The Income Tax Settlement Commission, Additional Bench, Replaced By The Interim Board, Income Tax Department, 640, Anna Salai, Chennai-35 v. Cit (328 Itr 477

In the High Court of Judicature at MadrasDated : 06.9.2021 CoramThe Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP Writ Appeal Nos.2208 & 2209 of 2021 & CMP.Nos.13978 & 13981 of 2021 M/s.K.Velusamy-Major HUF ...Appellant inWA.2208/2021 Smt.S.Chandralekha ...Appellant inWA.2209/2021 1.The Principal Commissioner of Income Tax, Central-2, Income Tax Department, No.46, MG Road, Chennai-34. Income Tax, Central-2, Income Tax Department, No.46, MG Road, Chennai-34. 2.The Income Tax Settlement Commission, Additional Bench, replaced by the Interim Board, Income Tax Department, 640, Anna Salai, Chennai-35....Respondents in both WAs APPEALS under Clause 15 of the Letters Patent againstthe common order dated 03.3.2021 in W.P.Nos.31352 and 31351 of2015. PRAYERS IN W.P.NOS.31352 and 31351 OF 2015: To issue a writ ofCertiorari, calling for the records on the 2[nd] respondent inTN/CN 52/13-14/17/IT and TN/CN 52/13-14/18/IT dated 2.03.2015and quash the same, insofar as it includes the advance amountwhich is deemed divided under Section 2(22)(e) from the totalincome of the 1[st] respondent and the direction to levy interestunder Section 234A and 234B runs contrary to the provisions ofthe Income Tax Act, 1961 and the law laid down by the Hon'bleApex Court in Brij Lal and Others vs CIT (328 ITR 477). For Appellants : Mr.A.S.Sriraman For Respondent-1: Mr.A.P.Srinivas, SSC COMMON JUDGMENT (Judgment was delivered by T.S.SIVAGNANAM,J) We have heard Mr.A.S.Sriraman, learned counsel appearing forthe appellants and Mr.A.P.Srinivas, learned Senior StandingCounsel accepting notice for the first respondent – Revenue. Inthe light of the judgment, this Court wishes to render in theseappeals, notice to the second respondent is dispensed with andthe writ appeals are taken up for final disposal. 2. These writ appeals have been filed by the assesseeschallenging the common order dated 03.3.2021 passed in W.P.Nos.31351 and 31352 of 2015. 3. The said writ petitions were filed by the firstrespondent herein namely the Revenue. 4. The challenge in the said writ petitions was to theorders passed by the second respondent herein namely the IncomeTax Settlement Commission (for short, the ITSC) dated 02.3.2015settling the case of the assessees for the assessment years2006-07 to 2012-13. 5. From the averments set out in the affidavits filed insupport of the said writ petitions, we are able to see that thechallenge by the Revenue to the orders passed by the ITSC wasprimarily on two grounds. 6. Firstly, with regard the issue relating to deemeddividend under Section 2(22)(e) of the Income Tax Act, 1961, theRevenue contended that the ITSC erred in accepting thecontention of the assessee for not including the advance amountreceived as liable to be taxed as deemed dividend under Section2(22)(e) of the Act and that the decision relied upon by theITSC could not be applied to the facts and circumstances of thecase. 7. The second issue was with regard to levy of interestunder Section 234A of the Act. The Revenue contended that thoughthe Assessing Officer was directed to keep in mind the decisionof the Hon'ble Supreme Court in the case of Brij Lal Vs. CIT[reported in (2010) 328 ITR 477], yet he directed to chargeinterest under Section 234A of the Act only for the delay infiling original returns under Section 139/153A/153C, as the casemay be, which was against the clear cut observations made by theHon'ble Supreme Court. With these grounds, the Revenue wasbefore the learned Single Judge. 8. The learned Single Judge upheld the view of the ITSC andno relief was granted to the Revenue. With regard to the aspect https://hcservices.ecourts.gov.in/hcservices/ 7. The second issue was with regard to levy of interestunder Section 234A of the Act. The Revenue contended that thoughthe Assessing Officer was directed to keep in mind the decisionof the Hon'ble Supreme Court in the case of Brij Lal Vs. CIT[reported in (2010) 328 ITR 477], yet he directed to chargeinterest under Section 234A of the Act only for the delay infiling original returns under Section 139/153A/153C, as the casemay be, which was against the clear cut observations made by theHon'ble Supreme Court. With these grounds, the Revenue wasbefore the learned Single Judge. 8. The learned Single Judge upheld the view of the ITSC andno relief was granted to the Revenue. With regard to the aspect https://hcservices.ecourts.gov.in/hcservices/ relating to charging of interest, the learned Single Judgedirected the Assessing Officer to recompute the interest interms of the orders passed by the Hon'ble Supreme Court in thecase of Brij Lal. Thus, the Revenue partly succeeded in the saidwrit petitions wherein the learned Single Judge set aside theorders settling the case of the appellants herein in respect ofthe assessment year 2012-13. 9. In our considered view, a truncated challenge to theorders of the ITSC either at the instance of the assessees or atthe instance of the Revenue cannot be maintained. As has beenheld in several decisions consistently, the Court, whileexamining the correctness of the orders passed by the ITSC, willexamine the decision making process and not the decision itself. 10. Admittedly, in the instant case, the assessees, at thetime of filing applications for settlement under Section 245C ofthe Act, did not offer any additional income for the assessmentyear 2012-13. The Revenue filed a report under Rule 9 of theIncome Tax Settlement Commission (Procedure) Rules contendingthat the assessees might be directed to produce the books ofaccounts and other documents pertaining to the year 2012-13before the Assessing Officer. The assessees submitted theirbooks of accounts along with profit and loss account, balancesheet, etc. 11. The tax audit report dated 28.9.2012 was also furnished.Pursuant to the said submission, the Revenue filed furtherreport to the assessees' reply to the report under Rule 9 of thesaid Rules. In the said report, there was an elaboratediscussion with regard to the matter concerning the assessmentyear 2012-13 and the report also stated as to what were all theadditions, which were suggested by the Revenue. On thosesubmissions, the assessees were heard by the ITSC andultimately, the cases were settled. In such circumstances, itwill be too late for the Revenue to now contend that the ITSCcould not have settled the cases in respect of the assessmentyear 2012-13 and especially when this was never the groundraised by the Revenue either in the report filed under Rule 9 ofthe said Rules or in the subsequent report filed to the replygiven by the assessees. 12. That apart, on a reading of Section 245C(1) Proviso(i), it can be seen that no such application shall be madeunless in a case where proceedings for assessment orreassessment for any of the assessment years referred to inClause (b) of Sub-Section (1) of Section 153A or Clause (b) ofSub-Section (1) of Section 153B in case of a person referred toin Section 153A or Section 153C have been initiated, theadditional amount of income-tax payable on the income disclosedin the application exceeds fifty lakh rupees. 12. That apart, on a reading of Section 245C(1) Proviso(i), it can be seen that no such application shall be madeunless in a case where proceedings for assessment orreassessment for any of the assessment years referred to inClause (b) of Sub-Section (1) of Section 153A or Clause (b) ofSub-Section (1) of Section 153B in case of a person referred toin Section 153A or Section 153C have been initiated, theadditional amount of income-tax payable on the income disclosedin the application exceeds fifty lakh rupees. 13. Admittedly, the jurisdiction to assess income of theassessee for six years would arise as a block assessment only inthe event of search and therefore, the ITSC rightly took intoconsideration the year of search namely 2012-13. As pointed outearlier, these are all issues, which are on the merits of thematter and more particularly with regard to the maintainabilityof the application before the ITSC, which was considered by theITSC at two stages and it was never the case of the Revenue thatthe year of search should be excluded. That apart, we find thatthe ITSC directed the Assessing Officer to follow the decisionof the Hon'ble Supreme Court in the case of Brij Lal and theAssessing Officer followed it and had given effect to the orderspassed by the ITSC in the year 2015. 14. The learned Senior Standing Counsel appearing for theRevenue would contend that in paragraph 11.3, the ITSC dealtwith charging of interest and observed as follows :“Prayer for waiver of interest is notaccepted and the same may be charged as per law. While calculating the interest, theAssessing Officer will keep in view thedecision of the Hon'ble Supreme Court inCivil Appeal Nos.516 to 527 of 2004 dated21.10.2010 in the case of Brij Lal & OthersVs. CIT [328 ITR 477]. In view of Section234A read with Section 245C, interest underSection 234A is to be charged for delays infiling of original return under Section139/153A/153C as the case may be on thetotal income determined under Section 245D(4) of the Act. Interest under Section 234Bis to be charged from the 1[st] day of theassessment year till the date of orderpassed by the Settlement Commission underSection 245D(1). Further, as has beendecided by the Hon'ble High Court ofCalcutta, reversing the decision of theSpecial Bench in the case of M/s.G.M.Foodsand another in W.P. No.44 of 2015, interestunder Section 234B has also to be charged onthe income as disclosed in the applicationunder Section 245C of the Act.” 15. It is submitted by the learned Senior Standing Counselappearing for the Revenue that the ITSC mentioned that theinterest under Section 234B of the Act has to be charged on theincome as disclosed in the applications under Section 245C ofthe Act. The Revenue is, thus, of the view that the Tribunalwrongly mentioned that the interest would be chargeable on theincome disclosed. 16. Though the word 'disclosed' gives a slightly distortedmeaning, a clear picture emerges if we see paragraph 11.2 of theorder passed by the ITSC, which deals with settlement of income.The total income arrived at by the ITSC is Rs.28,04,72,938/-,which alone shall be considered as the income disclosed for thepurposes of an application under Section 245C of the Act. TheRevenue need not have any apprehension over the income, whichwas initially disclosed at the time of filing the applicationunder Section 245C of the Act because the said income, which wasoffered at the first instance was not accepted by the Revenueand a report under Rule 9 of the said Rules was filed and basedon that, the Revenue suggested four additions and thereafter,the case was proceeded and the matter was settled. 16. Though the word 'disclosed' gives a slightly distortedmeaning, a clear picture emerges if we see paragraph 11.2 of theorder passed by the ITSC, which deals with settlement of income.The total income arrived at by the ITSC is Rs.28,04,72,938/-,which alone shall be considered as the income disclosed for thepurposes of an application under Section 245C of the Act. TheRevenue need not have any apprehension over the income, whichwas initially disclosed at the time of filing the applicationunder Section 245C of the Act because the said income, which wasoffered at the first instance was not accepted by the Revenueand a report under Rule 9 of the said Rules was filed and basedon that, the Revenue suggested four additions and thereafter,the case was proceeded and the matter was settled. 17. Therefore, in our considered view, there may not be anynecessity to remand the matter for a fresh consideration and theinterest under Section 234B of the Act has to be charged on theincome settled by the ITSC and in terms of the decision of theHon'ble Supreme Court in the case of Brij Lal, the interestwould be chargeable upto the date of order under Section 245D(1)of the Act and not upto the date of the order of the ITSC underSection 245D(4). 18. With the above clarification, the writ appeals areallowed and the common order passed in the writ petitions is setaside. No costs. Consequently, the connected CMPs are closed.Sd/- Assistant Registrar (CO) //True Copy// RS Sub Assistant Registrar To1.The Principal Commissioner of Income Tax, Central-2, Income Tax Department, No.46, MG Road, Chennai-34.2.The Income Tax Settlement Commission, Additional Bench, replaced by the Interim Board, Income Tax Department, 640, Anna Salai, Chennai-35. +1cc to Mr.S.Sridhar, Advocate, S.R.No.44847 +2cc to Mr.A.P.Srinivas, Advocate, S.R.No.44819 AJS(CO)GN(20/09/2021) WA.Nos.2208 & 2209 of 2021 &CMP.Nos.13978 & 13981 of 2021