Wp/4920/2018 Of M/S. Sable Associates v. Income-Tax Settlement Commission And Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYAPPELLATE SIDE CIVIL JURISDICTION WRIT PETITION NO.4920 OF 2018 M/s. Sable Associates..Petitioner.v/s.Income Tax Settlement CommissionAdditional Bench & Others .. Respondents. Mr. Jehangir Mistri, Sr. Advocate with Mr. Madhur Agrawal i/b. Mr.A. K. Jasani, for the Petitioner.Mr. Sham Walve, for the Respondents. P.C:- CORAM: M.S.SANKLECHA, & SANDEEP K. SHINDE,JJ. DATE : 10[th] AUGUST, 2018. This Petition under Article 226 of the Constitution of India,challenges the order dated 6[th] December, 2017 passed by the Income TaSettlement Commission (the Commission). The impugned order dated 6[th]December, 2017 rejected the Petitioner's Application for Settlement madeunder Chapter XIX-A of the Income Tax Act, 1961 (the Act). Theapplication was made by the Petitioner to settle its dispute for AssessmentYears 2009-10 to 2015-16 with the Revenue. This order of rejection waspassed at the stage of Section 245-D(4) of the Act, on account of a failureto make a full and true disclosure of its undisclosed income as requiredunder the Act, for the purposes of settlement. 2The Petitioner is engaged in the business of real estateDevelopment. More particularly, Petitioner is engaged in executinghousing projects and also providing facilitation work to obtainpermission/ clearance for development of land. It was in the above factsthat the Petitioner had made a declaration of its undisclosed income forSettlement of the disputes in the subject Assessment Years. 3The impugned order dated 6[th] December, 2017 of theCommission holds that there was failure on the part of the Petitioner tomake a full and true disclosure of its undisclosed income on the followingheads:- (a)Claim for deduction for the subject Assessment Years underSection 80-IB (10) of the Act; andSection 80-IB (10) of the Act; and (b)The income declared for the subject Assessment Years in respect of the diaries seized the during course of search.the diaries seized the during course of search. 4So far as the rejection of the application on account of itsclaim for deduction under Section 80-IB(10) of the Act is concerned, wefind that the basis of the income declared for settlement was afterclaiming the benefit available under Section 80IB(10)of the Act. In case,this was not found justified by the Commission, then ipso facto, it wouldnot lead to a conclusion that there was a failure on the part of theApplicant to fully and truly disclose its income for settlement of thedispute before the Commission. This, more particularly so, when theimpugned order holds that further details are required to be called forfrom the Pune Municipal Corporation to determine whether the claim fordeduction under Section 80IB(10) of the Act, is justified or not. Thus, the rejection of the application for settlement in the above facts on the groundof failure to disclose all facts may not be sustainable and would certainlyrequire further consideration by us. However, before we take a view onthis, it may be necessary to deal with the second ground of rejection. 5(i)So far the Applicant's income on account of the facilitation workdone for obtaining clearance in connection with thedevelopment of land is concerned, it is the case of the Applicantthat this income was entirely made up of the details recorded in theseized diaries. done for obtaining clearance in connection with thedevelopment of land is concerned, it is the case of the Applicantthat this income was entirely made up of the details recorded in theseized diaries. rejection of the application for settlement in the above facts on the groundof failure to disclose all facts may not be sustainable and would certainlyrequire further consideration by us. However, before we take a view onthis, it may be necessary to deal with the second ground of rejection. 5(i)So far the Applicant's income on account of the facilitation workdone for obtaining clearance in connection with thedevelopment of land is concerned, it is the case of the Applicantthat this income was entirely made up of the details recorded in theseized diaries. done for obtaining clearance in connection with thedevelopment of land is concerned, it is the case of the Applicantthat this income was entirely made up of the details recorded in theseized diaries. (ii)During the course of the hearing, the Commission called upon the Applicants to give the full details in respect of the additional income earned and expenses incurred on account of the facilitationwork done for obtaining clearance in connection with the development of land. However, the Applicants were unable to give any details except stating that these expenses were in connection with the facilitation work done for Joshi Site or for sale of land or were in nature of miscellaneous expenses as indicated in the seizeddiaries.Applicants to give the full details in respect of the additional income earned and expenses incurred on account of the facilitationwork done for obtaining clearance in connection with the development of land. However, the Applicants were unable to give any details except stating that these expenses were in connection with the facilitation work done for Joshi Site or for sale of land or were in nature of miscellaneous expenses as indicated in the seizeddiaries. (iii)The impugned order records that the Applicants were not coming with clean hands in respect of additional income to conclude as under:-with clean hands in respect of additional income to conclude as under:- “(i)The applicant has failed to satisfactorily explain the detailsand particulars of various receipts of Rs.1,55,36,000/- for A. Y.2013-14 2014-15 disclosed on the basis of entries in the seized diary.We are not convinced with the explanation of the AR that theapplicant does not remember the particulars of the transactionrelating to Joshi Site and sale of lands and housing schemes forwhich the receipts for facilitation work is claimed to have beenreceived by them. Similarly, in respect of expenses claimed at Rs.84.66 lacs in A. Y. 2013-14, 2014-15 and 2015-16, fullparticulars and details of the land and site etc. have not beensubmitted to establish how these expenses were relatable to thereceipts or were of admissible nature. Thus, on the parameters offullness and trueness, the applicant's claim is not maintainable. Onthe one hand the applicant has taken the stand that such type ofreceipts were not regular, on the other hand, some adhoc amount ofRs.5 lacs has been offered in each of the year from A.Y. 2009-10 to2012-13 and for A. Y. 2015-16. The ARs contention that theapplicant is not able to remember these transactions does notconvince us. The applicant seems to be concealing full information asthe same may result in to revelation of many more issues leading topossible enhancement of additional income. As the applicant hasearned quite substantial receipts from the transactions relating toJoshi Site, sale of land and for clearance of housing scheme, it isdifficult to believe that requisite information is not available with theapplicant. This conduct on the part of applicant makes us believethat the applicant does not want to disclose full details andinformation about these transactions. It is also not clear whether allincome based on similar kind of entries found/ recorded on seizedmaterial has been offered in SOF.” 6The Petitioner has moved this Court in its writ jurisdiction.Admittedly, there is no appeal provided under the Act from the orders ofthe Commission. However, the absence of an appeal, would not convert aWrit Court into an Appeal Court to enable us to substitute our view to thatof the Commission. (see Appropriate Authority v/s. Smt. Sudha Patil &Another 235 ITR 118) It is only in cases where the order passed by theCommission is contrary to and/or ignores the statutory provisions, causingprejudice to the Applicant or is bad on account of the flaw in the decisionmaking process that, we interfere with the orders of the Commission.Now, keeping these parameters in mind, we shall examine the Petition. 7It is the Petitioner's grievance that the impugned orderproceeds on the basis that there was failure to make full and true disclosure of its additional income. This on the ground of failure tosubstantiate the additional income. This, it is submitted , is beyond thejurisdiction of the Commission and in support, invites attention to Section245C(1) of the Act. The above Section 245C(1) of the Act, provides thatan application for settlement should contain full and true disclosure of hisincome which has not been disclosed before the Assessing Officer and themanner in which such income is derived. The aforesaid requirement, thePetitioner states, has been complied with, inasmuch as the income hasbeen declared and the manner in which such income is derived i.e. onaccount of rendering facilitation services. Thus, there is no requirement ofsubstantiating the income by giving particulars of the income. Ourattention is drawn to Section 271 AAB of the Act, which requires not onlydisclosing the manner in which the income is derived but a furtherrequirement of substantiating the same is also there and this requirementis absent in Section 245C(1) of the Act. This disclosing the manner inwhich income has been earned, would require giving particulars of themanner in which it was earned. Merely stating the source of the income orthe head of income, would not mean the manner in which the income isearned is enclosed. The manner i.e. the way in which income was earned,would involve disclosing the particulars, when specifically asked for i.e.the property or person involved in earning the undisclosed income. Itcannot be said that this amounts to calling upon the party to substantiatethe income. Further, the Petitioner has claimed expenses and seekingparticulars of the expenses, cannot be said to be calling upon thePetitioner to substantiate the expenses. In fact, the impugned orderrecords a finding that not giving particulars of the undisclosed incomewould result in failure to disclose truly and fully the income offered for settlement. This is on the basis of the above facts is a very possible view.Therefore, no interference under Article 226 of the Constitution, is calledfor on this count in our writ jurisdiction. settlement. This is on the basis of the above facts is a very possible view.Therefore, no interference under Article 226 of the Constitution, is calledfor on this count in our writ jurisdiction. 8It was next submitted that at the stage of Section 245D(4) ofthe Act, the application cannot be rejected on account of failure todisclose fully and truly the undisclosed income in its application. This isparticularly, so as on the same facts, the Commission itself had passed anorder under Section 245D(2C) of the Act to proceed further. This, it issubmitted would amount to Review of an order and should not beallowed. It is true that at the stage of Section 245D(2C) of the Act, theCommission has to be satisfied that the application is valid and it shouldbe proceeded with further. However, this satisfaction reached by theCommission at the stage of 245D(2C) of the Act, would not prohibit theCommission from rejecting the application at the stage of 245D(4) of theAct, if it finds that the application as filed, does not truly and fullydiscloses the un-declared income. In fact, the requirements of the full andtrue disclosure being made on the part of the Applicant, is required to besatisfied at all stages till the disposal of the application by theCommission. In fact, the satisfaction of true and full disclosure by theApplicant has to be met at all times and mere allowing of application tobe proceeded further under Section 245D(2C) of the Act, will not absolveand/or discharge the burden upon the Applicant to satisfy the request offull and true disclosure even at the stage of Section 245D(4) of the Act, ifthe need arises as in this case. In the above view, this grievances on partof the Petitioner is not sustainable. Hence, no reason to interfere underArticle 226 of the Constitution of India, arises. 9In view of our view on the issue of full and true disclosure inrespect of facilitation charges, no question of entertaining this Petition canarise. This, even if, we are of the view that the issue of deduction underSection 80IB(10) of the Act may require consideration. 10However, it is made clear that the Assessment Proceedingsunder the Act, will proceed on its own merits. Nothing stated in theimpugned order of the Commission or this order should influence theassessing procedure under the Act. 11Accordingly, Writ Petition dismissed. No order as to costs. (SANDEEP K. SHINDE,J.) (M.S.SANKLECHA,J.) Digitally signedSmitaby SmitaRajnikant JoshiRajnikantJoshiDate:2018.08.2022:47:15+0530Smitaby SmitaRajnikant JoshiRajnikantJoshiDate:2018.08.2022:47:15+0530