Debangsu Basak, J.- The petitioners have challenged an Order dated February 28, 2014 passed by the Settlement Commission exercising jurisdiction under the provisions of the Income Tax Act, 1961.
2. Learned Senior Advocate for the petitioners has submitted that, the petitioners had made a reference to the Settlement Commission in respect of six assessment years commencing from 2001-2002 to 2006-2007. The Settlement Commission had added Rs. 6.97 Crores as profit and had taken profit at the rate of 8 per cent of gross turn over and has calculated the income of the first petitioner on such basis. The reasons as to why the Settlement Commission had proceeded to add Rs. 6.97 Crores as profit and had taken the net profit rate at 8 per cent of the gross turnover has not been stated in the impugned order. The Settlement Commission has proceeded on the basis of a report which is not a report under Rule 9 of the Income Tax Rules. The petitioners had made submissions with regard to the adjustments of Rs. 6.97 Crores. Such submissions have not been dealt with in the impugned order. The impugned order does not reflect the submissions made and the manner in which the same have been dealt with. The Settlement Commission did not consider various material aspects of the matter. The sum of Rs. 6.97 Crores has been treated in the balance-sheet and the revised balance-sheet of the petitioners in a particular way. The profitability of the first petitioner for the previous years has not been considered. The addition of the sum of Rs. 6.97 Crores and introduction of a rate of 8% as net profit are arbitrary.
3. Relying upon (2009) 315 Income Tax Reports 328 (Madras) (Canara Jewellers v. Settlement Commission & Anr.) he has submitted that, the Settlement Commission has acted without jurisdiction, since the income disclosed by the assessees under Section 245C of the Income Tax Act, 1961 has not been accepted to be full and true disclosure of their respective income. He has relied upon (2016) 380 Income Tax Reports 342 (Delhi) (Agson Global Pvt. Ltd. & Ors. v. Income-Tax Settlement Commission & Ors.) and has submitted that, the powers and functions of the Settlement Commissioner must be in the context of and have a nexus with the settlement. He has submitted that, the power of the Settlement Commission under Chapter XIXA of the Income Tax Act, 1961 can be exercised for the purpose of procedure of settlement of an application under Section 245C and not for reassessment of tax of a particular year. The power of reassessment is vested with the assessing authority. Relying heavily on (2013) 359 Income Tax Reports page 450 (Bombay) (Major Metals Ltd. v. Union of India & Ors.) learned Senior Advocate for the petitioners has submitted that, the Settlement Commission is empowered to call for a report of the Commission at two stages. In the present case, the Settlement Commission has not done so. The Settlement Commission has acted contrary to the statute in arriving at the order of settlement. Therefore, the impugned order of the Settlement Commission stands vitiated.
4. On the aspect of introduction of the sum of Rs. 6.97 Crores as earnings of the first petitioner and the rate of net profit, learned Senior Advocate for the petitioners has submitted that, the Settlement Commission did not exercise best judgment in this matter. In support of such contention he has relied upon (1978) 115 Income Tax Reports 524 (Brij Bhushan Lal Parduman Kumar, Etc. v. Commissioner of Income-Tax, Haryana, Himachal Pradesh and New Delhi-III).
5. Learned Advocate appearing for the department has opposed the writ petition. He has submitted that, the scope of examination of an order passed by the Settlement Commission under Article 226 of the Constitution of India is limited. The petitioner has to demonstrate that, the impugned order of the Settlement Commission is contrary to the statue or that the impugned order stands vitiated by bias, fraud or malice. In the present case, none of the grounds available to assail of the order of the Settlement Commission is available to the petitioners. In support of the contention with regard to the scope and ambit of a writ petition directed against an order of the Settlement Commission, learned Advocate for the respondents has relied upon Major Metals Ltd. (supra), 204 Income Tax Reports 616 (SC) (Shriyans Prasad Jain v. Income-tax Officer), 1993 Volume 3 Supreme Court Cases (Supl.) 389 (Jyotendrasinhji v. S.I. Tripathi & Ors.) and 2011 Volume 4 Supreme Court Cases 635 (Union of India & Ors. v. Ind-Swift Laboratories Ltd.). Learned Advocate for the respondent has referred to Section 245 I of the Income Tax Act, 1961 and has submitted that, the approach to the Settlement Commission is a voluntary act of an assessee. The assessee has exercised his discretion in approaching the Settlement Commission. He cannot resile from the proceedings if he does not accept the views of the Settlement Commission. An assessee while approaching the Settlement Commission is aware of the consequences of the same, at least is deemed to be aware of the same. In the facts of the present case, learned Advocate for the respondent has submitted that, subsequent to the order of the Settlement Commission, an assessment was done pursuant thereto. The petitioners had applied under Section 154 of the Income Tax Act, 1961 on May 13, 2014 for correction of such order of assessment. The same was disposed of by an Order dated August 5, 2014. Therefore, the petitioners cannot be allowed to contend that, the order of the Settlement Commission stands vitiated since by its own action the petitioners had accepted the order of the Settlement Commission and have acted thereon. Learned Advocate appearing for the department has drawn the attention of the Court to the application made by the petitioners before the Settlement Commission. He submits that, a sum of Rs. 6.97 Crores is a part and parcel of the application. The rate of net profit is also part and parcel of the application. The Settlement Commission has considered these aspects and has taken a view on the subject. The petitioners are not entitled to challenge the view taken by the Settlement Commission. The petitioners have not been able to establish that, the Settlement Commission has acted in contrary to the provisions of the Income Tax Act, 1961. Two grounds of challenge made in the writ petition with regard to the order of the Settlement commission were placed before the Settlement Commission by the petitioners themselves.
6. In reply, learned Senior Advocate for the petitioners has distinguished the cases cited on behalf of the department. He has drawn the attention to the Court to the various passages of Major Metals Ltd. (supra).
7. Whether the impugned order of the Settlement Commission dated February 28, 2014 warrants an interference under Article 226 of the Constitution of India is the issue for consideration in the present writ petition.
8. An order of the Settlement Commission can be interfered with under Article 226 of the Constitution of India if such order is contrary to the provisions of the Income Tax Act, 1961 and that, such contraventions of the Act of 1961 are prejudicial to the petitioners. A writ petition is also maintainable if it can be substantiated that an order of the Settlement Commission stands vitiated by bias, fraud or malice. These grounds of challenge are noted in Ind-Swift Laboratories Ltd. (supra), Jyotendrasinhji (supra), Major Metals Ltd. (supra), Shriyans Prasad Jain (supra). A statutory authority is required to act in consonance with the principles of natural justice while deciding on an issue which affects the rights of any person. An order passed by a statutory authority be required to have reasons and reasons being the heartbeat of such order, a writ petition is maintainable, if it can be substantiated that, the impugned order is non-speaking.
9. In the present case, it has been contended that, the impugned order of the Settlement Commission is contrary to the Income Tax Act, 1961 inasmuch as the Settlement Commission did not call for a report under Rule 9 of the Income Tax Rules to consider the addition of the sum of Rs. 6.97 Crores. With respect, such a ground is not available in the facts of the present case, as the petitioners itself had disclosed the Rs. 6.97 Crores in the Statement of Fact filed by it while approaching the Settlement Commission. Such fact was available on record before the Settlement Commission for consideration. Moreover, the Settlement Commission had considered a report dated December 27/30, 2013 of the Commissioner of Income Tax. The petitioners were allowed to make submission thereto. The petitioners have done so. The petitioners were heard by the Settlement Commission in such document. The petitioners are well-aware of the contents of the report. The foundational basis for the Rs. 6.97 Crores was available on record before the Settlement Commission. The foundational basis for the rate of interest imposed by the Settlement Commission in the impugned order was also available before it. The petitioners had placed and contended a certain rate of interest. Such contention was not accepted by the Settlement Commission and the rate of profit was assessed at 8% per annum.
10. The petitioners have contended that on the aforesaid two grounds, the impugned order of the Settlement Commission is nonspeaking. The Settlement Commission has dealt with these two grounds in the impugned order. The petitioners may not agree with the reasons given in the impugned order of the Settlement Commission. However, the impugned order cannot be said to be without any reasons so far as the two grounds are concerned. Both the issues of the sum of Rs. 6.97 Crores as well as the rate of interest have been dealt with by the Settlement Commission. A Writ Court is not called upon to reappreciate the evidence produced before the Settlement Commission, act as the appellate authority and substitute the findings arrived at.
11. In has been contended that, the Settlement Commission did not apply the ratio of Brij Bhushan Lal Parduman Kumar (supra), Agson Global Pvt. Ltd. & Ors. (supra) and Canara Jewellers (supra) in making a best judgment. There is a distinction made between an order of assessment based on best judgment and order of assessment on the basis of the records available. Such distinctions are noted in the authorities cited above. In the present case, the Settlement Commission was called upon to arrive at the quantum of tax liability of the petitioners in the settlement proceeding. It has taken a particular view. The Writ Court need not enter into the factual aspect of the matter to reapprise itself and act as an appellate authority against an order passed by the Settlement Commission. The materials on the basis of which the Settlement Commission had arrived at its decision to add Rs. 6.97 Crores and take 8% as the rate of net profit for the purpose of calculation of tax were before the Settlement Commission. The Settlement Commission has taken a view thereon, giving its reason therefor. The impugned order of the Settlement Commission does not call for any interference. The issue raised is answered accordingly.
12. In such circumstances, the writ petition fails. W.P. No. 431 of 2014 is dismissed. No order as to costs.
[ DEBANGSU BASAK, J. ]
Later :-
Learned Advocate for the petitioners seeks stay of the judgment and order. Such prayer is considered and refused.
[ DEBANGSU BASAK, J. ]