Madras High Court
S.P.A.M. Krishnan Chettiar And Son vs Income-Tax Settlement Commission And ... on 13 October, 1992
Equivalent citations: [1993]202ITR81(MAD)
JUDGMENT S. Ramalingam, J.
1. The petitioner is an assessee under the Income-tax Act, 1961 (for short, "the Act"). For the assessment year 1980-81, a sum of Rs. 2,65,105 had been added to the returned income of Rs. 1,62,098. The petitioner preferred an appeal to the Commissioner of Income-tax (Appeals). The appeal was allowed and the matter was remanded for fresh consideration by order dated December 28, 1987.
2. Thereafter, the petitioner submitted an application on August 9, 1989, under section 245C(1) of the Act for settlement in respect of the assessment year 1980-81. This application was dismissed as not maintainable by order dated September 20, 1989, which is impugned in this writ petition.
3. Learned counsel for the petitioner would submit that the two reasons given in the order :
(1) That since the application was filed on August 9, 1989, it is governed by the requirements of the amended section 245C(1) of the Act; and (2) That the petitioner had not disclosed any amount in his application which has not been disclosed before the Income-tax Officer are not correct in law. He would submit that the application related to the assessment year 1980-81. The unamended section 245C(1) of the Act reads as follows :
"An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Income-tax Officer, the manner in which such income has been derived, the additional amount of Income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided :"
4. Section 245C of the Act was amended by the Taxation Laws (Amendment) Act, 1984, effective from October 1, 1984. This amendment grants substantial relief but imposes two restrictions in moving application for settlement before the Commission. The first restriction is that the assessee should, inter alia, make a full and true disclosure of his income which has not been disclosed before the Income-tax Officer and 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. The second restriction is that no such application can be made unless the Income-tax payable on the income computed as provided in sub-sections (1B) to (1D) exceeds Rs. 50,000. It is not in dispute that the petitioner has not in his application made a full and true disclosure of the income which has not been disclosed before the Income-tax Officer or the manner in which such income had been derived and the additional amount of Income-tax payable on such income. Therefore, the application submitted by the petitioner under section 245C of the Act did not satisfy the requirements of the amended section.
5. The contention of the petitioner is that the application made by him for relief by way of settlement related to the assessment year 1980-81, and even though he had submitted the application only on August 9, 1989, there is no need for his to comply with the amended section 245C of the Act and it is sufficient if his application satisfies the provisions of the unamended section 245C of the Act. This contention can hardly be accepted. Even though section 245C of the Act was amended by the Taxation Laws (Amendment) Act in 1984 which is effective from October 1, 1984, since it has not been disputed that the application submitted by him was in the year 1989, long after the amendment came into force, it is obvious that the Commission has jurisdiction only if the application is made after complying with the requirements of section 245C of the Act as it stood on the date when the application was submitted. Since the petitioner, admittedly, has not complied with the requirements of section 245C in his application dated August 9, 1989, the application has rightly been rejected as not maintainable.
6. Learned counsel for the petitioner would submit that even though he had asked for a personal hearing, such personal hearing was not given and, therefore, the order is vitiated. This contention is bereft of merit. If, on the facts, the petitioner has not disclosed the additional Income-tax payable by him and has also not intimated the source of such income, the application prima facie is not maintainable in law and it is not wrong if any personal hearing was not given in such cases. The writ petition stands dismissed.
JUDGMENT OF DIVISION BENCH
1. This appeal has been preferred by the appellant, a firm, against the order in Writ Petition No. 14273 of 1989 (see page 83 supra), dismissing in limine the prayer of the appellant for the issue of a writ of mandamus directing the first respondent to take on file the settlement application filed by the appellant on August 9, 1989, and to enquire into the same.
2. For the assessment year 1980-81, the appellant had returned an income of Rs. 1,62,098, but by order dated February 23, 1987, the second respondent finalised the assessment of the appellant by making an addition of Rs. 2,65,105 and also initiated proceedings for levy of penalty on the appellant. On appeal by the appellant before the Commissioner of Income-tax (Appeals), Madurai, by order dated December 28, 1987, the assessment order was set aside and the Income-tax Officer was directed to redo the assessment. While matters stood thus, the appellant filed an application on April 6, 1989, under section 245C of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), before the first respondent herein and when the appellant was informed that the defects therein had to be remedied, the appellant filed a fresh application on August 9, 1989. The appellant purported to make that application in accordance with section 245C of the Act as it existed in 1981 as, according to it, the amendments made in 1984, with effect from October 1, 1984, were not retrospective. By a communication dated September 20, 1989, the first respondent informed the appellant that the application filed by it has to conform to the requirements of the provisions of section 245C(1) as on August 9, 1989, when the application was filed and as the appellant had not disclosed any income which had not been disclosed before the Income-tax authorities and the additional amount of Income-tax payable on the income disclosed was also not stated to exceed Rs. 50,000, the application of the appellant could not be maintained before the first respondent. Thereupon, the appellant approached this court in Writ Petition No. 14273 of 1989 for the reliefs set out earlier.
3. Before the learned judge, it was submitted on behalf of the appellant that, as the assessment year was 1980-81, the application had been submitted under the unamended section 245C of the Act and there was no need on the part of the appellant to comply with the amended section 245C of the Act. The learned judge took the view that the amendment to section 245C of the Act was made with effect from October 1, 1984, and as the application filed by the appellant was in 1989, long after the coming into force of the amendment, it was necessary for the appellant to comply with the requirements of section 245C of the Act as it stood on August 9, 1989, and owing to non-compliance by the appellant with the requirements of that section in the application dated August 9, 1989, the rejection of the application by the first respondent was in order. In the view so taken, the writ petition was dismissed, the correctness of which is questioned in this appeal.
4. Learned counsel for the appellant, referring to section 245C, as it stood when inserted in 1975, and as amended with effect from October 1, 1984, by the Taxation Laws (Amendment) Act, 1984 (hereinafter referred to as "the Amendment Act"), submitted that the assessment year in question in respect of the assessee was 1980-81 and section 245C of the Act as it stood at that time alone would be applicable to the appellant, though the application under section 245C came to be filed on August 9, 1989. Elaborating this, learned counsel further submitted that section 245C, as amended in 1984, introducing further conditions, cannot have the effect of affecting the right of the appellant to file an application under section 245C, as it stood in the relevant assessment year. Reliance in this connection was placed by learned counsel upon the decisions in Hoosein Kasam Dada (India) Ltd. v. State of M. P. ; Garikapati Veeraya v. N. Subbiah Choudhary, . On the other hand, learned counsel for the respondents contended that section 245C of the Act is not in the nature of a charging section or even one which provides for the preferring of an appeal, but an independent provision conferring on an assessee a concession or an option for settlement of tax disputes and as a compromise measure in the nature of statutory settlement of tax disputes and merely provides a machinery for that purpose, so that when the disclosure is made as laid down in that section and the assessee disgorges what is fixed by the Settlement Commission, he secures a discharge from penalty as well as prosecution and it also accelerates the recovery of the tax by the State and cannot, therefore, be equated to a vested right of appeal. It was also further pointed out that the concession or opinion to settle had been kept intact even after the amendment of section 245C the Act in 1984, except that some more requirements to be fulfilled by the assessee had been laid down and that would only be procedural, in which the appellant cannot claim any vested right as such. Drawing attention to the fact that the appellant filed the application under section 245C in Form No. 34B, relevant to the amended section 245C, learned counsel pointed out that the appellant cannot, without fulfilling the requirements as per amended section 245C, claim that his defective petition before the first respondent, should be dealt with. Reference in this connection was made by learned counsel to the decisions reported in Kudilal Govindram Seksaria v. CIT [1964] 54 ITR 653 (Bom); Anant Gopal Sheorey v. State of Bombay, ; R. B. Shreeram Durga Prasad and Fatechand Nursing Das v. Settlement Commission (I. T. and W. T.) and an unreported judgment of the Bombay High Court in Rasik Ramji Kamani v. S. I. Tripathi (since reported in [1993] 202 ITR 74) (Writ Petition No. 1184 of 1990 judgment dated June 20, 1990).
5. Before proceeding to consider the aforesaid submission, it would be necessary to refer to the relevant provisions of the Act, as they stood prior to October 1, 1984, and after its amendment, with effect from October 1, 1984. Section 245C(1), inserted in 1975 and as it stood till September 30, 1984, was as follows :
"(1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner and containing such particulars as may be prescribed to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided."
6. Sub-sections (2) and (3) were there, as at present. By the Amendment Act, with effect from October 1, 1984, section 245C was amended and the amended section runs as under :
"(1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income, which has not been disclosed before the Income-tax Officer, the manner in which such income has been derived, the additional amount of Income-tax payable on such income and such other particulars as may prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided :
Provided that no such application shall be made, unless the addition amount of income-tax payable on the income disclosed to the application exceeds Rs. 50,000."
7. Sub-sections (1A) to (1E) were also introduced by the same amendment Act, though they are not very material for the purpose of the present appeal. Chapter XIX-A in the Act, introduced by the Taxation Laws (Amendment) Act, 1975, was the result of implementing the recommendations of the Wanchoo Committee to arrest the evil of black money and large scale tax evasion. One of the recommendations made was a compromise measure by which a disclosure could be made and the quantum of tax is determined and the assessee not only secured quittance for himself, but also freedom from levy of penalty and prosecution. The machinery, initially conceived of by the Wanchoo Committee to achieve this, was a Tribunal, though, later, it was rechristened the Settlement Commission with full powers to invested, quantify the amount of tax, penalty as well as interest, etc., and grant immunity from prosecution at its discretion. The details of the application, probe, consideration, hearing and disposal, found in the report, had been incorporated in the statutory provisions in Chapter XIX-A. Thus, a careful study of the anatomy of Chapter XIX-A clearly brings out that it was only in the nature of machinery provisions for the purpose of settlement of tax disputes between the assessees and the Revenue. The provisions do not compel any assessee to resort to section 245C, but that can be availed of, if the assessee so chooses. In other words, the remedy provided under section 245C, as a machinery provision for effecting settlement of tax disputes, was only in the nature of a concession or option open to the assessee who desired to settle his tax matters. In prescribing conditions for availing of this concession or option by an assessee, it was open to Parliament to stipulate certain conditions subject to which alone the settlement of tax disputes arising between an assessee who had invoked section 245C of the Act and the Revenue could be considered. To put it differently, in order to enable an assessee to take advantage of the machinery section for settlement of a tax dispute, it was open to Parliament to prescribe certain conditions upon the fulfilment of which alone the assessee could exercise the option or concession. By the Amendment Act, with effect from October 1, 1984, apart from the insertion of sub-sections (1A) to (1E), substantial changes were made, in that, (i) the assessee should make a full and true disclosure of his income, which had not been disclosed before the Income-tax Officer, the manner in which such income had been derived and the additional amount of Income-tax payable on such income, and (ii) that no application can be made unless the additional amount of Income-tax payable in respect of such income, computed as per sub-sections (1B) to (1D), exceeds Rs. 50,000. The addition of these conditions and the need to fulfil them before an assessee can resort to an application under section 245C are again parts of the prescribed mechanism for consideration of an application by an assessee for settlement of his tax dispute. It must also be borne in mind that section 245C is neither a charging section nor a provision for preferring any appeal, but an independent provision conferring an option or concession on an assessee to file an application subject to the fulfilment of certain conditions as laid down in the section. It is also necessary to point out that the appellant filed the application under section 245C(1), in Form No. 34B, after the amendment with effect from October 1, 1984. However, in that application, against column 11 relating to particulars of full and true disclosure of income not disclosed before the Assessing Officer, etc., the appellant had stated "no undisclosed income". The additional amount of Income-tax payable on such income had also not been disclosed. On a consideration of the provisions in Chapter XIX-A of the Act, the concession or option conferred on the assessee under section 245C(1) of the Act to invoke this section as well as those that followed cannot be regarded as a right vested in the assessee for all time to come without taking note of the procedural changes in section 245C, which, as pointed out earlier, is only purely a machinery section. The application of the appellant, in this case, was filed on August 9, 1989, and section 245C, as it then stood, required the assessee to furnish certain particulars in Form No. 34B and though the assessee approached the Settlement Commission under section 245C in the prescribed form, viz., Form No. 34B, yet it did not comply with the other conditions required and necessarily, therefore, the application could not be entertained by the first respondent.
8. A brief reference to the decisions cited by counsel on both sides may not be made. In Hoosein Kasam Dada (India) Ltd. v. State of M. P. , the question arose as to whether the amendment to the proviso in section 22(1) of the C. P. and Berar Sales Tax Act (Act 21 of 1947) applied to the proceedings commenced before the amendment of the Act. In that case, the return was submitted on November 28, 1947, and the Assessing Officer, not being satisfied with an inspection of the books of account of the assessee, submitted the case to the Assistant Commissioner, Sales Tax, who issued a fresh notice on January 25, 1949, for the hearing on February 5, 1949, and, after a hearing on June 9, 1949, an order of assessment was passed on April 8, 1950. Meanwhile, on November 25, 1949, the proviso to section 22(1) of the C. P. and Berar Sales Tax Act was amended and when the assessee preferred an appeal which was not accompanied by proof of payment of tax, the appellate authority declined to admit the appeal, and it was upheld by the Sales Tax Commissioner as well as the High Court. On further appeal, by special leave to the Supreme Court, it was held that a right of appeal was not a matter of procedure but a substantive right of appeal, the imposition of such restrictions as per the provisions as they stood at the commencement of the proceedings. This decision, in our view, cannot be called in aid by the appellant in support of its case, for, the court was considering the effect of imposition of restrictions on a statutory right of appeal available to the assessee under the provisions of the C. P. and Berar Sales Tax Act. Earlier, it had been pointed out that section 245C is neither a charging section nor one conferring a right of appeal, but that it is only in the nature of a machinery section for effecting settlement of tax disputes, subject to the fulfilment of certain conditions. Likewise, the decisions in Garikapati Veeraya v. N. Subbiah Choudhry, , does not support the case of the appellant. There, the question of availability of a right of appeal to the Supreme Court, with reference to the valuation of a property at Rs. 10,000 with a right of appeal to the Federal Court, after the coming into force of the provisions of the Constitution of India, came up for consideration. The Supreme Court pointed out that the right of appeal is a vested right and exists on and from the dated of the commencement of the lis and that right cannot be taken away by a subsequent enactment unless, expressly or by necessary intendment, it so provided. This decision was rendered with reference to the availability of a right of appeal to the Supreme Court, requiring a valuation of Rs. 20,000 in relation to the right of appeal which was earlier available on a valuation of Rs. 10,000 to the Federal Court after the coming into force of the provisions of the Constitution. It had earlier been pointed out that the application under section 245C cannot be equated to a right of appeal, but that it is only in the nature of concession or option exercisable by the assessee and this decision cannot, therefore, assist the appellant. Even in regard to the decision reported in Collector or Customs and Excise v. A. S. Bava, , it has to be pointed out that it related to the statutory appeal under section 35 of the Excise Act and the Supreme Court rightly pointed out that a litigant cannot be deprived of a pre-existing right of appeal by imposition of conditions which, in a mere rule of procedure. This decision also dealt with a case of statutory appeal and the effect of imposition of conditions which would cripple that right and that, in our view, cannot have any application here.
9. Now, coming to the decisions relied on by the learned counsel for the respondents, Kudilal Govindram Seksaria v. CIT [1964] 54 ITR 653 (Bom) related to section 22(4) of the Indian Income-tax Act, 1922, which empowered the Income-tax Officer only to require production of accounts and documents. That section, however, was amended with effect from April 1, 1952, retrospectively, giving power to the Income-tax Officer to require the assessee to furnish particulars and information, in addition to the production of accounts and documents only from April 1, 1952, and this would not apply to assessments in respect of an anterior period, viz., assessment year 1949-50. Repelling this contention, the Bombay High Court pointed out that the amendment providing for the calling of further particulars and information was only to help the Income-tax Officer to correctly determine the tax liability and that was purely procedural and merely because there has been a change in the procedural provision which was a little inconvenient to the assessee, that would not justify a departure from the usual rule that the procedural provision will have application to all pending proceedings subsequent to its introduction. In this case, on August 9, 1989, when the appellant filed the petition under section 245C, the amended provision was in force and it had earlier been pointed out that this is only a machinery section intended to settle the tax disputes between an assessee and the Revenue and in view of that, the appellant, undoubtedly, was bound to fulfil the requirements of section 245C on the date on which he filed the petition before the first respondent, in the light of the decision referred to above. In Anant Gopal Sheorey v. State of Bombay, , it has been clearly laid down that a person has no vested right in the course of procedure, but has a right of prosecution only in the manner prescribed for the time being by an Act of Parliament and if the mode of procedure is altered, he has no other option but to proceed according to the altered mode. It has also been further pointed out that a change in the law of procedure operates retrospectively, unlike the law relating to vested rights. The remedy under section 245C of the Act is in the nature of an independent remedy unconnected with the other remedies in the Act and if an assessee wants to avail of that remedy, he has necessarily to fulfil the conditions prescribed as on the date on which the application is made and as the section is a machinery section indicating the procedure to be followed, the appellant had to fulfil the requirements of section 245C as it stood on August 9, 1989. In R. B. Shreeram Durga Prasad and Fatechand Nursing Das v. Settlement Commission (I. T. and W. T.) a composite application was made by the assessee to the Settlement Commission in respect of the assessment years 1948-49 to 1975-76 under section 245C of the Act. The Commissioner agreed to the settlement for the years 1960-61 to 1975-76, but objected to the settlement for the earlier years. Without affording an opportunity to the appellant, the Settlement Commission rejected the application for settlement in respect of the assessment years 1948-49 to 1959-60. Thereupon, the appellant applied to the Commission for recalling the order, but pending that application, section 245D was amended enabling the Commission to reject the objection of the Commissioner. Subsequently, the Commission passed an order to the effect that the appellant was entitled to a rehearing, as the earlier order rejecting the application for settlement for the years 1948-49 to 1959-60 had been made in violation of the principles of natural justice, and it had rejected in its entirely if the Commissioner's objections were not interfered with. On appeal by the assessee, the Supreme Court, at page 174, observed thus :
"The application made for the settlement under section 245C was still pending before the Commission when the amendment made to the Finance Act, 1979, came into effect and the said amendment being procedural, it would govern pending proceedings and the Commission would have the power to overrule the objections of the Commissioner."
10. The above observations clearly bring out that amendment of section 245C by the Amendment Act, with effect from October 1, 1984, was also purely procedural and would undoubtedly govern the application filed by the appellant on August 9, 1989. In Rasik Ramji Kamani v. S. I. Tripathi [1993] 202 ITR 74 (Writ Petition No. 1184 of 1990 judgment dated June 20, 1990, of the Bombay High Court), Pendse J., pointed out that the proceedings before the Settlement Commission are in the nature of a concession given to an assessee who had suppressed the income and the Settlement Commission has been authorised to give immunity to such assessees, but it cannot be given by the Settlement Commission if the assessee fails to give a full and true account of his income. This decision also supports the view which we have expressed above that section 245C confers on the assessee a concession or option to settle his tax disputes and the availing of that can only be subject to the fulfilment of conditions prescribed under the section. Earlier, it had been pointed out that the application filed by the appellant did not contain the particulars required by section 245C, though the application was filed in Form No. 34B, which would be relevant, after the amendment with effect from October 1, 1984, and the application so filed was an incomplete and defective one, which was rightly not entertained by the first respondent. For the foregoing reasons, we dismiss the writ appeal with costs. Counsel's fee Rs. 1,500 each.