W.P. No. 431 of 2014 IN HIGH COURT AT CALCUTTA Constitutional Writ Jurisdiction Original Side Swamina International Private Limited & Anr. Vs. Income Tax Settlement Commission (IT & WT) & Ors. For Petitioners : Mr. J.P. Khaitan, Sr. Advocate Mr. Sanjay Kumar Baid, Advocate Ms. Anupa Banerjee, Advocate For Respondents : Md. Nizamuddin, Advocate Hearing concluded on : August 9, 2017 Judgment on : August 17, 2017 DEBANGSU BASAK, J.:- 1. petitioners have challenged Order dated February 28, 2014 passed by Settlement Commission exercising jurisdiction under provisions of Income Tax Act, 1961. 2. Learned Senior Advocate for petitioners has submitted that, petitioners had made reference to Settlement Commission in respect of six assessment years commencing from 2001-2002 to 2006-2007. Settlement Commission had added Rs.6.97 Crores as profit and had taken profit at rate of 8 per cent of gross turn over and has calculated income of first petitioner on such basis. reasons as to why Settlement Commission had proceeded to add Rs.6.97 Crores as profit and had taken net profit rate at 8 per cent of gross turnover has not been stated in impugned order. Settlement Commission has proceeded on basis of report which is not report under Rule 9 of Income Tax Rules. petitioners had made submissions with regard to adjustments of Rs.6.97 Crores. Such submissions have not been dealt with in impugned order. impugned order does not reflect submissions made and manner in which same have been dealt with. Settlement Commission did not consider various material aspects of matter. sum of Rs.6.97 Crores has been treated in balance-sheet and revised balance-sheet of petitioners in particular way. profitability of first petitioner for previous years has not been considered. addition of sum of Rs.6.97 Crores and introduction of rate of 8% as net profit are arbitrary. 3. Relying upon (2009) 315 Income Tax Reports 328 (Madras) (Canara Jewellers v. Settlement Commission & Anr.) he has submitted that, Settlement Commission has acted without jurisdiction, since income disclosed by assessees under Section 245C of Income Tax Act, 1961 has not been accepted to be full and true disclosure of their respective income. He has relied upon (2016) 380 Income Tax Reports 342 (Delhi) (Agson Global Pvt. Ltd. & Ors. v. Income-Tax Settlement Commission & Ors.) and has submitted that, powers and functions of Settlement Commissioner must be in context of and have nexus with settlement. He has submitted that, power of Settlement Commission under Chapter XIXA of Income Tax Act, 1961 can be exercised for purpose of procedure of settlement of application under Section 245C and not for reassessment of tax of particular year. power of reassessment is vested with assessing authority. Relying heavily on (2013) 359 Income Tax Reports page 450 (Bombay) (Major Metals Ltd. v. Union of India & Ors.) learned Senior Advocate for petitioners has submitted that, Settlement Commission is empowered to call for report of Commission at two stages. In present case, Settlement Commission has not done so. Settlement Commission has acted contrary to statute in arriving at order of settlement. Therefore, impugned order of Settlement Commission stands vitiated. 4. On aspect of introduction of sum of Rs.6.97 Crores as earnings of first petitioner and rate of net profit, learned Senior Advocate for petitioners has submitted that, Settlement Commission did not exercise best judgment in this matter. In support of such contention he has relied upon (1978) 115 Income Tax Reports 524 (Brij Bhushan Lal Parduman Kumar, Etc. v. Commissioner of Income-Tax, Haryana, Himachal Pradesh and New Delhi-III). 5. Learned Advocate appearing for department has opposed writ petition. He has submitted that, scope of examination of order passed by Settlement Commission under Article 226 of Constitution of India is limited. petitioner has to demonstrate that, impugned order of Settlement Commission is contrary to statue or that impugned order stands vitiated by bias, fraud or malice. In present case, none of grounds available to assail of order of Settlement Commission is available to petitioners. In support of contention with regard to scope and ambit of writ petition directed against order of Settlement Commission, learned Advocate for respondents has relied upon Major Metals Ltd. (supra), 204 Income Tax Reports 616 (SC) (Shriyans Prasad Jain v. Income-tax Officer), 1993 Volume 3 Supreme Court Cases (Supl.) 389 (Jyotendrasinhji v. S.I. Tripathi & Ors.) and 2011 Volume 4 Supreme Court Cases 635 (Union of India & Ors. v. Ind-Swift Laboratories Ltd.). Learned Advocate for respondent has referred to Section 245 I of Income Tax Act, 1961 and has submitted that, approach to Settlement Commission is voluntary act of assessee. assessee has exercised his discretion in approaching Settlement Commission. He cannot resile from proceedings if he does not accept views of Settlement Commission. assessee while approaching Settlement Commission is aware of consequences of same, at least is deemed to be aware of same. In facts of present case, learned Advocate for respondent has submitted that, subsequent to order of Settlement Commission, assessment was done pursuant thereto. petitioners had applied under Section 154 of Income Tax Act, 1961 on May 13, 2014 for correction of such order of assessment. same was disposed of by Order dated August 5, 2014. Therefore, petitioners cannot be allowed to contend that, order of Settlement Commission stands vitiated since by its own action petitioners had accepted order of Settlement Commission and have acted thereon. Learned Advocate appearing for department has drawn attention of Court to application made by petitioners before Settlement Commission. He submits that, sum of Rs.6.97 Crores is part and parcel of application. rate of net profit is also part and parcel of application. Settlement Commission has considered these aspects and has taken view on subject. petitioners are not entitled to challenge view taken by Settlement Commission. petitioners have not been able to establish that, Settlement Commission has acted in contrary to provisions of Income Tax Act, 1961. Two grounds of challenge made in writ petition with regard to order of Settlement commission were placed before Settlement Commission by petitioners themselves. 6. In reply, learned Senior Advocate for petitioners has distinguished cases cited on behalf of department. He has drawn attention to Court to various passages of Major Metals Ltd. (supra). 7. Whether impugned order of Settlement Commission dated February 28, 2014 warrants interference under Article 226 of Constitution of India is issue for consideration in present writ petition. 8. order of Settlement Commission can be interfered with under Article 226 of Constitution of India if such order is contrary to provisions of Income Tax Act, 1961 and that, such contraventions of Act of 1961 are prejudicial to petitioners. writ petition is also maintainable if it can be substantiated that order of Settlement Commission stands vitiated by bias, fraud or malice. These grounds of challenge are noted in Ind-Swift Laboratories Ltd. (supra), Jyotendrasinhji (supra), Major Metals Ltd. (supra), Shriyans Prasad Jain (supra). statutory authority is required to act in consonance with principles of natural justice while deciding on issue which affects rights of any person. order passed by statutory authority be required to have reasons and reasons being heartbeat of such order, writ petition is maintainable, if it can be substantiated that, impugned order is non-speaking. 9. In present case, it has been contended that, impugned order of Settlement Commission is contrary to Income Tax Act, 1961 inasmuch as Settlement Commission did not call for report under Rule 9 of Income Tax Rules to consider addition of sum of Rs.6.97 Crores. With respect, such ground is not available in facts of present case, as petitioners itself had disclosed Rs.6.97 Crores in Statement of Fact filed by it while approaching Settlement Commission. Such fact was available on record before Settlement Commission for consideration. Moreover, Settlement Commission had considered report dated December 27/30, 2013 of Commissioner of Income Tax. petitioners were allowed to make submission thereto. petitioners have done so. petitioners were heard by Settlement Commission in such document. petitioners are well-aware of contents of report. foundational basis for Rs.6.97 Crores was available on record before Settlement Commission. foundational basis for rate of interest imposed by Settlement Commission in impugned order was also available before it. petitioners had placed and contended certain rate of interest. Such contention was not accepted by Settlement Commission and rate of profit was assessed at 8% per annum. 10. petitioners have contended that on aforesaid two grounds, impugned order of Settlement Commission is non- speaking. Settlement Commission has dealt with these two grounds in impugned order. petitioners may not agree with reasons given in impugned order of Settlement Commission. However, impugned order cannot be said to be without any reasons so far as two grounds are concerned. Both issues of sum of Rs.6.97 Crores as well as rate of interest have been dealt with by Settlement Commission. Writ Court is not called upon to reappreciate evidence produced before Settlement Commission, act as appellate authority and substitute findings arrived at. 11. In has been contended that, Settlement Commission did not apply ratio of Brij Bhushan Lal Parduman Kumar (supra), Agson Global Pvt. Ltd. & Ors. (supra) and Canara Jewellers (supra) in making best judgment. There is distinction made between order of assessment based on best judgment and order of assessment on basis of records available. Such distinctions are noted in authorities cited above. In present case, Settlement Commission was called upon to arrive at quantum of tax liability of petitioners in settlement proceeding. It has taken particular view. Writ Court need not enter into factual aspect of matter to reapprise itself and act as appellate authority against order passed by Settlement Commission. materials on basis of which Settlement Commission had arrived at its decision to add Rs.6.97 Crores and take 8% as rate of net profit for purpose of calculation of tax were before Settlement Commission. Settlement Commission has taken view thereon, giving its reason therefor. impugned order of Settlement Commission does not call for any interference. issue raised is answered accordingly. 12. In such circumstances, writ petition fails. W.P. No. 431 of 2014 is dismissed. No order as to costs. [DEBANGSU BASAK, J.] Later :- Learned Advocate for petitioners seeks stay of judgment and order. Such prayer is considered and refused. [DEBANGSU BASAK, J.] Swamina International Private Limited & Anr. v. Income-tax Settlement Commission (IT & WT) & Or