Case Law Details
PCIT Vs Navinchandra Dalpatlal Mehta & Anr. (Gujarat High Court)
Gujarat High Court held that voluntary addition offered during hearing of the application u/s. 245D(4) cannot be equated with revision of application of disclosure made u/s. 245C(1) and hence no interference is called in the impugned order passed by the Settlement Commission.
Facts- The search and seizure action u/s. 132 of the Income Tax Act, 1961 was carried out at the premises of the assessee – respondent No.1 on 17.08.2016. During the course of search, various incriminating documents were found and seized pertaining to the unaccounted income of the assessee – respondent No.1 and assessment proceeding u/s. 153A of the Act was initiated.
During pendency of the assessment proceedings, respondent No.1 filed application u/s. 245C(1) before the Income Tax Settlement Commission offering additional income of Rs.17 Crores for the assessment years from 2011-12 to 2017-18.
The Settlement Commission admitted the application filed by respondent No.1. The application filed by respondent No.1 – assessee was admitted u/s. 245D(1) vide order dated 02.01.2019 and vide order dated 20.02.2019 passed u/s. 245D(2C) of the Act, the application of the assessee was treated as “not invalid”. The Settlement Commission passed the impugned order on 29.01.2021 accepting the settlement amount of Rs.17.25 Crores offered by the assessee u/s. 245D(4) of the Act. Being aggrieved, the petitioner has challenged the said order by this petition.
Conclusion- The Settlement Commission has, therefore, arrived at a finding that the assessee was not directly dealing with land from which income has been earned which has been invested in the land and therefore, it would not be possible for the assessee to disclose the manner in which such undisclosed income was earned from the real estate transactions. In view of such finding of fact arrived at by the Settlement Commission and in absence of any further evidence produced by the petitioner before the Settlement Commission and more particularly when the statement made in the application for settlement to the effect that it is based on full and true disclosure, which is to be accepted unless there is evidence found contrary to the disclosure made, therefore, the impugned order passed by the Settlement Commission is just and proper and requires no interference while exercising jurisdiction under Article 227 of the Constitution of India.
It is clear that to put quietus to the issue and in the spirit of settlement, the assessee offered further Rs.25 Lakhs which cannot be equated with the revision of the application of disclosure made under Section 245C(1) of the Act. In view of foregoing reasons, we are of the opinion that no interference is called in the impugned order passed by the Settlement Commission while exercising jurisdiction under Article 226/227 of the Constitution of India. The petition, therefore, being devoid of merits is, accordingly, dismissed. Rule is discharged.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned Senior Standing Counsel Mr. Karan Sanghani for the petitioner and learned Senior Advocate Mr. Tushar Hemani with learned advocate Mr. Hiren Trivedi for respondent No.1.
2. Rule returnable forthwith. Learned advocate Mr. Hiren Trivedi waives service of notice of rule for respondent No.1.
3. Having regard to the controversy involved which is in narrow compass, with the consent of learned advocates, the matter is taken up for hearing.
4. The brief facts of the case are as under.
4.1 The search and seizure action under Section 132 of the Income Tax Act, 1961 (for short “the Act”) was carried out at the premises of the assessee – respondent No.1 on 17.08.2016. During the course of search, various incriminating documents were found and seized pertaining to the unaccounted income of the assessee – respondent No.1 and assessment proceeding under Section 153A of the Act was initiated.
4.2 During pendency of the assessment proceedings, respondent No.1 filed application under Section 245C(1) before the Income Tax Settlement Commission (for short “Settlement Commission”) offering additional income of Rs.17 Crores for the assessment years from 2011-12 to 2017-18.
4.3 The Settlement Commission admitted the application filed by respondent No.1. The application filed by respondent No.1 – assessee was admitted under Section 245D(1) vide order dated 02.01.2019 and vide order dated 20.02.2019 passed under Section 245D(2C) of the Act, the application of the assessee was treated as “not invalid”.
4.4 The petitioner thereafter filed Rule 9 report before the Settlement Commission. The petitioner – Principal Commissioner of Income Tax (Central), Surat filed Rule 9 report before the Settlement Commission. It was brought to the notice of the Settlement Commission that additional income of Rs.17 Crores offered by the assessee in statement of facts was only in respect of his unaccounted income from real estate business based on the documents found and seized from the office premises of K Star Group of Surat.
4.5 It was also brought to the notice of the Settlement Commission that mobile phone seized from Shri Kishor P. Koshiya had several documents pertaining to the purchase and sale of rough diamonds and stock of rough diamonds. The documents extracted from the mobile phone was explained by Mr.Kishor Koshiya which contains the details of share of each persons, particulars of the grade and quality of rough diamond, rate or total value, payment terms etc.
4.6 It was, therefore, pointed out by the petitioner before the Settlement Commission that respondent No.1 is also involved in the diamond trading as his initial is extracted from the documents found from the mobile phone and the assessee had not taken into consideration such documents found from the mobile phone of Shri Kishor Koshiya while declaring total income in the settlement application, the same is required to be taken into cognizance by the Settlement Commission.
4.7 Respondent No.1 submitted explanation in response to the Rule 9 report on 24.09.2019 contending that the documents found from the mobile phone of Shri Kishor Koshiya were required to be explained by him and such documents produced on page 10 to 13 of Rule 9 report do not contain any reference of the assessee and there was failure on the part of the department to point out any correlation of the seized material with the assessee.
4.8 The rebuttal report was also filed by the petitioner to the reply of the assessee. The Settlement Commission passed the impugned order on 29.01.2021 accepting the settlement amount of Rs.17.25 Crores offered by the assessee under Section 245D(4) of the Act.
4.9 Being aggrieved, the petitioner has challenged the said order by this petition.
5. Learned advocate Mr. Sanghani for the petitioner submitted that while rejecting the claim of the petitioner that the respondent ex-facie has not discharged the condition of disclosing the manner of earning additional income successfully, the Settlement Commission has granted liberty to the petitioner to bring to the notice of the Settlement Commission for necessary action/revision of the order if at any stage department comes across any evidence to establish the manner of deriving the undisclosed income being different than what has been stated by the assessee in the application. It was, therefore, submitted that the order passed by the Settlement Commission is not a conclusive order and in absence of the condition of disclosing the manner of earning of additional income disclosed by the respondent – assessee, the Settlement Commissioner could not have passed the impugned order contrary to the provisions of the Act.
5.1 It was further submitted that though the Settlement Commission has recorded the finding in para 12.1 of the impugned order to the effect that the respondent – assessee has disclosed the income on the basis of the transactions carried out by Shri Kishor P. Koshiya, the assessee has failed to disclose manner of earning such income. Reference was made to the reply filed by the assessee to Rule 9 report wherein it is stated that no record of real estate transaction was maintained by the assessee and therefore, whatever information was available based on the recollection of facts and keeping in mind the other circumstantial evidence disclosure was made. It was, therefore, submitted that as per Section 245C(1) of the Act, the assessee has failed to make disclosure of the income which was not disclosed without pointing out the details in the manner in which such income was earned by the assessee.
5.2 It was further submitted that assessee has disclosed further Rs.25 Lakhs during the course of the hearing which would amount to revision of the application filed by the assessee and therefore, the entire application ought to have been rejected. Reliance was placed on the decision of the Hon’ble Apex Court in case of Ajmera Housing Corporation vs. Commissioner of Income Tax – [2010] 326 ITR 642 (SC).
5.3 Learned advocate Mr.Sanghani submitted that so far as documents found in the mobile phone of Mr. Kishor Koshiya is concerned, the Settlement Commission has rejected the doubts raised in Rule 9 report while accepting the reply of the assessee given in rejoinder without considering that it is for the assessee to furnish the evidence in respect of the documents found from the mobile phone during the course of the search proceedings. It was, therefore, submitted that the impugned order is liable to be quashed and set aside.
5.4 It was further submitted that considering the grounds of challenge to the impugned order passed by the Settlement Commission, this petition is maintainable and it is required to be entertained as the impugned order is passed contrary to the provisions of the Act. Reliance was placed on the decision of Hon’ble Apex Court in case of Jyotendrasinhji vs. S.I. Tripathi and others – [1993] 201 ITR 611 (SC).
6. Per contra, learned Senior Advocate Mr. Tushar Hemani for the respondent – assessee submitted that the stand of the assessee right from the beginning is that the documents found in the mobile phone of Mr. Kishor P. Koshiya is required to be explained by him and the assessee cannot be asked to explain such documents.
6.1 It was submitted that in case of Mr. Kishor P. Koshiya, the Settlement Commission has accepted the disclosure made by Mr. Kishor P. Koshiya without reference to any documents found from his mobile phone. A copy of the order dated 20.08.2024 of the Interim Board for Settlement is placed on record to point out that there is no reference to the documents found from the mobile phone of Mr. Kishor Koshiya. It was submitted that the Interim Board has accepted the application of Mr. Kishor Koshiya in view of the order passed by this Court in the Special Civil Application filed by the assessee on 21.03.2024 accepting the application for settlement. It was, therefore, submitted that no addition can be made even on the hands of the petitioner as no addition is made on the hands of Shri Kishor P. Koshiya.
6.2 With regard to the contentions raised on behalf of the petitioner that the assessee has failed to explain the manner in which undisclosed income was earned by the assessee, it was submitted that once there is no dispute with regard to the quantum of undisclosed income offered by the assessee, by the petitioner, the manner in which it is earned is already explained by the assessee to the effect that the assessee has provided funds to Mr.Kishor P. Koshiya who was undertaken the transaction and therefore, it would not be possible for the assessee to substantiate the claim of earning income as disclosure of the assessee is based on the amount of undisclosed income found during the course of search from the seized material only. It was, therefore, submitted that the assessee could not have offered more or less than what was found during the course of search from the seized material.
6.3 With regard to the contention raised on behalf of the petitioner that the assessee has offered further Rs.25 Lakhs than the amount of undisclosed income offered by the assessee in the application for settlement of Rs.17 Crores, reliance was placed on the decision of this Court in case of Principal Commissioner of Income-Tax vs. Akshat Shah – [2021] 430 ITR 93 (Guj.), wherein after following the decision in case of Principal Commissioner of Income-Tax vs. Shankarlal Nebhumal Uttamchandani – [2020] 425 ITR 235 (Guj), this Court has in the facts of said case held that the further disclosure of Rs.2,04,88,560/- is very marginal as compared to the disclosure of Rs.11,33,02,651/- made by the petitioner. It was, therefore, submitted that in the fact of the case when the assessee had disclosed Rs.17 Crores and further agreed for voluntary addition of Rs.25 Lakhs during the hearing of the application under Section 245D(4) of the Act to put a quietus to the issue of initial investment as recorded by the Settlement Commission in the impugned order in para 12.3, a decision relied upon on behalf of petitioner in case of Ajmera Housing Corporation (supra) would not be applicable to the facts of the present case.
7. Having heard learned advocates for the respective parties and considering the facts of the case, it appears that the Settlement Commission after taking into consideration the application for settlement filed by the respondent – assessee has considered the same in light of the fact of assessee being engaged in the business of land dealing and earning undisclosed income out of the land dealing through Shri Kishor P. Koshiya as the assessee was parking his fund with him who was making investment, entering into land transactions and parting with gap income with the assessee. This fact was also confirmed by Shri Kishor P. Koshiya in his affidavit filed before the Settlement Commission and the petitioner could not dispute the contents of such affidavit. The Settlement Commission has, therefore, arrived at a finding that the assessee was not directly dealing with land from which income has been earned which has been invested in the land and therefore, it would not be possible for the assessee to disclose the manner in which such undisclosed income was earned from the real estate transactions.
8. In view of such finding of fact arrived at by the Settlement Commission and in absence of any further evidence produced by the petitioner before the Settlement Commission and more particularly when the statement made in the application for settlement to the effect that it is based on full and true disclosure, which is to be accepted unless there is evidence found contrary to the disclosure made, therefore, the impugned order passed by the Settlement Commission is just and proper and requires no interference while exercising jurisdiction under Article 227 of the Constitution of India.
9. So far as contention raised on behalf of petitioner with regard to documents found in the mobile phone of Mr. Kishor Koshiya pertaining to the assessee is concerned, in view of the order passed by the Settlement Commission in case of Mr. Kishor Koshiya accepting the disclosure made by him as per the application for settlement, no further addition could have been made by the Settlement Commission in the hands of the assessee on such grounds as no further evidence was produced by the department during the joint verification of such documents found from the mobile phone of Shri Kishor Koshiya. Therefore, the Settlement Commission cannot be said to have committed any error while accepting the rejoinder of the assessee to the Rule 9 report discussed in para 8.1 of the impugned order which reads as under :
“8.1. Regarding the documents saved and found from the mobile phone of Shri Kishor Koshiya which has been discussed in para 7.1. above, the reply of applicant is that as per the provisions of the Act, it is well-settled that the onus to explain the content of the documents seized during the course of search is on the person from whose possession such material has been recovered. Still Kishor Koshiya is not asked any questions about the aforesaid seized material. The alleged material reproduced on page No. 10 to 13 of Rule-9 Report does not contain any reference of the applicant and therefore, by no stretch of imagination, it can be said that the applicant has carried out any transaction of rough diamond in his individual capacity. While alleging that the applicant has carried out diamond related transactions, Ld. PCIT failed to point out any correlation of such seized material with the applicant. It is not coming out from the Rule-9 report, on what basis Ld. PCIT concluded that the applicant has carried out rough diamond transaction as per the aforesaid seized record. It is well-settled position of law that when any document found during the course of search, then in the absence of any explanation with respect to the contents of the same, it would be presumed that such document belongs to the person from whose possession it is recovered. Therefore, in the absence of any corroborative evidences suggesting any correlation between the aforesaid seized material and the applicant, merely on the basis of surmises and presumption, no adverse action should be taken in the case of the applicant. It is apparent from the aforesaid discussion that images of loose sheets claimed to have been recovered from mobile phone of Kishor Koshiya are wholly irrelevant as evidence being not admissible under Section 34 of Indian Evidence Act, 1872 so as to constitute evidence with respect to the transaction mentioned therein being of no evidentiary value. At the same time it is further submitted by the applicant that since no comments or explanations is provided on the above seized papers/documents by Mr. Kishor Koshiya, the same may kindly be sought from him. The applicant will also cooperate and shall provide information, once the response from Mr,. Kishor Koshiya on the above documents is made available to the applicant.”
10. In view of above findings arrived at by the Settlement Commission, it is for Mr.Kishor Koshiya to explain the documents found his mobile phone and the assessee could not be subjected to any further disclosure on the basis of such assumption and presumption in absence of any evidence. It is true that this Court is not required to go into the merits of the matter on issues which are decided by the Settlement Commission while exercising the jurisdiction under Article 227 of the Constitution of India. In case of Jyotendrasinhji (supra), the Hon’ble Apex Court has observed as under :
“ It is true that the finality clause contained in Section 245-I does not and cannot bar the jurisdiction of the High Court under Article 226 or the jurisdiction of this court under Article 32 or under Article 136, as the case may be. But that does not mean that the jurisdiction of this Court in the appeal preferred directly in this court is any different than what it would be if the assessee had first approached the High Court under Article 226 and then come up in appeal to this court under Article 136. A party does not and cannot gain any advantage by approaching this Court directly under Article 136, instead of approaching the High Court under Article 226. This is not a limitation inherent in Article 136; it is a limitation which this court imposes on itself having regard to the nature of the function performed by the Commission and keeping in view the principles of judicial review. May be, there is also some force in what Dr. Gauri Shankar says viz., that the order of commission is in the nature of a package deal and that it may not be possible, ordinarily speaking, to dissect its order and that the assessee should not be permitted to accept what is favourable to him and reject what is not. According to learned counsel, the Commission is not even required or obligated to pass a reasoned order. Be that as it may, the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee and may waive interest, penalties or prosecution, where it thinks appropriate. Indeed, it would be difficult to predicate the reasons and considerations which induce the commission to make a particular order, unless of course the commission itself chooses to, give reasons for its order. Even if it gives reasons in a given case, the scope of enquiry in the appeal remains the same as indicated above viz., whether it is,contrary to any of the provisions of the Act. In this context, it is relevant to note that the principle of natural justice (and alteram partem) has been incorporated in Section 245-D itself. The sole overall limitation upon tire Commission thus appears, to be that it should act in accordance with the provisions of the Act. The scope of enquiry, whether by High Court under Article 226 or by this Court under Article 136 is also the same whether the order of the Commission is contrary to any of the provisions of the Act and if so, has it prejudiced the petitioner/appellant apart from ground of bias, fraud & malice which, of course, constitute a separate and independent category. Reference in this behalf may be had to the decision of this Court in Sri Ram Durga Prasad v. Settlement Commission 176 I.T.R. 169, which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji J., speaking for the Bench comprising himself and S.R. Pandian, J. observed that in such a case this Court is ” concerned with the legality of procedure followed and not with the validity of the order.’ The learned Judge added ‘judicial review is concerned not with the decision but with the decision-making process.” Reliance was placed upon the decision of the House of Lords in Chief Constable of the N.W. Police v. Evans, [1982] 1 W.L.R.1155. Thus, the appellate power under Article 136 was equated to power of judicial review, where the appeal is directed against the orders’ of the Settlement Commission. For all the above reasons, we are of the opinion that the only ground upon which this Court can interfere in these appeals is that order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant The main controversy in these appeals relates to the interpretation of the settlement deeds though it is true, some contentions of law are also raised. The commission has interpreted the trust deeds in a particular manner, Even if the interpretation placed by the commission the said deeds is not correct, it would not be a ground for interference in these appeals, since a wrong interpretation of a deed of trust cannot be said to be a violation of the provisions of the Income Tax Act. it is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in proceedings relating to other assessment years.”
11. Moreover, the order passed by the Hon’ble Apex Court in case of Ajmera Housing Corporation (supra) would not be applicable in the facts of present case as in the said case the assessee filed a revised application after the Commissioner objected that entertainment of the application for settlement submitted by the assessee has not been full and true disclosure of the income suggested that in place of disclosure made of Rs.1.94 Crores, the income of the assessee should not be settled at less than Rs.223.55 Crores. After such objection, the assessee filed the revised application declaring additional income of Rs. 11.41 Crores. In such circumstances, the Hon’ble Apex Court held that filing of such revised application would not be a full and true disclosure of the income which has not been previously disclosed being a precondition for valid application under Section 245C(1) of the Act. Whereas in the facts of the present case, the assessee has disclosed further Rs.25 Lakhs voluntarily as observed by the Settlement Commission in para 12.3 as under :
“12.3 Regarding quantum of offer of income, during the hearing, we however noted that the applicant has offered income of Rs.3 crores from the land dealing in A.Y. 2011-12. As per admitted modus operandi of the applicant, he would have made some investment which has fetched him the income of Rs. 3 crores. The applicant has not offered any initial investment in this regard in the application. When the AR was asked to clarify, he submitted that initial investment from which income has been earned in A.Y. 2011-12 is earned in earlier year which is not open before either the Commission or before the Department. However, to put quietus to the issue and in the spirit of settlement the applicant offered initial investment of Rs.25 lakhs in A.Y. 2011-12. We find this offer in order and therefore accepted.”
12. In view of above, it is clear that to put quietus to the issue and in the spirit of settlement, the assessee offered further Rs.25 Lakhs which cannot be equated with the revision of the application of disclosure made under Section 245C(1) of the Act. Such aspect is taken into consideration by this Court in case of Akshat Shah (supra) and Shankarlal Nebhumal Uttamchandani (supra).
13. In view of foregoing reasons, we are of the opinion that no interference is called in the impugned order passed by the Settlement Commission while exercising jurisdiction under Article 226/227 of the Constitution of India. The petition, therefore, being devoid of merits is, accordingly, dismissed. Rule is discharged.
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