(1.) BY order F. No. 1/45/Tech./94 SC dated March 21, 1994, as amended by the order dated April 8,1994, the Chairman of the Income-tax Settlement Commission constituted a Special Bench comprising the following :-
2. A single issue was set out in the abovementioned order dated March 21, 1993, for the consideration of the Special Bench. This was :
Whether the application for settlement under Section 245C(1) of the Income-tax Act, 1961, must contain some disclosure of additional income for 'each and every assessment year comprised in the petition when the petition is for several assessment years.
Four of the cases where this issue arose were, by an order dated March 22, 1994, notified for hearing. Three of them Airteck Pvt. Ltd., New Delhi, Hari Chand, Sirsa, and Messrs. Damani Bros., Bombay, were heard. One could not be heard. The first two were heard in the camp of the Special Bench at Bombay on April 12, 1994, and the third, in the same camp, on April 13, 1994. Shri C. S. Aggarwal, advocate, represented both Airteck Pvt. Ltd. and Hari Chand, Sirsa. Shri D. M. Harish, advocate, represented Messrs. Damani Bros. Dr. V. Balasubramanian, senior standing counsel of the Income-tax Department at Bombay, represented the Department on both the days of hearing. As a single common issue was to be considered in all the three cases, this common order is passed in respect of them.
3. In his submission, Shri C.S. Aggarwal took up the contention that the only pre-condition contained in Section 245C(1) was that there-should be disclosure of income in respect of a case and nothing more. He pointed out that for the purpose of Chapter XIX-A, which contained the provisions relating to settlement of cases in sections 245A to 245M thereof,, the term "case" had been defined. This definition which is contained in Section 245A(b) is as follows :
"'case' means any proceeding under this Act for the assessment or reassessment of any person in respect of any year or years, or by way of appeal or revision in connection with such assessment or reassessment, which may be pending before an income-tax authority on the date on which an application under Sub-section (1) of Section 245C is made."
(The proviso under Section 245A(b) has been excluded in the extract above as it is not material for our consideration of the issue). He referred to the use of the plural term "years" in the definition and contended that submissions of a single application covering a number of years was contemplated in the definition itself. He then took us through the language of Section 245C(1) which relates to the making of an application for settlement. This section is as follows :
"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,--
(a) the assessee has furnished the return of income which he is or was required to furnish under any of the provisions of this Act; and
(b) the additional amount of income-tax payable on the income disclosed in the application exceeds fifty thousand rupees."
4. He submitted that what was required as per the main part of Section 245C(1) was only that in the application for settlement there should be disclosure of income. There was no specification contained therein that there should be disclosure of income for each and every assessment year covered in the application. He also pointed out that proviso (b) below Section 245C(1) which related to tax on the additional income referred to the "income disclosed in the application". There was no ambiguity at all in the matter, he stated, and claimed that it was clear from the very provisions of Section 245C(1) that the income disclosure need only be with reference to the application as a whole. There was no requirement anywhere in it that there should be disclosure of income in respect of each and every year covered by the application.
5. Shri C.S. Aggarwal then submitted that the term "income" contained in Section 245C(1) should be taken as even including negative income or losses. According to him, there was no need even to declare in the application a positive income. He said that the purpose of Chapter XIX-A was to effect settlement of cases and settlements could be both regarding incomes and regarding losses. In this connection, he also drew our attention to the decision of the Supreme Court in the case of CIT v. J. H. Gotla  156 ITR 323. He stated that in this decision the Supreme Court did not agree with the view taken by the Gujarat High Court in the case of Dayalbhai Madhavji Vadera v. CIT (1966] 60 ITR 551. According to him, the Gujarat High Court had opined that for the purpose of Section 16(3) of the Indian Income-tax Act, 1922, which corresponded to Section 64 of the present Act, income would not include losses.
(2.) Shri Aggarwal then submitted that it was enough if for some of the years covered in the application alone there was additional positive income and the aggregate tax payable for the years for which additional positive income had been disclosed was in excess of Rs. 50,000. This, he said, would be clear from the provisions of sections 245C(1A) to 245C(1D). These provisions relate to the computation of tax on the income disclosed in the application. Section 245C(1D) refers to cases where the additional income has been disclosed for more than one year. Referring to the language of that section, Shri Aggarwal claimed that the aggregation was limited to those years for which there was additional tax. According to Shri Aggarwal, therefore, even in an application covering a number of years, there was need for a disclosure of positive income only for some of the years and not for all, and the maintainability of the application would depend upon whether the aggregate of the taxes for the years for which additional positive income was disclosed exceeded Rs. 50,000, and nothing else. He maintained that for some of the years not only no positive income but even losses could be disclosed and even for the application as a whole there was no need for a positive income to be disclosed.
Shri Aggarwal then submitted that the provisions contained in sections 245C(1A) to (1D) were merely procedural provisions and, therefore, they could not in any manner modify the substantive provisions contained in Section 245C(1). Hence, he argued, even if it was construed that these provisions would require offer of additional income for tax for each of the years for which the application was made, that requirement could not be read into the provisions of Section 245C(1) wherein the language was clear and unambiguous.. In this connection, he also stated that when two views were possible, the one in favour of the applicant had to be adopted, vide CIT v. Badri Prasad Agarwal  142 ITR 353 (MP).
(3.) SHRI Aggarwal then stated that there could be a number of instances where in a settlement the applicant could seek a reduction in the total income already declared to the Department for some of the years while offering additional positive income for tax for the other years. He gave an example. He stated that it was possible that in view of the provisions of the Act an assessee may, in the course of a search, in a statement recorded under Section 132(4), admit that the entire income represented by an asset found during the search was his income of the year of search, but later he might be able to gather evidence to show that the asset in fact was procured earlier out of the incomes earned in the earlier years. In such circumstances, he would approach the Commission for a settlement for the earlier years as well as for the year of search, in which case the income to be settled for the year of the search may be less than the income offered for assessment even as per the return filed by him on the basis of the statement given by him under Section 132(4).;