Of Income Tax (Central) – Ii v. Income Tax Settlement Commission &Anr. Reported In 2014 Scc Online Del 626, Particularly Paragraph 14Of The Said Judgment Which Is Quoted Hereunder

ORDER SHEETWPO/571/2018IN THE HIGH COURT AT CALCUTTACONSTITUTIONAL WRIT JURISDICTIONORIGINAL SIDE PRINCIPAL COMMISSIONER OF INCOME TAX, BURDWAN & ANR.VS INCOME TAX SETTLEMENT COMMISSION (INCOME TAX ANDWEALTH TAX), ADDITIONAL BENCH AND ORS. BEFORE:The Hon'ble JUSTICE MD. NIZAMUDDINDate : 24[th] August, 2022. Appearance:Mr. Vipul Kundalia, Adv.Mr. Anurag Roy, Adv.…For the PetitionerMr. Debajyoti Dutta, Adv.Mr. Sabyasachi Roy, Adv.Ms. P. Banerjee, Adv.…For the respondent The Court : Heard learned counsel appearing for the parties. By this writ petition, petitioner Income Tax Authorities havechallenged the impugned order of the settlement commission dated2[nd] September, 2016 granting partial immunity to the petitioner underSection 245H(1) of the Income Tax Act, 1961 by way of imposinglesser amount of penalty. Learned counsel appearing for the petitionersubmits that the impugned order of the settlement commissiongranting partial immunity to the petitioner under Section 245H(1) ofthe Act in respect of imposition of penalty is contrary to the spirit ofthe scheme of settlement commission and particularly under Section245H(1) of the Act. Petitioner in support of its contention relies on ajudgment of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax (Central) – II vs. Income Tax Settlement Commission &Anr. reported in 2014 SCC OnLine Del 626, particularly paragraph 14of the said judgment which is quoted hereunder : “ 14. The aforesaid factual position shows that the assessee tooka chance - sat on the fence, so to say – by not coming clean in thesettlement application and not disclosing income which it did notdisclose before the assessing officer – and when the CIT’s reportsexposed its conduct in the proceedings before the ITSC, it was“advised” by the ITSC, “in a spirit of settlement” to offer the entireamount of bogus purchase of Rs. 117.98 crores, which it accepted. Wefail to see any spirit of settlement; that spirit ought to have beenexhibited by the assessee in the application filed before the ITSC, asthe law requires, and it is not enough if it is shown in proceedingsbefore the ITSC after being confronted with adverse reports, to whichit had no answer. In Ajmera Housing Co-operation v. CIT, (2010) 326ITR 642, the Supreme Court held that the fact that the assessee keptrevising its application for settlement by disclosing higher income inthe revised applications established that it did not make a full andtrue disclosure of income which it aid not disclose to the assessingauthority. In the circumstances, the assessee cannot be said to have“co-operated” in the proceedings before the ITSC. It did not voluntarilyoffer the additional income, being the difference between 117.98crores and 39.53 crores. It first offered additional income of Rs. 39.53crores in the settlement application filed under Section 245 – C(1) ;when the ITSC found, pursuant to the report filed by the CIT on 17.10.2012, that by the assessee’s own admission, purchase invoiceswere bogus to the extent of Rs. 43.78 crores instead of Rs. 39.53crores, the assessee made a further disclosure of Rs. 4.25 crores. Afterall the reports were examined by the ITSC and after considering theevidence adduced by both the sides, it found that the assessee oughtto have offered the entire amount of Rs. 117.98 crores, being thebogus purchases of cement and steel from 5 parties as against Rs.39.53 crores offered by it. It was only at that stage, when corneredand when it was unable to rebut the evidence and the factsestablished by the evidence, that the assessee came forward with theadditional income of Rs. 78.45 crores, which when added to Rs. 39.53crores disclosed in the settlement application, aggregated to Rs.117.98 crores. In other words the assessee waited till the last momentto make the additional offer. This conduct of the assessee far fromshowing co-operation in the proceedings before the ITSC, showsdefiance and an attitude of a fence-sitter. The Member who expressedthe minority view rejecting the claim for immunity from penalty andprosecution has pertinently brought out this aspect of the assessee’sconduct in the observations quoted hereinabove. We agree with hisview that the assessee was all along quite aware that the entireamount of Rs. 117.98 crores, being bogus purchase of cement andsteel from 5 parites of Gurgaon and Delhi, was concealed income.There is ample evidence brought on record by the revenue in thisbehalf. Yet the assessee consciously chose not to offer the aforesaidamount as additional income – i.e. income which was not disclosed before the assessing officer – in the application filed before the ITSCunder Section 245(1). The assessee has thus failed to satisfy the twinconditions of Section 245H(1) and was, therefore, not entitled to theimmunity. The majority view expressed by the ITSC, with respect, goescontrary to the evidence on record and fails to take note of thecontumacious conduct of the assessee despite an opportunity affordedby Chapter XIX-A of the Income Tax Act to errant assessees to comeclean and turn a new leaf. The spirit of settlement was absolutelylacking; it may not be without justification to say that the assesseewas indulging in abuse of a well-intentioned statutory provision. It iscertainly open to the ITSC to grant immunity to an applicant frompenalty and prosecution. This power, however has to be exercised onlyin accordance with law i.e. on satisfaction of the conditions of Section245H(1). We are constrained to observe that the majority view takenby the ITSC in the present case reflects a somewhat cavalier approach,perhaps driven by the misconception that granting of immunity frompenalty and prosecution was ritualistic, once the assessee disclosesthe entire concealed income, ignoring the vital requirement that it isthe stage at which such income is offered that is crucial and that theapplicant cannot be permitted to turn honest in instalments. Whenthere is unimpeachable evidence of a much larger amount ofconcealed income, about which there is no ambiguity, then what wasdisclosed by the assessee in the application filed under Section 245-Clcannot be regarded as full and true disclosure of income merelybecause the assessee, when cornered in the course of the proceedings before the ITSC, offered to disclose the entire concealed income. In asmuch as the ITSC has ignored this crucial aspect, the majority viewexpressed by it cannot at all be countenanced.” Learned counsel appearing for the respondent assessee opposesthis writ petition and justifies the impugned order of the settlementcommission by contending that the assessee petitioner has fully andtruly disclosed his income and the manner in which such income hadbeen derived. I have perused the impugned order of the learned settlementcommission and particularly finding of settlement commissionrecorded in paragraph 29 relating to partial immunity granted to thepetitioner on penalty which is relevant and is quoted as hereunder : before the ITSC, offered to disclose the entire concealed income. In asmuch as the ITSC has ignored this crucial aspect, the majority viewexpressed by it cannot at all be countenanced.” Learned counsel appearing for the respondent assessee opposesthis writ petition and justifies the impugned order of the settlementcommission by contending that the assessee petitioner has fully andtruly disclosed his income and the manner in which such income hadbeen derived. I have perused the impugned order of the learned settlementcommission and particularly finding of settlement commissionrecorded in paragraph 29 relating to partial immunity granted to thepetitioner on penalty which is relevant and is quoted as hereunder : “29. Immunity From Penalty & Prosecution : The applicant hasrequested for immunity from penalty and prosecution. On carefulconsideration of the facts, it is evident that the applicant has not comeforward with full and true disclosure before us. Substantial evidencein the form of patients registers, admission registers, daily sheets andpapers etc. were impounded on the basis of which actual receipts werefound considerably higher than disclosed in SA. During the course ofhearing also, the A.R. could not reconcile various discrepancies andmismatches. The AR finally admitted the error and stated that a fairview may be taken by the Commission in this regard. For subsequentA. Yrs. Viz., 2012-13, 2013-14 and 2014-15, again the applicant hasnot disclosed full receipts from the profession. The heavy suppressionof income is evident from additions made for various Assessment Years as per discussion in preceding para. It is also admitted thatthere is no documentary evidence in support of several cashexpenses/payments. The income and expenditure account submittedbefore the Commission appear to be made with the sole motive todisclose the additional income as per the applicant’s convenience. Thisattitude of the applicant is not acceptable and runs contrary to thespirit of the settlement. The immunity is allowed to the applicant whocomes forward cleanly and discloses his affairs and income fully andtruly. In our considered view, the applicant does not deserve completeimmunity. Levy of some penalty u/s 271(1)(c ) of the Act forconcealment of income is warranted as the applicant has not disclosedhis additional income fully and truly before the SettlementCommission, we consider it fair to levy a lump sum penalty of Rs. 4lacs in each of the four Asstt. Years. Besides applicant’s professionalreceipts being much higher than the requisite monetary limit, he wasstatutorily obliged to maintain proper record and books of a/c, as persection 44AA of the IT Act. The applicant has continued with thedefault of not maintaining books of account in all the four Assessmentyears. Default in non maintenance of books of account during postsurvey period indicates that it was deliberate and intentional.Therefore, a penalty of Rs. 25,000/- each is levied u/s 271A of the Actfor A. Yrs. 2011-12, 2012-13, 2013-14 and 2014-15. Havingconsidered the facts and circumstances of the case, we are inclined togrant immunity u/s 245H(1) of the Act to the applicant from prosecution under I.T. Act. However, the same is subject to theprovisions of section 245H(1A) of the Act.” prosecution under I.T. Act. However, the same is subject to theprovisions of section 245H(1A) of the Act.” From the reading the recording and finding of the settlementcommission in the aforesaid paragraph 29 of the impugned order Ifind that the learned Settlement Commission itself has recorded thatattitude of the assessee respondent was not acceptable to it and thatit runs contrary to the settlement scheme and in its order settlementcommission also recorded and came to the finding that the assessee’sprofessional receipts were much higher than the requisite monetarylimit and he was statutorily obliged to maintain proper record andbooks of accounts as per Section 44AA of the Income Tax Act yet therespondent assessee had continued with the default of notmaintaining books of accounts of the four relevant assessment yearsand that such conduct of the assessee respondent was deliberate andintentional. It is strange that in spite of such finding of the learnedSettlement Commission how it has granted partial immunity frompenalty to the petitioner under Section 245H(1) of the Act which iscontrary to the spirit of the settlement scheme. Section 245H(1) is relevant for adjudication of this issue which isquoted as hereunder : “245H. Power of Settlement Commission to grant immunity fromprosecution and penalty. (1) The Settlement Commission may, if it issatisfied that any person who made the application for settlementunder Section 245C has cooperated with the Settlement Commissionin the proceedings before it and has made a full and true disclosure of his income and the manner in which such income has been derived,grant to such person, subject to such conditions as it may think fit toimpose for the reasons to be recorded in writing immunity fromprosecution for any offence under this Act or under the Indian PenalCode (45 of 1860) or under any other Central Act for the time being inforce and also (either wholly or in part ) from the imposition of anypenalty under this Act, with respect to the case covered by theSettlement : ……………………………………………………………………………….” Considering the submissions of the parties, facts andcircumstances as appears from record, relevant provisions of law andjudgment relied upon by the petitioner, I am inclined to hold that theimpugned order of the Settlement Commission to the extent ofgranting partial immunity to the petitioner from penalty under Section245H(1) of the Income Tax Act, 1961 inspite of specifically recordingthat it was evident to the Settlement Commission that the respondentassessee had not come forward with full and true disclosure before itand that the attitude of the assessee respondent was not acceptableand runs contrary to the spirit of the Settlement Commission and byalso recording that default in non maintenance of books of accountsunder Section 44AA of the Act was deliberate and intentional on thepart of the petitioner, the impugned order of settlement commission isbad, illegal and not sustainable in law and is contrary to the aims andobjects of the settlement commission under Chapter XIXA of theIncome Tax Act and accordingly the impugned order of the settlement commission dated 2[nd] September, 2016 is quashed to the extent it hasgranted partial immunity from penalty to the assessee respondent andin view of quashing of the impugned order to this extent all legalconsequence will follow. This writ petition being WPO 571 of 2018 stands disposed of byallowing the same to the extent indicated above. (MD. NIZAMUDDIN, J.) TR/