Private Limited v. Income Tax Settlement Commissioner

HIGH COURT OF MADHYA PRADESH MAIN SEAT AT JABALPUR Writ Petition No.3907/2019 M/s. Samdariya Builders Private Limited through its Director,16 Sarafa Bazar, Jabalpur ....Petitioner. versus 1.Income Tax Settlement Commissioner (through Secretary) Principal Bench, 9[th ] Floor Lok Nayak, Bhawan, Khan Market New Delhi-Pin 110003. 2.Principal Commissioner of Income Tax,(Central)-1, Aayakar Bhawan,Hoshangabad Road, Bhopal(MP). ....Respondents x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x Shri N.P.Sahni, Advocate for the petitioner. Revenue. Shri Sanjay Lal, Advocate for the x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x Present: Hon'ble Shri Justice S.K. Seth, Chief Justice Hon'ble Shri Justice Vijay Kumar Shukla. O R D E R (Passed on 07[th] May, 2019) Per Seth C.J. 3. 3.Petitioner is a Private Limited Company. It is a part of Samdariya Group, comprising of four entities, viz. M/s. Samdariya Enterprises; (2) M/s. Samdariya Builder Green City; (3) M/s. Samdariya Dharamchand Tejraj Saraf (HUF) and (4) M/s. Samdariya Builders Private Limited, (the petitioner above). 4.On 16.5.2013 search and seizure under Section 132 and 133A by the Income Tax Act were conducted by the Department on the Samdariya Group, including Petitioner Company, covering residential and business premises of the group including some brokers. So far as the petitioner company is concerned, it is alleged, that no incriminating material was found against the petitioner company during the search and seizure operations, except 9 loose sheets of papers, allegedly relating to petitioner company were seized from one broker Abhishek Gupta. 5.It is further alleged that in compliances of notices issued under Section 153 A of the Act for the A.Y. 2008-09 to A.Y. 2013-14 and 142(1) for the A.O. 2014-15. Petitioner Company filed the returns of income. During the assessment proceedings, Petitioner Company filed application under Section 245C(1) of the Act for settlement. The application was admitted to be proceeded with by the Settlement Commissioner under Section 245D(1) and after considering the submissions of the Department, the Settlement Commissioner proceeded ahead under Section 245D(2C) with the application for settlement. Thereafter, the Principal Commissioner filed the Rule 9 report. The Settlement Commissioner, by the order impugned under Section 245D(4) without deciding the application on merit, relegated the Petitioner Company to the Assessing Officer. Hence, the Assistant Commissioner of Income Tax, Central-Circle Jabalpur issued notice dated 8.9.2017 to the Petitioner Company to comply with the previous notice issued under Section 142(1) of the Act. Initially, petitioner Company challenged the order impugned in a writ petition before the Delhi High, but later on withdrew the said writ petition with a liberty to challenge the order impugned in this Court. Hence the present writ petition, to assail the Order of the Settlement Commissioner pertaining to the Petitioner Company. 6.After notice, respondents have filed the reply contending that no interference is called for with the order impugned and the writ petition is liable to be dismissed. 7.We have heard Shri Sahni, learned counsel for the petitioner and Shri Sanjay Lal, learned counsel for the respondents at length and considered the material placed on record. 6.After notice, respondents have filed the reply contending that no interference is called for with the order impugned and the writ petition is liable to be dismissed. 7.We have heard Shri Sahni, learned counsel for the petitioner and Shri Sanjay Lal, learned counsel for the respondents at length and considered the material placed on record. 8.Shri Sahni, learned counsel for petitioner submitted that the Settlement Commissioner while passing the order impugned under Section 245 D(4) of the Act committed serious illegality in not providing settlement when the Petitioner Company had made full and true disclosure of income along with the manner in which such income was derived in the application filed under Section 245(C) of the Act. He submitted that the Settlement Commissioner had only two options, either to reject the application when true and correct disclosure is not made in the application or allow it to be further proceeded. In any case, he submitted the Settlement Commissioner could not have relegated the petitioner to be dealt with by the assessing officer. According to him, the order impugned is therefore unsustainable in law and deserves to be quashed by impugned is therefore unsustainable in law and deserves to be quashed by allowing the writ petition. 9.On the other hand, Shri Lal, learned counsel for the Revenue supported the order passed by the Settlement Commissioner. He submitted that that in the facts and circumstances of the case, Settlement Commissioner by referring the petitioner to the Assessing Officer committed no illegality so as to warrant interference by this Court in exercise of extra-ordinary writ jurisdiction. He prayed that the writ petition be dismissed. 10.A new Chapter XIX-A was introduced in the Income Tax Act by the Taxation A new Chapter XIX-A was introduced Laws (Amendment) Act, 1975 (in short “the Amendment Act”) w.e.f. 1-4-1976 introducing provision for settlement of cases. The Commission is constituted by the Central Government for the settlement of cases under Chapter XIX-A. 11.Scheme of Chapter XIX-A shows that the filing of application by the assessee is a unilateral act. When an application for settlement is filed prescribed procedure can allow the application to be proceeded with or rejected. Only after the Commission allows the petition to be proceeded with, it exercises the power of settlement. 12.The Commission’s power of settlement has to be exercised in accordance with the provisions of the Act. Though the Commission has sufficient elbow room in assessing the 13.A bare reading of Section 245D(6) shows that every order passed under sub-section (4) has to provide the terms of the settlement and also to provide that the settlement shall be void if it is found subsequently by the Commission that it has been obtained by fraud or by misrepresentation of facts. The decision whether the order has been obtained by fraud or misrepresentation of facts is that of the Commission. 14.The foundation for settlement is an application which the assessee can file at any stage of a case relating to him in such form and in such manner as is prescribed. The statutory mandate is that the application shall contain “full and true disclosure” of the income which has not been disclosed before the assessing officer, the manner in which such income has been derived. The fundamental requirement of the application under Section 245C is that full and true disclosure of the income has to be made, along with the manner in which such income was derived. On receipt of the application, the Commission calls for the report from the Commissioner and on the basis of the material contained in the report and having regard to the nature and circumstances of the case or complexity of the investigation involved therein, it can either reject the application or allow the application to be proceeded with as provided in Section 245D(1). an application made in terms of Section allow the application to be proceeded with as provided in Section 245D(1). an application made in terms of Section 245C. That shows clear legislative intent that the applicant for settlement has to make a true and fair declaration from the threshold. It is on the basis of the application received that the Commission calls for the report to decide whether the application is to be rejected or permitted to be continued. The declaration contemplated in Section 245C is in the nature of voluntary disclosure of concealed income, but as noted above it must be true and fair disclosure. Voluntary disclosure and making a full and true disclosure of the income are necessary preconditions for invoking the Commission’s jurisdiction. In the scheme of thing, we are of the considered opinion that learned counsel for the petitioner company is right in contending that the Settlement Commissioner could have either rejected the application or allowed it to be proceeded further. If the Commission felt that the matter required further inquiry, it could have directed the Principal Commissioner or Commissioner of Income Tax to enquire and submit the report to the Commission to take a decision. The Commission could not get round the application for settlement. When a duty is casts on the Commission, it is expected that the Commission would perform the duty in the manner laid down in the Act, especially when no further remedy is provided in the Act against the order of the Settlement Commissioner. 17.In view of the foregoing discussion, we set aside the order dated 30.8.2017 and dispose of the writ petition with a direction to the Settlement Commission to proceed to decide the application for settlement afresh in accordance with law and pass order. 18.Ordered accordingly. (S.K.Seth) (Vijay Kumar Shukla) Chief Justice Judge rao SATYA SAI RAO 2019.05.07 11:18:30 +05'30'