TaxTMI 
TaxTMI 
2021 (8) TMI 929
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....he Income Tax Act, 1961. 3. For the assessment year 2012-13, the 1strespondent has added a further sum of Rs. 5,20,92,283/- though no additional amount was offered over and the amount declared as the taxable income in the return filed by the 2nd respondent. It is submitted that the 2nd respondent failed to make true and full declaration for the assessment years 2006-07 to 2011-12 and had not offered any amount for the assessment year 2012-13. It is therefore submitted that the 1st respondent ought to have dismissed the application filed by the 2nd respondent assessee before it under Chapter XIX A of the Income Tax Act, 1961. 4. The operative portion of the impugned order reads as:- 7.2 We find that it is true that no evidence was found during the search to indicate that the applicant had incurred any expenditure over and above what was recorded in the books. The applicant has stated that, in the books, only that expenditure is reflected which has been incurred for the day to day running of the Hospital. Since she is the sole proprietrix, all the daily receipts are handed over to her and this fact is supported by the handwritten diary, which was seized from h....
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....9 11,83,80,570 10,20,69,017 1,63,11,553 82,86,640 80,24,913 2009-10 22,65,58,005 14,09,46,233 8,56,11,772 1,58,59,060 6,97,52,712 2010-11 24,95,94,640 16,29,51,020 8,66,43,620 1,74,71,625 6,97,52,712 2011-12 28,21,49,930 19,86,50,666 8,34,99,264 1,97,50,495 6,37,48,769 Total 113,83,90,506 78,53,26,952 35,30,63,554 7,96,87,335 27,33,76,219 In other words, as against the additional income amounting to Rs. 15,88,78,599/- offered in the Settlement Application, the Applicant is required to offer further additional income amounting to Rs. 11,44,97,620/- (i.e. Rs. 27,33,76,219/- - Rs. 15,88,78,599/-) Suppression of Pharmacy sales: 7.3. The facts and submissions in this respect have already been summarised by us in para 6.1 above. For the reasons given therein, we find that there was no under disclosure of pharmacy sales. The confusion might have arisen because the medicines and surgical/non-surgical items supplied under the ' package scheme' had been considered as direct sales to customers. As the issue stands reconciled, no further action in this respect is necessary. ....
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.... prayers:- a) Determination and qualification of the additional income for A.Ys 2006-07 to 2012-13. b) To grant waiver of interest under the I.T.Act. c) To grant immunity from penalty and prosecution under the I.T.Act. 0.2. As regards the prayer listed at (a) above, we have already discussed this aspect in the earlier part of this order. Accordingly, the additional income is settled as under:- Assessment Year Returned Income as per Section 153A/142(1) Additional Income offered in Settlement Application Further disclosure required to be made as per order u/s.245D(4) Income Settled 2006-07 2,50,03,501 1,59,14,299 1,12,57,370 5,21,75,170 2007-08 2,65,83,450 2,05,34,506 1,49,71,655 6,20,89,611 2008-09 2,45,22,419 73,40,199 6,84,714 3,25,47,332 2009-10 3,49,48,605 3,85,25,297 3,12,27,415 10,47,01,317 2010-11 5,52,14,416 3,89,89,629 3,01,82,366 12,43,86,411 2011-12 6,52,63,454 3,75,74,669 2,61,74,100 12,90,12,223 2012-13 10,01,55,983 -- 5,20,92,283 15,22,48,266 Total 33,16,91,828 15,88,78,599 16,65,89,903 65,71,60,330 ....
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....ng the search, unaccounted cash for a sum of Rs. 1,80,00,000/- and unaccounted jewellery in the form of gold ornaments, bullion and diamond valued about Rs. 7,27,7150/- were seized. The gold jewellery bullion and diamond jewellery found during the search were valued at Rs. 14,74,99,880/-, a portion of which had been previously accounted by the 2nd respondent assessee under the Voluntary Disclosure Scheme of 1997. 7. The search had alsorevealed that the 2nd respondent assessee had not disclosed an income of Rs. 35,30,63,554/- for the assessment years 2006-07 to 2011-12.During the course of the investigation/search, the 2nd respondent had undertaking to pay income tax on the aforesaid amount. 8. During the search, it was also found that for the reassessment year 2012-13, the 2nd respondent had not disclosed additional amount of Rs. 8,94,84,051/-being the income from pharmacy sale and professional income from profession. 9. Apart from the above, the investigation/search also revealed non-disclosure of income from pharmacy sale for a sum of Rs. 7,39,49,995/- during the assessment years 2009-10 to 2012-13 which was based on the difference in the value of inventory between the b....
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....ve been rejected by the 1st respondent Settlement Commission. It is submitted that failure on the part of the 2nd respondent assessee to declare correctly the additional income above the income already declared in the returns filed for the assessment years 2012-13 also made it clear that the application for settling the case for the aforesaid assessment year was to be disallowed as there was no true and full disclosure. 17. It is further submitted the fact that the 1st respondent Settlement Commission had restricted the expense to 7%from 56% claimed by the 2nd respondent assessee demonstrated that there was no true and full disclosure of additional income before the 1st respondent Settlement Commission by the 2nd respondent assessee in her application under Section 245C of theIncome Tax Act, 1961. 18. Learned counsel for the petitioner relied on the following decision : i) Commissioner of Income Tax vs. Express Newspaper Ltd., (1994) 72 Taxman 428 (SC) ii) Ajmera Housing Corpn. Vs. Commissioner of Income Tax, (2010) 193 Taxman 193( SC) iii) V.M.Shaik Mohammed Rowther vs. Settlement Commission, (1999) 102 Taxman 546 (Madras) iv) ACE Investme....
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....inition of the case in the context of initiation and conduct of a settlement proceedings before the 1stRespondent Settlement Commission. 26. It was also submitted that in sub-clause (iiia) to Section 245A(b) the proceedings under Section 153A of the Act has been referred. Since Section 153A of the Act envisages issuance of notice for six assessment years immediately prior to the search assessment year the application field for all the assessment years were maintainable. 27. In so far as the search assessment year is concerned, it is submitted that the Jurisdictional Assessing Officer gets jurisdiction to initiate and complete the assessment under normal provisions of the Act, by issuing a notice u/s 143(2) of the Act. 28. It is submitted that while initiating the proceedings for the search assessment year, the Jurisdictional Assessing Officer has power to complete the said assessment along with the other six assessment years based on the search materials and other materials/information available in the records as well as information obtained during the assessment proceedings. 29. It is therefore submitted that the 2nd respondent Income Ttax Assessee was entitled to club....
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.... 34. In the absence of search materials to quantify the suppressed income for any of the assessment years initiated in consequence to the search conducted, there will not be any legal necessity for the applicant to add additional income over and above the reported income in the return of income filed either in the normal course or in consequence to the notice(s) issued after the date of search. 35. It is submitted that the stand of the Income Tax Departments for for the assessment year 2012-13 being the seventh assessment year covered in the settlement application is completely misdirected was account of erroneous interpretation of the Act. 36. It is submitted that for the assessment year 2012-13, the 2nd Respondent assessee recorded a gross receipts from various sources upto the date of search aggregating to Rs. 18,88,64,840/- and the gross receipts from the date of search to the end of the previous year relevant to the assessment year 2012- 13 amounted to Rs. 11,21,46,498/-. 37. It is therefore submitted that conclusion of the Income Tax Department/the writ petitioner that there was suppression of actual receipts to the extent of Rs. 8,94,84,022/- was omitted to be decla....
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....espondent vide final/impugned order dated 5.8.2013 in para 7.4 andthe findings in para 7.4 incorporated an addition of Rs. 5,20,92,283/- for the assessment year 2012-13 after taking into consideration the returned income for the said assessment year on 5.2.2013 by incorporating the gross actual receipts for the whole year as Rs. 30,10,11,338/- which amount was quantified upon taking into consideration all receipts including the alleged suppressed receipts. 44. It is further submitted that the stand of the Income Tax Department before this Court regarding non reporting of suppressed receipts before the 1st Respondent for the assessment year 2012-13 in the settlement application was devoid of merits as the entire gross receipts including the suppressed receipts up to the date of search were duly reported in there turn of income filed for the said assessment year 2012- 13 in the normal course. 45. It is submitted that not possible to imagine a situation of the present asessee/the 2nd Respondent Income Tax Assessee earning professional income during the last four months in excess of the income earned during the first eight months of the financial year 2011-12. Therefore, the r....
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....pose of settlement. 51. The disclosure of Rs. 35,30,63,554/- for the first six assessment years and the disclosure of Rs. 30,10,11,338/- for the search assessment year 2012-13 before the settlement commission can be traced from the settlement application filed on 19.2.2013, thereby establishing the compliance of the main condition of full and true disclosure of income for availing the benefits of settlement process envisaged in Chapter XIXA of the Act. 52. The details of disclosure are submitted below: Sl.No. Particulars Amount 1 Total actual Gross Receipts for Asst year 2006-07 to 2011-12 1,13,83,90,506 2 Less: Gross Receipts already accounted in the respective years returns 78,53,26,952 3 Total Suppressed Receipts 35,30,63,554 4 Income offered before the Settlement Commission 15,88,78,599 5 Income added by the Settlement Commission in the final order 11,44,97,619 6 Balance allowed towards expenses @ 7% of the Total Gross Receipts in the final order 7,96,87,335 7 Expenses Claimed by the 2nd Respondent in the settlement application 19,41,84,955 53. It is therefore submitted that the argument of the wri....
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....d order passed and the purpose of the settlement mechanism incorporated in Chapter XIXA of the Act is completely lost sight of while the said mechanism being one time opportunity for the tax payers to come out clean by disclosing full and true income for the assessment years covered in the settlement application. Having not pointed out any error of law in passing the impugned order, the entire attempt of the Writ Petitioner/Income Tax Department should be reckoned as unsustainable in law for invoking the extra ordinary jurisdiction of this Court under Article 226 of the Constitution of India, keeping in mind the provisions of Section 245 I of the Income Tax Act, 1961. 60. In any event, the 1st Respondent noticed the fact of the professional necessity to pay part of the fees to the doctors and para medical staff incash/not recorded in the regular books of accounts and accordingly estimated conservatively at 7% of the total receipts as acceptable outflow for the purpose of settling the dispute between theparties upon rejecting the claim for 55% of expenses for earning such income. 61. The claim of 55% of expenses for earning additional income disclosed before the 1st Respondent....
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....or deduction from the additional income as explained in the preceding paragraphs is completely erroneous and in the event of acceptance of their stand, the income computable as a result would distort the actual financial picture of the 2nd Respondent and completely go against the sworn statement recorded as referred to herein before. For all these grounds, the stand of the Writ Petitioner/Income Tax Department onthis issue may be rejected in the interest of justice. 67. Regarding the third objection of suppression of pharmacy sales, the 2nd Respondent consistently took a stand that the presumption of suppression of sales is completely devoid of merits and proving non application of mind on their part on the decision rendered by the 1st Respondent in the impugned order. 68. It is submitted that two types of patients are treated namely in-patients and the out-patients. While the out-patients invariably purchase medicines as prescribed for which there is absolutely no dispute in so far as the bills raised/reflected in thebooks of accounts, in so far as the in-patients, opting for the package for treatment, the package charges would admittedly include the cost of medicines for wh....
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....evoid of merits in the interest of justice. 75. It is further submitted that the provisions of Section 245 I of the Act which is in the said Chapter XIXA of the Act envisage that the order of the 1st Respondent should be considered as conclusive as to the matters stated therein and question of reopening of the said proceedings is completely prohibited and there is no statutory prescription for filing appeal against the said final order in the Act. 76. It is submitted that in the attempt to circumvent the provisions of section 245 I of the Act, the Writ Petitioner has wrongly invoked the extra ordinary jurisdiction namely, jurisdiction under Article 226 of the Constitution of India pleading for the interference of this Court showing irrelevant consideration and grounds. 77. The manner and method of the settlement could not be challenged in the present writ proceedings unless there was complete omission of referring to seized materials and other documents which formed part of the search records indicating/proving suppression of additional income over and above the amount shown and declared by the assessee in the settlement application. 78. Unless and otherwise, the factua....
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....come after Revenue pointing out evidence for enhancing the income disclosed. On the facts of the case, the gross receipts of Rs. 113.84 Crores was accepted at all stages as the true and full disclosure of the income/gross receipts earned for the first six assessment years. 84. On the cumulative consideration of the facts, the attempt of the Revenue in the present Writ Proceedings should be considered as excessive and the method and manner of settlement, according to the 2nd Respondent is outside the purview of the writ jurisdiction and hence the 2nd Respondent prays forthe rejection of the writ petition filed by the Revenue in the interest of justice. 85. Another issue of the validity of the present proceedings initiated by the Income Tax Department is to be tested in view of the proposed law of scrapping of the income tax settlement commission with effect from 01.02.2021. The Income Tax Department having not disputed so far the jurisdiction of the income tax settlement commission for settling the disputes pertaining to the search proceedings of the 2nd Respondent in initiating the said settlement process from 19.02.2013 cannot plead for setting aside their order on the state....
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.... ii)Jayarajbhai Jayantibhai Patel vs. Anilbhai Nathubhai Patel and Another (2006) 8 SCC 200, iii) H.B.Gandhi, Excise and Taxation Officer -cum- Assessing Authority, Karnal & Others vs. M/s.Gopinath & Sons & Others, 1992 Supp (2) SCC 312 If there is any regularity committed by the authority while passing the order impugned, a writ court in the exercise of its power under article 226 of the Constitution of India would be justified in interfering with the order impugned before it. 90. The 1st respondent Settlement Commission by the impugned order has added a sum of Rs. 11,44,97,626/- to the additional income of Rs. 15,88,78,598/- offered by the 2nd Respondent Income Tax Assessee for the assessment year 2006-07 to 2011-12. 91. The aforesaid additional income of Rs. 15,88,78,598/- was arrived by the 2nd respondent assessee out of Rs. 35,30,63,554/- by claiming 56% deduction towards expenditure allegedly incurred out of the aforesaid amount of Rs. 35,30,63,554/-. 92.In the application filed under Section 245C of the Income Tax Act, 1961 before the 1st respondent, the 2nd respondent had offered tax on 44% of the aforesaid undisclosed gross receipt of Rs. 35,30,6....
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....It has to be underlined that this Court is not concerned with the manner and method of accounting adopted by the 2nd respondent assessee which which led to the search operations under Section 132 of the Income Tax Act, 1961. The court is not really concerned with the previous conduct of the 2nd respondent. 100. This court only concerned as to whether the 1st respondent was justified in allowing the application filed by the 2nd respondent assessee to be proceeded particularly in the light of damning conclusions arrived by it in the course of proceedings before passing the impugned order settling the case of the 2nd respondent. 101. Though, the 2nd respondent had offered to pay tax on the entire amount of Rs. 35,30,63,554/- which was unearthed during the course of the search proceedings by giving statement to that effect the additional amount that was offered as income for settling the case before the 1st respondent settlement commission was confined to only 44% of the aforesaid amount amounting to Rs. 15,88,78,598/-. There was an apparent change of heart to pay lesser tax by offering lesser amount as additional income. 102. The 2nd respondent assessee thus to claimed a dedu....
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....ing the case. The 1st respondent merely relies on the inputs given by the departments to verify the claim of an income tax assessee. 109. It is also noticed that even for the search year no additional amount of income was offered over and above the amount disclosed in the returns filed under section 139 of theIncome Tax Act, 1961. On this score also, the application was liable to be rejected for the aforesaid search assessment year. The Hon'ble Supreme Court in Ajmera Housing Corporation and another Vs Commissioner of Income Tax (2010) 8 SCC 739 has held as under:- "27. It is clear that disclosure of "full and true" particulars of undisclosed income and "the manner" in which such income had been derived are the prerequisites for a valid application under Section 245- C(1) of the Act. Additionally, 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 245-C(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 ....
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....scheme of Chapter XIX-A, the revision of the annexure by itself was prejudicial to the interest of the Revenue. Apart from the fact, as explained above, revision of the annexure is tantamount to revision of the application, not contemplated in the scheme, withholding of the information regarding filing of revised annexure, disclosing undisclosed income of Rs. 11.41 crores as against the income of Rs. 1.94 crores disclosed in the annexure forming part of the application, deprived the Commissioner of his right to object to the maintainability of the assessee's application on the ground that the assessee had not made true and full disclosure of their income in the previous application, the foundational requirement of a valid application under Section 245-C(1) of the Act. Accordingly, we have no hesitation in rejecting the argument". 110. I therefore do not find any reasons to sustain the impugned order of the 1st respondent Settlement Commission as the 2nd respondent had not made true and full disclosure as was required under the provisions of the Income Tax Act, 1961. The 2nd respondent had a golden opportunity to settle the case under Chapter XIX A of the Income Tax Act, 1961....