K.s.jeyarani v. The Commissioner Of Income Tax

In the High Court of Judicature at Madras Dated : 24.8.2021 Coram The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP Writ Appeal Nos.2047, 2050 and 2052 of 2021 &CMP.Nos.13023, 13029 & 13032 of 2021 M/s.Akash Fertility Centre &Hospital, Chennai-26. ...Appellant in T.Kamaraj ...Appellant in K.S.Jeyarani Vs ...Appellant in WA.2052/2021 1. The Commissioner of Income Tax, Central II, Chennai-34. 2. The Income Tax Settlement Commission, (now substituted by Interim Board for Settlement by the Finance Act, 2021), Additional Bench, Chennai, No.640, Anna Salai, Chennai-35. ...Respondents in all WAs APPEALS under Clause 15 of the Letters Patent against thecommon order dated 30.4.2021 made in W.P.Nos.25845 to 25847 of2014. Prayer in W.P.Nos.25845 to 25847 of 2014: Writ Petitionsfiled under Article 226 of the constitution of India, prayingfor the issuance of a Writ of Certiorari, calling for therecords on the file of the second respondent in SettlementApplication Nos.TN/CN/52/2013-14/8/IT, TN/CN/52/2013-14/7/IT andTN/CN/52/2013-14/5/IT respectively, dated 23.01.2014 and quashthe same as illegal and restore the jurisdiction of theAssessing Officer in respect of the assessments for assessmentyears 2006-07 to 2012-13 of the First Respondent. For Appellants : Ms.Vandana Vyas for Mr.R.Sivaraman For Respondent-1 : Mr.A.P.Srinivas, SSC Judgment was delivered by T.S.SIVAGNANAM,J We have elaborately heard Ms.Vandana Vyas, learnedcounsel appearing on behalf of Mr.R.Sivaraman, learned counselon record for the appellants and Mr.A.P.Srinivas, learned SeniorStanding Counsel accepting notice for the first respondent –Revenue. In the light of the decision, which we propose torender in these appeals, notice to the second respondent isdispensed with and the appeals themselves are taken up for finaldisposal. 2. These appeals are directed against the common orderdated 30.4.2021 made in W.P.Nos.25845 to 25847 of 2014. 3. In this judgment, the appellants are referred to asthe assessees, the first respondent is referred to as theRevenue and the second respondent is referred to as the ITSC. 4. The Revenue filed the said writ petitions challengingthe common order dated 23.1.2014 passed by the ITSC underSection 245D(4) of the Income Tax Act, 1961 (for short, theAct). 5. Two of the assessees are doctors specialized inGynaecology and Reproductive Technology and are treatinginfertility. They run a medical facility at Chennai. A searchwas conducted by the Revenue in the hospital of the assesseesand the business and the residential premises of the partners.According to the Revenue, the search revealed substantial amountof undisclosed (professional) receipts of the assessee as wellas the hospital and other partners, huge investments inimmovable properties and payment of on money, etc., for theassessment years from 2006-07 to 2011-12 apart from part of theassessment year 2012-13. 6. Pursuant to the notices issued under Section 153A ofthe Act, the assessees filed their return of income disclosingthe same income in the returns, which were filed during March https://hcservices.ecourts.gov.in/hcservices/ 2013. Thereafter, two of the assessees namely Dr.T.Kamaraj andM/s.Akash Fertility Centre and Hospital filed an applicationbefore the ITSC and it was rejected on account of short paymentof tax. Therefore, they filed a fresh application and it wasallowed and they were permitted to proceed under Section 245D(1)of the Act by order dated 05.6.2013. Further, the separateapplication filed by Dr.Jeyarani was allowed to be proceeded byorder dated 30.5.2013. Thereafter, a common order dated12.7.2013 came to be passed under Section 245D(2C) of the Act. 6. Pursuant to the notices issued under Section 153A ofthe Act, the assessees filed their return of income disclosingthe same income in the returns, which were filed during March https://hcservices.ecourts.gov.in/hcservices/ 2013. Thereafter, two of the assessees namely Dr.T.Kamaraj andM/s.Akash Fertility Centre and Hospital filed an applicationbefore the ITSC and it was rejected on account of short paymentof tax. Therefore, they filed a fresh application and it wasallowed and they were permitted to proceed under Section 245D(1)of the Act by order dated 05.6.2013. Further, the separateapplication filed by Dr.Jeyarani was allowed to be proceeded byorder dated 30.5.2013. Thereafter, a common order dated12.7.2013 came to be passed under Section 245D(2C) of the Act. 7. Subsequently, an order under Section 245D(4) of theAct was passed on 23.1.2014 settling the case and holding thatthe assessees having satisfied the requisite conditions providedunder Section 245H of the Act and having cooperated with theproceedings before the ITSC and made full and true disclosure oftheir income, they were granted immunity from penalty andprosecution under the Act. 8. Admittedly, the order passed by the ITSC was giveneffect to, the tax as computed by the Assessing Officer was paidand the seized jewellery were returned to the assessees. Afterthe common order was passed by the ITSC, the Revenue filed thesaid writ petitions before this Court challenging the commonorder. The grounds of challenge were summarized in paragraphs 10to 15 of the respective affidavits filed in support of the saidwrit petitions. The said writ petitions were pending from theyear 2014 onwards, the matters were taken up for hearing onlyduring April 2021 and the same were allowed by a common orderdated 30.4.2021. The correctness of such a common order isquestioned before us in these appeals. 9. The first aspect, which strikes our mind, is as towhether a writ petition could have been entertained nearly eightmonths after the common order was passed by the ITSC and thattoo, after it was given effect to and the tax was fully paid bythe assessees. In the respective affidavits filed in support ofthe said writ petitions, we find that there is absolutely noexplanation for the delay and laches. 10. It is argued by Mr.A.P.Srinivas, learned SeniorStanding Counsel appearing for the Revenue that the givingeffect to order of the ITSC by the Assessing Officer is aprocedure, which has to be adopted and that, by itself, will notmean that Revenue cannot challenge the common order passed bythe ITSC by filing a writ petition. 11. As a general proposition, Mr.A.P.Srinivas, learnedSenior Standing Counsel appearing for the Revenue is right. But,what we need to note is that the common order impugned is anorder passed by the ITSC and it is not a regular assessmentorder nor an order passed by the Appellate Authority testing thecorrectness of an assessment order. This aspect has to be bornein mind because the Act prescribes a separate procedure forsettlement of cases and it is obvious that those, who approachthe ITSC, are defaulters where search and seizure operationswould have been conducted, unaccounted cash and documentsrelating to properties, etc., would have been recovered. Bearingin mind the fact that the tax amount is required to be collectedto augment the State Exchequer, such a provision had beeninserted in the Act. 12. Therefore, what is required to be examined is as towhether the filing of applications by the assessees for settlingthe cases is a genuine attempt of the assessees wherein theassessees fully and truly disclosed all material particularsbearing in mind that it is they who approached the ITSC tosettle the dispute. If the ITSC, on examination of the factsplaced before it, records satisfaction that the assesseescooperated in the proceedings and that there was full and truedisclosure and then proceeds to grant immunity from penalty andprosecution, as a Writ Court having jurisdiction under Article226 of The Constitution of India, the scope of examination ofsuch orders can be limited only to the decision making processand not to the decision itself whereby the Court cannotsubstitute its views to that of the views recorded by the ITSC,which obviously proceeded on the basis that endeavour should bemade to settle the case and recover tax from defaultingassessees. 13. The grounds, which have been raised by the Revenue,in the said writ petitions, were, in fact, the same grounds,which were raised by the Revenue in the report filed under Rule9 of the Income Tax Settlement Commission (Procedure) Rules,1997. This report was the subject matter of consideration by theITSC and by a detailed speaking order running to 94 pages, theITSC considered the objections of the Revenue in the said reportand recorded reasons as to why the case is required to besettled. We find that invariably on all issues, additions, whichwere suggested by the ITSC were accepted unconditionally by theassessees and additional amounts were offered to tax. https://hcservices.ecourts.gov.in/hcservices/ This, according to the Revenue, is incorrect and without anybasis. In fact, this issue was considered by the ITSC, whichrendered a finding that the assessees have not kept proper booksof accounts in all the three cases before it. The ITSC notedthat the Revenue had taken cash found at the time of search fortwo days and multiplied it by the number of days the doctorsworked to arrive at the suppressed income. The assessees'explanation was considered by the ITSC for its correctness. Theassessees stated that the treatments were provided as packagesand various types of treatments were given to the patients.Since the hospital is specialized in treating cases ofinfertility, the patients are required to visit the doctor tillthey conceive and periodical monitoring has to be done to enablethe patients to sustain pregnancy. The definite stand of theassessees was that every sitting cannot result in the payment offees. 15. The Revenue did not project its case based on theaverage income earned by the assessees during the period, forwhich, search had been conducted and assessments were opened.Therefore, when the material available with the Department wasonly cash found for two days, the ITSC, in our view, in theabsence of proper books of accounts and in the light of the factthat the Revenue sought to sustain its computation of suppressedincome based on the cash found during two days, rightly heldthat the net asset method was found to be the only way toproceed further. We do not find any perversity in the commonorder passed by the ITSC in this regard. 16. Equally, in respect of other issues also, the ITSCconsidered the objections in the report filed under Rule 9 ofthe said Rules and the stand of the assessees and recordedreasons as to why the stand of the assessees on certain issueswas not acceptable and certain amounts were directed to be addedin the hands of the assessees and they were accepted and theissues were settled. The Revenue does not fault the ITSC on anyprocedural ground. Rather, there is no allegation that theRevenue did not have adequate opportunity to place the materialsbefore the ITSC. 16. Equally, in respect of other issues also, the ITSCconsidered the objections in the report filed under Rule 9 ofthe said Rules and the stand of the assessees and recordedreasons as to why the stand of the assessees on certain issueswas not acceptable and certain amounts were directed to be addedin the hands of the assessees and they were accepted and theissues were settled. The Revenue does not fault the ITSC on anyprocedural ground. Rather, there is no allegation that theRevenue did not have adequate opportunity to place the materialsbefore the ITSC. 17. As noted above, the grounds, which have been raisedin the said writ petitions are the grounds, on which, the reportunder Rule 9 of the said Rules was filed and the said report wastaken into consideration and in almost all the heads, additionshave been made thereby demonstrating that the plea raised by theassessees was not accepted by the ITSC. The learned Single Judgeobserved in paragraph 33 of the common impugned order that there https://hcservices.ecourts.gov.in/hcservices/ was no clear finding rendered by the ITSC that the applicationsfiled by the assessees contained full and true disclosure ofincome. This finding rendered by the learned Single Judge isfactually incorrect, as, in more than one place, the ITSCrecorded that the applications filed by the assessees containedfull and true disclosure. This aspect has also been specificallydealt with in paragraph 8.4 of the common order passed by theITSC while dealing with immunity. Therefore, such a findingrendered by the learned Single Judge is incorrect. Thereafter,the learned Single Judge proceeded to extract paragraphs 7.1.2and 7.1.3 of the common order passed by the ITSC and stated thatthe assessees have not kept proper books of accounts in thethree cases before it. 18. The proper method of reading the common order passedby the ITSC is to read the order in its entirety. It is anundisputed fact that proper books of accounts were notmaintained in all the three cases and the assessees do not, atany point of time, state that they have maintained books ofaccounts. This is precisely the reason for which the matter hasgone before the ITSC and the assessees made full and truedisclosure and also offered additional income to tax andregarding valuation of the properties, etc., additions have beenmade. So far as the method of valuation is concerned, unless anduntil the Department had prima facie material to show that therewas gross undervaluation, the valuation adopted by theassessees, based on the guideline value issued by theGovernment, cannot be faulted. Therefore, the ITSC was right infinding that the Revenue could not offer any evidence in theirdefence with regard to valuation of the properties. Even whileexamining the issue regarding cost of construction of thebuilding, the ITSC took note of certain seized documents, whichshowed the cost of construction of two buildings at Rs.1.90Crores and the said shortfall should be added. 19. We need not labour much on the other issues, as theITSC examined each of the issues and wherever required, it hasadded the shortfall. Therefore, by referring to one sentence inparagraph 7.1.2 of the common order passed by the ITSC, itcannot be stated that there was no full and true disclosure. Infact, the findings in paragraph 7 have to be read in itsentirety, which had several sub-paragraphs and which consideredthe case of the assessees on various heads culminating inparagraph 7.7, which deals with withdrawals or drawals of theassessees from bank accounts. The ITSC found that the drawalswere inadequate and therefore, ordered Rs.5 lakhs to be added inthe hands of both the individual assessees for the relevantassessment years. Therefore, we find that there is no perversity in the approach of the ITSC and bearing in mind the conduct ofthe assessees that they approached the ITSC with true spirit ofsettlement, the ITSC granted relief. 20. Thus, we are of the view that the learned SingleJudge ought not to have set aside the common order passed by theITSC and remanded the matter to the Assessing Officer to followthe consequential assessment procedure without recording anyfinding as to whether there was any procedural error committedby the ITSC or any error with regard to the decision makingprocess. 21. That apart, we find that the learned Single Judgehas not rendered any finding on the decision of the ITSC, whichobviously could not have been done and that aspect has beentaken note of by the learned Single Judge. We find that thedecision relied upon by the Revenue as noted by the learnedSingle Judge in the case of Canara Jewellers Vs. SettlementCommission [reported in (2009) 184 Taxman 491] would support thecommon order passed by the ITSC wherein it had been pointed thatthe ITSC is empowered to have all the powers which are vested inan Income-Tax Authority under the Act in addition to the powerconferred under Chapter XIX-A and we find that the ITSC has notdone a reassessment for the order to the interfered with. 22. In paragraph 25 of the common impugned order, thelearned Single Judge noted the submissions of the learned SeniorStanding Counsel appearing for the Revenue, who placed relianceon the decision of this Court in the case of ACE InvestmentsLimited Vs. Settlement Commission [reported in (2003) 264 ITR571] wherein it has been pointed out that in so far as the powerof this Court to exercise its jurisdiction under Article 226 ofThe Constitution of India, the law is well settled that thejudicial review of this Court is not concerned with thedecision, but only with regard to the decision making process. 23. The learned Single Judge also noted the decision ofthe Apex Court in the case of R.B.Shreeram Durga Prasad andFatechand Nursing Das Vs. Settlement Commission [reported in(1989) 176 ITR 169]. After noting the above decision, thelearned Single Judge observed that judicial review of this Courtto interfere 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. In thisregard, the learned Single Judge referred to the decision of theApexCourtinthecase of JyotendrasinhjiVs. S.I.Tripathi [reported in (1993) 201 ITR 611] and the decisionof this Court in the case of C.A.Abraham Vs. ACIT [reported in(2002) 255 ITR 540]. 24. The learned Single Judge, in the impugned order, hasnot recorded any finding that the ITSC contravened theprovisions of the Act nor there is any finding recorded dulysupported by material that the common order passed by the ITSCsuffers from patent illegality. In such circumstances, we are ofthe clear view that the common order passed by the ITSC oughtnot to have been interfered with and that too, after such a longdelay and the matter was allowed to rest and the assessees' casewas settled and they paid taxes and seized jewellery werereturned to the assessees. 25. For all the above reasons, the writ appeals areallowed, the impugned common order dated 30.4.2021 is set asideand consequentially, the common order dated 23.1.2014 passed bythe ITSC is restored. No costs. Consequently, the connected CMPsare closed. Sd/- Assistant Registrar(CS IV) //True Copy// RS Sub Assistant Registrar To1. The Commissioner of Income Tax, Central II, Chennai-34. 2. The Income Tax Settlement Commission, (now substituted by Interim Board for Settlement by the Finance Act, 2021), Additional Bench, Chennai, No.640, Anna Salai, Chennai-35. +3CCs to Mr.A.P.Srinivas, Advocate, Sr.No.42608 WA.Nos.2047, 2050 & 2052/2021 & CMP.Nos.13023, 13029 & 13032 of 2021 PA (CO)K.RK. (15.09.2021)