The main legal point established in the judgment is the requirement for the Settlement Commission to provide reasons for its application of best judgment in arriving at figures added to the income of the taxpayer.

1. The Income Tax Department has challenged an Order dated June 10, 2014 passed by the Settlement Commission (Income Tax and Wealth Tax), Additional Bench, Kolkata in these writ petitions. The three writ petitions, all at the behest of the Income Tax Department, involve similar issues and have been heard analogously.

2. The parties have treated W.P. No. 33 of 2016 as the lead case and have advanced their respective submissions thereon.

3. Additional Solicitor General appearing for the writ petitioners has submitted that, the impugned order is perverse. It does not give any reasons as to why the Settlement Commission has added the quantum of expenditure as done in the impugned order. There is no basis for adding such small quantum given the nature of the transactions that the Settlement Commission has considered in the Impugned Order. The Settlement Commission did not consider the report of the Department filed under Rule 9 of the Income Tax Rules. It should not have added the entire amount as claimed by the private respondent. It has not given any reasons as to why it has added a sum of Rs.32 crores only. It could have been any other amount other than the sum of Rs.32 crores. It has failed to exercise best judgment. On the issue of best judgment, Additional Solicitor General relies upon 1978 Volume 115 Income Tax Reports page 524 (Brij Bhushan Lal Parduman Kumar v. Commissioner of Income-Tax, Haryana, Himachal Pradesh and New Delhi-III) and All India Reporter 1977 AP page 36 (Additional Commissioner of Income Tax v. Trikamji Punia & Sons).

4. Drawing the attention of the Court to the various portions of the impugned order, learned Additional Solicitor General has submitted that, the assessee had offered a sum of Rs.126.05 crores. The Settlement Commission has added a sum of Rs.36 crores. The Settlement Commission has noted that, there is a claim of expenditure which is bogus for a sum of Rs.236.68 crores and Rs.8.47 crores. It has failed to take into consideration that, there was a shortfall of Rs.110.01 crores.

5. He has submitted that, the Settlement Commission has relied upon the assessment order for the assessment year 2008-2009 to 2010-2011. He has submitted that, the same is not a correct basis, as the assessment orders have since been reopened. Therefore, the basis on which the Settlement Commission has proceeded is faulty.

6. Since the Settlement Commission has proceeded on wrong premises, it would be appropriate that, the matter be remanded to it for fresh consideration. Remand is possible. Learned Additional Solicitor General has relied upon 2010 Volume 8 Supreme Court Cases page 739 (Ajmera Housing Corporation & Anr. v. Commissioner of Income Tax) in support of such contention. Relying upon 2011 Volume 1 Supreme Court Cases page 1 (Brijlal & Ors. v. Commissioner of Income Tax, Jalandhar) learned Additional Solicitor General has submitted that, since the Settlement Commission has deviated from the procedure and has acted as an assessing officer, the impugned order stands vitiated. For the grounds as canvassed, the impugned order should be quashed and the matter may be remanded to the Settlement Commission for fresh consideration.

7. Learned Senior Advocate appearing for the private respondent has submitted that, the Settlement Commission has taken a realistic view on the expenditures claimed. He has drawn the attention of the Court to the fact that, the Settlement Commission has not taken the assessment of the shell companies into consideration. He has drawn the attention of the Court to the various findings recorded in the impugned order as also the stand taken by the Department in the affidavit in opposition. He has submitted that, the Department did not point out to the Settlement Commission that, the assessment orders of some of the assessment years have been reopened.

8. On the issue of best judgment assessment, learned Senior Advocate for the private respondent has relied upon 1973 Volume 90 Income Tax Repor