Madras High Court
M/S.Agarshans vs The Income Tax Settlement Commission on 22 November, 2011
Author: Chitra Venkataraman
Bench: Chitra Venkataraman
In the High Court of Judicature at Madras
Dated: 22.11.2011
Coram
The Honourable Mrs.JUSTICE CHITRA VENKATARAMAN
Writ Petition No.34840 of 2002
M/s.Agarshans
164, Linghi Chetty Street,
Chennai 600 001. .... Petitioner
Vs.
1. The Income Tax Settlement Commission,
Additional Bench,
488/489, Anna Salai, Chennai 35.
2. The Union of India,
rep. By the Chairman,
Central Board of Direct Taxes,
New Delhi.
3. The Commissioner of Income Tax,
Chennai VIII, Chennai 34.
4. The Assistant Commissioner of Income Tax,
Business Circle VIII, Chennai 6.
5. The Tax Recovery Officer XXI,
Range VIII, Chennai 6. .... Respondents
PETITION under Article 226 of The Constitution of India praying for the issuance of Writ of Certiorarified Mandamus calling for the records of the first respondent Income Tax Settlement Commission, Additional Bench, Chennai in its File Settlement Application No.21/IV/181-93-II and quash its order dated 16.07.2002 and direct the first respondent Settlement Commission to afford the petitioner firm an opportunity of being heard and pass a fresh order in the Settlement Application of the petitioner firm.
For Petitioner : Mr.T.N.Seetharaman
For Respondents : Mr.J.Narayanasamy
for Mr.T.R.Senthil Kumar R1, R3 to R5
Standing Counsel for Income Tax
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O R D E R
The petitioner seeks Writ of Certiorarified Mandamus to quash the order of the first respondent, namely, Income Tax Settlement Commission dated 16.7.2002 and to direct the first respondent to afford an opportunity of being heard and pass a fresh order on the Settlement Application of the petitioner firm.
2. The facts leading to the filing of the present Writ Petition are as follows:
The petitioner herein carries on business as a Civil Engineering Contractor. The petitioner herein originally filed an application for settlement of its case before the Income Tax Settlement Commission, relating to the assessment years 1989-90 to 1993-94. The petitioner offered additional income consequent on a search made in the petitioner's premises. The Settlement Commission pointed out, after analysing the various materials, that the income in respect of the above-said assessment years have to be arrived at on an estimated basis, despite the fact that the regular books of accounts have been maintained for the construction business and that the assessee firm had attempted to reconcile the notings in the seized materials with the figures appearing in the regular books of accounts. Noting the reasons for its decision in paragraph 9 of its order, the Settlement Commission viewed that the assessable income had to be estimated for the assessment years under consideration. The Settlement Commission further pointed out to innumerable cash credits in the cash books and the gross contract receipts for 15 years at Rs.6.28 crores, but taken by the assessee to an extent of Rs.3.28 crores only for estimating the profits on the ground that the cost of materials like cement steel etc. had been deducted from the total turnover for which no materials were furnished by the assessee. that the assessee had not furnished the details of expenditure under different heads like Commission, brokerage and expenses claimed on account of sand. Considering the above-said facts, the Settlement Commission disallowed the claim to the extent of 60%. Ultimately, the Settlement Commission considered the break-up of turnover project-wise and assessment year-wise. After considerable discussion, it decided that the assessable income from the contract have to be estimated at 9% of the gross turnover, which was net of all deductions. Thus the assessable income was arrived at Rs.56.59 lakhs or Rs.57.00 lakhs as a round sum. The same was to assessed as additional income in respect of the assessment years 1989-90 to 1993-94, apportioned on the basis of the gross turnover of each year shown by the assessee and considered by the Settlement Commission. It specifically pointed out, to quote from the words of the Settlement Commission, "The applicant is not entitled to any further deduction from this net income. The above will be added to the additional income disclosed in the S.O.F.". In respect of the income from lorry business, the Settlement Commission also arrived at the computation of income. Considering the co-operation extended by the assessee, the Settlement Commission granted immunity under Section 254H(1) of the Income Tax Act from imposition of penalty and prosecution under the provisions of the Income Tax Act and relevant Sections of the Indian Penal Code.
3. After the receipt of the order dated 11.11.1997, the petitioner filed an application on 27.2.1998 seeking rectification of its order, particularly as regards the additional amount offered for settlement. The assessee pointed out that the difference between the Chartered Accountant and the petitioner had really affected the fair adjudication, hence, they asked for revision of the order. By proceedings dated 12.4.2002, the said claim of the petitioner was rejected. Again, the assessee filed a Miscellaneous petition on 03.05.2002 against the rejection order passed on 12.4.2002 rejecting the prayer for rectification. The assessee pointed out that in estimating an additional income, the Settlement Commission should have taken note of the depreciation, which would be available to the assessee in the matter of such estimation as per the Circular of Central Board of Direct Taxes No.29D(XIX)-14 dated 31.8.1965. Considering the binding character of the Board's circular, as held in the decisions reported in (2001) 252 ITR 412 (P&H) (C.I.T. V. Chopra Bros. India (P) Ltd.; (1994) 210 ITR 118 (All) at page 120 (Commissioner of I.T. V. Bishambar Dayal & Co. as well as the decision of the Apex Court reported in (2001) 247 ITR 128 (S.C.) (Paper Products Ltd., V. Commissioner of Central Excise), the petitioner sought for rectification of the order to consider the Board's circular in the matter of arriving at the additional income. By proceedings dated 16.7.2002, the said prayer of the petitioner was rejected.
4. A perusal of the order of the Settlement Commission dated 06.07.2002 shows that the application dated 3rd May, 2002 was moved against the rejection of an earlier Miscellaneous Application dated 12th April, 2002. The Settlement Commission considered the contention of the assessee that the Commission had rejected the Miscellaneous Application without considering the arguments put forth in its application and pointed out that the first issue raised by the counsel for the petitioner related to the allowance of depreciation and other admissible reductions in estimating the business income. In support of the contention made based on the reliance on the Circular of Central Board of Direct Taxes No.29D(XIX)-14 dated 31.8.1965, wherein, it was held that in a case where a profit was to be estimated and prescribed particulars had been furnished by the tax payer, depreciation allowance should be separately worked out and the reliance placed on the decision of the Apex Court reported in (2001) 252 ITR 1 (Anjum M.H.Ghaswala & Others V. CIT), the Settlement Commission pointed out to its decision to paragraph 16 of the order dated 11.11.1997, holding that in arriving at the net taxable income "after considerable discussion, it was decided whether net assessable income (net of all deductions) from the contract business shall be estimated at 9% of the above gross turnover of Rs.6,28,83,182/-. On this basis, the net assessable income would come to Rs.56.59 lakhs or Rs.57 lakhs as a round sum." and held that the question of reviewing the order on an application would not arise in the case. The Settlement Commission further pointed out that even in the order passed in the earlier Miscellaneous Application, it was pointed out clearly that such a step would amount to review of the order and for the reasons given in the earlier order, the Settlement Commission held that the question of review did not arise and that the income was fixed after considering the materials. However, as regards the addition made to an extent of Rs.1,40,000/-, the Settlement Commission, however, held that there could be no separate addition for the cash credits, amounting to Rs.1,40,000/-, in view of the substantial addition made and to that extent alone, it granted the relief. Aggrieved by the same, the present Writ Petition has been filed.
5. Learned senior counsel appearing for the petitioner pointed out that the Settlement Commission, invested with the powers as that of the Assessing Officer in the matter of computation of additional income, should have taken note of the Board's Circular dated 31.8.1965. Going by the decision of the Apex Court reported in (2001) 252 ITR 1 (Anjum M.H.Ghaswala & Others V. CIT), the circular being of a binding character, the Settlement Commission committed a serious error in rejecting the petition. He also placed reliance on the decision reported in (1978) 115 ITR 524 (Brij Bhushan Lal Parduman Kumar Etc. V. Commissioner of Income-Tax, Haryana, Himachal Pradesh and New Delhi III) that the value of materials used in the execution of work should have been taken in the matter of computation of profits.
6. Per contra, learned Standing Counsel appearing for the Revenue placed reliance on the decision of the Apex Court reported in (2010) 328 ITR 477 (SC) (Brij Lal and others V. Commissioner of Income-tax) that in the absence of any provision for rectification or a review, the question of miscellaneous application filed for re-consideration of the additional income arrived at by the Settlement Commission, does not arise. In the circumstances, no interference is called for.
7. Heard learned Senior Counsel appearing for the petitioner and the learned Standing Counsel appearing for the Revenue and the perused the materials placed before this Court.
8. It is a settled proposition of law that the proceedings before the Settlement Commission under Chapter XIX-A relates to settlement of liability and not determination of liability. In the decision reported in 328 ITR 477 (SC) (Brij Lal and others V. Commissioner of Income-tax), the Apex Court pointed out that in the absence of any provision available for rectification or review, the Settlement Commission has no jurisdiction to touch on the order passed by it. Referring to the decision of the Apex Court reported in (2001) 252 ITR 1 (Anjum M.H.Ghaswala & Others V. CIT), on which heavy reliance was placed by the learned Senior Counsel appearing for the petitioner, the Apex Court pointed out that the question therein was as to whether interest under Section 234B is mandatory in nature and that the order of the Settlement Commission under Section 245D(4) is an order of assessment and in considering the said question, all that the Apex Court had held in the decision reported in (2001) 252 ITR 1 @ 16 (Anjum M.H.Ghaswala & Others V. CIT) was that, while exercising the power, the Settlement Commission, although does not act as a subordinate authority to the Central Board of Direct Taxes, yet, it would be enforcing the relevant provisions of the circulars for the benefit of the assessee in the process of settlement. Thus while holding that the circulars of the Board are legally binding on the Revenue, the beneficial circulars can be a subject matter of fair consideration at the hands of the Settlement Commission, on the assessee approaching the Settlement Commission under Section 245C of the Act. The Apex Court pointed out that Section 245F of the Act empowers the Settlement Commission to exercise the power of the Income Tax Authority under the Act. Considering the distinction maintained between the Income Tax Officer and the Settlement Commission and that the jurisdiction of the Settlement Commission is with reference to the settlement of the liability of an assessee and not determination of the liability, the question of this Court giving a direction as though he is an authority bound by the circular, does not arise. This is quite apart from this that in the absence of any provision for review, which must be specifically conferred on the authority to exercise such a jurisdiction, I do not find any justifiable ground to grant the relief to the petitioner. As for rectifying an order, unless the mistake is an apparent one curable without much of an argument, in the name of rectification, the Settlement Commission cannot review its own order.
9. Secondly, on the self-same issue, the petitioner had already moved the Settlement Commission for rectification, which was rejected under order dated 12.4.2002 which was not in any manner challenged. Thus I do not find any legal justification in accepting the case of the assessee, which is more in the nature of rectification of an order dated 12.4.2002 dismissing the rectification petition filed on 27.2.1998. Thus with the catena of decisions are to the effect that the jurisdiction of this Court under Article 226 of the Constitution of India as against the order of the Settlement Commission is not that of an appellate forum, this Court does not sit as an appeal to get into the process to take an ultimate decision. Unless the reasoning is abusive or contrary to the provisions of law, which is prejudicial to the interest of the assessee, this Court does not assume any jurisdiction to interfere with the order of the Settlement Commission. Admittedly, the petitioner had had no grievance as against the order originally passed by the Settlement Commission and there was no Writ Petition filed thereon. Subsequent thereto, there was a Miscellaneous Petition, which was dismissed by the Settlement Commission. Even as against that, there was no Writ Petition or any proceedings taken, to challenge that order. Only when the second petition was taken up and an order had been passed, the present Writ Petition has been filed. Learned senior counsel appearing for the petitioner could not specifically point out to the provision under which such a petition is maintainable in law. In the absence of any specific provision even to maintain the first Miscellaneous Application, I do not find any ground to grant the relief sought for by the petitioner. In the circumstances, the Writ Petition stands dismissed. No costs.
sl To
1. The Income Tax Settlement Commission, Additional Bench, 488/489, Anna Salai, Chennai 35.
2. The Chairman, The Union of India, Central Board of Direct Taxes, New Delhi.
3. The Commissioner of Income Tax, Chennai VIII, Chennai 34.
4. The Assistant Commissioner of Income Tax, Business Circle VIII, Chennai 6.
5. The Tax Recovery Officer XXI, Range VIII, Chennai 6