Maa Mahamaya Industries Limited V. Income Tax Department

WP/26241/2016

AI Insights

The case involves a writ petition filed by the petitioner, a director of M/s. Maa Mahamaya Industries Limited (MMIL), challenging the order of the Settlement Commission which rejected their application for settlement of tax assessments for the years 2006-07 to 2012-13. The rejection was based on the Commission's finding that the disclosures made by the petitioner regarding additional income from commodity trading were unsubstantiated and lacked specific details required to ascertain the correct income to be taxed. The High Court dismissed the writ petition, referencing a similar case involving the same parties, where it was held that the Settlement Commission's decision was not subject to interference under Article 226 of the Constitution of India.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 795461 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 26-09-2022
• Assessment Year: misc
• Other Referred Cases: Maa Mahamaya Industries Limited vs. ITSC
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Commodity trading; Full and True Disclosure; Income disclosure; Natural Justice; Settlement commission
• Section: 132; 153A; 245D(4); 127; 245D(2C); 245D; 245D(2B)

Judgement Text

"THE HON’BLE SRI JUSTICE C.PRAVEEN KUMAR AND THE HON’BLE SRI JUSTICE A.V. RAVINDRA BABU Writ Petition No.26241 of 2016 ORDER:- (per the Hon’ble Sri Justice C. Praveen Kumar) Heard learned counsel for the petitioner and Ms. M. Kiranmayee, learned Standing Counsel for Income Tax, appearing for the respondents and with their consent, the writ petition is disposed of at the admission stage. 2. Assailing the Order, passed by the first respondent/Settlement Commission on 21.07.2016 as violative of Principles of natural justice, the present writ petition came to be filed. 3. As seen from the record, the petitioner herein is a Director of M/s.Maa Mahamaya Industries Limited [MMIL]. A search operation was conducted, under Section 132 of the Income Tax Act, 1961 on 19.08.2011 and consequently proceedings under Section 153A were initiated. The factory and office premises of MMIL and other group companies as well as residential premises of the Directors 2 including petitioner were covered by the search. Subsequently, an application came to be filed by MMIL before the first respondent for settlement of its case for the Assessment Years 2006-07 to 2012-13. During the course of search operation, cash amounting to Rs.41,46,900/- was found, which the petitioner claimed to be that of M/s.Vidyasagar & Sons. It is to be noted here that the petitioner is also a partner in M/s.Vidyasagar & Sons. Further, gold jewellery and silver articles worth Rs.43,94,008/- belonging to the family members of the petitioner, were also found but not seized. (a) While things stood thus, the jurisdiction over the petitioner was transferred from ITO, Dhamtari to ACIT, Central Circle-I, Visakhapatnam vide Order under Section 127 of the Income Tax Act. Similarly, the jurisdiction over other entities of the group was also transferred to ACIT, Visakhapatnam. The jurisdiction of the respondents was challenged in the High Court and their failure to approach the Hon’ble Supreme Court of India. Thereafter, the petitioner approached the first respondent Settlement Commission for the purpose of settlement of its 3 assessments for the Assessment Years 2006-07 to 2012- 13. The records show that the petitioner made a disclosure of income which was not made before the Assessing Authority. The petitioner had offered income for Assessment Year 2010-11, from trading commodity and additional income in respect of Assessment Year 2012-13, on account of interest claim relatable to over-drawal of funds from the partnership firm. The net additional amount of income tax offered to be paid was Rs.11,47,552/- on a net additional income of Rs.47,40,550/-, apart from additional interest aggregating to Rs.10,35,983/-. The order came to be passed by first respondent on 13.06.2016, holding as under:- “15.1. We have carefully considered the submissions of the learned A.R and the facts available on record. The Applicant’s submissions with regard to pendency of assessment for the A.Ys 2006-07 to 2012-13 in the cases of (i) Smt. Anita Agrawal (ii) Shri Vidyasagar Agrawal (iii) Shri Ramcharan Agrawal (iv) Shri Ramgopal Agrawal (v) Shri Omprakash Agrawal (vi) Smt. Santosh Agrawal (vii) Smt. Sharda Devi Agrawal, (vii) Smt. Pinky Agrawal and for A.Ys.2007-08 to 2012-13 in the case of Shri Anunay Agrawal are found to be in order. The Applicants have declared additional income before us and the additional tax thereon arrived at by them exceeds the prescribed threshold limit of tax payable.- The Applicants have also 4 paid additional tax and interest payable with reference to the additional income disclosed before us. The Application fee of Rs.500/- has been paid by each Applicant and evidence has been filed. Intimation in Form 34BA has been furnished to the Assessing Officer on the same day i.e., 01.06.2016 by each Applicant when the Applications were filed before us. The manner of earning of additional income has also been explained by the Applicants during the course of hearing and also in the SOF filed along with the Applications. The AR stated that given further opportunity they would elaborate the same and file necessary details. As regards, the issue of true and full disclosure, we are of the opinion that, at present, there is prima facie no material in our possession which warrants the conclusion that true and full disclosure has not been made by the Applicants. So far as other conditions are concerned, they stand satisfied by the Applicants.” 4. As required under the law, a Notice under Section 245D was issued to the second respondent for his comments demanding submission of his reply under Section 245D(2B) of the Act on 30.06.2016, wherein, the second respondent accepted that consequent upon the search and issuance of notices under Section 143(2) of the Act, assessment for all the years i.e. 2006-07 to 2012-13 are pending consideration, which incidentally is one of the requisites of the statute for the application being processed with. Thereafter, the first respondent by its 5 letter dated 21.07.2016, said to have been made under Section 245D (2C) of the Act, has ordered that the application would not be processed and treated the same as invalid. The reason for rejection is found in para 13 of the order and the relevant portion, is as under:- “17. On account of commodity trading, the applicants disclosed certain sums as mentioned in pages 7 to 13 of this order. The applicants were not able to substantiate that they were involved in commodity trading. They are not transactions conducted through banks. There is no evidence adduced except the self-prepared ledger copy. Perhaps to gain entry the applications are filed disclosing this sum. Since the additional income disclosed on account of commodity trading is totally unsubstantiated and the manner is also unexplained, the disclosure cannot be considered as full and true. The contention of the A.R. that disclosure under a head is enough and it need not be substantiated is not acceptable, in letter and spirit. The words ‘manner’, ‘full’ and ‘true’ incorporated in the provisions have a purpose and a meaning. Unless specific details are given, there would be difficulty in ascertaining the relevant provisions of the Act that are to be applied and in arriving at the correct income that is to be brought to tax. Hence, it is not as if, the Applicant can simply state that it is out of commodity trading or that it is out of property without giving specific particulars. For all the above reasons, in the case of all the nine Applicants, the disclosure is not considered as full and true and the applications are not allowed to be proceeded with. 6 18. The applicants may argue that the applications are admitted in 245D(1) proceedings and hence they should be proceeded with. The proceedings u/s.245D(1) are very limited proceedings and opportunity to the Revenue is not given therein. Moreover according to case laws the entire process of admitting and settling an application is an on going process from 245D(1) stage to 245D(2C), and 245D(2C) stage to 245D(4) stage. Depending on the facts and circumstances of the case and the materials submitted and information gathered decision is to be taken at each stage. There is scope to reject an application at final stage i.e., at 245D(4) stage as one that is not full and true. In this case on account of several inputs during 245D(2C) proceedings the decision is taken on merits. 19. In summary, having considered all the facts and circumstances of the cases, it is held that the Applications of all the nine Applicants are not maintainable and the disclosure made by the Applicants is not full and true. The manner of deriving additional income is also not disclosed satisfactorily. Moreover in view of the fact that the Settlement Application in the case of main Applicant (M/s.Maa Mahamaya Industries Ltd. – the specified person of the group) is rejected, the Settlement Applications of the nine related persons before us is also liable to be rejected as the monetary limit (Rs.50 lakhs/Rs.10 lakhs) specified in proviso to Sec.245C(1) is not met”. 5. This order came to be challenged on various grounds. It is said that on surmises and conjectures, and 7 without any foundation, the impugned order came to be passed. 6. Today, when the matter is taken up for hearing, learned counsel for the petitioner as well as Ms. M. Kiranmayee, learned Standing Counsel for Income Tax, would submit that the case on hand is covered by the judgment of this Court in Maa Mahamaya Industries Limited vs. ITSC1 wherein the Court after considering the rival submissions made, held as under:- “52. Therefore, when the Settlement Commission has recorded reasons, which we have extracted above, to come to the conclusion, after perusing the report of the Principal Commissioner submitted under sub-section (2B) that there was no true and full disclosure, there is no scope for any interference under article 226 of the Constitution of India. Hence, all the writ petitions are liable to be dismissed.” Since the case on hand is squarely covered by the judgment of the Division Bench, as referred to above, which fact is not seriously disputed by learned counsel for the petitioner, we see no ground to interfere. 1 2018 TaxPub (DT) 5292 (AP-HC) 8 7. Having regard to the above, the writ petition is dismissed. There shall be no order as to costs. Miscellaneous petitions pending, if any, shall stand closed. _______________________________ JUSTICE C.PRAVEEN KUMAR _________________________________ JUSTICE A.V. RAVINDRA BABU Date: 26.09.2022 MS 9 THE HON’BLE SRI JUSTICE C.PRAVEEN KUMAR AND THE HON’BLE SRI JUSTICE A.V. RAVINDRA BABU Writ Petition No.26241 of 2016 (per the Hon’ble Sri Justice C. Praveen Kumar) Date: 26.09.2022 MS "