Union Of India Through Deputy Commissioner Of Incometax, Central Circle, Ajmer v. Shri Pradeep Kothari, Kothari House, Gajmal Lunia Street, Karakka Chowk, Ajmer-Rajasthan

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR S.B. CIVIL MISC. WRIT PETITION NO. 9210/2015 UNION OF INDIA THROUGH DEPUTY COMMISSIONER OF INCOMETAX, CENTRAL CIRCLE, AJMER ...PETITIONER VERSUS 1. SHRI PRADEEP KOTHARI, KOTHARI HOUSE, GAJMAL LUNIA STREET, KARAKKA CHOWK, AJMER-RAJASTHAN-305001.STREET, KARAKKA CHOWK, AJMER-RAJASTHAN-305001. 2. SHRI HEMANT KOTHARI, KOTHARI HOUSE, GAJMAL LUNIA STREET, KARAKKA CHOWK, AJMER-RAJASTHAN-305001.STREET, KARAKKA CHOWK, AJMER-RAJASTHAN-305001. 3. SHRI SANJAY KOTHARI, KOTHARI HOUSE, GAJMAL LUNIA STREET, KARAKKA CHOWK, AJMER-RAJASTHAN-305001.STREET, KARAKKA CHOWK, AJMER-RAJASTHAN-305001. 4.SHRI ALOK KOTHARI, KOTHARI HOUSE, GAJMAL LUNIA STREET, KARAKKA CHOWK, AJMER-RAJASTHAN-305001.STREET, KARAKKA CHOWK, AJMER-RAJASTHAN-305001. 5. M/S PRATEEK BULLS & BEARS (P) LTD., A-495/A, MAKARWALI ROAD, PANCHEEL NAGAR ‘A’ BLOCK, AJMER-RAJASTHAN-305006.MAKARWALI ROAD, PANCHEEL NAGAR ‘A’ BLOCK, AJMER-RAJASTHAN-305006. AY 2008-09 to AY 2014-15 ...RESPONDENTS _____________________________________________________ For Petitioner(s) : Mr. Anuroop Singhi Mr. Saurabh Jain For Respondent(s) : Mr. NM Ranka, Sr. Adv. with Mr. NK Jain _____________________________________________________ HON'BLE MR. JUSTICE M.N.BHANDARI Judgment 13/07/2017 By this writ petition, a challenge is made to the order dated22.12.2014 passed by the Settlement Commission on an application submitted by the assessee. Learned counsel for the petitioner submits that assesseeapproached the Settlement Commission by invoking Section245D(4) of the Income Tax Act, 1961 (for short “the Act of1961”). The Additional income disclosed by the petitioner was ofRs.10,62,60,920/-. The Settlement Commission passed theimpugned order after hearing the parties and, therein, totalundisclosed income of the petitioner was assessed atRs.9,37,58,960/-. Thereby, the assessment of the income by theSettlement Commission was on a lower amount than disclosed bythe assessee. The impugned order thus deserves to be set asideas there exists illegality therein on the face of record. If income isassessed lower than disclosed by the assessee then it cannot besaid to be true disclosure so as to accept it under Section 245D(4)thus for the aforesaid reason also, the impugned order deserves tobe set aside. Learned counsel for the respondents have opposed thepetition. It is submitted that the application under Section245D(4) was preferred and income therein was disclosed mainly intwo parts. The first part was regarding income from business andother from long term capital gain. Income towards business wasdisclosed to Rs.40 lakhs, whereas, income of long term capitalgain was of Rs.10,22,60,920/- totalling Rs.10,62,60,920. Thecomponent of the tax on it was Rs.6,90,63,427/-. The SettlementCommission considered the entire material and, thereupon,determined the income from business to be of Rs.5,56,80,000/-,whereas, the income from long term capital gain to be of Rs.3,80,78,960/-. The income aforesaid was determined afterreshuffling it and with application of mind. It is no doubt true that the total income comes to less thanwhat was disclosed but then it is due to reshuffling of the income.The Settlement Commission is having an authority to pass anorder because it is not considered to be a case of assessment,reassessment or computation of income etc. as is held by theDelhi High Court in the case of Agson Global Pvt. Ltd. & Ors.Vs. Income-Tax Settlement Commission & Ors. [2016] 380 Rs.3,80,78,960/-. The income aforesaid was determined afterreshuffling it and with application of mind. It is no doubt true that the total income comes to less thanwhat was disclosed but then it is due to reshuffling of the income.The Settlement Commission is having an authority to pass anorder because it is not considered to be a case of assessment,reassessment or computation of income etc. as is held by theDelhi High Court in the case of Agson Global Pvt. Ltd. & Ors.Vs. Income-Tax Settlement Commission & Ors. [2016] 380 ITR 342 (Delhi). Therein, the judgment of Supreme Court in thecase of Brij Lal Vs. CIT [2010] 328 ITR 477 (SC) and CIT Vs. OmPrakash Mittal [2005] 2 SCC 751 have been relied. The judgmentof Delhi High Court makes a consideration of the entire schemeand after relying the judgment of the Apex Court, it was held thatthe order passed by the Settlement Commission is not an order ofassessment, reassessment or computation of income rather theChapter XIX is a complete quote by itself. It is also stated that if whatever income has been disclosedby the petitioner is taken as it is than the component of taxliability would be less than what has been paid by the petitionerafter the impugned order. The petitioner has, in fact, paid anadditional amount of tax of Rs.84,50,360/- in pursuance to theorder of the Settlement Commission, whereas, if the incomedisclosed by the petitioner is accepted then the liability of taxwould have been Rs.6,90,63,427/-, whereas, the petitioner haspaid a sum of Rs.7,75,13,787/- in pursuance to the impugnedorder. The respondents have not assailed the order of the Settlement Commission for reshuffling of the income from onehand to another resulting in high tax liability, otherwise, therevenue would have suffered by a sum of Rs.84,50,000/-. Thus,this court may not cause interference in the impugned order and,otherwise, learned counsel for the respondents have no objectionto take the income of Rs.10,62,60,920/- but then it should be withthe bifurcation, as disclosed in the application. The prayer is to dismiss the writ petition. I have considered rival submissions of the parties andperused the record. By this writ petition, a challenge is made to the order dated22.12.2014 passed by the Settlement Commission. It is mainly onthe ground that the income assessed by the SettlementCommission is less than disclosed by the assessee. If income sodisclosed by the assessee was not taken to be true and correctthen the Settlement Commission should have dismissed theapplication as the jurisdiction under Section 245 D of the Act of1961 is limited to accept the application only when truedisclosures have been made. The respondents made an application before the SettlementCommission by invoking Section 245D of the Act of 1961. He haddisclosed income of Rs.40,000/- out of bussiness andRs.102,260,920 towards long term capital gain totaling a sum ofRs. 106,260,920/-. The Settlement Commission admitted theapplication and called upon the revenue. Rule 9 report was calledand was furnished by CIT (Central Jaipur). It was made availableto the applicant/respondents who furnished Rule 9A report on 07.10.2014. The Settlement Commission then considered details of theadditional income disclosed in the application and has referred theincome in tabular form. It further made a reference of theundisclosed income/ investment which includes details of theincome from capital gain. The respondents made an application before the SettlementCommission by invoking Section 245D of the Act of 1961. He haddisclosed income of Rs.40,000/- out of bussiness andRs.102,260,920 towards long term capital gain totaling a sum ofRs. 106,260,920/-. The Settlement Commission admitted theapplication and called upon the revenue. Rule 9 report was calledand was furnished by CIT (Central Jaipur). It was made availableto the applicant/respondents who furnished Rule 9A report on 07.10.2014. The Settlement Commission then considered details of theadditional income disclosed in the application and has referred theincome in tabular form. It further made a reference of theundisclosed income/ investment which includes details of theincome from capital gain. The Settlement Commission made further consideration andafter hearing both the parties, passed the impugned order. Theexplanation of the applicant-non-petitioners in regard to seizedannexures/ articles was also taken note of. It even considered rule9 report as referred by the CIT (DR). The Settlement Commissioncalled the explanation from the DIT(Inv.), ITSC regarding theseized articles. The DIT (Inv.), ITSC submitted the report. It wasgiving out that non-petitioners could not give explanation aboutthe silver jubilee to his satisfaction and it was even regardingEx.2. After making proper consideration and giving the reasons,commission passed the order, however, while doing so, the incomedisclosed by the non-petitioners was re-arranged and it is inreference to rule 9 report as well as rule 9A report given by thenon-petitioners apart from considerations of other material. It is tomake a proper assessment of the income though it resulted inassessment of total income to be less than disclosed by the non-petitioners but commission has given the basis for it. If theincome disclosed by the non-petitioners is taken as it is then therevenue would loose a sum of Rs.84,50,000/- because despite theorder of the Settlement Commission, the component of tax liability has gone up by Rs.84,50,000/-. As per the disclosure made by thenon-petitioners, tax liability was only of Rs.6,90,63c,427/-,whereas, now, tax liability is at Rs.7,75,13,787. Hence, if theargument of the learned counsel for the revenue is accepted andincome of the non-petitioners is taken as was disclosed, it wouldresult in loss of tax to be revenue by sum of Rs.84,50,000/-. The other argument of learned counsel for the revenue isthat the Settlement Commission can accept undisclosed incomeonly when it is found to be true. The proposition given above hasbeen considered by the Apex Court and subsequently by the DelhiHigh Court in the case of Agson Global Pvt Ltd & ors (supra). Itwas held that Commission did not engage itself in the process ofassessment or reassessment. The order of the SettlementCommission is by way of settlement and contains the terms. Thereference of the judgment of the Apex Court has also been givento hold that Chapter XIX is a complete Code in itself. It can not betaken to be a regular assessment under section 143(3) orassessment under 143(1) or even under section 144 of the Act of1961. The jurisdiction of the Settlement Commission has beenexplained in detail. Taking into consideration aforesaid, matterhas been considered by the Settlement Commission. Relevantparas of the judgment (supra) are quoted hereunder for readyreference - “Under section 245D(4) ofthe said Act, the SettlementCommission, after examination of therecords and the report of theCommissioner, if any, received under,inter alia, sub-section (2B) or sub-section (3) and after giving an opportunity to the applicant as also tothe commissioner to be heard, maypass such order as it thinks, inaccordance with the provisions of thesaid Act, on the matters covered bythe application and any other matterrelating to the case not covered bythe application, but referred to in thereport of the Commissioner. “Under section 245D(4) ofthe said Act, the SettlementCommission, after examination of therecords and the report of theCommissioner, if any, received under,inter alia, sub-section (2B) or sub-section (3) and after giving an opportunity to the applicant as also tothe commissioner to be heard, maypass such order as it thinks, inaccordance with the provisions of thesaid Act, on the matters covered bythe application and any other matterrelating to the case not covered bythe application, but referred to in thereport of the Commissioner. Section 245F of the said Act callsfor closer scrutiny as that is theprovision which has been invoked bythe Settlement Commission as alsothe learned counsel for the Revenuefor supporting the order with regardto the conducting of a special audit.Sub-section (1) of section 245Fstipulates that in addition to thepowers conferred on the SettlementCommission under Chapter XIX-A, itshall have all the powers which arevested in an income-tax authorityunder said Act. But, in our view, thishas to be read in the context of andthe scope of settlement proceedings.It does not entail that the powers ofregular assessment which are vestedin an income-tax authority can beexercisedbytheSettlementCommission. What we mean to say isthat the Settlement Commission doesnot engage itself in the process ofassessment and cannot make anassessment order. The order that theSettlement Commission makes undersection 245D(4) is not in the natureof an assessment but by way of asettlement and contains the terms ofsettlement. Thus, we reiterate thatthe powers which are vested in anincome-tax authority and could beexercisedbytheSettlementCommission are such which have anexuswiththesettlementproceedings which does not include,in our view, the making of anassessment under the said Act. In Brij Lal v. CIT [2010] 328 ITR477 (SC) ; [2011] 1 SCC 1, theSupreme Court held (Pages 500, 504,506 of ITR) : “Descriptively, it can be stated thatassessment in law is different formassessment by way of settlement. Ifone reads section 245D(6) withsection 245-I, it becomes clear thatevery order of settlement passedunder section 245D(4) shall be finaland conclusive as to the matterscontained therein and that the sameshall not be reopened except in thecase of fraud and misrepresentation.Under section 245F(1), in addition tothe powers conferred on theSettlementCommissionunderChapter XIX-A, it shall also have allthe powers which are vested in theincome-tax authority under the Act.In this connection, however, we needto keep in mind the differencebetween ‘procedure for assessment’under Chapter XIV and ‘procedure forsettlement’ under Chapter XIX-A (seesection 245D). Under section245F(4), it is clarified that nothing inChapter XIX-A shall affect theoperation of any other provision ofthe Act requiring the applicant to paytax on the basis of self-assessment inrelation to matters before theSettlement Commission. . . . Moreover, as stated above, underthe Act, there is a difference betweenassessmentinlaw(regularassessment or assessment undersection 143(1)) and assessment bysettlement under Chapter XIX-A. Theorder under section 245D(4) is not anorder of regular assessment. It isneither an order under section 143(1)or section 143(3) or section 144.Under sections 139 to 158, theprocess of assessment involves thefiling of the return under section 139or under section 142 ; inquiry by theAssessing Officer under sections 142and 143 and making of the order ofassessment by the Assessing Officerunder section 143(3) or under section144 and issuing of notice of demandunder section 156 on the basis of theassessment order. The making of theorder of assessment is an integralpart of the process of assessment. No such steps are required to befollowed in the case of proceedingsunder Chapter XIX-A. The saidChapter contemplates the taxabilitydeterminedwithrespecttoundisclosed income only by theprocess of settlement/arbitration.Thus, the nature of the orders undersections 143(1), 143(3) and 144 isdifferent from the orders of theSettlement Commission under section245D(4).” In the light of the judgment referred to above and whererelevant paras of the judgment of the Apex Court in the case ofBrijlal and Om Prakash Mittal (supra) has been referred, I do notfind that second argument raised by learned counsel for thepetitioner-revenue can be accepted. It is not that the Settlement Commission has to pass anorder either to accept or refuse disclosure of income withoutapplying its mind. If the argument of the counsel for revenue isaccepted and income, as disclosed by the assessee is acceptedthen the revenue would loose a sum of Rs.84,50,000/-. In the light of the discussion made above, I do not find anyground to interfere in the impugned order. Hence, writ petition isdismissed. (MN BHANDARI) J. sunita/56