HIGH COURT OF KARNATAKA
ING Vysya Bank Ltd.
versus
Commissioner of Income-tax, Bangalore-I
W.A. Nos. 2458 & 3004-3008 of 2010 (T-IT)
July 6, 2012
JUDGMENT
Aravind Kumar, J.
This Intra Court Appeal under Section 4 of the Karnataka High Court Act, 1961 is by the first respondent -assessee preferred against order passed in W.P. No. 12239/2008 whereunder the learned Single Judge has quashed the order passed by the Income Tax Settlement Commission (Additional Bench), Chennai dated 04.02.2008 in so far as it relates to granting immunity from penalty and prosecution and remanding the matter to the Settlement Commission for limited purpose of reconsidering the question of penalty, prosecution and the order of the Assessing Officer levying penalty after providing an opportunity to both the parties.
2. We have heard Sri Sarangan, learned Senior Counsel appearing for the Appellant-assessee (hereinafter referred to as ‘Assessee’ for the sake of convenience) and Dr. R.B. Krishna, learned counsel appearing for the respondent-revenue (hereinafter referred to as ‘Revenue’ for the sake of convenience).
Genesis of the case:
3. Assessee had filed its return of income for the Assessment years 1994-95 to 1999-2000. Assessment orders came to be passed by the Assessing Officer up to the Assessment years 1997-98 and in respect of subsequent years it was pending. The Assessee not being satisfied with the order of assessment preferred appeals and same was pending before various statutory appellate authorities and during this period the assessee thought fit to approach the Settlement Commission for settlement of its cases by invoking the jurisdiction of the Settlement Commission under Chapter XIX -A of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’ for the sake of brevity) and as such an application under section 245C (1) of the Act; came to be filed on 10.07.2000. A preliminary objection was raised by the revenue that application filed by the assessee was not maintainable and said issue came to be adjudicated by the Settlement Commission after considering the contentions of both the parties and allowed the application filed by the appellant under section 245C by order dated 11.12.2000 and thereby rejecting the contention of the revenue. Aggrieved by this order revenue preferred writ petition No. 13111/2001 before this court and after hearing the learned advocates appearing for parties disposed of the writ petition by order dated 18.08.2005 by concluding as under:
“12. Accordingly, this writ petition is disposed of observing that not withstanding the impugned order dated 11.12.2000, it is open to the parties to urge all their contentions before the Commission at the stage of disposal of the application itself and the commission may independent of the findings which it has given under the impugned order, examine all the contentions and proceed to pass orders on merits in accordance with the provisions of the Act”.
4. Accordingly Settlement Commission took up the application of the assessee for hearing and after considering the arguments advanced by respective learned advocates by order dated 04.03.2008 passed under section 245D(1) and 245D(4) of the Act determined the additional income and the tax payable thereon. Maintainability of the application filed by the assessee was also upheld.
5. Being aggrieved by the order dated 04.03.2008 passed by Settlement Commission, revenue preferred writ petition before this court in W.P. 12239/2008 and this court after considering the rival contentions formulated four points for its determination which reads as under:
1. Whether the writ petition is not maintainable for want of clearance from the committee on disputes (COD)?
2. Whether the first respondent has no authority to file the writ petition?
3. Whether the Settlement Commission has no jurisdiction to admit and entertain the application of first respondent under Section 245(C) of the I.T. Act after detection and discovery of the concealed income?
4. Whether the impugned order passed by the Settlement Commission is in accordance with law?
6. The learned Single Judge of this court allowed the writ petition in part by order dated 20.05.2010 in so far as it relates to granting immunity from penalty and prosecution and remanding the matter to the Settlement Commission for limited purpose of reconsidering the question of penalty, prosecution and the order of the Assessing Officer levying penalty after providing an opportunity to both the parties. The revenue being aggrieved by this order preferred Special Leave Petition (Civil) No. 19663/2010 before the Hon’ble Apex Court and on 21.02.2012 it came to be disposed of by following order:
“In the Special Leave Petition, no reference was made to pending Writ Appeal No.2458 of 2010 filed by the assessee. The said writ appeal is pending, even today, before, the Division Bench of the High Court of Karnataka. In the circumstances, we recall our order dated 6th January, 2012, passed in S.L.P. (C) No. …..CC 19663/2010. We also request the Division Bench of the High Court to dispose of Writ Appeal No. 2458 of 2010 as expeditiously as possible, preferably within a period of two months.”
7. As such the matter is before us for being disposed of.
Contentions raised:
8. It is the contention of Sri Sarangan, learned Senior Counsel appearing for the assessee that assessee is a Private Sector Bank not run, controlled or managed by the State or Central Government and as such writ petition was not maintainable against the assessee and as such he contents the learned Single Judge erred in holding that the writ petition was maintainable. He would further contend that obtaining of approval by the committee of disputes a body constituted pursuant to directions given by Hon’ble Apex Court was not obtained was a ground for not entertaining the writ petition and the law laid down by this court in this regard was not considered by the learned Single Judge. He contends that the learned Single Judge failed to consider the fact that orders of the Settlement Commission are final and conclusive subject to constitutional remedies and such remedies could be availed only when the orders passed by the Settlement Commission are contrary to the provisions of the Act. He would contend that issue regarding jurisdiction of the Settlement Commission to entertain an application filed by the assessee having been upheld by the learned Single Judge it erred in concluding that Settlement Commission was not justified in granting immunity to the assessee from levy of penalty and initiation of prosecution as vague, unsound. He further contends that section 245C contemplates full and true disclosure of income to be made before the Settlement Commission and the same was made by the assessee and as such the learned Single Judge committed an error in holding that there is statutory requirement that concealment of particulars before the assessing officer would have a bearing with the Settlement Commission exercising its power under section 245H of the Act for granting immunity from prosecution and penalty and elaborates his contentions that section 245H empowers the Settlement Commission to grant immunity to an assessee from prosecution wholly or in part or imposition of penalty and only condition required to be satisfied by the assessee is that assessee should have co-operated in the proceedings before the Settlement Commission. He would also contend that section 245H does not contemplate any explanation or evidence that requires to be offered by the applicant to the satisfaction of the Settlement Commission and as such he contends that order of the learned Single Judge is liable to be quashed.
9. Per contra, Sri R.B. Krishna, learned counsel appearing for revenue would contend that the issue regarding the maintainability of the writ petition even in the absence of clearance from committee of disputes (COD) and the authority of the first petitioner i.e., CIT (1) to file the writ petition held in favour of the revenue cannot be found fault with. He would contend that the direction given by Hon’ble Apex Court in the case of Oil & Natural Gas Commission v. Collector of Central Excise [1995] Supp. 4 SCC 541 related to inter departmental disputes to avoid litigations between two departments of the State and admittedly the order passed by the Settlement Commission questioned by the revenue before the learned Single Judge of this court and there was no necessity for the revenue obtaining clearance from the committee of disputes and even otherwise the said issue has now been resolved by the Apex Court in the case of Electronics Corporation of India Ltd. v. Union of India [2011] 3 SCC 404. He would further contend that in the instant case the assessing officer found that appellant is an income assessee for a number of years and has been conducting leasing business as per the guidelines issued by Reserve Bank of India and said business comprises of two types namely (1) Finance Lease – where the lease financier treats the lease as a financing transaction and interest component alone is accounted for as income, enabling the lessee to claim depreciation on the leased assets; (2) operating lease -where the lessor treats the transaction as lease per se – accounts for the entire lease rentals as income and the lessor claims depreciation on the leased assets as owner and contends that assessee accounted for interest component alone as income in line with finance lease but claimed depreciation on the leased assets as an operating lease and as such the assessee apparently sought benefits under both forms of the lease which was impermissible in law resulting in evasion of income and tax. This fact was noticed by assessing officer after completion of the assessment for the assessment years up to 1997-98 and brought to tax the concealed lease rentals as income and initiated penalty proceedings and also reopened the completed assessments for the earlier years. He contends that it is thereafter application was filed by the assessed under section 245C(1) before the Settlement Commission. He submits that there is a marked difference between “discovered” or “disclosed” in as much as what was “discovered” by the assessing officer during the course of assessment proceedings could not form part of what was “disclosed” by the assessee in the application filed before the Settlement Commission. What has been “disclosed” in the application is what was “discovered” by the assessing officer. He further contends that provisions of section 245C being made applicable to an application filed by an assessee the prime ingredient would be disclosure of such income which had not been disclosed in the return of income and contends that in the instant case that the said income which has been disclosed before the Settlement Commission is what was disclosed in the return of income by way of concealment and as such he contends that it is this precise issue which was remitted back to the commission by the learned Single Judge for being adjudicated since the Settlement Commission by two line order had granted immunity to the assessee from prosecution and levy of penalty and contends that said finding of the learned Single Judge does not call for interference.
10. He would also contend that writ appeal itself is not maintainable since the learned Single Judge has given a finding that impugned order (before the learned Single Judge) was passed by the Settlement Commission and said order was amenable to writ jurisdiction in exercise of supervisory jurisdiction under article 227 of the Constitution of India.
11. Having heard the learned advocates appearing for the parties, we are of the view that following points arise for our consideration:
(1) Whether the writ appeal in question is maintainable or not?
(2) Whether the order passed in W.P. 12239/2008 (T-IT) calls for interference?
Re: Point No. 1:
12. Revenue being aggrieved by the order passed by the Settlement Commission preferred writ petition in question before the learned Single Judge seeking for issue of writ of certiorari by quashing the order passed by the Settlement Commission dated 04.03.2008 Annexure-G and order dated 14.07.2009 Annexure – N. The copy of the said writ petition is appended to the writ appeal and perusal of the same would clearly go to show that it is filed under Articles 226 & 227 of the Constitution of India. This court in the case of Thammanna v. Ms. Renuka ILR 2009 Kar. 1207 has held as under:
“No appeal would lie under Section 4 of the Karnataka High Court Act against the order of the Single Judge passed in exercise of the power conferred under Article 227 of the Constitution of India in the matter arising against an order made deciding an issue, passed by the Court sub-ordinate to the High Court, in the course of a suit or other proceeding not finally disposed of, which is attracted by Section 115 Code of Civil Procedure and is governed under Section 8 of the Karnataka High Court Act. ……….”
In the said judgment the issue under consideration was as to whether against an interim order passed by a sub-ordinate court if challenged in writ petition under Article 226 or 227 of the Constitution of India to get over restrictions imposed in section 115 C.P.C., in view of amendment brought to the said section by Act 46 of 1999 and not as to whether order passed in exercise of the power under Articles 226 & 227 of the Constitution of India is amenable to intra court appeal or not. In the instant case it is no doubt held by the Learned Single Judge that Annexure-G can be questioned under Articles 227 of the Constitution of India. That by itself would not wipe the prayer sought for in the writ petition which is both under Articles 226 & 227 of the Constitution of India. Hence the contention of learned counsel appearing for respondent that intra court appeal is not maintainable cannot be accepted and it stands rejected.
Re: Point No. 2:
13. Chapter XIX-A was inserted by the Taxation Laws (Amendment) Act, 1975 with effect from 01.04.1976. It would not be out of context to refer at this juncture Dr. Chelliah Committee’s final report Part-1 wherein the following observation has been made:
“10.45 However, it is necessary to provide adequate safeguards in the law to ensure that the settlement commission does not become an easy escape route for tax evaders. We therefore recommend the following:
