Income Tax Act, 1961 – ss.245D(4), 148 – Assessee filed an application u/s.245C for the AY 2000-01 to 2006-07 to settle the cases as disclosed in the Application filed before the Income Tax Settlement Commission (ITSC) – ITSC, u/s.245D(4), passed the final Settlement Order after allowing deductions u/s.80IB(10) – However, after a fresh survey of the Assessee’s premises was conducted, a Notice u/s.148 was issued for the AY 2006-07, proposing to disallow the deduction u/s.80IB(10) – High Court allowed the Writ Petition filed by the Assessee, quashing the Re-assessment Notice and Order holding that the ITSC has exclusive jurisdiction once an application for settlement is admitted, and its final Order legally bars the AO from initiating reassessment in respect of the impugned Order passed by the ITSC – Challenge to:
Held: No merit in the appeal – If the jurisdiction of the AO u/ss.143(2), 148, 154, etc., is made independent and available for exercise again, the finality attached to the Settlement Commission will be defeated – Parliament did not envisage this course – On the contrary, while reopening the issues before the ITSC is provided for, judicial review by the Constitutional Courts u/Arts.226
29 and 32/136 is available, but the AO’s power to reassess the Settlement Order passed by the ITSC is unavailable – By operation of s.245C(3), the Assessee is precluded from withdrawing the Application filed u/s.245C – Revenue can oppose continuation before the ITSC based on the material and grounds discovered during the search and seizure against the Assessee – It participates before the ITSC in the Assessee’s Application, including any income further disclosed by the Assessee – Therefore, the argument that, after the proceedings before the ITSC attain finality, the regular assessment/re-assessment is still available to the Revenue is contrary to the defining expressions in ss.245C, 245D(2), 245D(3), and finally 245D(4) – Revenue has to revisit the procedure u/s.245D(6) by making out a case before the ITSC, but not otherwise – Revenue availed the remedy u/s.245D(6) before the ITSC, resulting in the findings recorded in the Order of the ITSC, whereby the application of the CIT to declare the Settlement Order passed by the ITSC as void was held to be devoid of merit, misconceived and non-maintainable, which has become final. [Paras 24-27]
Words and Phrases – “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” in s.245C of the Income Tax Act, 1961: Held: Revenue’s argument for issuing the Reassessment Notice rests on the words in s.245C of the Act, 1961, viz., “containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer”, but it overlooks the expression in s.245C, viz., “the manner in which such income has been derived” – On a plain construction of both the italicised expressions, what constitutes a case for consideration before the ITSC would be an Assessee making an Application containing a full and true disclosure of the Assessee’s income which has not been disclosed before the AO, and the manner in which such income has been derived – Therefore, the additional amount of income-tax payable in the disclosure will depend on the manner in which such income has been derived by the Assessee – In the case on hand, the Assessee has disclosed the revenue included in the Assessee’s gross total income, and, by claiming deductions under the Act, 1961, the net income liable for tax is set out – Once the ITSC admits the case for settlement, the consideration is the return for the assessment year, including deductions – The Report is called for on the Assessee’s Application, and there is no gainsaying that, while participating in the Settlement before ITSC, the Revenue allowed a deduction that is otherwise disallowable – The normal presumption is that the Revenue filed its Report on the Assessee’s application – Once the matter is concluded u/s.245D(4), the decision attains finality, and the scope of judicial review, is also limited – Revenue is not without recourse to realise tax on undisclosed income, even in cases filed under Chapter XIX-A of the Act, 1961 – It has the option to move u/s.245D(6) of the Act, 1961 on the grounds of fraud and misrepresentation – The words “fraud and misrepresentation” depend on the circumstances and are to be decided on a case-to-case basis; by making out a case under either head, the ITSC’s Order is reopened, which ultimately leads to the Settlement Order being declared void – The normal assessment procedure is restored or enabled, but not otherwise. [Paras 23, 24]
Income Tax Act, 1961 – Chapter XIX-A – Settlement framework under – Summarised. [Para 22]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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