tax

Sec.271 of INCOME TAX ACT = The AO has to initiate penalty proceedings when he found difference between the reported and assessed income – No separate reasons not necessary to record whether to intiate proceedings or not – but the burden lies on the assessee to give suffcient reasons for show cause notice and the burden shift on the Ao then he has to given reasons for imposing penalty = MAK Data P. Ltd. … Appellant Versus Commissioner of Income Tax-II … Respondent = http://judis.nic.in/supremecourt/filename=40925

Sec.271 of INCOME TAX ACT = The AO has to initiate penalty proceedings when he found     difference between the reported and assessed income – No separate reasons not necessary to record whether to intiate proceedings or not – but the burden lies on the assessee to give suffcient reasons for show cause notice and the burden … Continue reading →

Gift under income tax – credit-worthiness of the donor = We find that it is not in dispute that the aforesaid two amounts have been deposited by the two partners in their capital account. The partners are income tax payee. They have explained the source as having received gift from various persons, who have also filed their Income Tax Returns and have been assessed accordingly. Merely because, the donors are weavers and they own only one loom would not make any difference. They have filed their Income Tax Returns and have also filed the return under the Gift Tax Act. They have paid the gift tax also. Assessment under the Gift Tax Act has also been made, though the assessments made were summary in nature. In the case of Anil Rice Mills (supra), this Court has held that the assessee can not be asked to prove the source of source or the origin of origin. Taking the various facts enumerated above, we are of the considered opinion that the Tribunal had erred in holding that the amount deposited by the two partners is liable to be added under section 68 of the Act on the ground that the gifts received by the respective partners from the various persons could not be explained as the credit-worthiness of the donors had not been established. The Tribunal had wrongly drawn an adverse inference upon the fact that the donors had filed their Income Tax Return for the Assessment Years 1988-89 to 1991-92 on a single day and further the return for the Gift Tax was filed on 25.08.1992, which was well within the due date. The appellant has explained the nature and source of the deposit and has discharged its burden. The order of the Tribunal on this ground therefore can not be sustained and is liable to be set-aside. The appeal succeeds and is allowed.

reported/published in  http://elegalix.allahabadhighcourt.in/elegalix/WebShowJudgment.do HIGH COURT OF JUDICATURE AT ALLAHABAD  Reserved Income Tax Appeal No. 71 of 2002 M/s. Zafa Ahmad & Company Versus The Commissioner of Income Tax, Varanasi *********************** Hon’ble R.K. Agrawal, J. Hon’ble B. Amit Sthalekar, J. (Delivered by R.K. Agrawal, J.) The present appeal has been filed under section 260A of the … Continue reading →

Section 245: Set off of refunds against tax remaining payable: Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.” 20. From a reading of the above Section, it is crystal clear that the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set-off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under the Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under that Section. (emphasis supplied).On a perusal of the entire material documents including the impugned order, it is clearly evident that there is no intimation in writing to the petitioner-assessee before making such an adjustment of refund. No doubt, the respondent is empowered to make the adjustment of refund, but the same can be done only in the manner as contemplated under the provisions of the Act. It is conspicuous from the records that there is no intimation in writing to the petitioner before making such adjustment of refund. As the respondent has not followed the procedures prescribed under the provisions of the Act while adjusting the refund amount with the outstanding amount, the impugned order is vitiated in law and is liable to be set aside. For the foregoing reaasonings, the impugned order is set aside. The Writ Petition is allowed and the matter is remanded back to the respondent for compliance of Section 245 of the Act, and thereafter, the respondent is at liberty to adjust the refund amount payable to the petitioner with the amount payable for the respective assessment year, in accordance with law. Such an exercise shall be completed by the respondent within a period of four weeks from the date of receipt of a copy of this order. No costs. The Miscellaneous Petition is closed. Reported in/ published in http://judis.nic.in/judis_chennai/filename=41825

IN THE HIGH COURT OF JUDICATURE AT MADRAS     DATED: 30.4.2013   CORAM:   THE HONOURABLE MR.JUSTICE V.DHANAPALAN   W.P.No.8571 of 2013 & M.P.No.1 of 2013           M/s.Cognizant Technology Solutions India P. Ltd., 6th Floor, New No.165/Old No.110, Menon Eternity Building, St.Mary’s Road, Chennai-600 018 represented by its Director .. … Continue reading →

Gift Tax Act, 1958/Indian Succession Act, 1925: Section 5(1)(xi)/Section 191-Gift in contemplation of death- Essential requirements of-Gift of movable property-Donor seriously ill at the time of execution of deed and died shortly thereafter-Delivery of possession of gifted property effected-No indication in the document specifically or impliedly that gift would be effective only if donor died or liable to be revoked in case donor recovered-Whether gift valid-Whether entitled to exemption. Mohammedan Law: Marz-ul-maut (death-bed illness)-What is-Gift made during marz-ul-maut-Whether entitled to exemption under Gift Tax Act-Section 191, Indian Succession Act-Applicability of. =Gift to certain movable assets was made to the respondent assessee by a Muslim businessman, when he was seriously ill, and died of the illness after six weeks of the execution of the document. In gift-tax assessment proceedings, the assessee claimed exemption for this gift under Section 5(1)(xi) of the Gift Tax Act, 1958, on the ground that the gift was made in contemplation of death. The Gift Tax Officer rejected the claim. But, on appeal, the Appellate Assistant Commissioner allowed the exemption relying on the circumstances under which the gift was made and the events followed thereafter and the evidence of the Sub-Registrar, who was brought to residence for effecting registration, and the doctor, who was treating the donor. On appeal by the Gift-Tax Officer, the Tribunal affirmed the finding of the Appellate Assistant Commissioner regarding the donor’s illness but did not allow the exemption on the ground that, though there was delivery of possession of the gifted movables, the gift was unconditional and absolute, since it had not been specifically expressed or impliedly present in the deed that the gift must revert back in the event of the donor recovering from illness and that the gifted property had to be kept as a gift in case the donor died of his illness. However, on a reference made at the instance of the assessee for opinion, the High Court held that such a condition need not be mentioned in the deed and 847 it could be inferred from the attending circumstances of the gift, and since the donor was actually sick at the time of execution of the deed and died of the same illness without recovery, after a short period, the gift in question was made in contemplation of death and therefore, entitled to exemption from tax under Section 5(1)(xi) of the Act. In the appeal before this Court, on behalf of the Department it was contended that the gift in contemplation of death should be conditional, and in the absence of indications in the document to the effect that if the donor did not die, he should be entitled to remain in complete domination of the gifted property, the gift would become inter vivos and absolute, and that the exemption under Section 5(1)(xi) of the Gift Tax Act was not available to the assessee, since Section 191 of the Indian Succession Act was not applicable to marz-ul-maut gift. Dismissing the appeal by the Department, this Court HELD: 1.1 Explanation (d) to sub-section (2) of Section 5 of the Gift Tax Act, 1958 states that a gift made in contemplation of death has the same meaning as in Section 191 of the Indian Succession Act, 1925. The requirements of a gift in contemplation of death as laid down by Section 191 are: (i) the gift must be of movable property; (ii) it must be made in contemplation of death; (iii) the donor must be ill and he expects to die shortly of the illness; (iv) possession of the property should be delivered to the done; and (v) the gift does not effect if the donor recovers from the illness or the donee predeceases the donor. These requirements are similar to the constituent elements of a valid donatio martis causa. [853C-E] Cain v. Moon, [1893] 2 Q.B. 283 @ 286, referred to. 1.2. In the instant case, all the conditions prescribed, except perhaps the last one are found present by the fact finding authorities. [853G] 1.3. The recitals in the deed of gift are not conclusive to determine the nature and validity of the gift. The party may produce evidence aliunde to prove that the donor gifted the property when he was seriously ill and contemplating his death with no hope of recovery. These factors in conjunction with the factum of death of the donor may be sufficient to infer that the gift was made in contemplation of death. It is implicit in such circumstances that the donee becomes the owner of the gifted property only if the donor dies of the illness and if the donor recovers from the illness, the recovery itself operates as a revocation of the gift. [854B-C] 848 1.4 It is not necessary to state in the gift deed that donee becomes owner of the property only upon the death of the donor. Nor it is necessary to specify that the gift is liable to be revoked upon the donor’s recovery from the illness. The law acknowledges these conditions from the circumstances under which the gift is made. [854C-D] Halsbury’s Laws of England, 4th Edn. Vol. 20 p. 41 para 67; Jerman on Wills, 8th Edn. Vol, 1 p. 46-47; Williams on “Executors and Administrators”, 14th Edn. p. 315, and Corpus Juris Secundum, vol. 38 p. 782 and p. 917 para 110, referred to. 1.5 In the light of this and in view of the findings recorded by the Tribunal about the serious sickness of the donor and his state of mind at the time of making the gift in question, it can be reasonably concluded that the gift was not absolute and irrevocable. On the contrary, it would be legitimate to infer that the gift was in contemplation of death. any other view would be inappropriate. [856A-B] 2.1 Marz-ul-maut is also entitled to exemption from gift tax under Section 5(1)(xi) of the Gift Tax Act, 1958. [856B] 2.2 The exemption to gift in contemplation of death is provided under Section 5(1)(xi) of the Gift Tax Act, and not under Section 191 of the Indian Succession Act, Section 191 furnishes only the meaning or requirements of gift in contemplation of death. It a gift in contemplation of death is recognised by the personal law of parties satisfying the conditions contemplated under Section 191 of the Indian Succession Act, cannot be denied exemption under Section 5(1)(xi) of the Act, Even assuming that Section 191 as such will not be applicable to the parties. [856C-D] 2.3 Under Mohammedan Law gift made during marz-ul-maut (death-bed-illness) is subject to very strict scrutiny and subject to all other conditions necessary for the validity of a hiba or gift, including delivery of possession of the donor to the donee. [856D] Mulla’s Mohammedan Law, pp. 111 Sections 135 & 136, referred to. 2.4 Marz-ul-maut is a malady which induces an apprehension of death inthe person suffering from it and which eventually results in his death. There are three tests laid down to determine whether illness is to be regarded as marz-ul-maut. They are; (i) Proximate danger of death 849 so that there is preponderance of khauf or apprehension that at the given time death must be more probable than life. (2) There must be some degree of subjective apprehension of death in the mind of the sick person. (3) There must be external indicia chief among which would be the inability to attend to ordinary avocations. [856E-F] Rashid Karmalli and anr. v. Sherbanoo, [1907] 31 ILR Bombay 2641, referred to. 2.5 Therefore, under the Principles of Mohammedan Law, the gift made in marz-ul-maut could be regarded as gift made in contemplation of death, since it has all the requisites prescribed under Section 191 of the Indian Succession Act, 1925. The only limitation is that the disposition is restricted to a third on account of the right of the heirs. [857C-D] Syed Ameer Ali: Mohammedan Law, Vol. 1, 4th Edn. 1985 p. 59-60, referred to. =1991 AIR 1847, 1991( 2 )SCR 846, 1991( 3 )SCC 520, 1991( 2 )SCALE11 , 1991( 3 )JT 67

PETITIONER: COMMISSIONER OF GIFT TAX, ERNAKULAM Vs. RESPONDENT: ABDUL KARIM MOHD. (DEAD) BY LRS. DATE OF JUDGMENT10/07/1991 BENCH: SHETTY, K.J. (J) BENCH: SHETTY, K.J. (J) YOGESHWAR DAYAL (J) CITATION: 1991 AIR 1847 1991 SCR (2) 846 1991 SCC (3) 520 JT 1991 (3) 67 1991 SCALE (2)11 ACT: Gift Tax Act, 1958/Indian Succession Act, 1925: … Continue reading →

INCOME TAX ACT, 1961: CHAPTER X1X-A – Sections 245-C, 245-D (1) and 245-D(4) r/w s. 234-B – Settlement Commission – Settlement of cases – Interest for default in payment of advance tax – Applicability of s. 234-B – Held: Sections 234-A, 234-B and 234-C are applicable to the proceedings of the Settlement Commission under Chapter XIX-A – Sections 234-B, 245-D(2C) and s.245-D(6A) operate in different fields – Section 234-B comes into operation when there is default in payment of advance tax whereas liability to pay interest u/s 245-D(2C) arises when the additional amount of income tax is not paid within time specified u/s 245-D(2A) – Section 245-D (6A), on the other hand, imposes liability to pay interest only when the tax payable in pursuance of an order of Settlement Commission u/s 245-D(4) is not made within the specified time.. s. 234-B – Terminal point for levy of interest in settlement of cases under Chapter XIX-A – Held: Would be up to the date of the Order u/s 245-D(1) and not up to the date of the Order of Settlement u/s 245-D(4). ss. 154, 234-B, 245-D(4) and 245-I – Rectification of mistake – Levy of interest – Order of settlement u/s 245D(4) to be conclusive – Held: In view of s. 245-I, the Settlement Commission cannot re-open its concluded proceedings by invoking s. 154 so as to levy interest u/s 234-B – Section 154 is not applicable to Chapter XIX proceedings. Pursuant to the referral orders dated 14.12.2004 and 21.1.2005, the instant appeals were referred to the Constitution Bench of the Supreme Court. The questions for consideration before the Court were: (i) whether s. 234B of the Income Tax Act, 1961 would apply to proceedings of the Settlement Commission under Chapter XIX-A of the said Act? If yes; (ii) what would be the terminal point for levy of such interest – whether such interest should be computed up to the date of the Order u/s 245-D (1) or up to the date of the Order of the Commission u/s 245-D (4)? and (iii) whether the Settlement Commission could reopen its concluded proceedings by invoking s. 154 of the said Act so as to levy interest u/s 234-B, though it was not so done in the original proceedings? =Answering the reference and disposing of the appeals, the Court HELD: 1.1 Sections 234-A, 234-B and 234-C of the Income Tax Act 1961 are applicable to the proceedings of the Settlement Commission under Chapter XIX-A of the Act to the extent indicated in the judgment. [para 16] 1.2 Levy of interest is incidental to the liability and computation of advance tax. Liability and computation of advance tax is done under section C of Chapter XVII. On the other hand, interest for defaults in payment of advance tax falls u/s 234-B, apart from ss.234-A and 234-C, in section F of Chapter XVII. It is significant to note that s.234-A(4) refers to the increase or reduction of interest subsequent to the Order of the Commission u/s 245-D(4) increasing or reducing the amount of tax payable and so also s.234-B(4). [para 9] 1.3 Chapter XIX-A deals with Settlement of Cases. The word “case” is defined u/s 245-A (b). It is an exhaustive definition, which makes it clear that an application for Settlement shall lie only when any proceedings for assessment or re-assessment or an appeal or revision in connection with such assessment or re-assessment is pending before the Income Tax Authority. [para 10] 1.4 An application for settlement made u/s 245-C(1) will not be maintainable without full and true disclosure of the income by the applicant, the manner in which such undisclosed income was derived and that the applicant had furnished his return of income and that the additional tax payable on such income exceeds the specified amount. This was the position prior to Finance Act of 2007. However, s.245-C(1A) inter alia provides that additional amount of income tax payable in respect of the income disclosed shall be calculated in accordance with the provisions of s.245-C(1B). [para 10] 1.5 Under sub-s. (1B) of s.245-C, if the applicant has furnished his return in respect of his total income and no assessment is made, the tax shall be calculated on the aggregate of the total income returned and the income disclosed in the application as if such aggregate was the total income. The words “regular assessment” are not there in s. 245-C (1B) (ii). However, u/s 245-C(1C)(b), it is provided that the additional tax calculated u/s 245-C (1B)(ii) shall be reduced by the aggregate of the tax deducted at source or tax paid in advance and the amount of tax paid u/s 140-A. The resultant amount is the additional tax payable by the assessee. Thus, s.245-C incorporates within it, the provisions of Chapters XVIIB, XVIIC and s.140-A of the Act. [para 10] 1.6 A careful analysis of the provisions of s. 245-D(1) and 245-D(4) indicates two distinct stages – one, allowing the application to be proceeded with (or rejected), and the other, of disposal of the application by appropriate orders being passed by the Settlement Commission. In between the two stages, there are provisions which require the applicant to pay the additional income tax and interest. Under s.245-D(4) on compliance of ss. 245D(2A) and (2C) and on examination of relevant records and reports, the Settlement Commission may pass such orders as it thinks fit on the matter covered by the application and any other matter relating to the “case” referred to in the report of the Commissioner of Income Tax. Even u/s 245-D (7), it is provided that where the settlement becomes void u/s 245-D(6) the proceedings with respect to the matters covered by the settlement shall be deemed to have revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the income tax authority may complete the proceedings within the period mentioned therein. Thus, s. 245-D(7) brings out the difference between s. 245-D(1) stage and s. 245-D(4) stage. Under s.245-D (6), it is laid down that every order u/s 245-D (4) shall provide for the Terms of Settlement including any demand by way of tax, penalty or interest. [para 10] 1.7 Under s. 245-F (1), in addition to the powers conferred on the Settlement Commission under Chapter XIX-A, it shall also have all the powers which are vested in the income tax authority under the Act. However, there is a significant difference between “procedure for assessment” under Chapter XIV and “procedure for settlement” under Chapter XIX-A (s.245-D). Under s. 245-F(4), it is clarified that nothing in Chapter XIX-A shall affect the operation of any other provision of the Act requiring the applicant to pay tax on the basis of self-assessment in relation to matters before the Settlement Commission. The point to be noted is that several provisions of the Act like s. 140A; furnishing of the return of income by the applicant as indicated in the proviso (a) to s. 245-C(1); provisions of the Act governing liability and computation to pay additional income tax as indicated by proviso (b) to s. 245-C(1); aggregation of total income inter alia in terms of ss. 143, 144 or 147 as indicated by s.245-C(1B)(iii); aggregation of total income as returned plus income disclosed in the application for settlement as indicated in s. 245-C(1B)(ii); the deductions in s. 245-C(1C); increase of interest u/s 215(3) pursuant to the orders of the Settlement Commission and the levy of interest u/s 234-A(4) and 234- B(4) all bring into Chapter XIX-A various provisions of the Act. Thus, while reading the provisions of ss. 245-C and 245-D one has to keep in mind various provisions of the Act and the concepts of self-assessment, assessment, regular assessment and computation of total income which have been engrafted in Chapter XIX-A. [para 10] 1.8 Though Chapter XIX- A is a self-contained Code, the procedure to be followed by the Settlement Commission u/ss 245-C and 245-D in the matter of computation of undisclosed income; in the matter of computation of additional income tax payable on such income with interest thereon; the filing of settlement application indicating the amount of income returned in the return of income and the additional income tax payable on the undisclosed income to be aggregated as total income shows that Chapter XIX- A indicates aggregation of incomes so as to constitute total income which indicates that the special procedure under Chapter XIX-A has inbuilt mechanism of computing total income which is nothing but assessment (computation of total income). The word `assessment’ can be used to cover the whole procedure to ascertain the liability and machinery for enforcement. [para 8 and 11] C.A. Abraham v. Income-Tax Officer, Kottayam and Another 1961 ( 2 ) SCR 765=1961) 41 ITR 425 (SC); and Modi Industries Limited, Modinagar and Others v. Commissioner of Income Tax, Delhi and Another 1995 (3) Supp. SCR 642= 216 ITR 759 – referred to. 1.9 Under the Act, tax is payable on the total income as computed in accordance with the provisions of the Act. Thus, s. 143(3) provision is sought to be incorporated in s.245-C. When Parliament uses the words “as if such aggregate would constitute total income”, it presupposes that under the special procedure the aggregation of the returned income plus income disclosed would result in computation of total income which is the basis for the levy of tax on the undisclosed income which is nothing but “assessment”, which takes place at s. 245-D(1) stage. However, in that computation, one finds that provisions dealing with a regular assessment, self-assessment and levy and computation of interest for default in payment of advance tax, etc. are engrafted. [ss.245-C (1B), 245-C (1C), 245-D(6), 245-F(3) in addition to ss. 215(3), 234-A(4) and 234-B(4)] [para 11] 1.10 In the case of Damani Brothers*, a 3- Judge Bench of this Court, while analyzing the scheme of Chapter XIX-A, has rightly held that s. 234-B, s. 245-D(2C) and s.245-D(6A) operate in different fields. Section 234-B comes into operation when there is default in payment of advance tax whereas liability to pay interest u/s 245-D(2C) arises when the additional amount of income tax is not paid within time specified u/s 245-D(2A). Section 245- D (6A), on the other hand, imposes liability to pay interest only when the tax payable in pursuance of an order of Settlement Commission u/s 245-D(4) is not made within the specified time. [para 10] *C.I.T. v. Damani Brothers 2002(5) Supp. SCR 424=259 ITR 475 – upheld. 2.1 The terminal point for the levy of interest u/s 234-B would be up to the date of the order u/s 245-D(1) and not up to the date of the Order of Settlement u/s 245-D(4). [para 16] 2.2 The proviso to s. 245-C(1), ss.245-C(1B), 245-C(1C), 245-D(4) and 245F(3) bring in the concepts of returned income, self-assessment, aggregation of income returned and income disclosed as if it is total income; levy of interest u/s 215(3) read with s. 245-D(4); increase of interest u/ss 234-A(4) and 234-B (4) read with s. 245-D(4) as also ss. 140A(1A) and (1B) read with ss. 234-A and 234-B. [para 12] 2.3 Section 245-C (1) is voluntary disclosure by the assessee of his undisclosed income. Under s. 245-C (1), the assessee has to mention in his settlement application the additional amount of tax payable by him on such undisclosed income. Under proviso (a), the application for settlement shall not be entertained till the assessee has furnished the return of income which he was required to file under the Act to the extent of his income. Under proviso (b), the assessee has to declare the additional amount of tax payable. Thus, the two provisos to s. 245-C (1) show that Chapter XIX-A, which prescribes a special procedure for assessment by settlement, contemplates a pre-assessment collection of tax. With the filing of the settlement application and after such application is allowed to be proceeded with u/s 245-D(1), intimation u/s 143(1), regular assessment u/ss 143(3)/144 and re-assessment u/s 147 lose their existence, as u/ss 245- C(1A) and (1B) it is only the income disclosed in the return of income before the A.O. alone which survives for consideration by the Settlement Commission for settling the amount of income which is not disclosed in the return. Under s. 245-C (1B)(ii), if the applicant has furnished a return in respect of the total income, whether or not assessment is made in pursuance of the return, the additional amount of income tax payable in respect of the total income disclosed shall be on the aggregate of the total income returned and the income disclosed in his application for settlement as if such aggregate was his total income. This is pre- assessment collection of tax. Such pre- assessment is based on the estimation of the current income and tax thereon by the applicant himself. [para 12] 2.4 When the Settlement Commission accepts the Voluntary Disclosure by the application for settlement, s. 234-B (2) steps in. It is significant that the assessee is liable to pay advance tax, he commits default in payment to the extent of the undisclosed income but he offers to pay additional income tax then interest has to be calculated in accordance with ss. 207, 208 and 234-B(2) up to the date on which such tax is paid. This is not the interest which assessee has to pay after assessment u/s 245-D (4). Under ss. 245-C (1B) and (1C) the additional amount of income tax payable on the undisclosed income shall be on the total income as calculated under s. 245- C(1B). On computation of total income u/ss 245-C (1B) and (1C), interest follows such computation. It is important to note that interest follows computation of total income. Once such computation takes place u/s 245- C(1B) then s. 234-B(2) applies. The said sub-section deals with the situation where before determination of total income u/s 143(1) or 143(3) tax is paid u/s 140A or otherwise interest shall be calculated in accordance with s. 234-B(1) up to the date on which tax is so paid. In that sense an application u/s 245-C (1) is a return. Section 245-C (1) deals with computation of “total income”. Thus, ss. 234-A, 234-B and 234-C are applicable upto the stage of s.245-D(1) order passed by the Settlement Commission, i.e. admission of the case. [para 12 and 14] 2.5 Besides, Chapter XIX-A refers to procedure of settlement (s. 245-D (1)). Section 245-D (1) provides for expeditious recovery of tax by way of pre-assessment collection. Interest on default in payment of advance tax comes u/ss 234-A, 234-B, 234-C, which fall in Chapter XVII which deals with collection and recovery of tax. It is important to note that interest follows computation of additional payment of income tax u/ss 245-C (1B) and (1C). This is how ss. 234-A, 234-B and 234-C get engrafted into Chapter XIX-A at the stage of s. 245-D (1). Till the Settlement Commission decides to admit the case u/s 245-D (1), the proceedings under the normal provisions remain open. But, once the Commission admits the case after being satisfied that the disclosure is full and true then the proceedings commence with the Settlement Commission. In the meantime, applicant has to pay the additional amount of tax with interest without which the application for settlement would not be maintainable. Thus, interest u/s 234-B would be payable up to the stage of s. 245-D (1). This view is supported by the amendment made by Finance Act of 2007 w.e.f. 1.6.2007 in which interest is required to be paid for maintainability of the Application for Settlement. [para 12] 2.6 Parliament has not extended the provisions and the liability to pay interest beyond the date of application for settlement. This is the position even after Finance Act of 2007. Once this position is taken, s. 140-A is attracted. When an assessee has paid interest u/ss. 234-A, 234-B and 234-C in self-assessment u/s. 140-A, which is similar to the scheme of s.245-C (1), and once the Settlement Commission admits the application for settlement, one finds that even u/s 140-A(1B) interest payable u/s. 234-B has to be computed on an amount equal to the assessed tax as defined in the Explanation to mean tax on the total income as declared in the return. Under sub-s. (1B) of s.140-A interest payable u/s. 234-B can also be computed on an amount by which the advance tax paid falls short of the assessed tax as defined in the Explanation thereto. Thus, there is no provision under Chapter XIX-A or even u/s.140A (dealing with self- assessment) to charge interest beyond the date of application for settlement after the same is admitted by the Commission u/s.245-D(1). [para 14] 2.7 Moreover, under the Act, there is a difference between assessment in law [regular assessment or assessment u/s 143(1)] and assessment by settlement under Chapter XIX-A. The order u/s.245-D(4) is not an order of regular assessment. It is neither an order u/s. 143(1) or 143(3) or 144. The making of the order of assessment is an integral part of the process of assessment. [ss. 139 to 158] No such steps are required to be followed in the case of proceedings under Chapter XIX-A. The said Chapter contemplates the taxability determined with respect to undisclosed income only by the process of settlement/ arbitration. Thus, the nature of the orders u/ss. 143(1), 143(3) and 144 is different from the orders of the Settlement Commission u/s 245-D(4). [para 14] 2.8 Further, the jurisdiction of the A.O. is not fettered merely because the applicant has filed the Settlement Application. The Act does not contemplate stay of the proceedings during that period, i.e., when the Settlement Commission is deciding whether to proceed or reject the settlement application. The jurisdiction of the Settlement Commission to proceed commences only after an order is passed under section 245D(1). After making an application for settlement the applicant is not allowed to withdraw it [s. 245C(3)]. Once the case stands admitted, the Settlement Commission shall have exclusive jurisdiction to exercise the powers of the Income Tax Authority. The order of Settlement Commission u/s 245D(4) shall be final and conclusive u/s 245I subject to two qualifications under which it can be recalled, viz., fraud and misrepresentation but even here it is important to note that u/s 245D(7) where the settlement becomes void on account of fraud and misrepresentation the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission. This further supports the view that there are two distinct stages under Chapter XIX-A and that the Legislature has not contemplated the levy of interest between order u/s 245D(1) stage and s.245D(4) stage. Thus, interest u/s 234B will be chargeable till the order of the Settlement Commission u/s 245D(1), i.e., admission of the case. [para 14] Commissioner of Income Tax v. Anjum M.H. Ghaswala and others 2001(4) Supp. SCR 303=252 ITR 1 – referred to. 2.9 Lastly, the expression “interest” in s. 245-(6A) fastens the liability to pay interest only when the tax payable in pursuance of an order u/s 245- D(4) is not paid within the specified time and which levy is different from liability to pay interest u/s 234-B or u/s 245-D(2C). [para 14] C.I.T. v. Damani Brothers 2002(5) Supp. SCR 424=259 ITR 475 – referred to. 3.1 The Settlement Commission cannot re-open its concluded proceedings by invoking s. 154 of the Act so as to levy interest u/s 234-B, particularly, in view of s. 245-I. Invocation of s.154 (held to be inapplicable to Chapter XIX-A proceedings) cannot be justified. Descriptively, it can be stated that assessment in law is different from assessment by way of settlement. A reading of s.245-D (6) with s. 245-I makes it clear that every order of settlement passed u/s 245-D (4) shall be final and conclusive as to the matters contained therein and that the same shall not be re-opened except in the case of fraud and misrepresentation. [para 10, 15 and 16] 3.2 Proceedings before Settlement Commission are similar to arbitration proceedings. It contemplates assessment by settlement and not by way of regular assessment or assessment u/s 143(1) or u/s 143(3) or u/s 144 of the Act. In that sense, it is a Code by itself. It does not begin with the filing of the return but by filing the application for settlement. Under the Act, procedure for assessment falls in Chapter XIV (in which s. 154 falls) which is different from procedure for settlement in Chapter XIX-A in which ss. 245-C and 245-D fall. Provision for levy of interest for default in payment of advance tax u/s 234-B falls in Chapter XVII [Section F] which deals with collection and recovery of tax which is incidental to the liability to pay advance tax u/s 207 (which is also in Chapter XVII) and to the computation of total income in the manner indicated under Chapter XIX-A vide ss. 245-C(1B) and 245-C(1C) read with the provisos to s. 245-C(1) on the additional income tax payable on the undisclosed income. Further, if one examines the provisions of ss. 245-C(1B) and 245-C(1C), one finds that various situations are taken into account while computing the additional amount of tax payable, viz., if the applicant has not filed his return, if he has filed but orders of assessment are not passed or if the proceedings are pending for re-assessment u/s 147 (again in Chapter XIV) or by way of appeal or revision in connection with such re-assessment and the applicant has not furnished his return of total income in which case tax has to be calculated on the aggregate of total income as assessed in the earlier proceedings for assessment u/s 143 or u/s. 144 or u/s 147 [s. 245-C(1B)]. The point to be noted is that in computation of additional income tax payable by the assessee, there is no mention of s. 154. On the contrary, u/s 245-I the order of the Settlement Commission is made final and conclusive on matters mentioned in the application for settlement except in the two cases of fraud and misrepresentation in which case the matter could be re-opened by way of review or recall. [para 15] 3.3 Like ITAT, the Settlement Commission is a quasi-judicial body. Under s. 254(2), the ITAT is given the power to rectify, but no such power is given to the Settlement Commission. Thus, the Settlement Commission cannot reopen its concluded proceedings by invoking s. 154 of the Act. [para 15] 3.4 Lastly, one must keep in mind the difference between review/recall of the order and rectification u/s 154. The Schedule of Chapter XIX-A does not contemplate invocation of s. 154 otherwise there would be no finality to the assessment by settlement which is different from assessment under Chapter XIV where there is an appeal, revision, etc. Settlement of liability and not determination of liability is the object of Chapter XIX- A. Even otherwise, invocation of s. 154 on facts of this batch of cases is not justified. [para 15] Commissioner of Income Tax v. Anjum M.H. Ghaswala and others 2001(4) Supp. SCR 303= 252 ITR 1; and CIT v. Hindustan Bulk Carrier 2002 (5) Suppl. SCR387 =(2003) 259 ITR 449 – referred to. Case Law Reference: 1995(3) Supp. SCR 642 referred to para 7 1961 (2) SCR765 referred to para 7 2002 (5) Suppl. SCR387 referred to para 7 2002(5) Supp. SCR 424 upheld para 10 2001(4) Supp. SCR 303 referred to para 14 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 516-527 of 2004. From the Judgment & Order dated 07.03.2003 of the Income Tax Settlement Commission (IT & WT), Kolkata in Settlement Applications Nos. 1/J/297/89- IT, 1/J/295/89-IT, 1/J/294/89-IT, 1/J/299/89-IT, 1/J/296/89-IT, 1/J298/89- IT, 1/J/302/90-IT, 1/J/307/90-IT, 1/J/305/90-IT, 1/J/305/90-IT, 1/J/304/90- IT, 1/J/301/90-IT. With C.A. Nos. 280-286 of 2005, 8324-8328 of 2004, 603, 990, 925, 924 of 2005, Writ Petition (C0 Nos. 556, 555 of 2004, C.A. Nos. 2247-2250, 923, 995, 994 of 2005, Writ Petition (C) Nos. 63, 61, 62, 60 of 2005, C.A. Nos. 2246, 3231-3232 of 2005, 3091, 3087, 3092, 4599-4601, 528-531 of 2004, Writ Petition (C) Nos. 325, 324, 326 of 2004, C.A. Nos. 992 of 2007, 9174 of 2010, 532 of 2004, 604 of 2005. Gopal Subramanium, SG, C.S. Aggarwal, Parus F. Kaka, R.P. Bhat, O.S. Bajpai, Rajiv K. Garg, Vivek Verma, Ashish Garg, Vineet Garg, A.D.N. Rao, Preetesh Kapur, G.S. Pikale, E.C. Agarwala, Mahesh Agarwal, Rishi Agrawala, Amit Kumar Sharma, Rohma Hameed, Rajiv Tyagi, Vijay Verma, Chanchal Biswal, Asha Gopalan Nair, Balaji Subramanium, Aman Ahluwalia, B.V. Balaram Das,Subramonium Prasad, Ajay Majithia, Manish Kanth, Rajesh Kumar, Dr. Kailash Chand, Chirag M. Shroff, Dattatray Vyas, Ajay Vohra, Kavita Jha, Amit Sachdeva, Prem Malhotra, Rachna Gupta, C.S. Jain, Y. Raja Gopala Rao, Krishna, V.N. Jha, V.N. Raghupathy, Ajay Jain, Rajiv Tyagi, R.K. Raghavan, Chanchal Biswal, Manjit Singh, Kamal Mohan Gupta, Santosh Aggarwal, Bhargava V. Desai, Rahul Gupta, Nikhil Sharma, Vivek Verma, Pallavi Mohan, Pankaj Jain, Abhay Jain, Rakesh Jain, Manish Kr. Choudhary, Namita Chaudhary, S. K. Verma, Mohit Chaudhary, Ashok Kulkarni, Puja Sharma, A. Das, Rituraj Chaudhary fof the appearing parties.

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE/ORIGINAL JURISDICTION CIVIL APPEAL Nos. 516-527 OF 2004 Brij Lal & Ors. … Appellants versus Commissioner of Income Tax, Jalandhar … Respondents with Civil Appeal Nos. 280-286/2005, Civil Appeal No. 8324/2004, Civil Appeal Nos.8325- 8328/2004, Civil Appeal No. 603/2005, Civil Appeal No. 990/2005, Civil Appeal No. 925/2005, … Continue reading →

POSSESSION DELIVERED- Once a gift is complete, the same cannot be rescinded. For any reason whatsoever, the subsequent conduct of a donee cannot be a ground for rescission of a valid gift.

CASE NO.: Appeal (civil) 5942 of 2007 PETITIONER: Asokan RESPONDENT: Lakshmikutty & Ors. DATE OF JUDGMENT: 14/12/2007 BENCH: S.B. Sinha & Harjit Singh Bedi JUDGMENT: J U D G M E N T [Arising out of SLP (Civil) No. 20754 of 2003] S.B. SINHA, J : 1. Leave granted. 2. Whether an averment made in … Continue reading →

CASE NO.: Appeal (civil) 5942 of 2007 PETITIONER: Asokan RESPONDENT: Lakshmikutty & Ors. DATE OF JUDGMENT: 14/12/2007 BENCH: S.B. Sinha & Harjit Singh Bedi JUDGMENT: J U D G M E N T [Arising out of SLP (Civil) No. 20754 of 2003] S.B. SINHA, J : 1. Leave granted. 2. Whether an averment made in … Continue reading →

whether the value of SIM cards sold by the appellant herein to their mobile subscribers is to be included in taxable service under Section 65 (105) zzzx of the Finance Act, 1994, which provides for levy of service tax on telecommunication service OR whether it is taxable as sale of goods under the Sales Tax Act.

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6319 OF 2011 [Arising out of SLP(C) No. 24690 of 2009] IDEA MOBILE COMMUNICATION LTD. ….Appellant (s) VERSUS C.C.E. & C., COCHIN ….Respondent(s) JUDGMENT Dr. MUKUNDAKAM SHARMA, J. 1. Leave granted. 2. The present appeal is filed against the judgment and order … Continue reading →