Rohit Kumar Gupta v. Principal Commissioner Of Income Tax Central -Ii, New Delhi & Anr

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 24[th] July, 2019 Decided on: 19[th] August, 2019 + W.P.(C) 6054/2017 ROHIT KUMAR GUPTA ..... Petitioner Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Gautam Jain, Mr. Madhur Aggarwal, Mr. Uma Shankar and Mr. Prakash Kumar, Advocates. versus PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL -II, NEW DELHI & ANR. ..... Respondents Through: Mr. Zoheb Hossain, Senior Standing Counsel with Mr. Piyush Goyal, Advocate. + W.P.(C) 6060/2017 PRG CONSULTANTS PRIVATE LIMITED ..... Petitioner Through: Mr. C. S. Aggarwal, Senior Advocate with Mr. Gautam Jain, Mr. Madhur Aggarwal, Mr.Uma Shankar and Mr. Prakash Kumar, Advocates. versus PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-II, NEW DELHI & ANR. ..... Respondents Through: Mr. Zoheb Hossain, Senior Standing Counsel with Mr.Piyush Goyal, Advocate. WP(C) 6054/2017 & 6060/2017 Page 1 of 40 CORAM: JUSTICE S. MURALIDHAR JUSTICE TALWANT SINGH J U D G M E N T Dr. S. Muralidhar, J.: 1. An interesting question of law arises in the present petition concerning the interpretation of Sections 153, 153 B, 245 D and 245 HA of the Income Tax Act, 1961 („Act‟). 2. The challenge in both these petitions is to the order dated 4[th] August, 2016 passed by the Income Tax Settlement Commission („ITSC‟) under Section 245 D (4) of the Income Tax Act, 1961 (Act) as well as to the notices dated 6[th] April, 2017 in respect of assessment proceedings under Section 143(3) read with Section 153A of the Act for the Assessment Years (AYs) 2009-2010, 2010-2011 and 2011-2012 issued by the Assistant Commissioner of Income Tax, Central Circle-13, New Delhi (Respondent No.2). A further challenge is to the impugned letter and notice dated 4[th] July, 2017 issued by Respondent No.2 under Section 142(1) of the Act for the aforementioned AYs calling for further information from the two Assessees. Background facts 3. The background facts are that PRG Consultants Private Limited („PRGCPL‟) the Petitioner in WP(C) No. 6060/2017 was incorporated on 9[th]September, 2008. Its entire share capital was held by Mr. Rohit Kumar Gupta, the Petitioner in WP (C) No. 6054/2017, along with his family members. PRGCPL was established with the main business object of WP(C) 6054/2017 & 6060/2017 Page 2 of 40 providing consultancy services and acting as an advisor and consultant to technical industries. 4. Mr Rohit Kumar Gupta was a full time Director with M/s BSBK Engineers Private Limited („BSBK‟) and M/s. Macawber Beekay Private Limited („MBPL‟). Both BSBK and MBPL are related concerns and are referred to by the Petitioners as the BSBK group. It is stated that the primary source of income of Mr. Gupta was derived from the BSBK group. It is stated that PRGCPL is also a shareholder in the BSBK Group. 5. On 24[th] May, 2012 a search under Section 132 of the Act was conducted on the BSBK Group of Companies. Simultaneously a search was conducted at the premises of Mr. Gupta jointly with PRGCPL. 6. On 9[th] June, 2014 notices under Section 153A of the Act were issued by the Income Tax Department (Department) to Mr. Gupta as well as PRGCPL. In response thereto both Petitioners i.e. Mr. Gupta and PRGCPL filed respective returns of income for AYs 2009-2010 to 2011-2012. 7. The Assessing Officer (AO) (Respondent No.2) picked up their returns for scrutiny and on 25[th] September 2014 issued notices to each of the Petitioners under Section 143 (2) of the Act. One of the contentions of the Department was that PRGCPL had introduced bogus share capital of Rs.5.30 crores with hefty a premium from various fictitious concerns. 8. During the pendency of the above assessment proceedings both Mr. Gupta WP(C) 6054/2017 & 6060/2017 Page 3 of 40 6. On 9[th] June, 2014 notices under Section 153A of the Act were issued by the Income Tax Department (Department) to Mr. Gupta as well as PRGCPL. In response thereto both Petitioners i.e. Mr. Gupta and PRGCPL filed respective returns of income for AYs 2009-2010 to 2011-2012. 7. The Assessing Officer (AO) (Respondent No.2) picked up their returns for scrutiny and on 25[th] September 2014 issued notices to each of the Petitioners under Section 143 (2) of the Act. One of the contentions of the Department was that PRGCPL had introduced bogus share capital of Rs.5.30 crores with hefty a premium from various fictitious concerns. 8. During the pendency of the above assessment proceedings both Mr. Gupta WP(C) 6054/2017 & 6060/2017 Page 3 of 40 and PRGCPL filed applications with the ITSC under Section 245C of the Act on 26[th] February, 2015 for settlement of their cases for the aforementioned AYs 2009-2010 to 2011-2012. Mr. Gupta stated in his application that he had received Rs.5.60 crores in cash from his employer i.e. BSBK Group and the said sum had been utilised in raising share capital of PRGCPL. 9. Mr. Gupta disclosed that incentives of Rs.2.40 crores in each of the AYs 2009-2010 and 2010-2011 and Rs.80 lacs in AYs 2011-2012 had been received. Mr. Gupta also stated that the above share capital transactions were arranged through accommodation entries arranged from fictitious companies. He disclosed before the ITSC the names of such companies for each of the aforementioned AYs. 10. On its part, the PRGCPL disclosed additional consultancy charges received by it in cash from BSBK group over and above the consultancy receipts offered for taxation in its income tax returns. Orders of the ITSC under Section 245 C (1) of the Act 11. It is stated that on 5[th] March, 2015 the ITSC passed an order under Section 245D (1) of the Act dismissing the two applications filed under Section 245 C (1) of the Act by Mr. Gupta and PRGCPL. As regards Mr. Gupta, the ITSC held as under: “3.2 It was observed by us that the applicant has disclosed additional income being the incentive received from M/s. Macawar Beekay (P) Ltd. of Rs.2.40 crore, Rs.2.40 crore and Rs.80 lakh in AY 2009-10, AY 2010-11 and AY 2011-12 WP(C) 6054/2017 & 6060/2017 respectively. Regarding the manner of deriving such income, the AR was required to explain whether such income was disclosed in the statement u/s. 132(4) by the applicant or any confirmation from M/s. Macawar Beekay (P) Ltd., the employer was available. The AR was also required to clarify whether during the course of search in the applicant's premises or at the premises of M/s. Macawar Beekay (P) Ltd. any evidence was found regarding the payment of incentive to the applicant, The AR was further required to explain whether there is any other basis to b, justify the payment of incentive by the employer to the applicant. The AR replied that providing reply to all the above queries would not only require substantial time but also would need examination of the entire seized material recovered in the search in the group cases. The AR accordingly submitted that he may not be able to provide this information in the short time and therefore may be permitted to withdraw the application with liberty to file it again along with the clarifications on the above points. 3.3 After considering the arguments of the AR that settlement application and the facts/materials therein, we are satisfied that the applicant has not brought any material on record to establish the manner of deriving additional income disclosed in the settlement application und has also not been able to bring the clarification on the queries raised. We are of the opinion that the essential condition of a valid application u/s. 245C (1) namely full and true disclosure of manner of deriving additional income has not been satisfied. We therefore reject the application of Sh. Rohit Kumar Gupta with liberty that he may file it again.” 12. As regards the PRGCPL application, it was held by the ITSC as under: 3.3 After considering the arguments of the AR that settlement application and the facts/materials therein, we are satisfied that the applicant has not brought any material on record to establish the manner of deriving additional income disclosed in the settlement application und has also not been able to bring the clarification on the queries raised. We are of the opinion that the essential condition of a valid application u/s. 245C (1) namely full and true disclosure of manner of deriving additional income has not been satisfied. We therefore reject the application of Sh. Rohit Kumar Gupta with liberty that he may file it again.” 12. As regards the PRGCPL application, it was held by the ITSC as under: “4.3 After considering the arguments of the AR, the settlement application and the facts/materials therein, we are satisfied that the applicant has not paid the amount of tax and interest payable on the basis of income disclosed in the settlement application as required by section 245C (l) and therefore WP(C) 6054/2017 & 6060/2017 essential condition of a valid application is not been satisfied. We therefore reject the application of M/s. PRG Consultants Pvt. Ltd. with liberty that it may file application again.” 13. Liberty was granted to the PRGCPL as well as Mr. Gupta to file fresh applications. 14. On 26[th] March, 2015 both Mr. Gupta and PRGCPL again filed fresh applications in the ITSC under Section 245 C (1) of the Act. It is stated that the technical discrepancy in the application of PRGCPL pointed out by the ITSC was rectified. Orders of the ITSC under Section 245 D (1) of the Act 15. On 7[th] April, 2015 orders were passed in both applications by the ITSC on 26[th] March, 2015 under Section 245 D (1) of the Act allowing the applications to be proceeded with. As far as the application of Mr. Gupta was concerned the ITSC observed as under: “3.3 The AR submitted that, after the filing of settlement application on 26.02.2015 and its subsequent rejection on 05.03.2015, the applicant approached his employer to obtain confirmation regarding the payment of incentive. The AR further submitted that the application also approached his employer i.e. M/s.Macawar Beekay (P) Ltd. to allow examination of the seized material so as to find out any reference or evidence in such seized material regarding the payment of incentive to the applicant. The AR stated that on account of souring of relations with the employer, neither M/s. Macawar Beekay (P) Ltd. has provided any certificate/ confirmation regarding payment of incentive nor allowed access to the seized material to the applicant. Consequently the applicant has not been able to obtain any evidence in this WP(C) 6054/2017 & 6060/2017 regard. The applicant has however been able to obtain balance sheet of M/s. Macawar Beekay (P) Ltd. for FYs 2006-07, 2007-08 and 2008-09 copy of which have been enclosed with the Statement of Fact filed by the applicant. The AR argued that because of the efforts put in by the applicant, profit of M/s.Macawar Beekay (P) Ltd. increased tremendously which was evidence from the following figures. WP(C) 6054/2017 & 6060/2017 regard. The applicant has however been able to obtain balance sheet of M/s. Macawar Beekay (P) Ltd. for FYs 2006-07, 2007-08 and 2008-09 copy of which have been enclosed with the Statement of Fact filed by the applicant. The AR argued that because of the efforts put in by the applicant, profit of M/s.Macawar Beekay (P) Ltd. increased tremendously which was evidence from the following figures. The AR further mentioned that it is gathered that M/s. Macawar Beekay (P) Ltd. and M/s. BSBK Engineers Pvt. Ltd., the two main concerns of the group, have also filed settlement applications and have disclosed substantial unaccounted income. The AR argued that Sh.Rohit Kumar Gupta has been working with M/s.Macawar Beekay (P) Ltd. for the last 20 years and is the key personnel of the group. It is stated by the Assessee because of his efforts that his employer M/s. Macawar Beekay (P) Ltd. has progressed and has earned more and more income year after year. The AR argued that the applicant is deriving salary income and has disclosed the additional incentive income which is also derived from the same source even though it was not disclosed earlier. He argued that both the applicant and M/s. Macawar Beekay (P) Ltd. are before the Principal Bench of the Commission and therefore matter could be inquired in the settlement proceedings in these two cases to establish the correctness of incentive received by the applicant. He stated that in case source of income of the applicant was found to be false, immunity from penalty and prosecution may not be given to him. The AR argued that the applicant has made a full and true disclosure of his income and the manner of deriving such income. The AR stated that all facts have been disclosed correctly and nothing has been withheld. The AR urged that the application may be admitted. 3.4 We have considered the arguments of the AR, the settlement application and the material/record brought on record. We find that the applicant has disclosed additional income in the form of incentive received from the employer with whom he has been employed from the last 20 years. We also find that the substantial increase in the profits of M/s.Macawar Beekay (P) Ltd. has been demonstrated and claimed to be partly due to the efforts of the applicant. The application of M/s.Macawar Beekay (P) Ltd. has already been admitted u/s. 245D (1) and therefore the correctness of the receipt of incentive by Sh.Gupta from M/s.Macawar Beekay (P) Ltd. could be examined in the subsequent settlement proceeding of the two cases. We find that there is no evidence available, as of now, to hold that the disclosure made by the applicant is not full and true. 3.5 After considering the arguments of the AR, the settlement application and the facts/materials therein, we are of the opinion that the application of Sh.Rohit Kumar Gupta satisfied all the conditions of a valid application as mentioned in section 245C(1) and 245D(1). The tax and interest due on the basis of the additional income disclosed have been paid. The manner of deriving the additional income disclosed has been explained. There is no adverse information available on record, as of now, to prove that the disclosure of income in this case is not full and true. Accordingly, the settlement application of Sh. Rohit Kumar Gupta is admitted and allowed to be proceeded with u/s 245D(1).” 16. As regards the application of PRGCPL it was held by the ITSC in the same common order dated 7[th] April 2015 as under: 4.1 The AR stated that the deficiency of payment of tax and interestas noted inthe order u/s. 245D (1) dated 05.03.2015 has been removed as the required amount of tax and interest has been paid. The AR further explained that m/s. PRG Consultants Pvt. Ltd. is related to Sh. Rohit Kumar Gupta as Sh. Gupta holds 40% voting power in the applicant company. WP(C) 6054/2017 & 6060/2017 16. As regards the application of PRGCPL it was held by the ITSC in the same common order dated 7[th] April 2015 as under: 4.1 The AR stated that the deficiency of payment of tax and interestas noted inthe order u/s. 245D (1) dated 05.03.2015 has been removed as the required amount of tax and interest has been paid. The AR further explained that m/s. PRG Consultants Pvt. Ltd. is related to Sh. Rohit Kumar Gupta as Sh. Gupta holds 40% voting power in the applicant company. WP(C) 6054/2017 & 6060/2017 The AR stated that the applicant company has earned additional income from consultancy services which has been offered in the settlement application in the 3 assessment years. The AR stated that the application of the company satisfies all necessary conditions and should be admitted. 4.2 After considering the arguments of the AR, the settlement application and the facts and materials therein, we are of the opinion that the application of M/s. PRG Consultants Pvt. Ltd. satisfies all the conditions of a valid application as mentioned in Section 245C(1) and 245D(l). The tax and interest due on the basis of the additional income disclosed have been paid. The manner of deriving the additional income hasbeen explained. There is no adverse information available on record as of now to prove that the disclosure of income in this case is not full and true. Accordingly, the settlement application of M/s. PRG Consultants Pvt.Ltd. is admitted and allowed to be proceeded with u/s 245D(1).” 17. In both cases reports were called for by the ITSC under Section 245 D (2B) of the Act from the Principal Commissioner of Income Tax (PCIT). The PCIT submitted reports on 7[th] May, 2015 objecting to the validity of both applications on the ground that full and true disclosure of undisclosed income had not been made by each of the Petitioners. Orders of the ITSC under Section 245 D (2C) of the Act 18. On 20[th] May, 2015 the ITSC passed a further order under Section 245D (2C) holding as under: “8.1 We have heard the arguments put before by both the ld. CIT (DR) and the ld. AR of the applicants. We observed that the CIT has raised mainly the issue of manner of earning of additional income. The applicant has spelt out the manner of earning being the cash incentives received from the employer; WP(C) 6054/2017 & 6060/2017 however he expressed his inability to furnish the evidences due to the strained relationship with his employer. After examining the facts and circumstances of the case, the contentions of the AR regarding the manner of earning of additional income declared are found reasonable and tenable. 9. After careful consideration, we find that the above two applicants have fulfilled all the conditions prescribed u/s 245C (1) as there is no adverse material on record to suggest otherwise. Even otherwise the issues raised by the Ld. CIT in his reports dated 07.05.2015 shall be open for the Bench during the course of proceedings u/s 245D (4). The CIT will have opportunity to examine the same and offer further comments, if any, during the course of proceedings u/s 245D (4). The decision to hold these Settlement Applications “not invalid” is without prejudice to initiation of penalty and launching of prosecution proceedings, if required on facts available on the records at the relevant time in subsequent proceedings by the Commission. Accordingly, we hold that these Settlement Applications are prima-facie 'not invalid' and therefore, are allowed to be proceeded with further.” 19. Thereafter the ITSC called the PCIT to submit a report under Rule 9 of the Settlement Commission Procedure Rules, 1997. A report was submitted by PCIT dated 7[th] August, 2015 pointing out that the BSBK Group had itself filed petitions under Section 245(C) before the ITSC and neither the PRGCPL nor Mr. Gupta nor the BSBK have made a full and true disclosure of their incomes before the ITSC. Mr. Gupta, in reply to the Report submitted by the PCIT under Rule 9 filed a rejoinder clarifying that he had no other source of income other than salary from BSBK group. 20. On 16[th] March, 2016 the ITSC passed an order under Section 245D (3) of the Act allowing PCIT to conduct verification/investigation on the “issue WP(C) 6054/2017 & 6060/2017 Page 10 of 40 of incentive received by the applicant from BSBK Engineers Pvt. Ltd. and Macawar Beekay (P) Ltd. from the seized documents of these companies.”Thereafter, a notice dated 7[th] April, 2016 was issued by the AO directing each of the Petitioners to participate in the verification/investigation process as directed by the ITSC by order dated 16[th] March 2016. A reply was submitted by Mr. Gupta on 25[th] April, 2016 to the AO stating that he was unable to provide any confirmation from the BSBK group regarding payment of incentives on account of „strained relations‟. It was also submitted by Mr. Gupta that, copies of applications and submissions filed by BSBK Group with ITSC had not been made available to him. Report of investigation of the PCIT 21. Thereafter report of investigation conducted pursuant to the directions of the ITSC was submitted by the PCIT stating inter alia as under: “8. As already mentioned earlier no evidence of cash incentive is available in the seized documents of WS BSBK Engineers P. Ltd. and was Macawar Beekay (P) Ltd. It may not be out of place to mention here that Macawar Beekay (P) Ltd. and other companies of BSBK group are also before Hon'ble Settlement Commission. It is found from their statement of facts that all these companies have nowhere shown any cash incentive paid to Mr. Rohit Kumar Gupta or to any other employee of their concern. It is highly unlikely that cash incentive will be paid only to single executive and not to others. The fact that no incentive .has been shown as paid by was Macawar Beekay (P) Ltd. and other companies of BSBK group to She Rohit Kumar Gupta has major ramifications in these cases because if we agree on the assertions made by Sh. Rohit Kumar Gupta then it automatically implies that the company i.e., was Macawar Beekay (P) Ltd. has not come up with true and full disclosure before the Hon'ble Settlement Commission. On the other hand WP(C) 6054/2017 & 6060/2017 if we rely on statements of facts submitted by was Macawar Beekay (P) Ltd. before the Hon'ble Settlement Commission then it leads to a conclusion that Mr. Rohit Kumar Gupta has cooked up stow of receiving incentive from was Macawar Beekay (P) Ltd. and accordingly not furnished true and full disclosure before the Hon'ble Settlement Commission. Thus, in any of the eventuality, application of one of the persons deserves to be rejected. 9.Further, it is submitted that if the assertion of Mr. Rohit Kumar Gupta of receiving incentive bonus is accepted by the Hon'ble Settlement Commission, then it has other ramifications also like if the cash incentive is paid to one person then it is highly probable that the similar cash incentive was also paid to other persons/employees also, by Macawar Beekay (P) Ltd and other group companies of BSBK group. It is requested that Macawar Beekay (P) Ltd. and was BSBK Pvt. Ltd. may be asked by the Hon'ble Settlement Commission to furnish details in respect of cash incentive paid to Shri Rohit Kumar Gupta and other persons /employees and the decision on this issue may be taken on a holistic basis in all the concerned cases.” 9.Further, it is submitted that if the assertion of Mr. Rohit Kumar Gupta of receiving incentive bonus is accepted by the Hon'ble Settlement Commission, then it has other ramifications also like if the cash incentive is paid to one person then it is highly probable that the similar cash incentive was also paid to other persons/employees also, by Macawar Beekay (P) Ltd and other group companies of BSBK group. It is requested that Macawar Beekay (P) Ltd. and was BSBK Pvt. Ltd. may be asked by the Hon'ble Settlement Commission to furnish details in respect of cash incentive paid to Shri Rohit Kumar Gupta and other persons /employees and the decision on this issue may be taken on a holistic basis in all the concerned cases.” 22. The Petitioners thereafter submitted replies under Section 245D (3) of the Act. In the reply it was stated that the AO had exceeded the scope of investigation. It was also clarified by the Petitioners that as and when cash incentives were received from BSBK, they were injected in the form of share capital in PRGCPL within a day or two. Orders of the ITSC under Section 245 D (4) of the Act 23. Thereafter by a common order dated 4[th] August, 2016 under Section 245D (4) of the Act, the ITSC rejected the settlement applications filed by Mr. Gupta and PRGCPL holding that the essential condition under Section 245 C (1) of the Act that the Petitioners should make a “full and true WP(C) 6054/2017 & 6060/2017 Page 12 of 40 disclosure” was not satisfied. 24. As far as the application of Mr. Gupta was concerned, it was held that in view of the denial from the employer about payment of cash incentives and the report of the PCIT which stated that in the seized material, there was no evidence in that regard and considering his other sources, including business income and capital gain from sale of immovable properties/shares, the said Applicant did not satisfy the twin requirement of “full and true disclosure of additional income declared in the settlement application.” It was further held that the detailed breakup of Rs.60 lacs cash stated to have been received as consultancy charges from the BSBK Group was not explained. 25. As far as PRGCPL was concerned, it was held by the ITSC as under: The applicant company was incorporated in 2008 with the object of acting as consultants and advisors. Sh. Rohit Kumar Gupta and his family members are the only shareholders in this company. It has been stated that the so-called cash incentive received by Sh. Rohit Kumar Gupta from his employer company M/s. Macawber Beekay (Pvt.) Ltd. has been invested in this company as Share Capital. 10. The application of Sh. Rohit Kumar Gupta has been rejected, for the reasons cited above. Thus, the source of money which is stated to have been used for investing in the Share Capital of the company is not explained. Moreover in the application, the applicant company claims to have received consultancy charges of Rs. 60 lakhs in cash from BSBK Group. No detailed breakup of Rs. 60 lakhs as consultancy charges from BSBK Group are given. The two main companies of BSBK Group, also before the Settlement Commission, have denied having paid any such consultancy charges in cash to the applicant. WP(C) 6054/2017 & 6060/2017 11. After careful consideration of the facts discussed above and for the same reasons as in the case of Sh. Rohit Kumar Gupta at paras 6 to 8 above we hold that the applicant company has not made a full and true disclosure of additional income in the Settlement application. The same is also rejected u/s 245C (1) read with section 245 D (4).” WP(C) 6054/2017 & 6060/2017 11. After careful consideration of the facts discussed above and for the same reasons as in the case of Sh. Rohit Kumar Gupta at paras 6 to 8 above we hold that the applicant company has not made a full and true disclosure of additional income in the Settlement application. The same is also rejected u/s 245C (1) read with section 245 D (4).” 26. According to the Petitioners, they filed writ petitions in this Court on 7[th]October, 2016 assailing the above order dated 4[th] August, 2016 of the ITSC. The writ petitions are stated to have been returned with defects. However, according to the Petitioners, they instructed their counsel not to pursue the writ petitions since time for framing the assessment under Section 153A of the Act for AYs 2009-10, 2010-11 and 2011-12 had expired on 10[th] October, 2016 and pursuing the writ petitions would have merely been of academic interest. Impugned notices under Section 143 (3) read with Section 153 A 27. Thereafter on 6[th] April, 2017, the Respondent No. 2 issued notices under Section 143 (3) read with Section 153A of the Act for AYs 2009-10, 2010-11 and 2011-12. The Petitioner‟s raised objections by the letter dated 24[th]April, 2017 stating that there were no valid assessment proceedings pending before the Respondent No. 2 after 10[th] October, 2016. This was rejected by the Respondent No. 2 by letters dated 4[th] July, 2017. On the same date, notices were issued under Section 142 (1) of the Act for the aforementioned AYs. 28. On 12[th] July 2017, the Petitioners again objected to the assessment WP(C) 6054/2017 & 6060/2017 proceedings on the ground that they were time-barred. Thereafter the present petitions were filed on 15[th] July 2017. 29. On 19[th] July 2017, while directing notice to issue in these petitions, this Court stayed further proceedings pursuant to the impugned notices issued by Respondent No.2 under Sections 143 (3) read with Section 153 A of the Act. The interim order was made absolute on the next date i.e. 5[th] September 2017. Thereafter counter affidavits of the Respondents were filed on 14[th]September 2017 to which rejoinders were filed on 15[th] January 2018. 30. Counsel for the Petitioners filed two written notes of argument on 10[th]July 2018 and 4[th] September 2018. Rejoinder written submissions were filed on 24[th] July 2019. 31. Counsel for the Respondents filed two written notes of arguments on 23[rd] and 26[th] July 2019. Submissions on behalf of the Petitioners 32. Mr C.S. Aggarwal, learned senior counsel for the Petitioners submitted as under: (i) In terms of Section 153B (b) of the Act, the time limit for completion of assessment under Section 153A of the Act was within two years from the end of the financial year in which last of the authorization of the search under Section 132 (1) of the Act was executed. The assessment in the present case had to be completed before 31[st] March, 2015. WP(C) 6054/2017 & 6060/2017 Page 15 of 40 (ii) In computing the period of limitation, the period commencing from the date on which they had made applications before the ITSC ending with the date on which order under Section 245D (1) of the Act was received by the PCIT in terms of Section 245D (2) of the Act, had to be excluded. With the remaining period, after exclusion of the aforementioned period, being extended to 60 days in terms of the proviso below Explanation to Section 153B (1) of the Act, the time to frame assessment got extended till 10[th]October, 2016. (iii) There was no other provision under Section 153B which further extended the time for completion of assessment. In particular resort could not be had to Section 153 of the Act, since the present proceedings were pursuant to a search and Section 153 B was a complete code as far as the limitation for such proceedings was concerned. (iii) There was no other provision under Section 153B which further extended the time for completion of assessment. In particular resort could not be had to Section 153 of the Act, since the present proceedings were pursuant to a search and Section 153 B was a complete code as far as the limitation for such proceedings was concerned. (iv) The order passed by the ITSC although stated to be under Section 245D (4) of the Act is in fact an order under Section 245D (1) of the Act since it is an order rejecting the application of the Petitioner on the ground that the Petitioner‟s application had failed to satisfy the mandatory twin conditions that there had to be a full and true disclosure and the manner in which the undisclosed income had been earned. (v) Reliance was placed on the decision CIT v. Om Prakash Mittal (2005) 2 SCC 751 in support of the contention that unless an order under Section 245D (6) of the Act provides the terms of settlement, it cannot be an order WP(C) 6054/2017 & 6060/2017 Page 16 of 40 under Section 245D (4) of the Act. This was also what was held in Ajmera Housing Corporation v. Commissioner of Income Tax (2010) 8 SCC 739. (vi) The legislature has specifically provided time limit under Section 153B for framing assessment in cases where search had been initiated. As such Section 153 of the Act cannot be applied since it is of general nature. Inasmuch as Section 153B begins with the non obstante clause, it overrides all other provisions providing time limits in the Act. Even in terms of the the proviso to Section 153B(3) as inserted by the Finance Act, 2017 with effect from 1[st] June 2016 it is plain that it requires assessment to be completed in accordance with the provisions of „this‟ Section i.e. Section 153B as it stood immediately before its substitution by the Finance Act, 2016.‟ Thus it is plain that the time limit as provided under Section 153B has to be applied and not the time limit which is provided under Section 153. (vii) The 1 year time limit under Section 153B was inserted only with effect from 1[st] April 2017. Prior thereto there was no such period of 1 year available to the Revenue. In other words, the legislative intent that is expressed is that where notices under Section 153A have been issued prior to 1[st] June 2016 it is only the unamended Section 153B that would apply. This is also stated in the memorandum explaining the provisions of the Finance Bill, 2017 as provided in 391 ITR 201 (ST). It is only by the said amendment that the reference to Section 153B in the second proviso below the Explanation (1) to Section 153 has been omitted. This further strengthens the argument that Section 153 has no application at all to assessments to be made under Section 153A. Further, having provided WP(C) 6054/2017 & 6060/2017 Page 17 of 40 extension of the period of 60 days in the main provision of Section 153B, the further proviso in Section 153 cannot be invoked for the purpose of Section 153A of the Act. It is Clause (v) of the Explanation 1 below Section 153 as it stood at the relevant time that alone would apply. Section 153(8) and Section 245HA (4) would have no application whatsoever. (viii) According to Section 245HA(4) the period commencing from the date of application to the ITSC under Section 245C and ending with the „specified date‟ shall be excluded for the purposes of determining the time limit for framing assessments under Section 153, 153B of the Act. The specified date in terms of 245HA (1) (i) is the date on which the application is rejected under Section 245D (1) of the Act. Since in the case of the Petitioner it is Section 153B that applies, there is no occasion for invoking Section 245 HA (4) read with Section 153 of the Act. Submissions on behalf of the Revenue 33. Replying to the above contentions it is submitted by Mr. Zoheb Hossain, learned Senior Standing counsel for the Revenue as under: (viii) According to Section 245HA(4) the period commencing from the date of application to the ITSC under Section 245C and ending with the „specified date‟ shall be excluded for the purposes of determining the time limit for framing assessments under Section 153, 153B of the Act. The specified date in terms of 245HA (1) (i) is the date on which the application is rejected under Section 245D (1) of the Act. Since in the case of the Petitioner it is Section 153B that applies, there is no occasion for invoking Section 245 HA (4) read with Section 153 of the Act. Submissions on behalf of the Revenue 33. Replying to the above contentions it is submitted by Mr. Zoheb Hossain, learned Senior Standing counsel for the Revenue as under: (i) There is a fundamental flaw in the above submissions inasmuch as Clause (iv) of the Explanation below Section 153B of the Act only refers to an order passed by the ITSC under Section 245D (1) of the Act. However, in the present case the order of the ITSC dated 4[th] August 2016 is not an order under Section 245D(1) of the Act but expressly stated to be an order under Section 245D(4). WP(C) 6054/2017 & 6060/2017 Page 18 of 40 (ii) The ITSC is not denuded of the power of passing a final order under Section 245D (4) rejecting a settlement application. This has been conclusively settled by the Supreme Court in Ajmera Housing Corporation v. CIT (supra), the Gujarat High Court in PCIT v. Settlement Commission [2016] 386 ITR 660 (Guj),this Court in CIT v. ITSC [2014] 360 ITR 407and order dated 15[th] May 2017 in WP(C) 5185 of 2016 (Viswanath Gupta v. Pr. Commissioner of Income Tax). (iii) Section 245HA (iiia) too anticipates a final order by the ITSC rejecting a settlement application being passed under Section 245 D (4) of the Act. In such situations the proceedings before the ITSC abates. (iv) At the relevant time the only provision which directly dealt with the limitation in such case of abatement was the further proviso to Section 153 inserted by the Finance Act, 2007 and applicable from 1[st] June 2007. The legislative intent was clear from the explanatory notes to the above provision since it expressly mentions Section 153B while extending the period of limitation to 1 year where such period is less than 1 year from the date of abatement of settlement proceedings. (v) The fact that by the Finance Act, 2017 the above proviso was amended to delete the reference to Section 153B while simultaneously amending Section 153B to insert it strengthens the argument of the Revenue that in the present case it is the further proviso to Section 153 of the Act that would have applied. Page 19 of 40 (vi) If in terms of the above provision the limitation for completing the assessment could be extended by 1 year from 4[th] August 2016, the date of the order of the ITSC under Section 245D (4) of the Act rejecting the application of the Assessee, the impugned notice dated 6[th] April 2017 cannot be said to be time barred. (vii) Section 245D (6) was, as explained in CIT Mumbai v. Anjum Ghaswala (2001) 252 ITR 1 (SC) merely procedural in nature. It is Section 245D (4) which is a substantive portion and empowers the ITSC to reject a settlement application thereunder and at even the final stage. Page 19 of 40 (vi) If in terms of the above provision the limitation for completing the assessment could be extended by 1 year from 4[th] August 2016, the date of the order of the ITSC under Section 245D (4) of the Act rejecting the application of the Assessee, the impugned notice dated 6[th] April 2017 cannot be said to be time barred. (vii) Section 245D (6) was, as explained in CIT Mumbai v. Anjum Ghaswala (2001) 252 ITR 1 (SC) merely procedural in nature. It is Section 245D (4) which is a substantive portion and empowers the ITSC to reject a settlement application thereunder and at even the final stage. (viii) The mere fact that Section 153B opens with the non obstante clause cannot ipso facto mean that the present case is governed only by that provision. As explained in Vishin N.Khanchandani v. Vidya Lachmandas Khanchandani AIR 2000 SC 2747 a non obstante clause is a device for giving overriding effect to provisions that are inconsistent with other provisions of the Act. Here there was no inconsistency between Explanation 5 below Section 153B and the further proviso below Section 153 since the former contemplated an order under Section 245D (1) of the Act whereas the latter spoke of the abatement of proceedings under Section 245HA that resulted from the rejection of the settlement application by an order under Section 245D (4) of the Act as in the present case. The contention of the Petitioner that the order under Section 245D (4) of the Act should be treated as one under Section 245D (1) is untenable. Page 20 of 40 Analysis and reasons 34. The above submissions have been considered. There is no dispute about the facts in the present case namely that a search was initiated on the BSBK Group of on 24[th] May 2012 and that notices under Section 153A were issued to the Petitioners on 9[th] June 2014 for the aforementioned 3 AYs i.e. 2009-10, 2010-11 and 2011-12. It is also not in dispute that on 25[th] September 2014 notices under Section 143(2) of the Act were issued after the Petitioners filed their respective returns. 35. Before the assessments could be completed both Petitioners filed applications before the ITSC on 26[th] February 2015 under Section 245C (1) of the Act. On technical grounds that the tax on the admitted sum was not paid at the time of filing of the applications the ITSC rejected their applications on 5[th] March 2015 giving them liberty to file fresh applications. 36. Pursuant thereto on 26[th] March 2015 fresh applications were filed. 37. On 7[th] April 2015 the ITSC passed an order under Section 245D (1) and allowed the application to be proceeded with. This is a crucial stage of the proceedings before the ITSC. In order to appreciate the nature of the order passed at this stage it is necessary to refer to the provisions that governed the filing and processing of applications before the ITSC. 38. Section 245C (1) of the Act states that an Assessee, at any stage making an application has to fulfil the essential condition of the section, „containing a full and true disclosure of his income which has not been disclosed before WP(C) 6054/2017 & 6060/2017 Page 21 of 40 the AO‟. In addition to making the full and true disclosure the Assessee has to also indicate „the manner in which such income has been derived.‟ These are, therefore, the two requirements which have to be mandatorily complied with if such application is to be entertained by the ITSC. 38. Section 245C (1) of the Act states that an Assessee, at any stage making an application has to fulfil the essential condition of the section, „containing a full and true disclosure of his income which has not been disclosed before WP(C) 6054/2017 & 6060/2017 Page 21 of 40 the AO‟. In addition to making the full and true disclosure the Assessee has to also indicate „the manner in which such income has been derived.‟ These are, therefore, the two requirements which have to be mandatorily complied with if such application is to be entertained by the ITSC. 39. Section 245C (1) of the Act also states that along with the application, the Applicant has to remit the additional amount of income tax payable on such income. As rightly pointed out by the Revenue, Section 245C (1) does not contemplate any order being passed by the ITSC. However, a reading of the Section 245D (1) indicates that it is under that provision that the ITSC is required to pass an order in writing either rejecting the application or allowing the application to be proceeded with. The proviso to Section 245 D (1) further states that where no order has been passed within a period of 14 days from the date of application by the ITSC, such application „shall be deemed to have been allowed to be proceeded with.‟ 40. Therefore, the scheme appears to be that once an application is filed complying with the requirements spelt out in Section 245C (1) of the Act, then the ITSC considers it and passes an order within 14 days failing which the application shall be deemed to have been allowed to be proceeded with. If the ITSC decides not to allow the application to be proceeded with then it rejects the application for the reasons to be stated in the order. In the present case by an order dated 7[th] April 2015 the ITSC passed the aforementioned order and allowed the applications to be proceeded with. 41. At the next stage of the applications filed by the Petitioners, the ITSC WP(C) 6054/2017 & 6060/2017 Page 22 of 40 passed further orders under 245D (2C) of the Act, after receiving the report of the PCIT further allowing the applications to be proceeded with and observing that the applications filed were prima facie not invalid. At that stage the ITSC called for a report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. 42. At the third stage on 16[th] March 2016 an order was passed by the ITSC under Section 245D (3) of the Act by the ITSC calling for records and asking the Respondents to undertake a verification/investigation on the issue of incentives received by the Petitioners from the BSBK Group of cases. It is after this report was submitted by the Respondents on 23[rd] May 2016 that the final order came to be passed on 4[th] August 2016. A perusal of the order indicates that it is very expressly stated to be under Section 245D (4) of the Act. The final para of the order clearly states “we are, therefore, of the view that the application filed by the Applicant Sh. Rohit Kumar Gupta does not fulfil the conditions prescribed under Section 245C (1) read with 245D (4) of the Income Tax Act, 1961 and is hereby rejected.‟ In the case of PRG Consultants Pvt. Ltd. again the order in para 11 clearly states that the said application “is also rejected under 245C (1) read with 245D (4) of the Act.” 43. It is the contention of both the Petitioners that although this final order dated 4[th] August 2016 states the orders to be under Section 245D (4) of the Act they are in fact to be treated as orders under Section 245D (1) of the Act. This is because according to the Petitioners the only order that can be passed under Section 245D (4) of the Act is an order „on the matters covered by the application and any other matter relating to a case not covered by the WP(C) 6054/2017 & 6060/2017 Page 23 of 40 43. It is the contention of both the Petitioners that although this final order dated 4[th] August 2016 states the orders to be under Section 245D (4) of the Act they are in fact to be treated as orders under Section 245D (1) of the Act. This is because according to the Petitioners the only order that can be passed under Section 245D (4) of the Act is an order „on the matters covered by the application and any other matter relating to a case not covered by the WP(C) 6054/2017 & 6060/2017 Page 23 of 40 application, but to refer to with the report of the Commissioner‟. Further, according to them, under Section 245D (6) every order under sub-Section 4 „shall provide for the terms of settlement including any demand by way of tax penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make a settlement effective and also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of the facts.‟ The contention, therefore, is that the collective reading of Section 245D(4) and (6) makes it apparent that the order passed under Section 245D(4) of the ITSC cannot be an order that rejects the settlement application for failure to make a full and true disclosure or to disclose the manner in which the undisclosed income was earned. This is, therefore, one of the crucial questions that required to be decided in