TaxTMI 
TaxTMI 
2024 (10) TMI 1585
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....principal question which consequently arises is whether it would be open for the writ petitioner to assail the order of the ITSC only to the extent of according immunity from prosecution and penalty as contemplated under Section 245H of the Income Tax Act, 1961 [Act]. 3. It becomes pertinent to note that the writ petitioner has chosen to desist from assailing the order of the ITSC in its entirety and in terms of which, not only was a computation of income exercise in terms contemplated under Section 245D (4) undertaken, the ITSC had also framed directions for tax being computed in terms thereof and for the respondent nos. 1 and 2 being placed under the additional liability of paying interest under Sections 234A, 234B and 234C of the Act. 4. It is in the aforesaid backdrop that the petitioners were called upon to satisfy the Court as to whether a partial challenge to the order of the ITSC could be maintained. This aspect assumes significance since an order of settlement as rendered is premised on a full and true disclosure of income having been made by the applicant before the ITSC and it having processed that application on the anvil and rigors of the provisions contained in ....
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....8. It appears that before the ITSC, it was candidly conceded by respondent nos. 1 and 2 that their audited accounts could not be relied upon since they were replete with fictitious transactions. This becomes apparent from a reading of Para 22 of the order of the ITSC impugned before us:- "22. A perusal of the SOF clearly reveal that the applicant had taken the position that result of audited account will not be reliable for the reason that there are fictitious transactions and that the financial statements contain fabricated results for impressing banks with a sole purpose of impressing the banks. On the contrary, the applicant wanted the result of combined (consolidated) account to be adopted wherein all fictitious transactions of bogus concerns have been reversed or neutralized." 9. The applications for settlement appear to have been based on a combined or consolidated account which was prepared by M/s M.L. Puri & Co., Chartered Accountants. However, the aforesaid consolidated accounts were also found by the ITSC to be unreliable in light of various discrepancies which it noticed as well as the auditors themselves having expressed reservations with respect to the find....
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....ed primarily to applying analytical procedures with the objective of verifying financial data and thus provides less assurance than an audit. We have not performed audit and, accordingly, we do not express an audit opinion". This being the case, the so-called consolidated account is a fabricated, tailored and self serving document to suit the purpose of the applicant. Thus, the reliability cannot be accepted. xxxx xxxx xxxx 7) To sum up, having regard to the detailed discussion in the aforesaid paragraphs we are of the view that the consolidated account cannot be relied upon and does not depict a correct state of affairs. Considering inconsistencies found therein we are also of the view that rather than presenting a correct position the same account was used for a self serving intention of the applicant. Even with regard to the audited account, the applicant has expressed in no uncertain term that the account is not to be relied upon. In this circumstance, we have no option but to declare the book results of both the audited as well as the Review Report in the form of consolidated account as unreliable and therefore, reject the result. 8) In the given bac....
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....the purposes of disposal of the settlement applications. This becomes apparent from the following computation table which appears at page 56 of our record:- Computation of Income u/s 245D (4) Name of the Applicant Asst. Year Total Income as per Return (in Rs.) Income disclosed u/s. 245C(1) (in Rs.) Income settled u/s 245D (4) (in Rs.) Total Income determined u/s 245D (4) (Rs.) M/s. A.S.M. Traxim Pvt. Ltd. 2006-07 0 700000 700000 700000 2007-08 -30551 800000 800000 769449 2008-09 6507439 700000 46721861 53229300 2009-10 7854719 13000000 60194325 68049044 2010-11 Not filed 100000 47665739 47665739 2011-12 Not filed 100000 53616275 53616275 Total 1433607 15400000 209698200 224029807 Computation of Income u/s 245D (4) Name of the Applicant Asst. Year Total Income as per Return (in Rs.) Income disclosed u/s. 245C (1) (in Rs.) Income settled u/s 245D (4) (in Rs.) Total Income determined u/s 245D (4) (Rs.) Agson Global Pvt. Ltd. 2004-05 -177602 200000 200000 22398 2005-06 2404670 100000 100000 25046....
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.... from prosecution or from the imposition of penalty, either wholly or in part with respect to the case covered by the settlement. The necessary ingredients for granting immunity from prosecution would be : (a) the assessee should have co-operated with the Settlement Commission in the proceedings before it ; and (b) the assessee should have made a full and true disclosure of its income and the manner in which such income has been derived, to the satisfaction of the Commission. Therefore, what is of essence is that the assessee ought to have: (a) made full and true disclosure before 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. " 16. According to Mr. Menon, notwithstanding the computation of income having been undertaken by the ITSC and that part of the order not being questioned by the writ petitioner, the impugned order is clearly severable and this Court would thus be justified in ....
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.... that was undertaken. 20. We also bear in mind the stand taken by the respondents themselves that their audited accounts were not liable to be taken into consideration and that they could not form the basis for the proceedings as were laid before the ITSC. The respondents had candidly admitted that those accounts were wholly unreliable and it was in the aforesaid backdrop that they appear to have participated in the proceedings before the ITSC and agreed to collaborate in the exercise of ascertainment of a true and correct computation of income for the period in question being undertaken. It was this position as struck by parties which appears to have informed the decision of the ITSC to order a joint verification. 21. We are thus, in the facts of the present case, faced with a situation where the ITSC had at no stage come to conclude that the applications as made were liable to be rejected either on the ground that the respondents had failed to make a full and true disclosure or that they had failed to cooperate in the proceedings. If these twin conditions were found to be satisfied for the purposes of Section 245D (4), we fail to appreciate how the said issue could be quest....
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....cond question arising for our consideration, as we have pointed out earlier, the provision for constitution of the Settlement Commission was not in existence earlier. This legislative step was taken on the recommendation of the Wanchoo Committee. As observed by us earlier, the Settlement Commission was to be constituted for settling the complicated claims of chronic tax evaders as an extraordinary measure, for giving an opportunity to such persons to make true confession and to have the matters settled once for all, and earn peace of mind. It is a Forum for self surrender and seeking relief and not a Forum for challenging the legality of assessment order or orders passed in any other proceedings. This is not only evident from the provision of the Act which prevents the application made, from being withdrawn as also the provision which makes the decision of the Settlement Commission final and conclusive both on question of law and fact. The power conferred on the Settlement Commission is so wide that it can take any view on any questions of law, which it considers appropriate, having regard to the facts and circumstances of a case, which would be applicable only to that case and it ....
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....us." 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 between the reasons given and the decision taken by the Settlement Commission. (iii) this Court cannot interfere either with an error of fact or error of law, alleged to have been committed by the Settlement Commission. We answer the second question accordingly." 26. As was emphasized by the Supreme Court in Kotak Mahindra, the essential ingredients liable to be borne in consideration by the ITSC for the purposes of grant of immunity are cooperation by the applicant in the computation of total income in the settlement proceedings and a full and true disclosure of income being made. The Supreme Court, however, pertinently observed that what wou....
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....conferred finality by virtue of section 245-I of the Act. 22. As would be manifest from the discussion above, the Income-tax Settlement Commission is conferred wide powers by virtue of the provisions enshrined in Chapter XIX-A to examine and evaluate all aspects relating to an application for settlement that may come to be made before it. By virtue of the statutory powers so conferred, the Income-tax Settlement Commission's jurisdiction to examine and inquire is not confined merely to the disclosures that an applicant may choose to make. This is evident from the statutory provisions empowering and enabling it to call for reports from the Principal Commissioner/Commissioner as also the framing of directions for further inquiry and investigation being undertaken. Chapter XIX-A in our considered opinion thus enables the Income-tax Settlement Commission to holistically examine all aspects that may be said to arise from the application submitted for its consideration and enabling it to accord a full and complete closure to all disputes. 23. We note that the scope and extent of the power which the Income-tax Settlement Commission could exercise was lucidly explained by the Supr....
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....e Settlement Commission in the proceedings before it; and (b) the assessee should have made a full and true disclosure of its income and the manner in which such income has been derived, to the satisfaction of the Commission. Therefore, what is of essence is that the assessee ought to have: (a) made full and true disclosure before 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." 24. The power conferred upon the Income-tax Settlement Commission not being confined merely to the matters spoken of and covered by the application but also extending to any other matter relating to the case was an aspect which came to be highlighted in a decision handed down by a Division Bench of the court in Tahiliani Design P. Ltd. v. Joint CIT [(2021) 432 ITR 134 (Delhi); 2021 SCC OnLine Del 3518.] wherein the following was observed (page 142 of 432 ITR): "12. Though undoubtedly (a) the application under ....
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....of the matter and would be within its rights to, if so deems apposite, also deal with the aspect of violation of section 269ST of the Act and either to grant exemption from penalty therefor or to pass such other order as it thinks fit in relation thereto as well and it is felt that the said power and jurisdiction of the Settlement Commission should not be permitted to be interdicted by the impugned order. (D) In this context we may also notice that the notices under section 153A as well as under section 271DA of violation of section 269ST, both have their origin in the search, seizure and survey conducted qua the petitioner, as evident from a bare reading of the notice under section 271DA referred to hereinabove by us for this reason. Merit is thus found in the contention of the counsel for the petitioner that both are part of the same case. (E) The counsel for the respondent, on enquiry fairly states that if the violation of section 269ST of the Act is detected as a result of a search and seizure operation, as it is in the present case, then it is open to an applicant before the Settlement Commission to also include in the application, the violation of section 26....
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....ing against it in its application, pass such orders as it may think fit in relation/with respect thereto and the said powers of the Settlement Commission cannot be permitted to be interdicted by the impugned order. We reiterate that the proceedings of violation of section 269ST, as per the notice dated September 30, 2019, are a result of what was found in the search and survey qua the petitioner and are capable of being treated as part and parcel of the case taken by the petitioner by way of application to the Settlement Commission. (I) The Supreme Court, in Doypack Systems Pvt. Ltd. v. Union of India [(1989) 65 Comp Cas 1 (SC); (1988) 2 SCC 299.] held that the expression 'in relation to' has been interpreted to be the words of widest amplitude and is in the nature of a deeming provision and is intended to enlarge the meaning of a particular word or to include matters which otherwise may or may not fall within the main provisions. Again, in Thyssen Stahlunion GmbH v. Steel Authority of India Ltd. [(2000) 99 Comp Cas 383 (SC); (1999) 9 SCC 334; 1999 SCC OnLine SC 1031.] it was held that the phrase 'in relation to arbitral proceedings' cannot be given a narrow meaning to mea....