Commissioner Of Income Tax, Central-Ii v. Wp

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 30-04-2021 CORAM THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAMWP Nos.25845 to 25847 of 2014andMP Nos.1, 2 and 2 of 2014 Commissioner of Income Tax,Central-II,No.46, Mahathma Gandhi Road,Chennai-600 034. .. Petitioner in all WPsvs.M/s.Akash Fertility Centre and Hospital,No.10, Jawaharlal Nehru Salai,100 Feet Road,Vadapalani,Chennai-600 026.. R-1 in WP 25845/2014Dr.T.Kamaraj. R-1 in WP 25846/2014Dr.K.S.Jeyarani.. R-1 in WP 25847/2014Income Tax Settlement Commission,Represented by Secretary,Additional Bench,640, Anna Salai,Nandanam,Chennai-600 035... R-2 in all WPs WP No.25845 of 2014 is filed under Article226 of the Constitution of India, praying for the issuance of aWrit of Certiorari, calling for the records on the file of thesecond respondent in Settlement Application No.TN/CN/52/2013-14/8/IT, dated 23.01.2014 and quash the same as illegal andrestore the jurisdiction of the Assessing Officer in respect ofthe assessments for assessment years 2006-2007 to 2012-2013 ofthe first respondent. WP No.25846 of 2014 is filed under Article226 of the Constitution of India, praying for the issuance of aWrit of Certiorari, calling for the records on the file of the https://hcservices.ecourts.gov.in/hcservices/ second respondent in Settlement Application No.TN/CN/52/2013-14/7/IT, dated 23.01.2014 and quash the same as illegal andrestore the jurisdiction of the Assessing Officer in respect ofthe assessments for assessment years 2006-2007 to 2012-2013 ofthe first respondent. WP No.25847 of 2014 is filed under Article226 of the Constitution of India, praying for the issuance of aWrit of Certiorari, calling for the records on the file of thesecond respondent in Settlement Application No.TN/CN/52/2013-14/5/IT, dated 23.01.2014 and quash the same as illegal andrestore the jurisdiction of the Assessing Officer in respect ofthe assessments for assessment years 2006-2007 to 2012-2013 ofthe first respondent. The Commissioner of Income Tax, Central-II, Chennai isthe petitioner, who filed these writ petitions to quash theorders passed by the second respondent-Settlement Commission inproceedings dated 23.01.2014. 2. The contention of the writ petitioner is that thereis no true and full disclosure of income by the first respondentat the time of filing applications under Section 245C of theIncome Tax Act, 1961 before the second respondent-SettlementCommission for settlement. 3. Section 245C provides filing an application forsettlement of cases by the assessees. Sub-clause (1)contemplates that an assessee may, at any stage of a caserelating to him, make an application in such form and in suchmanner, as may be prescribed, and containing a full and truedisclosure of his income which has not been disclosed before theAssessing Officer, the manner in which such income has beenderived, the additional amount of income-tax payable on suchincome and such other particulars, as may be prescribed, to theSettlement Commission to have the case settled. 4. Any application filed under Section 245C is to beconsidered by the Settlement Commission and the procedurescontemplated under Section 245D is to be followed for thedisposal of the application filed under Section 245C. 5. Various stages are contemplated and the primeconsideration would be that the applications must be filed bythe assessees with full and true disclosure of their income,which has not been disclosed before the Assessing Officer. 6. Thus, the provision makes it very clear that theapplication for settlement under Section 245C must contain thefull and true disclosure of income, including the income, whichwere not disclosed by the assessees before the AssessingOfficer. Thus, the provision contemplates that an assesseeapproaching the Settlement Commission under Section 245C mustcome out with clean hands and disclose the full and true income. 5. Various stages are contemplated and the primeconsideration would be that the applications must be filed bythe assessees with full and true disclosure of their income,which has not been disclosed before the Assessing Officer. 6. Thus, the provision makes it very clear that theapplication for settlement under Section 245C must contain thefull and true disclosure of income, including the income, whichwere not disclosed by the assessees before the AssessingOfficer. Thus, the provision contemplates that an assesseeapproaching the Settlement Commission under Section 245C mustcome out with clean hands and disclose the full and true income. 7. This being the precondition for entertaining anapplication under Section 245C of the Income Tax Act, thelearned Senior Standing Counsel reiterated that in the absenceof the requirements in the application, the application cannotbe entertained by the Settlement Commission for furtheradjudication. 8. It is contended that even during the adjudication,at any stage, if the Income Tax Department is able to establishthat the assessees have not approached the second respondent-Settlement Commission with true and full disclosure of income orthe Settlement Commission has got some materials to identifythat the assessees have not disclosed the true and full income,then the applications are to be rejected immediately and itcannot be proceeded with any further. 9. The learned Senior Standing Counsel for thepetitioner solicited the attention of this Court with referenceto the discrepancies found regarding the disclosure of income bythe first respondent-assessees. 10. There are suppression of Ward collection andsuppression of IVF/IUI income, unaccounted income received fromconsulting Doctors and there are several such discrepancies andnon-disclosure of income, which were established before theSettlement Commission by the petitioner-Department. 11. The learned Senior Standing Counsel solicited theattention of this Court with reference to the contentions of theDepartment made by the CIT(DR) before the Settlement Commission,which reveals that many particulars and details are furnished bythe petitioner-Department. 12. The grievance of the petitioner is that the none ofthese particulars and details with reference to the documentsare adjudicated by the Settlement Commission and the SettlementCommission passed a cryptic order without considering any of thecontentions raised by the petitioner to establish that the firstrespondent-assessees have not approached the second respondent-Settlement Commission with full and true disclosure of income. 13. The learned Senior Standing Counsel made asubmission that the details and particulars with reference tothe contentions of the petitioner had not been adjudicated bythe Settlement Commission. Contrarily, the issues are settledwithout adjudicating such issues and therefore, the writpetitions are to be allowed. 14. The learned counsel, appearing on behalf of thefirst respondent, strenuously contended that the writ petitionsare not maintainable. 15. No writ can be entertained against an order ofSettlement Commission. The Settlement Commission adjudicated allthe disputed issues and accordingly settled the matter andtherefore, the petitioner cannot reopen the said concludedsettlement by filing a writ petition under Article 226 of theConstitution of India. 16. The learned counsel appearing on behalf of thefirst respondent is of an opinion that the elaborateadjudication made by the Settlement Commission would reveal thatthe petitioner had submitted the application with full and truedisclosure of income and there is no infirmity, as such. 14. The learned counsel, appearing on behalf of thefirst respondent, strenuously contended that the writ petitionsare not maintainable. 15. No writ can be entertained against an order ofSettlement Commission. The Settlement Commission adjudicated allthe disputed issues and accordingly settled the matter andtherefore, the petitioner cannot reopen the said concludedsettlement by filing a writ petition under Article 226 of theConstitution of India. 16. The learned counsel appearing on behalf of thefirst respondent is of an opinion that the elaborateadjudication made by the Settlement Commission would reveal thatthe petitioner had submitted the application with full and truedisclosure of income and there is no infirmity, as such. 17. It is further contended that the petitioner is notan aggrieved person in respect of the decision taken by theSettlement Commission. The Settlement Order was passed withreference to Section 245D(4) of the Act and such an order cannotbe challenged by way of a writ petition. https://hcservices.ecourts.gov.in/hcservices/ 18. In this regard, the learned counsel for the firstrespondent relied on the judgments in the following cases:- (1) R.B.Shreeram Durga Prasad vs. Settlement Commissionand Another [1989 (1) SCC 628] (2) Jyotendrasinhji vs. S.L.Tripathi and Others [1993 (3) SCC 38] (3) Shriyans Prasad Jain vs. Income Tax Officer andOthers [1993 Supp. 4 SCC 727] (4) Union of India and Others vs. Ind-SwiftLaboratories [2011 (4) SCC 635] (5) Commissioner of Income-Tax (C)-III vs. Gopal Gupta[(2014) 46 Taxmann.com 312 (Delhi)] (6) CIT vs. M/s.Adhiparasakthi Charitable, Medical,Educational and Cultural Trust – WP No.34040 and 34041 of 2014[Hon'ble High Court of Madras]. 19. The first respondent, even in their counter, haselaborately stated that the explanations were given withreference to the objections raised by the petitioner-Departmentbefore the Settlement Commission. Thus, the writ petitions areto be dismissed. 20. This Court is of the considered opinion thatraising an allegation of non-disclosure of certain full and trueincome or objecting the same by an assessee by submittingexplanations are one aspect of the matter. However, High Courtcannot entertain a writ petition, so as to adjudicate thedisputed facts and circumstances to be done with reference tothe documents and evidences filed by the respective parties. 21. However, the requirements of the provision ofSection 245C of the Income Tax Act, is of paramount importance.The very purpose and object of Section 245C is to ensure that aperson, who is submitting an application before the SettlementCommission must out come with clean hands and the applicationmust contain full and true disclosure of income. 22. The learned counsel for the first respondent raiseda preliminary objection regarding the maintainability of thewrit petitions. However, the maintainability of the writpetitions is replied by the learned Senior Standing Counsel bystating that the proposition mooted out with regard to themaintainability is incorrect. The writ petitions are entertained https://hcservices.ecourts.gov.in/hcservices/ on many occasions by various High Courts and by the Hon'bleSupreme Court of India. 23. What is required is that whether the SettlementCommission has passed an order in consonance with theingredients contemplated under Section 245C of the Act or not.Thus, the High Court is empowered to adjudicate those issues, inorder to form an opinion, whether the writ petitions areentertainable or not. It is not as if the writ petitions are notmaintainable at all. The writ petitions are maintainable subjectto the conditions that if the terms and conditions stipulatedfor filing an application under Section 245C of the Income TaxAct, are complied with. Thus, the very contention raised is tobe rejected and the judgments cited are relatable to the factsof those cases. on many occasions by various High Courts and by the Hon'bleSupreme Court of India. 23. What is required is that whether the SettlementCommission has passed an order in consonance with theingredients contemplated under Section 245C of the Act or not.Thus, the High Court is empowered to adjudicate those issues, inorder to form an opinion, whether the writ petitions areentertainable or not. It is not as if the writ petitions are notmaintainable at all. The writ petitions are maintainable subjectto the conditions that if the terms and conditions stipulatedfor filing an application under Section 245C of the Income TaxAct, are complied with. Thus, the very contention raised is tobe rejected and the judgments cited are relatable to the factsof those cases. 24. No writ petition can be dismissed as notmaintainable. The maintainability of the writ petition is to beconsidered with reference to the mixed question of law and fact,not merely on the ground that the Settlement Commission underthe Income Tax Act, passed an order of settlement. Thus, thegrounds raised for challenging the order passed by theSettlement Commission plays a pivotal role regarding themaintainability of the writ petitions. 25. The learned Senior Standing Counsel cited thejudgment of this Court in the case of ACE Investments Limitedvs. Settlement Commission reported in [2003] 264 ITR 571 (MAD).This Court, relying on the judgment of the Hon'ble Supreme Courtof India, made an observation that "in so far as the power ofthis Court to exercise its jurisdiction under article 226 of theConstitution of India, the law is well settled that the judicialreview of this Court is not concerned with the decision, butonly with regard to the decision making process. The aboveposition of law was reiterated by the apex court in the judgmentin R.B.Shreeram Durga Prasad and Fatechand Nursing Das's case[1989] 176 ITR 169 and this proposition of law is also notdisputed. Equally, the judicial review of this Court tointerfere with the order of the settlement Commission is notbarred, if the order of the Settlement Commission is incontravention to any of the provisions of the Act. The law onthis question is settled by the Apex court in the judgment inJyotendrasinhji's case {[1993] 201 ITR 611}. This proposition oflaw is also not disputed. Equally the power of this Court tointerfere in the order of the Settlement Commission unless thereis patent illegality as held by this Court in C.A.Abraham's case{[2002] 255 ITR 540} is also not disputed." 26. With reference to the powers of the AssessingOfficer under Section 153A of the Income Tax Act, the learnedSenior Standing Counsel referred the judgment in the case ofCANARA JEWELLERS vs. SETTLEMENT COMMISSION {[2009] 184 Taxman491 (Madras)}. This Court held as follows:“11. So far as Section 245F isconcerned, though the Settlement Commissionis empowered to have all the powers whichare vested in an income-tax Authority underthe Act, in addition to the power conferredunder Chapter XIX-A, but such power can beexercised for the purpose of procedure ofsettlement of application under Section 245Cand not for reasssessment of tax of aparticular year which is vested with theAssessing Authority". 27. Relying on the above judgments, the learned SeniorStanding Counsel contended that the writ petitions aremaintainable and therefore, the issues are to be adjudicatedregarding the manner in which the decision was taken by thesecond respondent-Settlement Commission and the decision makingprocess adopted with reference to Section 245C of the Income TaxAct. 27. Relying on the above judgments, the learned SeniorStanding Counsel contended that the writ petitions aremaintainable and therefore, the issues are to be adjudicatedregarding the manner in which the decision was taken by thesecond respondent-Settlement Commission and the decision makingprocess adopted with reference to Section 245C of the Income TaxAct. 28. This Court is of the considered opinion thatSection 245(C) of the Income Tax Act enumerates that "Anassessee may, at any stage of a case relating to him, make anapplication in such form and in such manner as may beprescribed, and containing a full and true disclosure of hisincome which has not been disclosed before the Assessing]Officer, the manner in which such income has been derived, theadditional amount of income-tax payable on such income and suchother particulars as may be prescribed, to the SettlementCommission to have the case settled and any such applicationshall be disposed of in the manner hereinafter provided". 29. A reading of the section portrays that it is aspecial provision contemplated enabling the assessee to settlethe disputes in a peaceful manner with the Department, if theyhave come out with full and true disclosure of income. Suchspecial provisions are enacted with an intention to provide anopportunity to the assessee to settle the issues, in order torectify certain omissions, commission, mistakes etc., by theAssessee. In view of the complex nature of business by theEntrepreneurs, it is possible for such omission, commission,mistakes etc., intentionally or unintentionally, while filingincome tax returns and furnishing other particulars. Thus, thelegislative intention of Section 245C is to provide anopportunity to the Assessee to settle the issues, if they found some discrepancy or commissions, omissions in respect of thedisclosures made before the Assessing Officer at the firstinstance. Since such enabling provisions are made with goodintention and to provide an opportunity to the assessee tocorrect the mistakes, it is to be done in the manner prescribed.Section 245C unambiguously stipulates that the application filedunder Section 245C is to be disposed of in the manner providedin the very section itself. Therefore, it is an exclusiveprovision under the Act, wherein the procedures are alsocontemplated and certain terms and conditions are alsostipulated for the purpose of settling the disputes. 30. Law presumes that every assessee discloses his fulland true income at all times. Law mandates that an assessee mustfile his returns and show the income in a true and correctmanner. While the law expects that an assessee to be truthfuland correct in his particulars, the additional provisions forsettlement of the disputes are provided enabling the assessee tosettle the disputes in the event of any correction, omission,commission or mistakes etc. Thus, an application for settlementof cases cannot be construed as an absolute right. But, it is aright of an assessee to approach the Settlement Commission withfull and true disclosure of his income. The right of theassessee is well enumerated in many other provisions of theIncome Tax Act. The assessment made by the Assessing Officer atthe first instance would be the factor for all purposes and thesettlement of the disputes is an additional provision, enablingthe assessee to correct certain mistakes, if at all occurred oron account of various other factors. Thus, the scope of Section245C of the Income Tax Act cannot be compared with the regularassessments to be made in accordance with the procedurescontemplated under the Act nor Section 245C can be tagged alongwith the regular provisions for the purpose of settling thedisputes between the assessee and the Department. 31. In a common parlance, the settlement of disputesare possible, only if there is a consensus between the partiesto the disputes. The dictionary meaning of "settlement" wouldshow that the settlement can be made, if the difference betweenthe parties are narrowed down. Undoubtedly, the secondrespondent-Settlement Commission has got certain powers tosettle the issues. However, such power of settlement isabsolutely guided by the provision itself. That is the reasonwhy the proviso clauses are provided under Section 245C. Theproviso clause stipulates that no application shall be madeunless certain terms and conditions are fulfilled. But Section245C(1) provides that it is a pre-condition to entertain anapplication that the assessee must disclose full and true factsand the evidence. Thus, Sub-clause (1) to Section 245C is thepre-requisite condition for entertaining the application under Section 245C. 32. A question arises who will be the decidingAuthority for the full and true disclosure as contemplated underSection 245C. When an application is made by the assessee forsettlement, then an assessee wil1 contend that the particularsprovided in the application are the full and true disclosure.However, if the Department raises an objection regarding suchfull and true disclosure made by the assessee, then the secondrespondent-Settlement Commission is empowered to go into thefacts and circumstances and find out the correctness ortruthfulness of the disclosure made by the assessee. Therefore,it is always the mixed question of fact and law and in order toascertain the entertainability of the writ petition, the HighCourt is bound to look into the facts as well as the laws. Inthe absence of examining both the facts and laws, it may not bepossible to form an opinion, whether the application filed underSection 245C of the Income Tax Act is entertainable or not? 33. In these cases, the second respondent-SettlementCommission formed an opinion that the issues can be settled.However, there is no clear finding that the application filed bythe first respondent contains full and true disclosure ofincome. If a clear finding is formulated and found in the orderof the second respondent-Settlement Commission, then the HighCourt can restrict its scope to deal with the facts. However, inthe absence of any such clear finding that the application filedby the first respondent contains full and true disclosure of theincome, then it is always arguable by the Department that suchdisclosure is not in full form and the materials are notconsidered by the second respondent-Settlement Commission. 34. With reference to the order passed by the secondrespondent-Settlement Commission, it would be relevant toconsider paragraphs 7.1.2 and 7.1.3 in the findings, which readas under:- “7.1.2 We find that theapplicants have not kept proper books ofaccount in all the three cases before us.The Department has taken the cash foundat the time of search for two days andmultiplied it by the number of days thedoctors worked to arrive at thesuppressedincome.Theapplicantsexplained that the treatments were mainlyprovided as packages for the varioustreatment given. In these treatment thepatient has to visit the doctor till sheconceives and consult them often to sustain the pregnancy. Every sittingcannot result in payment of fees. Thisdelicate procedure and issue was alsoheard and settled by us in the case ofDr.Kamala Selvaraj a pioneer in thisfield. 7.1.3 In the absence of properbooks of accounts the 'net asset method'was found the only way to proceedfurther.” 35. The learned Senior Standing Counsel relied on thevery finding that “we find that the applicants have not keptproper books of account in all the three cases before us”. sustain the pregnancy. Every sittingcannot result in payment of fees. Thisdelicate procedure and issue was alsoheard and settled by us in the case ofDr.Kamala Selvaraj a pioneer in thisfield. 7.1.3 In the absence of properbooks of accounts the 'net asset method'was found the only way to proceedfurther.” 35. The learned Senior Standing Counsel relied on thevery finding that “we find that the applicants have not keptproper books of account in all the three cases before us”. 36. The very finding of the Settlement Commission thatthe applicants have not kept proper books of account in all thethree cases would be sufficient to arrive a conclusion that anapplication under Section 245C has not been filed with full andtrue disclosure of income. 37. When the second respondent-Settlement Commissionitself not able to form an opinion that the assessees have notkept proper books of accounts and the Department has taken thecash found at the time of search for two days and multiplied itby the number of days the Doctors worked to arrive at thesuppressed income, then the second respondent-SettlementCommission ought to have considered these factors for thepurpose of entertaining an application under Section 245C of theIncome Tax Act. 38. The learned counsel for the first respondent-assessees made a submission that the first respondent-assesseesthemselves have admitted that they have not maintained properbooks of accounts. 39. This being the case, the Department must beprovided with an opportunity to go for a regular assessment. Inthe absence of any maintenance of proper books of accounts,admittedly, by the assessees, then it may not be possible evenfor the assessees to provide true and full disclosure of income. 40. At the outset, wherever there is a possibility ofescapement or non-disclosure of certain income in a true andfull manner, then the very purpose and object of the provisionis to provide powers to the Assessing Officer to cull out theentire truth and proceed with regular assessment. https://hcservices.ecourts.gov.in/hcservices/ 41. If at all, the first respondent-assessees say thatthey themselves have admitted that they have not maintained anybooks of accounts, then it is to be construed that the regularassessment must be done in such cases. There is no possibilityof providing true and full disclosure of income by theassessees. In either of the circumstances, when the Departmentcould able to establish that the assessee has not come out withtrue and full disclosure of income by the assessees themselvesadmitted that they have not maintained any books of accounts,then in both the cases, there is no possibility of disclosure offull and true income and therefore, in such cases, the regularassessment alone would be a proper method and settlement cannotbe made. 42. Thus, the very contention raised on behalf of thefirst respondent that the first respondent-assessees themselvesadmitted the fact that they have not maintained any books ofaccounts is of no avail for the purpose of settling the issuesand in such circumstances, all evidences collected by thepetitioner-Department also to be enquired into by the AssessingOfficer through a regular assessment. 43. Perusal of the order passed by the secondrespondent-Settlement Commission, as rightly pointed out by thelearned Senior Standing Counsel, the contentions of theDepartment made by the CIT(DR) in detail in respect of theincome were not completely enquired into nor considered by thesecond respondent-Settlement Commission. 44. Contrarily, the second respondent-SettlementCommission made a finding that the applicants have not keptproper books of accounts in all the three cases and settled theissues. Such a settlement is improper and not in consonance withthe provisions of the Act. 43. Perusal of the order passed by the secondrespondent-Settlement Commission, as rightly pointed out by thelearned Senior Standing Counsel, the contentions of theDepartment made by the CIT(DR) in detail in respect of theincome were not completely enquired into nor considered by thesecond respondent-Settlement Commission. 44. Contrarily, the second respondent-SettlementCommission made a finding that the applicants have not keptproper books of accounts in all the three cases and settled theissues. Such a settlement is improper and not in consonance withthe provisions of the Act. 45. When the prerequisite condition contemplated in theprovision stipulates that the person approaching the secondrespondent-Settlement Commission should come out with true andfull disclosure of income and the Department could able toestablish that there are many discrepancies in the matter ofsuch disclosure made by the first respondent-assessees, then,there is no other reason whatsoever to settle the issues underthe provisions of the Act and the mater must be placed beforethe Assessing Officer for assessment. https://hcservices.ecourts.gov.in/hcservices/ 46. This being the factum established, the petitioner-Department could able to prove that the orders impugned passedby the second respondent-Settlement Commission are not inconsonance with the provisions of the Act. Thus, the impugnedorders passed in Settlement Application Nos.TN/CN/52/2013-14/8/IT, TN/CN/52/2013-14/7/IT and TN/CN/52/2013-14/5/IT dated23.01.2014, 23.01.2014 and 23.01.2014 respectively are quashed. 47. Accordingly, WP Nos.25845 to 25847 of 2014 standallowed. However, there shall be no order as to costs.Consequently, connected miscellaneous petitions are closed. //True Copy// Sd/- Assistant Registrar(CCC) Sub Assistant Registrar SvnTo 1.Commissioner of Income Tax, Central-II, No.46, Mahathma Gandhi Road,Chennai-600 034. 2.The Secretary, Income Tax Settlement Commission, Additional Bench, 640, Anna Salai, Nandanam,Chennai-600 035. +1cc to Mr.A.P.Srinivas,, Advocate SR.No. 26681+1cc to Mr.R.Sivaraman , Advocate SR.No. 26609 WP Nos.25845 to 25847 of 2014 pp(CO) A.SK(08.07.2021)