TaxTMI 
TaxTMI 
2024 (4) TMI 464
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.... 2. The principal ground of challenge which was addressed before us flowed from the manner of disclosure made by the respondent and insofar as it related to the purchase of a land parcel admeasuring 20 acres. The petitioner principally asserts that since the respondent had failed to surrender the amount representative for the aforenoted transaction to tax in the statement filed before the ITSC, the acceptance of settlement is clearly vitiated and the order passed by the ITSC liable to be quashed on this ground alone. It was their contention that the petitioner had struck contradictory stands before the authority undertaking the assessment and before the ITSC insofar as this aspect is concerned and thus having clearly failed to make a "full and true" disclosure of its income. It is on the aforesaid primary ground that the order is impugned before us. 3. The record would reflect that a search and seizure operation was undertaken by the Department in December 1999 against one S.K. Jain. In the course of that search, certain documents came to be seized in which the name of the respondent company was also reflected. This led to a consequential search and seizure being conducted upon....
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....the explosive nature of the business activity and land being very near to the Airport, Airport Authority of India has denied permission to the applicant company for installation of the said plant. In view of the above, it was decided by the management for disposing off the said land and an agreement was first entered into in 1996 with M/s Spring Field. However, due to certain unavailable circumstances, the deal was not materialised and another agreement was later entered into with Sh. S.K. Jain through his associated concern M/s P.K. Jain and Associates for sale of the land for a total consideration of Rs. 5.10 crore vide agreement dated 18.2.99. Copy of the agreement is annexed with this statement of facts. As per the terms & conditions of the said agreement, 50% of total consideration was to be paid as advance and remaining 50% at the time of execution of agreement to sale subject to fulfillment of certain other conditions as laid down in the agreement. It is in this context that the applicant company received a sum of Rs. 263.50 lacs from Sh. Jain through his associated concerns. A confirmation to this effect is also enclosed with this statement of fact. However due to non fulfi....
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....had been filed by the assessee on 11.06.2001 declaring undisclosed income of NIL. The income of the assessee for the block period has been assessed at Rs. 24751000/- vide order u/s 158-BC dated 31.07.2002. Against the order of the AO the assessee has moved an application before the Income tax Settlement Commission, New Delhi and the application has been admitted and the order u/s 245-D(1) has been passed admitting the application to be processed with for the block period as also for the A.Ys. 2001-02 and 2002-03. The prime issue for consideration in this case is regarding the nature of transaction on account of which the amount of Rs. 2,33,50,000/- has been received by the applicant from Sh. S.K. Jain through his concerns M/s P.K. Jain & Associates, M/s Royal Investments and M/s Jyoti Shares. The applicant has submitted before the Hon'ble Settlement Commission that this amount of transaction relates to payment of advance given by the said concerns against agreement to self of property at Calcutta owned by the company. In the Block Asstt. order passed in this case on 31.07.2002, the Assessing Officer has treated this amount as an introduction of the unaccounted....
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.... modus operandi followed in providing accommodation entries and has categorically stated that M/s PK Jain & Associates and M/s Royal Investment were used by Sh. S.K. Jain for providing accommodation entries. (The copy of statement of Sh. A.K. Goel is placed at pages 31 to 46 of the paper book.) V. The agreement to sell dated 18.02.1999 is an after thought and cannot be relied upon for reasons mentioned at pages 30 to 37 of the assessment order and summarized in Para-5 above. It is seen from the back of the Stamp paper that overwriting has been done at S. No., of the Register of Stamp Vendor. The address of the Stamp vendor is not available/legible and the Department is not in a position to verify the genuineness of the stamp Paper. This appears to be a forged document in view of the over writings on the Register of Stamp Vender. A copy of the same is placed at pages 47 to 51 of the paper book. 7. In view of the above discussion, it is submitted that the view taken by the Assessing Officer in the block assessment order, is the correct view about the nature of the transactions done by the applicant and it leaves no further complexity regarding the quantum of transac....
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...., the view of the Commission was confronted to the applicant for his comments. The applicant has thereafter offered voluntarily to surrender the said amount along with the amount of entry charges @1% on the amount of entry. Hence amount of Rs. 2,33,50,000/- plus Rs. 2,33,500/- are being incorporated in the hands of the applicant for the block period. Hence total addition of Rs. 2,35,83,500/- is being made in addition to the amounts declared in ROI and SOF. 4.7 The applicant, in this regard, has submitted a letter dated 06.03.2014 in which he has offered the above discussed amount for settlement of the case. The said letter is reproduced as under: "...1. Honorable Commission was please to hear the above matters under section 245D(4) of the Income Tax Act, 1961 on 03.03.2014 and on earlier occasions. 2. During the course of hearings it transpired that the level of evidence in the following matter is not of such a nature that the addition could be made without further verification/confrontation of the material, the applicant in order to give a quietus to the matter once and for all in the spirit of settlement agrees to the following additions over and above ....
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....nd penalties, if exigible, u/s 158BFA of the Income tax Act, 1961. 5. That the applicant may kindly be allowed to capitalize the income brought to tax. It may be mentioned that the amount of Rs. 2,33,50,000/- stands paid to M/s P.K. Jain & Associates as per the books of the company between 11.10.2001 to 20.12.2001. 6. That the penalties under various provisions of the Income Tax Act, 1961 levied/leviable may kindly be deleted/waived in the case of the applicant. 7. Immunity from prosecution under any of the relevant provisions of Income-tax Act, 1961 and any other Central Acts. 8. Release of assets, books of account, documents, papers etc. seized upon payment of taxes. 9. To grant the liberal installments to the applicant for payment of the additional demand arising out of the above settlement.. 5. The income of the applicant is settled as under: Name of the applicant A.Y. Income as per ROI Additional income offered in SOF Further addition u/s 245D(4) Total M/s Trend East West LPG Bottling Ltd. Block period 1995-96 to 25.05.2000 Nil 3,27,000 2,35,83,500 2,39,10,500 2002-03 Nil ....
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....ection (3) of the said section. 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 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 inasmuch 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 which he cannot otherwise achieve directly and in the process rendering the provision of sub- section (3) of Section 245-C of the Act otiose and meaningless. In our opinion, the scheme of said Chapter is clear and admits no ambiguity. 36. It is trite law that a taxing statute is to be c....
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....rom S.K. Jain, borne in consideration the fact that the respondent-assessee had cooperated fully, voluntarily surrendered the said amount and agreed to the same being taxed in its hands. In view of the above and bearing in mind the limited scope of interference which is warranted with an order passed by the ITSC, Mr. Srivastava submitted that the challenge as raised by way of the present writ petition is liable to be negatived. 17. Having noticed the rival submissions so addressed, we at the outset deem it apposite to take note of the following salient provisions which stand incorporated in Chapter XIX-A and which regulates the subject of settlement. We, in this regard deem it appropriate to extract Sections 245C, 245D, 245F and 245I of the Act hereunder: - "245C Application for settlement of cases.-(1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income tax payable on such income and such other par....
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.... of the specified person, or any relative of such individual; (iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the specified person or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the specified person; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; (vi) any person who carries on a business or profession,- (A) where the specified person being an individual, or any relative of such specified person, has a substantial interest in the business or profession of that person; or (B) where the specified person being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director,....
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....d (1-C) and the aggregate of the amount so arrived at in respect of each of the years for which the application has been made under sub- section (1) shall be the additional amount of income tax payable in respect of the income disclosed in the application. (1E) [***] (2) Every application made under sub-section (1) shall be accompanied by such fees as may be prescribed. (3) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. (4) An assessee shall, on the date on which he makes an application under sub-section (1) to the Settlement Commission, also intimate the Assessing Officer in the prescribed manner of having made such application to the said Commission.] [(5) No application shall be made under this section on or after the 1st day of February, 2021.] xxxx xxxx xxxx 245-D. Procedure on receipt of an application under Section 245- C.- (1) On receipt of an application under Section 245-C, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application ma....
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....d shall send the copy of such order to the applicant and the [Principal Commissioner or Commissioner]: 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]. [Provided also that where in respect of an application, an order, which was required to be passed under this sub-section on or before the 31st day of January, 2021, has not been passed on or before the 31st day of January, 2021, such application shall deemed to be valid.] (2-D) Where an application was made under sub-section (1) of Section 245-C 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-....
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.... referred to in the report of the [Principal Commissioner or Commissioner]. (4-A) The Settlement Commission shall pass an order under subsection (4)- (i) in respect of an application referred to in sub-section (2-A) or sub-section (2-D), on or before the 31st day of March, 2008; (ii) in respect of an application made on or after the 1st day of June, 2007 [but before the 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 245-BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the Bench concerned before passing any order under sub-section (4) and, in relation to the passing of such order, the provisions of Section 245-BD 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 sett....
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....ings at any time before the expiry of two years from the end of the financial year in which the settlement became void. (8) For the removal of doubts, it is hereby declared that nothing contained in Section 153 shall apply to any order passed under subsection (4) or to any order of assessment, reassessment or re-computation required to be made by the Assessing Officer in pursuance of any directions contained in such order passed by the Settlement Commission and nothing contained in the proviso to subsection (1) of Section 186 shall apply to the pursuance of any such directions as aforesaid. [(9) On and from the 1st day of February, 2021, the provisions of sub-sections (1), (2), (2-B), (2-C), (3), (4), (4-A), (5), (6) and (6-B) shall apply to pending applications allotted to Interim Board with the following modifications, namely:- (i) for the words "Settlement Commission", wherever they occur, the words "Interim Board" shall be substituted; (ii) for the word "Bench", the words "Interim Board" shall be substituted; (iii) for the purposes of this section, the date referred to in subsection (2) of Section 245-M shall be deemed to be date on ....
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.... exercise the powers and perform the functions of an income tax authority under this Act in relation to the case: [Provided that where an application has been made under Section 245-C on or after the 1st day of June, 2007, the Settlement Commission shall have such exclusive jurisdiction from the date on which the application was made: Provided further that where- (i) an application made on or after the 1st day of June, 2007, is rejected under sub-section (1) of Section 245-D; or (ii) an application is not allowed to be proceeded with under subsection (2-A) of Section 245-D, or, as the case may be, is declared invalid under sub-section (2-C) of that section; or (iii) an application is not allowed to be further proceeded with under sub-section (2-D) of Section 245-D, the Settlement Commission, in respect of such application shall have such exclusive jurisdiction up to the date on which the application is rejected, or, not allowed to be proceeded with, or, declared invalid, or, not allowed to be further proceeded with, as the case may be.] (3) Notwithstanding anything contained in sub-section (2) and in the absence of any express d....
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....tion, the ITSC commences the process of evaluating whether the application is liable to be proceeded with. In respect of an application which is allowed to be proceeded with, the ITSC stands empowered to call for a report from the CIT in terms of Section 245D(2B) of the Act. Taking proceedings further and in respect of applications which have not been declared to be invalid, the ITSC in terms of Section 245D(3) of the Act is enabled to call for the records and, if deemed necessary, to direct such further inquiry or investigation as may be necessary. Pursuant to the aforesaid power as conferred, the Principal Commissioner/Commissioner is obliged to undertake a further inquiry or investigation and submit a report in respect of all matters covered by the application as also any other matter relating to the case. Sub-Section (4) of Section 245D of the Act envisages the ITSC passing final orders upon the application taking into consideration the report submitted by the Principal Commissioner/Commissioner, an examination of all the evidence that may have been placed before it and proceed to pass a final order on matters covered by the application as well as any other matter relating to t....
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.... "5.2. Section 245D deals with the procedure to be followed by the Commission on receiving an application for settlement under section 245C. Sub-section (1) of section 245C enables the Commission to call for a report from the Commissioner. On the basis of the Commissioner's report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may either allow the application to be proceeded with or reject the same. Sub- section (4) of section 245D empowers the Settlement Commission to pass an order after examination of the records and the report submitted by the Commissioner, after hearing the applicant and the Commissioner, or their authorized representatives and examining any further evidence before it. 5.3. Section 245H of the Act bestows upon the Settlement Commission, discretion to grant immunity to an applicant from prosecution for any offence under the Act or under the Indian Penal Code, or from the imposition of any penalty under the Act, with respect to the case covered by the settlement. The grant of such immunity is subject to such conditions which the Commission may think....
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....ptember 30, 2019 and in pursuance to which penalty under section 269ST has been levied on the petitioner ; and (b) the argument of the counsel for the respondent that in pursuance to such an application the Settlement Commission in exercise of powers under section 245F and 245H has no case of violation of section 269ST before it and thus does not have exclusive jurisdiction in the matter of levy of penalty under section 269ST and/or to grant immunity with respect thereto, is attractive but on further consideration we find ourselves unable to accept the same for the reasons : (A) Though the petitioner in the present case, in its application to the Settlement Commission has brought only the case pursuant to notices under section 153A admittedly issued to it, but the powers of the Settlement Commission under section 245D(4) to pass such order as it thinks fit are not confined to matters covered by the application but also extend to "any other matter relating to the case not covered by the application, but referred to in the report of the Principal Commissioner or Commissioner" presented to the Settlement Commission under section 245D(3) of the Act. (B) We have thus e....
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....th the settlement proceedings. We respectfully concur. The penalty proceedings initiated against the petitioner, as evident from the notice dated September 30, 2019, were in the context of and had a nexus with the search, seizure and survey carried out qua the petitioner and pursuant where too notices under section 153A were also issued to the petitioner and in which context the petitioner had approached the Settlement Commission. (G) Though undoubtedly section 245A(b) while defining "case" refers to a proceeding for assessment pending before an Assessing Officer only and therefrom it can follow that penalties and prosecutions referred to in section 245F and section 245H are with respect to assessment of undisclosed income only, but (i) section 245F vests exclusive jurisdiction in the Settlement Commission, to exercise the powers and perform the functions "of an Income-tax authority under this Act in relation to the case" ; and (ii) section 245H vests the Settlement Commission with the power to grant immunity from "imposition of any penalty under this Act with respect to the case covered by the settlement". The words "of an Income-tax authority under this Act in relation t....
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....he award is made under the old Act. Applying the said law and reasoning, we hold that if we were to interpret the words "in relation to" and "with respect to" narrowly, the same also would not only cause confusion as to prosecution and penalty under which provisions of the Act is the subject matter of settlement proceedings and which provisions not and the same is also likely to negate the objective and purpose for introduction of Chapter XIX-A in the Act and of settlement of cases. The said view has been followed in Tamil Nadu Kalyana Mandapam Association v. Union of India [2004] 267 ITR 9 (SC) ; (2004) 5 SCC 632, National Textile Corporation (MN) Ltd. v. Durga Trading Company (2015) 12 SCC 558 and Maxopp Investment Ltd. v. CIT [2018] 402 ITR 640 (SC) ; (2018) 15 SCC 523." 25. Reverting then to the facts of the present case, we find that the respondent had clearly alluded to the transaction with S.K. Jain in the application which was made before the ITSC. It had essentially questioned the stand taken by the respondent of the aforesaid land transaction being merely an accommodation entry. It had asserted that the transaction was genuine and that the receipt of a sum of INR 234.5....
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....offered to voluntarily surrender the said amount and thus agreeing to the same being subjected to tax. 29. It is also relevant to note that while ultimately accepting the voluntary surrender, it was not the case of the ITSC that the respondent was guilty of suppression or falsification of facts. What appears to have ultimately weighed upon it was the imperatives of the controversy being resolved and the matter being conferred finality. 30. The second aspect which weighs upon us is the extent and intensity of judicial review which must govern while considering a challenge to orders passed by the ITSC. The scope and extent of interference warranted with orders made by the ITSC were succinctly explained by the Supreme Court in Jyotendrasinhji v. S.I. Tripathi and Others 1993 Supp (3) SCC 389 in the following words: - "16. It is true that the finality clause contained in Section 245-I does not and cannot bar the jurisdiction of the High Court under Article 226 or the jurisdiction of this Court under Article 32 or under Article 136, as the case may be. But that does not mean that the jurisdiction of this Court in the appeal preferred directly in this Court is any differen....
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.... Shreeram Durga Prasad and Fatechand Nursing Das v. Settlement Commission (IT and WT) [(1989) 1 SCC 628 : 1989 SCC (Tax) 124 : (1989) 176 ITR 169] which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji, J., speaking for the Bench comprising himself and S.R. Pandian, J. observed that in such a case this Court is "concerned with the legality of procedure followed and not with the validity of the order". The learned Judge added "judicial review is concerned not with the decision but with the decision-making process". Reliance was placed upon the decision of the House of Lords in Chief Constable of the N.W. Police v. Evans [(1982) 1 WLR 1155 : (1982) 3 All ER 141] . Thus, the appellate power under Article 136 was equated to power of judicial review, where the appeal is directed against the orders of the Settlement Commission. For all the above reasons, we are of the opinion that the only ground upon which this Court can interfere in these appeals is that the order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant. The main controversy in these appeals relates to the interpretation of....
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....ntemplated under section 245H of the Act, are beyond the scope of judicial review, except under the circumstances set out in Jyotendrasinhji v. S. I. Tripathi (supra). xxxx xxxx xxxx 12. While we are mindful of the fact that the provisions of Chapter XIX-A of the Act are not to be employed so as to provide a shelter for tax dodgers to obtain immunity from facing the consequences of tax evasion by simply approaching the Settlement Commission, vide B. N. Bhattachargee (supra), we are however of the view that in the present case, the Commission rightly exercised its discretion under section 245H having regard to the bona fide conduct of the assessee of offering additional income for tax, apart from the income disclosed in the return of income. 13. Before parting with the record, we may add that having regard to the legislative intent, frequent interference with the orders or proceedings of the Settlement Commission should be avoided. We have already indicated the limited grounds on which an order or proceeding of the Settlement Commission can be judicially reviewed. The High Court should not scrutinize an order or proceeding of a Settlement Commission as an ....