TaxTMI 
TaxTMI 
2026 (7) TMI 810
X X X X Extracts X X X X
X X X X Extracts X X X X
....ai. Shri Kishore Kumar Jain is the Managing Director of the Company and the other Directors are his family members. 2.3 A search, under Section 132 of the Income Tax Act, 1961 (hereinafter called as "IT Act"), was carried out on 21.04.2016. During the course of search proceedings, Shri Kishore Kumar Jain, Managing Director, has admitted, while answering the Q.No.8, in his sworn statement recorded under Section 132(4) of the IT Act on 23.04.2016, that the company's inflated refinery loss would come across 3% to 5% and siphoned off the excess gold from the refining process and sold them in the black market. By virtue of inflation of refinery loss, the petitioner had generated about a sum of Rs. 70.66 Crores from the AY 2011-12 to 2016-17, which was stated by the petitioner in the letter dated 29.06.2016. 2.4 In the aforesaid petitioner's letter, they offered to an extent of Rs. 80 Crores (268.200 kg of gold bullion) towards stock in trade kept with and held by employees, Goldsmiths, Agents, etc., in the year of search, i.e., AY 2017-18. 2.5 Consequent to the search, the notices, under Section 153A and 142(1) of the IT Act, were issued for the AYs 2011-12 to 2017-18. Subs....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the Settlement Commission still insist the petitioner to disclose the manner of earning the income voluntarily, that too when the Act has not mandated for such disclosure. 3.5 Alternatively, the issue required to be decided in this matter is as to whether the income earned by the petitioner is a "business income" or not. If it is not "business income", whether the income should be treated as income earned under Section 69B of the IT Act. 3.6 Further, he would submit that if the income is earned as "business income", the petitioner is liable to pay 30% of tax, which was already paid by them. On the other hand, if the Settlement Commission is not accepting the income as "business income" and intend to treat it as income under Section 69B, then Section 115BBE would come into picture, in which case, the petitioner is liable to pay 60% of tax, out of total disclosure without any deduction for any expenditure, etc. 3.7 He would also submit that when the matter came up for hearing before this Court on 23.03.2023, the following order came to be passed by Hon'ble Dr.Justice Anitha Sumanth: "The only issue that arises from the impugned order of the Settlement Commission d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... illogical as the unaccounted stock of 268.200 kg of gold amounting to Rs. 80 Crores would not have been disclosed by the petitioner if not for the search action under Section 132 of the IT Act by the Income Tax Department. 4.2 Further, he would submit that it is mandatory for any assessee to offer a full and true disclosure of his income and the manner in which such income has been derived along with the additional amount of income tax payable on such income and such other particulars as may be prescribed before the 1st respondent, which means the complete disclosure is supposed to be made by the petitioner before the Settlement Commission. 4.3 However, in this case, no such disclosure was made by the petitioner. Though the 1st respondent had accepted the petitioner's contention with regard to the income of Rs. 70.66 Crore, in the impugned order, it was held that the disclosure of Rs. 80 Crore was not in the manner of full and true disclosure since the details of particulars of the earning had not been proved/substantiated with any documentary evidences. 4.4 With regard to treatment of Rs. 80 Crore to be taxable at the rate of 60% under Section 69B read with Section 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 (extracted supra), wherein, according to him, the issue was narrowed down as to whether the petitioner's income has to be taxed at the rate of 30% by treating it as "business income" or at the rate of 60% by treating it as the income under Section 69B and applying the provision of Section 115BBE(1) of IT Act. Hence, a request was made by him to set aside the impugned order and remand the matter back for re-consideration. 6.2 In this case, there are two issues, one is pertaining to the inflation of refinery losses, from which the petitioner had generated about Rs. 70.66 Crores during the AY 2011-12 to 2016-17. As far as this issue is concerned, the 2nd respondent filed a report stating that there was full and true disclosure and the same was also accepted by the 1st respondent. 6.3 The 2nd issue is pertaining to a sum of Rs. 80 Crores, which was offered towards stock in trade and kept with and held by employees, goldsmith, agents etc., during the AY 2017-18. As far as this issue is concerned, the contentions made by the petitioner was not accepted by the 1st respondent due to the absence of documentary evidences etc. Further, the 1st respondent had arrived at a conclusio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant in his return of income for the A.Y. 2017-18." The above submissions made by the applicant company in its SOF clearly states that the inflation on refinery losses relates to the period prior to the years covered in the settlement application (i.e prior to A.Y. 2011-12). Whereas, it is seen that the applicant company has not come out with any further details, as to which years it actually belongs to. The applicant company even after providing sufficient opportunities, has not substantiated with materials and evidence, its claim in respect of Rs. 80 crores offered during AY 2017-18 as excess stock. The onus is on the applicant to explain the query raised by the Department and to differentiate the said sum of Rs. 80 crores as stock-in-trade / investments made. It is seen that the applicant company has failed on its part to furnish the said information even during the Joint verification proceedings. The AO vide Joint Verification report has clearly mentioned that by including the unaccounted stock of 268.200 kgs of gold amounting to Rs. 80 crores in purchase of old gold, the applicant had drastically reduced the total income of Rs. 150.66 crores offered for taxation as a r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... facts. Reliance is placed in the cases of ACE Investments (2003] 264 ITR 571 (Mad). Ajmera Housing [2010] 193 TAXMAN 193 (SC) and Rashmi Infrastructure Developers Ltd. Vs Income Tax Settlement Commission and Others (2017) 396 ITR 210 (Bom). Thus, on the grounds that the application is not maintainable and the disclosure is not full and true and that there is deficiency in corroborating the manner in which the income has been earned, the terms of settlement are not provided for. With regard to all other issues raised, there is no necessity for us to give any findings as it is already held that the applicant did not disclose full and true manner of earning the income in its settlement application and hence the application is not maintainable. 5.3 The settlement application is thus rejected. Hence the proceedings before the Settlement Commission shall abate in accordance with the provisions of Section 245HA of the 1.T Act Department nay take further course of action in accordance with law. 6.6 A perusal of the above portion of the impugned order, wherein, the Statement Of Facts at Page No.20 Paragraph No.24 of the settlement application was reproduced by the 1st responden....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he income at the time of original assessment proceedings before the Assessing Officer. If such a disclosure is made by the Assessee, certainly, it will be considered as a full and true disclosure. On the other hand, if any portion of disclosure appears to be untrue, certainly, the settlement application filed by the Assessee will be rejected in entirety. 6.9 In this case, the petitioner made full and true disclosure only for a portion of income of a sum of Rs. 70.66 Crores and no such disclosure was made with regard to the remaining portion of income to an extent of a sum of Rs. 80 Crores. Under these circumstances, the settlement application was rejected in entirety by the 1st respondent. The 1st respondent will not treat the remaining portion of income under different head, other than the disclosure made by the petitioner. The said exercise will be carried out only by the Assessing Officer in the normal course of assessment and not by the Settlement Commission after the rejection settlement application. 6.10 At this juncture, it would be apposite to extract the provisions of Section 245C(1) of IT Act, which reads as follows: 245C. Application for settlement of case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her words, the disclosure of income before the Settlement Commission must be more accurate than the manner, in which he would have been disclosed the income before the Assessing Officer in the normal course of assessment. 6.12 It was contended by the petitioner that in the impugned order, the 1st respondent had held that the disclosure of income is "voluntary in nature" and hence, there is no necessity to disclose the manner, in which the income was earned by the petitioner. As far as this contention is concerned, though the disclosure is voluntary in nature as stated by the 1st respondent, such voluntary disclosure to the extent disclosed in the application, required to be made in a full and true manner and hence, this Court is not inclined to agree with the above contention made by the petitioner. 6.13 Therefore, the applicant is supposed to make full and true disclosure of income, which have not been made in the Settlement application, along with the manner in which such income has been derived. In other words, there is a statutory Mandate on the part of the applicant to substantiate the manner of earning the additional income to the extent of such voluntary disclosure. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irety. Hence, the petitioner's application was rightly rejected by the 1st respondent vide impugned order. 6.15 It was also submitted by the petitioner that he would have paid the tax at the rate of 60% for the disputed amount, i.e. Rs. 80 Crores. However, this Court is of the view that the said submission would apply in the course of making the original assessment, subsequent to Section 153A notice, and not in the application filed before the Settlement Commission. 6.16 Therefore, the question of narrowed down of the issue to the extent as to whether the petitioner's income has to be taxed at the rate of 30% by treating it as "business income" or at the rate of 60% by treating it as the income under Section 69B and applying the provision of Section 115BBE(1) of IT Act, by the Settlement Commission would not at all arise in this case, but before the Assessing Officer in the normal course of assessment. 6.17 The settlement commission have to admit the application filed by the applicant without any change, i.e., they will not have any jurisdiction to change the declaration made by the applicant. In other words, if any proposal was made for payment of tax at the rate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the provisions of Law. Only in the normal course of assessment, if the Assessing Officer had arrived at a conclusion that the income disclosed in the returns is not satisfactory, he can treat the said income as "undisclosed income" under Section 69B and impose tax, interest, penalty, etc., under Section 115BBE. However, the 1st respondent will not have any power to take such view, while considering the settlement application. iv) In a Settlement Application, filed under Section 245C(1), if any particular income is disclosed under Section 69B, then certainly, the settlement commission will have power to consider the said income under Section 69B, but not to treat the income disclosed in one head to other head, and impose the tax in terms of Section 115BBE. Therefore, while filing the application, the truthfulness of the disclosure is a serious matter to consider the said application, otherwise, the application will be rejected in entirety. v) In this case, this Court has already arrived at a decision that there was no full and true disclosure in the settlement application filed by the petitioner. The settlement commission had arrived at a conclusion that a porti....