TaxTMI 
TaxTMI 
2026 (9) TMI 1262
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....r dated 08.11.2011, under Sections 148 and 147 read with Section 143(3) of the Income Tax Act, 1961 ("The Act, 1961"), under which the deduction claimed by the Assessee under Section 80IB(10) of the Act, 1961 was disallowed, resulting in an addition of Rs. 65,65,17,999/- (Rupees Sixty-Five Crores Sixty-Five Lakhs Seventeen Thousand Nine Hundred and Ninety-Nine) to the total income of the Assessee/OMAXE Limited for the 2006-07 (Financial Year 2005-06). The circumstances preceding the impugned Judgment in the Writ Petition are few, and, given the nature of the contentions urged on behalf of both the sides, they are referred to chronologically. 2. The Assessee is a Public Limited Company engaged in real estate and is under the jurisdiction of the First Appellant for assessment and the Second Appellant for the administrative charge, respectively. The Appeal relates to the Return filed on 30.11.2006 by the Assessee for the Assessment Year (AY) 2006-07. On 22.09.2005, the Revenue, under Section 132 of the Act, 1961, conducted a search and seizure at the Assessee's business premises and the Associate Concerns, as well as the residential premises of its Directors. On 30.11.2006, the Ass....
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....g attended by Senior Executives, including the Director of Taxation, the V.P. Finance, the G.M. Legal, and the Company's Auditors. B. The impounded documents show that the Assessee's Executives mutually decided, before finalising the balance sheet for the period ending 31.03.2009, to transfer the commercial portions of specific projects to 100% subsidiary companies at cost to strengthen their claim under Section 80IB of the Act, 1961. C. Section 80IB(10)(vi) of the Act, 1961 provides that the built-up area of shops and other commercial units within a housing project must not exceed 5% of the aggregate built-up area or 2,000 sq. ft., whichever is lower. D. Further, the impounded documents showed that the commercial area in several of the Assessee's projects far exceeded the legal limit, making those projects ineligible for the deduction under Section 80IB(10)(vi) of the Act, 1961. Therefore, the Section 80IB deductions were wrongly claimed. E. Hence Rs. 55,58,96,486/- across four specific projects, i.e., OMAXE City Lucknow, OMAXE City Sonepat, OMAXE Heights Sonepat, and OMAXE Heights Faridabad, had escaped assessment, and these reasons wer....
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.... 6. On 04.01.2012, at the first instance, the Assessee filed Writ Petition No. 7975 of 2011 before the High Court of Delhi, challenging the Show Cause Notice dated 30.06.2010. The prayer was subsequently amended on 09.01.2012 to challenge the Reassessment Order dated 08.11.2011. 7. The following table sets out the disclosure of income and the deduction claimed by the Assessee for the AY 2006-07 in the return and the disclosure application: Income Tax Returns dated 30.11.2006 Revised Computation of Income and Tax in Application u/s 245C(1) of the Act Gross Total Income 1683849122 Income originally returned 892,076,630 Less: Deductions (Chapter VI-A) u/s 80 G Donation Additional income surrendered 1,800,000 893,876,630 Eligible for 50% 3743970 Tax Due 268,162,989 1871985 Add: - S/c @10% 26,816,299 294,979,288 Eligible Deduction U/S 80IB 789900509 791772494 Add: - Education Cess @ 2% 5,899,586 300,878,874 Total Income Round off u/s 288A 892076628 892076630 Less:- Tax Paid 300,272,994 605,880 8. It is a matter of record that on 29.10.2010, the CIT(C)-III, Delhi, filed an....
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....allowed in A.Y. 2006-07. The CIT goes on to state: "In fact, the assessee had willfully concealed this fact before the Settlement Commission while moving its application for settlement. Thus, the assessee has not made full and true disclosure of its income, which is a pre-requisite condition for settlement as provided under section 245C. xxx xxx xxx 23. We have carefully gone through the material on record and the rival submissions. We find that the main reason given by the CIT for moving the application under section 245D(6) is the evidence found during the course of survey under section 133(A) dated 17/18.12.2009 (para-3 of the CIT's letter dated 18.02.2011). A perusal of this evidence nowhere makes out any case of misrepresentation by the applicant. Minutes of the meeting of records in the CIT's application dated 29.10.2010 only talks of strengthening the claim of deduction under section 80IB(10). There is no hint in the minutes of stating wrong facts or suppressing material facts by the applicant. In fact, in the communication quoted in para- 6.3 of the Assessing Officer's letter dated 04.02.2011, the applicant's desire to strictly comply with the req....
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.... year by issuing a Notice under Section 148 of the Act, 1961. D. Under Section 245-I of the Act, 1961, an ITSC Order is conclusive on the matters stated therein, and no matter can be reopened in any other proceeding. Hence, the Reassessment Order passed by the AO was wholly without jurisdiction and illegal. 11. The Revenue contested the writ prayer and, in fact, set out its plea on the income disclosed for settlement in the Application under Section 245C of the Act, 1961, and on matters not specifically covered by fresh disclosure under the said Section. The Revenue's objections before the High Court are as follows: A. That the ITSC's Order is conclusive only in relation to the specific matters and issues stated in the Settlement Order itself. The Assessee did not specifically approach the ITSC to settle its claim for deduction under Section 80IB(10) of the Act, 1961. B. Furthermore, the Assessee did not disclose any income in respect of the housing project deduction. Therefore, ITSC did not adjudicate this specific claim, meaning the deduction claimed was not covered by ITSC's Order. C. Relying on Section 245F(4), it was contended....
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....l purpose of settlement. iii. The High Court distinguished the Supreme Court's Judgment in Damani Brothers (supra), clarifying that it applied only to the preliminary stage, before the ITSC officially decides to proceed with a Settlement Application under Section 245D(1). Once the Application is admitted, the ITSC assumes full jurisdiction over both disclosed and undisclosed income, thereby rendering the Revenue's reliance on this Judgment invalid after the final Settlement Order is passed. The Damani Brothers (supra) clarified earlier observations in Express Newspapers Ltd. [Commissioner of Income Tax, madras v. Express Newspapers Ltd., (1994) 2 SCC 374.] regarding the ITSC's role during the pendency of an Application under Chapter XIX-A of the Act, 1961. iv. Hence, the Statute does not, in principle, permit two divergent orders from different tax authorities to determine the total income for the same assessment year, as this would cause chaos in tax administration. C. On Statutory Interpretation: Under Section 245F(2) of the Act, 1961, the ITSC assumes exclusive jurisdiction to exercise the powers and perform the functions of an Income-Tax A....
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....come escaped and to levy taxes on account of claiming an inapplicable deduction under Section 80IB(10) of the Act, 1961. 16. Per contra, Ms. Kavita Jha contends that the Revenue is applying Section 245C of the Act, 1961 incorrectly and incompletely. The Assessee, desirous of settlement under Chapter XIX-A of the Act, 1961, makes an Application in the prescribed Form No. 34B. The Assessee has computed the net taxable income after claiming permissible statutory deductions under Section 80IB of the Act, 1961, and has offered additional tax after accounting for the additional undisclosed income and finally deriving the income on which the tax is payable. The ITSC admitted the Application. The ITSC sought a reply to the Application filed by the Assessee and, after hearing the representatives of the Assessee and the Principal Commissioner, Income Tax, passed the Order dated 17.03.2008. The attention of the Court is invited to the procedure followed by the Assessee for claiming deduction under Section 80IB(10) of the Act, 1961. It cannot be gainsaid that the Revenue and the ITSC have considered the net income liable for tax without appreciating the deductions claimed by the Assessee. I....
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.... Section 245-I of the Act, 1961 does not, and cannot, bar the High Court's constitutional jurisdiction under Article 226 of the Constitution of India or the Supreme Court's under Articles 32/136 of the Constitution of India. B. The scope of judicial review of the Settlement Commission is strictly limited to examining whether the Commission's Order is contrary to any provision of the Act, 1961, and whether any such contravention has prejudiced the assessee. C. Interference by the Court is also permissible on independent grounds of bias, fraud, or malice. D. In this context, judicial review under Article 136 concerns the decision-making process, not the merits of the ITSC's Settlement Order. E. An incorrect interpretation of a Settlement or Trust Deed by the Commission does not violate the provisions of the Act, 1961, and therefore cannot be a valid ground for interference. 18. In CIT, Madras v. Express Newspapers Limited (supra), this Court examined the maintainability of an application to the ITSC under Section 245C of the Act, 1961. It clarified that an Application must disclose previously undisclosed income and cannot be used to ....
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....a settlement Application is a unilateral act, and the Income Tax Authorities may continue their investigations and rely on evidence collected up to the date they submit their report to the Commission. The proper timeline for considering evidence is ordinarily based on the date the Commissioner submits the Report, not the date the Assessee files the Application. The Commission may also review material collected by the Income Tax Authorities even after the Commissioner submits the Report if it believes the interests of justice require it. 19. In Brij Lal (supra), the Constitution Bench examined the scheme and framework of Chapter XIX-A, the procedure before the Settlement Commission, and the binding nature of the Commission's Orders. It clarified the application of Sections 234A, 234B, and 234C of the Act, 1961, to proceedings before the Settlement Commission under Chapter XIX-A. It held that interest for default in payment of advance tax under Section 234B of the Act, 1961, is chargeable only up to the admission of the Settlement Application under Section 245D(1), not up to the final Order under Section 245D(4). It further held that the Settlement Commission lacks jurisdictio....
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....ssue was whether the High Court correctly interfered with a Settlement Commission Order granting an Assessee immunity from prosecution and penalty under Section 245H of the Act, 1961. This Court held that the High Court erred in remanding the matter, as the Commission had properly based its decision on the assessee's full and true disclosure and cooperation during the proceedings. It further held that judicial review of the Settlement Commission's discretionary orders is strictly limited. Accordingly, the Court restored the assessee's immunity under the Settlement Order. The Court held as follows: A. For the Settlement Commission to grant immunity from prosecution and penalty under Section 245H(1) of the Act, 1961, two essential conditions must be met: 1. The Assessee must have made a full and true disclosure of its income and the manner in which it was derived; and 2. The Assessee must have co-operated with the Settlement Commission during the proceedings. B. The material "disclosed" by an Assessee before the Settlement Commission need not be entirely distinct from what was previously "discovered" by the AO. An Assessee may accept the li....
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....of Section 154 of the Act by the Settlement Commission cannot be justified. The precedent is to the effect that even the scope of re-opening by the ITSC is not complete or referable to any other Section in the Act, 1961, except through Chapter XIX-A of the Act, 1961. The circumstances and the reasons for incorporating Chapter XIX-A of the Act, 1961, are considered in the precedents noted supra. The facility of resolution through Chapter XIX-A can be said to be summed up as a purification of accounts from distorted, suppressed and misrepresented entries of income and expenditure by an Assessee. This is not a simple holy shower but an opportunity to purge by paying the tax, penalty, and interest as may be determined by the ITSC. The procedure under Chapter XIX-A of the Act, 1961, is optional and enables voluntary disclosure by the Assessee for the final determination of tax payable for disputes before the ITSC. Once the Assessee makes an Application, the Assessee cannot withdraw it. 22. Per contra, the Revenue is afforded an opportunity to file a Report, place material before the ITSC, and request that the ITSC reject the Application under Section 245C of the Act, 1961, and allow ....
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....he Application or allowing it to proceed. If no Order is passed within this period, the Application is deemed to be allowed to proceed. iii. If the Application is not allowed to proceed, the regular assessment machinery remains undisturbed, no exclusive jurisdiction vests in the ITSC, and the AO continues proceedings under Sections 142 to 156 of the Act, 1961, as before. iv. If the Application is admitted (or deemed admitted), Section 245F(2) is triggered immediately. The ITSC assumes exclusive jurisdiction over the case. Because two Authorities cannot simultaneously exercise jurisdiction over the same subject matter, the regular assessment machinery, i.e., Sections 142-156, including inquiry, reassessment, search assessments, rectification, and demands, is placed in statutory abeyance. D. Once admitted, the case proceeds towards settlement of the income tax payable on the Application filed by the Assessee and other amounts payable thereon. The ITSC then calls for a comprehensive report from the Principal Commissioner or the Commissioner of Income Tax, which must be submitted within 45 days. The ITSC then reviews the Commissioner's Report, the underly....
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....ed by fraud or misrepresentation of facts is void under Section 245D(6), enabling the regular assessment machinery to reopen and assess the escaped income without any limitation. 23. The Revenue's argument for issuing the Reassessment Notice rests on the words in Section 245C of the Act, 1961, viz., "containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer", but it overlooks the expression in Section 245C, viz., "the manner in which such income has been derived". On a plain construction of both the italicised expressions, what constitutes a case for consideration before the ITSC would be an Assessee making an Application containing a full and true disclosure of the Assessee's income which has not been disclosed before the AO, and the manner in which such income has been derived. Therefore, the additional amount of income-tax payable in the disclosure will depend on the manner in which such income has been derived by the Assessee. In the case on hand, the Assessee has disclosed the revenue included in the Assessee's gross total income, and, by claiming deductions under the Act, 1961, the net income liable for tax is set out....