TaxTMI 
TaxTMI 
TaxTMI 
2024 (4) TMI 1291
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.... the ledger account would satisfy the requirement of provisions of Section 68 of the Act to establish the identity, creditworthiness and genuineness of the loan transactions. (iii) The Respondent No.1 erred in accepting the cash loans as genuine without directing any enquiry as to the identity and creditworthiness of the loan creditors and also in the absence of any confirmation from the loan creditors or the finance brokers. (iv) The Respondent No. 1 erred in holding that the third party evidence in support of fact and substantiation of fact relating to such unaccounted cash entries was a practical impossibility and that failure to obtain third party evidence (confirmation letters from the loan creditors) to substantiate the cash loans cannot be held against the Applicants, which is contrary to the decision of the Special Bench of ITSC in the case of MAAD Realtors & Infra Ltd. wherein such plea was rejected. (v) The Respondent No. 1 erred in misinterpreting the decisions of Hon'ble Supreme Court in the case of Mohanakala (291 ITR 271) and Sumati Dayal (2141TR801) and incorrectly holding that the facts as disclosed in the settlement application can be held as true and ....
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.... time frame for repayment of the outstanding cash loan of Rs. 299.38 Crores and in not spelling out the consequence of non-payment of the entire or part of the outstanding loan as part of the terms of settlement, which renders the direction / order of ITSC on this issue perverse. (xiii) The Respondent No. 1 erred in accepting the Applicants' offer of additional undisclosed income of Rs. 25.52 Crores on account of peak of undisclosed funds of Shri Jagdish Ahuja rotated in the business of Ahuja Group instead of rejecting the settlement applications as not containing full and true disclosure of the income, as required under Section 245C(1) of the Act, particularly after holding that the Applicant could not offer any reasonable justification for not having offered the peak amount of Rs. 25.52 crores as additional income in the settlement application and the Commission was of the considered view that amount is required to be assessed in the hands of the Applicant Group as further additional income. (xiv) On this issue of acceptance of additional undisclosed income of Rs.25.52 Crores, the order of ITSC suffers from perversity and gross error of law. (xv) Respondent No. 1 has....
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.... of Income Tax,Central-II Vs. Income Tax Settlement Commission (Kanakia Spaces Pvt Ltd.) 2024 SCC Online Bom 1090 as well as in Principal Commissioner of Income Tax (Central) - 3, Mumbai Vs. Income Tax Settlement Commission (M/s Wadhwa Group Holding Pvt Ltd.) Order dated 18th April 2024 in Writ Petition No.1830 of 2019, will be squarely applicable to the case at hand. It will be useful to reproduce paragraphs 7 to 15 of Wadhwa Group Holding Pvt Ltd. (supra) which read as under: "7 The Apex Court in Jyotendrasinhji Vs. S. I. Tripathi [(1993) 68 Taxman 59 (SC)] has discussed the scope of challenge to orders passed by the ITSC. The Apex Court has held that after examining such further evidence as it may be placed before it, the ITSC may, in accordance with the provisions of this Act, pass such order as it thinks fit. The Apex Court also held that the scope of enquiry is restricted to whether the order passed by the ITSC 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 assessee. The Apex Court has held that the order of the ITSC is in the natur....
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....if any, of the commissioner received under subsection (3), and after giving an opportunity to the applicant and to the commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the settlement commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the commissioner under sub-section (1) or subsection (3)." Section 245E empowers the Commission to reopen the completed proceedings in appropriate cases, while Section 245F confers all the powers of an Income Tax authority upon the Commission. Section 245H empowers the Commission to grant immunity from penalty and prosecution, with or without conditions, in cases where it is satisfied that the assessee has made a full disclosure of his income and its sources. Under Section 245HA the Commission can send back, the matter to assessing. officer, where it finds that the applicant is not cooperating with it. Section 245-I declar....
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....ive reasons for its order. Even if it gives reasons in a given case, the scope of enquiry in the appeal remains the same as indicated above viz., whether it is,contrary to any of the provisions of the Act. In this context, it is relevant to note that the principle of natural justice (and alteram partem) has been incorporated in Section 245D itself. The sole overall limitation upon the Commission, thus, appears, to be that it should act in accordance with the provisions of the Act. The scope of enquiry, whether by High Court under Article 226 or by this Court under Article 136 is also the same whether the order of the Commission is contrary to any of the provisions of the Act and if so, has it prejudiced the petitioner/appellant apart from ground of bias, fraud & malice which, of course, constitute a separate and independent category. Reference in this behalf may be had to the decision of this Court in Sri Ram Durga Prasad v. Settlement Commission 176 I.T.R. 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 ....
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....ainst prosecution or imposition of penalty. The Karnataka High Court further held that it is in the nature of statutory arbitration to which a person may submit himself voluntarily and the scope of interference is much more restricted than the power of the court to interfere with an arbitration award. 9 A similar matter came to be considered by this court in the Commissioner of Income Tax,Central-II Vs. Kanakia Spaces Pvt Ltd. This court after considering all the judgments cited, noted that in R. B. Shreeram Durga Prasad & Fatechand Nursing Das (Supra) the court held that any challenge to the orders of the Settlement Commission, the High Court should be concerned with the legality of the procedure followed and not with the validity of the order. The judicial review should be concerned not with the decision but with the decision making process. Thus, the Court could not interfere with the order if otherwise proper on the ground that the decision appeared erroneous. The decision wrong or right was binding, if it is reached fairly after giving adequate opportunity to the parties to place their case in the manner provided by the Act. Unless grave procedural defect such as violation ....
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....iew, ITSC was entitled to exercise discretion while passing the impugned order and has exercised its discretion. In our view, there is neither violation of any mandatory procedure prescribed under any of the sections of Chapter XIX-A of the Act nor any violation of any of the Rules of natural justice. Further, it cannot be said that the reasons assigned by the ITSC for granting relief sought for by assessee have no nexus to the decision taken. 12 As held by the Apex Court in Kotak Mahindra Bank Ltd. (supra), unsettling reasoned orders of the ITSC, and in the present case order runs into almost 170 pages, may erode the confidence of bonafide assessee thereby leading to multiple litigation where settlement is possible and this larger picture has to be borne in mind. Moreover, the members of the ITSC have been appointed by Central Government in accordance with Section 245B(3) of the Act for their integrity and outstanding ability and for special knowledge and experience in, problems relating to direct taxes and business accounts. The members of the ITSC, therefore, cannot be questioned for their decision or for exercising their discretion. 13 It will be useful to reproduce, at t....
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....s of the Act. It is rather unfortunate that the Commissioner who has filed the Writ Petition is sitting in appeal over findings of the members of the ITSC. Chapter XIX-A was inserted to enable an assessee, at any stage of a case relating to him, to make an application containing a full and true disclosure of his income which has not been disclosed before the A.O., the manner in which such income has been derived, the additional tax payable on such income and such other particulars as may be prescribed, to the ITSC to have the case settled. When such an application is made and the ITSC is satisfied that there has been a full and true disclosure, the department cannot raise any grievance. Unless a case of bias or fraud or malice is alleged, not being a bald allegation, but with details, no petition by Revenue impugning an order by the ITSC should be entertained. We say this because the Central Government has appointed the persons who are members of the Commission as they are persons of integrity and outstanding ability, having special knowledge of, and, experience in, problems relating to direct taxes and business accounts. Or the order impugned must be so perverse that no person ....