TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 125
X X X X Extracts X X X X
X X X X Extracts X X X X
....while purchases are also made from the Mumbai market. The imported dates are stored in cold storage immediately at the receiving station. After clearing, they are transported to the processing and manufacturing units at various places for cleaning, sorting, deseeding and packing. The packed dates are stored and delivered to the various centers in the country for supply to the market. The factory and processing units of the petitioner are situated at various places. The petitioner claims that from April 2011, the petitioner has started manufacture of dates, syrups and jams at its dedicated international standards unit situated at Ward-A, Block 6, T.S.No.21, Kallanai Road, Devadanam Village, Trichy Taluk, and more than thousand workers are employed for these purposes. 3.The learned counsel appearing on behalf of the petitioner contended that the Income Tax Settlement Commission rejected the application filed by the petitioner under Section 245C of the Income Tax Act, as not maintainable and thus, the petitioner is constrained to move the present Writ Petition. 4.It is contended that the petitioner was not provided with an opportunity to defend their case on several stages and there....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etitioner and therefore, he has not provided further opportunity to make his submissions on the said Report. The CBDT Circular dated 18.12.2014 in relation to admissions of undisclosed Income under coercion/pressure during search/survey, the Board issued guidelines and directed to convey that any instance of undue influence/coercion in the recording of the statement during search/survey/other proceedings under IT Act, 1961 and / or recording a disclosure of undisclosed income under pressure/coercion shall be viewed by the Board adversely. The said circular has not been followed scrupulously by the Authorities Competent. The petitioner filed an application under Section 245C before the Commission. Subsequent to the search conducted in the premises, the petitioner approached the Settlement Commission with an intention to settle the issues. He made full and true disclosure in respect of the materials and inspite of that the application was rejected as not maintainable. 7.The learned counsel for the petitioner has stated that dates and date syrup are not different products is purely a legal issue could be decided by the Courts. In this regard, the petitioner has stated that they have ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....income in the event of any difference or confrontation in this regard such an application for settlement cannot be entertained. Contrarily, the Assessing Officer must be permitted to make regular assessment of income under Section 153A of the Act. It is further contended that the differential amount of income is crossing Rs. 25 Crores and all these facts were placed before the Settlement Commission by the Department. In this regard, it is contended that the Settlement Commission has committed an error in adopting the decision making process, as the process adopted is totally in contravention to the facts and circumstances established by the Department and further, such facts and circumstances are not correlating with the application filed by the assessee under Section 245C of the Act. When there are discrepancies and doubt arises with regard to the true and full disclosure of income, then the natural course of action would be that the Assessing Officer must be permitted to make a regular assessment under Section 153A of the Act and settlement cannot be arrived under doubtful circumstances. In such circumstances, settlements are impermissible and cannot be construed as settlement at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erefore, other grounds raised on merits are to be considered only if the application before the Settlement Commission is maintainable. 14.In this regard, it is relevant to consider the findings of the Settlement Commission in its order and the Settlement Commission considered the following issues, which reads as under: "6.0. In the SOF, the Applicant has made the following prayers: a) To settle the total income offered in respect of Ays 2007 - 08 to 2014 - 15 on the basis of the disclosures made and to determine the consequential tax and interest chargeable thereon under the Income Tax Act, 1961. b) To allow the telescoping and capitalization of the income offered. c) To grant waiver of interest leviable under the Income Tax Act, 1961. d) To grant waiver of penalty under the I.T.Act in terms of section 245H. e) To grant immunity from prosecution in terms of section 245H." 7.1. Serious issues cropped up in this case. The main issue that arose for consideration is whether the methodology adopted by the applicant to disclose income in the application is correct or not. Claim of 80IB deduction is another bone of contention Additional claim of depreciation on account of c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it begins to operate such business on or after the 1st day of April, 2001;] [Provided that the provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the 1st day of April, 2009.]" 7.3.According to Sec.80IC(11A) once an assessee in involved in the processing preservation and packaging of fruits or vegetables, he can claim deduction u/s 80IB. The AR pointed out that with respect to processing of dates, the applicant was involved in the business from 2001 onwards and with respect to processing of dates and syrup production, the applicant was involved in business from FY 2007-08 (AY 2008-09) to the extent evidence is available. It may be that even earlier, the applicant was involved in import and packaging of syrup. Thus the claim that new unit was started only in FY 2011-12 (AY 2012-13) is not factually correct. 7.9.1.There is no separate unit that has been started in the A.Yr.2012-13 to make any claim. It is only one or two other machinery that was added. In fact, production of syrup was shown in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not eligible for this claim. 7.9.6.When this was all pointed out by the CIT, the applicant filed a fresh paper book calling back depreciation and adding back certain other expenditures as taxable. The following is the additional income offered as per the latest APB filed on 29.09.2016 which is enclosed in pages 80 to 94 of this order claim of deduction u/s.80IB on that portion Depreciation syrup machinery, wrongly claimed against taxable income now offered: A.Y. 2012-13. - Rs. 39,09,583 A.Y. 2013-14. - Rs. 33,23,146 A.Y. 2014-15. - Rs. 28,24,674 **Depreciation of Rs. 24,31,944 /- was also added back in AY 2011-12 on syrup unit. Additional income offered on account of disallowance of expenses allocated to 80IB Unit; A.Y. 2012-13 - Rs. 5,45,00,000 A.Y. 2013-14 - Rs. 3,60,00,000 A.Y. 2014-15 - Rs. 3,02,00,000 7.9.7.The applicant, when pointed out the defects in accounts and also the fact that around 54% of net profit was declared in the 80IB unit as against 12% int eh regular business which was abnormal, sought to correct the claims made. Fundamentally, the department objects to this type of apportionment and it stated that separate books of acco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ferred to the decision in the following case laws: (i) Decision of Bombay ITAT(J) Bench in the case of ITO- 19(3)4 Vs. Shri Shankar K. Bhanage in 3216 & 3217 / Mumbai/2010. (ii) Decision of Madras ITAT(D) Bench in the case of M/s. Aseptic Fruit Products (India) P. Ltd vs ACIT, Circle (1) dated 30.09.2015 in ITA No. 1136/MDS/2015. 7.9.11.We have given our anxious consideration to this aspect. Whenever there is manufacture / production of article or thing the deduction to be claimed only u/s. 80IB(3). This section is no longer in vogue on account of time limit. It was a conscious decision of the legislature to stop the benefit of Sec. 80IB(3) as it was not extended. A reading of Sec. 80IB(11A) shows that only when processing preservation and packaging of fruits or vegetables are done, the benefit can be claimed. All three activities are to be arrived out and the ultimate product should be fruits or vegetables and not any other product. To this extent, event in terms of language of this section, the applicant is not eligible. 7.9.12.The Settlement Commission can settle matters involving dispute of facts. It cannot lay down principles of law. It is only the High Courts and Supr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come as invested in depreciable building (fresh construction activity) for which there is no evidence in the seized material. Once again, it is to be seen that the disclosure cannot be considered as full and true because this is not substantiated. 9.5.The valuation reports are not reliable. According to Hon'ble High Court of Delhi in the case of Agson Global (P) Ltd. Vs. ITSC, the powers to refer to 142(2A) order is not available to the Settlement Commission. Hence reference cannot be made to Valuation Cell also. When the department does not have the opportunity to refer to the valuation cell, it is difficult to admit valuer's report and give relief to the applicant. This anamoly was also pointed out by the CIT (DR). 9.6.In fact, the main discovery in the search action was unearthing of undisclosed purchases which is shown in table below. Instead of disclosing the income based on the inflation of purchases which generated the undisclosed income, the applicant adopted its own methodology to suit its convenience and to claim depreciation. 9.7.The below table gives the undisclosed purchases detected assessment year-wise F.Y./A.Y Bogus bills raised by Mahalaxmi enterprises (Rs....