Mr.G.Jayaraman. Vs. the Settlement Commission. and ors. - Court Judgment

Excerpt:
prayer:- writ petition filed under article 226 of the constitution of india praying for the issuance of a writ of certiorari calling for the records, in proceedings s.a.no.21/11/79/94-it dated 22.04.1998 on the file of the first respondent and quash the same.1. this writ petition was filed in the year 1998 but the same could not be disposed of by this court for quite some time since the original bundle and connected records were found missing. on a note put up in this regard, a learned single judge of this court (honble mr.justice k.raviraja pandian (as he then was)) after hearing the parties to this writ petition issued an order dated 11.09.2009 to the registry to reconstruct the bundle and to proceed further. as per the said order, the entire case records were reconstructed and that is how the reconstructed records are now placed before me for disposal.2. the petitioner is an income tax assessee. he derives his income from four sources viz., from vegetable business, real estate business in the name of janaki real estate, a screening theatre called bharani theatre taken on lease and distribution of films under the name of devi karumariamman films. for the years 1983-84, 1984-85, 1985-86, 1986-87, 1987-88, he filed income tax returns on 22.03.1988. the said returns were assessed under section 143(3) of the income tax act. subsequently, the petitioner filed an application under section 245-c(1) of the income tax act on 26.09.1994 disclosing certain additional income to the tune of rs.8,02,980/- as detailed below:-1983-84 rs. 19,580/-1984-85 rs.1,49,000/-1985-86 rs. 6,000/-1986-87 rs.3,02,200/-1987-88 rs.3,26,180/-3. the petitioner wanted the commission to accept the same as full and true disclosure of the income and to pass an order as per section 242-c of the act. the settlement commission called for a report from the commissioner of income tax. the commissioner accordingly submitted a report based on a search conducted under section 132 of the act on 16.10.1986. the commissioner disputed the disclosure made by the petitioner before the commission and according to the commissioner, it was not a full and true disclosure of the income for the relevant periods. then the commission proceeded to enquire into the matter. ultimately, based on the materials placed on either side, the commission held that the disclosure of income made by the petitioner in his application was not true. but the commission proceeded further to assess the actual income for the purpose of income tax and accordingly, passed an order wherein, the commission assessed the income of the petitioner for the relevant periods as follows:- for the assessment year 1983-84 rs. 4,89,850/-for the assessment year 1984-85 rs.10,95,750/-for the assessment year 1985-86 rs. 2,13,860/-for the assessment year 1986-87 rs. 9,87,590/-for the assessment year 1987-88 rs.18,19,950/-------------------rs.46,07,000/- ------------------4. thus, the total income computed for the purpose of income tax by the commission was rs.46,07,000/-. the commission also gave waiver of 50% of the interest and also granted payment of the income tax in eight equal installments. immunity from penalty and prosecution was also granted. challenging the said order of the settlement commission, additional bench, chennai in settlement application no.21/iii/79/94-ii dated 26.09.1994, the petitioner has come forward with this writ petition to quash the same.5. i have heard the learned senior counsel appearing for the petitioner and the learned senior standing counsel for income tax department and also perused the records carefully.6. the learned senior counsel for the petitioner would submit that the order impugned in this writ petition is liable to be set aside inasmuch as the commission has exceeded its jurisdiction conferred upon the same under section 245-c of the act. the learned senior counsel would submit that in a case where the commission does not agree with the disclosure made by the applicant and comes to the conclusion that disclosure made by the applicant is not full and true, then, the commission is bound to reject the application leaving the option for the assessing authority to reopen the assessment as provided in section 147 of the act, but however, subject to limitation. he would further submit that having come to the conclusion that the disclosure made by the applicant is not full and true, the commission cannot proceed further to make an assessment of the income and to direct the applicant to pay additional income tax based on such computation. for this preposition, the learned senior counsel would rely on a judgment of a division bench of this court in w.a.nos.970 and 971 of 2001 dated 16.07.2009 (m/s.canara jewellers v. sri yogesh palke (alias) sri yogesh achar (died)) and the judgment of the honble supreme court in c.i.t v. express newspapers ltd., (1994 (206) i.t.r 443 (sc)). in the case on hand, according to the learned senior counsel for the petitioner, the commission has ventured upon to compute the income of the petitioner and has assessed the income tax as though the commission is exercising the power of the assessing authority under section 147 of the income tax act. therefore, according to the learned senior counsel, the order impugned in this writ petition is liable to be set aside.7. the learned senior standing counsel appearing for income tax department would submit that there is no controversy in respect of the settled position of law that the commission has no power to make re-assessment of the income of the applicant after having coming to the conclusion that the disclosure made by the applicant is not full and true. the learned counsel would rely on a judgment of the yet another division bench of this court in commissioner of income tax v. income tax settlement commission (2009 (310) itr 0010). but he would submit that before the settlement commission, the petitioner accepted the assessment made by the commission and agreed to pay the tax in installments. the learned counsel would further submit that having subjected himself to the jurisdiction of the settlement commission by making an appeal before the settlement commission to pay the amount in installments, it is not open for the petitioner to question the correctness of the order passed by the commission. the learned counsel would further submit that the petitioner is estopped from questioning the correctness of the order passed by the commission.8. i have considered the rival submissions.9. there is no controversy before this court regarding the settled position of law that the settlement commission has no power to proceed further to re-assess the actual income as though the commission exercises power of the assessing authority under section 147 of the act. in this case, the income disclosed by the petitioner in his application, as i have already extracted, is to the tune of rs.8,02,980/-. this was disputed by the commissioner of income tax in his report. the settlement commission, after holding enquiry, also found that the income of the petitioner as disclosed in the application was not full and true and that is the reason why the commission itself found that the total income for these relevant periods was rs.46,07,000/-. as per the settled position of law since, the commission had come to the conclusion that the disclosure made by the petitioner was not full and true, the commission should have dismissed the application leaving the option to the petitioner to work out his remedies in the manner known to law and also giving liberty to the assessing authority to re-open the assessment under section 147 of the act. instead of doing that the commission itself has taken up the role of assessing authority and has reassessed the alleged additional income of the petitioner for the purpose of tax under section 147 of the act. this, in my considered opinion, as held by the honble supreme court as well as the division benches of this court, is wholly without jurisdiction and therefore, the same is liable to be quashed.10. nextly, coming to the contention of the learned senior standing counsel appearing for the income tax department, having agreed to the assessment made by the commission; having agreed to pay the same in installments and also having enjoyed certain immunities extended by the commission, can the petitioner now challenge the correctness of the order?11. in my considered opinion, it is well settled that by agreement between the parties, jurisdiction cannot be conferred upon a forum or an officer. jurisdiction to pass an order should emanate from the statute itself and not from the mere agreement between the parties. in this case, the statute namely the income tax act does not confer upon any jurisdiction on the settlement commission to make reassessment of the escaped income for the purpose of income tax. therefore, though it is true that the petitioner had made a statement before the commission agreeing to the computation made by the commission and asked for certain other benefits like immunity, etc., the same would not confer jurisdiction on the commission to make reassessment of the escaped income. thus, there is no estoppel for the petitioner to raise the validity of the order passed by the commission as the same is wholly without jurisdiction. therefore, the contention of the learned counsel in this regard is only liable to be rejected.12. when a specific querry was made to the learned senior counsel as to whether at this stage, the assessing authority can reopen the assessment in terms of section 147 of the act after issuing notice under section 148 of the act, the learned senior counsel would submit that the same is possible provided the period of limitation contemplated under section 149 of the act is still available.13. the learned senior counsel would fairly submit that section 245 h (a) (4) of the act, provides that the period spent before the settlement commission and in this writ petition before this court shall be excluded while computing the period of limitation. regarding this legal position, there can be no controversy. therefore, if the assessing authority decides to re-assess the escaped income of the petitioner for the relevant years in question in this writ petition, for doing so, the time spent before the settlement commission and in this writ petition shall be excluded while computing the period of limitation.14. in view of all the above, the writ petition is allowed, the impugned order of the commission is set aside and the application filed by the petitioner before the settlement commission shall stand rejected with liberty to the assessing authority to proceed further under sections 147 and 148 of the act, if it is so warranted. no costs.

Judgment:
1. This writ petition was filed in the year 1998 but the same could not be disposed of by this Court for quite some time since the original bundle and connected records were found missing. On a note put up in this regard, a learned single judge of this Court (Honble Mr.Justice K.Raviraja Pandian (as he then was)) after hearing the parties to this writ petition issued an order dated 11.09.2009 to the Registry to reconstruct the bundle and to proceed further. As per the said order, the entire case records were reconstructed and that is how the reconstructed records are now placed before me for disposal.

2. The petitioner is an income tax assessee. He derives his income from four sources viz., from vegetable business, real estate business in the name of Janaki real Estate, a screening theatre called Bharani Theatre taken on lease and distribution of films under the name of Devi Karumariamman Films. For the years 1983-84, 1984-85, 1985-86, 1986-87, 1987-88, he filed income tax returns on 22.03.1988. The said returns were assessed under Section 143(3) of the Income Tax Act. Subsequently, the petitioner filed an application under Section 245-C(1) of the Income Tax Act on 26.09.1994 disclosing certain additional income to the tune of Rs.8,02,980/- as detailed below:-

1983-84 Rs. 19,580/-

1984-85 Rs.1,49,000/-

1985-86 Rs. 6,000/-

1986-87 Rs.3,02,200/-

1987-88 Rs.3,26,180/-

3. The petitioner wanted the Commission to accept the same as full and true disclosure of the income and to pass an order as per Section 242-C of the Act. The Settlement Commission called for a report from the Commissioner of Income Tax. The Commissioner accordingly submitted a report based on a search conducted under Section 132 of the Act on 16.10.1986. The Commissioner disputed the disclosure made by the petitioner before the Commission and according to the Commissioner, it was not a full and true disclosure of the income for the relevant periods. Then the Commission proceeded to enquire into the matter. Ultimately, based on the materials placed on either side, the Commission held that the disclosure of income made by the petitioner in his application was not true. But the Commission proceeded further to assess the actual income for the purpose of income tax and accordingly, passed an order wherein, the Commission assessed the income of the petitioner for the relevant periods as follows:- For the Assessment year 1983-84 Rs. 4,89,850/-

For the Assessment year 1984-85 Rs.10,95,750/-

For the Assessment year 1985-86 Rs. 2,13,860/-

For the Assessment year 1986-87 Rs. 9,87,590/-

For the Assessment year 1987-88 Rs.18,19,950/-

------------------

Rs.46,07,000/- ------------------

4. Thus, the total income computed for the purpose of income tax by the Commission was Rs.46,07,000/-. The Commission also gave waiver of 50% of the interest and also granted payment of the income tax in eight equal installments. Immunity from penalty and prosecution was also granted. Challenging the said order of the Settlement Commission, Additional Bench, Chennai in Settlement Application No.21/III/79/94-II dated 26.09.1994, the petitioner has come forward with this writ petition to quash the same.

5. I have heard the learned Senior Counsel appearing for the petitioner and the learned Senior Standing Counsel for Income Tax Department and also perused the records carefully.

6. The learned Senior Counsel for the petitioner would submit that the order impugned in this writ petition is liable to be set aside inasmuch as the Commission has exceeded its jurisdiction conferred upon the same under Section 245-C of the Act. The learned Senior Counsel would submit that in a case where the Commission does not agree with the disclosure made by the applicant and comes to the conclusion that disclosure made by the applicant is not full and true, then, the Commission is bound to reject the application leaving the option for the Assessing Authority to reopen the assessment as provided in Section 147 of the Act, but however, subject to limitation. He would further submit that having come to the conclusion that the disclosure made by the applicant is not full and true, the Commission cannot proceed further to make an assessment of the income and to direct the applicant to pay additional income tax based on such computation. For this preposition, the learned Senior Counsel would rely on a judgment of a Division Bench of this Court in W.A.Nos.970 and 971 of 2001 dated 16.07.2009 (M/s.Canara Jewellers v. Sri Yogesh Palke (alias) Sri Yogesh Achar (died)) and the judgment of the Honble Supreme Court in C.I.T v. Express Newspapers Ltd., (1994 (206) I.T.R 443 (SC)). In the case on hand, according to the learned Senior counsel for the petitioner, the Commission has ventured upon to compute the income of the petitioner and has assessed the income tax as though the Commission is exercising the power of the Assessing Authority under Section 147 of the income tax Act. Therefore, according to the learned Senior counsel, the order impugned in this writ petition is liable to be set aside.

7. The learned Senior Standing Counsel appearing for Income Tax Department would submit that there is no controversy in respect of the settled position of law that the Commission has no power to make re-assessment of the income of the applicant after having coming to the conclusion that the disclosure made by the applicant is not full and true. The learned counsel would rely on a judgment of the yet another Division Bench of this Court in Commissioner of Income Tax v. Income Tax Settlement Commission (2009 (310) ITR 0010). But he would submit that before the Settlement Commission, the petitioner accepted the assessment made by the Commission and agreed to pay the tax in installments. The learned counsel would further submit that having subjected himself to the jurisdiction of the settlement Commission by making an appeal before the Settlement Commission to pay the amount in installments, it is not open for the petitioner to question the correctness of the order passed by the Commission. The learned counsel would further submit that the petitioner is estopped from questioning the correctness of the order passed by the Commission.

8. I have considered the rival submissions.

9. There is no controversy before this Court regarding the settled position of law that the Settlement Commission has no power to proceed further to re-assess the actual income as though the commission exercises power of the Assessing Authority under Section 147 of the Act. In this case, the income disclosed by the petitioner in his application, as I have already extracted, is to the tune of Rs.8,02,980/-. This was disputed by the Commissioner of Income Tax in his report. The Settlement Commission, after holding enquiry, also found that the income of the petitioner as disclosed in the application was not full and true and that is the reason why the Commission itself found that the total income for these relevant periods was Rs.46,07,000/-. As per the settled position of law since, the commission had come to the conclusion that the disclosure made by the petitioner was not full and true, the commission should have dismissed the application leaving the option to the petitioner to work out his remedies in the manner known to law and also giving liberty to the Assessing Authority to re-open the assessment under Section 147 of the Act. Instead of doing that the commission itself has taken up the role of Assessing Authority and has reassessed the alleged additional income of the petitioner for the purpose of tax under Section 147 of the Act. This, in my considered opinion, as held by the Honble Supreme Court as well as the Division Benches of this Court, is wholly without jurisdiction and therefore, the same is liable to be quashed.

10. Nextly, coming to the contention of the learned Senior Standing Counsel appearing for the Income Tax Department, having agreed to the assessment made by the Commission; having agreed to pay the same in installments and also having enjoyed certain immunities extended by the Commission, can the petitioner now challenge the correctness of the order?

11. In my considered opinion, it is well settled that by agreement between the parties, jurisdiction cannot be conferred upon a Forum or an officer. Jurisdiction to pass an order should emanate from the statute itself and not from the mere agreement between the parties. In this case, the statute namely the income tax act does not confer upon any jurisdiction on the settlement commission to make reassessment of the escaped income for the purpose of income tax. Therefore, though it is true that the petitioner had made a statement before the Commission agreeing to the computation made by the Commission and asked for certain other benefits like immunity, etc., the same would not confer jurisdiction on the commission to make reassessment of the escaped income. Thus, there is no estoppel for the petitioner to raise the validity of the order passed by the commission as the same is wholly without jurisdiction. Therefore, the contention of the learned counsel in this regard is only liable to be rejected.

12. When a specific querry was made to the learned Senior Counsel as to whether at this stage, the assessing authority can reopen the assessment in terms of Section 147 of the Act after issuing notice under Section 148 of the Act, the learned Senior Counsel would submit that the same is possible provided the period of limitation contemplated under Section 149 of the Act is still available.

13. The learned Senior Counsel would fairly submit that Section 245 H (A) (4) of the Act, provides that the period spent before the settlement commission and in this writ petition before this Court shall be excluded while computing the period of limitation. Regarding this legal position, there can be no controversy. Therefore, if the Assessing Authority decides to re-assess the escaped income of the petitioner for the relevant years in question in this writ petition, for doing so, the time spent before the settlement commission and in this writ petition shall be excluded while computing the period of limitation.

14. In view of all the above, the writ petition is allowed, the impugned order of the Commission is set aside and the application filed by the petitioner before the settlement commission shall stand rejected with liberty to the Assessing Authority to proceed further under sections 147 and 148 of the Act, if it is so warranted. No costs.