Order Of ITSC Final And Conclusive For AY For Which Application Has Been Filed: Delhi High Court

The Delhi High Court has held that the order of the Income Tax Settlement Commission (ITSC) is final and conclusive for a particular assessment year (AY) for which the application has been filed.

The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the order of the ITSC is deemed to be conclusive for all the matters pertaining to the concerned AY for which the settlement application has been accepted and processed by the ITSC. If the Income Tax Department is not satisfied with the computation of income by the ITSC for the relevant AY, the same could only be assailed in accordance with the provisions contemplated under Section 245D(6) and Section 245D(7) of the Income Tax Act.

The appellant/assessee is a charitable trust performing activities in the field of education and forms a part of the Santosh Group, which is engaged in conducting medical courses. The assessee filed its income tax return, showing an excess expenditure of Rs. 2,69,34,371 and declaring its income as nil. The case of the assessee was processed under Section 143(1), and it was picked up for scrutiny assessment. A notice under Section 143(2) was issued to the assessee.

An assessment order was passed by the assessing officer, who determined the total income of the assessee to be ₹15,03,47,006/- after making the various additions.

The assessee filed an appeal before the Commissioner of Income Tax (Appeals), who partly allowed the appeal of the assessee and deleted the addition. The order of the CIT(A) was upheld by the ITAT in appeal, and the appeal against the ITAT order has been admitted by the Court. The appeals are pending before the court.

It appears that on June 27, 2013, a search under Section 132 was conducted in the case of Santosh Group, including the case of the assessee. During the course of the search, it was found that the group charged a capitation fee for admission to the concerned courses, and such a fee was not mentioned in the ITR. Consequently, the reassessment proceedings were initiated by the AO under Section 147/148, and a notice was served upon the assessee after recording reasons to believe.

The assessee filed a reply to the aforesaid notice, submitting that the ITR, which was originally filed, may be treated as an ITR filed in response to the notice under Section 148. A notice was issued under Section 143(2) of the Act. The assessee raised objections against the notice; however, it came to be disposed of as rejected on February 2, 2015.

An assessment order under Section 143(3), read with Section 148 of the Act, was framed by the AO on March 19, 2015. It was observed therein that a sum of ₹1,17,85,000/- pertained to AY 2005-06, and the sum amounting to ₹7,46,51,210/- was already included by the assessee in the income and expenditure account as fees. Thus, while rejecting other contentions raised by the assessee, the AO held that the amount of fees left undeclared in the ITR amounted to Rs. 10,38,30,790/-. In pursuance of the aforesaid, while disallowing the exemption under Section 11 and assessing the income of the assessee in the status of association of persons, the total income was computed to be Rs. 21,19,29,461.

The department preferred the appeal before the ITAT, which came to be dismissed, and the reopening of assessment proceedings under Section 148 was also quashed by the ITAT.

The department contended that the CIT (A) and the ITAT have erroneously relied upon the decision of the ITSC for AYs 2008–09 and 2009–10. The order of the ITSC is deemed to be conclusive for all the matters pertaining to the concerned AY for which the settlement application has been decided by the ITSC.

The court noted that the finality of the order of the ITSC emanates from Section 245-I of the Income Tax Act, which envisages that every order of settlement passed under sub-Section 4 of Section 245D shall be conclusive as to the matters, and no matter covered by the order shall, save as otherwise provided in Chapter XIX-A, be reopened in any proceeding under this Act or under any other law for the time being in force.

The court, while allowing the appeal of the department, held that the ITAT has wrongly placed reliance on the decision of the ITSC for subsequent years, and the same is liable to be quashed.

Counsel For Appellate: Ruchir Bhatia

Counsel For Respondent: None

Case Title: Pr. Commissioner Of Income Tax -Central -1 Versus Maharaji Education Trust

Citation: 2024 LiveLaw (Del) 748

Case No.: ITA 721/2023

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