THE COMMR. OF INCOME TAX, HYD. V. THE INCOME TAX SETTLEMENT COMMISSION AND ANOTHER

WP/18627/2008

AI Insights

The case revolves around a writ petition filed by the Commissioner of Income Tax, Hyderabad, against the order of the Income Tax Settlement Commission, which accepted the settlement application of M.V.R. & Son Techno Builders Private Limited. The settlement included additional income disclosures by the respondent and granted them immunity from prosecution and penalties. The petitioner contested the maintainability of the settlement application and the acceptance of disclosed incomes, arguing that the Commission overlooked procedural rules and the substantive requirements of a valid settlement. The High Court, after considering the arguments and the procedural framework of the Settlement Commission, dismissed the writ petition, emphasizing the limited scope of judicial review in such matters.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 760772 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 03-01-2023
• Assessment Year: misc
• Other Referred Cases: Jyotendrasinhji v. S.I.Tripathi
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: M DEEPAK
• Assessee Lawyers: J V PRASAD
• Keywords: Additional income; Income tax settlement commission; Natural Justice; Search and seizure; Settlement application; Writ petition
• Section: 132; 153A; 133A; 245C; 245D; 245H

Judgement Text

"[ 3311 I IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (SPecial Original Jurisdiction) TUESDAY, THE THIRD DAY OF JANUARY TWO THOUSAND AND TWENTY THREE PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE N.TUKARAMJI WRIT PETITI ONNO: 18627 OF 2008 I-A. NO:1 OF 2OO8(WPMP. NO:24238 OF 2008) Between: The Commissioner of lncome Tax' Aayakar Bhavan' Basheerbagh' Hyderabad. ...pETtIoNER AND l.ThelncomeTaxSettlementCommission,AdditionalBench,640,AnnaSalai, Nandanam, Chennai. 2. Ivl.V.R. & Son Techno Builders Private Limited' 9-19-44' CBI rl Compound' -. Visakhapatnam, Andhra Pradesh ...RES'.NDENTS Petition under Article 226 of lhe constitution of lndia praying that in the circumstancesstatedintheaffidavitfiledtherewith'theHighCourtmaybe .,f o-\"\"d to issue a writ Of Mandamus or any other appropriate writ -or order. Or i;;;\"il l; ir,\" nuL.\" or \" writ dectaring the order of the serflement commission (lT&WT).AdditionalBench,ChennaiinS'A.No.AP/HD51/06.07/18/lTdatedlS- 5;;d;l'r-lighi;lii.grr, improper, arbitrary, unjust, viotative of the pnnciples of natural justice and to set aside the same' PetitionunderSectionl5lCPCprayingthatintheCircumstancesstated in the affidavit filed in support of the peiition, the High Court may be pleased to ;r;p;nd G order of the setttement commission (tr & wr), Additional Ben.ch, a;;;\"i in S.A.No.AP/HD51/06-07/18/lr dated 18-3-2008' pending disposal of the writ petition. Counsel for the Petitioner: SRI J.V' PRASAD (SC FOR INCOME TAX) Counsel for the Respondent No'1 : - - - - Corn=et for the Respondent No'2: SRI M' NAGA DEEPAK The Court made the following: ORDER 2 THE HON'BLE THE CHIEF JUSTICE AL BHIIYAN AND THE HON'BLE SRI JUSTICE N. TUKARAMJI VRIT PETITION No.18627 of 2OOB 98DEB: eer the Hon'ble the Chief Justice LIIJ I tthultan) Heard Mr. J.V.Prasad, learned Standing Counsel, Income Tax Department appearing for the petitioner and Mr. M.Naga Deepak, learned counsel for respondent No.2 - ASSCSSCC. 2. This writ petition has been liled by the Commissioner ol lncome Tax (Central), Bashecrbagh, H1'derabad, assailing the legality and validity of the order dated 18.O3.2008 passed by the Income Tax Settlement Commission, Additional Bench, Chennai (briefly, 'the Settlement Commission' hereafter), in Settlement Application No.APlHDS 1 / 06-07 I LB / lT. :1. Respondent No.2 is an assessce under the lncome Tax Act, 196 1 (briefly, the Act' hereinafter) and is engaged in the business of civil construction. It is stated that business acti -ities of respondent No.2 is spread over the then State of Andhra Pradesh, Maharashtra and Goa. 4. On 16.12.2004, a search and seizure operation was carried out in the business and residential premises ol respondent No.2 under Section 132 of the Act. That apart, survey was also conducted under Section l33A ol thc Act. Pursuant to notice under Section 1534. of the Act, respondent No.2 filed its returns of income for the assessmcnt years 1999-2000 to 2005-2006 as under: Asst. Year Addl. tncome offered 1999-00 2000 0 I 2001 02 2002 03 2003-0.1 200 I 05 -2005 0r) Rs.85,58,590 Rs. 18,98,380 Rs.5,36,250 Rs.62,7A,23O Rs.41,92,86O Rs. 85,343 Rs. 17,79,200 5. During pendency of the assessment proceeding lollorving the search and seizure, respondent No.2 filed an application before the Settlement Commission under Section 245C of the Act. Respondent No.2 disclosed before the Settlement Commission additional income over and above 'a,hich u'as declared under Section l53A of the Act in the returns of income as under: 4 Asst- Year Addl. Income o red 1999-O0 2000-0 1 2001-o2 2002-03 2003-o4 2004-05 2005-06 Rs.28,63,8OO Rs. 15,07,5O0 Rs. 25,000 Rs. 25,0O0 Rs. 25,000 Rs. 25,O0O Rs. 25,0OO Total Rs.44,96,3OO 6. In response to notice issued by. the Settiement Commission, petitioner submitted objection under Rule 6 of thc Income Tax Settlement Commission (Proceedings) Rules, 1986 (briefly, the Rules' hereinafter)' In the said report, petitioner contended that application liled by respondent No.2 for settlement was not maintainable and should be rejected. However, Settlement Commission admitted the application of respondent No'2, \"r'hereafter pctitioner had to submit a report under Rule 9 of the Rules clisclosing therein as to how concealment of taxable itlcome .as detected by the revenue. It was mentioned therein that no new facts were disclosed by respondent No'2 in the application. In all, contention of the petitioner \"vas that conditions for settlement in terms of Section 245C of the Act 'ere absent and therefore, the application of i respondent No.2 should be rejected. However, br_ the impugned order dated 18.03.2008, respondent No.1 i.e., Settlement Commission accepted the additional income offered by respondent No.2 at Rs.44,96,300.O0. Consequently, petitioner u,as directed to issue demand notice to respondent No.2 to pay the income tax as per the order dated 18.03.2008 passed under Section 24SD(41 of the Act. As a consequence of the settlement, Settlement Commission granted immunitl to respondent No.2 from prosecution as well as from imposition of penalty under the Act. 7. Assaiiing the aioresaici order dated 1g.03.2008, the present writ petition has been fi1ed. By order dated 29.OB.2OOB, a Division Bench ol this Court had admitted the writ petition lor hczrring, but declined to grant any stay. 8. Since sta-v u,as declined, the effect of the order dated 18.O3.2OO8 passed b,r, rhe Settlement Commission had been given effect to. Therefore, a view can be taken that the writ petition has become infructuous. Nonetheless, as Mr. J.V.Prasad, learncd Standing Counsel has argued on 6 the merit of the order, we are of the view that a decision on me rit u,ould be approPriate. 9. Mr. J.V.Prasad, learned Standing Counsel for Income Ta-x Department submits that Settlement Commission mechanically accepted the application of respondent No'2 ancibrushedasidetheobjectionraisedbythepetitioner urnder Rule 6 of the Rules as well as the report submitted underRulegoftheRules'Accordingtohim'therewasno additional disclosure of concealed income of respondent No.2 in the appiication filed for settlement' Whatever income r'r'as detected in the course of the search and seizure rvas mentioned in the application for settlement' 'l'trcrclbrc. StrtLioment Commission was not justilied in accepting the plea of settiement of respondent No'2' 10. On the other hand' Mr' M'Naga Deepak' learned cor,rnsel for respondent No'2 submits that same set of arguments rere advanced before the Settlement Commission rvhich were rejected' Scope of interference u'iLh an order of Settlement Commission in judicial revierv procct:clings is very limited' In such a proceeding' Court l would only look into as to whether there is an1. procedural violation b,. the Settlement Commission there is any or violation of the principles of natural justice. In support of his contention, he has placed reliance on a decision of the Supreme Court in Jyotendrasinhji v. S.I.Tripathir. fls, therefoi:e, submits dismissed. that the writ petition should be 11. Submissions made b_v learned counsei for the parties have received the due consideration of the Court. I schern- nf -^++r^--- ui ',ELiicrrjclti as pr.o icled under the nct. 72-1 ch o,-,t^, Lrv ^ __. - . L.'aplcr \".,i, _A oi.the Acr comprising Sections 24SA to 245M deals with settlement of cases. Section 245A(f) of the Act defines \"settiement Commission,, to mean the Income Tax Settlement Commission constituted under Section 2458 ofthe Acr. 12. Before clealing t-ith Settlement Commission. u c tl-re order passed by the ma_r, briefl1, advert to the ' AtR 1993 sc I991 t{ 12.2. As per sub-section (1) of Section 2458 of the Act, the Centrai Government shall constitute a Commission to be called the Income Tax Settlement Commission for seltlement of cases under Chapter XIX-A. We may mention that as per the proviso, Income Tax Settlement Commission so constituted had ceased to operate with effect from OI.O2.2O21. However, we have been informed at the Bar that an Interim Settiement Board is now in operation to ensure that there is no vacuum in the interregnum. Composition of the Settlement Commission is dealt n,ith in sub,sections (2) and (3) of Section 2458 of the Ar:t. 12.3. J r-rri scl ictio ltal po 'ers of Settlement Commission are delineated ir-r Section 2458A of the Act. 12.4. Section 245C of the Act provides for filing of appiication lor settlement of cases. As per sub-section (1), an assessec nlet ', at an-y stage of a case relating to him, mal