THE PRINCIPAL COMMISSIONER OF INCOME TAX vs. AKSHAT SHAH

C/SCA/2760/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 2760 of 2020 ========================================================= = THE PRINCIPAL COMMISSIONER OF INCOME TAX Versus AKSHAT SHAH ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Petitioner(s) No. 1 for the Respondent(s) No. 1,2 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 10/02/2020

ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. By this petition under Article 226 and 227 of the Constitution   of   India,   the   petitioner   has   challenged the order dated 17.10.2018, passed by the Income Tax Settlement   Commission   (for   short   the   “Settlement Commission”) under Section 245D of the Income Tax Act­ 1961 (for short the “Act­1961) on the ground that the Settlement Commission passed the impugned order though there was no true and full disclosure by the assessee in   the   application   for   settlement   filed   before   the Commission. 2. Mrs.Mauna   Bhatt,   learned   Standing   Counsel appearing   for   the   petitioner   submitted   that   the report   of   the   Commissioner   under   Rule   9   of   the Settlement   Rules   was   submitted   before   the Settlement Commission on the basis of the certain loose papers which were seized and inventoried at Page NO.43 to 45 of the Annexure A­9. These loose papers   were   found   during   the   course   of   search Page 1 of 18

C/SCA/2760/2020 ORDER proceedings at the residence of the assessee which contained the valuation report dated 07.10.2010 for the   Financial   Year   2009­10.   According   to   the valuation   report,   total   value   of   jewelery   was Rs.2,04,88,650/­.   According   to   Mrs.Bhatt,   the assessee   did   not   disclose   this   valuation   of   the jewelery as per the valuation report seized during the course of search proceedings in the application filed   before   the   Settlement   Commission.   It   was, therefore, submitted that there is no true and full disclosure by the assessee. 3. Reliance   was   placed   on   the   decision   of   the Supreme   Court   in   the   case   of  Ajmera   Housing Corporation Vs. Commissioner of Income Tax [(2010) 326 ITR 642 (SC)  dated 20th  August, 2010 to submit that as there is no true and full disclosure by the assesseee,   the   order   passed   by   the   Settlement Commission is required to be quashed and set aside.

jewellery

amounting

to Rs.2,04,88,560/­   found   during   the   course   of search, although no physical stock of jewellery was found from the possession of the applicant out of the said inventory of jewellery. In the Report of PCIT dated 19.09.2018, based on the valuation report dated 07.01.2010 found during the course of search, the PCIT has stated that Page 2 of 18

C/SCA/2760/2020 ORDER an   amount   of   Rs.2,04,88,560/­   should   be considered   as   undisclosed   investment   of   the applicant.   In   this   regard,   the   applicant   has provided   detailed   submission   explaining   the reason for obtaining such a valuation report in the   year   2010   contending   that   the   amount   of Rs.2,04,88,560/­   should   not   be   treated   as undisclosed investment and any addition in this regard   is   unwarranted   and   has   relied   on   the decision of Hon'ble Gujarat High Court in case of   Commissioner   of   Income   Tax   Vs.   Mrugesh Jaykrishna [2000] 109 TAXMAN 89 (GUJ). However, without   prejudice   to   his   contentions,   the applicant submits that even though he does not agree   with   the   addition   of   Rs.2,04,8,560/­ proposed by the PCIT as undisclosed investment, to put quietus to the issue and to settle the matterthe   applicant   agrees   to   50%   of   the addition   (i.e.   Rs.1,02,44,280/­)   proposed   by PCIT   in   AY   2010­11.   Accordingly,   a   sum   of Rs.1,02,44,280/­ is being added to the income of the applicant in Asst. Yr. 2010­11.” 5. The   Settlement   Commission   arrived   at   the aforesaid findings and accepted the consensus given by the assessee so as to put quietus to the issue to settle the matter on the basis of explanation given  by   the  assessee   to  the   effect   that   in  the year 2010, the assessee was contemplating to make investment into real estate and was contemplating to   avail   loan   for   the   said   purposes   and accordingly,   the   valuation   report   was   obtained solely for the said purpose. It was also submitted by   the   assessee   that   even   during   the   course   of search   proceedings,  no   physical  jewelry   belonging to the assessee was found from the residence or the bank   lockers   which   were   referred   to   in   the valuation report. The physical jewellary which was found during the course of search proceedings was far   less   in  terms   of  value   in  comparison   to  the Page 3 of 18

C/SCA/2760/2020 ORDER jewellery   reflected   in   the   valuation   report obtained   in   the   year   2010   for   the   purpose   of obtaining loan. 5. This   Court   in   the   case   of Principal Commissioner   Income   Tax   Surat   1   Vs.   Shankarlal Nebhumal   Uttamchandani   vide   judgment   and   order dated   07.01.2020   passed   in   Special   Civil Application   No.13251   of   2019   and   allied   matters, which were having similar facts as in the present case, has observed and relied thus:­

“6.   Per   contra,   learned   Senior   Advocate   Mr.   S.N. Soparkar   assisted   by   learned   advocate   Mr.   Bandish Soparkar   for   the   respondent   assessee   submitted   that the facts of the present case are different than the facts   before   the   Supreme   Court   in   case   of  Ajmera Housing Corpn.  (supra). Reliance was placed upon the decision of Apex Court in case of  Jyotendrasinhji v. S.I.   Tripathi  reported   in   (1993)   201   ITR   611   (SC) dated   2nd  April,   1993   to   submit   that   this   Court   is required   to   consider   the   legality   of   the   procedure followed by the Commission and not the validity of the order. He relied upon the following observations made by the Apex Court in the said decision : “15. It is true that the finality clause contained in Section 245­I does not and cannot bar the jurisdiction of   the   High   Court   under Article   226 or   the jurisdiction of this court under  Article 32  or under Article 136, as the case may be. But that does not mean that the jurisdiction of this Court in the appeal preferred directly in this court is any different than what it would be if the assessee had first approached the High Court under Article 226 and then come up in appeal to this court under Article 136. A party does not and cannot gain any advantage by approaching this Court   directly   under Article   136,   instead   of approaching the High Court under Article 226. This is not   a   limitation   inherent   in  Article   136;  it   is   a limitation which this court imposes on itself having regard to the nature of the function performed by the Commission   and   keeping   in   view   the   principles   of Page 4 of 18

C/SCA/2760/2020 ORDER judicial review. May be, there is also some force in what Dr. Gauri Shankar says viz., that the order of commission is in the nature of a package deal and that it   may   not   be   possible,   ordinarily   speaking,   to dissect its order and that the assessee should not be permitted   to   accept   what   is   favourable   to   him   and reject what is not. According to learned counsel, the Commission is not even required or obligated to pass a reasoned order. Be that as it may, the fact remains that it is open to the Commission to accept an amount of   tax   by   way   of   settlement   and   to   prescribe   the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee   and   may   waive   interest,   penalties   or prosecution, where it thinks appropriate. Indeed, it would   be   difficult   to   predicate   the   reasons   and considerations which induce the commission to make a particular   order,   unless   of   course   the   commission itself chooses to, give 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 (audi alteram parterri)   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,   apart from ground   of   bias,   fraud   &   malice   which,   of   course, constitute a separate an independent category has it prejudiced the petitioner/appellant. Reference in this behalf may be had to the decision of this Court in RB Shreeram   Durga   Prasad   &   Fatechand   Nursing   Das   v. Settlement Commission   (1989) 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 legality   of   procedure   followed   and   not   with   the validity   of   the   order.'   The   learned   Judge   added 'judicial review is concerned not with the decision but   with   the   decision­making   process."   Reliance   was placed   upon   the   decision   of   the   House   of   Lords   in Chief Constable of the N.W. Police v. Evans, [1982] 1 W.L.R.1155.   Thus,   the   appellate   power   under  Article 136 was equated to power of judicial review, where the Page 5 of 18

C/SCA/2760/2020 ORDER appeal   is   directed   against   the   orders'   of   the Settlement Commission. For all the above reasons, we are of the opinion that the only ground upon which this   Court   can   interfere   in   these   appeals   is   that order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant The main controversy in these appeals relates to the interpretation of the settlement deeds though it is true, some contentions of law are also raised. The commission has interpreted the trust deeds in   a   particular   manner.   Even   if   the   interpretation placed   by   the   commission   on   the   said   deeds   is   not correct, it would not be a ground for interference in these appeals, since a wrong interpretation of a deed of   trust   cannot   be   said   to   be   a   violation   of   the provisions of the Income Tax Act. it is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act   in   proceedings   relating   to   other   assessment years.” 6.1) Learned   Senior   Counsel   for   the   respondent assessee   further   relied   upon   the   decision   of   this Court   in   case   of  Commissioner   of   Income­tax­I   v. Income   Tax   Settlement   Commission  reported   in   (2017) 390 ITR 306 (Gujarat) dated 12th  July, 2016, wherein this Court has held as under : “10. It can thus be seen that on the issue of true and full   disclosure,   stage   at   which   such   disclosures should   be   made   and   the   effect   of   making   further disclosures by revising initial offers of settlement was   examined   by   the   Supreme   Court   in   the   case   of Ajmera   Housing   Corporation   (supra).   The   manner   in which the Supreme Court has dealt with such issue and has   made   elaborate   and   conclusive   observations,   it cannot be stated contrary to what was argued before us that the above­noted portion of the judgment should not be seen as ration of the judgment of the Supreme Court. Ratio of this judgment is that the true and full   disclosure   of   the   income   must   be   made   at   the initial   stage   and   large   scale   remissions   in   such disclosure   itself   would   show   that   the   initial disclosures were not true. 11.   However,   the   facts   of   the   present   case   are somewhat   different.   The   applicants   had   initially offered   on   money   rotation   of   Rs.   25   lakhs,   Rs.   21 lakhs and Rs. 30 lakhs respectively and income at the Page 6 of 18

C/SCA/2760/2020 ORDER rate   of   12.5   per   cent   thereof   by   way   of   interest earned   which   during   the   course   of   assessment proceedings was revised to Rs. 50 lakhs, Rs. 50 lakhs and Rs. 75 lakhs respectively with rate of return at 15 per cent. With respect to revised rate of return, even   counsel   for   the   Revenue   would   not   be   in   a position to argue that the same would form part of declaration   of   two   incomes   since   whether   rate   of return should be estimated to 12.5 per cent or 15 per cent would be would be substantially in the realm of estimation   of   not   profit.   He   would   however, strenuously   contend   that   revised   declaration   of   on money   should   be   enough   to   establish   that   initial disclosures   made   by   the   assessees   were   not   full   or true disclosures of such income. In this context, we had called for the letter written by the applicants making   such   revised   offers.   Copies   of   such   letters dated 6.2.2014 written by the partners of the firm are produced on record. In such letters, it was conveyed that   the   applicants   had   filed   a   petition   for settlement in which offered a sum of Rs. 7,75,000/­ at the   rate   of   12   per   cent   on   peak   balance   of   funds deployed   in   money   lending   activity.   It   was   further stated that the applicant during the course of hearing under section 245D(4), in the spirit of settlement, agreed to further additional income of Rs. 39,12,667/­ which is computed on the basis stated hereinbelow: a. interest in money lending activity @ 15% p.a.; b.   Amount   deployed   in   money   lending   activity   Rs. 50,00,000/­ c. Income out of on money receipt @ 15%. 12.   Similar   declarations   were   made   in   the   case   of other applicants as well. It can thus be seen that these   revised   offers   of   tax   was   in   the   nature   of spirit   of   settlement   and   cannot   be   seen   in   strict sense of abandoning initial disclosures and replacing the same by fresh disclosures on the basis of such revised offers. What in essence the assessee did was to raise their offers marginally to put an end to the entire dispute through settlement or in the spirit of settlement as is referred to in the said letter. This cannot be seen as accepting that original or initial declaration was not true and full disclosure thereby paving way for the application of judgment in the case of Ajmera Housing Corporation (supra).” 6.2) Reliance was also placed on the decision of Page 7 of 18

C/SCA/2760/2020 ORDER the Court in case of  Commissioner of Income­tax­I v. Income Tax Settlement Commission and anr. reported in (2017) 244 Taxman 156 (Gujarat) dated 2nd  September, 2016, wherein it is held as under : “8. In view of the above facts and circumstances, more particularly, in view of the fact that this Court is dealing   with   and   examining   the   order   of   said commission in exercise of writ jurisdiction keeping in view the scope of judicial review and keeping in view the   exercise   of   extra   ordinary   jurisdiction,   this Court   is   of   the   opinion   that   from   the   overall background   of   the   fact   without   said   Commission   has thoroughly examined minutely all the details related to the issue in question and arrived at a particular finding which this Court found not to substitute the same.   In   the   background   of   these   facts   and circumstances, resultantly, the petition deserves to be dismissed.” 6.3) Reliance was also placed on the decision of this   Court   in   case   of  Principal   Commissioner   of Income­tax,   Central   v.   Income   Tax   Settlement Commission reported in (2017) 249 Taxman 54 (Gujarat) dated 13th June, 2017, wherein it is held as under : “14. It is true that before the Settlement Commission, the assessees indicated that the additional disclosure of   Rs.50   lakhs   each   may   be   accounted   for   the assessment year 2014­15. However, we cannot lose sight of   the   fact   that   such   disclosures   were,   as   noted above, in the spirit of settlement and to put an end to the controversy. The assessees therefore cannot be pinned down to the effect of such disclosures in the year   2014­15   alone.   We   cannot   fragment   a   larger picture and telescope the additional disclosures for a particular year and taking into account the comparable figures for that year decide whether such disclosures would shake the initial disclosures as to apply the ratio laid down by the Supreme Court in case of Ajmera Housing (supra)   and   to   hold   that   the   initial disclosures   themselves   were   untrue   projecting   the additional disclosures for all years the assessees had sought settlement, we find the Commission committed no error   in   accepting   them   and   in   proceeding   to   pass final order on such settlement applications.” Page 8 of 18

C/SCA/2760/2020 ORDER 6.4) Reliance   was   also   placed   on   the   recent decision   of   this   Court   in   case   of Principal Commissioner   of   Income   Tax,   Central   v.   Income   Tax Settlement   Commission  dated   22nd  October,   2019   in Special Civil Application No. 9883/2019, wherein it is held as under : “50.   In   the   above   backdrop,   the   decision   of   the Supreme   Court   in   the   case   of Ajmera   Housing Corporation v. Commissioner of Income­tax (supra), on which reliance has been placed by the learned counsel for   the   petitioner   would,   in     the   opinion   of   this court,   have   no   applicability   to   the   facts   of   the present case, inasmuch as, in the facts of the said case, the assessee had filed application under section 245C   before   the   Settlement   Commission   disclosing   an amount of Rs.1,94,33,580/­ for the relevant assessment year in addition to the income declared in the return of income submitted by them earlier. During the course of the proceedings before the Settlement Commission, the   assessee   filed   a   revised   settlement   application containing confidential annexures and related papers declaring   therein   an   additional   income   of   Rs.11.41 crore. Thus, while in the application under section 245C(1) of the IT Act, the disclosure was of Rs.1.94 crores,   in   the   revision   application   the   additional income of Rs.11.41 crore, which was approximately five times   the   amount   originally   disclosed,   came   to   be made.   Besides,   in   that   case,   a   revised   settlement application had been made and it is in the backdrop of such facts and circumstances that the Supreme Court held that full and true disclosure of income which had not been previously disclosed by the assessee being a precondition   for   a   valid   application   under   section 245C(1) of the Act. The scheme of Chapter XIXA does not contemplate revision of income so disclosed in the application against item 11 for the form. The court further   held   that   if   an   assessee   is   permitted   to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application and that in this regard, section 245C(3) of the Act which prohibits the withdrawal   of   an   application   once   made   under   sub­ section   (1)   of   the   said   section   is   instructive inasmuch as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. 51. Adverting to the facts of the present case, as Page 9 of 18

C/SCA/2760/2020 ORDER noticed earlier, the contesting respondents have not resiled from their stand in the application made under section 245C of the IT Act. The contesting respondents have also not made any further disclosure during the course of settlement proceedings but have only agreed to pay additional tax on the basis of the computation made by the revenue in respect of the disclosure made by them.” 6.5) Referring to the aforesaid decisions, it was submitted   that   in   facts   of   the   present   case,   the respondent­assessee has offered and disclosed  further amount of Rs. 12 Crore in addition to disclosed amount of   Rs.   22.09   Crore   so   as   to   put   an   end   to   the controversy and in spirit of the settlement before the Commission. The respondent has made overall additional disclosure of Rs. 12 Crore in all five years before the Commission altogether. It was therefore, submitted that in view of the aforesaid legal pronouncements and settled legal position, considering the facts of the case   of   the   respondent   before   the   Commission,   the decision of the Apex Court in case of Ajmera Housing Corpn. (supra), cannot be made applicable to the facts of the present case. It was further submitted that the Commission is convinced by the item­wise explanation submitted by the respondent assessee in response to the   income   of   Rs.   113   Crore   suggested   by   the petitioner. It was therefore submitted that in view of the   decision   of   the   Apex   Court   in   case   of Jyotendrasinhji   (supra), Commission is not required to give any reason, as the Commission has acted in accordance with the provisions of  the Act of 1961. He further submitted that as the scope of the inquiry is very limited, no interference is required to be made in the impugned order passed by the Commission. 7.   Having   considered   submissions   made   by   learned counsel   for   the   respective   parties   and     the   order passed by the Commission, only question which arises for consideration in facts of the present case is that whether additional income disclosed to the tune of Rs. 12 Crore by the respondent assessee during the course of proceedings before the Commission can be said to be fresh and substantial disclosure or not and to come to conclusion   that   it   is   far   greater   than   the   initial disclosure made by respondent assessee so as to apply decision of the Apex Court in case of Ajmera Housing Corpn. (supra)   and   in   case   of Shree   Nilkanth Page 10 of 18

C/SCA/2760/2020 ORDER Developers (supra) ?

C/SCA/2760/2020 ORDER Commissioner

make

further

enquiry

and investigations in the matter and furnish his report. Thereafter, after examining the record, Commissioner's report   and   such   further   evidence   that   may   be   laid before it or obtained by it, the Settlement Commission is required to pass an order as it thinks fit on the matter covered by the application and in every matter relating to the case not covered by the application and   referred   to   in   the   report   of   the   Commissioner under sub­section (1) or sub­section (3) of the said Section. It bears repetition that as per the scheme of the Chapter, in the first instance, the report of the Commissioner   is   based   on   the   bare   information furnished by the assessee against item No. 10 of the prescribed   form,   and   the   material   gathered   by   the revenue by way of its own investigation. It is evident from the language of Section 245C(1) of the Act that the   report   of   the   Commissioner   is   primarily   on   the nature   of   the   case   and   the   complexities   of   the investigation, as the annexure filed in support of the disclosure of undisclosed income against item No. 11 of the form and the manner in which such income had been derived are treated as confidential and are not supplied   to   the   Commissioner.   It   is   only   after   the Settlement Commission has decided to proceed with the application that a copy of the annexure to the said application   and   other   statements   and   documents accompanying such annexure, containing the aforesaid information   are   required   to   be   furnished   to   the Commissioner. In our opinion even when the Settlement Commission decides to proceed with the application, it will   not   be   denuded   of   its   power   to   examine   as   to whether in his application under  Section 245C(1)  of the   Act,   the   assessee   has   made   a   full   and   true disclosure of his undisclosed income. We feel that the report(s)   of   the   Commissioner   and   other   documents coming   on   record   at   different   stages   of   the consideration   of   the   case,   before   or   after   the Settlement Commission has decided to proceed with the application would be most germane to determination  of the said question. It is plain from the language of sub­section (4) of  Section 245D  of the Act that the jurisdiction of the Settlement Commission to pass such orders as it may think fit is confined to the matters covered by the application and it can extend only to such matters which are referred to in the report of the Commissioner under sub­section (1) or sub­section (3) of the said Section. A "full and true" disclosure of income, which had not been previously disclosed by the   assessee,   being   a   pre­condition   for   a   valid Page 12 of 18

C/SCA/2760/2020 ORDER application   under  Section   245C(1)  of   the   Act,   the scheme of Chapter XIX­A does not contemplate revision of the income so disclosed in the application against item No. 11 of the form. Moreover, if an assessee is permitted   to   revise   his   disclosure,   in   essence,   he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this   regard,  Section   245C(3)  of   the   Act   which prohibits the withdrawal of an application once made under   sub­section   (1)   of   the   said   Section   is instructive   in   as   much   as   it   manifests   that   an assessee cannot be permitted to resile from his stand at   any   stage   during   the   proceedings.   Therefore,   by revising   the   application,   the   applicant   would   be achieving   something   indirectly   what   he   cannot otherwise   achieve   directly   and   in   the   process rendering the provision  of sub­section (3) of Section 245C  of   the   Act   otiose   and   meaningless.   In   our opinion,   the   scheme   of   said   Chapter   is   clear   and admits no ambiguity. 27. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely   at   what   is   said   in   the   relevant   provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See:   Cape   Brandy   Syndicate   Vs.   Inland   Revenue Commissioners (1921) 1 KB 64 and Federation of A.P. Chambers of Commerce & Industry & Ors. Vs. State of A.P. (2001) 247 ITR 36 (SC) In interpreting a taxing statute, the Court must look squarely at the words of the   statute   and   interpret   them.   Considerations   of hardship,   injustice   and   equity   are   entirely   out   of place   in   interpreting   a   taxing   statute.   (Also   see: Commissioner of Sales Tax, Uttar Pradesh Vs. The Modi Sugar Mills Ltd. AIR 1961 SC 1047. 28. As afore­stated, in the scheme of Chapter XIX­A, there is no stipulation for revision of an application filed under  Section 245C(1)  of the Act and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said Section in the prescribed form. 29. Having noticed the scheme of Chapter XIX­A of the Act,   we   shall   now   advert   to   the   facts   at   hand   and evaluate the rival submissions. 30. Before addressing the other issues, at the outset, we record our disapproval with the view of the High Page 13 of 18

C/SCA/2760/2020 ORDER Court that it would not be proper to set aside the proceedings   before   the   Settlement   Commission   even though it was convinced that the assessee had not made full and true disclosure of their income while making application under  Section 245C  of the Act. As stated above,   in   its   earlier   order   dated   28th   July,   2000 while declaring order dated 17th November, 1994, as ab initio   void   and   setting   aside   order   dated   29th January, 1999, the High Court had remitted the case to the Settlement Commission to decide the entire matter afresh, including the question of maintainability of the application under Section 245C(1) of the Act. The said order of the High Court was put in issue before this Court and was set aside vide order dated 11th July, 2006 and the case was remanded back to the High Court   for   fresh   consideration.   Nevertheless,   all points raised by the parties, including the plea of the revenue that the application filed by the assessee before the Settlement Commission was not maintainable as   the   assessee   had   not   made   a   full   and   true disclosure of their undisclosed income were kept open. The High Court addressed itself on the said issue and found that the assessee had not made a full and true disclosure   of   their   income   while   making   the application under Section 245C(1) of the Act, yet did not find it proper to set aside the proceedings on that ground. Having recorded the said adverse finding on the very basic requirement of a valid application under  Section   245C(1)  of   the   Act,   the   High   Court's opinion that it would not be proper to set aside the proceedings   is   clearly   erroneous.   The   High   Court appears to have not appreciated the object and scope of the scheme of settlement under Chapter XIX­ A of the Act. At this juncture, it would be appropriate to notice a few illuminating observations in W T Ramsay Ltd. Vs. Inland Revenue Commissioners (1981) 1 All ER 865, which was considered to be a turning point in the interpretation   of   tax   laws   in   England   and   was   a significant

departure

from

Inland

Revenue Commissioners Vs. Duke of Westminster (1935) All ER Rep   259     dictum,   noted   in   the   passage   extracted below :­ "Given that a document or transaction is genuine, the court cannot go behind it to some supposed underlying substance. This is the well­known principle of Inland Revenue   Comrs   v   Duke   of   Westminster   [1936]   AC   1, [1935]   All   ER   Rep   259,   19   Tax   Cas   490.   This   is   a cardinal principle but it must not be overstated or over­extended.   While   obliging   the   court   to   accept Page 14 of 18

C/SCA/2760/2020 ORDER documents   or   transactions,   found   to   be   genuine,   as such,   it   does   not   compel   the   court   to   look   at   a document or a transaction in blinkers, isolated from any context to which it properly belongs. If it can be seen that a document or transaction was intended to have   effect   as   part   of   a   nexus   or   series   of transactions,   or   as   an   ingredient   of   a   wider transaction intended as a whole, there is nothing in the doctrine to prevent it being so regarded; to do so is not to prefer form to substance, or substance to form. It is the task of the court to ascertain the legal nature of any transactions to which it is sought to   attach   a   tax   or   a   tax   consequence   and   if   that emerges from a series or combination of transactions, intended   to   operate   as   such,   it   is   that   series   or combination which may be regarded." 31. We are convinced that, in the instant case, the disclosure   of   Rs.11.41   crores   as   additional undisclosed income in the revised annexure, filed on 19th September, 1994 alone was sufficient to establish that   the   application   made   by   the   assessee   on   30th September, 1993 under Section 245C(1) of the Act could not be entertained as it did not contain a "true and full" disclosure of their undisclosed income and "the manner"   in   which   such   income   had   been   derived. However, we say nothing more on this aspect of the matter as the Commissioner, for reasons best known to him,   has   chosen   not   to   challenge   this   part   of   the impugned order. 32. We shall now deal with the principal argument of learned counsel for the assessee that the High Court had failed to consider, in their correct perspective the two reports submitted by the Commissioner on 30th August, 1995 and 20th October, 1997, in as much as, in the   latter   report   the   Commissioner   had   himself computed the undisclosed income at Rs. 42.52 crores, which was equivalent to the amount finally determined by the Settlement Commission. Therefore, according to the learned counsel, there was no justification for the   remand   of   the   case   back   to   the   Settlement Commission. At the first blush, the argument appears to be attractive but on a deeper scrutiny, it does not merit acceptance. In the impugned order, on a critical examination   of   the   order   passed   by   the   Settlement Commission with reference to the said two reports, in particular the reconciliation report submitted by the Commissioner   on   20th   October,   1997,   estimating   the undisclosed   income   at   Rs.   187.20   crores,  the   High Court   had   found   that   only   that   part   of   the   report Page 15 of 18

C/SCA/2760/2020 ORDER dated 20th October, 1997, which dealt with "on money" was   highlighted   before   this   Court,   while   other incomes,   investments,   receipts   or   payments   were   not covered in that part of the statement. The High Court also observed that the manner in which expenses had been   shown,   created     a   serious   doubt   about   the expenditure   of   Rs.734.02   lakhs.   The   High   Court   has also   noted   that   the   Settlement   Commission   had   not properly dealt with the amount of Rs.911.51 lakhs on account   of   unexplained   expenses,   loans   and   surplus amount of Rs.488.98 lakhs, while assessing the total income and thus an amount of Rs.14.49 crores had been left out while determining the undisclosed income of the   assessee.   Besides,   the   High   Court   has   also commented that having come to the conclusion that the penalty leviable worked out to be Rs. 562.87 lakhs, the Settlement Commission had no reason for levying a token penalty of Rs. 50 lakhs, which was not even 10% of the minimum leviable penalty. Ultimately the High Court   observed   that   :   (i)   since   the   Settlement Commission   had   not   supplied   annexure   filed   on   19th September,   1994,   declaring   additional   income   of Rs.11.41 crores, due opportunity had not been given to the   revenue   to   place   its   stand   properly;   (ii)   huge amount of unexplained expenses, unexplained loans and unexplained   surplus,   total   of   which   was   more   than Rs.14 crores, was not taken into consideration while passing   the   final   order   and   (iii)   the   Settlement Commission had imposed token penalty of Rs.50 lakhs while   on   its   own   assessment   leviable   penalty   would have   been   Rs.562.87   lakhs.   Further,   if   the   amount which   had     not   been   taken   into   consideration   while assessing the total undisclosed income was to be taken into   account,   the   amount   of   leviable   penalty   would have been much more. In light of these facts, the High Court   formed   the   opinion   that   it   would   be   in   the interest   of   justice   to   set   aside   the   final   order passed by the Settlement Commission and to remand the case back to it for fresh adjudication on assessee's application. Bearing in mind the afore­stated factual position, as emanating from the material on record, we find it difficult to persuade ourselves to agree with learned   counsel   for   the   assessee   that   there   was   no justification for order of remand by the High Court and that the order passed by the Settlement Commission should have been affirmed. We are satisfied that under the   given   scenario,   the   High   Court   was   correct   in making the order of remand and no good ground is made out for interference in exercise of our jurisdiction under Article 136 of the Constitution. Page 16 of 18

C/SCA/2760/2020 ORDER 33. As regards the argument of learned counsel for the assessee   that   the   scope   of   judicial   review   being limited,   the   High   Court   should   not   have   interfered with   the   order   of   the   Settlement   Commission   in exercise   of   its   power   under  Article   226  of   the Constitution, in our opinion, the argument is stated to be rejected. Having conceded before the High Court that   the   assessee   was   not   pressing   the   point   of maintainability of the writ petition before the High Court, the assessee cannot be now permitted to resile from its earlier stand and raise the same issue before us.   Even   otherwise,   as   stated   above,   we   have   no hesitation   in   observing   that   the   manner   in   which assessee's   disclosures   of   additional   income   at different   stages   of   proceedings   were   entertained   by the Settlement Commission, rubbishing the objection of the Commissioner that the assessee had not made a full and true disclosure of their income in the application under  Section 245C(1)  of the Act, leaves much to be desired. 10. Thus the facts before the Apex Court were quite different than the facts of the present case as before the Apex Court revised disclosure was made whereas in the facts of the present case, additional disclosure is made to the tune of Rs. 12 Crore and therefore, judgments in case of  Commissioner of Income­tax­I v. Income Tax Settlement Commission  (supra)   dated 12th July, 2016, Commissioner of Income­tax­I v. Income Tax Settlement   Commission   and   anr.  (supra)     dated   2nd September, 2016, Principal Commissioner of Income­tax, Central   v.   Income   Tax   Settlement   Commission  (supra) dated 13th  June, 2017 and   Principal Commissioner of Income   Tax,   Central   v.   Income   Tax   Settlement Commission  (supra) dated 22nd  October, 2019 would be applicable to the facts of the present case and as such no interference is called for while exercising jurisdiction under Article 226 of the Constitution of India,   more   particularly,   when   the   Commission   has arrived   at   the   conclusion   that   further   additional income of Rs.12 Crore offered during section 245D(4) proceedings   can be accepted with reference to income disclosed in the settlement application. 11. On perusal of the impugned order passed by the Commission,   it   is   apparent   that   the   application submitted by the respondent has been dealt with as per the provisions of section 245C and 245D of the Act. Page 17 of 18

C/SCA/2760/2020 ORDER The Commission has observed detailed procedure while exercising powers under section 245D(4) of the Act of 1961 by examining thoroughly report submitted by the petitioner under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. The Commission has also   provided   proper   opportunity   of   hearing   to   the respective parties and therefore the amount which has been determined by the Commission is just and proper. In   view   of   the   aforesaid   decisions   cited   by   the respondent,   the   Commission   was   right   in   considering the revised offer made by the respondent during the course of the proceedings in the nature of spirit of settlement. Therefore, the decision of the Apex Court in case of  Ajmera Housing Corpn.  (supra), would not come   into   operation   in   facts   of   the     case.   We   are therefore   of   the   opinion   that   order   passed   by   the Commission does not call for any interference.” 6. In   view   of   the   aforesaid   dictum,   when   we compare the disclosure made by the assessee to the tune of Rs.11,33,02,651/­ in the application filed before the Settlement Commission and the grievance made   by   the   writ­applicant   with   regard   to   the amount   of   Rs.2,04,88,560/­,   the   same   is   very marginal as compared to the disclosure made by the assessee. Accordingly, when the assessee had agreed for addition of Rs.1,02,44,280/­  to put quietus to the issue and to settle the matter, no interference is called for in the impugned order passed by the Settlement   Commission.   The   petition,   therefore, fails and is accordingly dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) GIRISH Page 18 of 18