Supreme Agro Foods Private Ltd. V. Income Tax Settlement Commission and another

CWP/531/2013

AI Insights

The case revolves around a writ petition by Supreme Agro Foods Private Ltd. challenging an order by the Income Tax Settlement Commission, which applied a 12% gross profit rate in determining undisclosed income for the assessment years 1998-1999 and 1999-2000. The petitioner argued that the gross profit rate issue was not part of the original dispute as presented in the Commission's report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. The High Court, referencing precedents and the scope of the Commission's powers under Section 245-C of the Income Tax Act, 1961, found no merit in the petitioner's arguments and upheld the Commission's decision.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 815867 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 14-01-2013
• Assessment Year: misc
• Other Referred Cases: Brij Lal and ors vs. Commissioner of Income Tax, Commissioner of Income Tax vs. M/s Godwin Steels Pvt. Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: RADHIKA SURI
• Keywords: Gross Profit Rate; Income tax settlement commission; Settlement; Undisclosed income
• Section: 245(c)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 14.1.2013 CWP No. 531 of 2013 Supreme Agro Foods Private Ltd. ......Petitioner vs. Income Tax Settlement Commission and another .....Respondents CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MR. JUSTICE RITU BAHRI Present: - Ms. Radhika Suri, Advocate for the petitioner .......... Challenge in the present writ petition is to an order passed by the Income Tax Settlement Commission (for short the 'Commission') dated 30.10.2012, deciding the request of the petitioner for settlement in terms of the provisions of Section 245-C of the Income Tax Act, 1961 (for short the 'Act'). The grievance of the petitioner is in respect of application of 12% gross profit rate on the ground that such gross profit rate could be applied during the course of the assessment and cannot be made part of settlement, when the same was not an issue raised by the Commissioner of Income Tax in his report submitted in terms of Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997 (for short the 'Rules') We have heard learned counsel for the petitioner at some length and find no merit in the present petition. A perusal of the order shows that the Commission has taken into consideration the following facts at the time of passing of the order: - -2- Assessment year Gross profit rate applied by petitioner Amount of Profit as per petitioner Income found to undisclosed by Commission Difference 1998-1999 7.26% 1,11,04,486 1,83,48,418 72,43,932 1999-2000 8.32% 1,73,17,216 2,49,90,576 76,73,360 Learned counsel for the petitioner argued that the issue before the Commission was in respect of cash credit entries amounting to Rs. 3,13,89,655/- and not the income derived from its business. An issue which was not raised by the Commissioner in his report nor such an issue was arising for consideration before the Commission, therefore, the same cannot be taken into consideration to return a finding that there was an undisclosed income only for the reason that the less gross profit rate was applied. It is contended that the proceedings before the Commission and proceedings for assessment are distinct and that the factors which may be relevant for assessment, are not relevant and cannot be taken into consideration for the purpose of settlement. In support of arguments, learned counsel for the petitioner relied upon a judgment of Hon'ble the Supreme Court reported as 2010 (328) ITR 477 SC, Brij Lal and ors vs. Commissioner of Income Tax in respect of scope of powers of the Commission under Section 245-C of the Act. Reliance is also placed upon an order of Delhi High Court in CWP No. 10198 of 2009, Commissioner of Income Tax vs. M/s Godwin Steels Pvt. Ltd. decided on 23.2.2012. No doubt, the Commissioner of Income Tax in his report under Rule 9 of the Rules, has not referred to gross profit rate applied by the petitioner as an objection for the settlement but the fact remains that the Commission has found that the rate of profit adopted by the assessee was in fact leading to undisclosed income and thus made an addition on the basis of the information submitted by the assessee. In fact the order passed by Delhi High Court in M/s Godwin Steels Pvt. Ltd negates the arguments raised by the petitioner. The court held that the Commission has to consider the material brought on record before -3- it and that consideration means independent examination of the evidence and the material on record. The relevant extract is as under: - 'The aforesaid sub-section requires that the materials brought on record before ITSC shall be “considered” by the members before passing any final order under sub-section (4). The word “consideration” means an independent examination of the evidence and materials brought on record before the ITSC by the members and application of mind thereto with a view to independently assess the materials and evidence, whether adduced by the assessee-applicant or by the CIT and come to a conclusion by themselves.' The judgment in Brij Lal's case (supra), has no applicability to the facts of the present case. In the aforesaid judgment, Hon'ble the Supreme Court has discussed the scope of Section 245-C of the Act. There is no finding that the gross profit ration can be applied only during the assessment proceedings and not in the proceedings under Section 245-C of the Act. Since, the material was available before the Commission and such material has been taken into consideration for returning a finding which is relevant for determining undisclosed income of the petitioner. We do not find such order warrants interference in exercise of the writ jurisdiction of this Court as a part of the process of judicial review. Dismissed. (HEMANT GUPTA) JUDGE (RITU BAHRI) JUDGE 14.1.2013 preeti "