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2024 Supreme(Online)(DEL) 365
HIGH COURT OF DELHI
Yashwant Varma, Purushaindra Kumar Kaurav, JJ
HARSH DHANUKA HUF – Appellant
Versus
PRINCIPAL COMMISSIONER OF INCOME- & ORS. – Respondent
W.P.(C)-10864/2019
Mr. Puneet Rai, Sr.SC with Mr. Ashvini Kumar and Mr. Rishabh Nangia, Advocates.
The ITSC has broad authority to make additions based on evidence presented, even beyond the scope of the settlement application, provided it adheres to the provisions of the Income Tax Act.
Headnote:(A) Income Tax Act, 1961 - Sections 132, 153, 245A, 245C, 245D, 245F - Writ petitions filed against the order of the Income Tax Settlement Commission (ITSC) regarding additional income disclosure and commission addition - ITSC accepted additional income of Rs.10,36,36,417/- and added Rs.1,45,09,098/- for commission and margin money related to off-market transactions. (Paras 1-5)
(B) Settlement Commission Authority - The ITSC has the authority to make additions based on evidence presented, not limited to the application for settlement, and can consider reports from the Commissioner. (Paras 15-18)
(C) Burden of Proof - The petitioner argued that the addition was made without incriminating evidence, but the ITSC found sufficient corroboration from statements made during investigations. (Paras 23-26)
Facts of the case:
The Dhanuka family filed writ petitions against the ITSC's order, which added income based on undisclosed commission from off-market transactions facilitated by a family friend. (Paras 1-5)
Findings of Court:
The ITSC's addition was upheld as it was based on corroborated evidence and within its jurisdiction under the Income Tax Act. (Paras 26-28)
Issues: Whether the ITSC acted beyond its authority in making the addition of commission and margin money without incriminating evidence. (Paras 14, 23)
Ratio Decidendi: The court ruled that the ITSC has broad powers to assess cases and can make additions based on evidence, even if not explicitly included in the settlement application. (Paras 15-18)
Result: Writ petitions dismissed.
PURUSHAINDRA KUMAR KAURAV, J.
1. The present batch of writ petitions have been filed by the individuals of Dhanuka family including HUFs, assailing the common order of the Income Tax Settlement Commission [“ITSC”] dated 26.06.2019. These petitions raise a common question of law and hence, they are being decided by this common judgment. For the sake of brevity, the facts are being extracted from W.P. (C) No.10870/2019.
2. The dispute in question appears to have been triggered with the initiation of search under Section 132 of the Income Tax Act, 1961 [“Act”] in the case of the petitioner and other family members. In pursuance of the same, proceedings under Section 153/147 of the Act were initiated for the Assessment Years [“AYs”] 2010-11 to 2015-16.
While the assessment proceedings were carried out by the Revenue, the petitioner approached the ITSC with the settlement application dated 26.12.2017 disclosing additional income of Rs.10,36,36,417/-. In the said application, it was admitted by the petitioner that it entered into certain off-market transactions commonly referred to as Dabba trading, through a family friend namely, Raj Kumar Kedia and the same was facilitated by a family member namely, M.K. Dhanuka, which resulted in additional income beyond the regular books of accounts.
3. On 13.02.2018, the application filed by the petitioner was admitted by the ITSC vide order passed under Section 245D(2C) of the Act. During the course of settlement proceedings, respondent no.1 submitted a report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997 and consequently, a reply thereto was also furnished by the petitioner.
4. Subsequently, pursuant to an order dated 25.04.2019 passed by the ITSC directing respondent no.1 to conduct an enquiry and furnish a report as per Section 245D(3) of the Act, respondent no. 1 examined M.K. Dhanuka and Raj Kumar Kedia by issuing summons under Section 131 of the Act. Upon conducting investigation and recording statements of the aforesaid persons, respondent no.1 submitted a report on 07.06.2019 alleging that the following commission and margin money was paid to Raj Kumar Kedia by the members of Dhanuka family:-
- (i) commission for facilitating transaction of long-term capital gains;
- (ii) margin money on purchase of off-market shares; and (iii) commission on total turnover of the off-market transactions 5. Thereafter, on 26.06.2019, the ITSC passed an order under Section 254D(4) of the Act accepting the disclosure of additional income of Rs.10,36,36,417/- and further making an addition of Rs.1,45,09,098/- on the pretext of commission and margin money alleged to have been paid to Raj Kumar Kedia for carrying out off- market transactions. It is this part of the order of addition of Rs.1,45,09,098/- which is sought to be assailed by the petitioner in the instant batch of petitions.
6. Mr. Ajay Vohra, learned senior counsel appearing for the petitioner, submitted that the ITSC has erred in making addition on account of commission and margin money, inasmuch as, it has failed to strictly adhere to the provisions of the Act. According to him, the mandate of law envisaged in Chapter XIX-A of the Act does not confer an unbridled authority upon the ITSC to make any addition which is not permissible as per the regular assessment under the normal provisions of the Act.
7. He emphatically asserted that the aforesaid addition ought not to have been made by the ITSC since the AYs under consideration were unabated in terms of Section 153A of the Act and no incriminating material was found qua the said addition. He, therefore, contended that any addition for the relevant AYs could have been made only on the basis of any incriminating material discovered during the course of search, which is not the case at hand.
8. While inviting our attention to the statements of M.K. Dhanuka and Raj Kumar Kedia, Mr. Vohra contended that the said persons had explicitly denied any such payment of margin or com
