TaxTMI 
TaxTMI 
2023 (2) TMI 389
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.... Dr A.K.Sachan and Ms Richa Mishra. At the time of the search one of the assessee Ms. Richa Mishra surrendered Rs. 8.00 crores as undisclosed income as under: - Table- I 1. Ms. Richa Mishra Rs. 5.00 crores 2. Shri Balaji Charitable Trust Rs.1.50 crores 3. Shekhar Hospital (P) Ltd. Rs.1.50 crores 3. Out of the 5 entities which were subject to search on 31/07/2013, three of them made separate applications on 27.02.2015 before the Settlement Commission under Section 245 of the Income Tax Act, disclosing their unaccounted income as under:- Table- II 1. Ms. Richa Mishra Rs. 1,93,16,254/- 2. Shri Balaji Charitable Trust Rs. 1,69,04,560/- 3. Shekhar Hospital (P) Ltd Rs. 4,84,46,020/- 4. The Settlement Commission on receipt of the application, decided to proceed further with the application, and sent a copy to the concerned Principal Commissioner of Income Tax seeking his response as per Rule 9 of the Income Tax Settlement (Procedure) Rules, 1997 and finally settled the matter rejecting the objections raised by Income Tax Department vide impugned order dated 19/22.8.2016. 5. Present Writ Petition was filed challenging the order of the Settlement Commission. During pe....
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....as mandated by Section 245(C) of the Act of 1961. It was submitted that it is a precondition for making an application before the Settlement Commission that the declaration of unaccounted income should be full and true, hence on this ground alone the application should have been dismissed by the Settlement Commission. B. The second ground urged by the Counsel for petitioner was that Dr A. K. Sachan was subjected to search operation and number of undisclosed bank accounts were discovered, but receipts in the said bank accounts were sought to be attributed as income of M/s Hind Charitable Trust. It was submitted that Dr A. K. Sachan was not a party before the Commission, nor did he appear before the Commission. He did not give any evidence, hence, the Commission could not have returned finding in this regard in favour of respondents. C. It was further submitted that Dr A. K. Sachan was subjected to regular assessment, and the Income Tax department had assessed the receipts found in the undisclosed account as his income, which could not have been subject matter for Settlement before the Commission as it no longer remained "undisclosed income". Further it was never the stand of Dr.....
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....may have been decided by the Commission are open to review in this appeal. For answering this question one has to have regard to the scheme of Chapter XIX-A. The said chapter was inserted by the Taxation Laws (Amendment) Act, 1975 with effect from April 1, 1976. A somewhat similar provision was contained in sub-sections(1-A) to (1-D) of Section 34 of the Income Tax Act, 1922, introduced in the year 1954. The provisions of Chapter XIX-A are, however, qualitatively different and more elaborate than the said provisions in the 1922 Act. The proceedings under this chapter commence by an application made by the assessee as contemplated by Section 245-C. Section 245-D prescribes the procedure to be followed by the Commission on receipt of an application under Section 245-C. Sub-section (4) says: "After examination of the records and the report of the Commissioner, received under sub-section(1), and the report, if any, of the Commissioner received under sub-section(3), 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 ....
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....e, 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. Even if it gives reasons in a given case, the scope of enquiry in the appeal remains the same as indicated above viz., whether it is contrary to any of the provisions of the Act. In this context, it is relevant to note that the principle of n....
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....oceedings relating to other assessment years." TRUE AND FULL DISCLOSURE OF INCOME : 11. The first contentions raised by learned counsel for the petitioner was that the respondents had not made full and true disclosure of income while making application under Section 245(C) of the Act of 1961 and consequently the Commission on noticing the facts should have dismissed the application. In support of his argument, it was submitted that during search proceedings the assessee had voluntarily surrendered Rs. 8.00 crores as undisclosed income in the following manner. Rs. 5.00 crore was said to be undisclosed income by Ms. Richa Mishra, Rs. 1.50 crores by Sri Balaji Charitable Trust and Rs. 1.50 crores by Shekhar Hospitals Private Limited but in the applications made before the Commission the said figures were changed. The income and disclosure was made of Rs. 1,93,16,254/- by Dr. Richa Mishra, Rs. 1,69,04,560/- and Rs. 4,84,46,020/- by M/s Balaji Charitable Trust and Shekhar Hospital, respectively. It was further stated that the applications were filed by the department on 7.7.2015 to conduct further inquiries but no orders were passed by the Commission. Finally, it was also argued that ....
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....ile only an amount of Rs. 25,40,030/- has been disclosed for the financial year 2009-10 and no evidence has been submitted in support of the disclosed income. It was also submitted that the account maintained with the Axis Bank in the name of Shekhar School of Nursing which is run under the management of M/s Balaji Charitable Trust, unaccounted cash and non-cash deposit were found in various accounts. On the basis of the material collected by the department it was of the considered view that M/s Balaji Charitable trust was not entitled for any deduction under section 10 (23-C) of the Act of 1961 as it does not fulfill the twin conditions prescribed for the application for eligibility for deduction under the said provision, in as much as, the educational institution does not exist solely for the purposes of education but for profit considering the huge amount of cash deposits received by it, and also that it's aggregate annual receipt exceeded the limit prescribed as per Rule 2 (B-C) of the Income Tax Rules. According to the records it was stated that the group is being managed and controlled by Ms. Richa Mishra and Dr A.K Sachan. 15. After examining the accounts of the M/s Bal....
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....K. Sachan. No satisfactory explanation was given by the applicant for the receipts and on the other hand, different versions were given by her, and no details were provided to department. Before the Commission she further set up a case that the money found in the undisclosed accounts of Dr A. K. Sachan was in fact given by her. She surrendered the deposits in the account of Axis Bank, Indira Nagar in the name of Dr A. K. Sachan amounting to Rs. 3,57,92,000/- but has gone back on her version offered only Rs. 1,30,40,256/- as additional and total income for the assessment years 2010-11 & 2011-12. 18. During the search proceedings Rs. 79.00 lakhs in cash was found at the residence of Ms Richa Mishra and Dr A. K. Sachan and according to the statement made during search it was informed that the said amount was received as admission fee from the guardian of the students, but before the Settlement Commission it was stated that the said amount belongs to Hind charitable trust and the same is as per their books of accounts. It was the stand of the department that the books were prepared post the search and no evidence could be produced in support of this said cash found at the residence. ....
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.... for which application for settlement is made, the nature and circumstances of the case and complexities of the investigation involved, save and except the annexures, referred to in item No. 11 of the form and to call for report from the Commissioner. The Commissioner is obliged to furnish such report within a period of 45 days from the date of communication by the Settlement Commission. Thereafter, the Settlement Commission, on the basis of the material contained in the said report and having regard to the facts and circumstances of the case and/or complexity of the investigation involved therein may by an order, allow the application to be proceeded with or reject the application. After an order under Section 245D(1) is made, by the Settlement Commission, Rule 8 of the 1987 Rules mandates that a copy of the annexure to the application, together with a copy of each of the statements and other documents accompanying such annexure shall be forwarded to the Commissioner and further report shall be called from the Commissioner. The Settlement Commission can also direct the Commissioner to make further enquiry and investigations in the matter and furnish his report. Thereafter, after e....
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.... been previously disclosed by the assessee, being a pre-condition for a valid application under Section 245C(1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against item No. 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, Section 245C(3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said Section is instructive in as much as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and, in the process, rendering the provision of subsection (3) of Section 245C of the Act otiose and meaningless. In our opinion, the scheme of said Chapter is clear and admits no ambiguity. x x x x 28. As afore-stated, in the scheme of Chapter XIXA, there is no stipulation for revision of an application filed under Section 245C(....
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....ome Tax Act or otherwise has declared the same before the Settlement Commission. In any view of the matter, such entity cannot be granted undue benefit in contrast to an honest taxpayer, who has voluntarily disclosed all his income and assets. In the present case, it is evident that the applicant has made certain disclosures before the income tax authorities during the search operations and has also submitted an affidavit to this effect. The income tax authorities in their report before the Commission have duly informed the Commission that the assets and receipts of the applicant are much more than what has been disclosed before the Settlement Commission. There is a huge variation in the amounts disclosed by the applicant Ms. Richa Mishra while filling the application before the Settlement Commission and all these facts were duly bought to the knowledge of the Commission. The Settlement Commission was bound to consider the material recovered during search and placed before the Commission in the reply filed by the department, and could have rejected the stand of the department, but not taking cognizance of the reply of the department and not dealing with the issue the Commission has....
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....ission deserved to be rejected as the respondents had not made true and full disclosure of their undisclosed income. This issue is decided in favour of the petitioner. VALIDITY OF THE ORDER OF THE SETTLEMENT COMMISSION ADJUSTING THE RECEIPTS IN THE ACCOUNT OF DR. A. K. SACHAN TOWARD THE INCOME OF THE APPLICANTS: 27. The argument of the petitioner was that the jurisdiction of the Settlement Commission limits only to passing the orders with regard to "undisclosed income" of the applicants. Number of undisclosed income of Dr. A. K. Sachan was duly taken into consideration by the Assessing Officer in his assessment for the assessment year 2012-13. Once the receipts in the said accounts had been assessed as income of Dr. A. K. Sachan during regular assessment proceedings then the same could not have been considered by the Settlement Commission as undisclosed income of the respondents and such an issue could not have been considered by the Commission. There was no material before the commission for holding that the receipts in the said bank accounts held by Dr A. K. Sachan were income of M/s Shekhar Hospital (Pvt.) Ltd. 28. Submission of Sri D.D. Chopra, Senior Advocate, learned couns....
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....spondents and did not give any reason nor did it even consider the objections raised by the petitioner, which on the face of it is an arbitrary exercise of power. The Commission is under a duty to at least consider the objection raised by the department. But by not taking into consideration such objections, the Commission has acted arbitrarily and against the statutory provisions which mandate the Commission to adhere to the principles of natural justice while exercising its jurisdiction. Once the income has already been assessed at the hands of Dr. A.K. Sachan it no longer remained undisclosed income and in that regard to such an issue the Settlement Commission could not have passed any order as it was beyond its jurisdiction as per clear provisions of Section 245 of the Income Tax Act. Deciding the said issue merely at the behest and assertion of the respondents by the Commission and holding that the receipts in his bank account was income of M/s Shekhar Hospital Pvt. Ltd. is arbitrary and abuse of power vested in it. Such a procedure, and findings are clearly perverse and contrary to the settled judicial norms and beyond jurisdiction of the Commission. The impugned order is liab....
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....to the power of the Commission to rectify its orders as per section 245D(6B) of the Act of 1961. After passing of the impugned 19/22.08.2016 order an application for rectification under Section 245(6B) of the Act was preferred by the applicants on the ground that for the assessment year 2012-13 there was deposit of Rs.1.20 crores which was received from the bank accounts of M/s B. D. Agarwal. As discussed, earlier A "full and true" disclosure of income, which had not been previously disclosed by the assessee, being a precondition for a valid application under Section 245(C-1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against item No. 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, Section 245(C-3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said Section is instructive in as much as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings....
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....has to do the same in accordance with the provisions of the Act and where required will have to pass necessary orders giving reasons for allowing any release or exemption in favour of the applicants. WAIVER OF INTEREST 38. The Commission has waived off interest in favour of the respondents. This issue has been settled by the Hon'ble Supreme Court in Anjum M.H. Ghaswala and others' case (supra) and the other High Court in Brij Lal and others vs. Commissioner of Income Tax, Jalandhar (2011) 1 SCC 1. In Anjum M.H. Ghaswala and others' case (supra) it was held : "35. For the reasons stated above, we hold that the Commission in exercise of its power under Sections 245D(4) and (6) does not have the power to reduce or waive interest statutorily payable under Sections 234A, 234B and 234C except to the extent of granting relief under the circulars issued by the Board under Section 119 of the Act." 39. The Settlement Commission, in a mechanical manner, waived off the interest without considering whether the matter of the respondents was covered by the circulars of the Board, and waiving off the interest in such a manner, which may indicate that statutory interest payable under s....
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....less than the limit prescribed for filing and pursuing the appeals before the Tribunal. As the orders passed by the Settlement Commission have been set aside, to do complete justice, we grant liberty to the department to avail of appropriate remedy against the order passed by the Commissioner of Income Tax (Appeals) dated January 17, 2019 in the appeal filed by Dr. A.K. Sachan. If any such remedy is availed of within a period of one month from the date of receipt of copy of the order, the same shall not be rejected only on account of delay and shall be considered on merits. 41. We also feel to observe that the conditions as contained in the circular issued by Central Board of Direct Taxes regarding filing or pursing the appeals at different levels may have to be revisited and certain exceptions may have to be carved out to take care of cases like the one in hand. 42. It has also been brought on record that Dr. A. K. Sachan is a Doctor working as Professor in King Georges Medical University, Lucknow. This fact has come on record as well as in the report submitted by the Commissioner of Income Tax. It is surprising that a person working in a State University is a Director of a priv....