Bombay High Court
Rasik Ramji Kamani vs S.I. Tripathi And Others on 20 June, 1990
Equivalent citations: [1993]202ITR74(BOM)
JUDGMENT M.L. Pendse, J.
1. Rule returnable forthwith. Shri Jetley for respondents waives service. Heard counsel.
2. By this petition filed under article 226 of the Constitution of India, the petitioner is challenging the order dated November 23, 1989, passed by the Income-tax Settlement Commission under section 245HA of the Income-tax Act, 1961, and under section 22HA of the Wealth-tax Act, 1957. The petitioner had filed Income-tax and wealth-tax applications under section 245C(1) of the Income-tax Act and section 22C(1) of the Wealth-tax Act on July 22, 1976. The application was admitted for income-tax and wealth-tax on December 15, 1976. For Income-tax, the application was admitted for the assessment years 1974-75 and 1975-76, while, in respect of wealth-tax, the application was admitted for the assessment years 1973-74 to 1975-76. On admission of the applications, the petitioner was directed to file statements of facts on December 24, 1976, and December 27, 1976, for Income-tax and wealth-tax, respectively. The petitioner files statements on March 7, 1978, and reserved his right to make alterations and additions as subsequently deemed necessary.
3. The petitioner belonged to the Kamani family which is in charge of several Indian companies. The family created specific foreign assets for which a very broad, general and rudimentary account was given by the petitioner. The petitioner claimed that the foreign exchange position in the country deteriorated progressively from 1955 onwards and the taxation went on increasing with several restrictions. With these constraints, the Kamani group decided to have a second line of defence for its security and even with full knowledge that to acquire or possess any valuable assets outside India without obtaining permission under Foreign Exchange, Income-tax and other Central Acts would be illegal, the Kamani group created legal agencies on its behalf in foreign countries but scrupulously avoided having any direct involvement with the companies set up abroad. Initially, the scheme was implemented by the elder brother of the petitioner, but after his death, the petitioner continued to operate the foreign assets. The group formed five foreign companies and appointed foreign nationals as directors. The companies were formed for the benefit of Kamani Group and members of the Kamani family used to receive the profits made by the companies. Subsequently, there were allegations regarding misappropriation of the foreign company funds by the foreign directors and thereupon certain suits were filed in the foreign countries against the directors on the ground that they were holding assets as trustees for the Kamani family. As general information about these companies was furnished without disclosing the particulars, the petitioner was called upon to furnish particulars. The petitioner filed a supplementary statement of facts on December 1, 1983, but that was also totally inadequate.
4. The Settlement Commission thereupon called upon the petitioner to furnish information as set out in the notice served in terms of rule 7 read with rule 8 of the Income-tax Settlement Commission (Procedure) Rules, 1976. The petitioner was called upon to specifically set out the requisitions given by the Commission. On January 12, 1984, the petitioner sent his reply which was again extremely vague and evasive. The petitioner filed irrelevant and bulky replies and documents. The petitioner also made contradictory statements which ran contrary to the requirement of rule 7 which expects the petitioner to file a full and true statement of facts. After a long and protracted correspondence which yielded no relevant details from the petitioner and after granting a number of adjournments sought by the petitioner, the hearing was finally fixed on November 5, 1986. At the hearing, the Commission pointed out to the petitioner the requirement of full and true disclosure of his income and the need to co-operate with the Commission and disclose the manner in which such income has been earned before a claim for immunity can be made. The petitioner was pointed out what he has stated on affidavit and where the petitioner claimed that the assets of foreign firm were his personal income (sic). The Commission thereupon directed the petitioner to comply with the requirements in respect of several details and granted three months' time to submit information or evidence.
5. Instead of complying with the requirement, the petitioner filed Writ Petition No. 2819 of 1986 on October 22, 1986, in this court and challenged the refusal on the part of the Commissioner to issue directions to various agencies as demanded by the petitioner. The petitioner also applied for stay of the operation of the proceedings before the Commission. The petition was rejected by the learned single judge and Appeal No. 1065 of 1986 preferred by the petitioner met with the same fate on December 10, 1986. The petitioner then tried to stall the proceedings before the Commission by filing a petition before the Supreme Court, but the petition was not entertained nor was any interim relief granted.
6. On September 1, 1989, a notice under section 245HA of the Income-tax Act, 1961, and under section 22HA of the Wealth-tax Act, was served on the petitioner and the hearing was fixed on October 5, 1989. The notice informed the petitioner that the proceedings before the Settlement Commission would be disposed of due to non-co-operation of the petitioner. At the hearing, the petitioner appeared in person and again sought clarification and time. The Commission explained to the petitioner that the petitioner must produce any deed of trust or other documentary evidence available with him with regard to the trusteeship agreement of the foreign companies. The petitioner failed to carry out the directions of the Settlement Commission.
7. Ultimately, the Commission disposed of the proceedings holding that at no stage, the petitioner had co-operated with the Settlement Commission. The commission also noticed that from the letter dated November 13, 1989, it becomes apparent that the petitioner had come before the Commission only to obtain shelter from various criminal liabilities to which he was exposed in view of the blatant contravention of several Acts including FERA, Companies Act, Indian Penal Code, etc. The Commission noted that the whole exercise for a period of 13 years was to keep the proceedings in abeyance so that the petitioner can take the plea before various courts and the assessment authorities that the Settlement Commission which had powers of granting immunity is considering the issue. The Commission also noticed that the petitioner has not cared to send a proper reply to the show-cause notice under section 245HA of the Income-tax Act and under section 22HA of the Wealth-tax Act and shown callous indifference towards the proceedings. The Commission thereupon disposed of the proceedings by the impugned order directing that all the cases before the Income-tax and Wealth-tax Assessing Officer shall be disposed of as if no application for immunity was filed. The order passed by the Settlement Commission is under challenge.
8. Before adverting to the submission urged by Shri Kapadia, learned counsel appearing on behalf of the petitioner, it is necessary to briefly refer to the relevant provisions of the Income-tax Act relating to settlement of cases set out in Chapter XIX-A of the Income-tax Act. The Income-tax Settlement Commission is set up under section 245B and consists of a Chairman and as many Vice-Chairmen and other members as the Central Government thinks fit. The appointments are made from amongst persons of integrity and outstanding ability, having special knowledge of, and, experience in, problems relating to direct taxes and business accounts. Section 245C prescribes the procedure for filing applications for settlement of cases and, inter alia, provides that the assessee can make an application containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer to the Settlement Commission to have the case settled. Section 245D of the Act provides for procedure on receipt of an application under section 245C of the Act. Sub-section (4) of section 245D of the Act provides :
"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 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 under sub-section (1) or sub-section (3)."
9. Section 245H of the Act confers power on the Settlement Commission to grant immunity from prosecution and penalty. Section 245HA of the Act was inserted by Finance Act, 1987, with effect from June 1, 1987. This section confers power on the Settlement Commission to send the cases back to the Assessing Officer if the assessee does not co-operate. The section, inter alia, provides that, in case the Settlement Commission is of the opinion that the person who filed the application for settlement has not co-operated with the Settlement Commission, then the Commission may send the case back to the Assessing Officer. Section 245-I provides that every order of settlement passed by the Commission shall be conclusive and the order shall not be reopened in any proceeding under this Act or under any other law for the time being in force. The proceedings before the Settlement Commission are declared as judicial proceedings by section 245L of the Act.
10. With this background of the statutory provisions, it is now necessary to examine the submission advanced by Shri Kapadia to challenge the legality of the order. The first contention of learned counsel is that the Settlement Commission has no jurisdiction to dispose of the application in accordance with the provisions of section 245HA of the Income-tax Act and section 22HA of the Wealth-tax Act. Learned counsel urged that the provisions of section 245HA of the Act were introduced by an Amending Act and came into force with effect from June 1, 1987. It was contended that the application before the Settlement Commission was filed by the petitioner on July 22, 1976, and, on that day, the provisions of section 245HA of the Income-tax Act and section 22HA of the Wealth-tax Act were not available. It was claimed that the provisions which came into operation during the pendency of the proceedings cannot be resorted to dispose of the application. There is no merit in this submission. The Settlement Commission has very rightly pointed out that the provisions of section 245HA of the Income-tax Act and section 22HA of the Wealth-tax Act ware merely procedural in nature and do not affect any substantive right of the petitioner. It has now been well-settled that a change in law of procedure operates retrospectively unlike the law relating to vested rights. The Supreme Court in the decision in Anant Gopal Sheorey v. State of Bombay, , referred with approval to the quotation of Maxwell which sets out that no person has a vested right in any course of procedure and if by an Act of Parliament the mode of procedure is altered he has no other right than to proceed according to the altered mode. The petitioner can make vision because after this provision came into force, the petitioner was served with the notice under this amended provision and was called upon to produce the necessary documents and evidence. The petitioner failed to honour the commitment and the Commission, therefore, rightly held that the amending provisions were merely procedural in nature and the Commission was entitled to exercise the powers and dispose of the proceedings for non-co-operation of the petitioner. In my judgment, the view taken by the Commission is correct and the challenge by the petitioner is without any merit.
11. Apart from this consideration, it cannot be overlooked that sub-section (4) of section 245D of the Act which is all along in existence permits the Commission to pass any order as it thinks fit on the matter covered by the application and in matters relating to the case not covered by the application but referred to in the report of the Commissioner forwarded to the Settlement Commission. It is obvious that there is inherent power in the Settlement Commission to dispose of the proceedings for failure of the petitioner to give co-operation. Indeed, the proceedings before the Settlement Commission are in the nature of a concession given to an assessee who has suppressed his income and the Settlement Commission has been authorised to give immunity to such assessees. The Settlement Commission cannot grant immunity if the assessee fails to give a full and true account of his income. Apart from the provisions of section 245HA of the Income-tax Act and section 22HA of the Wealth-tax Act, the Commission could have called upon the assessee to produce the required documents and evidence and failure to do so would result in disposal of the proceedings. In these circumstances, the contention that the Settlement Commission could not have disposed of the proceedings for non-co-operation of the petitioner cannot be accepted.
12. Shri Kapadia then submitted that the finding recorded by the Settlement Commission that the petitioner failed to co-operate with the requirement of the Commission is not correct. It is not possible to entertain this plea for more than one reason. In the first instance, the question as to whether the petitioner co-operated with the Commission is a pure question of fact and it is not permissible to disturb the finding recorded by the high power Settlement Commission constituted under the Act in the exercise of writ jurisdiction. Secondly, even on merits, the submission has no substance. The Settlement Commission, in an exhaustive order, has pointed out how the petitioner successfully kept the proceedings hanging on for a period of 13 years. From the affidavits filed by the petitioner and from the correspondence, it is apparent that the resort to the Commission was only with a view to take shelter from civil and criminal liabilities and also for the purpose of fighting inter se disputes in the Kamani family. The Settlement Commission was more than liberal in permitting the petitioner to delay the proceedings. In this connection, it is also necessary to refer to the observation made by the Division Bench of this court in Appeal No. 1065 of 1986 which was disposed of on December 10, 1986. The Division Bench observed that the petitioner is trying to use the machinery of the Settlement Commission to extract information from his brothers with whom he has various disputes and the companies under their control and that too without joining them as parties to the proceedings. In my judgment, the petitioner has filed contradictory statements of facts on various occasions according to his convenience. The petitioner, at one stage, claimed that the assets of the foreign companies belonged to the Kamani family, while at another stage, the petitioner claimed that it was his personal income. It is obvious that the petitioner was making deliberate, misleading and false statements to keep the proceedings pending with a view to avoid civil and criminal liabilities. Surely, a person seeking immunity for suppressing income cannot enjoy this liberty with the Settlement Commission.
13. Shri Kapadia tried to rely upon certain documents produced before the Settlement Commission to urge that the petitioner had disclose sufficient material. It is impossible to accede to the submission. The Settlement Commission was not at all satisfied with the disclosures and came to the conclusion that the petitioner was more interested in suppressing the material than disclosing it. The finding recorded by the Settlement Commission does not suffer from any infirmity. In my judgment, the challenge to the order passed by the Settlement Commission is without any merit and the petition must fail.
14. Accordingly, rule is discharged with costs.