* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided On: 15.04.2014
+ W.P.(C) 1451/2013
M/S OMAXE LTD. AND ANR. ..... Petitioners
Through : Mr. Ajay Vohra with Ms. Kavita
Jha & Mr. Vaibhav Kulkarni, Advocates.
Versus
DEPUTY COMMISSIONER OF INCOME TAX AND ANR.
..... Respondent
Through : Mr. Sanjeev Sabharwal, Sr.
Standing Counsel with Mr. Ruchir Bhatia,
Jr. Standing Counsel.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.V. EASWAR
MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)
%
1. In these writ proceedings under Article 226 of the Constitution,
the petitioner challenges a notice issued by the respondents (hereafter
called "the Revenue") under Section 153A of the Income Tax Act
("the Act").
2. The petitioner company is engaged in real estate business. Its
premises were searched on 22.9.2005, and other dates. It filed its
return on 30.11.2006 declaring a net taxable income of
WP( C) 1451/2013 Page 1
Rs.89,20,76,630/-. The petitioner had earlier been issued separate
notice under Section 153-A of the Act, on 19.4.2006. In response to
the notice, the petitioner stated that its returns filed for 2000-2006 be
treated as reiterated under Section 153A. On 31.5.2007, the petitioner
approached the Settlement Commission to settle pending assessments
for AY 2000-2001 to 2006-2007 and declared an additional income of
Rs.18.75 crores. Initially, after hearing parties, the Commission
admitted the application for hearing and disposal. On 17.8.2008, the
Commission passed its order under Section 245D(4), finally
determining the petitioner's liability, for 2004-05 to 2006-07.
3. The AO issued notice under Section 148, on 30.6.2010
proposing reopening of assessment for 2006-07. The petitioner
objected to this on 30.7.2010; those objections were rejected by the
AO on 30.10.2010. In this background, the AO passed the final
reassessment order on 08.11.2011. This was challenged in WP(C)
7975/2011 filed by the petitioner.
4. In the meanwhile, consequent to search in the premises of one
Mr. Surinder Modi in June, 2009, a satisfaction note was recorded by
the AO (of Shri Modi) for initiating proceedings under Section 153C
of the Act against the petitioner for 2004-05 to 2009-10. The
Revenue, consequent to search (in the case of Mr. Modi), issued
notices under Section 153C of the Act seeking to reassess the
petitioner's income, inter alia, for assessment years 2004-05 to 2009-
10. Responding to notice dated 26.12.2011 issued under Section 153C
of the Act, the petitioner objected to assessment/ reassessment of
WP( C) 1451/2013 Page 2
income for assessment years 2004-05 to 2006-07 under the said
provision since the assessments had already been concluded by the
order of the Settlement Commission dated 17.03.2008.
5. This Court by judgment dated 13.07.2012 allowed WP(C)
No.7975/2011 and quashed the notice for reassessment under Section
147 of the Act (dated 30.6.2010) for the AY 2006-07.
6. The Revenue rejected the objections of the petitioner preferred
against the notice under Section 153C. The petitioner thereafter filed
detailed objections to notice dated 26.12.2011 issued under Section
153C of the Act, inter alia, objecting to assessment/ reassessment of
income for assessment years 2004-05 to 2006-07, particularly in the
light of the judgment of this Court dated 13.07.2012. The Revenue
issued the impugned order dismissing the said objections. During the
course of proceedings under Section 153C, the Revenue also issued
notices under Section 142(1) inter alia calling for detailed information
pertaining to the assessment years in question.
7. It is contended on behalf of the petitioner that by virtue of
Section 245I, the finality attached to the Settlement Commission's
order in respect of a particular period in this case AY 2006-07
cannot be disturbed. It is argued that in the previous judgment of this
Court reported as Omaxe Ltd. & Jai Bhagwan Goel Vs. ACIT & Anr.
254 CTR 370, the applicability of any other provision of law including
Section 148 had been ruled out once an order is made by the
Settlement Commission.
WP( C) 1451/2013 Page 3
8. Counsel argues that upon receipt of application, the
Commission forwards it to the Commissioner. Under Rule 44CA (1),
the Commission calls for a report under Section 245D(1). Once the
Settlement Commission admits an application for final decision, all
information in the statements and application filed by the assessee are
disclosed and reports are furnished by the Commissioner. Thereafter
upon assumption of jurisdiction and the making of an admission order,
it is the Settlement Commission alone which has exclusive jurisdiction
under Section 245F (2) of the Act to pass orders in respect of the
matters and related aspects. For this purpose, it exercises powers and
functions of all Income Tax authorities.
9. Learned counsel relies upon the decision of the Supreme Court
in Commissioner of Income Tax v Express Newspapers Ltd. (1994)
206 ITR 443 and of this Court in Vatika Farms Pvt. Ltd. v
Commissioner of Income Tax 302 ITR 98 to say that by virtue of
Section 245D(4), the orders of the Commission are final and
conclusive to the matters stated there and matters covered by it cannot
be reopened in any proceedings under the Act. Reliance is also placed
upon the Constitution Bench decision of the Supreme Court in Brij Lal
v Commissioner of Income Tax 328 ITR 477 where it was held as
follows :
"........... Consequently, Section 234B, Section 245D(2C)
and Section 245D(6A) in Chapter XIX-A operates in
different fields. To this extent, we agree with the view
expressed in Damani Brothers' case. Descriptively, it
can be stated that assessment in law is different from
assessment by way of settlement. If one reads Section
WP( C) 1451/2013 Page 4
245D(6) with Section 245-I, it becomes clear that every
order of settlement passed under Section 245D(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
245F(1), in addition to the 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........"
(refer page 500).
10. The Revenue contends that the application preferred before the
Settlement Commission and an order related to five issues. The search
carried out in the case of Shri Modi was subsequent to its order, i.e.,
on 19.6.2009. The materials were not part of the settlement and more
importantly revealed fresh non-disclosure of facts concerning
allotment and transfer of 1.25 lakh sq.ft. area by the petitioner to Shri
Modi at Rs.3500/- per sq.ft. Furthermore, an agreement dated
03.10.2006 between the petitioner and one Fantastic Buildcon (P) Ltd.
for sale of a hotel project and another letter of 19.3.2009 from the
petitioner to the said Fantastic Buildcon (P) Ltd. for payment of
balance amount were seized. These pointed to undisclosed income,
which clearly were not the subject matter of the settlement
proceedings and therefore had not been decided or adverted to. They
stood excluded from the proceedings and the Revenue could
justifiably proceed under Section 153C of the Act.
WP( C) 1451/2013 Page 5
11. The Revenue relies on Section 245D(4) of the Act to say that
finality attaches itself only in respect of the matters which are "stated
therein", i.e., stated in the application and dealt with in the order.
Since the subject matter of Section 153 notice and consequent
proceedings were not dealt with, there is no question of any finality.
Counsel also argues that the exclusive jurisdiction of the Settlement
Commission under Section 245F(2) to exercise powers and perform
the functions of the IT Authorities was only in relation to the "case",
which, as defined in Section 245A(b) read with proviso (i), refers to
any proceeding for assessment pending before an AO when the
application for settlement is made, except a proceeding for
reassessment under Section 147. Thus, any reassessment attempted to
be initiated would not impermissibly interfere with the jurisdiction of
the Settlement Commission.
Analysis and Conclusions
12. It is evident from the above discussion that on a previous
occasion when the petitioner's premises were searched, and Section
153A notice was issued, it approached the Settlement Commission.
The Commission made its final orders determining the petitioner's
liability. The AO, subsequent to this event, issued a notice on
30.6.2010 under Section 148 proposing reassessment proceedings. On
that occasion, this Court was approached. The reassessment notice
was quashed in Omaxe (supra). The relevant discussion at that stage
may be usefully reproduced as extracted below :
WP( C) 1451/2013 Page 6
"12. A conjoint reading of the aforesaid provisions
indicates that the ITSC is a high powered body vested with
powers to settle the case of an assessee. The order of
settlement is conclusive as expressly stated in Section 245I
but the argument of the Revenue is that it is conclusive
only with regard to matters stated in the order of
settlement and in respect of matters not stated therein, the
Assessing Officer has the power to reopen the assessment.
It is further submitted that the assessee did not approach
the ITSC with regard to settlement of its claim for
deduction under Section 80IB(10) of the Act and there was
no adjudication of the said claim in the order of the ITSC.
It is therefore submitted that the issue relating to deduction
under Section 80IB(10) is not a matter covered by the
order of the ITSC, and can be reopened by the Assessing
Officer.
13.We are afraid that the submission of the Revenue
overlooks the fact that in the return the assessee had
claimed deduction of Rs.78,99,00,509/- u/s. 80IB (10) and
it was only after claiming such deduction that the net
taxable income was declared at Rs.89,20,76,630/-. The
Assessing Officer issued notices under Section
143(2) and 142(1) on 12.07.2007 but even before the
questionnaire was issued the petitioner had approached
the Settlement Commission by an application filed on
31.05.2007. Under Section 245F(1), the ITSC, in addition
to the powers conferred on it under Chapter XIX-A, shall
have all the powers which are vested in an income-tax
authority under the Act. By virtue of the provisions of
Section 245F (2) once the application for settlement was
filed and an order was passed allowing the application to
be proceeded with, it was the ITSC which has the exclusive
jurisdiction to exercise the powers and perform the
functions of an income tax authority under the Act relating
to the case, till the final order of settlement is passed under
Section 245D (4). Thus the moment the application of the
assessee was allowed to be proceeded with by the ITSC till
the final order of the settlement is passed on 17.03.2008, it
WP( C) 1451/2013 Page 7
was the ITSC which had exclusive jurisdiction in relation
to the assessee's case. Therefore, all matters which could
be examined by the Assessing Officer could be examined
by the ITSC in these proceedings, including the assessee's
claim for deduction under Section 80IB (10). The total
income of the assessee for the assessment year 2006-07
has been computed by the ITSC at Rs.89,38,76,630/- which
is Rs.18,00,000/- more than the income
of Rs.89,20,76,630/- declared by the petitioner, which
figure is after the petitioner claimed deduction
of Rs.78,99,00,509/- under Section 80IB (10). It is
irrelevant that no undisclosed income was offered by the
petitioner in regard to the housing project. Again a
harmonious reading of the provisions of the statute would
show that it does not postulate the existence of two orders,
each of a different income tax authority, determining the
total income of an assessee for the same assessment year.
If the contention of the Revenue is accepted, not only will
the finality of the order of settlement be disturbed, but it
will also result in different orders relating to the same
assessment year and relating to the same assessee being
allowed to stand. We have grave doubts whether such a
result, which is likely to create chaos and confusion in the
tax administration could have been intended. The order of
the ITSC can be reopened only in cases of fraud and
misrepresentation and in no other case.
************* ***********
19. Thus if the observations made by the Court in the
paragraph at page 484 of the report are read as a whole, it
would be clear that the Court was dealing with a plea
which attributed an active role as an income tax authority
to the ITSC even during the pendency of the application till
an order under Section 245D (1) was passed and
thereafter once an order was passed allowing the
application to be proceeded, a role combining the
functions of both an assessing authority and an authority
settling the case. The Court repelled the plea by clarifying
WP( C) 1451/2013 Page 8
certain observations made by the Supreme Court in CIT v.
Express Newspapers Ltd., (1994) 206 ITR 443. What the
learned standing counsel relied upon before us are
observations of the Court clarifying the earlier
observations made in the case of Express Newspapers Ltd.
(supra). The gist and purport of the observations made by
the Supreme Court in the case of Damani Brothers (supra),
however, is not what the learned standing counsel would
like us to accept. These observations of the Supreme Court
in Damani Brothers (supra) do not at all support his plea
that the matter relating to the deduction under
Section 80IB (10) could not have been before the ITSC.
The observations of the Supreme Court in Damani
Brothers (supra) clarifying the observations of the Court in
Express Newspapers Ltd. (supra) only mean that the ITSC
does not deal with the disclosed income of the assessee
even before it decides to proceed with the case by passing
an order under Section 245D (1). It does not however
imply that once an order is passed under the aforesaid
provision, the ITSC does not deal with both the disclosed
and undisclosed incomes of the assessee. On the contrary,
it would inevitably follow that once a settlement
application is allowed to be proceeded with, the entire
case stands transferred to the ITSC and thereafter it is the
ITSC alone which shall have exclusive jurisdiction to
exercise the powers and perform the functions of an
income tax authority under the Act in relating to the case,
as emphatically stated in sub-section (2) of
Section 245F of the Act. In Damani Brothers (supra) the
Supreme Court was explaining the position during the
pendency of the settlement application till an order is
passed under Section 245D (1) allowing the application to
be proceeded with. In the case before us, we are not
concerned with that position. The question here is what
would be the position when an order under Section 245D
(4) is passed by the ITSC and whether such an order can
be construed as one dealing with the entire gamut of the
return filed by the assessee and the issues raised therein.
WP( C) 1451/2013 Page 9
While opining that the observations of the Supreme Court
in Damani Brothers (supra) are not relevant to the factual
situation or the legal dispute arising therefrom in the
present case, we hold that since the exclusive jurisdiction
to exercise the powers and perform the functions of an
income tax authority in relation to the case vests with the
ITSC after an order is passed under Section 245D (1) till
the final settlement order is passed under Section 245D
(4), it is not possible to countenance a situation where it
can be said that the assessee's claim for deduction under
Section 80IB (10) was not the subject matter of the order
passed by the ITSC under Section 245D (4). It is further
necessary to keep in mind that Section245B (3) requires
that the ITSC shall be manned by "persons of integrity and
outstanding ability having special knowledge of, and,
experience in, problems relating to direct taxes and
business accounts". The provisions of Chapter XIX-A
suggest that all matters in relation to the case of the
assessee shall be dealt with by the ITSC just as an
assessing authority would deal with them while completing
an assessment under Section 143 (3) of the Act. If this is
the position, it would be difficult to sustain the argument of
the revenue that the matter relating to the deduction under
Section 80IB (10) was not the subject matter of the final
order of settlement. It follows that the Assessing Officer
had no jurisdiction to reopen the assessment for the
assessment year 2006-07 by issuing a notice under
Section 148 of the Act on the ground that the deduction
was wrongly allowed.
20. The issue can also be viewed from another angle.
Barring the exception of the provisions relating to appeal
and revision, the Act does not contemplate or provide for
disturbing the finality of an order or proceeding passed or
completed by an income-tax authority, by any order or
proceeding passed or initiated by a different income-tax
authority. An assessment order passed by an Assessing
Officer can be rectified or amended under Section 154 or
WP( C) 1451/2013 Page 10
Section 155 or reopened under Section148 only by him,
and by no other income-tax authority. Similarly, an
assessment by way of settlement of a case, which is made
by the ITSC, can be reopened only by the ITSC and that
too only in certain circumstances. Applying this general
principle that runs through the Act, an assessment by way
of a settlement order passed by the ITSC cannot be
reopened by a different authority, viz., the Assessing
Officer. The fact that the ITSC has not been designated as
an "income-tax authority" under Section 116 of the Act
makes the position "a fortiori". Section 147 of the Act does
not employ language that permits him to do so, nor are the
powers and orders of the ITSC made subject to the
provisions of Section 147. Section 147 does not appear to
fit into the general scheme of Chapter XIX-A, which has
been held to be a self contained code by the Supreme
Court in Brij Lal and Ors. v. CIT, Jalandhar, (2010) 328
ITR 477 (SC).
14. It would be necessary to reproduce Sections 245D and 245I
both of which are relevant for the present purposes. These provisions
read as follows:
"245D. Procedure on receipt of an application
under section 245C (1) On receipt of an application
under section 245C, the Settlement Commission shall call
for a report from the Commissioner and on the basis of the
materials contained in such report and having regard to
the nature and circumstances of the case or the complexity
of the investigation involved therein, 70[the Settlement
Commission, shall, where it is possible, by order, reject the
application or allow the application to be proceeded with
within a period of one year from the end of the month in
which such application was made under section 245C] :
WP( C) 1451/2013 Page 11
Provided that an application shall not be rejected under
this sub-section unless an opportunity has been given to
the applicant of being heard :
71
[Provided further that the Commissioner shall furnish
the report within a period of forty-five days of the receipt
of communication from the Settlement Commission in case
of all applications made under section 245C on or after
the 1st day of July, 1995 and if the Commissioner fails to
furnish the report within the said period, the Settlement
Commission may make the order without such report.]
(1A) 72[Omitted by the Finance (No. 2) Act, 1991, w.e.f.
27-9-1991.]
(2) A copy of every order under sub-section (1) shall be
sent to the applicant and to the Commissioner.
73
[(2A) Subject to the provisions of sub-section (2B), the
assessee shall, within thirty-five days of the receipt of a
copy of the order under sub-section (1) 74[allowing the
application to be proceeded with], pay the additional
amount of income-tax payable on the income disclosed in
the application and shall furnish proof of such payment to
the Settlement Commission.]
74
[(2B) If the Settlement Commission is satisfied, on an
application made in this behalf by the assessee, that he is
unable for good and sufficient reasons to pay the
additional amount of income-tax referred to in sub-section
(2A) within the time specified in that sub-section, it may
extend the time for payment of the amount which remains
unpaid or allow payment thereof by installments if the
assessee furnishes adequate security for the payment
thereof.]
74
[(2C) Where the additional amount of income-tax is not
paid within the time specified under sub-section (2A), then,
whether or not the Settlement Commission has extended
the time for payment of the amount which remains unpaid
or has allowed payment thereof by installments under sub-
section (2B), the assessee shall be liable to pay simple
interest at fifteen per cent per annum on the amount
WP( C) 1451/2013 Page 12
remaining unpaid from the date of expiry of the period of
thirty-five days referred to in sub-section (2A)].
74
[(2D) Where the additional amount of income-tax
referred to in sub-section (2A) is not paid by the assessee
within the time specified under that sub-section or
extended under sub-section (2B), as the case may be, the
Settlement Commission may direct that the amount of
income-tax remaining unpaid, together with any interest
payable thereon under sub-section (2C), be recovered and
any penalty for default in making payment of such
additional amount may be imposed and recovered, in
accordance with the provisions of Chapter XVII, by the 75-
76
[Assessing] Officer having jurisdiction over the
assessee.]
(3) Where an application is allowed to be proceeded with
under sub-section (1), the Settlement Commission may call
for the relevant 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.
(4) After examination of the records and the report of the
Commissioner, received under sub-section (1), and the
report, if any, of the Commissioner received under sub-
section (3), 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 under sub-section (1) or sub-
section (3).
WP( C) 1451/2013 Page 13
77
[(4A) In every application allowed to be proceeded with
under sub-section (1), the Settlement Commission shall,
where it is possible, pass an order under sub-section (4)
within a period of four years from the end of the financial
year in which such application was allowed to be
proceeded with.]
78
[(5) Subject to the provisions of section 245BA, the
materials brought on record before the Settlement
Commission shall be considered by the Members of the
concerned Bench before passing any order under sub-
section (4) and, in relation to the passing of such order,
the provisions of section 245BD shall apply.]
(6) Every order passed under sub-section (4) shall provide
for the terms of settlement79 including any demand by way
of 80[tax, penalty or interest], the manner in which any sum
due under the settlement79 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.
81
[(6A) 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 installments, the assessee shall be
liable to pay simple interest at fifteen per cent per annum
on the amount remaining unpaid from the date of expiry of
the period of thirty-five days aforesaid.]
(7) Where a settlement becomes void as provided under
sub-section (6), the proceedings with 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 this Act, complete such proceedings at any time before
WP( C) 1451/2013 Page 14
the expiry of two years from the end of the financial year
in which the settlement became void.
82
[(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 83[Assessing] Officer in pursuance of any
directions contained in such order passed by the
Settlement Commission 84[and nothing contained in the
proviso to sub-section (1) of section 186 shall apply to the
cancellation of the registration of a firm required to be
made in pursuance of any such directions as aforesaid.]
**************** ****************
245I. Order of settlement to be conclusive Every order of
settlement passed under sub- section (4) of section 245D
shall be conclusive as to the matter stated therein and no
matter covered by such order shall, save as otherwise
provided in this Chapter, be reopened in any proceeding
under this Act or under any other law for the time being in
force."
15. A facial consideration of the above provisions would reveal that
the finality which attaches itself to Settlement Commission's order is
in respect of the matters referred to it. The Revenue's contention
appears to be that the non-disclosure of materials which have a
bearing on AY 2006-07, discovered or seized in search proceedings
concerning Shri Modi, were not the subject matter of the
Commission's deliberations and consequently the subject matter of its
order. Attractive though this aspect appears to be, the ruling in Omaxe
(supra) precludes exercise of authority by the Revenue. Whilst from
the Revenue's perspective, every non-disclosure or a fresh discovery
of facts which might have a bearing on the assessee's returns, prima
WP( C) 1451/2013 Page 15
facie, stands excluded from what is referred to a Settlement
Commission, the fallacy in that argument is the Commission has a full
weight and the jurisdiction of all the authorities under the Income Tax
Act when it is seized of a matter. Concededly in this case, the subject
matter before the Commission was the submission of the assessee to
its jurisdiction with respect to AY 2006-07. Of course, the Revenue
contends that the recovery of material in a third party's premises were
not a subject matter of the settlement proceedings, which got
concluded on 17.3.2008. However, equally its case can proceed only
on the assumption that the assessee was guilty of non-disclosure or
suppression of material facts which ought to have been primarily
revealed to the Settlement Commission when the application was
moved under Section 245D in the first place. The fallacy in the
Revenue's argument is that it overlooks the remedy available for the
Revenue, i.e to approach the Settlement Commission under Section
245D(6) contending that its previous order of 17.3.2008 ought to be
reopened because the non-disclosure amounted to a fraud or
misrepresentation. The observations in Brij Lal (supra) cited earlier
are extremely pertinent in this context. Likewise, in Express
Newspapers Ltd. (supra), the Supreme Court had earlier stated as
follows :
""....... It is equally evident that once an application made
under Section 245C is admitted for consideration (after
giving notice to and considering the report of the
Commissioner of Income Tax as provided by Section 245D)
the Commission shall have to withdraw the case relating to
that assessment year (or years, as the case may be) from the
assessing/appellate/revising authority and deal with the
WP( C) 1451/2013 Page 16
case, as a whole, by itself. In other words, the proceedings
before the Commission are not confined to the income
disclosed before it alone. Once the application is allowed
to be proceeded with by the Commission, the proceedings
pending before any authority under the Act relating to that
assessment year have to be transferred to the Commission
and the entire case for that assessment year will be dealt
with by the Commission itself. The words "at any stage of a
case relating to him" only make it clear that the pendency of
proceedings relating to that assessment year, whether
before the Assessing Officer or before the appellate or
revisional authority, is no bar to the filing of an application
under Section 245C so long as the application complies
with the requirements of Section 245C. (refer page 451
plac. E/F). (Emphasis supplied)."
The judgments in R.B. Shreeram Durga Prasad
v. Settlement Commission, (1989) 176 ITR169 Jyotendrasinghji v. S.I.
Tripathi & Ors., (1993) 201 ITR 611 Shriyans Prasad Jain v. Income-
tax Officer and others, (1993) 204 ITR 616 and Kuldeep Industrial
corporation v. ITO, (1997) 223 ITR 840 are equally conclusive about
the plenitude of powers conferred upon the Settlement Commission.
16. It is evident from the rulings of the Supreme Court that orders
of Settlement Commission are final and conclusive as to matters stated
therein. The "matters" necessarily could comprehend disputed
questions, items or heads of income, disallowance, etc. or variants of
it, but always with reference to a particular assessment year. In this
case, the Settlement Commission was seized of AY 2006-07. Whilst
exercising its authority over the application, the Commission
concededly exercised the vast plenitude of its power or jurisdiction.
The petitioner had made a disclosure in its application as it was duty
WP( C) 1451/2013 Page 17
bound to. What is in controversy today is that the subsequent event of
search and seizure operation conducted in the premises of Shri Modi
in the contention of the Revenue have thrown light on material that
had been suppressed from the Commission. If such is the case, it
would be only logical that the Commission itself should be
approached for a declaration that its order of 17.3.2008 is a nullity.
Allowing any other authority, even by way of a notice under Section
153C, would be to permit multiple jurisdictions which can result in
chaos. After all non-disclosure or suppression of information in
respect of what is required to be revealed to the concerned authorities
is akin to fraud and if it has a material bearing on the outcome of the
assessment, it would most certainly be misrepresentation. During the
course of hearing, the learned counsel for the Revenue had voiced
apprehensions that the Commission might well be of the opinion that
"misrepresentation" has to fall within the four corners of the meaning
of such expression under the Contract Act. This Court sees no
rationale for such apprehension. Misrepresentation has not been
defined under the Income Tax Act; importing the definition of
misrepresentation or for that matter fraud from the Contract Act in the
circumstances would not be appropriate. As one understands, the term
"misrepresentation" would mean failure to disclose material or facts
which are germane and relevant, or suppressing facts and materials
which are germane and relevant or holding out a falsehood which
gives the rise to an assumption that what is so stated or represented is
true or correct. These are only illustrative and by no means conclusive
as to what can be misrepresentation. The facts of each case would
WP( C) 1451/2013 Page 18
throw light on whether the individual or person concerned was guilty
of misrepresentation having regard to the totality of the circumstances,
given the nature of duty cast on him or her. This interpretation is in
consonance with the ruling of the Supreme Court in Commissioner of
Income Tax v Om Prakash Mittal [2005] 273 ITR 326(SC) where it
was held as follows:
"The decision whether the order has been obtained by
fraud or misrepresentation of facts is that of the
Commission. But it is not a requirement that the
Commission must suo motu initiate the action. If the
revenue has material to show that the order was obtained
by fraud or misrepresentation of facts it certainly can
move the Commission for decision on that issue.
Otherwise, even if in a given case there is material in
abundance to establish that the order was obtained by
fraud or misrepresentation of facts, yet the void order
would continue to be operative because of the fortuitous
circumstance that the Commission does not suo motu
initiate the proceeding. Merely because Section 245I
provides that the order of Settlement is conclusive it does
not take away the power of the Commission to decide
whether the settlement order had been obtained by fraud
or misrepresentation of facts. Any other interpretation
would render sub-section (6) otiose. The Commission had
really missed the true scope and ambit of Section
245D(6). If the CIT was able to establish that the earlier
decision was void because of misrepresentation of the
facts, certainly it was open to the Commission to decide
that issue. It cannot be called by any stretch of
imagination to be review of the earlier judgment or the
subsequent Bench sitting in appeal over the earlier
Bench's decision. Further the conclusions of the
Commission regarding the genuineness of the loan
transactions were arrived at without indicating reasons.
WP( C) 1451/2013 Page 19
It only referred to the respective stands and the
submissions of the assessee's counsel. That was not the
proper way to deal with the matter.
The foundation for settlement is an application which
assessee can file at any stage of a case relating to him in
such form and in such manner as is prescribed. The
statutory mandate is that the application shall contain
"full and true disclosure" of the income which has not
been disclosed before the assessing officer, the manner in
which such income has been derived. The fundamental
requirement of the application under Section 245C is that
full and true disclosure of the income has to be made,
along with the manner in which such income was derived.
On receipt of the application, the Commission calls for
report from the Commissioner and on the basis of the
material contained in the report and having regard to the
nature and circumstances of the case or complexity of the
investigation involved therein, it can either reject the
application or allow the application to be proceeded with
as provided in Section 245D(1).
It has to be noted that the Commission exercises power in
respect of income which was not disclosed before the
authorities in any proceeding, but are disclosed in the
petition under Section 245C. It is not that any amount of
undisclosed income can be brought to the notice of the
Commission in the said petition. Commission exercises
jurisdiction if the additional amount of tax on such
undisclosed income is more than a particular figure
(which at different points of time exceeded rupees fifty
thousand or rupees one hundred thousand, as the case
may be). The assessee must have in addition furnished the
return of income which he is or was required to furnish
under any of the provisions of the Act. In essence the
requirement is that there must be an income disclosed in
a return furnished and undisclosed income disclosed to
the Commission by a petition under Section 245C. There
is a purpose why the legislature has prescribed the
WP( C) 1451/2013 Page 20
condition relating to declaration of the order void when it
is obtained by fraud or misrepresentation of facts. It
cannot be said that there has been a true and fair
declaration of income which is the pre- requisite for
settlement by the Commission. If an order is obtained by
fraud or misrepresentation of facts, it cannot be said that
there was true and fair disclosure. It was noted here that
unlike Section 139 of the Act which provides for filing of
revised return, there is no provision for revision of an
application made in terms of Section 245C. That shows
clear legislative intent that the applicant for settlement
has to make a true and fair declaration from the
threshold. It is on the basis of the application received
that the Commissioner calls for report to decide whether
the application is to be rejected or permitted to be
continued. The declaration contemplated in Section 245C
is in the nature of voluntary disclosure of concealed
income, but as noted above it must be true and fair
disclosure. Voluntary disclosure and making a full and
true disclosure of the income are necessary pre-
conditions for invoking the Commission's jurisdiction."
17. Finally, this Court is not impressed by the argument of the
Revenue that the definition of "case" over which the Settlement
Commission has exclusive jurisdiction excludes proceedings for
reassessment, under Section 245A(i). This is because any
reassessment proceedings that are sought to be excluded from the
purview of "case" must be in respect of a Section 148 notice sent
while the proceedings before the Settlement Commission are ongoing.
Once the Settlement Commission has completed proceedings, its order
is considered conclusive as regards matters "stated therein" per
Section 245I and reopening any proceeding in respect of matters
covered in the order would be barred.
WP( C) 1451/2013 Page 21
18. For the above reasons, it is held that the impugned notice issued
to the petitioner under Section 153C cannot be sustained; the said
notice and all further proceedings are hereby quashed. It is open to the
respondent/Revenue to move the Settlement Commission for
appropriate relief of declaration that its previous order under Section
245D (6) is void, setting out the relevant facts and circumstances. In
the event the Revenue approaches the Commission with an application
for such relief, it shall be decided on its merits in accordance with law.
19. The writ petition is allowed, but in the above terms.
S. RAVINDRA BHAT
(JUDGE)
R.V. EASWAR
(JUDGE)
APRIL 15, 2014
skw
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