GRAHSHILPA CONSTRUCTION (P.) LTD. Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) This petition under Article 226 of the Constitution of India is directed against the order dated 4th March, 2014 made by the Income Tax Settlement Commission (hereinafter referred to as the "Commission") whereby the Commission has held that in view of non-compliance of the provisions of section 245D(2D) of the Income Tax Act, 1961 (hereinafter referred to as the "Act"), the proceedings before it abate as per provisions of section 245HA (1)(H) of the Act. The facts stated briefly are that the petitioner is being assessed in the status of a Company under the Act. There was a search on the petitioner on 13.12.1995 under section 132(1) of the Act. Thereafter, a notice under section 158BC of the Act came to be served on the petitioner directing it to file return of income for the block period 1.4.1985 to 12.12.1995. In response thereto, the petitioner filed its return of income. Thereafter, on 22.10.1996, the petitioner filed a settlement application dated 14.10.1996 under section 245C of the Act declaring undisclosed income of Rs. 5 lakhs. Subsequently, by a letter dated 27.12.1996 addressed to the Commission, the petitioner revised the application by substituting the undisclosed income at a higher amount of Rs. 7 lakhs. During the pendency of the application under section 245C of the Act, the Assessing Officer passed an order under section 158BC of the Act on 22.8.1997. By way of abundant caution, the petitioner filed an appeal against the said order before the Income Tax Appellate Tribunal (hereinafter referred to as "the Tribunal") being ITA No. 169/Ahd/1997. Thereafter, the Settlement Commission passed an order dated 10.9.1999 whereby it permitted the petitioner to proceed with the application under section 245D(1) of the Act directed the petitioner to pay the additional amount of income tax payable on the income disclosed in the application within a period of 35 days from the receipt of the said order.

(2.) Later on, when the appeal came up for hearing before the Tribunal on 10.1.2001, in view of the fact that the Settlement Commission had allowed the application to be proceeded with, the petitioner requested the Tribunal to adjourn the appeal. However, on 16.1.2001, bowing to the opinion of the Tribunal, the Chartered Accountant of the petitioner filed a letter before the Tribunal stating that in view of the admission of the matter of the petitioner by the Commission, the petitioner does not want to pursue the appeal before the Tribunal. Accordingly, the appeal came to be allowed to be withdrawn by an order dated 23.1.2001. It appears that, thereafter, on 20.2.2008, the Chartered Accountant of the petitioner addressed a letter to the Superintendent, Income Tax Settlement Commission stating that as per the hearing on 15.2.2008 before the Settlement Commission, they were submitting copies of submissions on payment of additional tax as per the orders passed under section 245D(1) dated 10.9.1999 and interest under section 158BFA with a request that the same may kindly be put up before the Members of the Bench for their consideration. In the said submission, the petitioner stated that in its case search proceedings came to be carried out by the Department on 12.12.1995, during the course of which cash amounting to Rs. 4,90,000/- was seized from the residence of the petitioner. That the income disclosed in the settlement application was revised to Rs. 7,00,000 and the additional tax payable at the rate of 60% works out to Rs. 4,20,000/-. The cash seized of Rs. 4,90,000/- has been adjusted by the department on 29.9.1997 which is much before the date of the order of 245D(1) which is 10.9.1999, in view of which the additional tax on income disclosed in the settlement application stands fully paid in time. It was further submitted and no interest is payable because section 158BFA applies to search on or after 1.1.1997 whereas in the case of the petitioner, the date of search is 12.12.1995. Eventually, the petitioner received a notice of hearing under section 245D(2D) read with section 245HA(1)(ii) of the Act fixing the hearing on 16.9.2013, which came to be adjourned to 25.11.2013.

(3.) At the time of the hearing before the Settlement Commission, the Commissioner of Income Tax representing the Department pointed out that the petitioner had not paid the requisite amount of taxes and interest on the revised undisclosed income of Rs. 7,00,000/- on or before 31.03.2007. Hence, the application cannot be further proceeded with and should be abated. On behalf of the petitioner, it was pointed out to the Commission that though the petitioner had not made any payment of tax and interest after the order under section 245D(1) of the Act was passed, the amount of Rs. 4,90,000/- which was already seized and adjusted on 29.9.1997 prior to that order should be treated as tax paid and, accordingly, the application need not be abated. It was submitted that while adjusting the cash seized towards the block assessment demand on 29.9.1997, no intimation had been given by the Assessing Officer and hence, the same should be considered as an adjustment against the demand created by the order under section 245D(1) of the Act. It was also submitted that in case this proposition of cash adjustment against the order under section 245D(1) is not accepted, the petitioner is still ready to deposit the tax amount to cover for the deficiency.