C/SCA/9037/2014 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 9037 of 2014 GRAHSHILPA CONSTRUCTION PVT LTD....Petitioner(s) Versus INCOME TAX OFFICER & 3....Respondent(s) Appearance: MR MANISH J SHAH, ADVOCATE for Petitioner(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for Respondent(s) No. 1 NOTICE SERVED for Respondent(s) No. 4 CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 26/09/2014 ORAL ORDER (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. This petition under Article 226 of Constitution of India is directed against order dated 4 th March, 2014 made by Income Tax Settlement Commission (hereinafter referred to as Commission ) whereby Commission has held that in view of non-compliance of provisions of section 245D(2D) of Income Tax Act, 1961 (hereinafter referred to as Act ), proceedings before it abate as per provisions of section 245HA (1)(II) of Act. 2. facts stated briefly are that petitioner is being assessed in status of Company under Act. There was search on petitioner on 13.12.1995 under section 132(1) of Act. Thereafter, notice under section 158BC of Act came to be served on petitioner directing it to file return of income for block period 1.4.1985 to 12.12.1995. In response thereto, petitioner filed its return of income. Thereafter, on 22.10.1996, petitioner filed settlement Page 1 of 26 HC-NIC Page 1 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER application dated 14.10.1996 under section 245C of Act declaring undisclosed income of Rs.5 lakhs. Subsequently, by letter dated 27.12.1996 addressed to Commission, petitioner revised application by substituting undisclosed income at higher amount of Rs.7 lakhs. During pendency of application under section 245C of Act, Assessing Officer passed order under section 158BC of Act on 22.8.1997. By way of abundant caution, petitioner filed appeal against said order before Income Tax Appellate Tribunal (hereinafter referred to as Tribunal ) being ITA No.169/Ahd/1997. Thereafter, Settlement Commission passed order dated 10.9.1999 whereby it permitted petitioner to proceed with application under section 245D(1) of Act directed petitioner to pay additional amount of income tax payable on income disclosed in application within period of 35 days from receipt of said order. 3. Later on, when appeal came up for hearing before Tribunal on 10.1.2001, in view of fact that Settlement Commission had allowed application to be proceeded with, petitioner requested Tribunal to adjourn appeal. However, on 16.1.2001, bowing to opinion of Tribunal, Chartered Accountant of petitioner filed letter before Tribunal stating that in view of admission of matter of petitioner by Commission, petitioner does not want to pursue appeal before Tribunal. Accordingly, appeal came to be allowed to be withdrawn by order dated 23.1.2001. It appears that, thereafter, on 20.2.2008, Chartered Accountant of petitioner addressed letter to Superintendent, Income Tax Settlement Commission Page 2 of 26 HC-NIC Page 2 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER stating that as per hearing on 15.2.2008 before Settlement Commission, they were submitting copies of submissions on payment of additional tax as per orders passed under section 245D(1) dated 10.9.1999 and interest under section 158BFA with request that same may kindly be put up before Members of Bench for their consideration. In said submission, petitioner stated that in its case search proceedings came to be carried out by Department on 12.12.1995, during course of which cash amounting to Rs.4,90,000/- was seized from residence of petitioner. That income disclosed in settlement application was revised to Rs.7 and additional tax payable at rate of 60% works out to Rs.4,20,000/-. cash seized of Rs.4,90,000/- has been adjusted by department on 29.9.1997 which is much before date of order of 245D(1) which is 10.9.1999, in view of which additional tax on income disclosed in 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 case of petitioner, date of search is 12.12.1995. Eventually, petitioner received notice of hearing under section 245D(2D) read with section 245HA(1)(ii) of Act fixing hearing on 16.9.2013, which came to be adjourned to 25.11.2013. 4. At time of hearing before Settlement Commission, Commissioner of Income Tax representing Department pointed out that petitioner had not paid requisite amount of taxes and interest on revised undisclosed income of Rs.7,00,000/- on or before 31.03.2007. Hence, application cannot be further proceeded with and Page 3 of 26 HC-NIC Page 3 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER should be abated. On behalf of petitioner, it was pointed out to Commission that though petitioner had not made any payment of tax and interest after order under section 245D(1) of Act was passed, 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, application need not be abated. It was submitted that while adjusting cash seized towards block assessment demand on 29.9.1997, no intimation had been given by Assessing Officer and hence, same should be considered as adjustment against demand created by order under section 245D(1) of Act. It was also submitted that in case this proposition of cash adjustment against order under section 245D(1) is not accepted, petitioner is still ready to deposit tax amount to cover for deficiency. 5. By impugned order dated 2.12.2013 made under section 245D(2D) read with section 245HA(1)(ii), Commission held that Assessing Officer had already adjusted seized cash on 29.9.1997 and in absence of any further payment, consequent to order under section 245D(1), there has been distinct failure on part of petitioner to pay taxes and interest as provided in amendment made by Finance Act, 2007. That petitioner ought to have taken due care to pay required taxes and interest on or before 31.7.2007 so as not to be hit by amendment made by Finance Act, 2007. Commission further observed that submission of petitioner that he is still ready to make payment to make good deficit is of no avail as act of making payment Page 4 of 26 HC-NIC Page 4 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER now cannot take away restriction imposed under law. Commission, accordingly, held that there has been violation of section 245D(2D) of Act and in view of noncompliance with provisions of section 245D(2D) of Act, proceedings in case abate as per provisions of section 245HA(1)(ii) of Act. Commission further observed that Assessing Officer shall now dispose of case in accordance with provisions of sub-sections (2), (3) and (4) of section 245HA of Act. Being aggrieved, petitioner has presented this petition seeking reliefs noted hereinabove. 6. Mr. J. P. Shah, learned counsel for petitioner, assailed impugned order by submitting that Commission, by its order dated 11.1.1999 under section 245D(1) of Act, directed petitioner to pay additional amount of income tax payable on income disclosed in application. It was submitted that petitioner had filed revised statement declaring undisclosed income at Rs.7,00,000/- and, accordingly, tax payable at rate of 60% would come to Rs.4,20,000/-. It was submitted that department had already in its custody Rs.4,90,000/- in cash which was seized from petitioner during course of search proceedings which was lying with it. Therefore, petitioner had informed Settlement Commission as well as Assessing Officer that he takes payment of tax of Rs.4,20,000/- on revised disclosure of Rs.7,00,000/- to have been paid because larger amount of Rs.4,90,000/- was lying seized with Income Tax Department and neither of them have chosen to reply to letters informing them of payment in above manner. It was submitted that Page 5 of 26 HC-NIC Page 5 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER assuming while denying that there is no fault on part of Assessing Officer or Commission, petitioner submitted at time of hearing under section 245D(2D) read with section 245HA(1)(ii) of Act before Commissioner that it was ready and willing to pay tax on above declared amount of Rs.7,00,000/- but Commission did not accept its offer. It was submitted that in order under section 245D(1) of Act, Commission has specifically observed that if petitioner does not pay additional amount of income tax within time specified in sub-section (2A) of section 245D of Act, amount of income tax remaining unpaid together with interest shall be recovered by Assessing Officer in accordance with section 245D (2D) of Act. It was submitted that despite fact that order of Settlement Commission was made on 11th September, 1999, no steps were taken by Assessing Officer under section 245D(2D) of Act and as result, petitioner was under impression that payment of Rs.4,20,000/- had been paid because larger amount of Rs.4,90,000/- was lying with Department. That it was only after notice came to be issued by Settlement Commission in year 2013, that petitioner came to know that Department had not adjusted amount of tax payable under order under section 245D(1) of Act against amount seized by it. It was submitted that even at that stage, petitioner had expressed its willingness before Commission to deposit amount of tax on total undisclosed amount of Rs.7,00,000/-. However, Commission did not accept offer of petitioner and passed impugned order under section 245HA of Act. 6.1 learned counsel submitted that petitioner suffered injustice not for his fault but because of fault of Page 6 of 26 HC-NIC Page 6 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER Assessing Officer and of Commission, and therefore, Commission committed serious mistake in not mitigating injustice and on contrary declaring proceedings as having abated. It was urged that while exercising powers, Commission has to have settlement oriented approach and must see that case is not kept away from settlement as far as possible, more particularly, where it is no fault of petitioner. It was submitted that in view of continuous fluctuation in law, present situation had arisen and that Commission was not justified in not accepting offer of petitioner to pay tax payable on undisclosed income and in holding that proceedings have abated. 6.2 Alternatively, it was submitted that in case court is of view that order passed by Settlement Commission does not require to be interfered with, petitioner s appeal preferred before Tribunal may be ordered to be restored as otherwise petitioner would be left with no remedy. Referring to provisions of sub-section (2) of section 245HA of Act, it was submitted that in light of said provision, upon abatement of proceedings before Settlement Commission, Income Tax Authority before whom proceedings at time of making application was pending, is required to dispose of case in accordance with provisions of Act as if no application under section 245C had been made. It was submitted that at time when application was made, matter was pending before Assessing Officer and that assessee has no objection if matter is sent back to Assessing Officer, though more appropriate course of action would be to send assessee to Tribunal. It was, accordingly, urged that impugned Page 7 of 26 HC-NIC Page 7 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER order passed by Commission deserves to be quashed and set aside and in alternate, appeal preferred by petitioner before Tribunal is required to be restored. 7. Vehemently opposing petition, Mr. M.R. Bhatt, Senior Advocate, learned counsel for respondent, invited attention of court to provisions of Chapter XIXA of Act which makes provision for Settlement of Cases . Referring to provisions of section 245C of Act, it was submitted that same provides for assessee making application in prescribed form containing full and true disclosure of income which has not been disclosed before Assessing Officer; manner in which such income has been derived; additional amount of income tax payable on such income and such other particulars as may be prescribed; to Settlement Commission to have case settled. It was pointed out that under sub-section (1) of section 245D of act, Commission may either by order in writing reject application or allow application to be proceeded with. Under sub-section (2D) of section 245D of Act, where application was made under sub-section (1) of section 245C before first day of June, 2007 and order under provisions of sub-section (1) of that section, as they stood immediately before amendment by Finance Act, 2007, allowing application to have been proceeded with, has been passed before first day of June, 2007, but order under provisions of sub-section (4), as they stood immediately before amendment by Finance Act, 2007, was not passed before first day of June, 2007, such application shall not be allowed to be further proceeded with unless additional tax on income disclosed in such Page 8 of 26 HC-NIC Page 8 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER application and interest thereon, is, notwithstanding any extension of time granted by Settlement Commission, paid on or before 31st July, 2007. It was submitted that in facts of present case, order under section 245D(1) came to be made on 10.9.1999 and, hence, in view of provisions of sub-section (2D) of section 245D, additional tax on income disclosed in application and interest thereon was required to be paid on or before 31 st June, 2007. It was pointed out that in facts of present case, Settlement Commission, by its order dated 11.9.1999, had directed petitioner, within 35 days of receipt of order to pay additional amount of income tax payable on income disclosed in application and to furnish proof of such payment to Secretary of Additional Bench and Assessing Officer assessing them within 15 days of making such payment. It was submitted that petitioner, till date matter came up for hearing before Commmission on 16.9.2013 and 25.11.2013, had not deposited amount payable pursuant to order made under section 245D(1) of Act. Under circumstances, in view of operation of provisions of sub-section (2D) of section 245D of Act, Settlement Commission had no power to allow application to be proceeded with as additional tax on income disclosed in application under section 245 and interest thereon had not been paid on or before 31 st day of July, 2007. 7.1 Next, it was submitted that petitioner, after making application under section 245C of Act, had moved revised application revising disclosure to 7 lakhs instead of 5 lakhs, as made in original application. It was submitted Page 9 of 26 HC-NIC Page 9 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER that in view of decision of Supreme Court in case of Ajmera Housing Corporation v. Commissioner of Income-tax, (2010) 8 SCC 739, full and true disclosure of income, which has not been previously disclosed by assessee being precondition for valid application under section 245C(1) of Act, scheme of Chapter XIX-A does not contemplate revision of income so disclosed in application against item 11 in form. Moreover, if assessee is permitted to revise his disclosure, in essence, he would be making fresh application in relation to same case by withdrawing earlier application. In this regard, section 245C(3) of Act which prohibits withdrawal of application once made under sub-section (1) of said section is instructive inasmuch as it manifests that assessee cannot be permitted to resile from his stand at any stage during proceedings. Therefore, by revising application, applicant would be achieving something indirectly which he cannot otherwise achieve directly and in process rendering provision of sub-section (3) of section 245C of Act otiose and meaningless. It was submitted that very fact that there was upward revision in amount of undisclosed income makes it evident that petitioner had not disclosed correct amount of undisclosed income in application made under section 245C(1) of Act. In any case, petitioner had not deposited any amount pursuant to order made by Commission under section 245D(1) of Act and hence, Commission was justified in disposing of application as having abated. 7.2 It was further submitted that insofar as cash seized Page 10 of 26 HC-NIC Page 10 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER by Department during course of search is concerned, before order under section 245D(1) came to be made by Commission on 10.9.1999, block assessment order under section 158BC of Act had been passed by Assessing Officer on 22.8.1997 computing total undisclosed income for block period at Rs.96,44,938/- and seized cash of Rs.4,90,000/- was adjusted on 29.9.1997 against demand raised. petitioner, after order under section 245D(1) of Act came to be made on 10.9.1999, had not paid any other amount pursuant to his disclosure of Rs.5 lakhs declared in settlement application dated 22.10.1996 or revised disclosure of Rs.7 lakhs made thereafter. It was submitted that in view of non-compliance of order made under section 245D(1) of Act, Commission was justified in holding that petitioner was required to pay tax on or before 31.7.2007 so as not to be hit by amendment made in Finance Act, 2007. Under circumstances, Commission was wholly justified in holding that in view of non-compliance with provisions of section 245D(2D) of Act, proceedings before it would abate in view of provisions of section 245HA(I)(II) of Act. It was, accordingly, urged that impugned order passed by Settlement Commission being in consonance with provisions of section 245D and 245HA of Act, there is no warrant for interference. 7.3 Insofar as alternate prayer challenging order dated 23.1.2001 made by Tribunal in ITA/170/Ahd/1997 and seeking reinstatement of appeal of petitioner with Tribunal is concerned, learned counsel submitted that said prayer would amount to add something in statute Page 11 of 26 HC-NIC Page 11 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER and, hence, is not permissible in law. Referring to provisions of section 245HA of Act, it was submitted that sub-section (2) thereof provides that where proceeding before Settlement Commission abates, Assessing Officer, or, as case may be, any other income-tax authority before whom proceeding at time of making application was pending, shall dispose of case in accordance with provisions of Act as if no application under section 245C had been made. Referring to provisions of section 116 of Act, it was pointed out that as to who are income-tax authorities has been provided under said section and that class of income-tax authorities for purposes of Act does not include Tribunal and, hence, question of restoring appeal to Tribunal would not arise in facts of present case. It was submitted that petitioner while making application before Settlement Commission has taken calculated risk and, hence, cannot seek benefit in equity which is contrary to statutory provisions. Referring to provisions of section 245M which came to be subsequently omitted, it was submitted that there being no provision of restoring appeal to Tribunal, alternate relief prayed for cannot be granted. Reference was made to decision of Supreme Court in case of Commissioner of Income Tax, (Central), Calcutta v. B.N. Bhattachargee & Another, (1979) 118 ITR 461, to point out that it was only in light of provisions of section 245M, that appeal could be restored to Tribunal. However, in view of deletion of said provision from statute book, it is no longer permissible for this court to restore appeal to Tribunal. Page 12 of 26 HC-NIC Page 12 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER 8. In support of their submissions, both learned counsel for respective parties had placed reliance on various decisions, reference to which shall be made at appropriate stage. 9. From facts and contentions noted hereinabove, two questions that arise for consideration are; firstly, as to whether Commission was justified in holding that proceedings before it abate in view of non-deposit of amount of additional tax together with interest as directed by it by order under section 245D(D1) of Act. If answer to first question is in affirmative, next question that would arise for consideration is as to whether petitioner is entitled to alternate relief prayed for in petition, namely, for restoration of appeal filed by it before Tribunal against order made by Assessing Officer under section 158BC of Act. 10. From facts noted hereinabove, it clearly emerges that pursuant to application dated 14.10.1996 made by petitioner under section 245C of Act, Commission, by order dated 11.10.1999, admitted appeal of petitioner and four others under section 245D(1) of Act whereby petitioner was directed in accordance with provisions of sub-section (2A) of section 245D of Act to pay additional amount of income tax payable on income disclosed in application within period of 35 days from receipt of that order and to furnish proof of such payment to Secretary of Additional Bench and Assessing Officer assessing them within 15 days of making of said payment. petitioner, initially, in application made under section Page 13 of 26 HC-NIC Page 13 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER 245C of Act, had declared undisclosed income at Rs.5 lakhs. However, subsequently, application came to be revised by letter dated 27.12.1996 whereby petitioner declared undisclosed income at Rs.7 lakhs instead of Rs.5 lakhs. Tribunal, while passing order under section 245D(1) of Act, did not make any reference to revised declaration of undisclosed income made by petitioner. Under circumstances, petitioner was required to pay additional tax on basis of original application under section 245C of Act. petitioner, instead of depositing additional tax on undisclosed amount, filed statement before Commission that in view of fact that Department had already with it cash of Rs.4,90,000/- seized in search, tax of Rs.4,20,000/- being 60% of Rs.7 lakhs disclosed, it takes it that same stands already paid and covered by above seized cash of Rs.4,90,000/-. It appears that pursuant to above statement made by petitioner, there was no response from Commission or from income-tax authorities nor were any steps taken to recover amount that petitioner was liable to pay pursuant to order made by Settlement Commission in accordance with provisions of section 245D(2D) of Act as it stood prior to its amendment with effect from 1.6.2007. It is case of petitioner that it was under bona fide belief that statement made by it before Commission for adjustment of amount of additional tax payable under order under section 245D(1) from cash seized during course of search proceedings had been accepted. It was only at stage when application under section 245C of Act came up for hearing that petitioner came to know that statement made by it had not been accepted. At this stage, Page 14 of 26 HC-NIC Page 14 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER petitioner also expressed willingness before Commission to pay entire amount of additional tax, however, Commission declined to accept proposal of petitioner and passed impugned order under section 245HA(1)(ii) of Act. 11. Before adverting to merits of impugned order, it may be necessary to consider as to whether petitioner can be said to have complied with order made by Commission under section 245D(1) of Act. As noticed hereinabove, petitioner, in application under section 245C of Act, had declared undisclosed income of Rs.5 lakhs. However, subsequently, petitioner filed revised statement declaring undisclosed amount at Rs.7 lakhs instead of Rs.5 lakhs. In this regard, it may be germane to refer to decision of Supreme Court in case of Ajmera Housing Corporation & Anr. v. Commissioner of Income Tax, (2010) 326 ITR 642 (SC), wherein court has held that disclosure of full and true particulars of undisclosed income and manner in which such income has been derived are pre-requisites for valid application under section 245C(1) of Act. full and true disclosure of income, which had not been previously disclosed by assessee, being pre-condition for valid application under section 245C(1) of Act, scheme of Chapter XIX-A does not contemplate revision of income as disclosed in application against item No.11 of Form No.34B. Moreover, if assessee is permitted to revise his disclosure, in essence, he would be making fresh application in relation to same case by withdrawing earlier application. In this regard, section 245C(3) of Act which prohibits withdrawal of Page 15 of 26 HC-NIC Page 15 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER application once made under sub-section (1) of said section is instructive inasmuch as it manifests that assessee cannot be permitted to resile from his stand at any stage during proceedings. Therefore, by revising application, applicant would be achieving something indirectly what he cannot otherwise achieve directly and in process rendering provision of sub-section (3) of section 245C of Act otiose and meaningless. court was of view that scheme of said Chapter is clear and admits of no ambiguity. It was held that in scheme of Chapter XIX-A, there is no stipulation for revision of application filed under section 245C(1) of Act and thus natural corollary is that determination of income by Settlement Commission has necessarily to be with reference to income disclosed in application filed under that section in prescribed form. court was accordingly of view that revision of annexure to application is tantamount to revision of application, not contemplated in scheme. 12. In light of law laid down by Supreme Court in above referred decision, it is apparent that it was not permissible for petitioner to revise application made by it under section 245C(1) of Act. Under circumstances, it was incumbent upon petitioner to pay additional tax in terms of original application made by him under section 245C of Act, whereby he had declared undisclosed income at Rs.5 lakhs. However, petitioner instead of paying amount of taxes and interest in terms of order under section 245D(1) of Act, wrote letter to Assessing Officer and Commission that it takes it that amount of cash seized during search of Rs.4,90,000/- has been Page 16 of 26 HC-NIC Page 16 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER adjusted against demand of Rs.4,20,000/- under said order. As noticed earlier, amount of Rs.4,90,000/- had already been adjusted by Department against demand under order made under section 158BC of Act and hence, no amount remained to be adjusted against amount payable under order made by Commission under section 245D(1) of Act. Evidently, therefore, petitioner has not duly complied with order made by Commission under section 245D(1) of Act till Commission fixed matter for hearing on 25.11.2013 and 3.3.2014. 13. On behalf of petitioner it has been emphatically argued that if statement of petitioner that it takes it that cash seized by Department has been adjusted against amount payable under order of Commission were not acceptable, respondents ought to have responded to same. Moreover, Department had not informed petitioner that it had adjusted cash seized against demand under order under section 158BC of Act. In absence of any response from Settlement Commission and income-tax authorities, petitioner was under bona fide belief that demand under order made under section 245D(1) of Act had been adjusted against seized cash. It has also be contended that before Commission, at time of hearing pursuant to notice under section 245D(2D) and 245HA(1)(ii) of Act, petitioner had offered to pay entire amount payable under order made by Commission under section 245D(1) of Act. In this regard it may be apposite to refer to provisions of section 245D(2D) of Act which lay down thus: Page 17 of 26 HC-NIC Page 17 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER (2D) Where application was made under sub-section (1) of section 245C before 1st day of June, 2007 and order under provisions of sub-section (1) of this section, as they stood immediately before their amendment by Finance Act, 2007, allowing application to have been proceeded with, has been passed before 1st day of June, 2007, but order under provisions of sub-section (4), as they stood immediately before their amendment by Finance Act, 2007, was not passed before 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless additional tax on income disclosed in such application and interest thereon, is, notwithstanding any extension of time already granted by Settlement Commission, paid on or before 31st day of July, 2007. 14. In light of provisions of sub-section (2D) of section 245D of Act, it is not permissible for Settlement Commission to proceed with application made under section 245C(1) of Act on which order under provisions of sub-section (1) thereof had been passed before 1.6.2007, unless additional tax on income disclosed in such application and interest thereon, is, notwithstanding any extension of time already granted by Settlement Commission, paid on or before 21.7.2007. Thus, in case where order under sub-section (1) of section 245C of Act has been made on application made under that sub-section before 1.6.2007, statute bars payment of additional tax with interest thereon after 31.7.2007. last date for payment of additional tax with interest thereon, therefore, was 31.7.2007. petitioner, having failed to pay same before time limit prescribed by statute, Settlement Commission had no power to allow application to be proceeded with. Page 18 of 26 HC-NIC Page 18 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER 15. At this juncture reference may be made to provisions of section 245HA of Act, which read thus: 245HA. Abatement of proceeding before Settlement Commis- sion. (1) Where (i) application made under section 245C on or after 1st day of June, 2007 has been rejected under sub-section (1) of sec- tion 245D; or (ii) application made under section 245C has not been allowed to be proceeded with under sub-section (2A) or further pro- ceeded with under sub-section (2D) of section 245D; or (iii) application made under section 245C has been declared as invalid under sub-section (2C) of section 245D; or (iv) in respect of any other application made under section 245C, order under sub-section (4) of section 245D has not been passed within time or period specified under sub-section (4A) of section 245D, proceedings before Settlement Commission shall abate on specified date. Explanation. For purposes of this sub-section, specified date means (a) in respect of application referred to in clause (i), day on which application was rejected; (b) in respect of application referred to in clause (ii), 31st day of July, 2007; (c) in respect of application referred to in clause (iii), last day of month in which application was declared invalid; (d) in respect of application referred to in clause (iv), on date on which time or period specified in sub-section (4-A) of Section 245-D expires. (2) Where proceeding before Settlement Commission abates, Assessing Officer, or, as case may be, any other income tax authority before whom proceeding at time of making ap- plication was pending, shall dispose of case in accordance with provisions of this Act as if no application under section 245C had been made. (3) For purposes of sub-section (2), Assessing Officer, or, as case may be, other income tax authority, shall be entitled to use all material and other information produced by assessee be- fore Settlement Commission or results of inquiry held or evidence recorded by Settlement Commission in course of Page 19 of 26 HC-NIC Page 19 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER proceedings before it, as if such material, information, inquiry and evidence had been produced before Assessing Officer or other in- come tax authority or held or recorded by him in course of pro- ceedings before him. (4) For purposes of time-limit under sections 149, 153, 153B, 154, 155, 158BE and 231 and for purposes of payment of interest under section 243 or 244 or, as case may be, Section 244A, for making assessment or reassessment under sub-section (2), period commencing on and from date of application to Set- tlement Commission under section 245C and ending with specified date referred to in sub-section (1) shall be excluded; and where assessee is firm, for purposes of time-limit for cancellation of registration of firm under sub-section (1) of Section 186, period aforesaid shall, likewise, be excluded. On plain reading of clause (ii) of sub-section (1) of section 245HA of Act, it is manifest that in case where application under section 245C has not been allowed to be further proceeded with under sub-section (2D) of section 245D, proceedings before Settlement Commission shall abate on specified date. Specified date in respect of application referred to in clause (ii) is 31 st July, 2007. Clearly, therefore, by virtue of operation of law, that is, in view of provisions of clause (ii) of sub-section (1) of section 245HA read with clause (b) to Explanation thereto, application made by petitioner under section 245C of Act stood abated on specified date, that is, 31 st July, 2007. Settlement Commission, therefore, committed no error in holding that application made by petitioner under section 245C of Act stands abated. In fact Settlement Commission has expressly stated what is implied in law, inasmuch as, abatement is by virtue of operation of provisions of sub-section (1) of section 245HA of Act. 16. In light of above discussion, it is not possible to Page 20 of 26 HC-NIC Page 20 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER state that there is any infirmity in impugned order passed by Settlement Commission warranting interference. 17. next question that arises for consideration is as to whether petitioner is entitled to grant of alternative relief prayed for in petition. On behalf of respondents, such prayer has been resisted on ground that section 245HA of Act does not permit restoration of appeal before Tribunal. 18. From facts noted hereinabove, it is apparent that at relevant time when application under section 254C(1) of Act came to be made by petitioner, assessment proceedings under section 158BC of Act were pending before Assessing Officer. However, before order under section 245D(1) of Act came to be made by Commission allowing application to be proceeded with, Assessing Officer had already passed assessment order under section 158BC of Act and, hence, petitioner had preferred appeal against said order before Tribunal. Subsequently, Commission, by order dated 10.9.1999, permitted application to be proceeded with under section 245D(1) of Act. In light of fact that Commission had allowed application made by petitioner to be proceeded with, Tribunal insisted upon withdrawal of appeal preferred by petitioner against order under section 158BC of Act; and by order dated 23.1.2001, permitted petitioner to withdraw appeal as application under section 245C had been admitted by Commission and dismissed appeal for non-prosecution. Subsequently, by virtue of order passed under section Page 21 of 26 HC-NIC Page 21 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER 245HA of Act, proceedings before Commission stand abated and, hence, petitioner has prayed for alternative relief of restoration of appeal before Tribunal. 19. Sub-section (2) of section 245HA of Act provides that where proceeding before Settlement Commission abates, Assessing Officer, or, as case may be, any other income tax authority before whom proceeding at time of making application was pending, shall dispose of case in accordance with provisions of Act as if no application under section 245C had been made. In present case, at time when petitioner made application under section 245C of Act, assessment proceedings were pending before Assessing Officer. However, before Settlement Commission passed order under section 245D(1) of Act, Assessing Officer had already made order under section 158BC of Act. 20. At this stage, reference may be made to decision of Supreme Court in case of Commissioner of Income- Tax v. Damani Brothers, (2003) 259 ITR 475 wherein court was considering question as to whether assessment order passed by Assessing Officer prior to submission of settlement application under section 245C of Act, will subsist and recovery proceedings will continue or not? court held that scheme of Chapter XIX-A shows that filing of application by assessee is unilateral act and department may not be aware of same. It has to be noted that if application for settlement is filed under section 245C, it is not automatically admitted. Section 245D Page 22 of 26 HC-NIC Page 22 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER deals with procedure on receipt of application under section 245C. Under sub-section (1) thereof, Commission, after following prescribed procedure can allow application to be proceeded with or rejected. Only after Commission allows petition to be proceeded with, it exercises power of settlement. petition before Commission is in respect of undisclosed income, therefore, situation is different till Commission decides to proceed with matter. That being position, income-tax authorities are free to proceed in prescribed manner till Commission decides to proceed with petition. It was also held that it is indisputable that liability under order passed by income-tax authority exists and does not get automatically set aside. 21. In light of above decision, it is clear that liability under order made by Assessing Officer under section 158BC of Act would exist even after Settlement Commission passed order under section 245D(1) of Act. Such order would continue to subsist till same is set aside by higher forum. passing of order of abatement under section 245HA of Act also does not have any effect on order made by Assessing Officer which continues to operate. Under circumstances, despite fact that Commission in operative part of impugned order has observed that Assessing Officer shall now dispose of case in accordance with provisions of sub-sections (2) (3) and (4) of section 245HA of Act, order under section 158BC of Act would still subsist as there is no automatic setting aside of such order. Consequently, unless appeal preferred by petitioner before Tribunal is restored, Page 23 of 26 HC-NIC Page 23 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER petitioner would be rendered remediless. 22. In light of fact that petitioner had challenged order made under section 158BC of Act before Tribunal, which proceedings came to be withdrawn in view of fact that Commission had allowed application made by petitioner under section 245C of Act to be proceeded with, if appeal is not restored to file of Tribunal, same would cause immense prejudice to petitioner, inasmuch as, assessment order made under section 158BC of Act would attain finality and would be binding upon petitioner. Besides, no prejudice would be caused to revenue, except that appeal would be decided on merits. Under circumstances, this court is of view that in light of abatement of proceedings before Settlement Commission by operation of provisions of section 245HA of Act, interest of justice requires that appeal preferred by petitioner before Tribunal be restored. petitioner is, therefore, entitled to alternate relief prayed for in petition, namely, for restitution of its appeal before Tribunal. contention that scheme of section 245HA does not admit of such course of action deserves to be stated to be rejected, inasmuch as, restoration of appeal is not under provisions of sub-section (2) of section 245HA of Act but on equitable considerations, namely, that appeal had been dismissed as withdrawn in view of order made by Commission under section 245D(1) of Act and now that proceedings stand abated, petitioner should be permitted to avail of remedy of appeal before Tribunal against block assessment order made under section 158BC of Page 24 of 26 HC-NIC Page 24 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER Act. above approach stand fortified by decision of Supreme Court in Commissioner of Income-tax, Madras v. Express Newspapers Ltd., (1994) 2 SCC 374, wherein court by its judgment and order dated 11 th January, 1994, after holding that Commission had no jurisdiction to entertain application under section 245C of Act, permitted respondent therein to file appeal before Tribunal against order dated 31st March, 1989 passed by Commissioner of Income-tax (Appeals) dismissing appeal preferred by assessee against assessment order within one month of said order and observed that if so filed it shall be treated as within time. 23. For foregoing reasons, petition partly succeeds and is accordingly, allowed to following extent: principal relief prayed for in petition, namely challenge to impugned order dated 2 nd December, 2013 passed by Settlement Commission is hereby rejected. However, alternate relief prayed for in petition is hereby granted by. order dated 23.1.2001 made by Tribunal in ITA No.169/Ahd/1997 is hereby quashed and set aside. Consequently, said appeal shall stand restored to file of Tribunal. Tribunal shall decide same on merits in accordance with law after affording reasonable opportunity of hearing to respective parties. Rule is made absolute to aforesaid limited extent with no order as to costs. (HARSHA DEVANI, J.) Page 25 of 26 HC-NIC Page 25 of 26 Created On Fri Jan 01 12:33:02 IST 2016 C/SCA/9037/2014 ORDER (MS SONIA GOKANI, J.) Vahid Page 26 of 26 HC-NIC Page 26 of 26 Created On Fri Jan 01 12:33:02 IST 2016 Grahshilpa Construction Pvt. Ltd. v. Income-tax Officer