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Income Tax Appellate Tribunal, DELHI ‘F’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI K.N. CHARY
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
With this appeal, the assessee has challenged the correctness of the order of the CIT(A)- 30, New Delhi dated 19.02.2015 pertaining to assessment year 2005-06.
With the first three grounds of appeal, the assessee has challenged the jurisdiction of the Assessing Officer in framing the assessment order u/s 153A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'.
Ground No. 4, with its sub grounds, challenges the disallowance of expenditure of Rs. 1.78 crores on merits of the case.
Since Ground Nos. 1 to 3 go to the root of the matter, we proceed to decide these grounds.
The under lying facts in this issue are that a search and seizure action u/s 132 of the Act was carried out in the Radico Khaitan group of cases including the assessee company on 15.02.2011. The assessee company had also been covered in an earlier search u/s 132 of the Act on 14.02.2006.
Pursuant to the present search, i.e. on 15.02.2011, the Assessing Officer commenced the assessment proceedings as the present A.Y is 2005-06 is one of the six A.Ys, preceding
the A.Y relevant to the previous year in which the search was conducted.
From the records available, the Assessing Officer observed that during the year under consideration, the assessee entered into a transaction with M/s Count Trade Links Pvt Ltd and booked expenses/made payment of Rs. 1,78,30,714/-.
On the basis of some information received from the DDIT, UNIT IV(3) [INV], New Delhi, the Assessing Officer found that that M/s Count Trade Links Pvt Ltd has received a large amount from the assessee towards reimbursement of marketing expenses. In this regard, some bills pertaining to the purchase of gold and diamond was also obtained by M/s Count Trade Links Pvt Ltd on behalf of the assessee.
On further enquiries, the Assessing Officer came to know that no sale of gold /diamond was made by the parties from whom M/s Count Trade Links Pvt Ltd contended purchases. It
came to the notice of the Assessing Officer that the parties from whom M/s Count Trade Links Pvt Ltd purchases gold/diamond, namely, M/s L.N. Nylon Pvt Ltd, M/s Surbhi Textiles, M/s Alka Gems, Shree Gee Jewellers, M/s Badshah Johri Pvt Ltd and N.V. Distilleries & Breweries Pvt Ltd were providing accommodation entries by charging commission @ 10 paise per Rs. 100.
In view of these enquiries and material gathered therefrom, the Assessing Officer asked the assessee to furnish details and documents to explain the genuineness of the transaction with M/s Count Trade Links Pvt Ltd amounting to Rs. 1,78,30,714/-. The assessee filed detailed reply dated 28.05.2013. The most relevant submissions of the assessee read as under:
“Your honour before going into the merit of allegation we would firstly like to point out that as already submitted earlier before your honour, that the assessment for the AY 2005-06 was covered u/s 153A of the Income Tax Act,1961 pursuant to search being conducted at the assessee's premises on 14.2.2006 and the assessee company had filed an application before the Hon'ble Settlement Commission for settlement of its income for the A Y/s
2000-01 to 2006-07. Consequently, the income of the assessee for the AY 2005-06 was settled by the Hon'ble Income Tax Settlement Commission at Rs.NIL after allowing deduction under chapter VIA amounting to Rs.5,31,20,630/-. Since the in case for the aforesaid assessment year has been settled by the Hon'ble Settlement Commission, we are of the opinion that the income settled by the Settlement Commission is final and no interference/adjustment in the said income is needed.”
The above challenge of the assessee did not find any favour with the Assessing Officer who was of the firm belief that the issue of amount involving Rs. 1,78,30,714/- pertaining to the transaction with M/s Count Trade Links Pvt Ltd was neither subject matter of the allegation/finding arising out of the earlier search nor a part of the assessee’s disclosure made before the Income tax Settlement Commission, New Delhi as well as in the order of the Income tax Settlement Commission dated 13.03.208 passed u/s 245D(4) of the Act. Drawing support from the provisions of section 245-I of the Act, the Assessing Officer made addition of Rs. 1,78,30,714/-.
The assessee carried the matter before the CIT(A) but without any success.
Before us, the ld. AR vehemently stated that when the assessment was completed on the basis of search conducted on 14.02.2006, the A.Y under dispute was part of block assessment. The ld. AR pointed out that the quarrel was settled by the Income tax Settlement Commission vide order dated 13.03.2008. it is the say of the ld. AR that by this order, the Income tax Settlement Commission settled the income of the assessee, inter alia, for A.Y 2005-06 at Rs. NIL. The ld. AR further stated that in the subsequent search conducted on 15.02.2011, once again the A.Y under dispute falls into block period but since in the earlier search when the order of the Income tax Settlement Commission for A.Y 2005-06 had attained finality, and, therefore, the Assessing Officer was not in his jurisdiction to once again frame assessment u/s 153A of the Act for the year under consideration.
Strong reliance was placed on the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of Omaxe Ltd. 209 Taxmann 443 and another decision, also of the Hon'ble High Court of Delhi in the case of Omaxe Ltd 364 ITR 423.
Per contra, the ld. DR strongly supported the finding of the Assessing Officer. It is the say of the ld. DR that by not disclosing the impugned transaction with M/s Count Trade Links Pvt Ltd, the disclosure before the Settlement Commission was not true and correct and, therefore, the Assessing Officer was well within his power to frame the assessment u/s 153A of the Act for the year under consideration.
We have given a thoughtful consideration to the orders of the authorities below. The chronological events can be understood from the following chart:
Date Event 14.02.2006 Search under section 132 of the Income Tax Act, 1961 (‘the Act’) was conducted at the business premises of the appellant and residential premises of its Directors. i 20.09.2006 The assessing officer issued notice initiating proceedings under section 153 A of the Act for assessment years 2000-01 to 2005- 06. Regular assessment proceedings for i the assessment year 2006-07 were also pending before the DOT. i 30.05.2007 The Appellant filed an application in Form No. 34B for settlement of its cases under section 245C(1) before the Income- tax Settlement Commission (‘ITSC’) for assessment years 2000- 01 to 2006-07.
' !3.03.200s" The ITSC, vide order dated 13.03.2008 passed under section 245D(4) of the Act settled the income of the appellant inter-alia for AY 2005-06 at Rs. NIL after <■& ^ allowing deduction under chapter VIA amounting to Rs. 5,31,20,630/-. 15.02.2011 A second search was conducted at the business premises of the appellant, alongwith various other companies of the Radico Khaitan Group 03.06.2013 The assessing officer passed assessment order under section 153 A of the Act for assessment year 2005-06. — io-l\ 194)2.2015 The CIT(A) dismissed the appeal filed by the appellant on the issue of jurisdiction and merits (impugned order). 13.07.2017 The Hon’ble Delhi High Court dismissed the Writ Petition bearing W.P.(C) No. 7207 of 2008 filed by the Revenue praying for quashing of the order dated 13.03.2008 passed by the ITSC.
23.08.2018 The Hon’ble Supreme Court dismissed the SLP filed by the Revenue against the order of the High Court.
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There is no dispute in so far as the chronology of events mentioned hereinabove are concerned. The bone of contention is whether the Assessing Officer was correct in framing at the assessment u/s 153A of the Act for the year under consideration when the same has attained finality by
the order of the Settlement Commission on 13.03.2008.
The Hon'ble Delhi High Court in the case of Omaxe Ltd 209 Taxmann 443 has considered similar issue though facts in that case relate to reassessment proceedings u/s 147 of the Act. But the observations and findings are relevant and read as under:
“The main argument of the learned counsel for the petitioner is that once the ITSC has passed a final order of settlement for an assessment year under Section 245D (4), the assessment becomes conclusive and the Assessing Officer has no jurisdiction to reopen any matter relating to that assessment year under Section 148 of the Act. In order to appreciate the contention it is necessary to refer to a few provisions of the Act relating to the jurisdiction, powers etc. of the ITSC. Section 245C provide for application for settlement of cases and permits an assessee to approach the ITSC with a full and true disclosure of its income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived and the additional amount of income tax payable on such income and such other particulars as may be prescribed and have the case settled by the ITSC. The assessee can approach the ITSC "at any stage of a case relating to him" under sub‐section (1). The word "case" was originally defined in clause (b) of Section 245A as "any proceeding under this Act for the assessment or
reassessment of any person in respect of any year or years, or by way of any appeal or revision in connection with such assessment or reassessment, which may be pending before an income tax authority on the date on which an application under sub‐section (1) of Section 245C is made". With effect from 01.06.2007 the Finance Act, 2007 amended the definition of the word "case" to mean "any proceeding for assessment under this act, of any person in respect of any assessment year or assessment years which may be pending before an Assessing Officer on the date on which the application under sub‐section (i) of Section 245C is made". On receipt of application, the ITSC has to issue a notice to the applicant requiring him to explain why the application be allowed to be proceeded with and after hearing the applicant an order shall be passed permitting or rejecting the application to be proceeded with. This has to be done within a time frame. This order is to be passed under Section 245D (1). Subsection (4) of the Section provides as under: ‐ "(4) After examination of the records and the report of the Commissioner, if any, received under (i) sub‐section (2B) or sub‐section (3), or (ii) the provisions of sub‐section (1) as they stood immediately before their amendment by the Finance Act, 2007,
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."
Sub‐section (6) of Section 245D provides that every order passed under subsection (4) shall stipulate the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due in the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the ITSC that it has been obtained by fraud or misrepresentation of facts. Sub‐section (7) provides that where a settlement becomes void, the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the ITSC and the income tax authority concerned may complete such proceedings at any time before the expiry of
two years from the end of the financial order in which the settlement became void.
Section 245E empowers the ITSC, for reasons to be recorded in writing, to reopen any proceeding connected with the case which has been completed under the Act before the application under Section 245C was made. The caveat is that this can be done by the ITSC only for the proper disposal of the case pending before it. There are other conditions by which the power is hedged but they are not relevant for our purpose. Section 245F provides for the powers and procedures of the ITSC. Sub‐section (1) says that in addition to the powers conferred upon it by Chapter XIX‐A, the ITSC shall have all the powers which are vested in an income tax authority under this Act. Subsection (4) declares, for the removal of doubt, that "in the absence of any express direction by the Settlement Commission to the contrary nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission". Section 245H empowers the ITSC to grant the assessee immunity from penalty and prosecution under the Act or under the IPC or any other Central Act in force. The immunity may be withdrawn if the assessee does not comply with the terms of the order of settlement or if it is shown that the assessee
has conceded any particular material to the settlement or has given false evidence. Section 245I provides for the conclusiveness of the order of settlement. It says that every order of settlement passed under Section 245D (4) "shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter be reopened in any proceeding under this Act or under any other law for the time being in force".
A conjoint reading of the aforesaid provisions indicates that the ITSC is a high powered body vested with powers to settle the case of an assessee. The order of settlement is conclusive as expressly stated in Section 245I but the argument of the Revenue is that it is conclusive only with regard to matters stated in the order of settlement and in respect of matters not stated therein, the Assessing Officer has the power to reopen the assessment. It is further submitted that the assessee did not approach the ITSC with regard to settlement of its claim for deduction under Section 80IB (10) of the Act and there was no adjudication of the said claim in the order of the ITSC. It is therefore submitted that the issue relating to deduction under Section 80IB (10) is not a matter covered by the order of the ITSC, and can be reopened by the Assessing Officer.
We are afraid that the submission of the Revenue overlooks the fact that in the return the assessee had claimed deduction of Rs.78,99,00,509/‐u/s. 80IB (10) and it was only after claiming such deduction that the net taxable income was declared at Rs.89,20,76,630/‐. The Assessing Officer issued notices under Section 143(2) and 142(1) on 12.07.2007 but even before the questionnaire was issued the petitioner had approached the Settlement Commission by an application filed on 31.05.2007. Under Section 245F(1), the ITSC, in addition to the powers conferred on it under Chapter XIX‐A, shall have all www.taxpundit.org www.taxpundit.org www.taxpundit.org www.taxpundit.org Page 3 of 6 www.taxpundit.org www.taxpundit.org the powers which are vested in an income‐tax authority under the Act. By virtue of the provisions of Section 245F (2) once the application for settlement was filed and an order was passed allowing the application to be proceeded with, it was the ITSC which has the exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority under the Act relating to the case, till the final order of settlement is passed under Section 245D (4). Thus the moment the application of the assessee was allowed to be proceeded with by the ITSC till the final order of the settlement is passed on 17.03.2008, it was the ITSC which had exclusive jurisdiction in relation to the assessee's case. Therefore, all matters which could be examined by the Assessing Officer could be
examined by the ITSC in these proceedings, including the assessee's claim for deduction under Section 80IB (10). The total income of the assessee for the assessment year 2006‐07 has been computed by the ITSC at Rs.89,38,76,630/‐ which is Rs.18,00,000/‐ more than the income of Rs.89,20,76,630/‐declared by the petitioner, which figure is after the petitioner claimed deduction of Rs.78,99,00,509/‐under Section 80IB (10). It is irrelevant that no undisclosed income was offered by the petitioner in regard to the housing project. Again a harmonious reading of the provisions of the statute would show that it does not postulate the existence of two orders, each of a different income tax authority, determining the total income of an assessee for the same assessment year. If the contention of the Revenue is accepted, not only will the finality of the order of settlement be disturbed, but it will also result in different orders relating to the same assessment year and relating to the same assessee being allowed to stand. We have grave doubts whether such a result, which is likely to create chaos and confusion in the tax administration could have been intended. The order of the ITSC can be reopened only in cases of fraud and misrepresentation and in no other case.”
The Hon'ble Delhi High Court, after considering the judgments of the Hon'ble Bombay High Court in 207 Taxmann 185 and the Hon'ble Supreme Court in 259 ITR 475 and 206 ITR 443 further observed as under:
“On the contrary, it would inevitably follow that once a settlement application is allowed to be proceeded with, the entire case stands transferred to the ITSC and thereafter it is the ITSC alone which shall have exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority under the Act in relating to the case.”
The Hon'ble High Court further observed that :
“The question here is what would be the position when an order under Section 245D (4) is passed by the ITSC and whether such an order can be construed as one dealing with the entire gamut of the return filed by the assessee and the issues raised therein. While opining that the observations of the Supreme Court in Damani Brothers (supra) are not relevant to the factual situation or the legal dispute arising therefrom in the present case, we hold that since the exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority in relation to the case
vests with the ITSC after an order is passed under Section 245D (1) till the final settlement order is passed under Section 245D (4), it is not possible to countenance a situation where it can be said that the assessee's claim for deduction under Section 80IB (10) was not the subject matter of the order. “
The Hon'ble High Court of Delhi in the case of Omaxe Ltd 364 ITR 423 had the occasion to consider similar averments as made by the present ld. DR that finality attaches itself only in respect of the matters which are considered by the Income tax Settlement Commission in the application before us and dealt with in the order.
The Hon'ble High Court considered the relevant provisions which read as under:
“14. It would be necessary to reproduce Sections 245D and 245I - both of which are relevant for the present purposes. These provisions read as follows:
"245D. Procedure on receipt of an application under section 245C (1) On receipt of an application under section 245C, the Settlement Commission shall call for a report from the Commissioner and on the basis of the materials contained in
such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, 70[the Settlement Commission, shall, where it is possible, by order, reject the application or allow the application to be proceeded with within a period of one year from the end of the month in which such application was made under section 245C] : WP( C) 1451/2013 Page 11 Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant of being heard :
[Provided further that the Commissioner shall furnish the report within a period of forty-five days of the receipt of communication from the Settlement Commission in case of all applications made under section 245C on or after the 1st day of July, 1995 and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report.] (1A) 72[Omitted by the Finance (No. 2) Act, 1991, w.e.f. 27-9-1991.] (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the Commissioner. [(2A) Subject to the provisions of sub-section (2B), the assessee shall, within thirty-five days of the receipt of a copy of the order under sub-section (1) 74[allowing the application
to be proceeded with], pay the additional amount of income- tax payable on the income disclosed in the application and shall furnish proof of such payment to the Settlement Commission.] [(2B) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income-tax referred to in sub-section (2A) within the time specified in that sub-section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by installments if the assessee furnishes adequate security for the payment thereof.] [(2C) Where the additional amount of income-tax is not paid within the time specified under sub-section (2A), then, whether or not the Settlement Commission has extended the time for payment of the amount which remains unpaid or has allowed payment thereof by installments under sub- section (2B), the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount WP( C) 1451/2013 Page 12 remaining unpaid from the date of expiry of the period of thirty-five days referred to in sub-section (2A)]. [(2D) Where the additional amount of income-tax referred to in sub-section (2A) is not paid by the assessee within the time specified under that sub-section or extended under sub-
section (2B), as the case may be, the Settlement Commission may direct that the amount of income-tax remaining unpaid, together with any interest payable thereon under sub-section (2C), be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered, in accordance with the provisions of Chapter XVII, by the 75- [Assessing] Officer having jurisdiction over the assessee.] (3) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. (4) After examination of the records and the report of the Commissioner, received under sub-section (1), and the report, if any, of the Commissioner received under sub- section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorized 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 sub- section (3). WP( C) 1451/2013 Page 13 [(4A) In every application allowed to be proceeded with under sub-section (1), the Settlement Commission shall, where it is possible, pass an order under sub-section (4) within a period of four years from the end of the financial year in which such application was allowed to be proceeded with.] [(5) Subject to the provisions of section 245BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the concerned Bench before passing any order under sub- section (4) and, in relation to the passing of such order, the provisions of section 245BD shall apply.] (6) Every order passed under sub-section (4) shall provide for the terms of settlement79 including any demand by way of 80[tax, penalty or interest], the manner in which any sum due under the settlement79 shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts.
[(6A) Where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by installments, the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty-five days aforesaid.] (7) Where a settlement becomes void as provided under sub-section (6), the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the income-tax authority concerned, may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before WP( C) 1451/2013 Page 14 the expiry of two years from the end of the financial year in which the settlement became void. [(8) For the removal of doubts, it is hereby declared that nothing contained in section 153 shall apply to any order passed under sub-section (4) or to any order of assessment, reassessment or recomputation required to be made by the 83[Assessing] Officer in pursuance of any directions contained in such order passed by the Settlement Commission
84[and nothing contained in the proviso to sub-section (1) of section 186 shall apply to the cancellation of the registration of a firm required to be made in pursuance of any such directions as aforesaid.] **************** **************** 245I. Order of settlement to be conclusive Every order of settlement passed under sub- section (4) of section 245Dshall be conclusive as to the matter stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force."
Finally, the Hon'ble High Court held as under:
“15. A facial consideration of the above provisions would reveal that the finality which attaches itself to Settlement Commission's order is in respect of the matters referred to it. The Revenue's contention appears to be that the non- disclosure of materials which have a bearing on AY 2006- 07, discovered or seized in search proceedings concerning Shri Modi, were not the subject matter of the Commission's deliberations and consequently the subject matter of its order. Attractive though this aspect appears to be, the ruling in Omaxe (supra) precludes exercise of authority by the Revenue. Whilst from the Revenue's
perspective, every non-disclosure or a fresh discovery of facts which might have a bearing on the assessee's returns, prima WP( C) 1451/2013 Page 15 facie, stands excluded from what is referred to a Settlement Commission, the fallacy in that argument is the Commission has a full weight and the jurisdiction of all the authorities under the Income Tax Act when it is seized of a matter. Concededly in this case, the subject matter before the Commission was the submission of the assessee to its jurisdiction with respect to AY 2006-07. Of course, the Revenue contends that the recovery of material in a third party's premises were not a subject matter of the settlement proceedings, which got concluded on 17.3.2008. However, equally its case can proceed only on the assumption that the assessee was guilty of non-disclosure or suppression of material facts which ought to have been primarily revealed to the Settlement Commission when the application was moved under Section 245Din the first place. The fallacy in the Revenue's argument is that it overlooks the remedy available for the Revenue, i.e to approach the Settlement Commission under Section 245D(6) contending that its previous order of 17.3.2008 ought to be reopened because the non- disclosure amounted to a fraud or misrepresentation. The observations in Brij Lal (supra) cited earlier are extremely pertinent in this context. Likewise, in Express Newspapers
Ltd. (supra), the Supreme Court had earlier stated as follows :
""....... It is equally evident that once an application made under Section 245C is admitted for consideration (after giving notice to and considering the report of the Commissioner of Income Tax as provided by Section 245D) the Commission shall have to withdraw the case relating to that assessment year (or years, as the case may be) from the assessing/appellate/revising authority and deal with the WP( C) 1451/2013 Page 16 case, as a whole, by itself. In other words, the proceedings before the Commission are not confined to the income disclosed before it alone. Once the application is allowed to be proceeded with by the Commission, the proceedings pending before any authority under the Act relating to that assessment year have to be transferred to the Commission and the entire case for that assessment year will be dealt with by the Commission itself. The words "at any stage of a case relating to him" only make it clear that the pendency of proceedings relating to that assessment year, whether before the Assessing Officer or before the appellate or revisional authority, is no bar to the filing of an application under Section 245C so long as the application complies with the requirements of Section 245C. (refer page 451 - plac. E/F). (Emphasis supplied)."
The judgments in R.B. Shreeram Durga Prasad v. Settlement Commission, (1989) 176 ITR169 Jyotendrasinghji v. S.I. Tripathi & Ors., (1993) 201 ITR 611 Shriyans Prasad Jain v. Income- tax Officer and others, (1993) 204 ITR 616 and Kuldeep Industrial corporation v. ITO, (1997) 223 ITR 840 are equally conclusive about the plenitude of powers conferred upon the Settlement Commission. 16. It is evident from the rulings of the Supreme Court that orders of Settlement Commission are final and conclusive as to matters stated therein. The "matters" necessarily could comprehend disputed questions, items or heads of income, disallowance, etc. or variants of it, but always with reference to a particular assessment year. In this case, the Settlement Commission was seized of AY 2006-07. Whilst exercising its authority over the application, the Commission concededly exercised the vast plenitude of its power or jurisdiction. The petitioner had made a disclosure in its application - as it was duty WP( C) 1451/2013 Page 17 bound to. What is in controversy today is that the subsequent event of search and seizure operation conducted in the premises of Shri Modi - in the contention of the Revenue - have thrown light on material that had been suppressed from the Commission. If such is the case, it would be only logical that the Commission itself should be approached for a declaration that its order of 17.3.2008 is a nullity. Allowing any other authority, even by way of a notice
under Section 153C, would be to permit multiple jurisdictions which can result in chaos. After all non-disclosure or suppression of information in respect of what is required to be revealed to the concerned authorities is akin to fraud and if it has a material bearing on the outcome of the assessment, it would most certainly be misrepresentation. During the course of hearing, the learned counsel for the Revenue had voiced apprehensions that the Commission might well be of the opinion that "misrepresentation" has to fall within the four corners of the meaning of such expression under the Contract Act. This Court sees no rationale for such apprehension. Misrepresentation has not been defined under the Income Tax Act; importing the definition of misrepresentation or for that matter fraud from the Contract Act in the circumstances would not be appropriate. As one understands, the term "misrepresentation" would mean failure to disclose material or facts which are germane and relevant, or suppressing facts and materials which are germane and relevant or holding out a falsehood which gives the rise to an assumption that what is so stated or represented is true or correct. These are only illustrative and by no means conclusive as to what can be misrepresentation. The facts of each case would WP( C) 1451/2013 Page 18 throw light on whether the individual or person concerned was guilty of misrepresentation having regard to the totality of the circumstances, given the nature
of duty cast on him or her. This interpretation is in consonance with the ruling of the Supreme Court in Commissioner of Income Tax v Om Prakash Mittal [2005] 273 ITR 326(SC) where it was held as follows: "The decision whether the order has been obtained by fraud or misrepresentation of facts is that of the Commission. But it is not a requirement that the Commission must suo motu initiate the action. If the revenue has material to show that the order was obtained by fraud or misrepresentation of facts it certainly can move the Commission for decision on that issue. Otherwise, even if in a given case there is material in abundance to establish that the order was obtained by fraud or misrepresentation of facts, yet the void order would continue to be operative because of the fortuitous circumstance that the Commission does not suo motu initiate the proceeding. Merely because Section 245I provides that the order of Settlement is conclusive it does not take away the power of the Commission to decide whether the settlement order had been obtained by fraud or misrepresentation of facts. Any other interpretation would render sub-section (6) otiose. The Commission had really missed the true scope and ambit of Section 245D(6). If the CIT was able to establish that the earlier decision was void because of misrepresentation of the facts, certainly it was open to the Commission to decide that issue. It cannot be
called by any stretch of imagination to be review of the earlier judgment or the subsequent Bench sitting in appeal over the earlier Bench's decision. Further the conclusions of the Commission regarding the genuineness of the loan transactions were arrived at without indicating reasons. WP(C) 1451/2013 Page 19 It only referred to the respective stands and the submissions of the assessee's counsel. That was not the proper way to deal with the matter. The foundation for settlement is an application which assessee can file at any stage of a case relating to him in such form and in such manner as is prescribed. The statutory mandate is that the application shall contain "full and true disclosure" of the income which has not been disclosed before the assessing officer, the manner in which such income has been derived. The fundamental requirement of the application under Section 245C is that full and true disclosure of the income has to be made, along with the manner in which such income was derived. On receipt of the application, the Commission calls for report from the Commissioner and on the basis of the material contained in the report and having regard to the nature and circumstances of the case or complexity of the investigation involved therein, it can either reject the application or allow the application to be proceeded with as provided in Section 245D(1).
It has to be noted that the Commission exercises power in respect of income which was not disclosed before the authorities in any proceeding, but are disclosed in the petition under Section 245C. It is not that any amount of undisclosed income can be brought to the notice of the Commission in the said petition. Commission exercises jurisdiction if the additional amount of tax on such undisclosed income is more than a particular figure (which at different points of time exceeded rupees fifty thousand or rupees one hundred thousand, as the case may be). The assessee must have in addition furnished the return of income which he is or was required to furnish under any of the provisions of the Act. In essence the requirement is that there must be an income disclosed in a return furnished and undisclosed income disclosed to the Commission by a petition under Section 245C. There is a purpose why the legislature has prescribed the WP( C) 1451/2013 Page 20 condition relating to declaration of the order void when it is obtained by fraud or misrepresentation of facts. It cannot be said that there has been a true and fair declaration of income which is the pre- requisite for settlement by the Commission. If an order is obtained by fraud or misrepresentation of facts, it cannot be said that there was true and fair disclosure. It was noted here that unlike Section 139 of the Act which provides for filing of revised return, there is no provision for revision of an application made in terms of Section 245C. That shows
clear legislative intent that the applicant for settlement has to make a true and fair declaration from the threshold. It is on the basis of the application received that the Commissioner calls for report to decide whether the application is to be rejected or permitted to be continued. The declaration contemplated in Section 245C is in the nature of voluntary disclosure of concealed income, but as noted above it must be true and fair disclosure. Voluntary disclosure and making a full and true disclosure of the income are necessary pre- conditions for invoking the Commission's jurisdiction." 17. Finally, this Court is not impressed by the argument of the Revenue that the definition of "case" over which the Settlement Commission has exclusive jurisdiction excludes proceedings for reassessment, under Section 245A(i). This is because any reassessment proceedings that are sought to be excluded from the purview of "case" must be in respect of a Section 148 notice sent while the proceedings before the Settlement Commission are ongoing. Once the Settlement Commission has completed proceedings, its order is considered conclusive as regards matters "stated therein" perSection 245I and reopening any proceeding in respect of matters covered in the order would be barred. WP( C) 1451/2013 Page 21
For the above reasons, it is held that the impugned notice issued to the petitioner under Section 153C cannot be sustained; the said notice and all further proceedings are hereby quashed. It is open to the respondent/Revenue to move the Settlement Commission for appropriate relief of declaration that its previous order under Section 245D (6) is void, setting out the relevant facts and circumstances. In the event the Revenue approaches the Commission with an application for such relief, it shall be decided on its merits in accordance with law.”
In the light of the aforementioned judgements of the Jurisdictional High Court, assuming that the contentions of the ld. DR have some force, then also, in the light of the judgments [supra], the Revenue is free to approach the Income Tax Settlement Commission as held by the Hon'ble High Court of Delhi [supra]. Respectfully following the judgments of the Hon'ble Delhi High Court [supra], we hold that the assessment order dated 03.06.2013 framed u/s 153A of the Act is without jurisdiction and deserves to be quashed.
In the result, the appeal filed by the assessee in ITA No. 4355/DEL/2015 is allowed.
The order is pronounced in the open court on 11.04.2019.
Sd/- sd/- [K.N. CHARY] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 11th April, 2019. VL/ Copy forwarded to:
Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi
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