TaxTMI 
TaxTMI 
2024 (4) TMI 501
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....ated 09 June 2014, passed by the ITSC, under Section 245D (4) of the Act, for the Assessment Years ["AY"] 2001-02 to 2007-08. FACTUAL MATRIX 3. The relevant facts for deciding the controversy at hand would reveal that the respondent-assessee group is engaged in real estate business in Delhi, and particularly in the development of commercial complexes. The business activities of the respondent-assessee group involve purchase of land from the Delhi Development Authority on auction, followed by development and sale of the same to various customers. 4. On 11 October 2006, a search and seizure operation was conducted at the business and residential premises of the respondent-assessee group under Section 132(1) of the Act. During the said operation, various incriminating documents including jewellery and cash were found and the same were accordingly seized. Subsequently, the case of the respondent-assessee group was centralized with the Assessing Officer ["AO"], Central Circle-08, New Delhi. 5. During the pendency of the assessment proceedings, the respondent-assessee group, vide letter dated 30 May 2007, preferred settlement applications under Section 245C (1) of the Act bef....
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....SSIONS 11. Mr. Shlok Chandra, learned counsel appearing on behalf of the Revenue, submitted that the respondent-assessee group has failed to fully and truly disclose the additional income before the ITSC, which was an elementary requirement for proceeding with any application made by an assessee in terms of Chapter XIX-A (Sections 245A to 245L) of the Act. According to him, the scheme of Chapter XIX-A does not envisage revision of the application filed by the assessee under Section 245C (1) of the Act. 12. He contended that during the course of proceedings, the respondent-assessee group had offered certain additional amounts which clearly shows that full and true disclosure of income was not made in the application under Section 245C of the Act. He, therefore, submitted that the respondent-assessee group had not approached the ITSC with clean hands. 13. Learned counsel for the Revenue further argued that the CIT, in its Rule 9 report dated 12 February 2008, has calculated and quantified the undisclosed sum of INR 23.69 crores for AYs 2001-02 to 2007-08 as the total amount of bogus share capital. The said quantification is based on the summons issued to the shareholders, wh....
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.... of the Act in the present case. 19. In support of his contentions, learned counsel for the Revenue placed reliance on the decisions of the Hon'ble Supreme Court in the case of CIT Jalpaiguri v. Om Prakash Mittal (2005) SCC OnLine SC 376., and Ajmera Housing Corporation v. CIT (2010) SCC OnLine SC 918., and the decision of this Court in the case of PCIT v. Om Prakash Jakhotia (2019) SCC OnLine Del 8063., and CIT v. ITSC (2014) SCC OnLine Del 626. RESPONDENT'S SUBMISSIONS 20. Per contra, Mr. Salil Aggarwal, learned counsel appearing on behalf of the respondent-assessee group vehemently opposed the submissions made by learned counsel for the Revenue. 21. Learned counsel for the respondent-assessee group submitted that they had filed an application under Section 245C (1) of the Act for the AYs 2001-02 to 2007-08 by disclosing an additional income of INR 98,43,706/- qua Pankaj Ltd. He contended that replies dated 19 July 2012, 31 January 2014 and 20 February 2014 along with complete documentary evidences were filed before the ITSC to establish the identity and creditworthiness of the shareholder and the genuineness of the transaction, which was questioned by the Revenue in ....
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....erned, the ITSC has rightly held that interest under Sections 234A and 234C of the Act would be charged as per law till the date, order under Section 245D of the Act was passed. 27. Additionally, he contended that the subsequent sale of shares at a reduced price was irrelevant for determining the authenticity of the investment in the share capital. He also submitted that the issue of tax avoidance in repurchasing shares from the promoters' family members at a nominal cost of INR 13.15 lakhs, compared to the face value of INR 13.15 crores, needs to be scrutinized in the hands of the purchaser of the shares. He, therefore, asserted that there is no reason to question the legitimacy of the share capital received by the respondent-assessee group. 28. Furthermore, learned counsel argued that the ITSC has offered well-founded justifications for granting immunity from prosecution and penalties, considering the facts and circumstances of the case. According to him, as a customary practice, the ITSC usually grants immunity from penalties and prosecution under the Act when an applicant exhibits full cooperation in resolving the case and provides a comprehensive and truthful disclosure ....
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.... 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 particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided...." 34.2 The settlement application under the aforesaid Section necessitates a thorough declaration of any additional income by the applicant. Through Form No.34B, extensive details are requested and the applicant is required to sign a verification form affirming the completeness and accuracy of the provided information. 34.3 Section 245D of the Act delineates the procedure to be followed by the ITSC, upon receiving an application for settlement under Section 245C of the Act. Pursuant to sub-Section (1) of Section 245C of the Act, the ITSC is empowered to solicit a report from the CIT. Based on this report and considering the nature and circumstances of the case or the complexity of the investigation involved, the ITSC may, after conducting a preliminary enquiry, decide whether to allow the settlement application o....
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....income was so derived, the additional amount of tax which is payable and such other particulars as prescribed under the Rules. In terms of Section 245C(3) of the Act, once an application comes to be submitted before the ITSC, it cannot be withdrawn by the applicant. On receipt of such an application, 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 ....
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....ch it was obtained. Following an enquiry into the authenticity of this disclosure, the ITSC may decide to either approve or dismiss the application. The relevant paragraph of the said decision is extracted hereinunder as:- "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 disclosure" of the income which has not been disclosed before the assessing officer, the manner in which such income has been derived. The fundamental requirement of the application under Section 245-C is that full and true disclosure of the income has to be made, along with the manner in which such income was derived. On receipt of the application, the Commission calls for report from the Commissioner and on the basis of the material contained in the report and having regard to the nature and circumstances of the case or complexity of the investigation involved therein, it can either reject the application or allow the application to be proceeded with as provided in Section 245-D(1)." [Emphasis supplied]....
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....T disclosed the amount to be added to the income of the respondent-assessee group in the case of Pankaj Ltd. equivalent to INR 23.69 crores for AYs 2001-02 to 2007-08. It is noteworthy that the report of the CIT recorded that the respondent-assessee group has not adverted to full and true disclosure in the application. The relevant paragraph of the CIT report is being extracted herein for reference:- "Looking at aforesaid facts, in M/s Pankaj Buildwell Ltd the assessee has routed Rs 23,69,70,000 as share capital/share application money in various previous years. The year wise bifurcation of addition of share capital/share application money is not readily available, therefore, if in excess of Rs. 23,69,70,000/- is received by M/s Pankaj Buildwell, the detail of the same may be obtained by Hon'ble Settlement Commission from the assessee and added as unexplained cash credit in the year of receipt. However, the amount of Rs. 23,69.70.000/- is added as unexplained cash credit in the hands of assessee for A.Y. 2001-02 to A.Y. 2007-08. This aspect has not been disclosed at all by the assessee in its application before the Settlement Commission. Therefore, the disclosure of th....
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.... and the proofs are attached. g. Introducing unaccounted money through sale of terrace rights at Rs. 28550000 cr. in the case of Pankaj Buildwell, Raghav Buildwell & Pankaj Enterprises for the AYs 2002-03 to 2005-06. The sale proceeds are duly entered in the regular return of income of the applicant hence no question of accommodation entries rises. h. Bogus share capital gains at Rs. 69951880 for the AY 2006-07 in the case of Usha Gupta. The transactions are genuine and all the proofs are attached. i. An amount of Rs. 63787700 should be added in the case of M/s Pankaj Buildwell for the AY 2003-04 to 2006-07 on the basis of page no. 1 of annexure A-2 found from residence. The CIT has not given benefit of expenses recorded in the diary. However the applicant has considered the diary while working out the income at the time of filing of SOF. j. An addition of Rs. 98.67 lakhs in the case of Sh. Pankaj Gupta and Rs. 50 lakhs in case of Smt. Archana Gupta on account of various investments made as per annexure A-3 for the AY 2007-08. All the investments are reflected in books of accounts and evidences are attached. k. Addition of Rs. 141901....
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....@10 paise per paid up shares of Rs. 10/- i.e. @10% of the face value cannot be accepted as genuine. The observation of the Commission was communicated to the applicant. The applicant has agreed voluntarily to surrender the amount which was under doubt i.e. the amount of shares which were bought back at highly unreasonable price discussed above along with the margin amount on estimated basis. The total amount of Rs. 17 cr. has been worked out in the case of M/s Pankaj Buildwell Ltd. and Raghav Buildwell Ltd." [Emphasis supplied] 44. Accordingly, it is seen that the respondent-assessee group did not reveal the said additional income in the settlement application or before the ITSC at the very threshold. Rather, it only acknowledged the said additional income after the CIT report was submitted to the ITSC, thereby, raising doubts regarding the completeness and accuracy of the disclosure made by the respondent-assessee group in the settlement application preferred under Section 245C of the Act. 45. Hence, despite acknowledging the respondent-assessee group's inadequate disclosure regarding the share capital/premium and the absence of a satisfactory explanation from its s....
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....s. 18 cr. This observation of the Commission was conveyed to the applicant. The applicant on our suggestion voluntarily offered to surrender the same amount, hence an amount of Rs. 1 Crore(Rs. 40 lacs for AY 06-07 and Rs. 60 lacs for AY 07-08) is further being added in the Income of the applicant and the total addition is made at Rs. 18 Crore. Hence the amount of Rs. 18 crore is being incorporated in the income of the respective applicants for different AYs as mentioned in the paras below." 8. On the basis of the forgoing paras the income settled by the Commission in the case of all the applicants for different years is given in the table below: Sr.No. Name of the applicant A.Y. Incomer as per ROI (in Rs.) Additional income offered in SOF (in Rs.) Additional income settled-under 245D(4) Total income (in Rs.) (A) (B) (C) (D) (E) (F) (G) 1. M/s. Pankaj Buildwell Ltd. 2001-02 2,94,310 30,000 - 3,24,310 2002-03 6,24,649 40,000 5,01,00,000 5,07,64,649 2003-04 1,69,08,990 55,000 1,50,00,000 3,19,....
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.... 25,000 - 8,55,570 2005-06 13,03,884 28,000 - 13,31,884 2006-07 2,99,490 35,000 - 3,34,490 2007-08 16,60,660 3,60,000 - 20,20,660 Total 9,36,47,637 1,53,50,504 18,00,00,000 28,89,98,821 47. At this juncture, it is pertinent to refer to the decision of this Court in Om Prakash Jakhotia (supra), wherein, while recognizing the onus on the part of the assessee to approach the ITSC with clean hands, the Court held as under:- "21. The second and equally important reason for this court to hold that the Income-tax Settlement Commission gravely erred in its approach is an utter disregard to the condition that the assessee always has the duty to come clean and make full disclosure. 23. In the present case, after noting and brushing aside the Revenue's objections with regard to the complete lack of explanation by the assessee with respect to credits claimed, the Income-tax Settlement Commission proceeded to compute the amounts offered and observed that the difference in the net asset and the income declared was Rs. 5.55 crores. Jakhotia accepted the difference as their undisclosed income compu....
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....ion, we are of the opinion that the statutory framework of Chapter XIX-A of the Act does not allow for any revision or amendment of an application under Section 245C of the Act, as this would essentially entail submitting a new application in the same case while withdrawing the previous one. Such a process would afford the respondent-assessee group an opportunity to retract their initial submission and make a fresh one. Therefore, permitting the revision of the application would indirectly provide the respondent-assessee group a chance to accomplish something that they could not achieve directly. Furthermore, it would also severely affect the importance of the requirement of full and true disclosure at the first instance. The very foundation of a settlement proceeding lies at the bedrock of good faith and therefore, revision or amendment, which has the effect of concealing a misrepresentation made in the application, would be impermissible and de hors the scheme of Chapter XIX-A under the Act. 49. In the case of CIT v. ITSC [2013] SCC OnLine Del 2341, this Court, while relying upon the decision of the Hon'ble Supreme Court in the case of Ajmera Housing Corporation (supra), concl....
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....under the said section in the prescribed form. .. We are convinced that, in the instant case, the disclosure of Rs. 11.41 crores as additional undisclosed income in the revised annexure, filed on September 19, 1994, alone was sufficient to establish that the application made by the assessee on September 30, 1993, under section 245C(1) of the Act could not be entertained as it did not contain a "true and full" disclosure of their undisclosed income and "the manner" in which such income had been derived. However, we say nothing more on this aspect of the matter as the Commissioner, for reasons best known to him, has chosen not to challenge this part of the impugned order." [Emphasis supplied] 50. It is, thus, safely concluded that in the given facts and circumstances, the ITSC ought not to have proceeded with passing of the order as the respondent-assessee had failed to make a true and full disclosure before the ITSC. 51. Furthermore, in order to address the issue of granting immunity from penalty and prosecution under Section 245H of the Act, it is important to note that the said Section empowers the ITSC to exercise discretion in granting immunity to assesse....
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.... the immunity was granted and thereupon the provisions of this Act shall apply as if such immunity had not been granted. (2) An immunity granted to a person under sub-section (1) may, at any time, be withdrawn by the Settlement Commission, if it is satisfied that such person had, in the course of the settlement proceedings, concealed any particular material to the settlement or had given false evidence, and thereupon such person 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. (3) On and from the 1st day of February, 2021, the power of the Settlement Commission under this section shall be exercised by the Interim Board and the provisions of this section shall mutatis mutandis apply to the Interim Board as they apply to the Settlement Commission." 52. The Hon'ble Supreme Court in the case of Kotak Mahindra Bank Ltd. v. CIT 2023 SCC OnLine SC 1215, examined the pertinent condition req....