Mandhana Industries Ltd v. Principal Commissioner Of Income Tax(Central) 1 & Anr

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. WRIT PETITION NO. 2320 OF 2018 Mandhana Industries Ltd..Petitioner Versus Principal Commissioner of Income Tax(Central) 1 & Anr...Respondents ................... Mr. Jehangir Mistri, Senior Counsel a/w Mr. Nishant Thakkar andMr. Hiten Chande for the Petitioner Mr. Jehangir Mistri, Senior Counsel a/w Mr. Nishant Thakkar andMr. Hiten Chande for the Petitioner Mr. Suresh Kumar for the RespondentsMr. Suresh Kumar for the Respondents ................... CORAM : AKIL KURESHI & M.S. SANKLECHA, JJ. DATE : FEBRUARY 4, 2019. ORAL JUDGMENT(Per Akil Kureshi, J.) 1.We have heard learned counsel for the parties atlength. 2.The petitioner Mandhana Industries Ltd, a public limitedcompany has challenged an order dated 28.2.2018 passedby the Principal Commissioner of Income Tax, copy of whichproduced at 'Annexure Q' to the petition. By the said order, the Commissioner had rejected the revision application filedby the petitioner company under Section 264 of the Income Tax Act, 1961 ("the Act" for short). 3.The petitioner is engaged in the business ofmanufacturing textiles and garments. The petitioner has setup its manufacturing units at two locations i.e Tarapur inMaharashtra and at Banglore. The petitioner would point outthat the Government of India had launched the TechnologyUpgradation Fund Scheme ("the scheme" for short) w.e.f.1.4.1999. Under the scheme, to encourage investment intechnology upgradation in textile and jute industry, certainfinancial assistance was made available to domestic industry.Said benefit would be available for modernization orexpansion of the existing units as also for setting up newunits of textiles and jute industry. 4.The petitioner received reimbursement of interestexpenses under the said scheme for assessment years 2006-07 to 2013-14, breakup of which is as under:- AYNet TUF Claim(Rupees in Crore)06-071.4807-084.7408-095.92 09-108.4410-1113.0711-1215.4412-1318.2713-1412.78TOTAL80.15 5.The petitioner periodically filed the returns of incomefor all the above mentioned assessment years and offeredthe subsidy benefits received from Government of Indiaunder the said scheme to tax as revenue receipt. Thepetitioner was subjected to search operation on 11.1.2012.By that time, the petitioner's assessment for certain yearswere already completed under Section 143(3) of the Act.The rest were not. Pending assessment under Section 153Aof the Act pursuant to the search, the petitioner applied tothe Settlement Commission for settlement of all cases undera joint application filed on 22.10.2013. This petition did notcontain the Settlement Application and accompanyingdocuments. We had, therefore, requested the learnedcounsel for the petitioner to make said documents available.These documents have, accordingly, been supplied to uswhich are taken on record. 6.The petitioner's application for settlement afterpassing through the various stages envisaged under the Act,came to be finally disposed of by the Settlement Commissionby an order dated 30.8.2014 (as at 'Annexure M' to thepetition). In such order, the Settlement Commissionconcluded as under:- "Considering all these aspects of the case, we are of the viewthat end of justice would be met by making an addition of Rs.1,25,00,000/- to the profits disclosed by the applicant in A.Ys. 2009-10 to 2012-13 pro-rate in the proportion of unsubstantiated purchasesas below:- (1)(2)(3)(4)(5)(6)A.Yr.Amount ofTotal Col 3 +4AmountAmount furtherunsubstantiate(% total)disclosed byaddedd purchasesapplicant in thedetectedapplicationu/S. 132u/S. 133A2009-1010,99,51,420-10,99,51,42044,43,07113,37,500(10.7%)2010-116,36,28,3263,67,38,13110,03,66,45721,11,74512,25,000(9.8%)2011-121,75,67,46527,59,54,12829,35,21,59370,49,59835,87,500(28.7%)2012-1352,06,10,91052,06,10,9103,42,64,0241,25,00,000(100%) 7.The Settlement Commission imposed certain conditions "Considering all these aspects of the case, we are of the viewthat end of justice would be met by making an addition of Rs.1,25,00,000/- to the profits disclosed by the applicant in A.Ys. 2009-10 to 2012-13 pro-rate in the proportion of unsubstantiated purchasesas below:- (1)(2)(3)(4)(5)(6)A.Yr.Amount ofTotal Col 3 +4AmountAmount furtherunsubstantiate(% total)disclosed byaddedd purchasesapplicant in thedetectedapplicationu/S. 132u/S. 133A2009-1010,99,51,420-10,99,51,42044,43,07113,37,500(10.7%)2010-116,36,28,3263,67,38,13110,03,66,45721,11,74512,25,000(9.8%)2011-121,75,67,46527,59,54,12829,35,21,59370,49,59835,87,500(28.7%)2012-1352,06,10,91052,06,10,9103,42,64,0241,25,00,000(100%) 7.The Settlement Commission imposed certain conditions on which the settlement was based and granted immunity to the petitioner from penalty and prosecution under the Act.The terms and conditions of the settlement for enjoying such immunity read thus:- "11.Coming to the terms of settlement, the applicant has soughtfollowing terms of settlement in the application. 1. Determination of income for all assessment years coveredby the application.by the application. 2. Waiver of interest chargeable under any section of theIncome Tax Act, 1961Income Tax Act, 1961 3. Granting of immunity from penalty under section of theIncome Tax Act,1961 in respect of the income disclosed bythe applicant company and determined by the commission.Income Tax Act,1961 in respect of the income disclosed bythe applicant company and determined by the commission. 4. Granting of immunity from prosecution under varioussections of the Income Tax Act, 1961sections of the Income Tax Act, 1961 5. Adjustment of refund against payment of taxes due as perapplication and also as per the order 245D(4) of theIncome Tax Act, 1961application and also as per the order 245D(4) of theIncome Tax Act, 1961 6. Adjustment of the seized cash of Rs. 64,58,000/- againsttax / interest due for settlement application filed by theapplicant.tax / interest due for settlement application filed by theapplicant. 7. Any other term that may be considered necessary at thetime of settlement application hearing."time of settlement application hearing." The total income is determined for all the years as perenclosure. Interest is to be charged up to the date of passing of theorder under Section 245D(1) of the Act. In view of the followingdecisions of the Hon'ble Supreme Court in case of Brijlal Vs. CIT(2010) 328 ITR 477 (SC). We are satisfied that there has been noattempt to conceal any material facts before us and also theapplicant has fully co-operated in the proceedings before us.Therefore, immunity from Penalty under the Income Tax Act, 1961 asprayed for by the applicant is granted. For same reasons, Immunityfrom Prosecution under the Income Tax Act, 1961 as prayed for bythe applicant is also granted. The A.O. is directed to adjust refundpending after verification while giving effect to order u/S. 245D(4) ofthe Income Tax Act, 1961, including adjustment of seized cash amounting to Rs. 64,58,000/-. 12.The immunity granted to the applicant, however, may bewithdrawn if the Commission is satisfied that the applicant has in thecourse of the settlement proceedings, concealed any particularmaterial to the settlement, or has given false evidence. Thereupon,the applicant may be tried for the offence for which immunity wasgranted, or for any offence for which the applicant appears to havebeen guilty in connection with the settlement, and the applicant shallalso become liable to the imposition of penalty under the Act to whichthe applicant would have been liable had such immunity not beengranted. This order shall be void if it is subsequently found by theCommission that the same has been obtained by fraud ormisrepresentation of the facts." amounting to Rs. 64,58,000/-. 12.The immunity granted to the applicant, however, may bewithdrawn if the Commission is satisfied that the applicant has in thecourse of the settlement proceedings, concealed any particularmaterial to the settlement, or has given false evidence. Thereupon,the applicant may be tried for the offence for which immunity wasgranted, or for any offence for which the applicant appears to havebeen guilty in connection with the settlement, and the applicant shallalso become liable to the imposition of penalty under the Act to whichthe applicant would have been liable had such immunity not beengranted. This order shall be void if it is subsequently found by theCommission that the same has been obtained by fraud ormisrepresentation of the facts." 8.The Assessing OfÏcer passed individual orders for eachassessment year covered in the order of settlement givingeffect to the Settlement Commission's order and termed as"Order giving effect to Settlement Commission's Order". Thecopy of one such order dated 26.9.2014 passed by him forthe assessment year 2009-10 is at page 197 of the paperbook. We may reproduce the contents of the order whichread thus:- "ORDER GIVING EFFECT TO SETTLEMENT COMMISSION'S ORDERIn pursuance to the order of the Settlement Commission,Additional Bench, Mumbai's order No. MH/MUCC-I/021/2013-14/ITdated 30.8.2014, the income of the assessee company as comparedby the Settlement Commission as under:- Income returned as per return Rs. 18,11,96,847/- Add: Additional Income offered in SOF Add: Further addition during hearing u/S245D(4) on account of unsubstantiatedpurchases as per para 10 Total Income Total income u/S. 115JB Rs. 56,15,14,131/- Rs. 1,69,11,761/- ------------------------ Rs. 19,81,08,608/- Rs. 13,37,500/- ------------------------Rs. 19,94,46,108/-============== Since the tax on book profit u/S. 115JB is less than the tax ontotal income, the assessee is liable to pay tax on the total incomecomputed under the normal provisions of the Act other than Section115JB. Assessed accordingly. Calculation of Tax and interest payableare incorporated in Income Tax Computation Form (ITNS150A),Credit of taxes paid given. Demand Notice as per the provisions ofsection 245D(6) of the I.T. Act is issued" 9.The Assessing OfÏcer passed similar individual orders for each assessment year covered under the settlement. It isnot necessary to record contents of all of them. 10. The petitioner thereupon filed a common petition for revision before the Commissioner of Income Tax. In suchrevision petition, the petitioner took up the question oftaxing subsidy amount received from the Government ofIndia under the said scheme and argued that the subsidybeing in the nature of capital receipt, was not liable to be taxed, both while computing the assessee's book profit underthe Minimum Alternative Tax (MAT) provisions and under thenormal provisions under the Act. The petitioner relied onseveral decisions in support of this contention. Thepetitioner further contended that despite such legal position,the subsidy was erroneously offered to tax during all thesaid assessment years. It was argued that the powers of theCommissioner under Section 264 of the Act are wide enoughto entertain such contention. It was contended that theissue which was not adjudicated by the SettlementCommission was open to revision under Section 264 of theAct. 11. Curiously, however, the petitioner did not point outwhich order it wishes the Commissioner to revise.Petitioner's averments and prayers titled as "Conclusions"may be noted:- 11. Curiously, however, the petitioner did not point outwhich order it wishes the Commissioner to revise.Petitioner's averments and prayers titled as "Conclusions"may be noted:- "E. Revision of settlement commission order29.In view of the above, it is clear that TUF subsidy received by the MIL iscapital receipt in nature and not chargeable to tax. However, inadvertentlythe same was offered to tax in AY 2006-07 till AY 2013-14. Accordingly, werequest your Honour to consider this revision application of the MIL anddirect the AO to re-compute the income by excluding the TUF subsidy fromthe total income.29.In view of the above, it is clear that TUF subsidy received by the MIL iscapital receipt in nature and not chargeable to tax. However, inadvertentlythe same was offered to tax in AY 2006-07 till AY 2013-14. Accordingly, werequest your Honour to consider this revision application of the MIL anddirect the AO to re-compute the income by excluding the TUF subsidy fromthe total income. 30.Reference in this regard is also invited to the decision in the case of C.Parikh & Co. Vs. CIT 138 ITR 689 (All) wherein it has been held that therevisional powers conferred by Sec. 264 on the CIT are very wide and it isalso open to the CIT to entertain even a new ground, not urged before thelower authorities, while exercising revisional powers. Further, theAllahabad High Court in the case of Rashtriya Vikas Ltd Vs. CIT 99 CTR68 (All) has held that a new claim for deduction made by the assessee inrevision petition is to be examined on merits."Parikh & Co. Vs. CIT 138 ITR 689 (All) wherein it has been held that therevisional powers conferred by Sec. 264 on the CIT are very wide and it isalso open to the CIT to entertain even a new ground, not urged before thelower authorities, while exercising revisional powers. Further, theAllahabad High Court in the case of Rashtriya Vikas Ltd Vs. CIT 99 CTR68 (All) has held that a new claim for deduction made by the assessee inrevision petition is to be examined on merits." ..................... H. Conclusion 39.In view of the above submission, we would request your honour toconsider the following: Application should be admitted and delay if any, should becondoned;condoned; Matter in application should be decided on merits of the case; Merely offering of TUF subsidy as income in the return, will notmake capital receipt as revenue receipt;make capital receipt as revenue receipt; TUS subsidy should be treated as capital receipt in view ofscheme of the subsidy, judicial precedent on the topic andprospective amendment made in the Income Tax Act.scheme of the subsidy, judicial precedent on the topic andprospective amendment made in the Income Tax Act. We request your Honour to provide us an opportunity to personally appearbefore you and furnish additional submissions. We will be glad to submitany further information or clarification as may be required. 12. To explain the delay in filing the revision petition, the petitioner contended that:- "F. Time Limit for application under Section 264 of the Act 31.As per section 264(3) of the Act, time limit for makingapplication under Section 264 of the Act is one year from thedate on which the order in question is communicated to theAssessee.application under Section 264 of the Act is one year from thedate on which the order in question is communicated to theAssessee. 32. In the present case, the settlement commission order dated30 August 2014. However, the time limit for making applicationunder section 264 of the Act is to be seen from the date onwhich amendment is brought into statute i.e 14 May 2015.30 August 2014. However, the time limit for making applicationunder section 264 of the Act is to be seen from the date onwhich amendment is brought into statute i.e 14 May 2015. "F. Time Limit for application under Section 264 of the Act 31.As per section 264(3) of the Act, time limit for makingapplication under Section 264 of the Act is one year from thedate on which the order in question is communicated to theAssessee.application under Section 264 of the Act is one year from thedate on which the order in question is communicated to theAssessee. 32. In the present case, the settlement commission order dated30 August 2014. However, the time limit for making applicationunder section 264 of the Act is to be seen from the date onwhich amendment is brought into statute i.e 14 May 2015.30 August 2014. However, the time limit for making applicationunder section 264 of the Act is to be seen from the date onwhich amendment is brought into statute i.e 14 May 2015. Section 2(24) of the Act is amended from 14 May 2015 (i.edate on which President given its acceptance to Finance Bill2015 and it became Finance Act 2015). 33.By way of aforesaid amendment with prospective effect, it isbeing made clear that subsidy received from government ischargeable to tax as revenue receipt and the said amendmentis made with prospective effect. Therefore, time limit formaking application should be taken from the aforesaid dateand the application is well within the time and hence, thesame should be accepted and matter should be decided onmerits of the case.being made clear that subsidy received from government ischargeable to tax as revenue receipt and the said amendmentis made with prospective effect. Therefore, time limit formaking application should be taken from the aforesaid dateand the application is well within the time and hence, thesame should be accepted and matter should be decided onmerits of the case. 34.Without prejudice to above, the assessee prays before yourhonour to condone the delay of approximate one year from thedate of settlement commission order in filing of presentapplication (if date for counting time limit is computed fromdate of settlement commission order). In this regard, it ishumbly submitted that the delay in filing the application ispurely attributable to the lack of clarity under the Income TaxAct and the same was clarified by Finance Act 2015 on 14May 2015. Hence, Assessee has sufficient cause for makingdelay application and the same should be condoned and it ishumbly prayed that matter should be decided on merits of thecase."honour to condone the delay of approximate one year from thedate of settlement commission order in filing of presentapplication (if date for counting time limit is computed fromdate of settlement commission order). In this regard, it ishumbly submitted that the delay in filing the application ispurely attributable to the lack of clarity under the Income TaxAct and the same was clarified by Finance Act 2015 on 14May 2015. Hence, Assessee has sufficient cause for makingdelay application and the same should be condoned and it ishumbly prayed that matter should be decided on merits of thecase." 13. The Commissioner, by the impugned order, dismissed the revision petition on three grounds namely:- i. That the petitioner had failed to explain the delay in filing therevision petition. Issue discussed in this context was whetherthe revision petition can be treated as being 270 days beyond theperiod of limitation prescribed, reconning the period of limitationrevision petition. Issue discussed in this context was whetherthe revision petition can be treated as being 270 days beyond theperiod of limitation prescribed, reconning the period of limitation from the date of the order of Settlement Commission or whetherthe limitation should be considered from the date theassessment orders (in given cases) were passed by theAssessing Officer. The Commissioner held that in either case,the petitioner had failed to show sufficient cause preventing itfrom filing the revision petition within the time prescribed; from the date of the order of Settlement Commission or whetherthe limitation should be considered from the date theassessment orders (in given cases) were passed by theAssessing Officer. The Commissioner held that in either case,the petitioner had failed to show sufficient cause preventing itfrom filing the revision petition within the time prescribed; ii.The Commissioner was also of the opinion that he had nopowers to revise the order of Settlement Commission andessentially, granting relief to the petitioner as prayed for wouldamount to exercising such powers;powers to revise the order of Settlement Commission andessentially, granting relief to the petitioner as prayed for wouldamount to exercising such powers; iii.On merits also, the Commissioner was of the opinion that thepetitioner was not correct in contending that the subsidy inquestion was of capital nature and therefore, not taxable.petitioner was not correct in contending that the subsidy inquestion was of capital nature and therefore, not taxable. It is this order of the Commissioner which the petitionerhas challenged in this petition. 14. We have heard learned counsel for the petitioner atconsiderable length. In so far as the Commissioner'sobjections to the revision petition on the grounds of delayand taxability of the subsidy in question are concerned, weare prepared to proceed on the basis that the petitioner hasarguable case. However, if ultimately, we come to theconclusion that the Commissioner had no power to entertainthe revision petition in present set of facts andcircumstances, these issues would become purely academic. We would focus our attention only on this aspect. 15. To summarize the relevant facts, the petitioner hadapplied for settlement of all assessment cases for the periodbetween assessment years 2006-07 to 2013-14. TheSettlement Commission after making certain additions todisclosures made by the petitioner passed final order ofsettlement granting immunity to the petitioner from penaltyand prosecution subject to conditions. The Assessing OfÏcerpassed individual orders giving effect to the order ofSettlement Commission after which the petitioner applied forrevision to the Commissioner and raised dispute abouttaxability of the subsidy. 16. In this context, Mr. Mistri, the learned senior counselappearing for the petitioner took us extensively through thevarious provisions of the Act and contended that :- I. The Commissioner of Income Tax erred in rejecting theapplication under Section 264 of the Act on the ground that orderof the Income Tax Settlement Commission cannot be revisedbeing an authority not subordinate to the CIT.application under Section 264 of the Act on the ground that orderof the Income Tax Settlement Commission cannot be revisedbeing an authority not subordinate to the CIT. a. Order sought to be revised is the order passed by the AssessingOfficer after the order passed by Commission, therefore, CITOfficer after the order passed by Commission, therefore, CIT under Section 264 has jurisdiction to revise such an order passedby an authority subordinate to him [Section 264(1)]. b. Revision application under Section 264 is maintainable as orderof the Commission is conclusive only on the issues which aredecided by it.of the Commission is conclusive only on the issues which aredecided by it. i. Section 245D(4) - Commission passes order only on thematters which are covered in the application made by theassessee and any other matter referred by the CIT in itsreport.matters which are covered in the application made by theassessee and any other matter referred by the CIT in itsreport. ii. Section 245-I - Order of Commission is conclusive only on thematter which is covered by such order.matter which is covered by such order. iii. Section 245F(4) - All other provisions of the Act apply to thematter other than before Commission.matter other than before Commission. b. Revision application under Section 264 is maintainable as orderof the Commission is conclusive only on the issues which aredecided by it.of the Commission is conclusive only on the issues which aredecided by it. i. Section 245D(4) - Commission passes order only on thematters which are covered in the application made by theassessee and any other matter referred by the CIT in itsreport.matters which are covered in the application made by theassessee and any other matter referred by the CIT in itsreport. ii. Section 245-I - Order of Commission is conclusive only on thematter which is covered by such order.matter which is covered by such order. iii. Section 245F(4) - All other provisions of the Act apply to thematter other than before Commission.matter other than before Commission. iv. As can be seen in the present case for AY 2009-10,wherebefore the order of Commission, the petitioner was assessedunder MAT. However, after the order of Commission, AOpassed the order assessing the income of the Petitioner undernormal provisions of the Act.before the order of Commission, the petitioner was assessedunder MAT. However, after the order of Commission, AOpassed the order assessing the income of the Petitioner undernormal provisions of the Act. v. Order passed by the AO after the order of the Commissioncan be revised under Section 264 of the Act Vaata Infra Vs.ITO (229 Taxman 373)(Mad).can be revised under Section 264 of the Act Vaata Infra Vs.ITO (229 Taxman 373)(Mad). Therefore, the CIT had jurisdiction to consider this matter which wasnot at all dealt with by the Commission on its order. On the other hand, Mr. Suresh Kumar for the Revenueopposed the petition contending that the Commissionercorrectly held that he had no power to revise the oder of theSettlement Commission. 17. In order to appreciate and consider such contentions,we may refer to the provisions contained in the Act. ChapterXIX-A was added to the Act by Taxation Laws (Amendment)Act 1975 w.e.f. 1.4.1976. This was pursuant to Direct TaxInquiry Committee's final report submitted in the month ofDecember 1971. Section 245A contained in the said chapteris a definition provision defining various terms for thepurpose of said chapter. The term "case" has been definedin clause (b) of Section 245A as to mean any proceedings forassessment under this Act, of any person in respect of anyassessment year or assessment years which may be pendingbefore an Assessing OfÏcer on the date on which anapplication under sub-section (1) of Section 245C is made.We may record that this definition requires that the caseshould be pending before the Assessing OfÏcer is amendedw.e.f 1.6.2007, prior to which a "case" in terms of saiddefinition would include also the proceedings pending beforethe appellate or revisional stage. 18. Section 245BA of the Act pertains to jurisdiction andpowers of Settlement Commission and lays down the procedure for constitution and decision of the SettlementCommission Benches. Sub-section (5A) of Section 245BAprovides that notwithstanding anything contained in theearlier provisions of the said Section, the Chairman may, forthe disposal of any particular case, constitute a SpecialBench consisting of more than three members. Reference inthis sub-section is thus "for the disposal of any particularcase". Likewise proviso to sub-section 5 of Section 245BAalso provides that if at any state of the hearing of any suchcase or matter, it appears to the Presiding OfÏcer that thecase or matter is of such a nature that it ought to be heardby a Bench consisting of three members, the case or mattermay be referred by the Presiding OfÏcer of such Bench to theChairman for transfer to such Bench as the Chairman maydeem fit. We are conscious that this proviso refers to a caseas well as to a matter to which expression some elaborationwill be necessary and would be made later. 19. Section 245C of the Act pertains to application forsettlement of cases. Sub-section (1) to Section 245Cprovides that an assessee may, at any stage of a case relating to him, make an application in prescribed formantand in prescribed manner containing full and true disclosuresof his income which has not been disclosed before theAssessing OfÏcer, the manner in which such income hasbeen derived, the additional amount of income tax payableon such income and such other particulars as may beprescribed, to have his case settled by the SettlementCommission. Sub-section (1A) of Section 245C provides thatfor the purpose of sub-section (1), the additional amount ofincome tax payable in respect of the income disclosed in anapplication made under sub-section (1) shall be the amountcalculated in accordance with the provisions of sub-sections(1B) to (1D). Sub-sections (1B) to (1D) essentially provide forcomputing additional tax liability to be paid by the applicantof settlement, depending upon the various situations. 20. Section 245D of the Act pertains to procedure onreceipt of an application under Section 245C. This sectioncontains a detail procedure that the Commission would followupon the assessee filing application under Section 245C ofthe Act. Sub-section (2B) of Section 245D envisages sending a report from Principal Commissioner or the Commissioner tothe Settlement Commission within prescribed time. Undersub-section (2C) of Section 245D, upon receipt of the saidreport, the Commission by passing order may declare thatthe application for settlement as invalid. A settlementapplication which has not been declared so invalid would beconsidered by the Settlement Commission for passing orderunder Section 245D (4) of the Act after the same passesthrough the stage of sub-section (3) thereof. Sub-section 4of Section 245D reads thus:- "(4) After examination of the records and the report of the[Principal Commissioner or] Commissioner, if any, received under-(i) sub-section (2B) or sub-section (3), or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after giving an opportunity to the applicant and to the [PrincipalCommissioner or] Commissioner to be heard either in person orthrough a representation duly authorized in this behalf, and afterexamining such further evidence as may be placed before it orobtained by it, the Settlement Commission may, in accordance withthe provisions of this Act, pass such order as it thinks fit on thematters covered by the application and any other matter relating tothe case not covered by the application, but referred to in the reportof the [Principal Commissioner or] Commissioner. Sub-section (5) to Section 245D provides that subject to the provisions of Section 245BA, the materials brought on record before the Settlement Commission shall beconsidered by the Members of the concerned Bench beforepassing any order under sub-section (4) and in relation to thepassing of such order, the provisions of Section 245BD shallapply. Sub-section (6) of Section 245D provides that everyorder passed under sub-section (4) shall provide for theterms of settlement including any demand by way of tax,penalty or interest, the manner in which any sum due underthe settlement shall be paid and all other matters to makethe settlement effective and shall also provide that thesettlement shall be void if it is subsequently found by theSettlement Commission that it has been obtained by fraud ormisrepresentation of facts. Sub-section (7) of Section 245D provides that if thesettlement becomes void as provided under sub-section (6),the proceedings with respect to the matters covered by thesettlement shall be deemed to have been revived from thestage at which the application was allowed to be proceededwith by the Settlement Commission and the income taxauthority concerned, may, notwithstanding anything Sub-section (7) of Section 245D provides that if thesettlement becomes void as provided under sub-section (6),the proceedings with respect to the matters covered by thesettlement shall be deemed to have been revived from thestage at which the application was allowed to be proceededwith by the Settlement Commission and the income taxauthority concerned, may, notwithstanding anything contained in any other provisions of this Act, compete suchproceedings at any time before the expiry of two years fromthe end of the financial year in which the settlement becamevoid. 21. Section 245F of the Act pertains to powers andprocedure of Settlement Commission and reads as under:-procedure of Settlement Commission and reads as under:- "(1)In addition to the powers conferred on the SettlementCommission under this Chapter, it shall have all the powerswhich are vested in an income- tax authority under this Act.Commission under this Chapter, it shall have all the powerswhich are vested in an income- tax authority under this Act. (2) Where an application made under section 245C has beenallowed to be proceeded with under section 245D, theSettlement Commission shall, until an order is passed undersub- section (4) of section 245D, have, subject to the provisionsof sub- section (3) of that section, exclusive jurisdiction toexercise the powers and perform the functions of an income- taxauthority under this Act in relation to the case:allowed to be proceeded with under section 245D, theSettlement Commission shall, until an order is passed undersub- section (4) of section 245D, have, subject to the provisionsof sub- section (3) of that section, exclusive jurisdiction toexercise the powers and perform the functions of an income- taxauthority under this Act in relation to the case: [Provided that where an application has been made underSection 245C on or after 1st day of June, 2007, the SettlementCommission shall have such exclusive jurisdiction from the dateon which the application was made:Section 245C on or after 1st day of June, 2007, the SettlementCommission shall have such exclusive jurisdiction from the dateon which the application was made: Provided further that where - (i) an application made on or after the 1st day of June,2007, is rejected under sub-section (1) of Section 245D; or(ii) an application is not allowed to be proceeded withunder sub-section (2A) of Section 245D, or, as the casemay be, is declared invalid under sub-section (2C) of thatsection; or2007, is rejected under sub-section (1) of Section 245D; or(ii) an application is not allowed to be proceeded withunder sub-section (2A) of Section 245D, or, as the casemay be, is declared invalid under sub-section (2C) of thatsection; or (iii)an application is not allowed to be further proceeded with under sub-section (2D) of Section 245D,the Settlement Commission, in respect of such application shallhave such exclusive jurisdiction upto the date on which theapplication is rejected, or, not allowed to be proceeded with, or,declared invalid, or, not allowed to be further proceeded with, as the case may be.] (3) Notwithstanding anything contained in sub- section (2)and in the absence of any express direction to the contrary bythe Settlement Commission, nothing contained in this sectionshall affect the operation of any other provision of this Actrequiring the applicant to pay tax on the basis of self-assessment in relation to the matters before the SettlementCommission. (4) For the removal of doubt, it is hereby declared that, in theabsence of any express direction by the Settlement Commission tothe contrary, nothing in this Chapter shall affect the operation of theprovisions of this Act in so far as they relate to any matters other thanthose before the Settlement Commission. (5) ....... (6) ....... the case may be.] (3) Notwithstanding anything contained in sub- section (2)and in the absence of any express direction to the contrary bythe Settlement Commission, nothing contained in this sectionshall affect the operation of any other provision of this Actrequiring the applicant to pay tax on the basis of self-assessment in relation to the matters before the SettlementCommission. (4) For the removal of doubt, it is hereby declared that, in theabsence of any express direction by the Settlement Commission tothe contrary, nothing in this Chapter shall affect the operation of theprovisions of this Act in so far as they relate to any matters other thanthose before the Settlement Commission. (5) ....... (6) ....... (7) The Settlement Commission shall, subject to the provisions ofthis Chapter, have power to regulate its own procedure and theprocedure of Benches thereof in all matters arising out of theexercise of its powers or of the discharge of its functions, includingthe places at which the Benches shall hold their sittings. 22. Section 245H of the Act pertains to power of SettlementCommission to grant immunity from prosecution and penalty.Section 245HA pertains to abatement of proceeding before Settlement Commission. Sub-section (1) of Section 245HAprovides for time limit for completion of settlement proceedings and if not so completed, the proceeding wouldabate on the specified date. Sub-section (2) of Section245HA provides that where a proceeding before theSettlement Commission abates, the Assessing OfÏcer, or, asthe case may be, any other income tax authority beforewhom the proceeding at the time of making the applicationwas pending, shall dispose of the case in accordance withthe provisions of the Act as if no application under Section245C had been made. 23. Section 245I of the Act pertains to order of settlementto be conclusive and reads as under:- "Every order of settlement passed under sub-section (4) of Section245D shall be conclusive as to the matters stated therein and nomatter covered by such order shall save as otherwise provided in thisChapter, be reopened in any proceeding under this Act or under anyother law for the time being in force." 24.These are the provisions which would come up forinterpretation as we proceed further with the discussion. Forthe time being, we may notice that in the application forsettlement which the petitioner filed under Section 245C(1)of the Act, the reference in the first annexure was to theamount of income tax which has not been disclosed before the Assessing OfÏcer. This application contains annexure Cwhich gives particulars of the issues to be settled andrevolves around the determination and quantification ofincome for all assessment years under the application forsettlement. Annexure D to the application contains themanner of earning undisclosed income. In response to thesaid application, the Revenue had submitted the reportbefore the Commission in terms of Rule 9 of the Income TaxSettlement Commission (Procedure) Rules, 1997 ("the Rules"for short) and objected to the disclosures made by theassessee contending that the same were not sufÏcientlooking to the assessee's scale of operation and activities. Inresponse to such report, the petitioner had filed a rejoinderin terms of Rule 9A of the Rules. A brief point to be notedfrom such materials at this stage would be that the entirefocus of the Settlement Commission on the application ofsettlement filed by the petitioner was on the income notdisclosed before the Assessing OfÏcer, the manner of earningsuch income and truthfulness of the declaration made by theassessee. Before the Settlement Commission, the questionof taxability of the subsidy income was nowhere in horizon. 25. It was pursuant to such application of the petitionerthat the Settlement Commission passed the final order ofsettlement making certain additions to the declaration madeby the petitioner and granting immunity from penalty andprosecution subject to fulfillment of the conditions containedin the order. The Assessing OfÏcer, therefore, while carryingout the terms of settlement and the order passed by theSettlement Commission, had limited jurisdiction of onlygiving effect to the directives contained therein. Thequestion of correctness of taxing the subsidy income wasneither raised, nor in our opinion could have been raisedbefore him. We are conscious that the powers of theCommissioner for revision under Section 264 of the Act arenot seen to be co-terminus with the powers of the AssessingOfÏcer. The Commissioner may as well entertain a ground, aclaim or a contention of the assessee which may not havebeen raised either in the return or before the AssessingOfÏcer during the course of the assessment. However, thequestion is could the petitioner have in the present facts ofthe case raised the question of taxability of subsidy beforethe Commissioner. 26. As noted, the Act contains detail provisions in ChapterXIX-A for settlement of cases. An application for settlementcan be made under sub-section (1) of Section 245C of theAct. This can be made at any stage of a case relating to theassessee. The term 'case' has been defined to mean anyproceedings for assessment under this Act of any person inrespect of any assessment year or assessment years whichmay be pending before the Assessing OfÏcer on the date onwhich the application under sub-section (1) of Section 245Cis made. In other words, the application for settlement canbe filed as long as the proceedings for assessment of thereturn is pending before the Assessing OfÏcer. The previousdefinition of word 'case' would cover within its scope anyproceedings of assessment pending also before the appellateor revisional stage. This amendment, however, is of noimportance for our discussion. What is important to note isthat in whatever form the word 'case' may have beendefined, the settlement application should be filed only aslong as such 'case' is pending. 27. Once such application is filed, the same would beconsidered by the Settlement Commission as provided underSection 245F of the Act which lays down powers andprocedure of Settlement Commission. Sub-section (1) toSection 245F as noted above provides that the SettlementCommission shall have all the powers which are vested in anincome tax authority under the Act. Sub-section (2) ofSection 245F further provides that where an applicationmade under Section 245C has been allowed to be proceededwith under Section 245D, the Settlement Commission shall,until an order is passed under sub-section (4) of Section245D, have, subject to the provisions of sub-section (3) ofthat section, exclusive jurisdiction to exercise the powers andperform the functions of an income tax authority under theAct. As per the first proviso to sub-section (2), in relation toapplication for settlement made on or before 1.6.2007, theSettlement Commission would have such exclusivejurisdiction from the date on which such application wasmade. 28. Further proviso to sub-section (2) provides that suchexclusive jurisdiction would continue upto the date on whichthe application is rejected, or, not allowed to proceed with ordeclared invalid. Sub-section (4) of Section 245F provides forremoval of doubt, in absence of any express direction by theSettlement Commission, nothing contained in the Chaptershall affect the operation of the provisions of the Act in so faras they relate to any matters other than those before theSettlement Commission. 28. Further proviso to sub-section (2) provides that suchexclusive jurisdiction would continue upto the date on whichthe application is rejected, or, not allowed to proceed with ordeclared invalid. Sub-section (4) of Section 245F provides forremoval of doubt, in absence of any express direction by theSettlement Commission, nothing contained in the Chaptershall affect the operation of the provisions of the Act in so faras they relate to any matters other than those before theSettlement Commission. 29. In the context of our discussion, this Section 245F is ofutmost importance. In clear terms, it signifies the intentionof the legislature to vest jurisdiction in relation to a case inone authority; be it Assessing OfÏcer or SettlementCommission. In relation to application for settlement filedafter 1.6.2007, once it is filed, the Settlement Commissionwould have exclusive jurisdiction in relation to the case, theCommission would enjoy all the powers of the AssessingAuthority and the Assessing OfÏcer would have no power todeal with the assessment. This position would continue tillthe application for settlement is rejected, or not allowed to be proceeded further or declared invalid, or until an order ispassed under Section 245D(4) of the Act. 30. Sub-section (4) of Section 245F merely provides that forremoval of doubt in absence of any express direction by theSettlement Commission to the contrary, nothing in thisChapter shall affect the operation of the provisions of the Actin so far as they relate to any matters other than thosebefore the Settlement Commission by virtue of Section 245Fin relation to a case would be confined to matters covered inapplication for settlement or in the report of the Commission.Any other view would require the Assessing OfÏcer tocontinue with the assessment minus the matters before theSettlement Commission, thus giving rise to two parallelproceedings. 31. On reading the provisions contained in Chapter XIX-A ofthe Act, a clear picture that emerges is that an assessee canapply for settlement of a case as long as same is pending.Once such an application is filed (and in case of applicationfiled before 1.6.2007) allowed to proceed further, all powers vested in income tax authority would vest in SettlementCommission in relation to such a case. The SettlementCommi