TaxTMI 
TaxTMI 
2023 (9) TMI 1231
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....irmed and the aforesaid Writ Appeal filed by the appellant herein, was dismissed. 2. The facts giving rise to the present appeal, in a nutshell are that the appellant-assessee, Kotak Mahindra Bank Limited (formerly, "M/s ING Vysya Bank Limited") is a Public Limited Company carrying on the business of banking and is assessed to tax in Bangalore where its registered office is located. Apart from the business of banking, the appellant also carries out leasing business on receiving approval from the Reserve Bank of India (hereinafter "RBI" for short) vide Circular dated 19.02.1994. Thus, the appellant derives its income, inter alia, from banking activities as well as from leasing transactions. 2.1. The appellant filed its income tax returns for the assessment years 1994-1995 to 1999-2000 and assessment orders were passed up to assessment year 1997-1998 and the assessment for the subsequent years was pending. During the assessment proceedings for the assessment year 1997-1998, the Assessing Officer made certain additions and disallowances based on which the assessment already concluded for the assessment years 1994-1995 to 1996-1997 were proposed to be reopened. The Assessing Offi....
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....uance of notices under Section 148 of the Act. The appellant filed returns under protest with respect to the said assessment years. 2.5. Before the Settlement Commission, the Respondents-Revenue raised a preliminary objection contending that the appellant did not fulfil the qualifying criteria as contemplated under Section 245C(1) and hence, the application filed by the appellant was not maintainable, as, under the said provision, the appellant was required to make an application in the prescribed manner containing full and true disclosure of its income which had not been disclosed before the Assessing Officer and also the manner in which such income had been derived. That unless there is a true and full disclosure there would be no valid application and the Settlement Commission will not be able to assume jurisdiction to proceed with the admission of the application. It was thus contended that the purported application made before the Settlement Commission was not an application as contemplated under section 245C (1) of the Act for the reason that the appellant had not made a full and true disclosure of its income which had not been disclosed before the Assessing Officer. 2.....
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....to settle cases and to reduce the disputes and not to prolong litigation. Thus, the High Court disposed of the Writ Petition holding that it was open to the parties to raise all their contentions before the Commission at the stage of disposal of the application and the Commission may, independent of the findings which it has given under the Order dated 11.12.2000, examine all the contentions and proceed to pass orders on merits in accordance with the provisions of the Act. 2.9. As a result of the Order dated 18.08.2005 passed by the High Court of Karnataka, the Settlement Commission heard both parties on merits as well as on the issue of maintainability. The Settlement Commission upheld the maintainability of the application filed by the appellant and passed an Order dated 04.3.2008 under Sections 245D(1) and 245D(4), determining the additional income at Rs.196,36,06,201/-. As regards the issue of immunity from penalty and prosecution, the Commission, having regard to the fact that the appellant had co-operated in the proceedings before the Settlement Commission and true and full disclosure was made by the appellant before the Commission in paragraph 18.2 of its Order granted im....
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....ggrieved by the Order dated 04.03.2008 passed by the Settlement Commission, the Respondent-Revenue preferred Writ Petition bearing No. 12239 of 2008 (T-IT) before the High Court of Karnataka assailing the said Order. The learned Single Judge of the High Court vide Order dated 20.05.2010 upheld the Order of the Settlement Commission as regards the jurisdiction to entertain the application and also as regards the correctness of the Order passed by the Settlement Commission in determining the tax liability, but found fault with the Commission in so far as granting immunity to the appellant from the levy of penalty and initiation of prosecution was concerned. The Single Judge was of the view that the reasoning of the Settlement Commission was vague, unsound and contrary to established principles and that the burden was on the appellant herein to prove that there was no concealment or wilful neglect on its part and in the absence of such evidence before the Settlement Commission, the Order granting immunity from penalty and prosecution was an illegal order. The learned Single Judge, thus, remanded the matter to the Settlement Commission for the limited purpose of reconsidering the quest....
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.... the proceedings before the Settlement Commission and made full and true disclosure of his income and the manner in which such income has been derived before the Settlement Commission. Thus, the learned Single Judge erred in drawing reference to the possibility of concealment of income before the Assessing Officer. iii. That the learned Single Judge failed to appreciate the difference between the provisions of Section 245H and Section 27l(l)(c) of the Act. Section 245H does not contemplate offering of any explanation or evidence by an applicant to the satisfaction of the Settlement Commission. If the Settlement Commission is satisfied that an applicant has complied with the precondition specified therein, the Settlement Commission could exercise its discretion to grant immunity from prosecution and penalty. Therefore, there was no error committed by the Settlement Commission in granting immunity from prosecution and penalty. 2.12. In the meanwhile, Revenue preferred Special Leave Petition (C) CC No. 19663 of 2010 before this Court against the Order dated 20.05.2010 passed by the learned Single Judge in Writ Petition No. 12239 of 2008. On 06.01.2012, this Court directed ....
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....ee should have made a full and true disclosure of its income and the manner in which such income has been derived. ii. Under Section 245H (1), the Settlement Commission, if satisfied that any assessee who makes the application for settlement under Section 245C, has co-operated with the Commission in the proceedings before it and has made a full and true disclosure of its income and the manner in which such income has been derived, may grant immunity from prosecution and also from the imposition of penalty, either wholly or in part with respect to the case covered by the settlement. Thus, Section 245H (1) cannot be read in isolation as Section 245C is embedded in 245H (1), and hence, both the Sections must be read harmoniously. Further, if in a given case such immunity is not granted, the Revenue would proceed to prosecute the assessee in a jurisdictional court. Once prosecution is lodged, the presumption is that there was mens rea on the part of the assessee to conceal the income by a smoke screen and thereby to evade tax. The Settlement Commission will have to examine the application by lifting the veil to see as to whether there has been an intention to evade tax and the....
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.... to have appreciated that the Assessing Officer may make all kinds of additions and make claims of evasion of tax by an assessee. However, the Order of the Assessing Officer is by no means the last word. There are appellate remedies which provide remedies for an aggrieved assessee and until the assessment reaches finality, the conclusion of the Assessing Officer in the assessment Order is nothing but his own assertion. Such a stage had not been reached in the case of the appellant herein. iii. Concealment of particulars before the Assessing Officer would not have a bearing while the Settlement Commission exercises its powers under Section 245H of the Act for grant of immunity from prosecution and penalty. That if an assessee has disclosed in the return of income his true income and the disclosure of income is full and complete, there is no reason for him to go before the Settlement Commission. Section 245C contemplates full and true disclosure of income to be made before the Settlement Commission only. iv. That Section 245C does not contemplate any explanation or evidence that requires to be offered by an applicant to the satisfaction of the Settlement Commission ....
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.... proceeded to consider the application filed by the assessee, as also the question of granting of immunity from penalty and prosecution. Since this procedure was not adhered to and the Settlement Commission, de hors any material to demonstrate that there was any wilful concealment on the part of the assessee to evade tax, went on to pass an order granting immunity under Section 245H (1) to the appellant-assessee from imposition of penalty and prosecution under the Act, the learned Single Judge rightly set aside the Order of the Commission to such extent only and remanded the said aspect of the matter for fresh consideration. iii. That concealment of income before the Assessing Officer would have a bearing on the result of the application filed before the Settlement Commission. That a perusal of Section 245H (1) would reveal that the same cannot be read in isolation as Section 245C is embedded in 245H (1). Therefore, the two provisions would have to be read harmoniously and when so read, it would emerge that in order to qualify for immunity under Section 245H, the assessee must not only co-operate with the Settlement Commission, but must also disclose income which was not r....
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....f merit and the judgment of the learned Single Judge of the High Court, as affirmed by the Division Bench in the impugned judgment dated 06.07.2013, be upheld. Points for Consideration: 4. Having heard the learned counsel for the respective parties and on perusal of the material on record, the following points would emerge for our consideration: i. Whether the Division Bench of the High Court was right in affirming the findings of the learned Single Judge, to the effect that the Settlement Commission ought not to have exercised discretion under Section 245H of the Act and granted immunity to the assessee de hors any material to demonstrate that there was no wilful concealment on the part of the assessee to evade tax and on that ground, remanding the matter to the Commission for fresh consideration? ii. What order? Legal Framework : 5. Before proceeding further, it would be useful to refer to the legal framework relevant to the issues which arise in this appeal. 5.1. Chapter XIX-A of the Act was introduced by the Taxation Laws (Amendment) Act, 1975 w.e.f. 01.04.1976 for quick settlement of cases so that the tax due to the Department is realized at th....
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....proceedings before it and has made a full and true disclosure of his income and the manner in which such income has been derived, grant to such person, subject to such conditions as it may think fit to impose for the reasons to be recorded in writing, immunity from prosecution for any offence under this Act or under the Indian Penal Code (45 of 1860) or under any other Central Act for the time being in force 2 and also (either wholly or in part) from the imposition of any penalty under this Act, with respect to the case covered by the settlement: Provided that no such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under section 245C: Provided further that the Settlement Commission shall not grant immunity from prosecution for any offence under the Indian Penal Code (45 of 1860) or under any Central Act other than this Act and the Wealth-tax Act, 1957 (27 of 1957) to a person who makes an application under section 245C on or after the 1st day of June, 2007. (1A) An immunity granted to a person under sub-section (1) shall....
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....e the Commission, and (b) co-operated with the Commission in the proceedings before it. 6.1. Upon being satisfied as to the said ingredients, the Commission may grant immunity from prosecution or from the imposition of penalty, either wholly or in part with respect to the case covered by the settlement. 7. While Section 245C provides that the disclosures as to income "not disclosed before the Assessing Officer" must accompany the application filed before the Settlement Commission, Section 245H provides that if the assessee has co-operated with the Settlement Commission and has made "full and true disclosure of his income", the Settlement Commission may grant immunity from prosecution and penalty. It is the case of the Revenue that Section 245H (1) cannot be read in isolation as Section 245C is embedded in 245H (1), and hence, both the Sections must be read harmoniously. That when so read, the requirement under Section 245H would be that disclosure of income "not disclosed before the Assessing Officer" must be made before the Commission. According to the Revenue, in the present case, what had been "disclosed" in the application was the same as what was "discovered" by....
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....hile exercising discretion, direct itself properly in law and consider all the facts and material that it is bound to consider while excluding from consideration irrelevant aspects of the matter. While exercising power under Section 245H, read with Section 245C of the Act the relevant facts and material which ought to be considered by the Commission are: i. the report which is to be submitted by the Commissioner, under Section 245D(1) of the Act; ii. the disclosures made by the applicant before the Commission as to income, and the source of such income; iii. any other relevant evidence let in by the assessee or the department. 7.4. We find that in the present case, the Settlement Commission has rightly considered the relevant facts and material and, accordingly, decided to grant immunity to the appellant from prosecution and penalty. We arrive at this conclusion having regard to the following aspects of the matter, recorded by the Settlement Commission: i. The Commission in its order dated 04.03.2008, noted that the appellant had realized while adhering to the RBI guidelines of accounting of lease income that there was an error in not disclosi....
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....roceeded with u/s 245D(1) of the Act." The aforesaid findings of the Settlement Commission, demonstrate that it had applied its mind to the aspect of whether there was wilful concealment of income by the assessee. Having noted that non-disclosure was on account of RBI guidelines, which required a different standard of disclosure, the Commission decided to grant immunity to the appellant from prosecution and penalty. Accrodingly, the Commission passed the following order: "TERMS OF SETTLEMENT: 18.1 The computation of the undisclosed income and the tax payable thereon is furnished in the annexure 1 to 5 to this Order. Tax payable along with interest as per law shall be paid within 35 days of receipt of this order. 18.2 Considering the co-operation extended by the applicant in the completion of the present settlement proceedings and the true and full disclosure made, we grant immunity u/s 245H(1) from the imposition of penalty and prosecution under the income-tax Act and relevant sections of IPC, relating to the matters covered in the present order. Penalty u/s 271(1)(c) was levied by the Assessing Officer for AY 1997-98 in respect of non disclosure....
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....ld warrant interference by the High Court, by passing an order of remand. 8. It may be apposite at this juncture, to refer to the decision of this Court in Ashirvad Enterprises vs. State of Bihar, (2004) 3 SCC 624 wherein it was stated that whether immunity from prosecution and penalty should be granted in a given case, has to be decided by the Commission by exercising its discretion, in the light of the facts and circumstances of each case. There is no straight jacket formula that would universally apply in every case. Where the Commission is satisfied that the applicant (a) has made full and true disclosure of his income and the manner in which such income was derived, and (b) has co-operated with the Commission in the proceedings before it, immunity under Section 245H may be granted. 9. In the present case, as noted above, we find that the appellant placed material and particulars before the Commission as to the manner in which income pertaining to certain activities was derived and has sought to offer such additional income to tax. Based on such disclosures and on noting that the appellant co-operated with the Commission in the process of settlement, the Commission procee....