THE COMMISSIONER OF INCOME TAX, HYD V. THE INCOME TAX, CHENNAI AND ANOTHER

WP/19182/2008

AI Insights

The case revolves around a writ petition filed by the Commissioner of Income Tax (Central), Hyderabad, against the order of the Income Tax Settlement Commission, which accepted the settlement application of M.V.R. Constructions (P) Ltd. The company had declared additional income following a search and seizure operation. The Settlement Commission's order included acceptance of the declared income and granted the company immunity from prosecution and penalties. The Commissioner contested the legality of this order, arguing that the conditions for settlement under Section 245C of the Income Tax Act were not met. The High Court, after considering the arguments and the procedural adherence of the Settlement Commission, dismissed the writ petition, affirming the Commission's decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 753106 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 03-01-2023
• Assessment Year: misc
• Other Referred Cases: Jyotendrasinhji v. S.I.Tripathi, Sri Rant Durga Prasad v. Settlement Commission
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M NAGA DEEPAK
• Assessee Lawyers: J V PRASAD
• Keywords: Income tax settlement; Search and seizure; Settlement commission; Undisclosed income; Writ of Mandamus
• Section: 132; 153A; 133A; 245D(4); 226; 245C

Judgement Text

"t 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 Between: AND 1. The Commissioner of lncome Tax, (Central) Aayakar Bhavan, Basheerbagh, Hyderabad- ...PETITIONER The lncome Tax, Settlement Commission Additional Bench, 640, Anna Salai, Nandanam, Chennai. M.V.R. Constructions (P) Ltd., 9-19-44, CBM Compound, Visakhapatnam, Andhra Pradesh ...RESPONDENTS ) Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ of mandamus or any other appropriate writ or order or direction in the nature of a Writ declaring the order of the Settlement Commission (lT & WT), Additional Bench, Chennai in SA No. AP/HD51/06-07t1tAT dt.18-3-2008 as highly illegal, improper, arbitrary, unjust, violative of the principles of naturaljustice and to set aside the same. l.A. NO: 1 OF 2008 WPMP. NO: 25014 OF 2008) Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to suspend the order of the Settlement Commission (lT & WT), Additional Bench, Chennai in SA No. AP/HDSl/06-07l20llT 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 : - - - - Counsel for the Respondent No.2: SRI M. NAGA DEEPAK The Court made the following: ORDER WRIT PETITION NO: '19182 OF 2008 I , TH E HON'BLE THE CHIEF JUSTICE UJJA - ]sHIIYAN AND THE HON'BLE SRI JUSTICE N. TUKAI'.AMJ I WRIT PETITION No.19182 of 2: :.tB O!pER: l) (r lhe HotL'bIe the Chief Justice Uictl Bhulan) Hea rd Mr. J.V.Prasad, learned Star d ing Counsel, Incorne T rx Department appea-ring for the lletitioner and Mr. M.Na;1a Deepak, learned counsel for respondent No.2 - ASSESSCE. 2. This r,,'rit petition has been filed bv the (lommissioner of Incorr r: Tax (Central), Basheerbagh H-yderabad, assailing the legality and validity ol' the orc er dated I 8.03 .2O0 3 passed by the Income Ta r. Settlement Commissit n, Additional Bench, Chennai (i:rit:fly, ,the Settlement Commission' hereafter), in Settlement Applicatior No.APlHDS1 l06-07 l17 lIT. 3. Resprrndent No.2 is an assessee under the Income Tzx Act, 1! 61 (briefly, 'the Act' hereinafter) a:rd is engaged in the bur iness of civil construction. It i:; stated that business activities of respondent No.2 is spread over the then State of Andhra Pradesh, Maharashtra and Goa. 2001-o2 2002-o3 2003-o4 2004-05 2005-06 Rs RS Rs Rs Rs t2,493 2,40,O00 2,23,517 36,577 77,636 5. During pendency of the assessrnent proceeding following 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 Settiement Commission additional income over and above which was declared under Section 153A of the Act in the returns of income as under: I 2 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 133A of the Act' Pursuant to notice under Section 153.4 of the Act, respondent No.2 filed its returns of income for the assessment years 2OO1-2002 to 2005-2006 as under: Asst' Year Addl' Income offered -) Asst, Year 201) I,O2 20()2,03 20()3-04 2004-05 2005-06 Total Rs. 3.O2,'293 Rs. 1r9.14,'/O7 I lL I II I It, Rs. 77 17,OOO 6. In : esponse to notice issued by t re Settlement Commissi )n, petitioner submitted objection under Rule 6 of the Inrrome Tax Settlement Commission (proceedings) Rules, 19r]6 (briefly, .the Rules, hereinafter). In the said report, p( :titioner contended that applica tion filed by respondenI No.2 for settlement was not mainlainable and shouid be rejected. However, Settlemenl Commission admitted r he application of respondent No. 2. whereafter petitioner lrad to submit a report under Rule :r of the Rules disclosing .herein as to how concealment of trxable income was detect:d by the revenue. It was mentionecl therein that no nerr facts were disclosed by respondetrt No.2 in the application In a,ll, contention of the petitiont:r was that conditions lor settlement in terms of Section 245C of the Act were absent and therefore, the appliczttion of respondent No.2 shouid be rejected. How:ver, by the I &!lf !-!qqJ,,r1q e otlelgd 4 impugned order dated 18.03.2008, respondent No'1 ie', Settlement Commission accepted the additional income offered by respondent No.2 at Rs.77,17,000.00. Consequently, petitioner was 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 245D(4) of the Act. As a consequence of the settiement, Settlement Commission granted immunity to respondent No'2 from prosecution as well as from imposition of penalty under the Act. 7. Assailing the aforesaid order dated 18'O3'2008, the present writ petition has been filed. By order dated 05.09.2008, a Division Bench of this Court had admitted the writ petition for hearing, but declined to grant any stay' 8. Since stay was declined, the effect of the order dated 1S.O3.2OO8 passed by the 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, learned Standing Counsel has argued on I 5 ;1 the meril of the order, we are of the vie,w th,rt a /l I l5 forc: in what Dr. Gauri Shankar says viz., thtt the order of c cmmission is in the nature of a packal3: dezrl and that it may not be possible, ordinarily spe.akfurg, to diss:ct its order and that the assessce shcrrld rrot be perr dtted to accept what is favourable to hin r:nd reject whal is not. According to leaJned co.rtlsel. the Con mission is not even required or obligate,l [o pass a reas:ned order. Be that as it may, the l'act rernains that it is open to the Commission to accept arl amJunt ff ta,x by vay of settlement and to prescribc the manner in whic h the said amount shall be paid. It m. )' corrdone the r lefaults and lapses on the part of lhe as;esset: ard may waive interest, penalties or prosecutior , wht:re it thinl:s appropriate. Indeed, it would be rhfficult to pred cate the reasons and considerations wh t:tr induce the { ommission to make a particular order, unless of courrie the commission itself chooses to give reasons for its o. der. Even if it gives reasons in a given (:ase, the scopr of inquiry in the appeal remains thr same as indic rted above viz., whether it is contr:rry to ar:y o[ the provi;ions of the Act. In this context, rt is r:lt:valt to note jlat the principle of natura.l justice (aurii altc:rant porteilt) has been incorporated in Set:tion 245-I t itself. The sole overall limitation rpon the Comr rission thus appears to be that it shor l "