Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: VAT RATES :: cpt :: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TDS :: empanelment :: articles on VAT and GST in India :: list of goods taxed at 4% :: form 3cd :: Central Excise rule to resale the machines to a new company :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: VAT Audit
 
 
From the Courts »
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)
 Ashok Prapann Sharma vs. CIT (Supreme Court)a
  Vatsala Shenoy vs. JCIT (Supreme Court)
  Vatsala Shenoy vs. JCIT (Supreme Court)
 M.K.Overseas Pvt. Ltd. Vs. Pr.Commissioner Of Income Tax-06
 Arshia Ahmed Qureshi Vs. Pr. Commissioner Of Income Tax-21

Agson Global Pvt Ltd & Ors Vs. Income Tax Settlement Commission And Ors
February, 03rd 2016
        THE HIGH COURT OF DELHI AT NEW DELHI
%                                      Judgment delivered on: 06.01.2016

+      W.P.(C) 2927/2013

AGSON GLOBAL PVT LTD & ORS                                     ... Petitioners

                                         versus

INCOME TAX SETTLEMENT
COMMISSION AND ORS                                             ... Respondents

Advocates who appeared in this case:
For the Petitioners : Mr M. S. Syali, Sr Advocate with Ms Gayatri Verma,
                      Ms Husnal Syali, Mr Mayank Nagi and Mr Harkunal Singh
For the Respondents : Ms Suruchi Aggarwal, Adv. with Ms Lakshmi Gurung,
                      Ms Radhika Gupta and Mr Abhishek Sharma

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE V. KAMESWAR RAO

                                   JUDGMENT

BADAR DURREZ AHMED, J

1.     The only issue which arises for consideration in this writ petition is

whether the income tax settlement commission has the power to direct a

special audit under section 142 (2A) in exercise of its power vested in

section 245F of the Income Tax Act, 1961 (hereinafter referred to as "the

said act")?




WPC 2927/2013                                                         Page 1 of 38
2.     Petitioner Nos. 1 to 7 filed a settlement application before the income

tax settlement commission, New Delhi under the provisions of chapter

XIX-A of the said act on 12.12.2011. Thereafter, on 22.12.2011 petitioner

nos. 8 to 10 filed their settlement application before the said income tax

settlement commission. On 22.12.2011, the principal bench of the said

settlement commission passed an order under section 245D (1) of the said

act admitting the application made by petitioner nos. 1 to 7 for settlement

before it. Similarly, on 28.12.2011, the principal bench of the income tax

settlement commission passed an order under section 245D (1) of the said

act admitting the applications made by petitioner nos. 8 to 10 for settlement

before it. On 21.06.2012, the Commissioner of income tax, Delhi furnished

his consolidated report as required by the income tax settlement

commission. The petitioners submitted their reply to the said consolidated

report on 10.09.2012.     As required by the settlement commission, the

petitioners submitted their consolidated profit and loss account and balance

sheets for the assessment year's 2004-05 to 2011-12 before the assessing

officer (Asst Commissioner of income tax, central circle 23, Jhandewalans,

New Delhi).




WPC 2927/2013                                                    Page 2 of 38
3.     The Commissioner of income tax submitted a supplementary report

dated 05.12.2012 in which he noted that after examining the accounts

submitted by the petitioners, the assessing officer was of the opinion that

the accounts were very complex in nature and that the same ought to be

audited under section 142 (2A) of the said act for determining the correct

income of the petitioner group. The Commissioner indicated that he was

also of the opinion that owing to the complexity in the maintenance of

accounts, to arrive at the correct income of the assessee group for all the

assessment years for which settlement applications have been filed and

admitted by the settlement commission, the accounts of the assessee group

are required to be audited under section 142 (2A) of the said act. The

settlement commission was therefore requested to direct a special audit of

the accounts of the assessee group.


4.     After    considering   the   material   on   record,   including         the

supplementary report dated 05.12.2012 requesting for a special audit under

section 142 (2A), the settlement commission sent a letter dated 17.04.2012

to the petitioners providing them an opportunity of being heard as to why

their accounts should not be subjected to the said special audit. Arguments

were heard on this aspect by the settlement commission on 25.04.2013. It



WPC 2927/2013                                                    Page 3 of 38
was inter alia argued on behalf of the petitioners that a special audit under

section 142 (2A) of the said act could only be directed at the stage of

assessment and cannot be conducted in the course of settlement

proceedings. This argument was rejected by the settlement commission in

the following manner: ­

           "(V)      The powers of the settlement commission u/s 245F
           (2) entail exclusive jurisdiction to exercise the powers and
           perform the functions of an income tax authority. This, in
           our view, includes the powers to direct audit u/s 142 (2A).
           The contention of the applicants that Sec 142(2A) can be
           conducted only in assessment proceedings and not
           settlement proceedings under chapter XIX ­ A, is misplaced.
           Accepting such a contention will render the provisions of
           section 245F (2) otiose. We therefore reject this contention."


5.     The settlement commission was of the view that the accounts were

complex and that it was in the interest of the revenue that the special audit

be ordered. Consequently, by virtue of the impugned order dated

26.04.2013, the settlement commission directed that the special audit be

carried out. Being aggrieved by this, the petitioners have filed the present

petition seeking the quashing of the impugned order dated 26.04.2013.


6.     On behalf of the petitioners it was argued that there is a clear

distinction between a settlement and an assessment. The procedure for



WPC 2927/2013                                                     Page 4 of 38
assessment is provided in chapter XIV of the said act. On the other hand the

procedure for settlement of cases is set out in chapter XIX-A of the said act.

The requirement of a special audit is spelt out in section 142 (2A) of the

said act which falls within the ambit of inquiry before assessment. It was

contended that the proceedings under chapter XIX-A are entirely different

from assessment proceedings and, therefore, the settlement commission

which is concerned with settlement of cases would not have the jurisdiction

to direct a special audit. It was also contended that merely because section

245F confers powers on the settlement commission which are vested in an

income tax authority, does not mean that all the powers of an income tax

authority under the said act vest in the income tax settlement commission.

It was submitted that the powers conferred under section 245F ought to be

construed keeping in mind the distinction between an assessment and a

settlement. Reliance was placed on the following decisions:





       (1)      CIT v. Om Prakash Mittal: (2005) 2 SCC 751;

       (2)      Brij Lal & Ors v. CIT, Jalandhar: (2011) 1 SCC 1;

       (3)      Picasso Overseas & Ors v. DGRI: WPC 1495/2007:
                decided on 03.08.2009;




WPC 2927/2013                                                    Page 5 of 38
       (4)      Ashwani Tobacco Pvt. Ltd v. Union of India: WPC
                9104/2009 decided on 29.01.2010;

       (5)      Union of India v. Dharampal & Ors.: WPC 4376/2012
                decided on 27.09.2013; and

       (6)      Director General of Central Excise Intelligence v.
                Murarilal Harishchandra Jaiswal Pvt. Ltd: (2010) 172
                DLT 593 (DB).

7.     The learned counsel for the revenue supported the view taken by the

income tax settlement commission. It was contended that the settlement

commission by virtue of the provisions of section 245F of the said act

acquires exclusive jurisdiction in respect of a case when an application

under section 245C is made before it and such jurisdiction comes to an end

if an order under section 245D(1) is made whereby the settlement

application is not proceeded with or, where the application is proceeded

with, till the order is passed under section 245D (4). It was submitted that in

respect of matters covered by the settlement application and all proceedings

incidental thereto, the settlement commission has exclusive jurisdiction

with regard to adjudication, orders and directions. It was also submitted, on

the strength of Brij Lal (supra), that the filing of an application before the

settlement commission is akin to the filing of a return before the assessing

authority under section 139 of the said act. It was submitted that the




WPC 2927/2013                                                     Page 6 of 38
settlement commission has to determine the income as is done by the

assessing officer under section 143(3) of the said act. Thus, according to the

learned counsel for the revenue, just as the assessing officer has a right to

make any enquiry for proper assessment and can direct a special audit

having regard to the nature and complexity of the accounts and keeping in

mind the interest of the revenue, the settlement commission, which also has

to determine the total income and thereby make an assessment, can, when it

has exclusive jurisdiction over the case, certainly direct that a special audit

be carried out. Reliance was also placed on the following decisions: ­

      (1) CIT v. Express Newspapers Limited: (1994) 206 ITR 443
          (SC);
      (2) Parag Nivesh Private Limited v. DCIT: (1999) 240 ITR
          419 (Cal).

8.     The relevant provisions of the said act are set out hereunder:

       A.    Section 142 {in Chapter XIV: Procedure for
       Assessment} as it stood on the date of the impugned order:
       "142. Enquiry before assessment.--(1) For the purpose of
       making an assessment under this Act, the Assessing Officer
       may serve on any person who has made a return under Section
       115-WD or Section 139 or in whose case the time allowed
       under sub-section (1) of Section 139 for furnishing the return
       has expired a notice requiring him, on a date to be therein
       specified,--
            (i) where such person has not made a return within the
            time allowed under sub-section (1) of Section 139 or



WPC 2927/2013                                                     Page 7 of 38
            before the end of the relevant assessment year, to furnish
            a return of his income or the income of any other person
            in respect of which he is assessable under this Act, in the
            prescribed form and verified in the prescribed manner and
            setting forth such other particulars as may be prescribed,
            or:
            Provided that where any notice has been served under this
            sub-section for the purposes of this clause after the end of
            the relevant assessment year commencing on or after the
            1st day of April, 1990 to a person who has not made a
            return within the time allowed under sub-section (1) of
            Section 139 or before the end of the relevant assessment
            year, any such notice issued to him shall be deemed to
            have been served in accordance with the provisions of
            this sub-section.
            (ii) to produce, or cause to be produced, such accounts or
            documents as the Assessing Officer may require, or
            (iii) to furnish in writing and verified in the prescribed
            manner information in such form and on such points or
            matters (including a statement of all assets and liabilities
            of the assessee, whether included in the accounts or not)
            as the Assessing Officer may require:
      Provided that--

      (a )     the previous approval of the Joint Commissioner shall be
      obtained before requiring the assessee to furnish a statement of
      all assets and liabilities not included in the accounts;
      (b )    the Assessing Officer shall not require the production of
      any accounts relating to a period more than three years prior to
      the previous year.
      (2)    For the purpose of obtaining full information in respect of
      the income or loss of any person, the Assessing Officer may
      make such enquiry as he considers necessary.




WPC 2927/2013                                                      Page 8 of 38
      (2-A) If, at any stage of the proceedings before him, the
      Assessing Officer, having regard to the nature and
      complexity of the accounts of the assessee and the interests of
      the revenue, is of the opinion that it is necessary so to do, he
      may, with the previous approval of the Chief Commissioner
      or Commissioner, direct the assessee to get the accounts
      audited by an accountant, as defined in the Explanation
      below sub-section (2) of Section 288, nominated by the Chief
      Commissioner or Commissioner in this behalf and to furnish
      a report of such audit in the prescribed form duly signed and
      verified by such accountant and setting forth such particulars
      as may be prescribed and such other particulars as the
      Assessing Officer may require:
      Provided that the Assessing Officer shall not direct the
      assessee to get the accounts so audited unless the assessee has
      been given a reasonable opportunity of being heard.
      xxxx           xxxx        xxxx        xxxx          xxxx"
                                                    (underlining added)


      B.        Provisions of Chapter XIX-A {Settlement of Cases}:
      "245-A. Definitions.--In this Chapter, unless the context
      otherwise requires,--
       xxxxx         xxxxx       xxxxx       xxxxx         xxxxx

      (b )    "case" means any proceeding for assessment under this
      Act, of any person in respect of any assessment year or
      assessment years which may be pending before an Assessing
      Officer on the date on which an application under sub-section (1)
      of Section 245-C is made:
      Provided that--
      (i )  a proceeding for assessment or reassessment or
      recomputation under Section 147;

      (ii) [* * *]


WPC 2927/2013                                                      Page 9 of 38
      (iii) [* * *]

      (iv) a proceeding for making fresh assessment in pursuance of an
      order under Section 254 or Section 263 or Section 264, setting
      aside or cancelling an assessment,
      shall not be a proceeding for assessment for the purposes of this
      clause.
      Explanation.--For the purposes of this clause--

      (i) a proceeding for assessment or reassessment or recomputation
      referred to in clause (i) of the proviso shall be deemed to have
      commenced from the date on which a notice under Section 148 is
      issued;
      (ii) [* * *];

      (iii) a proceeding for making fresh assessment referred to in
      clause (iv) of the proviso shall be deemed to have commenced
      from the date on which the order under Section 254 or Section
      263 or Section 264, setting aside or cancelling an assessment was
      passed;
      (iii-a) a proceeding for assessment or reassessment for any of the
      assessment years, referred to in clause (b) of sub-section (1) of
      Section 153-A in case of a person referred to in Section 153-A or
      Section 153-C, shall be deemed to have commenced on the date
      of issue of notice initiating such proceedings and concluded on
      the date on which the assessment is made;
      (iv) a proceeding for assessment for any assessment year, other
      than the proceedings of assessment or reassessment referred to in
      clause (i) or clause (iv) of the proviso or clause (iii-a) of the
      Explanation], shall be deemed to have commenced from the 1st
      day of the assessment year and concluded on the date on which
      the assessment is made;
      xxxx            xxxx       xxxx         xxxx"




WPC 2927/2013                                                    Page 10 of 38
      "245-C. Application for settlement of cases.--(1) An assessee
      may, at any stage of a case relating to him, make an application
      in such form and in such manner as may be prescribed, and
      containing a full and true disclosure of his income which has not
      been disclosed before the Assessing Officer, the manner in which
      such income has been derived, the additional amount of income
      tax payable on such income and such other particulars as may be
      prescribed, to the Settlement Commission to have the case settled
      and any such application shall be disposed of in the manner
      hereinafter provided:
      Provided that no such application shall be made unless,--
      (i) in a case where proceedings for assessment or reassessment
      for any of the assessment years referred to in clause (b) of sub-
      section (1) of Section 153-A or clause (b) of sub-section (1) of
      Section 153-B in case of a person referred to in Section 153-A or
      Section 153-C have been initiated, the additional amount of
      Income Tax payable on the income disclosed in the application
      exceeds fifty lakh rupees,
      (i-a) in a case where--
         (A) the applicant is related to the person referred to in clause
         (i) who has filed an application (hereafter in this sub-section
         referred to as "specified person"); and
         (B) the proceedings for assessment or re-assessment for any
         of the assessment years referred to in clause (b) of sub-
         section (1) of Section 153-A or clause (b) of sub-section (1)
         of Section 153-B in case of the applicant, being a person
         referred to in Section 153-A or Section 153-C, have been
         initiated,
         the additional amount of income-tax payable on the income
         disclosed in the application exceeds ten lakh rupees,
      (ii) in any other case, the additional amount of Income Tax
      payable on the income disclosed in the application exceeds ten
      lakh rupees, and such tax and the interest thereon, which would
      have been paid under the provisions of this Act had the income



WPC 2927/2013                                                       Page 11 of 38
      disclosed in the application been declared in the return of income
      before the Assessing Officer on the date of application, has been
      paid on or before the date of making the application and the proof
      of such payment is attached with the application.
      Explanation.--For the purposes of clause (i-a),--
      (a) the applicant, in relation to the specified person referred to in
      clause (i-a), means,--
      (i) where the specified person is an individual, any relative of the
      specified person;
      (ii) where the specified person is a company, firm, association of
      persons or Hindu undivided family, any director of the company,
      partner of the firm, or member of the association or family, or
      any relative of such director, partner or member;
      (iii) any individual who has a substantial interest in the business
      or profession of the specified person, or any relative of such
      individual;
      (iv) a company, firm, association of persons or Hindu undivided
      family having a substantial interest in the business or profession
      of the specified person or any director, partner or member of such
      company, firm, association or family, or any relative of such
      director, partner or member;
      (v) a company, firm, association of persons or Hindu undivided
      family of which a director, partner or member, as the case may
      be, has a substantial interest in the business or profession of the
      specified person; or any director, partner or member of such
      company, firm, association or family or any relative of such
      director, partner or member;
      (vi) any person who carries on a business or profession,--
         (A) where the specified person being an individual, or any
         relative of such specified person, has a substantial interest in
         the business or profession of that person; or




WPC 2927/2013                                                       Page 12 of 38
         (B) where the specified person being a company, firm,
         association of persons or Hindu undivided family, or any
         director of such company, partner of such firm or member
         of the association or family, or any relative of such director,
         partner or member, has a substantial interest in the business
         or profession of that person;
      (b) a person shall be deemed to have a substantial interest in a
      business or profession, if--
      (A) in a case where the business or profession is carried on by a
      company, such person is, on the date of search, the beneficial
      owner of shares (not being shares entitled to a fixed rate of
      dividend, whether with or without a right to participate in profits)
      carrying not less than twenty per cent of the voting power; and
      (B) in any other case, such person is, on the date of search,
      beneficially entitled to not less than twenty per cent of the profits
      of such business or profession.
      (1-A) For the purposes of sub-section (1) of this section, the
      additional amount of income tax payable in respect of the income
      disclosed in an application made under sub-section (1) of this
      section shall be the amount calculated in accordance with the
      provisions of sub-sections (1-B) to (1-D).
      (1-B) Where the income disclosed in the application relates to
      only one previous year,--
      (i) if the applicant has not furnished a return in respect of the
      total income of that year, then, tax shall be calculated on the
      income disclosed in the application as if such income were the
      total income;
      (ii) if the applicant has furnished a return in respect of the total
      income of that year, tax shall be calculated on the aggregate of
      the total income returned and the income disclosed in the
      application as if such aggregate were the total income.
      (1-C) The additional amount of income tax payable in respect of
      the income disclosed in the application relating to the previous
      year referred to in sub-section (1-B) shall be,--


WPC 2927/2013                                                       Page 13 of 38
      (a) in a case referred to in clause (i) of that sub-section, the
      amount of tax calculated under that clause;
      (b) in a case referred to in clause (ii) of that sub-section, the
      amount of tax calculated under that clause as reduced by the
      amount of tax calculated on the total income returned for that
      year;
      (c) [* * *]

      (1-D) Where the income disclosed in the application relates to
      more than one previous year, the additional amount of income
      tax payable in respect of the income disclosed for each of the
      years shall first be calculated in accordance with the provisions
      of sub-sections (1-B) and (1-C) and the aggregate of the amount
      so arrived at in respect of each of the years for which the
      application has been made under sub-section (1) shall be the
      additional amount of income tax payable in respect of the income
      disclosed in the application.
      (2) Every application made under sub-section (1) shall be
      accompanied by such fees as may be prescribed.
      (3) An application made under sub-section (1) shall not be
      allowed to be withdrawn by the applicant.
      (4) An assessee shall, on the date on which he makes an
      application under sub-section (1) to the Settlement Commission,
      also intimate the Assessing Officer in the prescribed manner of
      having made such application to the said Commission."
      "245-D. Procedure on receipt of an application under Section
      245-C.-- (1) On receipt of an application under Section 245-C,
      the Settlement Commission shall, within seven days from the
      date of receipt of the application, issue a notice to the applicant
      requiring him to explain as to why the application made by him
      be allowed to be proceeded with, and on hearing the applicant,
      the Settlement Commission shall, within a period of fourteen
      days from the date of the application, by an order in writing,
      reject the application or allow the application to be proceeded
      with:



WPC 2927/2013                                                     Page 14 of 38
      Provided that where no order has been passed within the
      aforesaid period by the Settlement Commission, the application
      shall be deemed to have been allowed to be proceeded with.
       (2) A copy of every order under sub-section (1) shall be sent to
      the applicant and to the Commissioner.
      (2-A) Where an application was made under Section 245-C
      before the 1st day of June, 2007, but an order under the
      provisions of sub-section (1) of this section, as they stood
      immediately before their amendment by the Finance Act, 2007,
      has not been made before the 1st day of June, 2007, such
      application shall be deemed to have been allowed to be
      proceeded with if the additional tax on the income disclosed in
      such application and the interest thereon is paid on or before the
      31st day of July, 2007.
      Explanation.--In respect of the application referred to in this
      sub-section, the 31st day of July, 2007 shall be deemed to be the
      date of the order of rejection or allowing the application to be
      proceeded with under sub-section (1).
      (2-B) The Settlement Commission shall,--
      (i) in respect of an application which is allowed to be proceeded
      with under sub-section (1), within thirty days from the date on
      which the application was made; or
      (ii) in respect of an application referred to in sub-section (2-A)
      which is deemed to have been allowed to be proceeded with
      under that sub-section, on or before the 7th day of August, 2007,
      call for a report from the Commissioner, and the Commissioner
      shall furnish the report within a period of thirty days of the
      receipt of communication from the Settlement Commission.
      (2-C) Where a report of the Commissioner called for under sub-
      section (2-B) has been furnished within the period specified
      therein, the Settlement Commission may, on the basis of the
      report and within a period of fifteen days of the receipt of the
      report, by an order in writing, declare the application in question



WPC 2927/2013                                                     Page 15 of 38
      as invalid, and shall send the copy of such order to the applicant
      and the Commissioner:
      Provided that an application shall not be declared invalid unless
      an opportunity has been given to the applicant of being heard:
      Provided further that where the Commissioner has not furnished
      the report within the aforesaid period, the Settlement
      Commission shall proceed further in the matter without the report
      of the Commissioner.
       (2-D) Where an application was made under sub-section (1) of
       Section 245-C before the 1st day of June, 2007 and an order
       under the provisions of sub-section (1) of this section, as they
       stood immediately before their amendment by the Finance Act,
       2007, allowing the application to have been proceeded with, has
       been passed before the 1st day of June, 2007, but an order under
       the provisions of sub-section (4), as they stood immediately
       before their amendment by the Finance Act, 2007, was not
       passed before the 1st day of June, 2007, such application shall
       not be allowed to be further proceeded with unless the
       additional tax on the income disclosed in such application and
       the interest thereon, is, notwithstanding any extension of time
       already granted by the Settlement Commission, paid on or
       before the 31st day of July, 2007.
       (3) The Settlement Commission, in respect of--
       (i) an application which has not been declared invalid under
       sub-section (2-C); or
       (ii) an application referred to in sub-section (2-D) which has
       been allowed to be further proceeded with under that sub-
       section,
         may call for the records from the Commissioner and after
         examination of such records, if the Settlement Commission is
         of the opinion that any further enquiry or investigation in the
         matter is necessary, it may direct the Commissioner to make or
         cause to be made such further enquiry or investigation and
         furnish a report on the matters covered by the application and



WPC 2927/2013                                                    Page 16 of 38
         any other matter relating to the case, and the Commissioner
         shall furnish the report within a period of ninety days of the
         receipt of communication from the Settlement Commission:
       Provided that where the Commissioner does not furnish the
       report within the aforesaid period, the Settlement Commission
       may proceed to pass an order under sub-section (4) without
       such report.
       (4) After examination of the records and the report of the
       Commissioner, if any, received under--
       (i) sub-section (2-B) or sub-section (3), or
       (ii) the provisions of sub-section (1) as they stood immediately
       before their amendment by the Finance Act, 2007,
       and after giving an opportunity to the applicant and to the
       Commissioner to be heard, either in person or through a
       representative duly authorised in this behalf, and after
       examining such further evidence as may be placed before it or
       obtained by it, the Settlement Commission may, in accordance
       with the provisions of this Act, pass such order as it thinks fit on
       the matters covered by the application and any other matter
       relating to the case not covered by the application, but referred
       to in the report of the Commissioner.
       (4-A) The Settlement Commission shall pass an order under
       sub-section (4)--
       (i) in respect of an application referred to in sub-section (2-A)
       or sub-section (2-D), on or before the 31st day of March, 2008;
       (ii) in respect of an application made on or after the 1st day of
       June, 2007 but before the 1st day of June, 2010], within twelve
       months from the end of the month in which the application was
       made.
       (iii) in respect of an application made on or after the 1st day of
       June, 2010, within eighteen months from the end of the month
       in which the application was made.




WPC 2927/2013                                                       Page 17 of 38
       (5) Subject to the provisions of Section 245-BA, the materials
       brought on record before the Settlement Commission shall be
       considered by the Members of the Bench concerned before
       passing any order under sub-section (4) and, in relation to the
       passing of such order, the provisions of Section 245-BD shall
       apply.
       (6) Every order passed 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 the
       settlement effective and shall 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 facts.
       (6-A) Where any tax payable in pursuance of an order under
       sub-section (4) is not paid by the assessee within thirty-five
       days of the receipt of a copy of the order by him, then whether
       or not the Settlement Commission has extended the time for
       payment of such tax or has allowed payment thereof by
       instalments, the assessee shall be liable to pay simple interest at
       5
         [one and one-fourth per cent for every month or part of a
       month] on the amount remaining unpaid from the date of expiry
       of the period of thirty-five days aforesaid.
       (6-B) The Settlement Commission may, at any time within a
       period of six months from the date of the order, with a view to
       rectifying any mistake apparent from the record, amend any
       order passed by it under sub-section (4):
       Provided that an amendment which has the effect of modifying
       the liability of the applicant shall not be made under this sub-
       section unless the Settlement Commission has given notice to
       the applicant and the Commissioner of its intention to do so and
       has allowed the applicant and the Commissioner an opportunity
       of being heard.
       (7) Where a settlement becomes void as provided under sub-
       section (6), the proceedings with respect to the matters covered



WPC 2927/2013                                                      Page 18 of 38
       by the settlement shall be deemed to have been revived from the
       stage at which the application was allowed to be proceeded with
       by the Settlement Commission and the income tax authority
       concerned, may, notwithstanding anything contained in any
       other provision of this Act, complete such proceedings at any
       time before the expiry of two years from the end of the financial
       year in which the settlement became void.
       (8) For the removal of doubts, it is hereby declared that nothing
       contained in Section 153 shall apply to any order passed under
       sub-section (4) or to any order of assessment, reassessment or
       recomputation required to be made by the Assessing Officer in
       pursuance of any directions contained in such order passed by
       the Settlement Commission and nothing contained in the
       proviso to sub-section (1) of Section 186 shall apply to the
       pursuance of any such directions as aforesaid."


       "245-F. Power and procedure of Settlement Commission.--
       (1) In addition to the powers conferred on the Settlement
       Commission under this Chapter, it shall have all the powers
       which are vested in an income tax authority under this Act.
       (2) Where an application made under Section 245-C has been
       allowed to be proceeded with under Section 245-D, the
       Settlement Commission shall, until an order is passed under
       sub-section (4) of Section 245-D, have, subject to the provisions
       of sub-section (3) of that section, exclusive jurisdiction to
       exercise the powers and perform the functions of an income tax
       authority under this Act in relation to the case:
       Provided that where an application has been made under
       Section 245-C on or after the 1st day of June, 2007, the
       Settlement Commission shall have such exclusive jurisdiction
       from the date on which the application was made:
       Provided further that where--
       (i) an application made on or after the 1st day of June, 2007, is
       rejected under sub-section (1) of Section 245-D; or



WPC 2927/2013                                                    Page 19 of 38
       (ii) an application is not allowed to be proceeded with under
       sub-section (2-A) of Section 245-D, or, as the case may be, is
       declared invalid under sub-section (2-C) of that section; or
       (iii) an application is not allowed to be further proceeded with
       under sub-section (2-D) of Section 245-D,
       the Settlement Commission, in respect of such application shall
       have such exclusive jurisdiction up to the date on which the
       application is rejected, or, not allowed to be proceeded with, or,
       declared invalid, or, not allowed to be further proceeded with,
       as the case may be.
       (3) Notwithstanding anything contained in sub-section (2) and
       in the absence of any express direction to the contrary by the
       Settlement Commission, nothing contained in this section shall
       affect the operation of any other provision of this Act requiring
       the applicant to pay tax on the basis of self-assessment in
       relation to the matters before the Settlement Commission.
       (4) For the removal of doubts, it is hereby declared that, in the
       absence of any express direction by the Settlement Commission
       to the contrary, nothing in this Chapter shall affect the operation
       of the provisions of this Act in so far as they relate to any
       matters other than those before the Settlement Commission.
       (5) [Omitted]
       (6) [Omitted]
       (7) The Settlement Commission shall, subject to the
       provisions of this Chapter, have power to regulate its own
       procedure and the procedure of Benches thereof in all matters
       arising out of the exercise of its powers or of the discharge of its
       functions, including the places at which the Benches shall hold
       their sittings."

9.     On examining the provisions of section 142, it is evident that it is

part of Chapter XIV which specifically details the procedure for



WPC 2927/2013                                                       Page 20 of 38
assessment. The said provision relates to the enquiry before assessment. It

is specifically for the purpose of making an assessment under the said act.

Sub-section (2A) stipulates that if at any stage of the proceedings before

him, the assessing officer, having regard to the nature and complexity of the

accounts of the assessee and the interest of the revenue, is of the opinion

that it is necessary so to do, he may, with the previous approval of the Chief

Commissioner of Commissioner, direct the assessee to get the accounts

audited by an accountant as prescribed under the said act and to furnish a

report of such audit in the prescribed form duly signed and verified by such

accountant and setting forth such particulars as may be prescribed and such

other particulars as the assessing officer may require. It is obvious that the

expression "at any stage of the proceedings before him" has clear reference

to the assessment proceedings. Thus, the assessing officer, subject to the

pre-conditions set out in the said provision, could require a special audit to

be conducted but this is with the sole and ultimate object of making an

assessment under the said act. The language employed in section 142

clearly indicates that the steps, including that of special audit, taken

thereunder are part and parcel of the assessment proceedings with the object

and purpose of enabling the assessment to be made under the said act by the

assessing officer.


WPC 2927/2013                                                    Page 21 of 38
10.    We shall now examine the provisions pertaining to settlement of

cases. These provisions have been examined in detail in Commissioner of

Income Tax       v. Income Tax        Settlement Commission & Ors.:

MANU/DE/1816/2013 [=[2014]360ITR407(Delhi)] and it would be

apposite to reproduce the same: ­

      "6.      We shall now briefly examine the scheme of the said Act
      insofar as it is relevant for our purposes. Under section 245C of
      the said Act, an assessee is entitled to make an application for
      settlement. The application has to be made in such form and such
      manner as may be prescribed. The application must contain (i) a
      full and true disclosure of the assessee's income which has not
      been disclosed before the assessing officer; (ii) the manner in
      which such income has been derived; (iii) the additional amount
      of income tax payable on such income; and (iv) such other
      particulars as may be prescribed. Furthermore the assessee is also
      required to pay the additional amount of tax and interest thereon,
      on or before the date of making the application and the proof of
      such payment should be attached with the application. Section
      245C(1) stipulates that when such an application is received by
      the Settlement Commission for having the case settled, the same
      is to be disposed of in the manner as indicated in the said Act.
      7.      Section 245D of the said Act sets out the procedure
      which is to be adopted by the Settlement Commission on receipt
      of an application under Section 245C. Section 245D(1) stipulates
      that on receipt of an application under Section 245C, the
      Settlement Commission is required to, within seven days from
      the date of receipt of the application, issue a notice to the
      applicant requiring him to explain as to why the application made
      by him be allowed to be proceeded with. Thereafter on hearing
      the applicant, the Settlement Commission is required to, within a
      period of 14 days from the date of the application, by an order in
      writing, reject the application or allow the application to be



WPC 2927/2013                                                    Page 22 of 38
      proceeded with. The proviso to Section 245D(1) stipulates that
      where no order is passed within the above mentioned period by
      the Settlement Commission, either allowing the application or
      rejecting the application, the application shall be deemed to have
      been allowed to be proceeded with.
      8.      Sub-section (2B) of Section 245D of the said Act
      stipulates that the Settlement Commission shall call for a report
      from the Commissioner and the Commissioner shall furnish the
      said report within 30 days of receipt of the communication from
      the Settlement Commission. Section 245D(2C) of the said Act
      prescribes that where a report of the Commissioner, which has
      been called for under sub-section (2B), has been furnished within
      the specified period, the Settlement Commission may, on the
      basis of the report and within a period of 15 days of receipt of the
      report, by an order in writing, declare the application in question
      as invalid and in such eventuality, the Settlement Commission is
      enjoined to send a copy of such order to the applicant and the
      Commissioner. The first proviso to Section 245D (2C) ensures
      that an application shall not be declared invalid by the Settlement
      Commission unless an opportunity has been given to the
      applicant of being heard. The second proviso thereto stipulates
      that where the Commissioner has not furnished the report within
      the specified period, the Settlement Commission is enjoined to
      proceed further in the matter without the report of the
      Commissioner.
      9.      Under Section 245D(3), the Settlement Commission,
      inter alia, in respect of an application which has not been
      declared invalid under Section 245D(2C) of the said Act may call
      for the records from the Commissioner and after examination of
      such records, if the Settlement Commission is of the opinion that
      any further enquiry or investigation in the matter is necessary, it
      may direct the Commissioner to make or cause to be made such
      further enquiry or investigation and to furnish a report on the
      matters covered by the application and any other matter relating
      to the case. The Commissioner is required to furnish the report
      within a period of 90 days of receipt of the communication from
      the Settlement Commission. It is further provided that where the



WPC 2927/2013                                                      Page 23 of 38
      Commissioner does not furnish a report within the said period of
      90 days, the Settlement Commission may proceed to pass an
      order under sub-section (4) without such report.
      10.     Under Section 245D(4) of the said Act, the Settlement
      Commission, after examination of the records and the report of
      the Commissioner, if any, received under, inter alia, sub-section
      (2B) or subsection (3) and after giving an opportunity to the
      applicant as also to the Commissioner to be heard, may pass such
      order as it thinks, in accordance with the provisions of the said
      Act, on the matters covered by the application and any other
      matter relating to the case not covered by the application, but
      referred to in the report of the Commissioner.
      11.      Section 245D(6) is also of some importance. It provides
      that every order passed under sub-section (4) of Section 245D is
      to 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 is to be paid and all other matters to make
      the settlement effective. It is specifically provided that the terms
      of settlement are to indicate that the settlement would be void if it
      was subsequently found by the Settlement Commission that it
      had been obtained by fraud or misrepresentation of facts. As a
      corollary to sub-section (6), sub-section (7) of Section 245D
      provides that where a settlement becomes void under sub-section
      (6), the proceedings in respect to the matters covered by the
      settlement shall be deemed to have been revived from the stage at
      which the application was allowed to be proceeded with by the
      Settlement Commission and the income tax authority concerned,
      may, notwithstanding anything contained in any other provision
      of the said Act, complete such proceedings at any time before the
      expiry of two years from the end of the financial year in which
      the settlement became void.
      12.     From the above provisions, it is apparent that the
      settlement application passes through several stages before the
      final order providing for the terms of settlement is passed by the
      Settlement Commission. The first stage is under Section
      245D(1). This is followed by the next step under Section






WPC 2927/2013                                                       Page 24 of 38
      245D(2C) and finally by the order passed under Section
      245D(4)...............
      13.      .................., it would also be appropriate if we refer to
      the provisions of Section 245F of the said Act. The said section
      deals with the powers and procedures of the Settlement
      Commission. Sub-section (1) stipulates that in addition to the
      powers conferred on the Settlement Commission under the said
      Act, it would also have all the powers which are vested in an
      income tax authority under the said Act. Sub-section (2) of
      Section 245F further stipulates that where an application under
      Section 245C has been allowed to be proceeded with under
      Section 245D, the Settlement Commission shall, until an order is
      passed under sub-section (4) of Section 245D, have, subject to
      the provisions of sub-section (3) of that section, exclusive
      jurisdiction to exercise the powers and perform the functions of
      an income tax authority under the said Act in relation to the case.
      We must also notice the proviso to Section 245F(2) which makes
      it clear that where an application has been made under Section
      245C on or after the first day of June, 2007, the Settlement
      Commission shall have exclusive jurisdiction from the date on
      which the application was made.............
      14.     For the sake of completeness, it would also be
      appropriate for us to refer to the second proviso to Section
      245F(2) of the said Act which, inter alia, makes it clear that
      where an application which has been made on or after the first
      day of June, 2007 is rejected under Section 245D(1) or is
      declared invalid under Section 245D(2C), the Settlement
      Commission, inspite of such an application, would have
      exclusive jurisdiction upto the date on which the application is
      rejected or declared invalid as the case may be. ................
      xxxxx          xxxxx         xxxxx         xxxxx         xxxxx

      27.    It is clear that disclosure of "full and true" particulars of
      undisclosed income and "the manner" in which such income had
      been derived are the prerequisites for a valid application under
      Section 245-C(1) of the Act. Additionally, the amount of income
      tax payable on such undisclosed income is to be computed and


WPC 2927/2013                                                          Page 25 of 38
      mentioned in the application. It needs little emphasis that Section
      245C-(1) of the Act mandates "full and true" disclosure of the
      particulars of undisclosed income and "the manner" in which
      such income was derived and, therefore, unless the Settlement
      Commission records its satisfaction on this aspect, it will not
      have the jurisdiction to pass any order on the matter covered by
      the application."


11.    Section 245F of the said act calls for closer scrutiny as that is the

provision which has been invoked by the settlement commission as also the

learned counsel for the revenue for supporting the order with regard to the

conducting of a special audit. Sub-section (1) of section 245F stipulates that

in addition to the powers conferred on the settlement commission under

chapter XIX ­ A, it shall have all the powers which are vested in an income

tax authority under the said act. But, in our view, this has to be read in the

context of and the scope of settlement proceedings. It does not entail that

the powers of regular assessment which are vested in an income tax

authority can be exercised by the settlement commission. What we mean to

say is that the settlement commission does not engage itself in the process

of assessment and cannot make an assessment order. The order that the

settlement commission makes under section 245D(4) is not in the nature of

an assessment but by way of a settlement and contains the terms of

settlement. Thus, we reiterate that the powers which are vested in an



WPC 2927/2013                                                     Page 26 of 38
income tax authority and could be exercised by the settlement commission

are such which have a nexus with the settlement proceedings which does

not include, in our view, the making of an assessment under the said act.


12.    Coming now to sub-section (2) of section 245F of the said act read

with the first proviso thereto, it is thus clear that where an application has

been made under section 245C on or after the first day of June, 2007 (which

is the case at hand), the settlement commission shall until an order is passed

under sub-section (4) of section 245D, have, subject to the provisions of

sub-section (3) of section 245D, exclusive jurisdiction to exercise the

powers and perform the functions of an income tax authority under the said

act in relation to the case from the date on which the application was made.

In our view, the exclusivity of jurisdiction which is contemplated by the

said provision is that once an application for settlement is made before the

settlement commission, no income tax authority would have jurisdiction to

deal with the case. It does not mean that the settlement commission from

that date steps into the shoes of the income tax authority who was hitherto

dealing with the case. To be clear, let us take an example. Let us assume

that assessment proceedings are underway before an assessing officer. At

that point of time, the assessee files a settlement application before the



WPC 2927/2013                                                    Page 27 of 38
settlement commission. In view of the provisions of Section 245F, from

that date onwards the settlement commission would have exclusive

jurisdiction to exercise the powers and perform the functions of an income

tax authority under the said act in relation to the case. Does it mean that the

settlement commission could continue with the assessment proceedings

which were before the assessing officer and pass an assessment order under

section 143(3) by way of regular assessment as an assessing officer would

have done? We do not think so. The settlement commission does not carry

out the function of assessment and does not make an assessment order. It

settles the case in terms of the provisions contained in chapter XIX-A of the

said act. Therefore, the exclusivity of jurisdiction stipulated in section 245F

entails two things: (1) that from the point of time of filing of the settlement

application, no income tax authority can exercise jurisdiction over the case

and it is only the settlement commission which could exercise such

jurisdiction; (2) the powers and functions of the income tax authority which

can exclusively be exercised by the settlement commission must have a

nexus with the settlement proceedings before it.


13.    We also note that the exclusive jurisdiction of the settlement

commission in terms of sub-section (2) of section 245F of the said act is



WPC 2927/2013                                                     Page 28 of 38
subject to the provisions of section 245D(3) of the said act. That provision

entails that the settlement commission, in respect of, inter alia, an

application which has not been declared invalid under section 245D(2C),

may call for the records from the Commissioner and after examination of

such records, if the settlement commission is of the opinion that any further

enquiry or investigation in the matter is necessary, it may direct the

Commissioner to make or cause to be made such further enquiry or

investigation and furnish a report on the matters covered by the application

and any other matter relating to the case.      Thus, the only income tax

authority who is permitted some jurisdiction in the matter is the

Commissioner, who, when called upon by the Settlement Commission, is

enjoined to make or cause to be made such further enquiry or investigation

and furnish a report on the matters covered by the application and any other

matter relating to the case.


14.    It is, therefore, clear that the powers and functions of an income tax

authority which are to be exclusively exercised by the settlement

commission (subject to the provisions of section 245D (3)) must be in the

context of and have a nexus with the settlement proceedings. That being the

case, since the requirement of a special audit falls under the procedure for



WPC 2927/2013                                                    Page 29 of 38
assessment which is distinct and different from settlement proceedings, the

settlement commission would not, in our view, have jurisdiction to direct a

special audit as it does not have any nexus with the settlement proceedings.

All that the settlement commission is required to do in the course of the

settlement proceedings is to ensure that the assessee who has made the

application for settlement of his case has inter-alia made a full and true

declaration of his hitherto undisclosed income and the manner in which it

was derived. The method of computation of the tax liability of the applicant

is set out in section 245C and in particular in sub-sections (1A) to (1D)

thereof. If the settlement commission is of the view that an assessee has not

made a full and true declaration of the undisclosed income then the

application is liable to be rejected. In other words, if the accounts put forth

by the assessee before the settlement commission are found by the

settlement commission on the basis of the available records and/or the

reports of the Commissioner to be neither full nor true then the only option

available with the settlement commission is to reject the application for

settlement and relegate the assessee to the normal provisions of assessment

under the said act. The settlement commission cannot, by itself, enter upon

an assessment and step into the shoes of an assessing officer for the

purposes of making an assessment.


WPC 2927/2013                                                     Page 30 of 38
15.        Let us now examine the decisions cited at the bar. In CIT v. Om

Prakash Mittal: (2005) 2 SCC 751 the Supreme Court observed as under:

       "13. Section 245-F dealing with powers and procedure of the
       Settlement Commission provides that in addition to the powers
       conferred on the Settlement Commission under Chapter XIX-A, it
       has all the powers which are vested in the Income Tax Authority
       under the Act. Sub-section (2) is of vital importance and provides
       that where an application made under Section 245-C has been
       allowed to be proceeded with under Section 245-D, the Commission
       shall until an order is passed under sub-section (4) of Section 245-D,
       subject to the provisions of sub-section (3) of that section, have
       exclusive jurisdiction to exercise the powers and perform the
       functions of the Income Tax Authority under the Act in relation to
       the case. In essence, the Commission assumes jurisdiction to deal
       with the matter after it decides to proceed with the application 1 and
       continues to have the jurisdiction till it makes an order under Section
       245-D. Section 245-D(4) is the charging section and sub-section (6)
       prescribes the modalities to be adopted to give effect to the order. It
       has to be noted that the language used in Section 245-D is
       "order" and not "assessment". The order is not described as the
       original assessment or regular assessment or reassessment. In
       that sense, the Commission exercises a plenary jurisdiction."
                                                                          (emphasis supplied)


16.        In Brij Lal v. CIT: (2011) 1 SCC 1, the Supreme Court held:

           "23. Descriptively, it can be stated that assessment in law is
           different from assessment by way of settlement. If one reads
           Section 245-D(6) with Section 245-I, it becomes clear that every
           order of settlement passed under Section 245-D(4) shall be final
           and conclusive as to the matters contained therein and that the
           same shall not be reopened except in the case of fraud and
           misrepresentation. Under Section 245-F(1), in addition to the
1
    Now, the exclusive jurisdiction is from the date on which the application is made.



WPC 2927/2013                                                                            Page 31 of 38
       powers conferred on the Settlement Commission under Chapter
       XIX-A, it shall also have all the powers which are vested in the
       Income Tax Authority under the Act. In this connection,
       however, we need to keep in mind the difference between
       "procedure for assessment" under Chapter XIV and
       "procedure for settlement" under Chapter XIX-A (see
       Section 245-D). Under Section 245-F(4), it is clarified that
       nothing in Chapter XIX-A shall affect the operation of any other
       provision of the Act requiring the applicant to pay tax on the basis
       of self-assessment in relation to matters before the Settlement
       Commission.
       xxxx         xxxxx              xxxxx               xxxxx

       39. Moreover, as stated above, under the Act, there is a
       difference between assessment in law [regular assessment or
       assessment under Section 143(1)] and assessment by
       settlement under Chapter XIX-A. The order under Section
       245-D(4) is not an order of regular assessment. It is neither an
       order under Section 143(1) or Section 143(3) or Section 144.
       Under Sections 139 to 158, the process of assessment involves
       the filing of the return under Section 139 or under Section 142;
       inquiry by the AO under Sections 142 and 143 and making of the
       order of assessment by the AO under Section 143(3) or under
       Section 144 and issuing of notice of demand under Section 156
       on the basis of the assessment order. The making of the order of
       assessment is an integral part of the process of assessment. No
       such steps are required to be followed in the case of
       proceedings under Chapter XIX-A. The said chapter
       contemplates the taxability determined with respect to
       undisclosed       income     only     by   the     process    of
       settlement/arbitration. Thus, the nature of the orders under
       Sections 143(1), 143(3) and 144 is different from the orders of
       the Settlement Commission under Section 245-D(4).
       xxxx         xxxxx              xxxxx               xxxxx

       44. As stated, proceedings before the Settlement
       Commission are similar to arbitration proceedings. It
       contemplates assessment by settlement and not by way of


WPC 2927/2013                                                      Page 32 of 38
       regular assessment or assessment under Section 143(1) or
       under Section 143(3) or under Section 144 of the Act. In that
       sense, it is a code by itself. It does not begin with the filing of
       the return but by filing the application for settlement. As
       stated above, under the Act, the procedure for assessment
       falls in Chapter XIV (in which Section 154 falls) which is
       different from the procedure for settlement in Chapter XIX-A
       in which Sections 245-C and 245-D fall. Provision for levy of
       interest for default in payment of advance tax under Section 234-
       B falls in Chapter XVII (Section F) which deals with collection
       and recovery of tax which as stated above is incidental to the
       liability to pay advance tax under Section 207 (which is also in
       Chapter XVII) and to the computation of total income in the
       manner indicated under Chapter XIX-A vide Sections 245-C(1-B)
       and 245-C(1-C) read with the provisos to Section 245-C(1) on the
       additional income tax payable on the undisclosed income."
                                                     (emphasis supplied)


17.    The Supreme Court, in Brij lal (supra), made a clear distinction

between assessment in law (regular assessment under Chapter XIV) and

"assessment" by way of settlement. It clearly held that there is a difference

between "procedure for assessment" under Chapter XIV and "procedure for

settlement" under Chapter XIX-A. In fact, it reiterated that under the said

Act, there is a clear difference between `assessment in law' [regular

assessment or assessment under Section 143(1)] and `assessment by

settlement' under Chapter XIX-A. It also held categorically that an order of

settlement under Section 245D(4) is not an order of regular assessment nor

is it an order under Section 143(1) or Section 143(3) or Section 144. What



WPC 2927/2013                                                    Page 33 of 38
is of importance is that the Supreme Court held that the making of an order

of assessment is an integral part of the process of assessment. Meaning

thereby that if the proceedings do not culminate in an assessment order the

same cannot be regarded as assessment proceedings.          In the case of

proceedings under Chapter XIX-A there is no provision for an assessment

order and the said chapter only contemplates the taxability determined with

respect to undisclosed income by the process of settlement/arbitration.

Elaborating on this aspect, the Supreme Court held that the Chapter XIX-A

provisions contemplate assessment by settlement and not by way of regular

assessment or assessment under Section 143(1) or under Section 143(3) or

under Section 144 of the Act and that the said Chapter XIX-A is a code by

itself.


18.       Since the learned counsel for the revenue placed reliance on

paragraphs 25 to 27 of the decision in Brij Lal (supra) it would be

appropriate to consider the same. The said paragraphs are as under:

          "25. Our detailed analysis shows that though Chapter XIX-A is
          a self-contained code, the procedure to be followed by the
          Settlement Commission under Sections 245-C and 245-D in the
          matter of computation of undisclosed income; in the matter of
          computation of additional income tax payable on such income
          with interest thereon; the filing of settlement application
          indicating the amount of income returned in the return of
          income and the additional income tax payable on the


WPC 2927/2013                                                   Page 34 of 38
       undisclosed income to be aggregated as total income shows
       that Chapter XIX-A indicates aggregation of incomes so as to
       constitute total income which indicates that the special
       procedure under Chapter XIX-A has an in-built mechanism
       of computing total income which is nothing but assessment
       (computation of total income).
       26. To elaborate, under Section 245-C(1-B), if the applicant
       has furnished a return in respect of his total income, tax shall be
       calculated on the aggregate of total income returned and the
       income disclosed in the settlement application as if such
       aggregate were total income. Under the Act, tax is payable on the
       total income as computed in accordance with the provisions of the
       Act. Thus, Section 143(3) provision is sought to be incorporated
       in Section 245-C. When Parliament uses the words "as if such
       aggregate would constitute total income", it presupposes that
       under the special procedure the aggregation of the returned
       income plus income disclosed would result in computation of
       total income which is the basis for the levy of tax on the
       undisclosed income which is nothing but "assessment" .
       Similarly, Section 245-C(1-C) provides for deductions from the
       total income computed in terms of Section 245-C(1-B).
       27. Thus, the special procedure under Sections 245-C and
       245-D in Chapter XIX-A shows that a special type of
       computation of total income is engrafted in the said
       provisions which is nothing but assessment which takes place
       at Section 245-D(1) stage. However, in that computation, one
       finds that provisions dealing with a regular assessment, self-
       assessment and levy and computation of interest for default in
       payment of advance tax, etc. are engrafted. [See Sections 245-
       C(1-B), 245-C(1-C), 245-D(6), 245-F(3) in addition to Sections
       215(3), 234-A(4) and 234-B(4).]"
                                                 (emphasis supplied)


19.    On the strength of the observations quoted above it was contended by

the learned counsel for the revenue that the proceedings under Chapter



WPC 2927/2013                                                    Page 35 of 38
XIX-A also entail assessment. The corollary to this being that the direction

for the conducting of a special audit was legitimate. We cannot agree with

this contention of the learned counsel for the revenue.       Wherever the

Supreme Court spoke of assessment in the context of settlement

proceedings under Chapter XIX-A, it qualified it by using the expression

"computation of income" (which has necessarily to be done by aggregating

the disclosed and undisclosed income) and more particularly the expression

­ "a special type of computation of total income". In any event, as pointed

out above, the Supreme Court held that the Chapter XIX-A provisions

contemplate assessment by settlement and not by way of regular assessment

under section 143(3) or `assessment' under Section 143(1) or under Section

144 of the Act and that the said Chapter XIX-A is a code by itself.


20.    In view of the above analysis, we need not examine the decisions in

Picasso Overseas (supra), Ashwani Tobacco (supra), Dharampal (supra)

and Murarilal Harishchandra Jaiswal (supra), which, though they support

the contentions on behalf of the petitioners, have been rendered either under

the Central Excise Act, 1944 or the Customs Act, 1962. We may, however,

notice the decision of a division bench of the Madras High Court in Canara




WPC 2927/2013                                                    Page 36 of 38
Jewellers v. Settlement Commission: [2009] 315 ITR 328 (Madras), in

which it was held that:-


       "11. So far as section 245F is concerned, though the Settlement
       Commission is empowered to have all powers which are vested in
       an income-tax authority under the Act, in addition to the power
       conferred under Chapter XIX-A, but such power can be exercised
       for the purpose of procedure of settlement of application under
       section 245C and not for reassessment of tax of a particular year
       which is vested with the assessing authority."


21.    We have already expressed a similar view above. The exclusive

jurisdiction of the settlement commission to exercise the powers and

perform the functions of an income tax authority, in terms of section

245F(2) of the said Act, is to be exercised and performed for the purpose of

settlement of the case under Chapter XIX-A and not for assessment under

Chapter XIV. That being the case, the powers and functions which are in

the exclusive jurisdiction of the settlement commission are circumscribed

by the object and role which has been ascribed to the settlement

commission, which is to settle the case in terms of the procedure stipulated

in Chapter XIX-A.      Since assessment of the type contemplated under

section 143(3) is outside the purview of settlement proceedings, a special

audit under section 142(2A), which is in aid of assessment, would also be

beyond the scope of settlement proceedings. The other decisions referred



WPC 2927/2013                                                   Page 37 of 38
to by the learned counsel for the revenue do not militate against the view

we have taken.


22.    In sum, we hold that the income tax settlement commission does not

have the power to direct a special audit under section 142(2A) in the course

of settlement proceedings under Chapter XIX-A of the said Act.

Consequently, the impugned order dated 26.04.2013, to the extent it directs

the conduct of a special audit, is quashed. The matter be placed before the

settlement commission for further consideration of the petit ioners'

settlement applications in accordance with the prescribed procedure under

Chapter XIX-A. The writ petition is allowed to the aforesaid extent. We

are making it clear that we have not commented upon the merits of the

settlement applications. The parties are left to bear their own costs.



                                       BADAR DURREZ AHMED, J



JANUARY 06, 2016                          V. KAMESWAR RAO, J
HJ




WPC 2927/2013                                                     Page 38 of 38

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Privacy Policy

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions