By TIOL News Service

AHMEDABAD, MAY 12, 2018: THE ISSUE BEFORE THE BENCH is - Whether the declaration of abatement of the proceedings is maintainable when, the Settlement Commission fails to record any findings with regard to the delay in proceedings due to the reasons attributable to the assessee. NO is the answer.

Facts of the case:

The assessee, a partnership firm, engaged involved in manufacturing and exporting of diamonds. A search and seizure operation was carried out at the assessee's premises. Thereupon, an order was passed by the AO u/s 158BC for the block period. Accordingly, applications for settlement was filed by the assessee wherein, an additional income was disclosed. After passing through several stages, the assessee had made further disclosure of undisclosed income during the time of hearing of the such application. As per the total disclosure, the assessee's tax liability would come to Rs. 1.20 crore (rounded off) however, the assessee claimed to had paid the same. Nevertheless, the Revenue contended that the assessee was short by close to Rs. 66 lakhs. In reply, the assessee submitted that the refund amount was available in the hands of M/s. M Kantilal & Company, a limited company and the assessee had requested the same to be adjusted in their hands. The Revenue again, stated that when the said amount was already adjusted in the case of the limited company, the same could not be given credit gain to the assessee.

Meanwhile, the provisions for settlement of cases were amended by introducing Sec. 245HA w.e.f. 1st June 2007. The assessee had challenged the validity of the said Section before the Ahmedabad High Court. In the meantime, such an issue had reached the Supreme Court in the case of Prabhu Dayal challenging the vires of the very same Section. Therefore, the Division Bench of the Ahmedabad High Court had disposed of the assessee's petition. Subsequently, Prabhu Dayal was not interested in pursuing the litigation, and therefore, withdrew the same. Following the said amendments, the Settlement Commission declared that the abatement provisions contained in Sec. 245HA would apply to the assessee. Therefore, the Commission dismissed the application by concluding that the admitted tax was not paid on the disclosed income.

High Court held that,

++ under the identical situation in the case of M. Kantilal & Exports, this Court has held that "... the Settlement Commission has committed an error in disposing of the proceedings as having abated. It is true that the assessee had earlier approached this Court on the issue of applicability of the abatement provisions and such petition was disposed of, the assessee to abide by the judgment of the Supreme Court in case of Prabhu Dayal. However, the Supreme Court did not have occasion to decide the case of Prabhu Dayal on merits ... If the proceedings were delayed due to the reasons attributable to the assessee, the provision for abatement would apply but not otherwise. The Settlement Commission has not recorded any such finding. The Department has not brought any facts to our notice to permit any further inquiry in this respect by the Commission. In plain terms therefore there is no material before us to hold that the application for settlement of the present assessee were belated due to the reasons attributable to the assessee ..." Therefore, the declaration of abatement of the proceedings in case of the present assessee is also set-aside;

++ Ccoming to the question of inadequacy of the tax deposited by the assessee, the Settlement Commission has not cited any reasons for coming to such a conclusion. We have noticed that both the sides have placed materials in support of their rival contentions. We request the Commission to examine such material and come to a conclusion – whether the assessee had deposited the tax or was short in doing so. For such purpose, we would place the matter back before the Settlement Commission. While doing so, we would request the Commission to examine the implication of the judgment of Supreme Court in the case of Ajmera Housing Corporation & Anr. in light of the fact that the assessee's initial disclosure was for Rs. 75.78 lakhs and further disclosures made nearly four years later were of additional sum of Rs. 97 lakhs.

(See 2018-TIOL-886-HC-AHM-IT)