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Maintainability of Application u/s 245 C(1)

Shri K Prathap
SA No 602/II/81/98-IT

ITSC  Chennai
Date of Order 22.7.99

As per proviso (a) to Section 245C(1), no settlement application shall be made unless the applicant has furnished a valid return of income. In the present case, the return filed for the Asst Year 1996-97 and 1997-98 were not accompanied by the Challans for payment of Self Assessment tax.

Non-payment of self assessment tax would automatically lead to the conclusion that the IT Return filed without self-assessment tax payment challan, when in fact no such payment of the self assessment was made, would be invalid and non-est. The IT return filed for the Asst Year 1996-97 was regularised by the issue of notice u/s 148 for that year. The return filed for the Asst Yr 1997-98 was filed within the time allowed under section 139(4) and in any event it was filed within the time specified in the notice under section 148 notice, there was a pendency of proceeding for each of the relevant Asst Years as per Sec 245A(b) of the Act.

In the absence of books of account, the income has to be estimated and while doing so, the VDIS declaration has to be taken into account. There is no complexity of investigation involved and accordingly the settlement application cannot be entertained.
As per Section 67(2) of the Finance Act 1997, if the tax on the voluntary disclosure income is not paid by the declarant before the expiry of three months from the date of filing the VDIS declaration, the declaration filed by him "shall be deemed never to have been made under this scheme". In view of this, the applicant has expressed his apprehension that the Assessing Officer may take into account in the course of proceedings before us, the contents of the VDIS declaration claimed to be incorrect and when the declaration itself is prima facie non-existent as per Section 67(2) of the Finance Act 1997. Having in view the above factors, we hold that the nature and circumstances of the case justify the admission of the impugned settlement application.

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M/s. Reno Chemicals Pharmaceuticals & Cosmetics Pvt. Ltd.,
S.A.No. 5/II/028/98-99/IT

ITSC Mumbai
Order dt. 13.10.1999

In this case the applicant M/s. Reno Chemicals Pharmaceuticals & Cosmetics Pvt. Ltd., owned a property which was given on lease to three separate entities connected with Johnson & Johnson Co. Ltd. By a first set of agreements the applicant company leased their factory premises to these entities and by a second set of agreements separately in each case, the Directors of the company offered certain services to the lessee in respect of those premises. The Directors were the family members of Dr. V.K.Sahu, who owned the company. The Co. as well as the four Directors involved were assessed as such, for about ten years. All the agreements were valid upto October 2012. The applicant company submitted a settlement application and also revised its returns before the Assessing Officer to offer all the income including the rental for the main lease of the premises and the income which was hither to assessed in the hands of its Directors.

The case was not admitted for the reason that, beyond the so called legal advice claimed to have been received by the applicant, there was no support for the proposed stand taken by the applicant whereby it offered all the income in the hands of the company only. Accepting the above position would entail double assessment or will require upsetting the assessments of those over whom the Settlement Commission would not be having any jurisdiction.

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