Hem Chand Govil v. Income Tax Settlement Commission & Ors

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANJAIPUR BENCHS.B. Civil Writ Petition No.485/97Hem Chand Govil Vs. Income Tax Settlement Commission & Ors. 13.3.2007 Hon’ble Mr.Justice Mohammad Rafiq Shri G.S. Bapna for petitioner.Shri R.B. Mathur for respondents. REPORTABLE Under challenge in this writ petition is the order dated 30.9.1996 passed by the Settlement Commissioner whereby application of the petitionerfiled under Section 245C of the Income Tax Act, 1961 (in short `the Act’) was rejected and not allowed to be proceededwith. Factual matrix of the case is that thebusiness and residential premises of thepetitionerweresearchedbytherespondents in accordance with the provisions of section 132(1) of the Act on21.3.90. During the course of searchproceedings,certainincriminatingdocuments were found at these premises. Anorder was later passed u/s. 132(5) of theAct on 13.7.90. Notice under Section 148was issued to the petitioner on 30.4.91 in respect of the assessment year 1989-90because the petitioner by that time hadnot filed the return under Section 139(1)of the Act. Pursuant to the said notice,the petitioner filed his return of incometax for the assessment year 1989-90 on15.5.91 declaring total income tax ofRs.18,289/-. The petitioner then filedreturn of income tax under Section 139(1)of the Act for the assessment year 1990-91on 31.3.92. The Assessing Authority firsttook up the assessment for the year 1990-91 and by order dated 10.2.93 determined 3 the total income of the petitioner asRs.28,15,375/- in respect of thatassessmentyear.Feelingaggrieved thereby, the petitioner filed an appeal before the CIT(Appeals). The CIT(Appeals) however by his order dated 15.10.93 held that the two additions made by the Assessing Officer were not relevant in respect of the assessment year 1990-91. Hehowever further held that these additionscould be relevant for the assessment year1989-90. Aggrieved by the order of the CIT(Appeals) dated 15.10.93, the petitioneras well as revenue both filed furtherappeals before Income Tax Appellate Tribunal. In the meanwhile, assessmentproceedings in respect of assessment year1989-90 were taken up by the AssessingOfficer who made two additions ofRs.11,21,000/-andRs.12,64,564/- respectively in the income of thepetitioner vide his order dated 30.3.94.The petitioner thereupon filed an appealbefore the CIT(Appeals) against the saidorder dated 30.3.94, passed in respect ofassessment year 1989-90, on the ground ofinvalidity of the notice u/s. 148 and thesame was set aside by CIT(Appeals) byorder dated 31.3.95. The assessmentproceedings for the assessment year 1989- 90 was said to be pending before theAssessing Officer when the writ petitionwas filed but in the meantime thepetitioner filed an application u/s. 245(C) of the Act on 14.11.95 in regard tothe assessment year 1989-90 for beingsettled before the Settlement Commission. The Settlement Commission after hearingboth assessee as well as revenue by orderdated 30.9.96 held that in view of the complexity of the investigation involved,the application for settlement about theassessment year 1989-90 does not deserve to be proceeded with because disputedmatters have already reached to Income TaxAppellate Tribunal (for short- `theTribunal') which is the final appellateauthority on questions of facts and itsfindings will finally decide the issuesregarding disputed additions and also the The Settlement Commission after hearingboth assessee as well as revenue by orderdated 30.9.96 held that in view of the complexity of the investigation involved,the application for settlement about theassessment year 1989-90 does not deserve to be proceeded with because disputedmatters have already reached to Income TaxAppellate Tribunal (for short- `theTribunal') which is the final appellateauthority on questions of facts and itsfindings will finally decide the issuesregarding disputed additions and also the issue of assessability. Further, theSettlement Commission was not persuaded toproceed with the application of thepetitioner on the premise that since thepetitioner has already chosen the normalappeal procedure for both the assessmentyears one of which was covering part ofthe dispute in the application before themand the other having been appealed againstbefore the CIT(Appeals) in respect of assessment year 1989-90, this was not a fit case to proceed in the matter. I have heard Shri G.S. Bapna, thelearned counsel for the petitioner andShri R.B. Mathur, the learned counsel forthe revenue. Shri G.S. Bapna, the learned counselfor the petitioner argued that the solebasis on which the Settlement Commissionrefused to proceed with the matter was thecomplexity of the investigation andpendency of the appeal before the IncomeTax Appellate Tribunal. He argued that twoadditions made in respect of thepetitioner’s income for the assessmentyear 1989-90 was based on conclusionsarrived at by the CIT(Appeals) whiledeciding the appeal of the petitioneragainst the assessment order of theassessment year 1990-91. Appeal of the 7 petitioner against the said order wasallowed at least in respect of thosefindings by the Income Tax AppellateTribunal vide its order dated 4.6.2001 inITA No.1757/JP/93 and 1796/JP/93. Shri Bapna has placed copy of the judgment onrecord before this Court. In para 8 ofwhich the Tribunal while dealing with twoadditions in the income of the petitionerbased on the observation made by the CIT(Appeals) in his order dated 15.10.1993observed as under:- “8. We have carefully considered therival submissions of the parties,perused the material available onrecord and the case laws relied uponby the ld. A.R. We find that theaddition of Rs.11,21,000/- was madeby the AO as undisclosed investmentmade by the assessee in respect ofpurchase of front portion of theproperty, known as 24, Surya Bhawan,Ajmer Road, Jaipur. This addition was made by the AO on the basis ofseized paper page No.10 of ExhibitB-1, contending to be paymentsmentionedalongwithdates.According to the assessee, theproperty was purchased for a sum ofRs.9 lakhs, the payment of which wasmade by the assessee on 20.6.1988Rs.25,000/-,24.6.1988 Rs.2,00,000/-, 1.9.1988 Rs.65,000/-and Rs.1,00,000/- aggregating toRs.3,90,000/- and the balance amountof Rs.5,10,000/- was paid on7.1.1991. According to the revenue,all the payments of Rs.15,11,000/-were made from 20.6.1988 to10.3.1989 and after deducting thepayments as shown by the assesseeRs.3,90,000/- upto 1.9.1988, theaddition of Rs.11,21,000/- was madein the year under appeal. Since allthe dates fall in the financial year1988-89, relevant to assessment year1989-90, therefore, no addition canbe made as undisclosed investment inthe front portion of the property inthe assessment year under appeal, i.e., assessment year 1990-91 and tothis extent, the findings of the CIT(A) are confirmed. However, the CIT(Appeals) has given a finding thatthe said amount was liable to beconsidered in assessment year 1989- i.e., assessment year 1990-91 and tothis extent, the findings of the CIT(A) are confirmed. However, the CIT(Appeals) has given a finding thatthe said amount was liable to beconsidered in assessment year 1989- 90. Such a finding by the CIT(Appeals) is unjust and un-calledfor in view of the fact that theissue for assessment year 1989-90was not before him for adjudication.Accordingly, such a finding given byhim is hereby directed to bereversed. Under such circumstances,any decision rendered by the CIT(Appeals) on merits to the fact thatit was investment by the assessee inassessment year 1989-90, is alsodirected to be reversed. Since theaddition cannot be sustained legallyin the assessment year 1990-91 inappeal before us, we do not considerit necessary to decide the issue onmerits of the case. However, the AOshall be at liberty to take anyactionashemayconsider appropriate under any of the enabling provisions of the Act.Accordingly, Ground Nos. 1, 2 and 3raised by the assessee in his appealand revenue's ground on the additionof Rs.11,21,000/- in Ground No.1stand disposed of.” Shri R.B. Mathur, the learned counselfor the revenue however although supported the judgment of the Settlement Commissionbut could not deny the fact that theappeal of the petitioner against the orderpassed by CIT(Appeals) dated 15.10.1993was partly allowed and the findingrecorded by the CIT(Appeals) in respect ofthose two additions in the income of thepetitioner, was held to be unjust anduncalled for. But he prayed that the writpetition be dismissed. Ihavegivenmythoughtfulconsideration to the arguments advanced by learned counsel for the parties andperused the material on record. Findings recorded by the Tribunal in the aforesaid appeals filed by the assessee as well as revenue should notdetain me longer to observe that theTribunal itself has held the observationsmade by the CIT(Appeals) in his orderdated 15.10.1993 as to those two additionsmade in the income of the petitionerassessee as unjust and uncalled for inview of the fact that the issue forassessment year 1989-90 was not before himfor adjudication. Those findings weretherefore ordered to be expressly reversedby the Tribunal and further direction wasgiven that any decision rendered by theCIT(Appeals) on merits to the effect thatit was investment by the assessee in theassessment year 1989-90 should also stand 12 reversed. If that was the foundation ofthe decision of the Settlement Commissionnot to proceed in the matter because ofthe complexity of the investigation, that finding having now been reversed, is nolonger available as impediment in law, ifthere was one, to proceed with the matterand decide it in accordance with law onthe basis of that finding alone. In thefacts and circumstances of the case,therefore I find that conclusions arrivedat by the Settlement Commission no longerremain valid in view of the subsequentdevelopments.Thematterthereforerequires a fresh consideration at the endof the Settlement Commission itself ratherthan this Court further adjudicating upon the controversy. In view of theconclusions arrived at by the Tribunalthat the findings recorded by the CIT (Appeals) were unjust and uncalled for andtherefore they were liable to be reversedand were accordingly reversed, it would beonly appropriate that the SettlementCommission reconsiders the entire matterafresh. For what has been discussed above, theorder passed by the Settlement Commissionis set aside and the matter is remandedback to the Settlement Commission todecide it afresh in the light of thediscussion made above keeping in view theobservations made by the Tribunal. Thewrit petition is accordingly allowedthough with no order as to costs. (Mohammad Rafiq),J.