{"id":248711,"date":"1996-03-11T00:00:00","date_gmt":"1996-03-10T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-ms-paharpur-cooling-towers-on-11-march-1996"},"modified":"2016-04-24T15:31:26","modified_gmt":"2016-04-24T10:01:26","slug":"commissioner-of-income-tax-vs-ms-paharpur-cooling-towers-on-11-march-1996","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-ms-paharpur-cooling-towers-on-11-march-1996","title":{"rendered":"Commissioner Of Income Tax, … vs M\/S.Paharpur Cooling Towers … on 11 March, 1996"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Commissioner Of Income Tax, … vs M\/S.Paharpur Cooling Towers … on 11 March, 1996<\/div>\n
Equivalent citations: JT 1996 (3), 144\t 1996 SCALE (2)655<\/div>\n
Author: B Jeevan Reddy<\/div>\n
Bench: Jeevan Reddy, B.P. (J)<\/div>\n
           PETITIONER:\nCOMMISSIONER OF INCOME TAX, CALCUTTA [CENTRAL]\n\n\tVs.\n\nRESPONDENT:\nM\/S.PAHARPUR COOLING TOWERS PRIVATE LIMITED\n\nDATE OF JUDGMENT:\t11\/03\/1996\n\nBENCH:\nJEEVAN REDDY, B.P. (J)\nBENCH:\nJEEVAN REDDY, B.P. (J)\nMUKHERJEE M.K. (J)\n\nCITATION:\n JT 1996 (3)   144\t  1996 SCALE  (2)655\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
\t\t      J U D G M E N T
\nB.P.JEEVAN REDDY,J.\n<\/p>\n
     The Commissioner  of Income Tax, Calcutta (Central) has
\npreferred these appeals against the judgment and order dated
\nMarch 1,  1979\tmade  by  the  Settlement  Commission  under
\nSection\t 245-D<\/a>\t of  the  Income  Tax  Act  [the  Act].\t The
\nrespondent-assessee,   Paharpur\t  Cooling   Towers   Private
\nLimited, is engaged in the manufacture of cooling towers and
\ntheir parts.  For the  Assessment Years\t 1970-71 to  1974-74
\n[five years], it had filed its returns. [The accounting year
\nwas the year ending list October.] For Assessment Year 1975-
\n76, the assessee had filed its return. It was pending. While
\nso, on October 27, 1976 and on the following dates, searches
\nwere  conducted\t by  the  Director  of\tInspection  and\t his
\nofficers in the premises of the assessee at Calcutta, Bombay
\nand Delhi.  The assessee’s  factories  and  the\t residential
\npremises of  the Managing Director, Sales Manager, Directors
\nand their  associates were  also searched  simultaneously. A
\nnumber of documents were seized.\n<\/p>\n
     On\t June\t24,  1977,   the  assessee   approached\t the
\nSettlement Commission [Commission] with an application under
\nSection 245-C<\/a>  of the  Act. The\t application was made in the
\nprescribed proforma.  Against Column  No.5 “Assessment Years
\nin connection  with which  the application for settlement is
\nmade”, the assessee stated, “Assessment Year 1975-76 and any
\nother proceeding  that may  be\tdecided\t by  the  Settlement
\nCommission (now\t pending before\t the ITO)”.  Against  Column
\nNo.8, “Particulars  of\tthe  matters  to  be  settled”,\t the
\nassessee stated,  “assessment of total income for Assessment
\nYear 1975-76 and any other matter that may be decided by the
\nSettlement Commission”.\n<\/p>\n
     The application  made by  the assessee was forwarded to
\nthe Commissioner  of Income Tax for his report under Section
\n245-D(1)<\/a>. In his report dated July 6, 1977, the Commissioner
\nstated that  “he has  no objection  to the  application\t for
\nsettlement being  processed with  in respect  of the  Asstt.
\nYear 1975-76”.\tBy order dated July 21, 1977, the Commission
\nadmitted the application for settlement.\n<\/p>\n
     On November  15, 1977,  the  assessee  filed  “a  brief
\nstatement of  facts” stating inter alia the following facts:
\nit had\tfiled the  return of  its income  for the Assessment
\nYear 1975-76  on February 10, 1976 showing a total income of
\nRs.64,75,860\/-; the  assessment for the said year is not yet
\ncompleted; while  so, searches were conducted in its various
\npremises; the  accounts department and the Managing Director
\nwere  not   aware  of  many  facts  which  have\t since\tbeen
\ndiscovered; in\tview of\t the said  fact and  with a  view to
\ncooperate with\ttax authorities\t and to avoid harassment and
\nunnecessary litigation,\t it has been advised to approach the
\nCommission for\tsettlement; the\t value of the finished goods
\nas mentioned  in the  return for the Assessment Year 1975-76
\nis Rs.14,25,077,16p;  It should\t in fact  be Rs.31,55,000\/-;
\nsimilarly the  value of\t the stocks and of finished goods at
\nthe end\t of accounting\tyear ending  with 31st October, 1975
\nought to  be Rs.19,85,000\/-  as against\t disclosed figure of
\nRs.5,36,304\/-. The  assessee requested\tthat  the  aforesaid
\nrevised figures\t may be accepted in the place of the figures
\ndisclosed in the return. It then stated, “8. Since the value
\nof  the\t  opening  stock   is  required\t to  be\t amended  by
\nRs.14,48,696\/-\t(Rs.19,85,000\/-\t  minus\t Rs.5,36,304\/-)\t  as
\naforesaid, this\t will have  effect on  the  profits  of\t the
\nprevious years\tas the\tincreased stocks  were not and could
\nnot be built up in any one accounting year only. (9)…for a
\nproper fixation\t of the profits for the Asstt. Year 1975-76,
\ndue to\tincreased value\t of the\t closing stocks, the company
\nsubmits that  the Commission  may consider  reopening of the
\nearlier five  years assessment\tyears,\ti.e.,  Asstt.  Years
\n1970-71 to  1974-75.  (10)  The\t company  hereby  gives\t its
\nconsent for reopening all the earlier five years assessments
\nas required  in Section 245E<\/a> of the Act.” Similar request is
\nsaid  to   have\t been  made  regarding\tthe  other  item  of
\ndisclosure, viz., certain capital expenditure claimed in the
\nreturn as  revenue expenditure,\t but which  the assessee now
\nconceded may  be  treated  as  a  capital  expenditure.\t The
\nassessee also  requested that  all further  proceedings with
\nrespect to Assessment Year 1975-76 as well as those relating
\nto the said earlier Assessment Years be stayed.\n<\/p>\n
     The Commission called upon the Commissioner to file his
\nresponse to  the aforesaid “statement of facts” filed by the
\nassessee. In  his response\/report dated January 3, 1978, the
\nCommissioner stated  inter alia,  “the applicant…asked for
\nsettlement in  respect of  asstt, year\t1975-76, but  in the
\nStatement of  Facts now\t submitted, it\tis stated  that\t the
\namount now  offered  for  settlement  will  have  effect  on
\nearlier 5  years’ assessments…..all these assessments have
\nlong been  completed and  in none of these years, the under-
\nvaluation of  stock, as\t now  offered,\twas  considered\t for
\nassessment\/re-assessment…..There is absolutely no material
\nin the file in support of this contention of the applicant”.
\nThe Commissioner further submitted that since the assessee’s
\noriginal application  was for  settlement in connection with
\nthe Assessment\tYear 1975-76, the assessee’s prayer in Para-
\n13 of  the statement  of facts\tfor issuing  stay orders  in
\nrespect\t of   penalty  proceedings   pertaining\t to  earlier
\nassessment years  is unwarranted, more particularly when the
\nsaid penalty proceedings do not relate to under-valuation of
\nstock but  to other  matters some  of which  were  not\teven
\ncontested  in\tappeal.\t  To   this   response\/report,\t the
\nCommissioner enclosed the report of the concerned Income Tax
\nOfficer stating\t in detail  the facts  relating to  the said
\nearlier assessment  years. It  was stated therein that there
\nwas substantial\t concealment on\t the part  of the  assessee,
\nthat in\t certain cases\tassessments were  reopened and\tthat
\npenalty proceedings  were also\tpending for  concealment  in
\nrespect of the said assessment years. Several irregularities
\nin the\tmaintenance of\taccounts and records by the assessee
\nwere also pointed out.\n<\/p>\n
     The Commission  comprising the Chairman and two members
\nheard the  parties at length and disposed of the application
\nfor settlement\tunder the  impugned order.  The Chairman and
\nthe two\t members differed  on one  issue – which is the only
\nissue  in   these  appeals.  The  question  is\twhether\t the
\nCommission could  drop the  penalty proceedings\t relating to
\nAssessment Years  1970-71 to  1974-75 in  an application for
\nsettlement relating  to Assessment  Year 1975-76. We are not
\nconcerned  with\t  the\tother\tdirections   made   by\t the
\nCommissioner. They  were not argued before us and we express
\nno opinion  thereon. The only question we are considering is
\nthe  power   of\t the   Commission  to\tdrop\/waive   penalty
\nproceedings and\t penalties for\tthe Assessment Years 1970-71
\nto 1974-75  in an application for settlement relating to the
\nAssessment  Year  1975-76.  The\t majority  opinion  [of\t the
\nCommission] mainly  relied upon\t Section 245-E<\/a>\tfor  holding
\nthat Commission\t did have such power while the Chairman held
\nto  the\t  contrary.  The  Chairman  opined  that  since\t the
\napplication for settlement before the Commission was only in
\nrespect of  Assessment Year 1975-76, the penalty proceedings
\nrelating  to  earlier  assessment  years  “were\t in  no\t way
\nconnected  with\t  the  present\t settlement  application  or
\nstatement of facts made by the assessee” and, therefore, the
\nCommission had\tno jurisdiction\t to waive  or drop  the said
\npenalty proceedings.  He pointed  out further  that the said
\npenalty\t proceedings   were  “in   respect  of\t some  other
\nconcealment already  detected by  the Income Tax Officer and
\nnot  relating\tto  incomes  considered\t in  the  settlement
\napplication”. [Emphasis added]
\n     CONTENTIONS URGED BY THE PARTIES:\n<\/p>\n
     In\t these\t appeals,  the\t main  submission   of\t Sri
\nJ.Ramamurthy, learned  counsel\tfor  the  Revenue,  is\twith
\nrespect to  the jurisdiction  of the  Commission to drop the
\npenalty proceedings  relating to Assessment Years 1970-71 to
\n1974-75.  Counsel   submitted  that   the  application\t for
\nsettlement pertained only to Assessment Year 1975-76 and not
\nto the\tsaid earlier  assessment  years.  The  assessee\t did
\ndisclose certain  additional income  for the Assessment Year
\n1975-76 requesting at the same time that the said additional
\nincome be  spread over\tall the six Assessment Years 1970-71
\nto 1975-76.  The assessee had so requested and had given its
\nconsent for re-opening the said earlier assessment years for
\nthe limited  purpose of\t the spreading over\/distributing the
\nsaid additional\t income over  the six  years,  which  was  a
\nrequest made  in his  own self-interest. He did not want the
\nentire additional  income to  be added\tto his income in the
\nAssessment Year\t 1975-76 which\twould have  enhanced his tax
\nliability. The\trequest to  re-open the\t assessments of\t the
\nsaid earlier assessment years was, said the learned counsel,
\nfor the limited purpose of giving due and appropriate relief
\nfor the Assessment Year 1975-76. The advantage he was asking
\nfor  could   not  be   granted\texcept\t by  re-opening\t the
\nassessments for\t the said  earlier assessment  years for the
\nlimited purpose\t of adding  certain amounts as a consequence
\nof “spreading  over”. There was no request or concurrence to
\nre-open the  earlier assessments for all purposes. In short,
\nthe application filed by the assessee did not pertain to the
\nsaid earlier  assessment years but only to 1975-76. Whatever
\nwas asked  for was  being asked\t for only  to reduce the tax
\nliability for  the Assessment  Year 1975-76. Learned counsel
\nemphasized the\tadmitted fact  that the\t penalty proceedings
\nrelating to  the said  earlier assessment  years, pending at
\nthe time  of filing of the settlement application, pertained
\nto some\t other concealments  and not to the items which were
\ndisclosed  in\tthe  settlement\t application.  Counsel\talso
\nsubmitted that a settlement application can be filed only in
\nrespect of  a pending  matter  whereas\tthe  assessments  in
\nrespect of  the said  earlier assessment  years were already
\nconcluded. They\t were  also  not  appealed  against  by\t the
\nassessee.  Sri\tRamamurthy  commended  the  opinion  of\t the
\nChairman for our acceptance.\n<\/p>\n
     Sri N.K.Poddar,  learned counsel  for  the\t respondent-
\nassessee supported  the\t reasoning  and\t conclusion  of\t the
\nmajority.  His\t reasoning  runs   thus:  the  assessee\t had
\nexpressly requested  and had  given his\t consent\/concurrence
\nfor re-opening\tthe assessments\t for the  earlier Assessment
\nYears 1970-71  to 1974-75.  It is true that this request and
\nconcurrence was\t for giving  the relief\t asked\tfor  by\t the
\nassessee in  respect of the Assessment Year 1975-76. But for
\ngiving the  relay so  asked for\t by  the  assessee,  it\t was
\nnecessary to  re-open the  assessment for  the said  earlier
\nassessment years  and add  certain  amounts  on\t account  of
\nenhanced valuation  of the  opening stocks  in each  of\t the
\nrelevant accounting  years.  The  Commission  did  have\t the
\nundoubted power,  in these  circumstances,  to\tre-open\t the
\nassessments relating  to the  said earlier  assessment years
\nfor the aforesaid purpose. Once the Commission re-opened the
\nsaid assessments,  it was  entitled to\tpass  necessary\t and
\nappropriate orders  relating  to  those\t earlier  assessment
\nyears; there  was no  restriction  or  limitation  upon\t the
\nCommission’s power.  Even  though  the\tpenalty\t proceedings
\nrelating to  the said  earlier assessment years pertained to
\ncertain other  alleged concealments  by the  assessee [other
\nthan the  two items concerned in the settlement application]
\nthe Commission had the power, in law, to direct the dropping
\nof those  penalty proceedings  also, once  it re-opened\t the
\nassessments relating  to the  said earlier assessment years.
\nThe majority  opinion of  the Commission  is, therefore, the
\ncorrect one  both on  facts and\t in law.  The scheme and the
\nobject\tunderlying   Chapter   XIX-A   supports\t  the\tsaid
\ninterpretation. The  learned counsel  submitted further that
\nthe penalty  proceedings are  co-related to  the  amount  of
\nconcealment. Once the amount concealed undergoes a change by
\nvirtue of  additions made  in the  said\t earlier  assessment
\nyears on  account of spreading over [of the value of opening
\nstock] in each of the relevant accounting years, the penalty
\nproceedings become  automatically unsustainable in law. They
\ncannot proceed further. Fresh penalty proceedings have to be
\ninitiated on  the basis of the revised figure of concealment\n<\/p>\n
– and that can be done only by the Commission and not by the
\nIncome Tax Officer.\n<\/p>\n
     RELEVANT PROVISIONS OF LAW:\n<\/p>\n
     For a  proper appreciation\t of  the  questions  arising
\nherein, it is necessary to notice the relevant provisions in
\nChapter XIX-A  as they\twere obtaining at the relevant time.
\nThe definition\tof the\texpression “Case”  in clause  (a) of
\nSection 245-A<\/a> reads:\n<\/p>\n
     “`Case’ means  proceeding under the
\n     Indian  Income-tax\t Act<\/a>,  1922,  or
\n     under this Act for or in connection
\n     with the assessment or reassessment
\n     of any  person in\trespect\t of  any
\n     year or  years which may be pending
\n     before an\tincome-tax authority  on
\n     the date  on which\t an  application
\n     under sub-section\t(1)  of\t section
\n     245C<\/a> is made.”\n<\/p><\/blockquote>\n
Section 245-C<\/a>  provides that  the application for settlement
\nshall  be  filed  in  the  form\t prescribed  and  containing
\nprescribed  particulars.   Section  245-D<\/a>   prescribes\t the
\nprocedure to  be followed  on receipt  of an application for
\nsettlement. The\t second\t proviso  to  sub-section  (1)\tsays
\n“provided further that an application shall not be proceeded
\nwith under  this sub-section  if the Commissioner objects to
\nthe application\t being proceeded  with on  the\tground\tthat
\nconcealment of\tparticulars of\tincome on  the part  of\t the
\napplicant or  perpetration of  fraud by\t him for evading any
\ntax or\tother sum  chargeable or impossible under the Indian
\nIncome-tax  Act<\/a>,   1922,  or   under  this   Act,  has\tbeen
\nestablished or is likely to be established by any Income-tax
\nauthority, in relation to the case.”\n<\/p>\n
     Sub-section  (4)  provides\t that  after  examining\t the
\nentire material\t including the\treport(s) of the Commission,
\nthe Commission\tmay pass final orders in accordance with the
\nprovisions of the Act. It is not necessary to refer to other
\nsub-sections in\t Section 245-D<\/a>\tfor the\t purposes  of  these
\nappeals.\n<\/p>\n
     Section 245-E<\/a>  is relevant\t for our purposes and may be
\nset out in full:\n<\/p>\n
     “245E.    Power\tof    Settlement
\n     Commission\t to   reopen   completed
\n     proceedings.–  If\t the  Settlement
\n     Commission is  of the  opinion (the
\n     reasons  for  such\t opinion  to  be
\n     recorded by  it in\t writing)  that,
\n     for the proper disposal of the case
\n     pending before  it, it is necessary
\n     or\t  expedient    to   reopen   any
\n     proceeding connected  with the case
\n     but which\thas been completed under
\n     the Indian Income-tax Act<\/a>, 1922, or
\n     under this\t Act by\t any  Income-tax
\n     section 245C<\/a> was made, it may, with
\n     the concurrence  of the  applicant,
\n     reopen  such  proceeding  and  pass
\n     such  orders  thereon  relation  to
\n     which    the     application    for
\n     settlement had  been  made\t by  the
\n     applicant\t under\t  that\t section
\n     covered such proceeding also:\n<\/p>\n
\t  Provided  that  no  proceeding
\n     shall be reopened by the Settlement
\n     Commission under this section after
\n     the expiry\t of a  period  of  eight
\n     years   from   the\t  end\tof   the
\n     assessment\t year\tto  which   such
\n     proceeding relates.”\n<\/p>\n
Sub-section (1)\t of Section 245-F<\/a> provides that “in addition
\nto the\tpowers conferred  on the Settlement Commission under
\nthis Chapter,  it shall have all the powers which are vested
\nin an  Income-tax authority under this Act”. Sub-section (2)
\nprovides that  “where an application made under section 245C<\/a>
\nhas been  allowed to  be proceeded  with under section 245D<\/a>,
\nthe Settlement\tCommission shall,  until an  order is passed
\nunder sub-section  (4) of section 245D<\/a>, have, subject to the
\nprovisions of  sub-section (3)\tof that\t section,  exclusive
\njurisdiction  to   exercise  the   powers  and\tperform\t the
\nfunctions of  an Income-tax  authority\tunder  this  Act  in
\nrelation to the case.”\n<\/p>\n
     Section 245-H<\/a> empowers the Commission to grant immunity
\nfrom prosecution  under\t Indian\t Penal\tCode<\/a>  or  any  other
\nCentral Act<\/a>  to an  applicant if it is satisfied that he has
\nmade full  disclosure of his income and has fully cooperated
\nwith the Commission.\n<\/p>\n
     Section 245-I<\/a>  declares that “every order of settlement
\npassed under  sub-section  (4)\tof  section  245D<\/a>  shall  be
\nconclusive as  to the  matters stated  therein and no matter
\ncovered by  such order\tshall, save as otherwise provided in
\nthis Chapter,  be reopened  in any proceeding under this Act
\nor under any other law for the time being in force.”\n<\/p>\n
     CONSIDERATION OF THE CONTENTIONS URGED:\n<\/p>\n
     Section  245-C(1)<\/a>\tprovides  that\tan  application\t for
\nsettlement shall  be filed in the prescribed form containing
\nprescribed particulars;\t in this case, the application filed
\nby the\tassessee pertaining  only to  one  assessment  year,
\nviz., 1975-76  and to no other assessment year. According to
\nthe second  proviso to\tSection 245-D(1)<\/a>, as in force at the
\nrelevant time,\tno such application can be proceeded with by
\nthe  Commission\t  if  the   Commissioner  objects   to\t the
\napplication  being   proceeded\twith   on  the\tground\tthat
\nconcealment of\tparticulars of\tincome on  the part  of\t the
\napplicant or  perpetration of  fraud by\t him for evading any
\ntax or\tother sum  chargeable has  been\t established  or  is
\nlikely to  be established  by any  income tax  authority  in
\nrelation  to  the  case;  in  this  case,  the\tCommissioner
\nobjected to  the Commission  passing any orders with respect
\nto assessment  years other than the Assessment Year 1975-76;
\nso  far\t  as  Assessment  Year\t1975-76\t is  concerned,\t the
\nCommissioner put  forward no  objection. Sub-section  (4) of
\nSection 245-D<\/a> says that after examining the entire material,
\nthe Commission\tshall “pass  such orders as it thinks fit on
\nthe  matters  covered  by  the\tapplication  and  any  other
\nmaterial  relating   to\t the   case  not   covered  by\t the
\napplication”, “in  accordance with  the\t provisions  of\t the
\nAct”; in  other words, the Commission has not only to act in
\naccordance with\t the provisions\t of the\t Act  but  that\t its
\njurisdiction is\t confined to  the  matters  covered  by\t the
\napplication before  it. The  further words  “and  any  other
\nmaterial  relating   to\t the   case  not   covered  by\t the
\napplication”  show   that  the\t Commission  can  take\tinto
\nconsideration  any   other  material   not  covered  by\t the
\napplication but\t it must  be one relating to the case before
\nit.  It\t  must\tbe  remembered\tthat  this  chapter  [XIX-A]
\nprescribes a  procedure which is a departure from the normal
\nprocedure provided  by\tthe  Act.  Once\t an  application  is
\nadmitted –  an application  can be made only in respect of a
\npending case – the Commission takes over all the proceedings
\nrelating to  that case\twhich  may  be\tpending\t before\t any
\nauthority under\t the Act.  But this power is confined to the
\ncase before the Commission, which means the case relating to
\nthe assessment year for which the application for settlement
\nis filed  and admitted\tfor settlement\t– to wit, Assessment
\nYear 1975-76 in this case. Section 245-E<\/a>, which is the sheet
\nanchor of  the majority\t opinion, empowers the Commission to
\nre-open any  completed proceedings  connected with  the case
\nbefore it but this power is circumscribed by the requirement
\nexpressly stated  in the  section that\tsuch  re-opening  of
\ncompleted proceedings  should be  necessary or expedient for
\nthe proper disposal of the case pending before it. There are
\ntwo other  limitations upon  this power, viz., that this re-
\nopening of  the completed  proceedings can be done, even for
\nthe aforesaid  limited purpose, only with the concurrence of
\nthe assessee and secondly that this power cannot extend to a
\nperiod beyond  eight years  from the  end of  the assessment
\nyear to\t which such  proceeding relates.  These two features
\nmake it\t abundantly clear  that the section contemplates re-
\nopeining of the completed proceedings not for the benefit of
\nthe  assessee\tbut  in\t  the  interests   of  Revenue.\t  It
\ncontemplates  a\t  situation  where   the  case\t before\t the
\nCommission cannot  be  satisfactorily  settled\tunless\tsome
\npreviously concluded  proceedings are  re-opened which would
\nnormally  be  to  the  prejudice  of  the  assessee.  It  is
\nprecisely for  this reason that the section says that it can
\nbe done\t only with  the concurrence of the assessee and that
\ntoo for\t a period within eight years. This section cannot be
\nread as\t empowering the\t Commission to\tdo  indirectly\twhat
\ncannot be  done directly. We may explain. The Commission has
\njurisdiction to\t settle the  case which\t is before  it. Take
\nthis very  case: the  application for  settlement before  it
\npertains to the Assessment Year 1975-76. Its jurisdiction is
\nlimited to settling this case alone. In this case, it cannot
\nsettle the matters relating to other assessment years, which
\nare  not  before  it.  The  Commissioner  cannot  touch\t the
\nproceedings relating  to the  earlier or  other years.\tThis
\nrule is,  however, relaxed  by Section\t245-E<\/a> to  a  limited
\nextent and  for a limited purpose. The concluded proceedings
\ncan be\tre-opened by  the Commission  provided (a)  such re-
\nopening is necessary or expedient for the proper disposal of
\nthe case  before it,  (b) the  reasons for  such opinion are
\nrecorded in  writing by\t the Commission,  (c) the applicant-
\nassessee must  give his\t concurrence therefore\tand (d)\t the
\nproceeding which  is  being  re-opened\tmust  relate  to  an
\nassessment year\t which is within eight years from the end of
\nthe assessment\tyear to which the case before the Commission
\nrelates. The  power conferred  by Section  245-E<\/a> is  thus  a
\ncircumscribed and  a conditional  power. It can be exercised
\nonly in\t accordance  with  and\tsubject\t to  the  conditions
\naforementioned and  in no  other manner.  Now,\tlet  us\t see
\nwhether Section\t 245-E<\/a> availed\tthe Commission to direct the
\ndropping of penalty proceedings relating to Assessment Years
\n1970-71 to  1974-75 while  settling  the  case\trelating  to
\nAssessment Year 1975-76.\n<\/p>\n
     In the  present case,  the\t application  filed  by\t the
\nassessee was  in respect  of only one assessment year, viz.,
\n1975-76. This is clear from the particulars mentioned in his
\napplication for\t settlement dated  June 24, 1977 referred to
\nhereinbefore.\tIn   his   response\/report   to\t  the\tsaid
\napplication, the  Commissioner had  stated that\t he  had  no
\nobjection to  the application for settlement being processed
\nwith  in   respect   of\t  Assessment   Year   1975-76\tvide
\nCommissioner’s report  dated July  6, 1977.  Thereafter, the
\nassessee filed,\t what  he  called,  “a\tbrief  statement  of
\nfacts”. In  this statement,  he requested  that the enhanced
\nvalue of  the opening  stock disclosed\tby him should not be
\nadded in the assessment of the Assessment Year 1975-76 alone
\nbut  should   be  appropriately\t spread\t over  all  the\t six
\nassessment years, viz., Assessment Years 1970-71 to 1975-76.
\nThis he\t requested because,  doing so would have reduced his
\noverall tax  liability. It  is for this purpose that he gave
\nhis consent\/concurrence\t for re-opening\t the assessments  of
\nthe earlier  assessment years.*\t It was,  therefore,  not  a
\nsituation contemplated by Section 245-E<\/a>. This was not a case
\nwhere  the   Commission\t wanted\t to  re-open  the  concluded
\nassessments because  it was  found necessary or expedient to
\ndo so for the proper disposal of the case pending before it;
\nit was\ta case\twhere the  assessee  was  requesting  for  a
\nbenefit and  for the  purpose of  obtaining that benefit, he
\nwas\t\t\t requesting\t\t\t the\n<\/p>\n
————————————————————
\n*This request  was promptly  opposed by\t the Commissioner of
\nIncome\tTax.   He  stated   that  while\t  in  the   original
\napplication, settlement\t was sought in respect of Assessment
\nYear 1975-76  alone, the  assessee was\tnow saying  that the
\nsettlement of  Assessment Year 1975-76 will have effect upon
\nearlier years as well. The Commissioner of Income Tax stated
\nthat the  assessments for  the said earlier assessment years
\n“have long  been completed”  and that the valuation of stock
\nwas never  under consideration\tin those  assessment  years.
\nThis objection of the Commissioner is also a limiting factor
\non the power and jurisdiction of the Commission in the light
\nof the second proviso to Section 245-D(1)<\/a>. re-opening of the
\nearlier assessments.  Even this\t request of the assessee was
\nfor a limited purpose, viz., for spreading over the enhanced
\nvalue of  opening stock\t disclosed by  him over the said six
\nassessment years. It was not a request or concurrence to re-
\nopen the  entire assessment and penalty proceedings relating
\nto the\tsaid earlier assessment years. [As a matter of fact,
\npenalty proceedings  for the  said earlier  assessment years
\nwere pending  on the  date of  filing of the application for
\nsettlement and its admission. As pointed out by the Chairman
\nin his\topinion, the  said proceedings\twere in\t respect  of
\ncertain concealments  already discovered  by the  Income Tax
\nOfficer, i.e.,\tconcealments established  or  likely  to  be
\nestablished by\tthe Income Tax Officer within the meaning of
\nthe second  proviso to\tSection 245-D(1)<\/a>  – another limiting
\nfactor on  the power  of  the  Commission.]  It,  therefore,
\nfollows that  the Commission  could re-open  the  assessment
\nproceedings for\t the said  earlier assessment years only for
\nthe aforesaid  limited purpose, i.e., for spreading over the
\nsaid enhanced  value. Under the guise of re-opening the said
\nassessments for\t the  aforementioned  limited  purpose,\t the
\nCommission could  not have  re-opened or  for  that  matter,
\nsettled the  matters relating to the said earlier assessment
\nyears. It  is not permissible for the Commission to say that
\nsince it has re-opened the assessments of earlier assessment
\nyear for  the limited  purpose\tof  giving  relief  for\t the
\nassessment year\t before it,  it gets  full command and total
\njurisdiction over  all the said earlier assessment years and
\nthat it\t can pass such orders as it thinks fit in respect of
\nall the\t matters  relating  to\tthe  said  assessment  years
\nincluding the  penalty proceedings.  This  would  amount  to
\ndoing indirectly  what cannot be done directly. The ultimate
\norders passed  by the  Commission should  relate to the case
\nbefore it;  it\tis  only  for  the  purpose  of\t effectively
\nsettling the  case before it that the Commission can re-open
\nconcluded proceedings subject to the four conditions set out
\nhereinabove. We\t fail to  see how  the\tpenalty\t proceedings
\n(which have  now been  dropped) fall within the ambit of the
\npower conferred\t by Section  245-E<\/a>. The\t penalty proceedings
\nnot  only   relate  to\t assessment  years  not\t before\t the
\nCommission but\tthey relate  to alleged\t concealments during
\nthose earlier  assessment years\t which concealments were not
\nbefore the Commission. The disclosures before the Commission
\nrelated\t to   two  other  concealments\t[disclosed  for\t the
\nAssessment Year\t 1975-76  but  which  amounts  the  assessee
\nwanted to  be spread over all the six Assessment Years 1970-
\n71 to  1975-76]\t wholly\t different  and\t distinct  from\t the
\nconcealments  on   account  of\t which\tthe   said   penalty
\nproceedings  were  initiated.  We  are,\t therefore,  of\t the
\nopinion that  the Commission  exceeded its  jurisdiction  in
\ndirecting that\tthe said  penalty proceedings  [relating  to
\nAssessment Years  1970-71 to  1974-75] should  be dropped or
\nthat penalties\tbe waived  in respect of the said assessment
\nyears.\tThe  interpretation  placed  by\t the  Chairman\tupon
\nSection 245-E<\/a>  is the correct one and not the interpretation
\nplaced by the majority.\n<\/p>\n
     We are  also not  impressed  by  the  argument  of\t Sri
\nPoddar, learned\t counsel for  the assessee, that inasmuch as
\nthe quantum  of penalty\t depends upon  the  quantum  of\t the
\nincome assessed and because the income assessed for the said
\nearlier assessment  years was  bound to\t undergo a change on
\naccount of  the\t “spreading  over”  aforesaid,\tthe  earlier
\npenalty proceedings  fall to  the ground  automatically\t and
\nthat, thereafter  penalties, if\t any, can  be levied only by
\nthe Settlement\tCommission. There  is a clear fallacy in the
\nsaid submission.  The penalty proceedings related to certain
\nother concealments,  i.e., other  than the  two concealments
\ndisclosed in  the assessee’s  application for settlement and
\nwhich were  sought to  be spread  over backwards.  The\tsaid
\npenalty proceedings could not, therefore, have been affected
\nor rendered  nugatory by  the addition\tto the\ttotal income
\nresulting  from\t  the  aforesaid  “spreading  over”.  It  is
\ndifficult to  see any  connection,  much  less\tan  intimate
\nconnection,  between  the  said\t “spreading  over”  and\t the
\nconsequent enhancement\tof the\tincome assessed for the said
\nassessment years and the penalty proceedings.\n<\/p>\n
     Lastly, we\t may refer  to Sri Poddar’s submission based
\nupon Section  245-F(1)<\/a>. According  to him,  sub-section\t (1)
\nconfers the  powers of\tan income  tax\tauthority  upon\t the
\nSettlement Commission  including the  power to\tre-open\t the
\nassessments as\tcontemplated by\t Section 147<\/a>. We do not know
\nwhether the  power under  Section 147<\/a> can also be claimed by
\nthe Commission.\t But assuming  it can, the said power has to
\nbe exercised  in accordance with the provisions contained in
\nSections 147<\/a>  to and  150 including  Sections 148<\/a>  and\t149<\/a>.
\nAdmittedly, they were not complied with in this case.\n<\/p>\n
     The appeals  are accordingly  allowed and\tthe order of
\nthe Settlement\tCommission is set aside to the extent it has
\ndropped the penalty proceedings relating to Assessment Years
\n1970-71 to  1974-75 and\t to the\t extent it  has\t waived\t the
\npenalties for  the said\t assessment years.  The\t orders\t and
\ndirections made\t by it\tshall not  affect the  said  penalty
\nproceedings which  can now  proceed according  to  law.\t The
\nSettlement Commission shall modify its judgment and order in
\nterms of and in accordance with this judgment.\n<\/p>\n
     The appeals  are accordingly  allowed with\t costs.\t The
\nappellants’ costs  are quantified  at a\t consolidated sum of
\nRupees twenty thousand.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Commissioner Of Income Tax, … vs M\/S.Paharpur Cooling Towers … on 11 March, 1996 Equivalent citations: JT 1996 (3), 144 1996 SCALE (2)655 Author: B Jeevan Reddy Bench: Jeevan Reddy, B.P. (J) PETITIONER: COMMISSIONER OF INCOME TAX, CALCUTTA [CENTRAL] Vs. RESPONDENT: M\/S.PAHARPUR COOLING TOWERS PRIVATE LIMITED DATE OF JUDGMENT: 11\/03\/1996 BENCH: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-248711","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nCommissioner Of Income Tax, ... vs M\/S.Paharpur Cooling Towers ... on 11 March, 1996 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-ms-paharpur-cooling-towers-on-11-march-1996\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Commissioner Of Income Tax, ... vs M\/S.Paharpur Cooling Towers ... on 11 March, 1996 - 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