M/S.agarshans164, Linghi Chetty Street,Chennai – 600 001 v. The Income Tax Settlement Commission, Additional Bench, 488/489, Anna Salai, Chennai – 35

In the High Court of Judicature at Madras Dated: 22.11.2011 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMAN Writ Petition No.34840 of 2002 M/s.Agarshans164, Linghi Chetty Street,Chennai – 600 001..... Petitioner Vs. 1. The Income Tax Settlement Commission, Additional Bench, 488/489, Anna Salai, Chennai – 35. 2. The Union of India, rep. By the Chairman, Central Board of Direct Taxes, New Delhi. 3. The Commissioner of Income Tax, Chennai VIII, Chennai – 34. 4. The Assistant Commissioner of Income Tax, Business Circle VIII, Chennai – 6. 5. The Tax Recovery Officer XXI, Range VIII, Chennai – 6. .... Respondents PETITION under Article 226 of The Constitution of India prayingfor the issuance of Writ of Certiorarified Mandamus calling for therecords of the first respondent Income Tax Settlement Commission,Additional Bench, Chennai in its File Settlement ApplicationNo.21/IV/181-93-II and quash its order dated 16.07.2002 and directthe first respondent Settlement Commission to afford the petitionerfirm an opportunity of being heard and pass a fresh order in theSettlement Application of the petitioner firm. For Petitioner : Mr.T.N.SeetharamanFor Respondents: Mr.J.Narayanasamy for Mr.T.R.Senthil Kumar – R1, R3 to R5 Standing Counsel for Income Tax ------- https://hcservices.ecourts.gov.in/hcservices/ O R D E R The petitioner seeks Writ of Certiorarified Mandamus to quash theorder of the first respondent, namely, Income Tax SettlementCommission dated 16.7.2002 and to direct the first respondent toafford an opportunity of being heard and pass a fresh order on theSettlement Application of the petitioner firm. 2. The facts leading to the filing of the present Writ Petitionare as follows: For Petitioner : Mr.T.N.SeetharamanFor Respondents: Mr.J.Narayanasamy for Mr.T.R.Senthil Kumar – R1, R3 to R5 Standing Counsel for Income Tax ------- https://hcservices.ecourts.gov.in/hcservices/ O R D E R The petitioner seeks Writ of Certiorarified Mandamus to quash theorder of the first respondent, namely, Income Tax SettlementCommission dated 16.7.2002 and to direct the first respondent toafford an opportunity of being heard and pass a fresh order on theSettlement Application of the petitioner firm. 2. The facts leading to the filing of the present Writ Petitionare as follows: The petitioner herein carries on business as a Civil EngineeringContractor. The petitioner herein originally filed an applicationfor settlement of its case before the Income Tax SettlementCommission, relating to the assessment years 1989-90 to 1993-94. Thepetitioner offered additional income consequent on a search made inthe petitioner's premises. The Settlement Commission pointed out,after analysing the various materials, that the income in respect ofthe above-said assessment years have to be arrived at on an estimatedbasis, despite the fact that the regular books of accounts have beenmaintained for the construction business and that the assessee firmhad attempted to reconcile the notings in the seized materials withthe figures appearing in the regular books of accounts. Noting thereasons for its decision in paragraph 9 of its order, the SettlementCommission viewed that the assessable income had to be estimated forthe assessment years under consideration. The Settlement Commissionfurther pointed out to innumerable cash credits in the cash books andthe gross contract receipts for 15 years at Rs.6.28 crores, but takenby the assessee to an extent of Rs.3.28 crores only for estimatingthe profits on the ground that the cost of materials like cementsteel etc. had been deducted from the total turnover for which nomaterials were furnished by the assessee. that the assessee had notfurnished the details of expenditure under different heads likeCommission, brokerage and expenses claimed on account of sand.Considering the above-said facts, the Settlement Commissiondisallowed the claim to the extent of 60%. Ultimately, theSettlement Commission considered the break-up of turnover project-wise and assessment year-wise. After considerable discussion, itdecided that the assessable income from the contract have to beestimated at 9% of the gross turnover, which was net of alldeductions. Thus the assessable income was arrived at Rs.56.59 lakhsor Rs.57.00 lakhs as a round sum. The same was to assessed asadditional income in respect of the assessment years 1989-90 to 1993-94, apportioned on the basis of the gross turnover of each year shownby the assessee and considered by the Settlement Commission. Itspecifically pointed out, to quote from the words of the SettlementCommission, "The applicant is not entitled to any further deductionfrom this net income. The above will be added to the additionalincome disclosed in the S.O.F.". In respect of the income from lorrybusiness, the Settlement Commission also arrived at the computation of income. Considering the co-operation extended by the assessee,the Settlement Commission granted immunity under Section 254H(1) ofthe Income Tax Act from imposition of penalty and prosecution underthe provisions of the Income Tax Act and relevant Sections of theIndian Penal Code. of income. Considering the co-operation extended by the assessee,the Settlement Commission granted immunity under Section 254H(1) ofthe Income Tax Act from imposition of penalty and prosecution underthe provisions of the Income Tax Act and relevant Sections of theIndian Penal Code. 3. After the receipt of the order dated 11.11.1997, thepetitioner filed an application on 27.2.1998 seeking rectification ofits order, particularly as regards the additional amount offered forsettlement. The assessee pointed out that the difference between theChartered Accountant and the petitioner had really affected the fairadjudication, hence, they asked for revision of the order. Byproceedings dated 12.4.2002, the said claim of the petitioner wasrejected. Again, the assessee filed a Miscellaneous petition on03.05.2002 against the rejection order passed on 12.4.2002 rejectingthe prayer for rectification. The assessee pointed out that inestimating an additional income, the Settlement Commission shouldhave taken note of the depreciation, which would be available to theassessee in the matter of such estimation as per the Circular ofCentral Board of Direct Taxes No.29D(XIX)-14 dated 31.8.1965.Considering the binding character of the Board's circular, as held inthe decisions reported in (2001) 252 ITR 412 (P&H) (C.I.T. V. ChopraBros. India (P) Ltd.; (1994) 210 ITR 118 (All) at page 120(Commissioner of I.T. V. Bishambar Dayal & Co. as well as thedecision of the Apex Court reported in (2001) 247 ITR 128 (S.C.)(Paper Products Ltd., V. Commissioner of Central Excise), thepetitioner sought for rectification of the order to consider theBoard's circular in the matter of arriving at the additional income.By proceedings dated 16.7.2002, the said prayer of the petitioner wasrejected. 4. A perusal of the order of the Settlement Commission dated06.07.2002 shows that the application dated 3[rd] May, 2002 was movedagainst the rejection of an earlier Miscellaneous Application dated12[th] April, 2002. The Settlement Commission considered the contentionof the assessee that the Commission had rejected the MiscellaneousApplication without considering the arguments put forth in itsapplication and pointed out that the first issue raised by thecounsel for the petitioner related to the allowance of depreciationand other admissible reductions in estimating the business income.In support of the contention made based on the reliance on theCircular of Central Board of Direct Taxes No.29D(XIX)-14 dated31.8.1965, wherein, it was held that in a case where a profit was tobe estimated and prescribed particulars had been furnished by the taxpayer, depreciation allowance should be separately worked out and thereliance placed on the decision of the Apex Court reported in (2001)252 ITR 1 (Anjum M.H.Ghaswala & Others V. CIT), the SettlementCommission pointed out to its decision to paragraph 16 of the orderdated 11.11.1997, holding that in arriving at the net taxable income "after considerable discussion, it was decided whether net assessableincome (net of all deductions) from the contract business shall beestimated at 9% of the above gross turnover of Rs.6,28,83,182/-. Onthis basis, the net assessable income would come to Rs.56.59 lakhs orRs.57 lakhs as a round sum." and held that the question of reviewingthe order on an application would not arise in the case. TheSettlement Commission further pointed out that even in the orderpassed in the earlier Miscellaneous Application, it was pointed outclearly that such a step would amount to review of the order and forthe reasons given in the earlier order, the Settlement Commissionheld that the question of review did not arise and that the incomewas fixed after considering the materials. However, as regards theaddition made to an extent of Rs.1,40,000/-, the SettlementCommission, however, held that there could be no separate additionfor the cash credits, amounting to Rs.1,40,000/-, in view of thesubstantial addition made and to that extent alone, it granted therelief. Aggrieved by the same, the present Writ Petition has beenfiled. 5. Learned senior counsel appearing for the petitioner pointedout that the Settlement Commission, invested with the powers as thatof the Assessing Officer in the matter of computation of additionalincome, should have taken note of the Board's Circular dated31.8.1965. Going by the decision of the Apex Court reported in(2001) 252 ITR 1 (Anjum M.H.Ghaswala & Others V. CIT), the circularbeing of a binding character, the Settlement Commission committed aserious error in rejecting the petition. He also placed reliance onthe decision reported in (1978) 115 ITR 524 (Brij Bhushan LalParduman Kumar Etc. V. Commissioner of Income-Tax, Haryana, HimachalPradesh and New Delhi – III) that the value of materials used in theexecution of work should have been taken in the matter of computationof profits. 6. Per contra, learned Standing Counsel appearing for the Revenueplaced reliance on the decision of the Apex Court reported in (2010)328 ITR 477 (SC) (Brij Lal and others V. Commissioner of Income-tax)that in the absence of any provision for rectification or a review,the question of miscellaneous application filed for re-considerationof the additional income arrived at by the Settlement Commission,does not arise. In the circumstances, no interference is called for. 7. Heard learned Senior Counsel appearing for the petitioner andthe learned Standing Counsel appearing for the Revenue and theperused the materials placed before this Court. 8. It is a settled proposition of law that the proceedings beforethe Settlement Commission under Chapter XIX-A relates to settlementof liability and not determination of liability. In the decisionreported in 328 ITR 477 (SC) (Brij Lal and others V. Commissioner of https://hcservices.ecourts.gov.in/hcservices/ 7. Heard learned Senior Counsel appearing for the petitioner andthe learned Standing Counsel appearing for the Revenue and theperused the materials placed before this Court. 8. It is a settled proposition of law that the proceedings beforethe Settlement Commission under Chapter XIX-A relates to settlementof liability and not determination of liability. In the decisionreported in 328 ITR 477 (SC) (Brij Lal and others V. Commissioner of https://hcservices.ecourts.gov.in/hcservices/ Income-tax), the Apex Court pointed out that in the absence of anyprovision available for rectification or review, the SettlementCommission has no jurisdiction to touch on the order passed by it.Referring to the decision of the Apex Court reported in (2001) 252ITR 1 (Anjum M.H.Ghaswala & Others V. CIT), on which heavy reliancewas placed by the learned Senior Counsel appearing for thepetitioner, the Apex Court pointed out that the question therein wasas to whether interest under Section 234B is mandatory in nature andthat the order of the Settlement Commission under Section 245D(4) isan order of assessment and in considering the said question, all thatthe Apex Court had held in the decision reported in (2001) 252 ITR 1@ 16 (Anjum M.H.Ghaswala & Others V. CIT) was that, while exercisingthe power, the Settlement Commission, although does not act as asubordinate authority to the Central Board of Direct Taxes, yet, itwould be enforcing the relevant provisions of the circulars for thebenefit of the assessee in the process of settlement. Thus whileholding that the circulars of the Board are legally binding on theRevenue, the beneficial circulars can be a subject matter of fairconsideration at the hands of the Settlement Commission, on theassessee approaching the Settlement Commission under Section 245C ofthe Act. The Apex Court pointed out that Section 245F of the Actempowers the Settlement Commission to exercise the power of theIncome Tax Authority under the Act. Considering the distinctionmaintained between the Income Tax Officer and the SettlementCommission and that the jurisdiction of the Settlement Commission iswith reference to the settlement of the liability of an assessee andnot determination of the liability, the question of this Court givinga direction as though he is an authority bound by the circular, doesnot arise. This is quite apart from this that in the absence of anyprovision for review, which must be specifically conferred on theauthority to exercise such a jurisdiction, I do not find anyjustifiable ground to grant the relief to the petitioner. As forrectifying an order, unless the mistake is an apparent one curablewithout much of an argument, in the name of rectification, theSettlement Commission cannot review its own order. 9. Secondly, on the self-same issue, the petitioner had alreadymoved the Settlement Commission for rectification, which was rejectedunder order dated 12.4.2002 which was not in any manner challenged.Thus I do not find any legal justification in accepting the case ofthe assessee, which is more in the nature of rectification of anorder dated 12.4.2002 dismissing the rectification petition filed on27.2.1998. Thus with the catena of decisions are to the effect thatthe jurisdiction of this Court under Article 226 of the Constitutionof India as against the order of the Settlement Commission is notthat of an appellate forum, this Court does not sit as an appeal toget into the process to take an ultimate decision. Unless thereasoning is abusive or contrary to the provisions of law, which isprejudicial to the interest of the assessee, this Court does not assume any jurisdiction to interfere with the order of the SettlementCommission. Admittedly, the petitioner had had no grievance asagainst the order originally passed by the Settlement Commission andthere was no Writ Petition filed thereon. Subsequent thereto, therewas a Miscellaneous Petition, which was dismissed by the SettlementCommission. Even as against that, there was no Writ Petition or anyproceedings taken, to challenge that order. Only when the secondpetition was taken up and an order had been passed, the present WritPetition has been filed. Learned senior counsel appearing for thepetitioner could not specifically point out to the provision underwhich such a petition is maintainable in law. In the absence of anyspecific provision even to maintain the first MiscellaneousApplication, I do not find any ground to grant the relief sought forby the petitioner. In the circumstances, the Writ Petition standsdismissed. No costs. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarslTo1. The Income Tax Settlement Commission, Additional Bench, 488/489, Anna Salai, Chennai – 35.2. The Chairman, The Union of India, Central Board of Direct Taxes, New Delhi.3. The Commissioner of Income Tax, Chennai VIII, Chennai – 34.4. The Assistant Commissioner of Income Tax, Business Circle VIII, Chennai – 6.5. The Tax Recovery Officer XXI, Range VIII, Chennai – 6.1 CC to M/s.J.Narayanaswamy, Advocate, SR.71545 RSI(CO)SRA(28/12/2011) W.P.No.34840 of 2002