Gujarat High Court
Principal Commissioner Of Income Tax ... vs Settlement Commission & on 8 December, 2015
Author: Akil Kureshi
Bench: Akil Kureshi, Mohinder Pal
C/SCA/12209/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 12209 of 2015
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PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL)....Petitioner(s)
Versus
SETTLEMENT COMMISSION & 1....Respondent(s)
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Appearance:
MR MANISH R.BHATT, SENIOR ADVOCATE assisted by MRS MAUNA M BHATT,
ADVOCATE for the Petitioner(s) No. 1
MR B S SOPARKAR, ADVOCATE for the Respondent(s) No. 2
NOTICE UNSERVED for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE MOHINDER PAL
Date : 08/12/2015
ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Petition is filed by the Income Tax Department challenging two separate orders passed by the Settlement Commission dated 28.01.2015 and 23.03.2015. The respondent-assessee, having applied for settlement of the income for the Assessment Year 2013-14, the Settlement Commission passed its first order dated 28.01.2015 under Section 245D(1) of the Act and allowed the application to proceed further with.
1.1 The Settlement Commission thereafter passed another order dated 23.03.2015 under Section 245D(2C) of the Act and allowed the said application to proceed further from that stage. These orders the Income Tax Department has challenged on various grounds. Page 1 of 8 HC-NIC Page 1 of 8 Created On Wed Dec 09 02:56:53 IST 2015 C/SCA/12209/2015 ORDER
2. The case of the Department is that both the orders of the Settlement Commission suffer from material irregularities. Application for settlement was irregular and that therefore, ought not to have been proceeded further beyond the stage of Section 245D(1) of the Act. In any case, assessee had not made true disclosure of his income previously before the Assessing Officer and the manner in which the said income has been derived. In absence of such important disclosures, the Settlement Commission ought to have declared the application as invalid as provided under Section 245D(2C) of the Act. The Settlement Commission therefore committed a serious error in allowing the application to proceed further.
3. On the other hand, the respondent-assessee contends before us that both the stages are tentative and none of the observations made by the Settlement Commission in the impugned orders would act as res judicata. Learned Counsel Shri Bandish Soparkar for the assessee drew our attention to judgment of Division Bench of this Court in case of Vishnubhai Mafatlal Patel Vs. Assistant Commissioner of Income Tax, reported in [2013] 31 taxmann.com 99 (Gujarat), in which it was observed that order allowing settlement application to proceed beyond the stage of sub-section (1) of Section 245D of the Act would be tentative in nature and it would still be open Page 2 of 8 HC-NIC Page 2 of 8 Created On Wed Dec 09 02:56:53 IST 2015 C/SCA/12209/2015 ORDER for the Commission, if grounds are so available, to declare such an application invalid after obtaining report from Commissioner and giving an opportunity of being heard to the applicant. Counsel also drew our attention to a judgment of Division Bench of Delhi High Court in case of Commissioner of Income Tax Vs. Income Tax Settlement Commission, reported in [2013] 35 taxmann.com 56 (Delhi), in which, in the context of the order passed by the Settlement Commission under Section 245D(2C) of the Act, it was observed that such order is not final and is subject to the final orders that may be passed by the Settlement Commission under Section 245D(4) of the Act.
4. Insofar as the order of the Settlement Commission under Section 245D(1) of the Act on 28.01.2015 is concerned, the same poses no serious consideration. Under sub-section (1) of Section 245C of the Act, an assessee is allowed to make an application for settlement in prescribed formate which would contain full and true disclosure of his income which has not been disclosed before the Assessing Officer and the manner in which such income has been derived. Sub-section (1) of Section 245D of the Act provides that on receipt of an application under Section 245C, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring Page 3 of 8 HC-NIC Page 3 of 8 Created On Wed Dec 09 02:56:53 IST 2015 C/SCA/12209/2015 ORDER him to explain as to why the application made by him be allowed to be proceeded with and on hearing the applicant, the Settlement Commission shall pass, within fourteen days from the date of the application, an order in writing rejecting the application or allowing the application to be proceeded with. Proviso to sub-section (1) of Section 245D would make it clear that where no such order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with.
5. Thus, at the stage of sub-section (1) of Section 245D, there is no requirement of hearing the Commissioner at all. The stage is to be crossed within a rigid time frame and in absence of any order, either rejecting the application for settlement or allowing it to be proceeded further, it would be deemed to have been allowed to proceed. In this context, Division Bench of this Court in case of Vishnubhai Mafatlal Patel (supra) observed as under:-
"12. The twin requirements for an assessee making an application for settlement under section 245C(1) of the Act, of containing full and true disclosure of income which has not been disclosed before the Assessing Officer and the manner in which such income has been derived, are thus of considerable importance and would be open for the Settlement Commission to examine the fulfillment thereof at several stages of the settlement proceedings. If therefore, while at the threshold, considering Page 4 of 8 HC-NIC Page 4 of 8 Created On Wed Dec 09 02:56:53 IST 2015 C/SCA/12209/2015 ORDER the question whether such application should be allowed to be proceeded with or be rejected, the Commission examined such questions on the basis of disclosure made by the applicants and the supporting material produced along with the applications, we do not see that the Commission committed any legal error. As already noted, it was well within the jurisdiction of the Commission at the stage of sub-section(1) of section 245D of the Act to examine whether application for settlement fulfills the statutory requirements contained in sub- section(1) of section 245C of the Act. At this stage we may refer to the decision of the Supreme Court in case of Ajmera Housing Corporation and another(supra). It was a case in which the assessee had made certain disclosures in the initial application under section 245C(1) of the Act. Such disclosures were however, revised and additional income was disclosed in the revised annexures. The Apex Court held that the assessee had no right to revise an application under section 245C(1) of the Act and further that such revised annexure making further disclosure of undisclosed income alone was sufficient to establish that the initial application made by the assessee could not be entertained as it did not contain true and full disclosure of the undisclosed income and the manner in which such income had been derived."
6. In the context of later order that the Settlement Commission passed on 23.03.2015 allowing the application for settlement to proceed further from the stage of Section 245D(2C) of the Act, judgment of this Court in case of Vishnubhai Mafatlal Patel (supra) makes no reference. However, we have, as pointed out by the Counsel for the assessee, judgment of the Delhi High Court in case of Commissioner of Income Tax Vs. Income Tax Settlement Commission (supra), in which, in the Page 5 of 8 HC-NIC Page 5 of 8 Created On Wed Dec 09 02:56:53 IST 2015 C/SCA/12209/2015 ORDER context of the stages envisaged under sub-section (1) of Section 245D of the Act, the Court held and observed as under:-
"13. From the above provisions, it is apparent that the settlement application passes through several stages before the final order providing for the terms of settlement is passed by the Settlement Commission. The first stage is under Section 245D(1). This is followed by the next step under Section 245D(2C) and finally by the order passed under Section 245D(4). In the present case, the final order under Section 245D(4) is yet to be passed. The orders under Section 245D(1) and 245D(2C) are not final orders and they are subject to the final orders that may be passed under Section 245D(4). It is, therefore, clear that the issue of full and true disclosure on the part of the applicants and the manner in which the undisclosed income was derived is still open for discussion and debate and the Settlement Commission would have to give its final decision on these aspects before an order of settlement is passed under Section 245D(4) of the said Act. Therefore, on a plain reading of the provisions, it is apparent that the submission made by the learned counsel for the respondents 2 to 5 merits acceptance insofar as it was contended by him that the entire issue remains open and at any stage of the proceedings till the order under Section 245D(4) is passed by the Settlement Commission, the issue with regard to full and true disclosure and the manner in which the undisclosed income had been derived would be open and can be raised by the Revenue. In fact, it was clarified by the learned counsel for the respondents 2 to 5 that the said respondents do not even contend that once an application has been proceeded with under Section 245D(1) and has not been held to be invalid under Section 245D(2C), the validity of the same in terms of the requisite conditions stipulated in Section 245C(1) cannot be gone into at the subsequent stages up to the passing of the order under Section 245D(4) of the said Act."Page 6 of 8
HC-NIC Page 6 of 8 Created On Wed Dec 09 02:56:53 IST 2015 C/SCA/12209/2015 ORDER
7. In the said judgment, as reproduced in para-13, the Counsel for the assessee had not contended that once the application has been proceeded with under Section 245D(1) and has not been held to be invalid under Section 245D(2C), the validity of the same in terms of the requisite conditions stipulated in Section 245C(1) cannot be gone into at the subsequent stages up to the passing of the order under Section 245D(4) of the Act. Same is the situation in the present case. We record the contention of the Counsel for the assessee that despite the orders being passed by the Settlement Commission under sub-section (1) of Section 245D and Section 245D(2C) of the Act, the question of fulfillment of all material requirements of a valid application for settlement would be still open for the Commission to examine before further inquiry under sub-section (3) of Section 245D and passing final order under sub-section (4) of Section 245D In fact, the Commission also in the order dated 23.03.2015 made following observations:-
"We appreciate that some of the issues raised by the department in the report u/s 245D(2B) may call for necessary enquiry and investigation u/s 245D(3) of the Act and in the absence of the same, it cannot be conclusively, observed that the applicant has not made true and full disclosure of its income in the settlement application. At this stage, we find that no clinching, cogent and direct evidence have been placed on record by the department to come to the conclusion that the above applicant has not made a true and full disclosure of his Page 7 of 8 HC-NIC Page 7 of 8 Created On Wed Dec 09 02:56:53 IST 2015 C/SCA/12209/2015 ORDER income in the settlement application. We have no adverse material /information in our possession at this stage to come to a negative conclusion against the applicant. As mentioned above, all other technical requirements have been fulfilled by the applicant. Under the circumstances, we are of the opinion that the settlement application filed in this case cannot be held to be 'invalid'."
8. Thus, quite apart from the statutory interpretation adopted by this Court in case of Vishnubhai Mafatlal Patel (supra) and Delhi High Court in case of Commissioner of Income Tax Vs. Income Tax Settlement Commission (supra), even the stand of the assessee and that of the Settlement Commission being that the findings of the Settlement Commission on the fulfillment of the requirements of a valid offer are merely tentative and it will be open for the Settlement Commission to examine these aspects before passing final order under sub-section (4) of Section 245D of the Act. Under the circumstances, we are not inclined to scrutinize the decisions of the Settlement Commission.
9. The petition is disposed of with above observations.
(AKIL KURESHI, J.) (MOHINDER PAL, J.) SHITOLE Page 8 of 8 HC-NIC Page 8 of 8 Created On Wed Dec 09 02:56:53 IST 2015