Commissioner Of Income Tax, Jalpaiguri v. Om Prakash Mittal

COMMISSIONER OF INCOME TAX, JALPAIGURI OM PRAKASH MITT AL FEBRUARY 22, 2005 [MRS. RUMA PAL, ARIJIT PASAYAT AND C.K. THAKKER, JJ.] Income Tax Act, 1961; Section 245 : Income Tax Settlement Commission-Order .of Settlement-Section 245-Scope and ambit of-Held: Foundation for settlement is filing of an application C by assessee at any stage of a case-Full and true disclosure of the income is statutory requirement for consideration of the application provided additional tax on the undisclosed income not to exceed the prescribed limit-Merely because provisions under Section 245(I) provides that order of settlement is conclusive it does not take away the power of the Commission/Revenue to D decide whether the settlement was obtained by fraud/misrepresentation-Mis-representation/fraud implies no true and fair disclosure of the income, which is against the legislative intent-Since Revenue established that the order was obtained by misrepresentation, Commission could decide the issue afresh-Directions issued-Interpretation of Statutes. Settlement Commission's power of settlement-Scope of-Discussed Order vis-a-vis assessment-Distinction between. Words and Phrases : 'case'-Meaning of in the context of Section 245A(b) of the Income Tax Act, 1961. Respondent-assessee filed an application for settlement in terms of Section 245C of the Income Tax Act before the Income Tax Settlement Commission. Assessee claimed to have received certain amount, as loan G as disclosed by him in the application. The Settlement Commissioner passed an order treating the loan amount as advance. The order was challenged by Revenue Authorities by filing a petition under Section 2450(6) of the Act, which was rejected by the Commissioner. Hence the 263 A present appeal filed by the Revenue. It was contended by the Revenue that the·application filed by them was not really for review; that there was no question of the subsequent Bench sitting in appeal over the earlier Bench's decision; that the jurisdiction under Section 2450(6) of the Act is exercisable when it is B subsequently found by the Commission that the settlement had been obtained by fraud or misrepresentation of facts; that the investigating officer had stated that the alleged money lenders categorically denied to have advanced any loan; that there was inherent improbability in the assessee's stand that seven persons/money lenders would keep huge sums c of money and would give money on the same day by c~sh; that since there was no assessment, question of furnishing certificates about assessment from unconnected persons, is sufficient to show misrepresentation of facts; and that no returns of income were filed by the lenders upto relevant time. Assessee submitted th.at finality is attached to the order passed under D Section 2450 ( 4) in terms of Section 2451 of the Act; that the order was obtained by fraud or misrepresentation of facts; that the Revenue cannot initiate any proceedings in terms of Section 2450(6) of the Act; that on mere unsubstantiated allegation regarding lack of capacity to advance loans, alleged inherent improbabilities, or the authorities' giving a different version after having issued certificates, there is no scope for coming to E the conclusion that there was any fraud or misrepresentation of facts. Thus, the Commission had rightly refused to accept the prayer made by the Revenue as it would have amounted to review of the earlier order and in essence would have amounted to the subsequent Bench sitting in appeal over the decision of the earlier Bench. Disposing of the appeal, the Court Section: CONCLUSION HELD: I.I. The Income Tax Settlement Commission is not bound to proceed with any application filed under Section 245C of the Income Tax Act, as is clear from Section 2450 of the Act. An assessee cannot G approach the Commission for settlement of his case in respect of an income which has already been disclosed as contemplated is in the nature of voluntary disclosure of concerned income. The Commission's power of settlement has to be exercised in accordance with the provisions of the Act. Though the Commission has sufficient elbowroom in assessing the income of the applicant and it cannot make any order with terms of settlement which would be in conflict with the mandatory provisions of tl1e Act. The A object of the legislature in introducing Section 245C is to see that protracted proceedings before the authorities or in Courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amounts statutorily payable under the Act. 1272-H; 273-A; 275-B, G-HJ B 1.2. It is a statutory requirement that a condition has to be incorporated in the order passed under sub-section ( 4) specifying that settlement shall be void if it is subsequently found by the Commission that it has been obtained by fraud or misrepresentation of facts. The decision whether the order has been obtained by fraud or misrepresentation of facts C is that of the Commission. But it is not a requirement that the Commission must suo motu initiate the action. If the revenue has material to show that the order wall obtained by fraud or misrepresentation of facts it certainly can move the Commission for decision on that issue. Otherwise, even if in a given case there is material in abundance to establish that the order was obtained by fraud or misrepresentation of facts, yet the void order would D continue to be operative because of the fortuitous circumstance that the Co.mmission does not suo motu initiate the proceeding. [276-B-C-D) 1.3. Merely because Section 2451 of the Act provides that the order of Settlement is conclusive it does not take away the power of the Commission to decide whether the settlement order had been obtained by E fraud or misrepresentation of facts. Any other interpretation would render sub-sectiOn (6) otiose. [276-D-EI 2.1. The foundation for settlement is an application which assessee can file at any stage of a case relating to him any stage of a case relating to him stage of a case relating to him of a case relating to him a case relating to him in such form and in manner as is prescribed. [276-GJ can file at any stage of a case relating to him any stage of a case relating to him stage of a case relating to him of a case relating to him a case relating to him in such form and in such . F 2.2. The fundamental requirement of the application under Section 245C is that full and true dis.closure of the income has to be made, along with the manner in which such income was derived. 1276-H; 277,..Al 2.3. The Commission exercises power in respect of income which was not disclosed before the authorities in any proceeding, but are disclosed in the petition. It is not that any amount of undisclosed income can be brought to the notice of the Commission in the said petition. Commission exercises jurisdiction if the additional amount of tax on such undisclosed income is more than a particular figure (which at different points of time H [2005) 2 S.C.R. A exceeded rupees fifty thousand or rupees one hundred thousand, as the case may be). The assessee must have in addition furnished the return of income which he.iS,or was required'to furnish under any of the provisions of the Act. 1277-C-DI 2.4. There is a purpose why the legislature has prescribed the B condition relating to declaration of the order void when it is obtained by fraud or misrepresentation of facts. If an order is obtained by fraud or misrepresentation of facts, it cannot be said that there was tr·ue a·nd fair disclosure. Unlike Section 139 of the Act which provides for filing of revised return, there is no provision for revision of an application made C in terms of Section 245C of the Act. That shows clear legislative intent that the applicant for settlement has to make a true and fair declaration from the threshold. It is on the basis of the application recei\'ed that the Commissioner calls for report to decide whether the application is to be rejected or permitted to be continued. The declaration so contemplated is in the nature of voluntary disclosure of concealed income, but it must be D true and fair disclosure. Voluntary disclosure and making a full and true disclosure of the income are necessary pre-conditions for invoking the Commission's jurisdiction. (277-E-F-G) 3.1. In the instant case, the Commission had really missed the true scope and ambit of Section 245D(6). If the Revenue was able to establish E that the earlier decision was void because of misrepresentation of the facts, certainly it was open to the Commission to decide that issue. It cannot be called by any stretch of imagination ti' be a review of the earlier judgment or the subsequent Bench sitting in appeal over the earlier Bench's decision. Further the conclusions of the Commission regarding the genuineness of F the loan transactions were arrived at without indicating reasons. It only referred to the respective stands and the submissions of the assessee's counsel. That was not the proper way to deal with the matter. (276~E-F-G) 3.2. In the facts and circumstances of th.e case, ·the Commission is G dfrected to decide the matter afresh keeping inyiew the observations made by this Court. It is, ho~ever, made <:lear that no opinion is expressed on the facts of the case. 1278-AI CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 5334of1999. From the Judgment and Order dated 28.1.99 of the Income Tax Settlement Commission, Additional Bench, Calcutta in Settlement Applicant A No. 1/1/3/1989-IT. Mohan Parasaran, Additional Solicitor General, T.A. Khan, Pritish Kapoor, B.V. Bairam Das and Ms. Sushma Suri for the Appellant. C.S. Agarwal, Sanjeev Kr. Singh, Pradeep Kr. Malik and Bhargava V. B Desai Respondent. The Judgment of the Court was delivered by ARIJIT PASAYAT, J. Challenge in this appeal is to the order passed by the Income Tax Settlement Commission, Additional Bench Calcutta (in C short the 'Commission'). By the impugned order it was held that the prayer made by the Commissioner of Income Tax, West Bengal-VIII, Calcutta (in short 'CIT') to declare the settlement order passed by the Commission on 18.9.1990 to be void and for withdrawing the benefit~ and immunities granted to the respondent-assessee was not acceptable. The order dated 18.9.1990 D was passed under Section 245D( 4) of the Income Tax Act, I 96 I (in short the 'Act'). The application by the CIT for declaration of the said order to be void was made purportedly under Section 245D(6) of the Act. The controversy in the present appeal has arisen in the following factual background : ( ) iv20,00,000। (vii) A search was conducted in the premises of the respondent (hereinafter referred to as the 'assessee') on 8.2.1989 and 9.2.1989 and certain seizures were made. The assessee filed an application for settlement in terms of Section 245C of the Act on 13.l.1989. It is relevant to note that application for settlement was made was the financial year 1985-86. The Settlement F Commission passed an order on 18.9.1990 in terms of Section 245D(4). It is to be noted that in the application for settlement before the Commission the assessee claimed to have received Rs.1.5 crores from seven persons on 31.3.1985 in cash. All these seven persons were claimed to be residents of Sikkim and that the amounts were received by way of loan. The details of the receipts are as follow$ : G (i) Rs.20,00,000 From Shri Srinivas Agarwal, Singtam, Sikkim. (ii) Rs.20,00,000 From Shri Hari Krishan Agarwal, Singtam, Sikkim. (iii) Rs.20,00,000 From Shri Keshu Ram Agarwal, Melli, Sikkim. (iv)· Rs.20,00,000 From Shri Subhas Ch. Minda, Melli, Sikkim. (v) Rs.20,00,000 From Shri Vinod Kr. Minda, Melli, Sikkim. (vi) Rs.25,00,000 From Shri Gauri Shankar Agarwal, Melli, Sikkim. (vii) Rs.25,00,000 From Shri Chandulal Agarwal, Melli, Sikkim. · Certain docu'inents were produced before the Commission to prove the genuineness of 01e aforesaid loans. The Commission accepted the stand of the assessee aqd did not cast any doubt on the credibility of sum of Rs.1.5 crores to have been advanced as loans. It appears that enquiries were conducted by the Central Bureau of Investigation (in short the 'CBI') at the request of C the revenue regarding the aforesaid loans, at Jorthang, Melli and Singtam. In the opinion of the CBI the alleged lenders had no means or financial capacity to advance huge loan to the assessee and were mere name lenders. When the investigating officer contacted the so called lenders, they denied having advanced any loan. Some of the certificates purportedly issued were not authentic. One of the persons i.e. the then Commissioner of Siliguri D municipality Mr. Rabin Paul admitted that he had no direct knowledge of the transaction and, therefore, the assessee had obtained the certificate by practising fraud. The further fact is that some of the lenders i.e. S/Shri Gauri Shankar · Agarwal, Subhas Ch. Minda andVinod Kr. Minda had made payment of tax to the Sikkim authorities after the order of settlement. It was projected before E the Commission at the first in~tanee a:s · if they were tax payers. Enquiries revealed that Shri Subhas Cb. ·.Minda was not assessed to income tax up to the period 1985-86. Therefcire, the submission made before the Commission that he was·~ssessed regularly before the Sikkim authorities was false. In the afore5-_aj,d.-Oackground prayer was made by the CIT for declaration F of the order passed by the Commission to be void and for withdrawal of the benefits granted. The motion was opposed by the assessee according to whom the order of the Commission was final in terms of Section 24~1. There was no power for any review of the earlier order and in any event the Commission had. analysed the factual position. Fresh analysis would amount to sitting in G judgment over the earlier decision which power the Commission did not possess. By the impugned order the Commission held that the stand taken by the · assessee 's counsel was correct. It was held that the department had not established that settlement order under Section 2450 (4) dated 18.9.1990 was H obtained by the assessee by fraud and misrepresentation of facts. It was further noted that under Section 2450(6) the Commission was not considering A whether the loans of Rs.1.5 crores claimed to have been taken by the assessee from seven persons were genuine or not. It was held that if the Commission would go into merit regarding genuineness of the loans, that would amount to re-appraisal and re-evaluation of the evidence which was already apprised by the earlier Bench, and it would amount to sitting in judgment over the findings arrived at by the earlier Bench which was not legally permissible to B the Commission to review its own decision. Further it was held that the CBI report did not merit acceptance as the alleged lenders were genuine persons who were admittedly contacted by the CBI officials. There was no statement recorded from them stating that they had not given the loans. Therefore, the petition under Section 2450(6) was rejected. C Mr. Mohan Parasaran, learned Additional Solicitor General appearing for the appellant submitted that approach of the Commission is legally not tenable. The Commission has not kept the scope and ambit of the power exerc