The Commissioner Of Income Tax,Central – Ii v. Income Tax Settlement Commission

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE C.SARAVANAN W.P.No.34638 of 2013 The Commissioner of Income Tax,Central – II,No.46, Mahathma Gandh Road,Chennai 600 034. ...Petitioner vs. 1.Income Tax Settlement Commission Additional Bench, 640, Anna Salai, Nandanam, Chennai 600 035. 2.Kamala Selvaraj ...Respondents Prayer:Writ petition filed under Article 226 of the Constitutionof India praying for issuance of a writ of Certiorari to callfor the records on the file of the first respondent inTN/CN.52/2012-13/10-IT dated 05.08.2013 and quash the same. The Commissioner of Income Tax has filed this writ petitionto quash the impugned order dated 5.8.2013 passed by the 1[st]respondentSettlement Commission under Section 245D(4) of theIncome Tax Act, 196 settling the case of the 2[nd] respondent underChapter XIX A in Section 245D(4) of the Income Tax Act, 1961. 2. By the impugned order, the 1[st] respondent SettlementCommission has allowed the application filed under Section 245Cof the Income Tax Act, 1961by the 2[nd] respondent assessee byadding a further sum of Rs.11,44,97,620/- to the additionalincome of Rs.15,88,70,598/-offered by the 2[nd] respondent incometaxes assessee for the assessment years 2006-07 to 2011-12 for settling the dispute under Chapter XIX A of the Income Tax Act,1961. 3. For the assessment year 2012-13, the 1[st]respondent hasadded a further sum of Rs.5,20,92,283/- though no additionalamount was offered over and the amount declared as the taxableincome in the return filed by the 2[nd] respondent. It issubmitted that the 2[nd] respondent failed to make true and fulldeclaration for the assessment years 2006-07 to 2011-12 and hadnot offered any amount for the assessment year 2012-13. It istherefore submitted that the 1[st] respondent ought to havedismissed the application filed by the 2[nd] respondent assesseebefore it under Chapter XIX A of the Income Tax Act, 1961. 4. The operative portion of the impugned order reads as:- 7.2 We find that it is true that no evidence wasfound during the search to indicate that theapplicant had incurred any expenditure over andabove what was recorded in the books. Theapplicant has stated that, in the books, onlythat expenditure is reflected which has beenincurred for the day to day running of theHospital. Since she is the sole proprietrix, allthe daily receipts are handed over to her andthis fact is supported by the handwritten diary,which was seized from her possession. She hasstated there are certain expenses which aredirectly incurred by her and for which no recordsare kept by the accounting staff. She hasexplained the nature of such expenses. We findthat the explanation given by her is acceptable.We find it to be a fact that it is a normalpractice that the specialist doctor gives a ‘cut’ to the general practitioner or any otherdoctor who has referred the patient. Suchpractice may be unethical or unprofessional butit cannot be denied that a specialist wouldstand; to lose substantial clientele if he or sherefuses to be a part of the system. We therefore,agree that the Applicant would have incurred someexpenditure towards, what is euphemisticallytermed as ‘ referral fees’. We also find that itis common practice amongst employers that, inorder to avoid PF, ESI etc., many of theemployees are not shown in the official payrolls.Such employees are paid in cash. We are of theopinion that the Applicant would have alsoincurred some expenditure of this nature. Similarly, as is the prevalent ( though not legalor desirable) practice, a part of the salarymight have been paid in cash to the doctorsemployed by her. Having accepted the fact thatsome expenditure in cash was incurred out of theunaccounted receipts, the next question whicharises is as to how much could have been thequantum of such unaccounted expenditure. TheApplicant has claimed 55% of the totalunaccounted receipts as expenditure towards theheads discussed above. We find this claim to beexcessive. After a careful consideration of allaspects, we are of the view that such expenditurecould at best be 7% of the total turnover. Bytotal turnover, we mean the disclosed receipts aswell as the suppressed receipts. We, therefore,find that 7% of the total turnover should bereduced from the suppressed receipts to arrive atthe undisclosed income for A.Ys.2006-07 to 2011-12. The position which will emerge as a result ofour directions would be as under:- In other words, as against the additional incomeamounting to Rs.15,88,78,599/- offered in theSettlement Application, the Applicant is requiredto offer further additional income amounting toRs.11,44,97,620/- (i.e. Rs.27,33,76,219/- -Rs.15,88,78,599/-) Suppression of Pharmacy sales: 7.3. The facts and submissions in this respecthave already been summarised by us in para 6.1above. For the reasons given therein, we find thatthere was no under disclosure of pharmacy sales.The confusion might have arisen because themedicines and surgical/non-surgical items suppliedunder the ‘ package scheme’ had been considered asdirect sales to customers. As the issue standsreconciled, no further action in this respect isnecessary. Quantum of undisclosed income for A.Y.2012-13 : 7.4. We fine that the correct figure ofdisallowance u/s.40A(3) for A.Y.2012-13 would beRs.3,44,65,606/- ( as quantified by the TaxAuditor) as against Rs.5,23,795/- shown in theSettlement Application. We also find that thejournal entry for the amount of Rs.31,50,472/-made on 31.03.2012 vide Voucher No.1296 has notbeen explained properly. Hence further additionalincome to this extent is also required to be made.The Department has also pointed out a number ofitems which seen to indicate certain deficienciesand defects. In order to cover such deficiencies and defects,we are of the opinion that it will be reasonableto make a further adhoc disallowance of Rs.1.50 crores. As regards, the amount of Rs.70 lakhscredited on 02.04.2011 in the books of account,the Department has contended that further incometo the extent is to be disclosed. However, we findthat this amount stands covered by the disclosureof additional income already made in theSettlement Application. To summarise, furtheradditional income amounting to Rs.5,20,92,283/- isrequired to be disclosed in respect of A.Y.2012-13. Taxability of investment : 7.5. During the search, unaccounted jewellery wasfound, which was in excess by an amount ofRs.12,07,40,183/- than what has been disclosed inthe latest Wealth Tax return. The Department hascontended that additional income in respect of thejewellery should have also been offered in theSettlement Application. We are unable to agreewith this contention. The Applicant has offeredRs.15.88 crores in the Settlement Application asadditional income. We have ordered a furtherdisclosure of Rs.11.44 crores. The value of theunaccounted jewellery would stand covered by suchdisclosure. Hence we are of the considered opinionthat no separate disclosure in this respect iswarranted. Regarding Miscellaneous Petition : 1. The Applicant has filed a petition for releaseof jewellery seized by the department against bankguarantee. The CIT may consider her requestkeeping in view of the provisions of Section 132 Bof the Act. The miscellaneous petition filed inthis respect by the Applicant before theSettlement Commission is treated as disposed. Regarding Miscellaneous Petition : 1. The Applicant has filed a petition for releaseof jewellery seized by the department against bankguarantee. The CIT may consider her requestkeeping in view of the provisions of Section 132 Bof the Act. The miscellaneous petition filed inthis respect by the Applicant before theSettlement Commission is treated as disposed. 9. ORDER OF SETTLEMENT 0.1 : In the SOF, the Applicant has made thefollowing prayers:- a) Determination and qualification of theadditional income for A.Ys 2006-07 to 2012-13. b) To grant waiver of interest under theI.T.Act.c) To grant immunity from penalty andprosecution under the I.T.Act. Our directions on the prayers listed at (b) & (c) above aregiven in the paragraphs which follows. Charge/Waiver of Interest: Prayer for waiver of interest is not acceptedand the same will be charged as per law. Whilecalculating the interest, the Assessing Officerwill keep in view the decision of the Hon’bleSupreme Court in Civil Appeal No.516-527 of 2004dated 21.10.2010 in the case of Brij Lal andOthers vs. CIT (328 ITR 477)Immunity 9.4 : The applicant has made a prayer forgranting immunity from penalty and prosecutionunder the Income Tax Act. We note that theApplicant has satisfied the requisite conditionsprovided u/s.245H. We find that the Applicanthas co-operated in the proceedings before us.She also made full & true disclosure of income.We find that the Applicant has also disclosedthe manner in which such income was derived.Accordingly, we allow the prayer of theApplicant for immunity from penalty andprosecution under the Income Tax Act only so faras the same relate to issues dealt with in thisorder of settlement. Payment of Taxes: 9.5.1. : The Assessing Officer is directed tocompute the tax and interest as per law givingeffect to this order. 9.5.2.: During the hearing, the learned A.R.madea prayer for granting of instalment for paymentof taxes and interest arising out of this order.The final liability of tax, surcharge andinterest payable by the applicant will be paidin three equal quarterly instalments i.e. 31[st]September 2013 31[st] December 2013 and the lastinstalment on or before 15[th] of March, 2014.Interest u/s.245D (6A) will also be paid before15[th] of March 2014. Others: 9.5: The operative part of this order waspronounced in the Court on 31.07.2013. 9.7. The order shall be void if it issubsequently found that it has been obtained byfraud or mis-representation of facts.” 5. Before proceeding with correctness or other wise of theimpugned order of the 1[st] respondent, it will be relevant torefer to the facts of the case briefly. The hospital andresidential premises of the 2[nd] respondent assessee, a well-knownphysician Obstetrician and Gynaecologist and a pioneer in IVFtreatment in India was searched by the officers of the IncomeTax Department on 24/25.11.2011under Section 132 of the IncomeTax Act, 1961. 6. During the search, unaccounted cash for a sum ofRs.1,80,00,000/- and unaccounted jewellery in the form of goldornaments, bullion and diamond valued about Rs.7,27,7150/- wereseized. The gold jewellery bullion and diamond jewellery foundduring the search were valued at Rs.14,74,99,880/-, a portion ofwhich had been previously accounted by the 2[nd] respondentassessee under the Voluntary Disclosure Scheme of 1997. 7. The search had alsorevealed that the 2[nd] respondentassessee had not disclosed an income of Rs.35,30,63,554/- forthe assessment years 2006-07 to 2011-12.During the course of theinvestigation/search, the 2[nd] respondent had undertaking to payincome tax on the aforesaid amount. 8. During the search, it was also found that for thereassessment year 2012-13, the 2[nd] respondent had not disclosedadditional amount of Rs.8,94,84,051/-being the income frompharmacy sale and professional income from profession. 7. The search had alsorevealed that the 2[nd] respondentassessee had not disclosed an income of Rs.35,30,63,554/- forthe assessment years 2006-07 to 2011-12.During the course of theinvestigation/search, the 2[nd] respondent had undertaking to payincome tax on the aforesaid amount. 8. During the search, it was also found that for thereassessment year 2012-13, the 2[nd] respondent had not disclosedadditional amount of Rs.8,94,84,051/-being the income frompharmacy sale and professional income from profession. 9. Apart from the above, the investigation/search alsorevealed non-disclosure of income from pharmacy sale for a sumof Rs.7,39,49,995/- during the assessment years 2009-10 to 2012-13 which was based on the difference in the value of inventorybetween the billing software maintained by the 2[nd] respondent andthe inventory at the pharmacy of the hospitals of the 2[nd]respondent/Income tax Assessee. 10. The 1[st] respondent Settlement Commissionby the impugnedorder has added a sum of Rs.11,44,97,620/- to the additionalincome of Rs.15,88,78,599/- offered by the 2[nd] Respondent IncomeTax Assessee for the assessment year 2006-07 to 2011-12. 11. The aforesaid additional income of Rs.15,88,78,599/-was arrived by the 2[nd]respondent assessee out ofRs.35,30,63,554/- by claiming 56% deduction towards expenditureallegedly incurred out of the aforesaid amount ofRs.35,30,63,554/-. 12. In the application filed under Section 245C of theIncome Tax Act, 1961 before the 1[st] respondent, the 2[nd]respondent had offered tax on 44% of the aforesaid undisclosedgross receipt of Rs.35,30,63,554/- as additional income and thusagreed to pay tax and interest on Rs.15,88,78,599/- for settlingthe case under Chapter XIX A of the Income Tax Act, 1961. 13. By the impugned order, the 1[st] respondent SettlementCommission has restricted the deduction on expenses to a mere 7%of Rs.35,30,63,554/- and thereby added a sum ofRs.11,44,97,620/- to the additional income offered by the 2[nd]respondent. By the impugned order, the 1[st] respondent , hasdetermined the total additional income as Rs.27,33,76,219/-(Rs.11,44,97,620/- + Rs.15,88,78,599/-) for the Assessment Year https://hcservices.ecourts.gov.in/hcservices/ 2006-07 to 2011-1. In other words, the additional income onwhich tax was payable was enhanced to 72% from mere 44% offeredbefore the 1[st]respondent Settlement Commission for theAssessment Year 2006-07 to 2011-12 by the 2[nd] respondentassessee. For the Assessment year, a sum of Rs.5,20,92,283/- wasadded to additional income. 14. The impugned order of the 1[st] respondent SettlementCommission is assailed primarily on the ground that noadditional income was offered by the 2[nd] respondent for theassessment year 2012-13 over and above the income disclosed inthe returns filed under Section 139/142 (1) of the Income TaxAct, 1961. 15. It is submitted that income tax was also payable on asum of Rs.8,94,84,051/- for the said Assessment Year being theincome from pharmacy sale and professional income which was notoffered by the 2[nd] respondent assessee . 16. It is therefore submitted that application filed by the2[nd] respondent assessee ought to have been rejected by the 1[st]respondent Settlement Commission. It is submitted that failureon the part of the 2[nd] respondent assessee to declare correctlythe additional income above the income already declared in thereturns filed for the assessment years 2012-13 also made itclear that the application for settling the case for theaforesaid assessment year was to be disallowed as there was notrue and full disclosure. 15. It is submitted that income tax was also payable on asum of Rs.8,94,84,051/- for the said Assessment Year being theincome from pharmacy sale and professional income which was notoffered by the 2[nd] respondent assessee . 16. It is therefore submitted that application filed by the2[nd] respondent assessee ought to have been rejected by the 1[st]respondent Settlement Commission. It is submitted that failureon the part of the 2[nd] respondent assessee to declare correctlythe additional income above the income already declared in thereturns filed for the assessment years 2012-13 also made itclear that the application for settling the case for theaforesaid assessment year was to be disallowed as there was notrue and full disclosure. 17. It is further submitted the fact that the 1[st]respondent Settlement Commission had restricted the expense to7%from 56% claimed by the 2[nd] respondent assessee demonstratedthat there was no true and full disclosure of additional incomebefore the 1[st] respondent Settlement Commission by the 2[nd]respondent assessee in her application under Section 245C oftheIncome Tax Act, 1961. 18. Learned counsel for the petitioner relied on thefollowing decision : i) Commissioner of Income Tax vs. ExpressNewspaper Ltd., (1994) 72 Taxman 428 (SC) ii) Ajmera Housing Corpn. Vs. Commissioner ofIncome Tax, (2010) 193 Taxman 193( SC) iii) V.M.Shaik Mohammed Rowther vs. SettlementCommission, (1999) 102 Taxman 546 (Madras) iv) ACE Investments Ltd., vs. SettlementCommission, (2003) 264 ITR 571 (Madras) v) Commissioner of Income Tax vs. Income TaxSettlement Commission, (2008) 170 Taxman 172(Madras) vi)Canara Jewellers vs. Settlement Commission,(2009) 184 Taxman 491 (Madras) vii)G.Jayaraman vs. Settlement Commission(Additional Bench) Chennai, (2011) 196Taxman 552 (Mad.) viii) Maddi Venkataraman & Co., (P) Ltd., vs.Commissioner of Income Tax, (1998) 2 SCC 95 19. Defending the impugned order passedby the 1[st] respondent Settlement Commission,learned counsel for the 2[nd] respondent IncomeTax assessee submits that the said order of the1[st] respondent Settlement Commission was wellreasoned and requires no interference underarticle 226 of the Constitution of India. 20. Learned counsel for the 2[nd] respondent income taxassesseesubmits that the 1[st] respondentSettlement Commission isthe ultimate fact-finding authority and therefore, the orderpassed under Section 245D(4) of the Income Tax Act, 1961 attainsfinality under Section 245 I of theIncome Tax Act, 1961. 21. It is submitted that unless the petitioner was able todemonstrate any material irregularity in the procedure followedby the 1[st] respondent Settlement Commissionwhile passing theimpugned order, or that the order was vitiated on account offraud or arbitrariness, there is no scope for interference. 22. It is submitted that an application for settlement inForm No.34B can be filed incorporating the pending assessmentsinitiated in consequence of search under section 132 of theIncome Tax Act, 1961. https://hcservices.ecourts.gov.in/hcservices/ 23. It is submitted that as per the scheme of the Act, theassessments proceedings can be initiated by the JurisdictionalAssessing Officer for six assessment years immediately prior tothe search assessment year and therefore the JurisdictionalAssessing Officer is also statutorily bound to start theprocessof search assessment even for the search assessment year,namely, the seventh assessment year. 24. Therefore, the application for settlement was filedfor seven assessment years in view of the provisions prescribedin Chapter XIXA of the Income Tax Act, 1961. It is furthersubmitted that Section 245A(b) defines the expression ”case”. https://hcservices.ecourts.gov.in/hcservices/ 23. It is submitted that as per the scheme of the Act, theassessments proceedings can be initiated by the JurisdictionalAssessing Officer for six assessment years immediately prior tothe search assessment year and therefore the JurisdictionalAssessing Officer is also statutorily bound to start theprocessof search assessment even for the search assessment year,namely, the seventh assessment year. 24. Therefore, the application for settlement was filedfor seven assessment years in view of the provisions prescribedin Chapter XIXA of the Income Tax Act, 1961. It is furthersubmitted that Section 245A(b) defines the expression ”case”. 25. It is submitted that Sub-clause (iiia) toSection 245A(b) incorporates the search assessment proceedings as part ofthe said definition of the case in the context of initiation andconduct of a settlement proceedings before the 1[st]RespondentSettlement Commission. 26. It was also submitted that in sub-clause (iiia) toSection 245A(b) the proceedings under Section 153A of the Acthas been referred. Since Section 153A of the Act envisagesissuance of notice for six assessment years immediately prior tothe search assessment year the application field for all theassessment years were maintainable. 27. In so far as the search assessment year is concerned,it is submitted that the Jurisdictional Assessing Officer getsjurisdiction to initiate and complete the assessment undernormal provisions of the Act, by issuing a notice u/s 143(2) ofthe Act. 28. It is submitted that while initiating the proceedingsfor the search assessment year, the Jurisdictional AssessingOfficer has power to complete the said assessment along with theother six assessment years based on the search materials andother materials/information available in the records as well asinformation obtained during the assessment proceedings. 29. It is therefore submitted that the 2[nd] respondentIncome Ttax Assessee was entitled to club and file a compositeapplication under Chapter XIX A of the Income Tax Act, 1961. 30. It was further submitted that it is procedural background, the 2[nd]Respondent opted for settlement after the searchwas completed by initiating the process as per Chapter XIX-A ofthe Act and the search assessment year being the assessment year2012-13 and six other assessment years, namely 2006-07 to 2011-12 immediately preceding the search assessment year were coveredin the settlement application filed by the 2nd Respondent on19.2.2013 (the search was conducted by the Income Tax Departmenton 24.11.2011). 31. It is further submitted that the objection to thesettlement application filed covering seven assessment years onthe validity of the proceedings initiated before the1[st]Respondent on the ground of non inclusion of income includingthe suppressed income pertaining to the assessment year 2012-13for settlement cannot be countenanced. The submission that the2[nd]Respondent violated the primary condition of the requirementto disclose full and true income is untrue. 32. The learned counsel for the 2[nd] respondent assesseesubmitted that the 2[nd] respondent was entitled to discloseadditional income before the 1st Respondent, SettlementCommission for grant of waiver of penalty and immunity fromprosecution for the pending search assessment proceedingscovering seven assessment years which was based on the searchresults. 32. The learned counsel for the 2[nd] respondent assesseesubmitted that the 2[nd] respondent was entitled to discloseadditional income before the 1st Respondent, SettlementCommission for grant of waiver of penalty and immunity fromprosecution for the pending search assessment proceedingscovering seven assessment years which was based on the searchresults. 33. The learned counsel for the 2[nd] respondent assesseesubmitted that the 2[nd] respondent assessee was expected todisclose the full and true income based on the analysis of thesearch materials which was made. In this regard, the disclosureof income was made fully and truly and need not necessarily befor all the seven assessment years. It is submitted that thesurrender of the income for any particular assessment year willdepend on the income reported in the returns of income filed forthose seven assessment years in response to the proceedingsinitiated after the search, namely, by issuance of a notice u/s153A of the Act for the six assessment years immediatelypreceding the search assessment year and by issuance of a noticeu/s 143(2) of the Act for the search assessment year. What isdisclosed in the returns of income filed, the same would notform part of the settlement application for the reason ofeliminating double taxation. 34. In the absence of search materials to quantify thesuppressed income for any of the assessment years initiated inconsequence to the search conducted, there will not be any legalnecessity for the applicant to add additional income over andabove the reported income in the return of income filed eitherin the normal course or in consequence to the notice(s) issuedafter the date of search. 35. It is submitted that the stand of the Income TaxDepartments for for the assessment year 2012-13 being theseventh assessment year covered in the settlement application iscompletely misdirected was account of erroneous interpretationof the Act. 36. It is submitted that for the assessment year 2012-13,the 2[nd] Respondent assessee recorded a gross receipts fromvarious sources upto the date of search aggregating to https://hcservices.ecourts.gov.in/hcservices/ Rs.18,88,64,840/- and the gross receipts from the date of searchto the end of the previous year relevant to the assessment year2012- 13 amounted to Rs.11,21,46,498/-. 37. It is therefore submitted that conclusion of theIncome Tax Department/the writ petitioner that there wassuppression of actual receipts to the extent of Rs.8,94,84,022/-was omitted to be declared in the settlement application filedbefore the 1st Respondent cannot be countenanced. 38. It is submitted that for the first eight months of theprevious year i.e. 2011-12 corresponding to the assessment year2012-13, the actual gross receipts was determined by the searchparty at Rs.18,88,47,118/- as against the recorded grossreceipts of Rs.9,89,63,096/- despite the seized materials in theform of tally ledger account incorporated a total gross receiptsupto the date of search as Rs.13,14,63,096/-. 39. The search was conducted in the middle of thefinancial year i.e on 24.11.2011. Therefore, the balance fourmonths in the assessment year 2012-13 after the date of searchgenerated actual receipts Rs.11,15,82,665/- inasmuch as the 2[nd]Respondent Income Tax Assessee prepared the books after searchbased on the actual receipts, thereby showing the total grossreceipts at Rs.30,10,11,338/- and incorporated the receiptswhich were considered as not accounted at the time of search. 40. It is submitted that the entire receipts were dulyaccounted in the revised regular books itself and the Income taxreturn for the said assessment year was filed after the date ofsearch accordingly, there is no question of suppression ofIncome at all by the 2[nd] respondent Income Tax Assessee. 41. The breakup of the actual receipts as per the IncomeTax Department is as follows:- 40. It is submitted that the entire receipts were dulyaccounted in the revised regular books itself and the Income taxreturn for the said assessment year was filed after the date ofsearch accordingly, there is no question of suppression ofIncome at all by the 2[nd] respondent Income Tax Assessee. 41. The breakup of the actual receipts as per the IncomeTax Department is as follows:- 42. The breakup of the actual receipts as per the incomereturn filed for theassessment year 2012-13 incorporating theaccounted receipts and actualreceipts: 43. It was further submitted that on behalf of the 2ndRespondent assessee that the 1[st]Respondent vide final/impugnedorder dated 5.8.2013 in para 7.4 andthe findings in para 7.4incorporated an addition of Rs.5,20,92,283/- for the assessmentyear 2012-13 after taking into consideration the returned incomefor the said assessment year on 5.2.2013 by incorporating thegross actual receipts for the whole year as Rs.30,10,11,338/-which amount was quantified upon taking into consideration allreceipts including the alleged suppressed receipts. 44. It is further submitted that the stand of the IncomeTax Department before this Court regarding non reporting ofsuppressed receipts before the 1[st]Respondent for the assessmentyear 2012-13 in the settlement application was devoid of meritsas the entire gross receipts including the suppressed receiptsup to the date of search were duly reported in there turn ofincome filed for the said assessment year 2012-13 in the normalcourse. 45. It is submitted that not possible to imagine asituation of the present asessee/the 2[nd]Respondent Income TaxAssessee earning professional income during the last four monthsin excess of the income earned during the first eight months ofthe financial year 2011-12. Therefore, the reconstructedfinancials incorporating both the actual receipts till the dateof search and remaining receipts for the balance four months wasconsidered as full and true disclosure of income for the purposeof settlement by the 1[st] Respondent, thereby fortifying the stand of 2[nd] Respondent’s income tax assessee for non inclusion ofadditional income for the assessment year 2012-13 in thesettlement application filed before the 1[st]Respondent. 46. It is submitted that while filing the return of incomefor the assessment year 2012-13, the 2[nd]Respondent Income TaxAssessee had paid the taxes on the income computed from thegross receipts reported at Rs.30,10,11,338/-. 47. It is therefore submitted that there was no reason forthe Income Tax Department to question the factual aspect in thepresent writ petition in view ofsection 245 I of the Act. 48. As far as the second objection raised of the petitionerIncome Tax Department that there was no full and true disclosureof income for availing the settlement mechanism provided in theAct as the gross receipts as per the seized materials amountedto Rs.113,83,90,506/- for the six assessment years andRs.18,84,47,147/- for the first eight months/up to the date ofsearch for the assessment year 2012-13 should have beenincorporated for the purpose of computation of taxable totalincome for imposing tax cannot be countenanced. 49. The learned counsel further submitted that the 2[nd]Respondent assessee submitted that the receipts from theprofession for the six assessment years in the regular returnsof income filed for those six assessment years to the extent ofRs.78,53,26,952/- and further had shown Rs.30,10,11,338/- forthe assessment year 2012-13 (12 months) incorporating the actualgross receipts of the eight months/up to the date of search. 49. The learned counsel further submitted that the 2[nd]Respondent assessee submitted that the receipts from theprofession for the six assessment years in the regular returnsof income filed for those six assessment years to the extent ofRs.78,53,26,952/- and further had shown Rs.30,10,11,338/- forthe assessment year 2012-13 (12 months) incorporating the actualgross receipts of the eight months/up to the date of search. 50. It is submitted that out of Rs.35,30,63,554/- beingthe receipts not accounted in the books of accounts for thefirst six assessment years, the 2[nd] respondent Income TaxAssessee had disclosed Rs.15,88,78,599/, while not showing anyadditional income for the assessment year 2012-13 in view ofdisclosing/accountingtheentiregrossreceiptsofRs.30,10,11,338/- in the return of income filed on 5.2.2013prior to the filing of the settlement application, thereby notnecessitating for making any disclosure for the said assessmentyear 2012-13 for the purpose of settlement. 51. The disclosure of Rs.35,30,63,554/- for the first sixassessment years and the disclosure of Rs.30,10,11,338/- for thesearch assessment year 2012-13 before the settlement commissioncan be traced from the settlement application filed on19.2.2013, thereby establishing the compliance of the maincondition of full and true disclosure of income for availing thebenefits of settlement process envisaged in Chapter XIXA of theAct. 52. The details of disclosure are submitted below: 53. It is therefore submitted that the argument of thewrit petitioner on the failure to disclosefully and truly is notcorrect and after admitting the actual receipts the 2[nd]Respondentassessee proceeded to compute the taxable income for all theassessment years covered. As per charging provisions of the Actthe net income would alone get taxed and not the gross receipts.Hence the stand of the writ petitioner may be rejected asfactual and not sustainable in law. 54. Regarding the claim of expenses for earning additionalincome and according to the writ petitioner, there was no needfor the 1st Respondent to consider deduction of expenses forearning such income especially in view of accounting of all theexpenses in the regular books of accounts maintained and furtherin the absence of search materials indicating incurring ofexpenses not recorded in the regular books of accounts. 55. It is submitted that having noticed the fact ofearning of receipts over and above the accounted receipts, thereis no scope for the Income Tax Department to contend that theentire unaccounted receipts should be taxed in its entirety. Itis to be noted that for earning such receipts there is in builtcost/expenses and hence the 1[st] Respondent using their powers https://hcservices.ecourts.gov.in/hcservices/ vested for settlement of the dispute estimated the expenses at7% of the total turnover/gross receipts after rejecting theclaim for expenses at 55% on the suppressed receipts. 56. It is submitted that there is no scope for the IncomeTax Department to challenge the method of settlement arrived atby the 1st Respondent especially in the absence of appealmechanism prescribed in the statute and in the light of thespecific provision in Section 245 I of the Act declaring thefinal order of the 1[st] Respondent as conclusive. 57. The action of the writ petitioner/Income TaxDepartment invoking the extra ordinary jurisdiction of thisHon'ble Court under Article 226 of the Constitution of India isonly to circumvent the provisions of Section 245 I of the Actand the absence of the appellate remedy in relation thereto. 58. The stand of the writ petitioner/Income Tax Departmentis accordingly pleaded to be rejected as devoid of merits in theinterest of justice. 57. The action of the writ petitioner/Income TaxDepartment invoking the extra ordinary jurisdiction of thisHon'ble Court under Article 226 of the Constitution of India isonly to circumvent the provisions of Section 245 I of the Actand the absence of the appellate remedy in relation thereto. 58. The stand of the writ petitioner/Income Tax Departmentis accordingly pleaded to be rejected as devoid of merits in theinterest of justice. 59. The exercise of the Writ Petitioner/Income TaxDepartment in this present writ proceedings centered around thefacts and not pointing out any substantial questions of lawemanating from the impugned order passed and the purpose of thesettlement mechanism incorporated in Chapter XIXA of the Act iscompletely lost sight of while the said mechanism being one timeopportunity for the tax payers to come out clean by disclosingfull and true income for the assessment years covered in thesettlement application. Having not pointed out any error of lawin passing the impugned order, the entire attempt of the WritPetitioner/Income Tax Department should be reckoned asunsustainable in law for invoking the extra ordinaryjurisdiction of this Court under Article 226 of the Constitutionof India, keeping in mind the provisions of Section 245 I of theIncome Tax Act, 1961. 60. In any event, the 1[st] Respondent noticed the fact ofthe professional necessity to pay part of the fees to thedoctors and para medical staff incash/not recorded in theregular books of accounts and accordingly estimatedconservatively at 7% of the total receipts as acceptable outflowfor the purpose of settling the dispute between theparties uponrejecting the claim for 55% of expenses for earning such income. 61. The claim of 55% of expenses for earning additionalincome disclosed before the 1[st] Respondent in the settlementapplication is based on the sworn statement recorded by thesearch team and according to the Writ Petitioner/Income TaxDepartment, the sworn statement recorded u/s 132(4)of the Act should be reckoned as valid piece of evidence 62. In the answer to Question No.15 forming part of thesworn statement recorded on the date of search 24.11.2011, the2[nd] Respondent stated as follows:- “out of the total consultancy receipts andcharges for various treatment, Iwould say afterexpending about 75% for electricity, gas,oxygen, nitrateoxide, inhalation anesthesia,medication,consultantfees,equipment,annualmaintenance, sterilization of theatres,staff salary, purchase of equipment etc.Theremaining 30% approximately will be left in myhand.” 63. The above answer was given by the 2[nd]Respondent to the pointed question raised by thesearch team and the same is extracted hereinafter: “15. Please tell me the percentage ofexpenditure out of the total receipts andhowmuch of the consultancy receipts would remain inmy hand?” 64. Therefore, the argument of the Writ Petitioner/IncomeTax Department is completely misdirected and the stand of the2nd Respondent on the contrary is completely in accordance withthe consistent stand on the incurring of expenses for earningthe income right from the date of search. The above answer isalso part of the sworn statement recorded u/s 132(4) of the Actwhich is considered to be a crucial piece of evidence by theWrit Petitioner/Income Tax Department and accordingly the answergiven should be taken to its logical end/conclusion. 65. There is absolutely no scope for theWritPetitioner/Income Tax Department to question the incurring ofexpenses for earning the additional income and in any event the1[st] Respondent embarked upon a conservative approach ofestimating such expenses as 7% ofthe total turnover and not onthe suppressed/additional turnover. 65. There is absolutely no scope for theWritPetitioner/Income Tax Department to question the incurring ofexpenses for earning the additional income and in any event the1[st] Respondent embarked upon a conservative approach ofestimating such expenses as 7% ofthe total turnover and not onthe suppressed/additional turnover. 66. It is therefore submitted that on the above factualscenario, there is no room for insisting on the production ofevidence for incurring of such expenses and in any event theexpenses were admittedly incurred for cash payments to thereferral doctors, doctors and para-medical forming part of the2[nd] Respondent’s team for which it is impossible for maintainingany records. Further, the questioning conservative estimate of https://hcservices.ecourts.gov.in/hcservices/ expenses for deduction from the additional income as explainedin the preceding paragraphs is completely erroneous and in theevent of acceptance of their stand, the income computable as aresult would distort the actual financial picture of the 2[nd]Respondent and completely go against the sworn statementrecorded as referred to herein before. For all these grounds,the stand of the Writ Petitioner/Income Tax Department onthisissue may be rejected in the interest of justice. 67. Regarding the third objection of suppression ofpharmacy sales, the 2[nd]Respondent consistently took a stand thatthe presumption of suppression of sales is completely devoid ofmerits and proving non application of mind on their part on thedecision rendered by the 1st Respondent in the impugned order. 68. It is submitted that two types of patients are treatednamely in-patients and the out-patients. While the out-patientsinvariably purchase medicines as prescribed for which there isabsolutely no dispute in so far as the bills raised/reflected inthebooks of accounts, in so far as the in-patients, opting forthe package for treatment, the package charges would admittedlyinclude the cost of medicines for which the bills are generatedinasmuch as the said portion of the bills generated for themedicines consumed for the packaged patients is erroneouslyconsidered as suppressed pharmacy sales. 69. The above aspect was in fact considered in theproceedings for settlement and incorporated in para 6.1 of theimpugned order and the said fact was accepted after thoroughverification of voluminous records in relation thereto. 70. The verification process was conducted by the 1stRespondent in the presence of the CIT and the WritPetitioner/Assessing Officer. Therefore it is too late inthe dayfor them to question the accepted factual position in arguingthe suppression of pharmacy sales. 71. The bills raised by the pharmacy division are only forreducing the stock and for reporting to the sales tax departmentand hence there cannot be any presumption of suppression ofpharmacy sales. The portion of the sales considered assuppression was included in the package charges received andoffered for taxation. On these facts, the objections of the WritPetitioner/Income Tax Department may be rejected as untenable inthe interest of justice. 72. The last objection is on the failure of the 1[st]Respondent for making separate addition for the unaccountedjewellery to the extent of Rs.12,07,40,183/- and in para 7.5,the 1[st] Respondent concluded that there was no warrant for https://hcservices.ecourts.gov.in/hcservices/ separate addition in view of assessment of additional income tothe tune of Rs.27.32 crores. The said additional income wasconsidered to be represented by unaccounted jewellery, therebyapplied the theory of telescoping especially in the absence ofany other unaccounted outflow in the form of investments orexpenses. 72. The last objection is on the failure of the 1[st]Respondent for making separate addition for the unaccountedjewellery to the extent of Rs.12,07,40,183/- and in para 7.5,the 1[st] Respondent concluded that there was no warrant for https://hcservices.ecourts.gov.in/hcservices/ separate addition in view of assessment of additional income tothe tune of Rs.27.32 crores. The said additional income wasconsidered to be represented by unaccounted jewellery, therebyapplied the theory of telescoping especially in the absence ofany other unaccounted outflow in the form of investments orexpenses. 73. The said approach of the 1[st]Respondent is reasonableand based on the powers of settlement as well widely accepted bythe Income Tax Department itself in the normal course ofassessment proceedings. 74. The issue being factual need not be subjected to thisproceeding of invoking extraordinary jurisdiction of thisHon'ble Court especially in the absence of any substantialquestions of law emanating from the order passed by the 1stRespondent which order by operation of law insection 245 I ofthe Act is not appealable and considered to be conclusive andfinal. It is therefore submitted that the contentions of theWrit Petitioner/Income TaxDepartment may be rejected as devoidof merits in the interest of justice. 75. It is further submitted that the provisions of Section245 I of the Act which is in the said Chapter XIXA of the Actenvisage that the order of the 1[st] Respondent should beconsidered as conclusive as to the matters stated therein andquestion of reopening of the said proceedings is completelyprohibited and there is no statutory prescription for filingappeal against the said final order in the Act. 76. It is submitted that in the attempt to circumvent theprovisions of section 245 I of the Act, the Writ Petitioner haswrongly invoked the extra ordinary jurisdiction namely,jurisdiction under Article 226 of the Constitution of Indiapleading for the interference of this Court showing irrelevantconsideration and grounds. 77. The manner and method of the settlement could not bechallenged in the present writ proceedings unless there wascomplete omission of referring to seized materials and otherdocuments which formed part of the search recordsindicating/proving suppression of additional income over andabove the amount shown and declared by the assessee in thesettlement application. 78. Unless and otherwise, the factual aspect of thedeclaration by the assessee on the financial affairs concerningthe assessment years in the settlement application filed as nottrue and full disclosure, there is absolutely no right vested tochallenge the powers of settlement vested on the 1st Respondentunder Chapter XIXA of the Act. 79. According to the 2[nd] Respondent assessee there wascomplete disclosure of financial results pertaining to the firstsix assessment years especially in reporting the gross receiptsat 113.84 Crores which sum was notaltered/enhanced at any stageboth by the 1st Respondent or by the Writ Petitioner. Hence, thepresumption of the failure on the part of the 2[nd]Respondent inreporting full and true disclosure of the financial affairs/theincome in the settlement application is wholly unjustifiedproving perversity in the submissions of the Writ Petitioner. 80. In so far as the reliance of the decision of theAjmera Housi