M/S AKSHAR DEVELOPERS Vs. INCOME-TAX SETTLEMENT COMMISSION ADDITIONAL BENCH II
LAWS(GJH)-2019-2-96
HIGH COURT OF GUJARAT
Decided on February 04,2019

M/S Akshar Developers Appellant
VERSUS
Income-Tax Settlement Commission Additional Bench Ii Respondents


Referred Judgements :-

COMMISSIONER OF INCOME TAX V. B.N. BHATTACHARJEE [REFERRED TO]
MARC BATHING LUXURIES LTD. V. INCOME TAX SETTLEMENT COMMISSION [REFERRED TO]
COMMISSIONER OF INCOMETAX V. SAI PRASAD PROPERTIES LTD. [REFERRED TO]
MANOJKUMAR BABULAL AGRAWALA V. SECRETARY [REFERRED TO]
PADMASUNDARA RAO DEAD VS. STATE OF TAMIL NADU [REFERRED TO]
PEERLESS GENERAL FINANCE AND INVESTMENT CO LTD VS. INCOME TAX SETTLEMENT COMMISSION [REFERRED TO]
BALAJI NAGAR RESIDENTIAL ASSOCIATION VS. STATE OF TAMIL NADU [REFERRED TO]


JUDGEMENT

HARSHA DEVANI, J. - (1.)All these petitions arise out of a common order dated 2.2.2018 passed by the Income Tax Settlement Commission (hereinafter referred to as "the Settlement Commission") on the respective applications filed by the respective petitioners, and hence, the same were taken up for hearing and are decided by this common judgment. For the sake of convenience, reference is made to the facts as appearing in Special Civil Application No.13572 of 2018 filed by M/s Akshar Developers.
(2.)The facts stated briefly are that on 22.9.2015, a raid came to be carried out in the case of the petitioner under section 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") when some documents came to be seized. The partners were also searched. According to the petitioner, nothing worth the name by way of unaccounted cash, jewellery or investment was found from the above raid from the petitioner or its partners. The petitioner was advised that instead of entering the channel of long drawn litigation starting with the assessment order, it would be wise to approach the Settlement Commission. Therefore, the petitioner preferred application dated 30.11.2017 under section 245(C)(1) of the Act. The form was filled by the petitioner along with which the statement of particulars of issues to be settled, as well as the statement showing full and true disclosure came to be submitted.The matter came up for the purpose of admission and by an order dated 12.12.2017 by the Settlement Commission admitted the applications under section 245(D)(1) of the Act.
2.1 Thereafter, the Principal Commissioner of Income Tax (Central), Surat (hereinafter referred to as "the Principal Commissioner") submitted a report dated 16.1.2018 under section 245D(2B) of the Act. It is the case of the petitioner that the Principal Commissioner has virtually accepted the admission of the petitioner's application as he has nowhere directly or indirectly indicated that the income disclosed by the petitioner is not full and true.

2.2 Thereafter, the petitioner filed a rejoinder dated 25.1.2018 to the above report under section 245D(2B) of the Act meeting with the objections raised by the Principal Commissioner. On 30.1.2018 the matter was heard for the purposes of decision under section 245D(2C) of the Act, whereupon the Settlement Commission passed an adverse order dated 2.2.2018 under section 245D(2C) of the Act which is subject matter of challenge in the present petitions.

(3.)Mr. J. P. Shah learned counsel for the petitioners submitted that the Settlement Commission instead of passing the order on the basis of the report as clearly laid down in section 245D(2C) of the Act has passed the order on the basis of what was not in the report, which renders such order bad in law. Referring to the provisions of section 245D(2C) of the Act, it was submitted that no one is required to be heard at this stage unless the report of the Commissioner is unfavourable. According to the learned counsel when in the report, the Principal Commissioner does not tell the Settlement Commission that the applicant has not made full and true disclosure and if it is obligatory on the part of the Settlement Commission to pass an order based on the report of the Principal Commissioner, then on this report the Settlement Commission could not have passed the order rejecting the application.
3.1 Referring to Paragraph 5.1 of the impugned order, it was pointed out that the Settlement Commission has considered the objections raised by the Commissioner of Income-tax (Departmental Representative) [hereinafter referred to as the "CIT (DR)"] to the admission of the settlement applications. It was submitted that it is not open for the CIT (DR) to raise objection and that the Commissioner has gone beyond what his superior Principal Commissioner has stated in the report and that if there was any objection, it was for the Principal Commissioner to take such objection in the report. It was submitted that there was grave error on the part of the Settlement Commission permitting the CIT (DR) to raise objections to the admission of the application and more so in permitting him to go beyond the report.

3.2 Referring to the impugned order, it was submitted that several points which were not there in the report have been taken into consideration in the order and, therefore, the petitioner's representative naturally was not ready to reply off hand without instructions from the petitioner or its accountant. It was urged that the impugned order having gone far beyond the report of the Principal Commissioner is therefore, bad in law.

3.3 It was submitted that sub-section (2C) of section 245D of the Act mandates that, the order be passed within fifteen days of the report. It was submitted that if the report said that there was no full and true disclosure, the petitioner would have been called upon. It was submitted that the provision contemplates opportunity of hearing to the assessee in case the application is to be held to be invalid, however, if the Principal Commissioner has not given a report against the petitioner assessee, hearing the petitioner could have been dispensed with. It was submitted that if the report was not against the assessee, the Settlement Commission could not have called upon the CIT (DR) as to why the report should not be accepted.

3.4 It was contended that if a new argument, that too, a factual one, which is not there in the report of the Commissioner is advanced, the rule of audi alterem partem would require the Settlement Commission to give time to the representative of the other side to reply to the same because factual arguments cannot be replied off the cuff without the petitioner's representative checking the records and taking instructions from the petitioner. It was submitted that given the time line provided in the section, namely, that the order has to be passed within a period of fifteen days of the receipt of the report, it is not possible to adopt such a course of action. Therefore, it is not permissible for the Settlement Commission to consider new arguments, which are factual in nature and not contained in the report.

3.5 On the merits of the impugned order, it was submitted that the Settlement Commission has not mentioned in the impugned order as to which seized document has not been considered by the petitioner to arrive at the profit. It was submitted that in the order made under section 245D(1) of the Act, the Settlement Commission has given a clear finding that there is full and true disclosure and that between the passing of that order and the impugned order, there was no new fact or additional material which could have inspired an adverse conclusion. It was submitted that, therefore, the impugned order passed by the Settlement Commission being in breach of the provisions of section 245D(2C) of the Act deserves to be set aside.

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