TaxTMI 
TaxTMI 
2024 (12) TMI 825
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....regators and Sand Pvt. Ltd. and M/s Delta Msand Pvt. Ltd. A search and seizure action under Section 132 of the Income Tax Act [hereinafter referred to as the "I.T. Act"] was carried out on 13.10.2017 at the business premises of the two companies as also at the residence of the appellant. Consequent to the search, notices under Section 153A of the I.T. Act were issued on 07.06.2018 to the companies as well as to the appellant for the assessment years 2012-13 to 2017-18. A notice under Section 143 (2) of the I.T. Act was also issued on 23.09.2019 for the assessment year 2018-19. 3. During the pendency of the proceedings initiated under Section 153A, the appellant, along with the two companies, preferred settlement applications before the Interim Board for Settlement [IBS]. In this Writ Appeal, we are concerned only with the settlement application put in by the appellant in his personal capacity. That application was filed on 26.02.2021, and the appellant admitted an undisclosed income of Rs. 44,00,000/- towards remuneration earned outside the banking channels for the assessment years 2013-14 to 2018-19. 4. On the settlement application being entertained by the IBS, a report was....
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....the purposes of settlement. 6. The learned Single Judge, who considered the writ petition, took note of the Scheme of Chapter XIXA of the I.T. Act, which dealt with the procedure for settlement of cases before the Settlement Commission constituted under the said Act. His analysis of the Scheme inherent in the said provisions is discernible from paragraphs 8 to 8.3 and 10 to 11.2 of the impugned judgment that read as follows: "8. Under the scheme of Chapter XIX A of the Act the proceedings before the Settlement Commission commence by an application made by the assessee as contemplated by Section 245C. Section 245D prescribes the procedure to be followed by the Commission on receipt of an application under Section 245C. The particulars which need to be disclosed in the application under Section 245C are provided. Sub-section (4) of Section 245D provides: "after examination of the records and the report of the Principal Commissioner or Commissioner, if any, received under - (i) sub-section (2B) or subsection 3, or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after g....
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.... It is also well settled that even if the Commission decides any principles, they do not bind the Income Tax authorities in relating to the subsequent years. The Order of the Commission is relevant and confined only to the assessment years to which it relates. xxxxxx xxxxxxxx xxxxxxxxxxx 10. The Order of the Commission is in the nature of a package deal. An assessee cannot be permitted to accept what is favourable to him and reject what is not. The scope of enquiry by the High Court or Supreme Court is limited, i.e., whether the Order of the Commission is contrary to any of the provisions of the Act and, if so, has it prejudiced the applicant apart from the grounds of bias, fraud, or malice? 10.1 From the provisions of Chapter XIXA, it is clear that once the Settlement Commission admits a case for consideration, it shall have exclusive jurisdiction to exercise all powers of regular authorities under the Act to effect a settlement and recover tax penalty and interest. Once the Settlement Commission formally allows the application to be considered for "settlement", the regular assessment proceedings and recoveries initiated for tax penalty or interest pursu....
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....hapter is a complete code in itself. Under this Chapter, taxability is determined by the Commission with respect to the undisclosed income only through the process of settlement/arbitration. [Brij Lal v. Commissioner of Income Tax - [(2011) 1 SCC]]. 11.1.1 Paragraph 23 of the said judgment is extracted hereunder: "23. Descriptively, it can be stated that assessment in law is different from assessment by way of settlement. If one reads Section 245-D(6) with Section 245-I, it becomes clear that every order of settlement passed under Section 245-D(4) shall be final and conclusive as to the matters contained therein and that the same shall not be reopened except in the case of fraud and misrepresentation. Under Section 245-F(1), in addition to the powers conferred on the Settlement Commission under Chapter XIX-A, it shall also have all the powers which are vested in the Income Tax Authority under the Act. In this connection, however, we need to keep in mind the difference between "procedure for assessment" under Chapter XIV and "procedure for settlement" under Chapter XIX-A (see Section 245-D). Under Section 245-F(4), it is clarified that nothing in Chapter XIX-A shal....
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.... the judgment in Commissioner of Income Tax v. Hindustan Bulk Carriers - [(2003) 3 SCC 57] in support of the said contention. The argument advanced before the learned Single Judge, as regards the legality of the finding of the IBS that amounts treated as deemed dividend could be treated as undisclosed income of the appellant, were also reiterated before us at the time of hearing of the Writ Appeal. 8. Per contra, it is the submission of Smt. Susie B. Varghese, the learned Standing Counsel for the Income Tax Department, that the orders of the Settlement Commission cannot be lightly interfered with by this Court in exercise of its discretionary powers under Article 226 of the Constitution of India. It is her submission that unless the defect in the order of the Settlement Commission is one that constitutes a grave error of law or a flagrant disregard for the provisions of the I.T. Act, this Court would not ordinarily interfere with an order that was passed in the spirit of settlement and with a view to put a quietus to litigation. She, therefore, supported the impugned judgment of the learned Single Judge that found that the writ petition was not maintainable as such. 9. We hav....
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....whether the order of the Commission is contrary to any of the provisions of the Act and if so, apart from ground of bias, fraud and malice which, of course, constitute a separate and independent category, has it prejudiced the petitioner/appellant....." The Karnataka High Court in N.Krishnan (Decd. By legal representative, K. Badrinarayan, and others) v. Settlement Commission and Others - [1989 (180) ITR 585] observed as follows at page 597: "The provision for settlement would show that it is in the nature of statutory arbitration to which a person may submit himself voluntarily. Hence, many of the grounds on which an arbitration award could be set aside would not be available in view of the nature and jurisdiction of the Settlement Commission. A decision of the Settlement Commission could be interfered with only (i) if grave procedural defects such as violation of the mandatory procedural requirements of the provisions in Chapter XIXA of the Income-tax Act, 1961, and/or violation of the rules of natural justice are made out; or (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission. The court cannot inte....
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....e purposes of settlement. We say this because an argument that an assessee may ordinarily raise in adjudication proceedings before the hierarchy of statutory authorities under the I.T. Act may not be available for him to raise in proceedings before the Settlement Commission where the object behind the proceedings is not to determine the correctness of the legal contentions raised by the assessee but to settle a dispute between the assessee and the Department so as to bring about a quietus to litigation. One cannot also overlook the fact that notwithstanding the contentions that may have been taken in normal adjudication proceedings under the I.T. Act, based on returns filed by the assessee or orders already passed by the Income Tax Authorities, when it comes to an assessee opting for a settlement and choosing to prefer an application by voluntarily disclosing previously undisclosed income exceeding Rs. 50,00,000/-, the enquiry that follows is entirely directed towards ascertaining whether or not the disclosure by the assessee was a full and true disclosure for the purposes of settlement. The perspective to be held by the Settlement Commission, while adjudicating on a settlement app....