the question of lack of jurisdiction on the part of the Settlement Commission to entertain and decide the applications under section 245C of the Income Tax Act did not arise. It is by now well settled that while a statutory provision which has been made applicable retrospecti....
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....ritical resources necessary to undertake programs for social inclusion and economic development. It also puts a disproportionate burden on the honest taxpayers as they have to bear the brunt of higher taxes to make up for the revenue leakage caused by evasion. The money stashed away abroad by evading tax could also be used in ways which could threaten the national security." Reference was also made to the Explanatory Memorandum to the Finance Bill (2) of 2019, to submit that the same makes it clear that the legislative intent behind enacting the Black Money Act was to tax such foreign income and assets which were not charged to tax under the Income Tax Act. 32. The learned Additional Solicitor General further submitted that considering the intent of the legislature behind enacting the Black Money Act, non-providing of a non-obstante clause is clearly an omission on the part of the legislature and hence, the provisions should be interpreted accordingly. It was also suggested that considering the avowed object of the Black Money Act, the provisions thereof should be given an overriding effect over the provisions of the IT Act, though the Black Money Act does not contain any ove....
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....rly, without there being any provision giving overriding effect to the provisions of the Black Money Act, it is not possible to read such a provision in the statute and say that the provisions of the said Act would have overriding effect over the provisions of any other statute. 35. At this stage, it may be apposite to note that there are several provisions under the Income Tax Act, 1961 which cover assessment of undisclosed foreign income. 36. The second proviso to section 147 of the Income Tax Act, 1961 provides that nothing contained in the first proviso to section 147 shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year. The first proviso provides that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to make a return under section 139....
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....ons of the Income Tax Act. Thus, though notice under Section 10 can be issued for Assessment Years for which settlement proceedings are pending before the Settlement Commission, ultimately benefit will be required to be granted whole computation under Section 5 of the Act." "Thus, it is clear that the proceedings under Black Money Act and under Income-tax Act are not mutually exclusive to each other. Both can be legally carried out at the same time as per the provisions of both the Acts. However, the benefit of tax paid under provisions of the Income-tax Act will be provided to the assessee under Black Money Act. Xxxx 2.5 Considering the same, it would be more appropriate to continue with the assessment of income under the Income-tax Act under the provisions of section 147 for which the assessee has already admitted income. If there is an income which is not assessed under the said section, then the difference will be brought to tax under the Black Money Act as per the relevant provisions thereof." In aforesaid premises, the contention that in view of the provisions of sections 4, 5 and 59 of the Black Money Act, the Black Money Act and the IT Act rema....
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....sion for application for settlement of cases and provides that an assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing 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, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner provided therein. Thus, under section 245C of the IT Act, an assessee can make an application at any stage of a case relating to him. 40. The expression "case" has been defined under clause (b) of section 245A of the IT Act to mean any proceeding for assessment under that Act, of any person in respect of any assessment year or assessment years which may be pending before an Assessing Officer on the date on which an application under sub-section (1) of section 245C is made. The Explanation thereto inter alia provides for the purposes of that clause- "(i) a proceeding for assessment or reassessment ....
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....the application shall be deemed to have been allowed to be proceeded with. (1-A) * * * (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the Principal Commissioner or Commissioner. (2-A) Where an application was made under section 245-C before the 1st day of June, 2007, but an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, has not been made before the 1st day of June, 2007, such application shall be deemed to have been allowed to be proceeded with if the additional tax on the income disclosed in such application and the interest thereon is paid on or before the 31st day of July, 2007. Explanation.-In respect of the application referred to in this sub-section, the 31st day of July, 2007 shall be deemed to be the date of the order of rejection or allowing the application to be proceeded with under sub-section (1). (2-B) The Settlement Commission shall,- (i) in respect of an application which is allowed to be proceeded with under sub-section (1), within thirty days from the date on which the application was....
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....ith under that sub-section, may call for the records from the Principal Commissioner or Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Principal Commissioner or Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case, and the Principal Commissioner or Commissioner shall furnish the report within a period of ninety days of the receipt of communication from the Settlement Commission: Provided that where the Principal Commissioner or Commissioner does not furnish the report within the aforesaid period, the Settlement Commission may proceed to pass an order under sub-section (4) without such report. (4) After examination of the records and the report of the Principal Commissioner or Commissioner, if any, received under- (i) sub-section (2-B) or sub-section (3), or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after g....
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....emaining unpaid from the date of expiry of the period of thirty-five days aforesaid. (6-B) The Settlement Commission may, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (4)- (a) at any time within a period of six months from the end of the month in which the order was passed; or (b) at any time within the period of six months from the end of the month in which an application for rectification has been made by the Principal Commissioner or the Commissioner or the applicant, as the case may be: Provided that no application for rectification shall be made by the Principal Commissioner or the Commissioner or the applicant after the expiry of six months from the end of the month in which an order under sub-section (4) is passed by the Settlement Commission: Provided further that an amendment which has the effect of modifying the liability of the applicant shall not be made under this sub-section unless the Settlement Commission has given notice to the applicant and the Principal Commissioner or Commissioner of its intention to do so and has allowed the applicant and the Principal....
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....fered with only if such order is found to be contrary to any provisions of the IT Act. 43. Besides, the petitioner cannot be permitted to approbate and reprobate at the same time, namely before the Settlement Commission to take a stand that the undisclosed foreign income and assets are governed by the provisions of the Income Tax Act, 1961 for the relevant years in respect of which the proceedings were pending before the Settlement Commission, and now to take a somersault and say that the Settlement Commission had no jurisdiction to decide the applications under section 245C of the IT Act. 44. Another aspect of the matter is that the proceedings before the Settlement Commission were taken in connection with notices issued under section 148 and 153A of the Income Tax Act, and it is therefore, that the Settlement Commission had the jurisdiction to decide the applications under section 245C of that Act, which related to the proceedings in respect of those notices. If it was the case of the revenue that the undisclosed foreign income and asset of the contesting respondents were covered by the provisions of the Black Money Act, the notices under section 148 and 153A of the IT Act,....
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.... PCIT verified entries, as directed by the it, in the bank statements/ portfolio statements, ledger accounts, entries in the Tally database and all other evidences submitted by the applicants in different paper books and income statements of the applicants. The sources of individual credit entries were also verified by the PCIT. The verification reports of the PCIT are narrated in the earlier part of the order of the Settlement Commission. The Settlement Commission recorded that on some of the issues, which remained unreconciled due to the fact that they pertained to very old periods and for want of further evidence, the applicants in true spirit of settlement and for bringing quietus to the issues have offered additional income vide detailed submissions filed on 17.12.2018. The Settlement Commission recorded that the applicants had made the additional offer of Rs. 8,65,63,679/- in respect of the following issues:- "a. Irregularities in the opening stock of 7.5% HSBC Bank Plc Bond of US $ 10,86,457. b. HSBC Bank account balance of HKD 9,20,400 as on 10.10.2005. c. Barclays Bank accounts held in the name of the Applicant bearing account no.204490 and accou....
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....sed, the additional amount offered was only Rs. 8.64 crores which comes to approximately 6.7% of the total amount of income disclosed and is, therefore, only a fraction of the total income disclosed. Moreover, this offer to pay additional amount by the contesting respondents has to be considered keeping in mind the fact that the proceedings before the Settlement Commission are in the nature of settlement proceedings. If for the reason that in respect of issues which pertained to very old period and could not be reconciled due to lack of want of further evidence, the contesting respondents, with a view to bring about a settlement, agreed to pay a higher amount as proposed by the revenue, it certainly cannot be termed as a revision of the original disclosure made under section 245C of the IT Act, inasmuch as, there is no further disclosure but an acceptance of additional liability based on the disclosure already made before the Settlement Commission. 50. In the above backdrop, the decision of the Supreme Court in the case of Ajmera Housing Corporation v. Commissioner of Income-tax (supra), on which reliance has been placed by the learned counsel for the petitioner would, in the op....
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....tlement Commission could be interfered with only if the said order is found to be contrary to any provisions of the Act. So far as the findings of fact recorded by the Commission or question of facts are concerned, the same is not open for examination either by the High Court or by the Supreme Court. In the present case the order of the Settlement Commission clearly indicates that the said order, particularly, with regard to the imposition of simple interest @ 10% per annum was passed in accordance with the provisions of Rule 14 but the High Court wrongly interpreted the said Rule and thereby arrived at an erroneous finding. So far as the second issue with respect to interest on Rs. 50 lakhs is concerned, the same being a factual issue should not have been gone into by the High Court exercising the writ jurisdiction and the High Court should not have substituted its own opinion against the opinion of the Settlement Commission when the same was not challenged on merits." 53. In the present case, it is not possible to state that the impugned order passed by the Settlement Commission is in any manner contrary to any provisions of the IT Act. Insofar as the findings of fact recorded....