47. Principal CIT vs.
IT Settlement Commission; [2020] 420 ITR 149
(Guj.) Date of order: 8th
November, 2019 A.Ys.: 2004-05 to
2015-16
Settlement of cases –
Section 245C of ITA, 1961 – Black Money Act, 2015 – Jurisdiction of Settlement
Commission – Undisclosed income of non-resident Indians – Charge under Black
Money Act only from A.Y. 2016-17 – Pending reassessment proceedings order of
Settlement Commission for A.Y. 2004-05 to 2015-16 – Order of Settlement
Commission is valid
A search and seizure operation came to
be carried out at the residential and business premises of the B group of
companies of which the assessees were directors. Pursuant to the search,
notices under sections 148 and 153A of the Income-tax Act, 1961 were issued to
the three assessees for the A.Ys. 2005-06 to 2013-14, 2004-05 to 2015-16, and
2004-05 to 2015-16, respectively. In response thereto, the assessees filed
income tax returns disclosing undisclosed foreign income and assets.
Thereafter, they filed separate applications u/s 245C of the 1961 Act before
the Settlement Commission disclosing additional undisclosed foreign income and
assets. The Settlement Commission passed an order on 30th January,
2019 settling the cases and granting reliefs. On 18th February,
2019, the A.O. passed orders giving effect to the order of the Settlement
Commission and determined the additional tax payable and issued notices of
demand u/s 156 of the Act on the same day. Each of the assessees paid the
additional tax payable.
On a writ petition filed by the Department
on 30th May, 2019 challenging the orders passed by the Settlement
Commission as without jurisdiction since the Settlement Commission had no
jurisdiction to pass an order under the 1961 Act in relation to undisclosed
foreign income and assets covered under the 2015 Act, the Gujarat High Court
dismissed the petition and held as under:
‘i) On a conjoint reading of sections 3 and 2(9)
of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of
tax Act, 2015, it is clear that undisclosed foreign income or assets become
chargeable to tax from the A.Y. 2016-17. However, when undisclosed foreign
assets become chargeable to tax from the A.Y. 2016-17 onwards, the date of
acquisition of such assets may relate to any assessment year prior to the A.Y.
2016-17. Therefore, even after the coming into force of the 2015 Act, insofar
as assessment years prior to the A.Y. 2016-17 are concerned, the undisclosed
foreign income would be chargeable to tax under the relevant provisions of the
Income-tax Act, 1961.
ii) What sub-section (3) of section 4 of the 2015
Act provides is that what is included as income and asset under the 2015 Act
cannot be included in the total income under the 1961 Act. The said sub-section
does not contain a non obstante clause ousting the applicability of the
1961 Act, insofar as undisclosed foreign income and assets are concerned. The
2015 Act is a taxing statute and provides for stringent penalties and
prosecution and it is by now well settled that a taxing statute must be
interpreted in the light of what is clearly expressed. The second proviso
to section 147 of the 1961 Act does away with the limitation of four years as
provided in the first proviso to section 147 in the case of undisclosed
foreign income. By virtue of clause (c) of sub-section (1) of section 149, the
time limit for reopening of assessments has been extended to sixteen years in
respect of any asset, including financial interest in any entity located
outside India, so that the bar applies for periods beyond sixteen years in such
cases. Clearly, therefore, the scheme of the Income-tax Act, 1961 is not meant
to tax only disclosed foreign income but also undisclosed foreign income.
iii) It was an admitted position that the
residential status of two of the assessees was non-resident for the A.Y.
2016-17 and for the third for the A.Y. 2014-15 onwards. Thus, when the 2015 Act
came into force, the assessees were not residents. It could not be said that
the assessees fell within the ambit of the expression ‘assessee’ as defined
under clause (2) of section 2 of the 2015 Act as it stood prior to its
amendment by the Finance (No. 2) Act of 2019. The expression ‘assessee’ was
amended on 1st August, 2019, albeit with retrospective effect
from 1st July, 2015, and as on the date when the Settlement
Commission passed the order, namely, 30th January, 2019, the
assessees were not ‘assessees’ within the meaning of such expression as
contemplated u/s 2(2) of the 2015 Act and were, therefore, not covered by the
provisions of that Act. The search proceedings were conducted after the 2015
Act came into force and, consequently, the notices under sections 148 and 153A
of the 1961 Act were also issued after the 2015 Act came into force. The fact
that these notices under sections 148 and 153A of the 1961 Act were issued in
respect of undisclosed foreign income or assets could be substantiated on a
perusal of the reasons recorded for reopening the assessment for the A.Y.
2000-01.
The Revenue authorities were well aware
of the fact that the provisions of the 2015 Act covered undisclosed foreign
income only from the A.Y. 2016-17 onwards and, therefore, categorically
submitted to the jurisdiction of the Settlement Commission and requested it to
proceed further pursuant to the applications made by the assessees u/s 245C of
the Income-tax Act, 1961. It was only for this reason that notices under the
2015 Act were issued only for the A.Ys. 2017-18 and 2018-19. The A.O. had
issued notices under sections 148 and 153A of the 1961 Act for different
assessment years. Therefore, proceedings for assessment or reassessment as
contemplated under clauses (i) and (iiia) of the Explanation to clause (b) of
section 245A had commenced and were pending before the A.O. when the
applications u/s 245C of the 1961 Act came to be made. Therefore, the
requirements of the provisions of section 245C of the 1961 Act were duly
satisfied when the applications thereunder came to be made by the assessees.
Upon receipt of the applications made u/s 245C of the 1961 Act, the Settlement
Commission proceeded further in accordance with the provisions of section 245D
of the 1961 Act. At the stage when it was brought to its notice that notices
u/s 10 of the 2015 Act had been issued to the assessees, the Settlement
Commission gave ample opportunity to the Revenue to decide what course of
action it wanted to adopt, and it was the Revenue which categorically invited
an order from the Settlement Commission in respect of the undisclosed foreign
income and assets disclosed before it.
The record of the case showed that the
requirements of section 245D of the 1961 Act had been duly satisfied prior to
the passing of the order u/s 245D(4). The proceedings before the Settlement
Commission were taken in connection with notices issued under sections 148 and
153A of the 1961 Act and it was, therefore, that the Settlement Commission had
the jurisdiction to decide the applications u/s 245C of that Act, which related
to the proceedings in respect of those notices. If it was the case of the
Revenue that the undisclosed foreign income and assets of the assessees were
covered by the provisions of the 2015 Act, the notices under sections 148 and
153A of the 1961 Act, which mainly related to undisclosed foreign income, ought
to have been withdrawn and proceedings ought to have been initiated under the
relevant provisions of the 2015 Act. The Settlement Commission had the
jurisdiction to decide the applications u/s 245C.
iv) The Settlement Commission, after considering
the material on record, had given a finding of fact to the effect that there
was a full and true disclosure made by the assessees and that there was no
wilful attempt to conceal material facts. If for the reason that issues which
pertained to past periods could not be reconciled due to lack of further
evidence, the assessees, with a view to bring about a settlement, agreed to pay
a higher amount as proposed by the Revenue, it certainly could not be termed a
revision of the original disclosure made u/s 245C of the 1961 Act, inasmuch as,
there was no further disclosure but an acceptance of additional liability based
on the disclosure already made before the Settlement Commission.
v) Another aspect of the matter was that it was
an admitted position that prior to the presentation of the writ petition, the
order of the Settlement Commission came to be fully implemented. This was not
mentioned in the writ petition. Therefore, there was suppression of material
facts. The order passed by the Settlement Commission was valid.’
