TaxTMI 
TaxTMI 
2022 (7) TMI 558
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....2017 and to quash the same as arbitrary, unjust and illegal and to consequently direct the first respondent to reconsider the applications filed by the appellants bearing No.TN/CN-51/2015-16/34 & 35/IT and pass a fresh order under section 245D(4) of the Income Tax Act, 1961, after affording sufficient opportunities of being heard to the appellants in accordance with law. 3. For the purpose of disposal of these appeals, it is essential to look into the common averments made in the affidavits filed in support of the writ petitions and they are elucidated hereunder, in brief. 4.1. The appellant in W.A. No. 2632 of 2021 is the Managing Director of MRF Limited, dealing in tyre and rubber industry, finance and investment business as also consultancy and advisory services. It is stated that during the year 2005, for the purpose of commencing the consultancy and advisory service related business activities outside India, he opened a Joint Bank Account (US Dollar Account) along with his brother Kandathil M. Mammen (appellant in W.A. No. 2629 of 2021) with Standard Chartered Bank, Dubai Branch. In 2010, the name of Mr. Samir Thariyan Mappillai (brother's son) was also added as a jo....
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....6.2015. 4.3. In the above circumstances, the appellants filed applications under Section 245C of the Act in Form 34B before the second respondent - Settlement Commission for settlement of all the pending cases by making a full and true disclosure of the facts in relation to the income earned by them for the assessment years 2005-2006 to 2014-2015, as, at that time, the assessment for the said assessment years was pending. The appellants also paid a sum of Rs.18,30,00,000/- towards income tax together with interest. However, the first respondent, without taking note of the disclosure of income of the appellants, rejected the Applications on 30.06.2015 on the ground that the first respondent has no jurisdiction to accept the applications in view of the notification dated 27.05.2015 issued under the provisions of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (in short, Black Money Act). It is further stated that by virtue of the notification dated 27.05.2015, all the undisclosed income will be dealt with under the said statute i.e., Black Money Act, 2015. 4.4. Pursuant to the order dated 30.06.2015, the appellants sent a letter dated 03.07.2....
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....ts were allowed with a direction to the Principal Commissioner of Income Tax to submit a report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, within 45 days of receipt of the said order. Accordingly, a report dated 08.02.2017 was submitted to the effect that an enquiry is required to be conducted under Section 245D (3) through FT & TR, a division of the CBDT to find out the nature of credit and debit appearing in the foreign bank accounts disclosed by the appellants and other transactions related thereto. In effect, the Principal Commissioner of Income Tax requested the first respondent to permit him to conduct an enquiry to verify the domestic income and expenditure of the appellants. The appellants also submitted reply dated 23.02.2017 to the report dated 08.02.2017 of the Principal Commissioner of Income Tax Department contending that no further enquiry is required to be conducted inasmuch as the income earned by the appellants have been truly and fully disclosed along with documentary evidence. 4.6. Notwithstanding the objections raised by the appellants, the first respondent passed an order dated 11.05.2017 under Section 245D (3) of the Act, direct....
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....receipt of the application of the appellants, reports have been called for from the Principal Commissioner of Income Tax and various reports have been furnished to the Settlement Commissioner. After receipt of such reports, the Settlement Commissioner has to give opportunity of hearing to the appellants as provided in Section 245D (4) of the Act. In the present case, a notice dated 15.11.2017 was issued to the appellants directing them to appear for an enquiry on 23.11.2017 at 11.30 am. On the date of hearing namely 23.11.2017, a report of the learned Principal Commissioner dated 22.11.2017 was served on the authorised representative of the appellants stating that the appellants have not made true and full disclosure of the undisclosed income. For the report dated 22.11.2017 served on 23.11.2017 at 11.30 am, the appellants were asked to submit their response together with documentary evidence by 27.11.2017 by 12 noon, allowing just one and half working day. Nevertheless, the response was submitted by the appellants within the time allowed by the first respondent. According to the learned Senior counsel, in compliance with the directions of the settlement commission on 23.11.2017, t....
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....d with a report by the Principal Commissioner of Income Tax dated 22.11.2017 on 23.11.2017 and was expected to file a response thereto on 27.11.2017 i.e., barely one and half working days. As such, the order dated 06.12.2017 was passed without affording sufficient opportunities to the appellant to respond to the report of the PCIT, the contents of which represent the chief reasoning offered by the first respondent. The learned senior counsel placed reliance on the decision in the case of Automotive tyre manufacturers Association vs. Designated Authority and others, [(2011) 2 SCC 258] wherein it was held that the written submissions furnished by a litigant cannot be a substitute for oral hearing. In that decision, it was held as follows: "...82. In the light of the afore noted legal position and the elaborate procedure prescribed in Rule 6 of the 1995 Rules, which the DA is obliged to adhere to while conducting investigations, we are convinced that duty to follow the principles of natural justice is implicit in the exercise of power conferred on him under the said Rules. Insofar as the instant case is concerned, though it was sought to be pleaded on behalf of the respondent....
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....t from 01.02.2021 and in its place, an Interim Board for settlement has been constituted. The Interim board has been formed to consider the pending applications and it has the powers to resolve the tax dispute raised by the appellants. While so, the discontinuance of the Settlement Commission will have no bearing in the case of the appellants and the Interim Board has the powers to adjudicate the dispute in the place of the Settlement Commission in the event of the matter being remanded back to the Interim Board. The learned senior counsel therefore prayed this court to allow this appeal and to remand the matter back to the Interim Board for settlement of the tax dispute. 7.1. Mr.N.L. Rajah, learned senior counsel appearing for the appellant in W.A. No. 2632 of 2021, at the outset, would contend that the order passed by the first respondent-Settlement Commission is in violation of the principles of natural justice. According to the learned senior counsel, the appellants herein are brothers and they have filed two settlement applications bearing Nos. TN/CN51/2015-16/34/IT and TN/CN51/2015-16/35/IT on 10.07.2015 before the first respondent invoking Section 254C (1) of the Act rela....
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..... It is also submitted that the appellant had fully and truly disclosed the income and any other details are wholly extraneous to the determination of an application for settlement. The appellant had fully cooperated with the first respondent for conclusion of the proceedings, which stands testimony to the fact that the Department, in the various reports filed before the first respondent, do not indicate any non-cooperation on the part of the appellant. However, while passing the order, which was impugned before the learned Judge, the first respondent failed to adhere to the basic principles of natural justice and it infringes the fundamental rights as guaranteed to the appellant under Articles 14, 19 (1) (g) and 21 of The Constitution of India. Therefore, it is submitted by the learned senior counsel that the gay abandon with which the first respondent proceeded to pass the order dated 06.12.2017 is based on preconceived notions. As such, the order dated 06.12.2017 of the first respondent has to be set aside with a direction to give sufficient opportunity to the appellant to put forth their submission. Without considering the said aspects, the learned Judge erred in dismissing the....
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....account as has been held by the Honourable Supreme Court in the case of Sutlej Cotton Mills Limited vs. CIT [116 ITR 1]. In the present case, the appellants have followed accrual basis of accounting in respect of the income received from ABN Amro Bank but in respect of a commission income, the appellants followed 'cash basis' accounting. The amounts are already lying in the bank account and whatever benefit arises out of the foreign exchange gain is already available in the bank accounts itself and hence taxable in either system of accounting by treating it as income received by the appellants. As per Section 6 of the Act, the total income includes all income that accrues or arises outside India. It has to be necessarily taxed in the mercantile system of accounting. However, the appellants have not disclosed any income on account of foreign exchange rate fluctuation in the year of remittances also. Further, in the absence of production of balance sheet or statement of accounts, the full and true income of the appellants cannot be determined. Even as on date, the appellants have not produced the bank statement of the account No. 1685646 held with First Gulf Bank, Dubai and t....
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....ng, the AR stated that the applicant is not aware of any company by name Moon Water Limited and the salary income mentioned in the account opening form was filed up just like that. Later, the applicants took a position in the further submissions dated 27.11.2017, that it represents the salary income of AED 3,50,000/- per month, coming to approx Rs.6.8 crores per annum earned in India. The applicant also submitted that Shri Arun Mammen was never an employee of the so called company Moon water Limited and the applicant was also not aware of the existence of any such company. We find that the statements recorded in the account opening form duly signed by the applicant and that given in the SOF/further submissions by the applicant are contradictory. The salary income shown in India in the Returns of Income is around Rs.2.57 crores (AY 2013-14) and Rs.5.79 crores (AY 2014-15) from MRF Ltd. in respect of Shri Arun Mammen. Hence, the disclosure made by the applicant in the statement of facts is not full both in respect of Moon Water Ltd and the salary income. Further, whatever is stated in the Statement of Facts on the manner in which the income has been derived has not been corroborated ....
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....eferred to in section 153A or section 153C have been initiated, the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees, (ia) in a case where- A) the applicant is related to the person referred to in clause (i) who has filed an application (hereafter in this sub-section referred to as -specified person?); and (B) the proceedings for assessment or re-assessment for any of the assessment years referred to in clause (b) of sub-section (1) of section 153Aor clause (b) of sub-section (1) of section 153B in case of the applicant, being a person referred to in section 153A or section 153C, have been initiated,the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees, (ii) in any other case, the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees, and such tax and the interest thereon, which would have been paid under the provisions of this Act had the income disclosed in the application been declared in the return of income before the Assessing Officer on the date of application, has been pa....
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....missioner: Provided that an application shall not be declared invalid unless an opportunity has been given to the applicant of being heard: Provided further that where the Principal Commissioner or Commissioner] has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the Principal Commissioner or Commissioner (2D) Where an application was made under sub-section (1) of section 245C before the 1st day of June, 2007 and an order under the provisions of sub-section (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 sub-section (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 Comm....
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....1st day of June, 2010, within twelve months from the end of the month in which the application was made; (iii) in respect of an application made on or after the 1st 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 subsection (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 ....
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....contained in such order passed by the Settlement Commission and nothing contained in the proviso to sub-section (1) of section 186 shall apply to the cancellation of the registration of a firm required to be made in pursuance of any such directions as aforesaid. Power of Settlement Commission to reopen completed proceedings. 245E. If the Settlement Commission is of the opinion (the reasons for such opinion to be recorded by it in writing) that, for the proper disposal of the case pending before it, it is necessary or expedient to reopen any proceeding connected with the case but which has been completed under this Act by any income-tax authority before the application under section 245C was made, it may, with the concurrence of the applicant, reopen such proceeding and pass such order thereon as it thinks fit, as if the case in relation to which the application for settlement had been made by the applicant under that section covered such proceeding also : Provided that no proceeding shall be reopened by the Settlement Commission under this section if the period between the end of the assessment year to which such a proceeding relates and the date of appli....
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....direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission. (5) [* * *] (6) [* * *] (7) The Settlement Commission shall, subject to the provisions of this Chapter, have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings. Inspection, etc., of reports. 245G. No person shall be entitled to inspect, or obtain copies of, any reports made by any income-tax authority to the Settlement Commission; but the Settlement Commission may, in its discretion, furnish copies thereof to any such person on an application made to it in this behalf and on payment of the prescribed fee : Provided that, for the purpose of enabling any person whose case is under consideration to rebut any evidence brought on record against him in any such report, the Settlement Commission shall, on an application made in th....
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....son may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the settlement and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had not such immunity been granted. Abatement of proceeding before Settlement Commission. 245HA. (1) Where- (i) an application made under section 245C on or after the 1st day of June, 2007 has been rejected under sub-section (1) of section 245D; or (ii) an application made under section 245C has not been allowed to be proceeded with under sub-section (2A) or further proceeded with under subsection (2D) of section 245D; or (iii) an application made under section 245C has been declared as invalid under sub-section (2C) of section 245D; or (iiia) in respect of any application made under section 245C, an order under sub-section (4) of section 245D has been passed not providing for the terms of settlement; or (iv) in respect of any other application made under section 245C, an order under sub-section (4) of section 245D has not b....
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....firm, for the purposes of the time-limit for cancellation of registration of the firm under sub-section (1) of section 186, the period aforesaid shall, likewise, be excluded. Credit for tax paid in case of abatement of proceedings. 245HAA. Where an application made under section 245C on or after the 1st day of June, 2007, is rejected under sub-section (1) of section 245D, or any other application made under section 245C is not allowed to be proceeded with under sub-section (2A) of section 245D or is declared invalid under sub-section (2C) of section 245D or has not been allowed to be further proceeded with under sub-section (2D) of section 245D or an order under sub-section (4) of section 245D has not been passed within the time or period specified under sub-section (4A) of section 245D, the Assessing Officer shall allow the credit for the tax and interest paid on or before the date of making the application or during the pendency of the case before the Settlement Commission. Order of settlement to be conclusive. 245-I. Every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and ....
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....xure and the statement or other documents accompanying such annexure), it shall be stated clearly and concisely and supported by a duly sworn affidavit. Commissioner's further report 9.(1) Where an application has not been declared invalid under sub-section (2C) of Section 245D or an application has been allowed to be further proceeded with under sub-section (2D) of Section 245D, the information contained in the annexure and in the statements and other documents accompanying such annexure shall be sent to the Commissioner by the Commission with the direction that the Commissioner shall furnish a further report in seven copies within forty-five days of the receipt of said annexure or within such extended period as may be allowed by the Commission on a request made by the Commissioner. (2) If the Commissioner fails to furnish his report on or before the expiry of the specified period of forty-five days or within further extended period as the Commission may allow, as the case may be, the Commission may proceed to hear the case without such report. (3) A copy of the report of the Commissioner under sub-rule (1) of rule 9 shall be sent to the app....
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....r, it can ask the commissioner to submit a report. The report is to be furnished within 45 days as per Rule 9 and if in case, the report is not furnished in time or if no extension is granted, then the commissioner cannot file any report and the settlement commission has to proceed further and pass orders without such report. The time period specified under Rule 9 is mandatory as because there is no provision to extend the outer time limit of 18 months, even in case any extension in filing the report under Rule 9. As per Rule 9A, the assessee is to file his objections within 15 days or within such extended period. Thereafter, considering the report, objections to the report of the assessee and after granting a personal hearing to the applicant, the commission is to pass an order under Section 245D (4) as it deems fit on the matters covered by the application and also by the report. The power is not only to lay down the terms of settlement but also includes the authority to reject the application. The final order under sub-section 4, if in case the settlement commission deems it fit to grant such reliefs as it may think, shall set forth the terms of settlement including demand by wa....
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....intending defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigational resources of the Department in cases of doubtful benefit to revenue, while needlessly proliferating litigation and holding up collections. We would, therefore, suggest that there should be a provision in the law for a settlement with the taxpayer at any stage of the proceedings. In the United Kingdom the 'confession' method has been in vogue since 1923. In the U.S. law also, there is a provision for compromise with the tax payer as to his tax liabilities. A provision of this type facilitating settlement in individual cases will have this advantage over general disclosure schemes that misuse thereof will be difficult and the disclosure will not normally breed further tax evasion. Each individual case can be considered on its merits and full disclosures not only of the income but of the modus operandi of its buildup can be insisted on, thus sealing off chances of continued evasion through similar practices. 2.33. To ensure that the settlement is fair, prompt and independent, we would suggest that there should be a high level machinery for administering the p....
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....ure, it will be useful to refer to the judgments of the Apex Court, wherein the scope of proceedings by the Settlement Commission has been discussed and laid down, as follows: (i) CIT v. Om Prakash Mittal, (2005) 2 SCC 751 : 2005 SCC OnLine SC 376: "14. The Commission's power of settlement has to be exercised in accordance with the provisions of the Act. Though the Commission has sufficient elbow room in assessing the income of the applicant, it cannot make any order with a term of settlement which would be in conflict with the mandatory provisions of the Act, like in the quantum and payment of tax and the interest. The object of the legislature, in introducing Section 245-C is to see that protracted proceedings before the authorities or in courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amounts statutorily payable under the Act. ...... 16. The foundation for settlement is an application which the assessee can file at any stage of a case relating to him in such form and in such manner as is prescribed. The statutory mandate is that the application shall contain "full and true ....
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....e Commission calls for report to decide whether the application is to be rejected or permitted to be continued. The declaration contemplated in Section 245-C is in the nature of voluntary disclosure of concealed income, but as noted above it must be true and fair disclosure. Voluntary disclosure and making a full and true disclosure of the income are necessary preconditions for invoking the Commission's jurisdiction. 19. In the aforesaid background it would be proper to direct the Commission to rehear the matter. It shall be open to the parties to place any further material which they may choose to place for consideration in support of their respective stands. The Commission shall decide the matter afresh keeping in view the observations made above. It is, however, made clear that we have not expressed any opinion on the facts of the case." (ii) Brij Lal v. CIT, (2011) 1 SCC 1 : 2010 SCC OnLine SC 1192: "18. Coming to Chapter XIX-A which deals with settlement of cases, it may be stated that the word "case" is defined under Section 245-A(b). It is an exhaustive definition. The definition makes it clear that an application for settlement shall lie only ....
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....n. Thus, Section 245-D(7) brings out the difference between Section 245-D(1) stage and Section 245-D(4) stage. Under Section 245-D(6), it is laid down that every order under Section 245-D(4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest. 23. Descriptively, it can be stated that assessment in law is different from assessment by way of settlement. If one reads Section 245-D(6) with Section 245-I, it becomes clear that every order of settlement passed under Section 245-D(4) shall be final and conclusive as to the matters contained therein and that the same shall not be reopened except in the case of fraud and misrepresentation. Under Section 245-F(1), in addition to the powers conferred on the Settlement Commission under Chapter XIX-A, it shall also have all the powers which are vested in the Income Tax Authority under the Act. In this connection, however, we need to keep in mind the difference between "procedure for assessment" under Chapter XIV and "procedure for settlement" under Chapter XIX-A (see Section 245-D). Under Section 245F(4), it is clarified that nothing in Chapter XIX-A shall affect the operation of any other ....
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....the AO under Sections 142 and 143 and making of the order of assessment by the AO under Section 143(3) or under Section 144 and issuing of notice of demand under Section 156 on the basis of the assessment order. The making of the order of assessment is an integral part of the process of assessment. No such steps are required to be followed in the case of proceedings under Chapter XIX-A. The said chapter contemplates the taxability determined with respect to undisclosed income only by the process of settlement/arbitration. Thus, the nature of the orders under Sections 143(1), 143(3) and 144 is different from the orders of the Settlement Commission under Section 245-D(4). 42. The order of the Settlement Commission under Section 245-D(4) shall be final and conclusive under Section 245-I subject to two qualifications under which it can be recalled viz. fraud and misrepresentation but even here it is important to note that under Section 245-D(7) where the settlement becomes void on account of fraud and misrepresentation the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed t....
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....y the assessee, there is no mention of Section 154. On the contrary, under Section 245-I 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 reopened by way of review or recall. Like ITAT, the Settlement Commission is a quasijudicial body. Under Section 254(2), ITAT is given the power to rectify but no such power is given to the Settlement Commission. Thus, we hold that the Settlement Commission cannot reopen its concluded proceedings by invoking Section 154 of the Act." 14. Following the above decisions and considering various other judgments, a Division Bench of the Delhi High Court, while considering the scope of proceedings before the Settlement Commission in Agson Global Pvt Ltd & Others v. Income Tax Settlement Commission & Others [(2016) SCC Online Del 49] held as under: "14. It is, therefore, clear that the powers and functions of an income tax authority which are to be exclusively exercised by the settlement commission (subject to the provisions of section 245D(3)) must be in the context of and have a ne....
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....thority under the Act in relation to the case. In essence, the Commission assumes jurisdiction to deal with the matter after it decides to proceed with the application1 and continues to have the jurisdiction till it makes an order under Section 245-D. Section 245-D(4) is the charging section and sub-section (6) prescribes the modalities to be adopted to give effect to the order. It has to be noted that the language used in Section 245-D is "order" and not "assessment". The order is not described as the original assessment or regular assessment or reassessment. In that sense, the Commission exercises a plenary jurisdiction." (emphasis supplied) 16. In Brij Lal v. CIT [(2011) 1 SCC 1], the Hon'ble Supreme Court held as under: "23. Descriptively, it can be stated that assessment in law is different from assessment by way of settlement. If one reads Section 245-D(6) with Section 245-I, it becomes clear that every order of settlement passed under Section 245-D(4) shall be final and conclusive as to the matters contained therein and that the same shall not be reopened except in the case of fraud and misrepresentation. Under Section 245-F(1), in addition to the po....
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....cedure for settlement in Chapter XIX-A in which Sections 245-C and 245-D fall. Provision for levy of interest for default in payment of advance tax under Section 234-B falls in Chapter XVII (Section F) which deals with collection and recovery of tax which as stated above is incidental to the liability to pay advance tax under Section 207 (which is also in Chapter XVII) and to the computation of total income in the manner indicated under Chapter XIX-A vide Sections 245-C(1-B) and 245-C(1-C) read with the provisos to Section 245-C(1) on the additional income tax payable on the undisclosed income." (emphasis supplied) 17. The Supreme Court, in Brij lal (supra), made a clear distinction between assessment in law (regular assessment under Chapter XIV) and "assessment" by way of settlement. It clearly held that there is a difference between "procedure for assessment" under Chapter XIV and "procedure for settlement" under Chapter XIX-A. In fact, it reiterated that under the said Act, there is a clear difference between 'assessment in law' [regular assessment or assessment under Section 143(1)] and 'assessment by settlement' under Chapter XIX-A. It also held categorically that ....
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....3) provision is sought to be incorporated in Section 245-C. When Parliament uses the words "as if such aggregate would constitute total income", it presupposes that under the special procedure the aggregation of the returned income plus income disclosed would result in computation of total income which is the basis for the levy of tax on the undisclosed income which is nothing but "assessment". Similarly, Section 245-C(1-C) provides for deductions from the total income computed in terms of Section 245-C(1-B). 27. Thus, the special procedure under Sections 245-C and 245-D in Chapter XIX-A shows that a special type of computation of total income is engrafted in the said provisions which is nothing but assessment which takes place at Section 245-D(1) stage. However, in that computation, one finds that provisions dealing with a regular assessment, selfassessment and levy and computation of interest for default in payment of advance tax, etc. are engrafted. [See Sections 245C(1-B), 245-C(1-C), 245-D(6), 245-F(3) in addition to Sections 215(3), 234-A(4) and 234-B(4).]" (emphasis supplied) 19. On the strength of the observations quoted above it was contended by the le....
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....n are circumscribed by the object and role which has been ascribed to the settlement commission, which is to settle the case in terms of the procedure stipulated in Chapter XIX-A. Since assessment of the type contemplated under section 143(3) is outside the purview of settlement proceedings, a special audit under section 142(2A), which is in aid of assessment, would also be beyond the scope of settlement proceedings. The other decisions referred to by the learned counsel for the revenue do not militate against the view we have taken." 15. The powers therein are not akin to the powers of an assessing authority making regular assessment or revision of assessment to accept or deny the explanation offered by the assessee but rather the scope of enquiry would be confined to the true and full disclosure, co-operation with the commission and the manner in which such income has been derived. The powers are to be exercised keeping in mind the object of the settlement scheme provided under the Act for speedy disposal of the disputes. The proceedings are similar to arbitration, whereby the commission is not to delve more on the legalities on the conduct of the assessee prior to the applica....
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....ctricity Commissioners [(1924) 1 KB 171] and followed by this Court in more than one decision clearly brings out the meaning of the concept of judicial act: "Wherever any body of persons having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially, act in excess of their legal authority they are subject to the controlling jurisdiction of the King's Bench Division exercised in these writs." Lord Justice Slesser in King v. London County Council [(1931) 2 KB 215, 243] dissected the concept of judicial act laid down by Atkin, L.J., into the following heads in his judgment: "Wherever any body of persons (1) having legal authority (2) to determine questions affecting rights of subjects and (3) having the duty to act judicially (4) act in excess of their legal authority - a writ of certiorari may issue". It will be seen from the ingredients of judicial act that there must be a duty to act judicially. A tribunal, therefore, exercising a judicial or quasi-judicial act cannot decide against the rights of a party without giving him a hearing or an opportunity to represent his case in the manner known to law. If the....
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.... considered by this Court and the true legal position in that behalf is no longer in doubt. A writ of certiorari can be issued for correcting errors of jurisdiction committed by inferior courts or tribunals: these are cases where orders are passed by inferior courts or tribunals without jurisdiction, or is in excess of it, or as a result of failure to exercise jurisdiction. A writ can similarly be issued where in exercise of jurisdiction conferred on it, the Court or Tribunal acts illegally or properly, as for instance, it decides a question without giving an opportunity, be heard to the party affected by the order, or where the procedure adopted in dealing with the dispute is opposed to principles of natural justice. There is, however, no doubt that the jurisdiction to issue a writ of certiorari is a supervisory jurisdiction and the Court exercising it is not entitled to act as an appellate Court. This limitation necessarily means that findings of fact reached by the inferior Court or Tribunal as result of the appreciation of evidence cannot be reopened or questioned in writ proceedings. An error of law which is apparent on the face of the record can be corrected by a writ, but no....
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....Sawarn Singh v. State of Punjab, [(1976) 2 SCC 868], wherein, it was held by the Hon'ble Supreme Court as follows: "12. Before dealing with the contentions canvassed, it will be useful to notice the general principles indicating the limits of the jurisdiction of the High Court in writ proceedings under Article 226. It is well settled that certiorari jurisdiction can be exercised only for correcting errors of jurisdiction committed by inferior courts or tribunals. A writ of certiorari can be issued only in the exercise of supervisory jurisdiction which is different from appellate jurisdiction. The Court exercising special jurisdiction under Article 226 is not entitled to act as an appellate court. As was pointed out by this Court in Syed Yakoob case, "this limitation necessarily means that findings of fact reached by the inferior court or tribunal as a result of the appreciation of evidence cannot be reopened or questioned in writ proceedings. An error of law which is apparent on the face of the record can be corrected by a writ, but not an error of fact, however grave it may appear to be." 13. In regard to a finding of fact recorded by an inferior tri....
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....le the Commissioner's objection. He also very fairly, in our opinion and [ Vide Corrigendum No. F.3/Ed. B.J./61 dated 21-8-1989] rightly accepted the position that the appellant was entitled to be heard on the Commissioner's objections. It appears to us, therefore, if that is the position then, in our opinion, the appellant was entitled to be heard on the objections of the Commissioner. As mentioned hereinbefore, the only short ground which was sought to be canvassed before us was whether after the amended Act the order had been rightly set aside and whether the appellant had a right to be heard on the objections of the Commissioner. Mr Harish Salve, counsel for the appellant contends that it had a right to be heard. On the other hand Dr. V. Gauri Shankar, learned counsel for the respondents submitted that the order proceeded on the assumption that the objections had been heard. He did not, in fairness to him it must be conceded, contest that in a matter of this nature the appellant had a right to be heard. Reading the order, it appears to us, that though the appellant had made submissions on the Commissioner's objections but there was no clear opportunity given to the ....
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....t, those findings are binding on this Court or the High Court. By process of judicial review we cannot appreciate the evidence and record our own findings of fact. If the findings are based on no evidence or based on conjectures or surmises and no reasonable man would, on given facts and circumstances, come to the conclusion reached by the appellate authority on the basis of the evidence on record, certainly this Court would oversee whether the findings recorded by the appellate authority is based on no evidence or beset with surmises or conjectures. Giving of reasons is an essential element of administration of justice. A right to reason is, therefore, an indispensable part of sound system of judicial review. Reasoned decision is not only for the purpose of showing that the citizen is receiving justice, but also a valid discipline for the Tribunal itself. Therefore, statement of reasons is one of the essentials of justice. ............ 11. The contention of Shri Chatterjee that it is the duty of the appellant to produce the record to repudiate the findings recorded by the appellate authority is without substance. In a quasi-judicial enquiry it is for the parties ....
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....26. 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 assessee and may waive interest, penalties or prosecution, where it thinks appropriate. Indeed, it would be difficult to predicate the reasons and considerations which induce the Commission to make a particular order, unless of course the Commission itself chooses to give reasons for its order. Eve....
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....wrong interpretation of a deed of trust cannot be a violation of the provisions of the Income Tax Act. It is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in proceedings relating to other assessment years." (viii) Dharamraj v. Chhitan, [(2006) 12 SCC 349 : 2006 SCC OnLine SC 1153], wherein, it was held as follows: "18. It is well-settled position of law by a catena of decisions of this Court that in the writ jurisdiction of the High Court, it is always permissible for it to correct the decision of the consolidation authorities or to declare the law on the basis of facts and proof of such facts. For this proposition, we may usefully refer to a decision of this Court in Mukunda Bore v. Bangshidhar Buragohain [(1980) 4 SCC 336 : 1982 SCC (Tax) 143 : AIR 1980 SC 1524] in which this Court indicated as to when the High Court can interfere with the orders of quasi-judicial authority. This observation may be quoted which is as follows: (SCC pp. 339-40, para 16) "16. While on facts the order of the Board under appeal is not impeccable, we must remember that under Article 226 of the Constitu....
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....icult to persuade ourselves to agree with the learned counsel for the assessee that there was no justification for the order of remand by the High Court and that the order passed by the Settlement Commission should have been affirmed. We are satisfied that under the given scenario, the High Court was correct in making the order of remand and no good ground is made out for interference in exercise of our jurisdiction under Article 136 of the Constitution." (x) Union of India v. Asahi India Safety Glass Ltd., [(2015) 11 SCC 451 : 2015 SCC OnLine SC 518], wherein, it was held as follows: "14. From the aforesaid it becomes clear that the High Court has not interfered with the facts which were recorded by the Settlement Commission. On the contrary, the facts noted above remained undisputed. On those facts the High Court has simply stated the correct legal position where the Settlement Commission had gone wrong in law. Thus, the High Court has simply applied the correct principle of law on the admitted facts. This, according to us, was well within the powers of the High Court while exercising its jurisdiction under Article 226 of the Constitution. Such remand of the High Cour....
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....t it is a Tribunal. Its powers are considerable; its determination affects the rights of parties; its obligations are quasi-judicial; the orders it makes at every stage have tremendous impact on the rights and liabilities of parties. xxxxxxxxx In short, Settlement Commissions are Tribunals. The preliminary point fails." Thus the Settlement Commission is held to be a Tribunal. That being the position, the petitioner is entitled to seek judicial review of the order of the Settlement Commission in a petition under Articles 226 and 227 of the Constitution of India. For these reasons, we answer the first question in the affirmative. 15........ In our opinion, many of the grounds on which arbitration award could be set aside, would not be available in view of the nature and jurisdiction of the Settlement Commission. We are of the view that a decision of Settlement Commission could be interfered with only. (i) if grave procedural defect such as violation of the mandatory procedural requirements of the provisions in the Chapter XIX-A and/or violation of Rules of natural justice is made out; (ii) if it is found that there is no nexus bet....
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....efore, 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." (ii) ACE Investment Ltd v. Settlement Commission (2003) 264 ITR 571 (Mad), in which it was held as follows: "10.This is more so, since the petitioners, having filed the application had no option even to withdraw the application in terms of s. 245C(3) of the Act. The power of judicial review of this Court is not barred when the validity of an order of the Settlement Commission is questioned on the ground that the application itself is not maintainable and any decision on the application is also without jurisdiction. When, once it is held that an application filed for settlement of cases is not maintainable on the ground that the applicant has not made a true and full disclosure of the income, proceeding with such application and deciding the issue would be outside the power of the Settlement Commission, as the application itself is not in conformity with s. 245C(1) of the Act. Merely because the petitioners have participated in the proceedings, the petitioners are not prevented from questioning the....
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....ure different from what existed before the Commission, this Court will not exercise its writ jurisdiction. Therefore, the petitioner has not come with clean hands. In the present case, we are of the view that there was suppression of facts in the petition which was material to the issue at hand. Therefore, we see no reason to entertain this petition on the above ground also." 20. There is no quarrel about the preposition that the failure to truly and fully disclose the particulars and the manner of derivation of the additional income is the primordial requisite for an application to be entertained. In the present case, the Learned Senior Counsel for the appellants has, referring to the applications, annexures and other particulars filed before the commission, contended that the appellants have truly and fully disclosed all the particulars within their knowledge and also the manner in which the additional income has been derived and that satisfies the requirements under Sections 245C and 245D of the Act. What constitutes true and full disclosure in the context of Chapter XIX-A is to be explored before we proceed further. 21. An assessee is entitled to approach the settlement C....
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.... disclosure which the section demands. The words used are "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year". It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise - the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority ha....
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....he assessing authority what inferences whether of facts or - law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law he would draw from the primary facts. 11. If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn? 12. It may be pointed out that the Explanation to the sub-section has nothing to do with "inferences" and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income Tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose "inferences" to draw the proper inferences being the du....
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....to the facts of the case as the alleged escapement of income for assessment had not resulted from failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that year. The notice in the instant case did not indicate whether it was a case covered by clause (a) or clause (b). On our finding that clause (a) was not invokable, the power under clause (b) could be called in aid under Section 149(1)(b) of the Act within four years from the end of the relevant assessment year. Admittedly, the notice has been issued beyond a period of four years and, therefore, the notice itself was beyond the time provided under the law. On the facts appearing in the case the High Court overlooked to consider this aspect of the matter. Since the proceedings before the High Court were under Article 226 of the Constitution and not by way of reference under the Act, the jurisdiction of this Court is not advisory and confined to the questions referred for opinion. On the facts we are satisfied that ends of justice require our intervention and we would accordingly allow the appeal of the assessee by holding that the notice under Section 148 of the Act can....
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.... have gone into the merits of the contentions advanced on behalf of the appellants and rendered specific findings, more particularly when allegations of principles of natural justice and violation of the procedures, are alleged. Even if the Learned Judge was to disagree with the contentions, all the contentions ought to have been discussed and specific findings ought to be given. However, the learned Judge has merely reproduced the order of the Settlement Commission and recorded that the conditions stipulated have not been satisfied, without considering whether the opportunities as contemplated under the provisions, have been granted in the light of the specific contentions. 25. At this stage, we are concerned with the legality of the procedure. The applications were originally filed on 10.07.2015. The order of remand was passed by this Court on 21.06.2016. The order under Section 245D(3) was passed on 11.05.2017. The report ought to have been filed with 90 days or within such extended period. No records are produced before this Court to show that the time to file the report has been extended by the commission. By the impugned order, it is evident that the proceedings were held ....
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....been reiterated in the following paragraphs: "30.The mandate of the law is that the order on the objections is required to be passed by the competent authority "after the personal hearing" is granted. The respondents had filed an affidavit dated 17-7-2018 before the High Court wherein it was stated that the reply given vide letter dated 15-72011 does not indicate the decision/order/predetermination of the competent authority. The competent authority had informed the objectors to remain present with all material documents at the time of personal hearing, the date of which would be notified later. At the time of arguments before this Court, it was sought to be contended by the Additional Solicitor General for the Union of India that the letter dated 15-7-2011 was an order passed under Section 20-D(2) of the Act. We find that the stand taken by the respondents before the High Court and this Court is completely contradictory, and does not commend acceptance. 31. In any event, the order under Section 20-D(2) cannot be passed prior to the personal hearing. The mandate of the law is that the order must be passed "after" the grant of personal hearing, and after any furthe....
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....17 and the same were dismissed on 03.08.2021. In the meantime, by Finance Act 2021, Section 245A and 245B were amended by which the Settlement Commission ceased to exist, and "interim Board" was substituted. The Amendment Act came into force on 01/04/2021. By the amended provisions, initially, the Interim Board was entitled to entertain only applications which were pending. 27. Section 245A(eb) defined the word "Pending applications" defined as follows: "Pending application" means an application which was filed under section 245C and which fulfils the following conditions, namely: - (i) it was not declared invalid under sub-section (2C) of section 245D; and (ii) no order under sub-section (4) of section 245D was issued on or before the 31st day of January, 2021 with respect to such application." 28. By the amendment, it was made clear that no application will be entertained after 01.02.2021. Thereafter, the Central Government has constituted Interim Board for Settlement vide Notification no. 91 of 2021 dated 10.08.2021. Subsequently, the following press release dated 07.09.2021 was issued by the Central Board of Direct Taxes. Government of India ....
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....ard as per the provisions of the Act. It is clarified that taxpayers who have filed such applications shall not have the option to withdraw such applications as per the provisions of section 245M of the Act. Further, the taxpayers who have already filed application for settlement on or after 01.02.2021 as per the direction of the various High Courts and who are otherwise eligible to file such application, as per para 3 above, on the date of filing of the said application shall not be required to file such application again. Legislative amendments in this regard shall be proposed in due course. (Surabhi Ahluwalia) Commissioner of Income Tax (Media & Technical Policy) Official Spokesperson, CBDT 29. The said press release was issued after several High Courts issued directions to entertain the applications for settlement. It was further stated that the assessees who were eligible to file an application as on 31.01.2021 and where assessments are pending would be eligible to file their application till 30th September 2021. It was also made clear that the applications filed by the assessees based on the directions of the H....
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....e application is sought to be filed (relevant assessment years); and (ii) where the relevant assessment proceedings of the assessee are pending as on the date of filing the application for settlement. 5. The Hindi version of the order shall follow." 30. The above order has been issued by exercising the powers under Section 119 in line with the press release dated 07.09.2021. In the case before us, the order of the Settlement Commission rejecting the applications has been passed on 06.12.2017, the challenge to the same was accepted by this Court. The writ petitions were pending, when the Settlement Commission was abolished and Interim Board was brought into operation. This court is of the view that the restrictive circumstances under which an Interim Board can entertain an application is applicable, only when an application is filed afresh or pending and not applicable to cases, where the High Court in exercise of its powers under Article 226 of the Constitution of India, set asides an earlier order and remands back the matter for fresh consideration. The powers of the High Court which emanate from the Constitution, cannot be curtailed by a law made by the legis....