ITSC Entrusted With Power Of Granting Immunity From Penalty And Prosecution Only In Case Of Full And True Disclosure: Delhi High Court
The Delhi High Court has held that the Income Tax Settlement Commission (ITSC) is entrusted with the power to grant immunity from penalty and prosecution only in cases of full and true disclosure.The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that once it is seen that the disclosure was not full and truthful, the ITSC loses its jurisdiction to...
The Delhi High Court has held that the Income Tax Settlement Commission (ITSC) is entrusted with the power to grant immunity from penalty and prosecution only in cases of full and true disclosure.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that once it is seen that the disclosure was not full and truthful, the ITSC loses its jurisdiction to entertain such an application as well as to provide any immunity to the applicant from prosecution and penalties.
The respondent/assessee group is engaged in real estate business in Delhi, particularly in the development of commercial complexes. The business activities of the respondent-assessee group involve the purchase of land from the Delhi Development Authority at auction, followed by the development and sale of the same to various customers.
A search and seizure operation was conducted at the business and residential premises of the respondent and assessee group under Section 132(1). During the said operation, various incriminating documents, including jewelry and cash, were found, and the same were accordingly seized. Subsequently, the case of the respondent-assessee group was centralized with the Assessing Officer.
During the pendency of the assessment proceedings, the respondent-assessee group preferred settlement applications under Section 245C (1) before the ITSC for AYs 2001-02 to 2007-08 by disclosing an additional income of INR 1,53,50,504 in toto.
Consequently, the Commissioner of Income Tax (CIT) filed a report under Rule 9 of the Income Tax Settlement Commission Procedure Rules, 1997, raising various issues against the respondent-assessee group and doubting the genuineness of the transactions with respect to share capital.
The ITSC admitted all the applications filed by different members of the respondent-assessee group, including business entities and individuals therein, to settle their income tax liability. While deciding the settlement applications, the ITSC passed the impugned order and declared the total additional income to the tune of INR 18 crores, which includes a voluntarily offered amount of INR 1 crore at the instance of the respondent-assessee group.
However, as per the claim of the department, an amount of INR 23.69 crore ought to have been added in the category of bogus share capital in the case of Pankaj Ltd. The department's claim was based upon the summons issued to the alleged shareholders, which were returned undelivered, thereby alluding to the non-existence of such shareholders. The respondent-assessee group is also stated to have bought back shares from the family members of the promoters, having a face value of INR 13.15 crores at a nominal cost of INR 13.15 lakhs.
The department contended that during the course of proceedings, the respondent-assessee group had offered certain additional amounts, which clearly shows that full and true disclosure of income was not made in the application under Section 245C of the Act. The respondent-assessee group had not approached the ITSC with clean hands.
The assessee contended that no incriminating material was found during the course of the search, and despite the same, they voluntarily agreed to surrender an amount of the share capital that was in doubt. He further submitted that the ITSC, after a detailed discussion, had given reasons for arriving at its findings of additional income of INR 6.51 crores for AY 2002-03 and 2003-04 in the case of Pankaj Ltd.
The court noted that the ITSC is entrusted with the power to grant immunity from penalty and prosecution. However, such power is exercised only in cases where the contingency of full and true disclosure is fulfilled and the assessee has cooperated in the settlement proceedings.
The court held that the ITSC erred in law by approving the application of the respondent-assessee group under Section 245C of the Income Tax Act.
Counsel For Petitioner: Shlok Chandra
Counsel For Respondent: Salil Aggarwal
Case Title: PCIT Versus Pankaj Buildwell Ltd. & Group
Citation: 2024 LiveLaw (Del) 444
Case No.: W.P.(C) 8103/2015