Chhotalal S. Ajmera (HUF) vs Commissioner of Income Tax

The order shall dispose of Civil Appeal Nos. 2251/2001 and 2272-2291/2001 filed by the assessee-appellants (for short "the assessee") and Civil Appeal Nos. 2292/2001 and 2252-2271/2001 filed by the Commissioner of income tax (for short "the revenue") against a common judgment and order dated July 28, 2000, passed by the Division Bench of the High Courts of Judicature at Bombay in W.P. No. 2191/1999 [see Commissioner of Income Tax Mumbai City XIV, Mumbai Vs. The Income Tax Settlement Commission, Mumbai and Others, ] and other connected writ petitioners.

For the sake of convenience, the facts are taken from C.A. No. 2251/2001. The facts giving rise to the present appeal are :

Search of various premises of the assessee and its group was conducted (date not mentioned) followed by another one on 19-11-1992. Voluminous books of account, Rs. 25,000 in cash and a computer disk were seized.

On 12-3-1993, an order of provisional assessment u/s 132(5) of the income tax Act, 1961 (for short "the Act") , as it then stood on the statute, was passed estimating the undisclosed income of the assessee at Rs. 200.60 crores for the assessment year 1993-94. The application filed by the assessee u/s 132(12) of the Act, as we are given to understand, is still pending.

On 30-9-1993, the assessee filed an application under Chapter XIX-A of the Act for settlement of the dispute before the Settlement Commission for settlement of the dispute for the assessment years 1989-90 to 1993-94. This application for settlement was filed u/s 245C in Form No. 34B set out in Appendix II to the income tax Rules, 1962, which is in two parts. While Part I deals with the nature and complexity and circumstances of the case, Part II deals with the statement of facts which must contain the amount of income which had not been disclosed before the Assessing Officer, the additional amount of income tax payable on the said income, full and true statement of facts regarding the issues to be settled including the terms of settlement sought for by the applicant, and the manner in which the undisclosed income has been derived, as a confidential document which is not disclosed to the Commissioner of income tax until the Settlement Commission admits the application for being proceeded with.

A notice was issued to the concerned Commissioner of income tax (the revenue) who submitted his report u/s 245C(1) of the Act read with rule 6 of the income tax Settlement Commission (Procedure) Rules, 1987 (for short "the Rules") . The revenue submitted its reply on 21-1-1994, to the effect that there was no complexity in the case and the same was not fit for settlement.

Hearings took place in July and August, 1994. Initially, the assessee had approached the Settlement Commission disclosing its undisclosed income at Rs. 1.94 crores. At the time of making the disclosure the assessee was not in possession of the seized documents as the same had not been supplied and, on the documents being made available to the assessee and, at the instance of the Settlement Commission, the assessee filed its revised confidential annexure in Form No. 34B on 19-9-1994, and raised the undisclosed income to Rs. 11.41 crores (according to the revenue, the undisclosed income was raised by and not to Rs. 11.41 crores) . It may be mentioned that in the impugned order the High Court (at page 24 of the paper book) has recorded that after the filing of the revised confidential annexure on 19-9-1994, u/s 245D(1) , the assessee had further raised the undisclosed income by Rs. 2.76 crores and Rs. 7 crores which, according to the revenue, was a disclosure whereas, according to the assessee, it was conceded with a view to settle the matter and buy peace with the Department.

The total disclosure of the group was raised to Rs. 17.03 crores from Rs. 3.59 crores.

On 17-11-1994, the Settlement Commission admitted the application for settlement and passed an order u/s 245D(1) of the Act. The said order was not challenged by the revenue by filing a petition under article 226 of the Constitution of India. Pursuant to the direction given by the Settlement Commission, the concerned Commissioner of income tax filed his report u/s 245D(4) read with rule 8 on 30-8-1994, assessing the undisclosed income at Rs. 187.20 crores which, in turn, was raised on the basis of the order of summary assessment dated March 12, 1993, passed u/s 132(5) of the Act.

The revenue submitted a further report on 20-10-1997 and estimated the undisclosed income at Rs. 42.5 crores.

The Settlement Commission heard the matter finally in October, 1998 and passed the final order on 29-1-1999, determining the undisclosed income at Rs. 21.17 crores and another sum of Rs. 20.36 crores towards the incomplete works which were to be adjusted in due course, as and when the remaining phases of the work were accomplished. In addition to this, the assessee was made liable to pay statutory interest. Penalty of Rs. 50 lakhs was also imposed on the assessee. However, the assessee was granted immunity from prosecution.

The revenue filed a batch of 21 writ petitions before the High Court of Judicature at Bombay out of which C.W. P. No. 2191/99 was treated as the main writ petition, challenging the maintainability of the application filed by the assessee before the Settlement Commission. These writ petitions of the revenue have been allowed by the impugned common order dated 28-1-2000.

Aggrieved against the order of the High Court, the assessee and its group have filed 21 appeals by grant of special leave. Similarly, the revenue being aggrieved against a part of the order, i.e., remission of the case to the Settlement Commission, has also filed equal number of appeals before this court by grant of special leave. All these appeals are being disposed of by this common order.

Mr. Fali S. Nariman, learned senior counsel appearing for the assessee, at the outset, before making his submissions on the merits, stated that the second report submitted by the Commissioner on 20-10-1997, estimating the undisclosed income at Rs. 42.5 crores which approximately coincides and equals the figure arrived at by the Settlement Commission in the final order, has not been taken into consideration by the High Court which is vital for determination of the dispute between the parties. He prayed that the appeals filed by the assessee should be accepted and the case remitted back to the High Court for a fresh decision on all points including a finding on the second report dated 20-10-1997, as well.

Mr. M.L. Verma, learned senior counsel appearing for the revenue, fairly concedes to the submission put forth by Mr. Nariman that the High Court has not taken into consideration the second report dated 20-10-1997, submitted by the Commissioner of income tax and states that the same may be of some importance for determination of the dispute between the parties.

Without expressing any opinion on the merits of the dispute, the findings recorded on the first report or the effect of not recording a finding on the second report, we set aside the impugned order and remit the case back to the High Court for a fresh decision, leaving the parties, to raise all points including the point raised before us on behalf of the assessee that the High Court should not have entertained the revenue's writ petitions in exercise of its discretionary jurisdiction under article 226 of the Constitution of India, and the stand taken by the revenue that the application filed by the assessee for settlement before the Settlement Commission was not entertainable as the assessee had not made, inter alia, true and complete disclosure of its undisclosed income, as provided under the law. All contentions of the parties are left open to be agitated before the High Court.

Since it is an old matter, we would request the Hon'ble Chief Justice of the High Court to list the writ petitions for disposal as expeditiously as possible.

The appeals stand disposed of accordingly. However, there shall be no order as to costs.

Needless to mention that after the writ petitions are disposed of, if any of the parties is aggrieved against the findings recorded or a part thereof, it would be at liberty to approach this court.