B. P. Jeevan Reddy, J. - (1.) These appeals are preferred by the Revenue against the order of the Settlement Commission in the case of the respondent-Express Newspapers Limited, Madras relating to the assessment years 1985-86, 1986-87 and 1987-88. It raises certain important questions with respect to the jurisdiction of the Settlement Commission under Chapter XIX-A of the Income-tax Act, 1961. We have heard Dr. Gowri Shankar for the appellant and Ms. Bina Gupta for the respondent. We may mention here that when called upon to argue, after the conclusion of submissions by Dr. Gowri Shankar, Ms. Bina Gupta asked us to adjourn the matter to enable her to engage a senior counsel. We refused to do so since it was the first case in the list that day and the request was made after the commencement of the arguments. We then hear her fully.
(2.) Relevant Facts of the Case: The respondent-assessee filed its return for the assessment year 1985-86 on July 22, 1985. A revised return was filed on February 26, 1988. It disclosed a loss of Rs. 32,80,700/-. The Assessing Officer, however, assessed the income at Rs. 1,27,95,570/- by his order dated March 30. 1988. The Assessing Officer held that the transactions of sale and purchase of potatoes, iron scrap and shares, from which the assessee claimed to have suffered huge tosses were not true but were bogus transactions fabricated for the purpose of evading the legitimate tax due on its income. The assessee preferred an appeal before the C.I.T. (Appeal), who dismissed the same by his order dated March 31. 1989. During the pendency of the said appeal, the assessee approached the Commission on December 16, 1988 with respect to four assessment years namely, 1985-86, 1986-87, 1987-88 and 1988-89. On that date, the assessments relating to the three later years were pending before the Assessing Officer. The application to the Commission made by the assessee is in Form No. 34B. In column 10, the assessee stated that the case involved substantial issue and amount, that the transactions of the assessee were large and diverse and that the case calls for judicial approach and appreciation of the facts. It requested the Commission to determine the tax payable for the aforesaid four assessment years, to confer immunity upon it from the levy of penalty and prosecution, and waiver of interest chargeable under the provision of the Act. Through this application, the respondent-assessee offered for tax "an additional total income of Rupees 1,32,27,969/ - and over and above the income offered for assessment in the returns for the assessment years 1985-86 to l988-89 on which the tax payable work out to Rupees 14,35,720/-" The respondent further complained that the department "has conducted a hostile and unfair investigation, has concluded assessment and has raised large demands based on disallowances and additions without providing an opportunity whatsoever." The respondent requested to Commission to grant "an ad-interim order restraining the assessing officer from going ahead with further proceedings in regard to the assessment years sought to be settled hereby so that the application is not rendered otiose by any action of the department during the interrogation." In short, the respondent did not disclose any income not disclosed before the assessing officer but merely offered a small part of the losse claimed by it for the said assessment years to tax. According to the respondent, it was doing so to buy peace from the department. A copy of the application filed by the assessee was sent to the Commissioner. The Commissioner submitted his report on July 6, 1989. In this report, the Commissioner stated the following facts and objections: The respondent-assessee owns substantial house properties in Bombay, Madras and New Delhi. The gross rental income derived therefrom is about Rupees two crores. Apart from the above, the assessee "reportedly had a merchandise division stated to be run from Calcutta". The activities of this division were reported to be in the purchase and sale of potatoes, metal scrap and shares. The assessments for the various years are pending with the Assessing Officer. Some of the past completed assessments have been reopened under S. 147 of the Act. The details of the income/loss disclosed by the assessee for the four assessment years are stated in the Annexure to the report. "Enquiries regarding the claims made by the Company for losses on transactions in these years had commenced before the date of filing of the application by the company with the Settlement Commission and these enquiries had reached a final stage even before the petition was filed by the assessee."
(3.) The Commissioner then set out the comprehensive and elaborate enquiries made by the department into the claims made by the assessee-company relating to its alleged dealings in potatoes, scrap and shares from which it claimed to have suffered substantial losses. He referred to the statements of parties, through whom the said transactions were said to have been put through, denying any such transactions. He pointed out with reference to the Books of the assessee and other relevant persons that the several alleged payments were not real and that the several transactions disclosed by the assessee were mere make-believe and that all those entries were fabricated. Some of the parties who made statements adverse to the assessee's interest, were also cross-examined by the assessee. We do not think it necessary to refer to or set out the particulars of the investigation and enquiries made or the material gathered, referred to in the Report. It sets out the material separately with respect to alleged dealings in potatoes, scrap and shares. It would suffice to set out the concluding paragraphs of the said Report. They read: "The discussion above would therefore conclusively establish the fact that the Department has in its possession document and materials to lead to the view that the assessee had fraudulently claimed losses on various accounts for the assessment years 1985-86, 1986-87 and 1987-88. The Department has acted on these, had conducted its own enquiries and had disallowed the claims and treated them as part of the assessee's income. For the assessment year 1985-86, complaint under Ss. 276C, 277, 278 and 278B of the Income-tax Act has been filed before the Additional Chief Metropolitan Magistrate, Egmore. Therefore, for the assessment years 1985-86, 1986-87 and 1987-88 the petition filed by the company before the Settlement Commission is not a correct statement of fact. As far as the assessment year 1988-89 is concerned, the assessee company filed its return of income on 11-7-1988 accompanied by a copy of the profit and loss account and Balance Sheet as at 31-3-1988. Notices issued under Section 143(2) of the Act in October, 1988 and March, 1989 did not elicit any response from the company. For reasons stated above it is claimed that the Department had in its possession adequate information prior to 16-12-1988 to warrant a conclusion that the assessee had concealed details of its true income and furnished inaccurate particulars thereof. In such circumstances, under S. 245D of the Act, objection is taken by the Department to the Company's petition being entertained by the Commission, - more particularly for assessment years 1985-84, 1986-87 and 1987-88." ;