BALWINDER SINGH V. UNION OF INDIA, FINANCE MINISTRY THROUGH FINANCE SECRETARY,GOVT.OF INDIA, NEW DELHI & OTHE

CWP/14757/2014

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The case involves Balwinder Singh, who filed a writ petition under Articles 226/227 of the Constitution of India challenging the order of the Income Tax Settlement Commission which rejected his application under Section 245C of the Income Tax Act, 1961. The petitioner's father, Bawa Singh, had earlier made a surrender of \'1.25 crores' during a search operation under Section 132 of the Act, which was later included in the additional income determined by the Settlement Commission. The petitioner contested the valuation and the binding nature of the confessional statement, claiming it was made under pressure. The High Court, after examining the scope of judicial review and the specifics of the case, upheld the Settlement Commission's decision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 723472 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 30-07-2014
• Assessment Year: misc
• Other Referred Cases: Jyotendrasinhji vs. S.I.Tripathi, Commissioner of Central Excise vs. Carrier Aircon Limited, N.Krishan and others vs. Settlement Commissioner, Commissioner of Income Tax vs. M/s Godwin Steels Pvt. Limited, Chawla Enterprises Limited vs. Commissioner of Customs
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: PANKAJ JAIN; DIVYA SURI; SACHIN BHARDWAJ
• Keywords: Assessment Order; Confessional statement; Income Tax; Judicial review; Settlement commission
• Section: 132; 153A; 139(1); 50C; 226; 245C; 245D(1); 227

Judgement Text

"CWP No.14757 of 2014 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No.14757 of 2014 Date of decision: 30.7.2014 Balwinder Singh ……Petitioner Vs. Union of India and others …..Respondents CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr. Pankaj Jain, Sr. Advocate with Mr. Divya Suri and Mr. Sachin Bhardwaj, Advocates, for the petitioner. Ajay Kumar Mittal,J. 1. Prayer in this petition filed under Articles 226/227 of the Constitution of India is for quashing the order dated 28.2.2014, Annexure P.9 whereby the application under Section 245C of the Income Tax Act, 1961 (in short, “the Act”) filed by the petitioner was rejected. Further prayer has been made for directing the respondents not to pass the assessment order in consequence of the order dated 28.2.2014 during the pendency of the petition. 2. A few facts relevant for the decision of the controversy involved as narrated in the petition may be noticed. Bawa Singh, father of the petitioner retired as Patwari in the year 1984 from the Government of GURBAX SINGH 2014.09.05 16:13 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.14757 of 2014 2 Punjab. He started working as property dealer. He also had agricultural land where popular trees were grown and regular income tax returns were being filed with the respondent under Section 139(1) of the Act. On 12.10.2006, search under section 132 of the Act was conducted wherein certain documents were found and seized by the respondent. Notice under Section 153A of the Act was issued on 4.5.2007, Annexure P.1. On 14.5.2007, in response to the notice, the petitioner filed returns of income for the assessment years 2001-02 to 2007-08, Annexure P.2. On 25.5.2007, the petitioner moved an application under Section 245C of the Act before the Settlement Commission with the statement of facts declaring disclosure amounting to ` 20 lacs. On 11.2.2008, the respondent submitted a report in response to the aforesaid petition. On 10.9.2007, the application was proceeded with by passing an order under Section 245D(1) of the Act. On 4.10.2010, father of the petitioner expired due to heart problem and could not appear during the case proceedings. On 20.11.2013, another report was filed under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997 (in short, “the Rules”) by the respondent before the Settlement Commission. On 29.9.2013, the petitioner filed rebuttal placing reliance on certain judgments. On 19.11.2013, further pleadings were made by the petitioner to justify acceptance of the additional income offered for taxation with a prayer that the properties were registered at the circle rate in consonance with the provisions of section 50C of the Act. Vide order dated 28.2.2014, Annexure P.9, the petition was rejected. 3. Learned counsel for the petitioner raised two-fold submissions. Firstly, in view of the verification report submitted by ACIT, CC-II, GURBAX SINGH 2014.09.05 16:13 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.14757 of 2014 3 Ludhiana vide No. DCIT/CC-II/Ludh/13-14/401 dated 19.11.2013, the rate of ` 8000/- per kanal taken by the Settlement Commission had been wrongly fixed. It was also urged that the confessional statement made by the assessee under Section 132(4) of the Act at the time of search, surrendering an amount of ` 1.25 crores would not be binding on the assessee as it was recorded under pressure. 4. After hearing learned counsel for the petitioner, we do not find any merit in the writ petition. 5. Before delving into the arguments raised by learned counsel for the petitioner, we proceed to examine the scope of judicial review under Articles 226/227 of the Constitution of India in writ petition challenging the order of the Settlement Commission as enunciated in various judicial pronouncements of the Apex Court and High Courts. 6. The Supreme Court in Jyotendrasinhji vs. S.I.Tripathi and others, 1993 Supp (3) SCC 389 observed that the order of the Settlement Commission is in the nature of a package deal and ordinarily,it would be difficult to dissect the order so as to permit the assessee to accept the favourable portion and reject what does not suit him. Further, the Settlement Commission can accept an amount of tax by way of settlement and prescribe the manner in which the said amount shall be paid. It is empowered to condone the defaults and lapses on the part of the assessee and waive interest, penalties and prosecution where it is considered appropriate. The scope of enquiry in judicial review would be whether the order is contrary to any provisions of the Act or not. The judicial review is concerned not with the decision but with the decision making process. GURBAX SINGH 2014.09.05 16:13 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.14757 of 2014 4 7. A Division Bench of this Court in Commissioner of Central Excise vs. Carrier Aircon Limited, ILR (2008) 1 P&H 281 considering similar proposition and following S.I.Tripathi's case (supra) had held as under:- “The order passed by the Settlement Commission can no doubt be challenged before this Court or before Hon'ble the Supreme Court under Article 32 of the Constitution yet the enquiry envisaged is limited as to whether the order is contrary to any provisions of the Act or suffers from bias, fraud or malice. In support of the afore-mentioned conclusion, we place reliance on the judgment in S.I.Tripathi's case (supra). The following observations determines the area of judicial scrutiny by this Court or by Hon'ble the Supreme Court which reads thus: “.... Be that as it may, the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee and may waive interest, penalties or prosecution, where it thinks appropriate. Indeed, it would be difficult to predicate the reasons and considerations which induce the Commission to make a particular order, unless the Commission itself chooses to give reasons for its order. Even if it gives reasons in a given case, the scope of enquiry in the appeal remains the same as indicated above, viz. whether it is contrary to any of the provisions of the Act. In this context, it is relevant to note that the principle of natural justice ( audi alteram partem) has been incorporated in Section 245 D itself. The sole overall limitation upon the Commission thus appears to be that it should act in accordance with the provisions of the Act. The scope of enquiry, whether by the High Court under Article 226 or by this Court under Article 136 is also the same- whether the order of the Commission is contrary GURBAX SINGH 2014.09.05 16:13 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.14757 of 2014 5 to any of the provisions of the Act and if so, apart from ground of bias, fraud and malice which, of course, constitute a separate and independent category, has it prejudiced the petitioner/ appellant. Reference in this behalf may be had to the decision of this Court in R.B.Shreeram Durga Prasad and Fatechand Nursing Das v.Settlement Commission ( I.T. And W.T.) [1989] 176 ITR 169,which too was an appeal against the orders of the Settlement commission. Sabyaschi Mukharji J., speaking for the Bench comprising himself and S.R.Pandian J., observed that in such a case, this Court is “ concerned with the legality of the procedure followed and not with the validity of the order”. The learned Judge added “ judicial review is concerned not with the decision but with the decision making process...” 8. The Karnataka High Court in N.Krishan and others vs. Settlement Commissioner and others, (1989) 180 ITR 585 has expressed the view as under:- \"In our opinion, many of the grounds on which arbitration awards could be set aside would not be available in view of the nature and jurisdiction of the Settlement Commission. We are of the view that a decision of the Settlement Commission could be interfered with only: (i) if grave procedural defects such as violation of the mandatory procedural requirements of the provisions in Chapter XIX-A and/or violation of the rules of natural justice is made out; (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission. ITA No.10198-09 Page 32 of 33. (iii) this court cannot interfere either with an error of fact or error of law alleged to have been committed by the Settlement Commission.\" GURBAX SINGH 2014.09.05 16:13 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.14757 of 2014 6 The first two grounds of judicial review mentioned above fortify our decision in the present case.” It was followed in Commissioner of Income Tax vs. M/s Godwin Steels Pvt. Limited, 2012(188) DLT 148 by the Delhi High Court. 9. Delhi High Court in Chawla Enterprises Limited vs. Commissioner of Customs and others, 2004(175) ELT 61 also opined in similar terms in the following words:- “Furthermore, it is not within the scope of our power of judicial review to go into the validity of the said determination, particularly when under section 127J of the Act every order of settlement passed under sub-section (7) of section 127C shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in the Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force. What is required to be seen is whether the order of Commission is contrary to any of the provisions of the Act and if so, has it prejudiced the petitioner. This Court is concerned with the illegality of the procedure followed and not the validity of the order. In other words, the judicial review is concerned not with the decision but with the decision making process [See: Jyotendrasinhji Vs. S.I.Tripathi & Ors., (1993) suppl. 3 SCC 389: R.B.Shreeram Durga Prasad Vs. Settlement Commission & Anr. (1989) 176 ITR 169]. Having come to the conclusion that the order passed by the Commission is in consonance with the provisions of the Act, there is no ground to interfere with the impugned determination of tax liability by the Commission.” 10. Having analysed the scope of judicial review as noticed above, it would be apt to consider the contentions of the learned counsel for the petitioner. The assessee had surrendered an amount of ` 1.25 crores in GURBAX SINGH 2014.09.05 16:13 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.14757 of 2014 7 pursuance to the statement made under Section 132(4) of the Act at the time of search. The said surrender was made on 10.11.2006 whereas the petition was filed before the Settlement Commission on 25.5.2007. The retraction from the said statement is sought to be made on 19.11.2013 during the proceedings before the Settlement Commission(Annexure P.7). No plausible reason or explanation has been furnished for not making retraction during the period between 10.11.2006 to 19.11.2013. Retraction to be effective has to be at the earliest so that it is open to the other side to take action in the facts and circumstances as may be considered appropriate. In case, the retraction from the confessional statement is taken to be not binding on the assessee, doubt about the genuineness of the disclosure arises as the retraction has been sought to be made after seven years and after the petition had been filed before the Settlement Commission. Having once taken the benefit of surrender as ordinarily further investigation at the time of search comes to a halt, the assessee cannot be permitted to plead undue pressure and coercion in making the confessional statement after a long time gap. Further, no material has been produced to show that there was undue influence, coercion or pressure of any kind to make confessional statement. 11. Further, the details as given by the Settlement Commission in paras 26 and 27 read as under:- “26. As held in para 11 hereinbefore, the applicant's offer/surrender of ` 1,25,00,000/- under section 132(4) of the Act shall remain undiluted for the purposes of the present Settlement proceedings as well. Total additional income determined pursuant upon this order has to be in synchrony with this surrender. As per the foregoing discussion, total additional income (alongwith additional income offered in the Settlement application) comes to ` 1,28,90,850/- (` 20,00,000/- + ` 21,50,000/- + ` GURBAX SINGH 2014.09.05 16:13 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.14757 of 2014 8 68,90,000/- + ` 5,81,750/- + `12,68,200/-). In the circumstances, the applicant's offer/surrender of ` 1,25,00,000/- under Section 132(4) of the Act gets subsumed within the determined additional income of ` 1,28,90,850/- thereby requiring no separate addition on this score. Order 27.1 Keeping in view the foregoing discussion, determination of year- wise additional income is summed up hereunder: AY 2001-02 Disclosure in the Settlement application `1,00,000/- Further additional income (` 23,91,800/- + ` 1,84,000/-_ ` 25,75,800/- Total additional income ` ` ` ` 26,75,800/- AY 2002-03 Disclosure in the Settlement application ` 1,80,000/- Further additional income (` 5,52,600/- + ` ` 7,36,600/- 1,84,000/-) Total additional income ` 9,16,600/- AY 2003-04 Disclosure in the Settlement application `1,40,000/- Further additional income (` 8,34,200/- + ` `10,14,200/- 1,80,000/-) Total additional income ` 11,54,200/- AY 2004-05 Disclosure in the Settlement application ` 30,000/- Further additional income ` 28,47,700/- Total additional income ` 28,77,700/- AY 2005-06 Disclosure in the Settlement application ` 2,00,000/- Further additional income (` 2,34,800/- + ` 3,71,800/- ` 1,37,000/-) Total additional income ` 5,71,800/- AY 2006-07 Disclosure in the Settlement application ` 5,00,000/- GURBAX SINGH 2014.09.05 16:13 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.14757 of 2014 9 Further additional income (` 21,50,000/- + ` 25,51,800/- ` 2,09,800/- + ` 1,92,000/-) Total additional income ` 30,51,800/- AY 2007-08 Disclosure in the Settlement application ` 8,50,000/- Further additional income (` 5,81,750/-/- + ` ` 7,92,950/- ` 2,11,200/-) Total additional income ` 16,42,950/- 12. As noticed above, the Settlement Commission had determined additional income of ` 1,28,90,850/- and has held that ` 1.25 crores surrendered by the petitioner at the time of search on 10.11.2006 shall stand subsumed therein. The petitioner's retraction from surrender of ` 1.25 crores has been rightly repelled. Thus, the plea of the petitioner that Settlement Commission had wrongly fixed the rate at ` 8000/- per kanal loses its significance. 13. In view of the above, no interference is called for with the impugned order dated 28.2.2014, Annexure P.9. Consequently, finding no merit in the petition, the same is hereby dismissed. (Ajay Kumar Mittal) Judge July 30, 2014 (Jaspal Singh) 'gs' Judge GURBAX SINGH 2014.09.05 16:13 I attest to the accuracy and integrity of this document High Court Chandigarh "