TaxTMI 
TaxTMI 
2021 (9) TMI 49
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....lso filed separately the second writ petition. 3. Both the petitioners by way of these writ petitions have challenged the legality, validity and propriety of the order dated 19/12/2013 passed by the Income Tax Settlement Commission while exercising the powers under Section 245D(4) of the IT Act whereby the settlement application filed by the petitioners was disposed of. 4. In order to appreciate the controversy raised in the present writ petitions, it would be apposite to quote the relevant provisions relating to settlement of cases as provided under Chapter XIX of the IT Act which are as under:- "245C. [(1) 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 hereinafter provided: [Provided that no such application ....
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....irm, association or family, or any relative of such director, partner or member; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the specified person; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; (vi) any person who carries on a business or profession,- (A) where the specified person being an individual, or any relative of such specified person, has a substantial interest in the business or profession of that person; or (B) where the specified person being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person; (b) a person shall be deemed to have a substantial interest in a business or profession, if- (A) in a case where the business or profession is carried on by a company, such person is, [on the date of sear....
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....d. (3) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. [(4) An assessee shall, on the date on which he makes an application under sub-section (1) to the Settlement Commission, also intimate the Assessing Officer in the prescribed manner of having made such application to the said Commission.] [(5) No application shall be made under this section on or after the 1st day of February, 2021] Procedure on receipt of an application under section 245C.- 245D. [(1) On receipt of an application under section 245C, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant, the Settlement Commission shall, within a period of fourteen days from the date of the application, by an order in writing, reject the application or allow the application to be proceeded with: Provided that where no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded wit....
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....oner or Commissioner]. [Provided alsothat where in respect of an application, an order, which was required to be passed under this sub-section on or before the 31st day of January, 2021, has not been passed on or before the 31st day of January, 2021, such application shall deemed to be valid] (2D) Where an application was made under subsection (1) of section 245C before the 1st day of June, 2007 and an order under the provisions of subsection (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st day of June, 2007, but an order under the provisions of subsection (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007.] [(3) The Settlement Commission, in respect of- (i) an application ....
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....st day of June, 2010, within eighteen months from the end of the month in which the application was made.] [(5) Subject to the provisions of section 245BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the concerned Bench before passing any order under sub-section (4) and, in relation to the passing of such order, the provisions of section 245BD shall apply.] (6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of [tax, penalty or interest], the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts. [(6A) Where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by instalments, the assesse....
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....de in pursuance of any such directions as aforesaid.]" 6. Brief facts of the case as noticed are that on 09/09/2010, the petitioner and its director Rajendra Gupta (petitioner in CWP No.8699/2014) were subjected to search and seizure under Section 132 of the IT Act and were served with consequential notices issued under Section 153A of the IT Act for initiating assessment proceedings in case of search. The petitioner approached the Settlement Commission and filed application under Section 245C(1) of the IT Act in the prescribed form seeking settlement of their cases on 29/06/2012 for the period AY 2007-08 to 2012-13 making true and full disclosure of income not disclosed before the Assessing Officer alongwith the manner in which such income has been derived and additional amount of Income Tax payable thereon for the period specified therein. The Settlement Commission upon being satisfied that the petitioner has fulfilled the condition precedent under Section 245A, 245C and 245D(1) of the IT Act allowed the Settlement Application to be proceeded with by passing order under Section 245D(1) of the IT Act. Further, as per Section 245D(2B) of the IT Act, the respondent No.2 furnished ....
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....ed the true and full disclosure and assumed the role of Assessing Officer and made an addition which is 155 times of the disclosed. It is further stated that the petitioner submitted an application for rectification under Section 164 and by way of an order dated 18/06/2014 the Settlement Commission partly accepted the application under Section 245D(6B) of the IT Act. 10. It was further contended that the impugned order dated 19/12/2013 passed by the learned Settlement Commission under Section 245D(4) of the IT Act is without jurisdiction and suffers from vice of non-application of mind, arbitrariness and the Commission exceeded its jurisdiction by proceeding as Assessing Officer. The Commission completely lost sight of the maintainability criteria for the Settlement Application prescribed under Section 245C(1) of the IT Act wherein the full and true disclosure of income by an assessee in the Settlement Application is the condition precedent/eligibility for a valid Settlement Application. Thus, when the Settlement Commission is of the view that full and true disclosure of income has not been made then the Settlement Application itself becomes non-maintainable and the same is the pr....
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....st the final order which was passed on 19/12/2013. It is further stated that the petitioner has acted upon and deposited the installments as per the directions issued by the learned Settlement Commission in the order impugned. The amount was directed to be deposited by the learned Settlement Commission in 6 installments and the petitioners moved application praying to deposit the amount in 24 installments instead. The learned Settlement Commission granted benefit and increased the installments to 15 which was accepted by the petitioner-assessee and he acted upon accordingly. Thus, it is a case of acquiescence to the order passed by the learned Settlement Commission and therefore, the petitioner is estopped from challenging the said order before this Court after accepting the same without any demur. 15. Learned counsel for the Revenue also pointed out that by the impugned order, the petitioner was granted immunity from prosecution and penalty imposable under the Act as provided under the provisions contained under Section 245H of the Act. The petitioner and its officers have been enjoying such protection and benefit and therefore, are now estopped from challenging the order impugne....
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....tion 245-D(4)?" and third "Whether the Settlement Commission could reopen its concluded proceedings by invoking Section 154 of the said Act so as to levy interest under Section 234-B, though it was not so done in the original proceedings?" Thus, the judgments were essentially in relation to the interest for defaults in payments of advance tax and at what terminal point the levy of such interest can be imposed and what are the powers in granting the relief under the CBDT Circulars. The moot question, which has been essentially raised in the present writ petitions is "Whether the Settlement Commission can proceed and pass final orders on an application moved by an assessee after finding that the concerned assessee has not truly and fully disclosed the income?" and secondly, "Whether it can proceed to make assessment after adding the undisclosed income and thereafter pass orders by including such non-disclosure?." 19. The Madras High Court in Principal Commissioner of Income Tax Vs. Rasi Seeds (P) Ltd. & Anr. (supra), without adjudicating the issue, held that "it is not in dispute that for entertaining an application for settlement under Section 245-C of the Income Tax Act, the asses....
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....aid Annexure (including the statements and other documents accompanying it or within such further period as the Commission may specify. 30. It will also be useful to extract the relevant portions of Form (No. 34B), prescribed for making an application under Section 245C(1) of the Act: [Form No. 34B] [See rules 44C and 44CA] Form of application for settlement of cases under section 245C(1) of the Income-tax Act, 1961 10. Particulars of the issues to be settled, nature and circumstances of the case and complexities of the investigation involved [See Note 7] 11. Full and true disclosure of income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived and the additional amount of income-tax payable on such income [See Notes 9 and 10] .... Signed (Applicant) Notes: .... 7. Full details of issues for which application for settlement is made, the nature and circumstances of the case and complexities of the investigation involved must be indicated against item 10. Where the application relates to more than one assessment year, these details should be furnished for each assessment year. .... 9. The additi....
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.... be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See:Cape Brandy Syndicate v. Inland Revenue Commissioners (1921) 1 KB 64 and Federation of A.P. Chambers of Commerce and Industry and Ors. v. State of A.P. and Ors.: (2000) 6 SCC 550. In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also see:CST v. Modi Sugar Mills Ltd.: 1961 (2) SCR 189.) 39. Before addressing the other issues, at the outset, we record our disapproval with the view of the High Court that it would not be proper to set aside the proceedings before the Settlement Commission even though it was convinced that the assessee had not made full and true disclosure of their income while making application under Section 245C of the Act. As stated above, in its earlier order Dated 28th July, 2000 while declaring order Dated 17th November, 1994, ....
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....submitted that if the Settlement Commission had not accepted the disclosure as full and true disclosure of income, it could not have proceeded further and it is their submission that the order passed by the Settlement Commission is ab-initio, void. 22. In the facts of the present case, it would be apposite to notice the observations made by the Apex Court in Brij Lal & ors. Vs. Commissioner of Income Tax, Jalandhar (supra) which read as under:- "20. Under Section 245D(2A) the applicant is required to pay the additional amount of income tax payable on the income disclosed in the application within 35 days of the receipt of the copy of the order passed by the Settlement Commission under Section 245D(1) allowing such application to be proceeded with. Under Section 245D(2A) the applicant shall, within 35 days of the receipt of the order under Section 245D(1) allowing the application to be proceeded with, pay the additional amount of income tax payable on the income disclosed. Under Section 245D(4) on compliance of Sections 245D(2A) and (2C) and on examination of relevant records and reports, the Settlement Commission may pass such orders as it thinks fit on the matters covered by th....
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....n under Sections 245C and 245D in the matter of computation of undisclosed income; in the matter of computation of additional income tax payable on such income with interest thereon; the filing of settlement application indicating the amount of income returned in the return of income and the additional income tax payable on the undisclosed income to be aggregated as total income shows that Chapter XIX-A indicates aggregation of incomes so as to constitute total income which indicates that the special procedure under Chapter XIX-A has inbuilt mechanism of computing total income which is nothing but assessment (computation of total income). 26.To elaborate, under Section 245C(1B), if the applicant has furnished a return in respect of his total income, tax shall be calculated on the aggregate of total income returned and the income disclosed in the settlement application as if such aggregate were total income. Under the Act, tax is payable on the total income as computed in accordance with the provisions of the Act. Thus, Section 143(3) provision is sought to be incorporated in Section 245C. When Parliament uses the words "as if such aggregate would constitute total income", it pre....
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....by this Court that the order of Settlement Commission under Section 245D(4) is an order of assessment under Section 143(3) or under Section 144. In Ghaswala's case the only question decided by this Court is that the interest under Section 234B is mandatory in nature and that Settlement Commission, therefore, had no authority to waive it. 41. Further, as stated above, the jurisdiction of the A.O. is not fettered merely because the applicant has filed the Settlement Application. The Act does not contemplate stay of the proceedings during that period, i.e., when the Settlement Commission is deciding whether to proceed or reject the settlement application. The jurisdiction of the Settlement Commission to proceed commences only after an order is passed under Section 245D(1). That, after making an application for settlement the applicant is not allowed to withdraw it [see Section 245C(3)]. Once the case stands admitted, the Settlement Commission shall have exclusive jurisdiction to exercise the powers of the Income Tax Authority. 42. The order of Settlement Commission under Section 245D(4) shall be final and conclusive under Section 245I subject to two qualifications under whic....
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....ished his return of total income in which case tax has to be calculated on the aggregate of total income as assessed in the earlier proceedings for assessment under Section 143 or under Section 144 or under Section 147 [see Section 245C(1B)]. The point to be noted is that in computation of additional income tax payable by the assessee, there is no mention of Section 154. On the contrary, under Section 245I the order of the Settlement Commission is made final and conclusive on matters mentioned in the application for settlement except in the two cases of fraud and misrepresentation in which case the matter could be re- opened by way of review or recall. Like ITAT, the Settlement Commission is a quasi-judicial body. Under Section 254(2), the ITAT is given the power to rectify but no such power is given to the Settlement Commission. Thus, we hold that Settlement Commission cannot reopen its concluded proceedings by invoking Section 154 of the Act." 23. The High Court of Bombay, in Commissioner of Income Tax Vs. Income Tax Settlement Commission & Anr. (supra), examined the issue. In the said case also, the Commissioner (Revenue) had submitted a report that the assessee had failed to ....
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....as to be furnished by the Commissioner within ninety days of the receipt of a communication from the Commission. Next, sub-sections 4 and 6 of Section 245D are of relevance and they provide as follows: (4) After examination of the records and the report of the Commissioner, if any, received under- (i) sub-section (2B) 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 giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the commissioner. (5)... (6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due under the settle....
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....ter settled the income. On an application moved by the petitioner, installments were also increased from 6 to 15. The payments have already been made accordingly. 26. Brij Lal & ors. Vs. Commissioner of Income Tax, Jalandhar (supra), the Settlement Commission passes the order which is a complete code in itself. It is a quasi-judicial authority and there is no provision for the Settlement Commission to remand the matter back to the Assessing Officer. In view thereof, the contention of the petitioner solely based on the observations made in different context by the Supreme Court and the High Court of Madras and Bombay that the Settlement Commission should have rejected his application cannot be sustained once the Settlement Commission has reached to the conclusion that there is no full and true disclosure of income. The stage is no more available for the petitioner. 27. As observed by the Supreme Court in Brij Lal & ors. Vs. Commissioner of Income Tax, Jalandhar (supra), the Settlement Commission has the authority to itself make assessment (Para 27 of judgment in Brij Lal & Ors. (supra)). This type of computation of total income, on a conjoint reading of Section 245C(1B), 245C(1C),....