Vildirect: IncomeTax-caselaws-1994-VIL-252--DT

1994-VIL-252--DT

Equivalent Citation: [1994] 209 ITR (A. T.) 21

INCOME TAX SETTLEMENT COMMISSION

Date: 15.06.1994

AIRTECH PVT. LTD. AND OTHERS

INCOME-TAX SETTLEMENT COMMISSION

BENCH

ORDER

JUDGMENT

By order F. No. 1/45/Tech./94 SC dated March 21, 1994, as amended by the order dated April 8, 1994, the Chairman of the Income-tax Settlement Commission constituted a Special Bench comprising the following :

1. Shri S. M. Deshmukh Chairman 2. Shri K. Rangarajan Vice-Chairman, Additional Bench, Madras 3. Shri S. B. Potnis Vice-Chairman, Additional Bench, Bombay 4. Shri P. K. Appachoo Member, Principal Bench, Delhi 5. Shri H. Venkataraman Member, Additional Bench, Bombay.

A single issue was set out in the abovementioned order dated March 21, 1993, for the consideration of the Special Bench. This was :

Whether the application for settlement under section 245C(1) of the Income-tax Act, 1961, must contain some disclosure of additional income for each and every assessment year comprised in the petition when the petition is for several assessment years.

Four of the cases where this issue arose were, by an order dated March 22, 1994, notified for hearing. Three of them Airteck Pvt. Ltd., New Delhi, Hari Chand, Sirsa, and Messrs. Damani Bros., Bombay, were heard. One could not be heard. The first two were heard in the camp of the Special Bench at Bombay on April 12, 1994, and the third, in the same camp, on April 13, 1994. Shri C. S. Aggarwal, advocate, represented both Airteck Pvt. Ltd. and Hari Chand, Sirsa. Shri D. M. Harish, advocate, represented Messrs. Damani Bros. Dr. V. Balasubramanian, senior standing counsel of the Income-tax Department at Bombay, represented the Department on both the days of hearing. As a single common issue was to be considered in all the three cases, this common order is passed in respect of them.

In his submission, Shri C. S. Aggarwal took up the contention that the only pre-condition contained in section 245C(1) was that there should be disclosure of income in respect of a case and nothing more. He pointed out that for the purpose of Chapter XIX-A, which contained the provisions relating to settlement of cases in sections 245A to 245M thereof, the term "case" had been defined. This definition which is contained in section 245A(b) is as follows :

"case ' means any proceeding under this Act for the assessment or reassessment of any person in respect of any year or years, or by way of appeal or revision in connection with such assessment or reassessment, which may be pending before an income-tax authority on the date on which an application under sub-section (1) of section 245C is made." (The proviso under section 245A(b) has been excluded in the extract above as it is not material for our consideration of the issue). He referred to the use of the plural term "years" in the definition and contended that submissions of a single application covering a number of years was contemplated in the definition itself. He then took us through the language of section 245C(1) which relates to the making of an application for settlement. This section is as follows :

" An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided :

Provided that no such application shall be made unless, -

(a) the assessee has furnished the return of income which he is or was required to furnish under any of the provisions of this Act ; and

(b) the additional amount of income-tax payable on the income disclosed in the application exceeds fifty thousand rupees. ''

He submitted that what was required as per the main part of section 245C(1) was only that in the application for settlement there should be disclosure of income. There was no specification contained therein that there should be disclosure of income for each and every assessment year covered in the application. He also pointed out that proviso (b) below section 245C(1) which related to tax on the additional income referred to the "income disclosed in the application". There was no ambiguity at all in the matter, he stated, and claimed that it was clear from the very provisions of section 245C(1) that the income disclosure need only be with reference to the application as a whole. There was no requirement anywhere in it that there should be disclosure of income in respect of each and every year covered by the application.

Shri C. S. Aggarwal then submitted that the term "income" contained in section 245C(1) should be taken as even including negative income or losses. According to him, there was no need even to declare in the application a positive income. He said that the purpose of Chapter XIX-A was to effect settlement of cases and settlements could be both regarding incomes and regarding losses. In this connection, he also drew our attention to the decision of the Supreme Court in the case of CIT v. J. H. Gotla [1985] 156 ITR 323. He stated that in this decision the Supreme Court did not agree with the view taken by the Gujarat High Court in the case of Dayalbhai Madhavji Vadera v. CIT [1966] 60 ITR 551. According to him, the Gujarat High Court had opined that for the purpose of section 16(3) of the Indian Income-tax Act, 1922, which corresponded to section 64 of the present Act, income would not include losses. Shri Aggarwal then submitted that it was enough if for some of the years covered in the application alone there was additional positive income and the aggregate tax payable for the years for which additional positive income had been disclosed was in excess of Rs. 50,000. This, he said, would be clear from the provisions of sections 245C(1A) to 245C(1D). These provisions relate to the computation of tax on the income disclosed in the application. Section 245C(1D) refers to cases where the additional income has been disclosed for more than one year. Referring to the language of that section, Shri Aggarwal claimed that the aggregation was limited to those years for which there was additional tax. According to Shri Aggarwal, therefore, even in an application covering a number of years, there was need for a disclosure of positive income only for some of the years and not for all, and the maintainability of the application would depend upon whether the aggregate of the taxes for the years for which additional positive income was disclosed exceeded Rs. 50,000, and nothing else. He maintained that for some of the years not only no positive income but even losses could be disclosed and even for the application as a whole there was no need for a positive income to be disclosed. Shri Aggarwal then submitted that the provisions contained in sections 245C(1A) to (1D) were merely procedural provisions and, therefore, they could not in any manner modify the substantive provisions contained in section 245C(1). Hence, he argued, even if it was construed that these provisions would require offer of additional income for tax for each of the years for which the application was made, that requirement could not be read into the provisions of section 245C(1) wherein the language was clear and unambiguous. In this connection, he also stated that when two views were possible, the one in favour of the applicant had to be adopted, vide CIT v. Badri Prasad Agarwal [1983] 142 ITR 353 (MP).

Shri Aggarwal then stated that there could be a number of instances where in a settlement the applicant could seek a reduction in the total income already declared to the Department for some of the years while offering additional positive income for tax for the other years. He gave an example. He stated that it was possible that in view of the provisions of the Act an assessee may, in the course of a search, in a statement recorded under section 132(4), admit that the entire income represented by an asset found during the search was his income of the year of search, but later he might be able to gather evidence to show that the asset in fact was procured earlier out of the incomes earned in the earlier years. In such circumstances, he would approach the Commission for a settlement for the earlier years as well as for the year of search, in which case the income to be settled for the year of the search may be less than the income offered for assessment even as per the return filed by him on the basis of the statement given by him under section 132(4).

Shri Aggarwal then drew our attention to a definition of the term "income" contained in section 2(24). He pointed out that income included profits and gains and claimed that the profits and gains could be positive or negative. This was only a reiteration of the claim made earlier that income included losses.

Shri Aggarwal concluded his arguments by stating that what was required under section 245C(1) was only a disclosure of income (which would include losses) with the aggregate of the taxes payable for the years for which additional positive income was disclosed exceeding Rs. 50,000. Accordingly, therefore, he claimed that the answer to the issue referred to us would be that there was no requirement under section 245C(1) for the disclosure of additional income for each and every one of the assessment years covered in the application.

The submission of Dr. V. Balasubramanian made on behalf of the Department may now be taken up. According to him, Chapter XIX-A, being merely a part of the Income-tax Act, should be construed consistently with the scheme of the Act. Since as per the overall scheme of the Act, each assessment year was a self-contained period and assessments were made and all other actions taken assessment-yearwise, the application contemplated in section 245C(1) should also be an application referable to only one assessment year. In other words, he claimed that there should be a single application for every assessment year for which a settlement was sought. He also referred to the proviso under section 245C(1). He pointed out that proviso (a) which required the furnishing of a return of income only mentioned "the return of income". He submitted that the plural "returns" must have been used if a single application was meant to cover a number of assessment years. He argued that since proviso (a) could only refer to one single year, proviso (b) could also accordingly refer to only one year. A harmonious construction was possible, he claimed, only if such a view was taken. According to him, therefore, to satisfy the requirements of the proviso (b), for each assessment year for which settlement was sought, the additional income disclosed should result in a tax of more than Rs. 50,000. He admitted that the prescribed form for the filing of the application made provision for a single application for a number of years. This he stated could only mean that there could be a composite application for a number of assessment years but would not mean that the requirement of the provisions contained in section 245C(1) was to be satisfied only for the application as a whole and not for each and every one of the assessment years covered in the application.

Dr. Balasubramanian then pointed out that the provisions contained in sections 245C(1A) to 245C(1D) were not only for the purpose of section 245C(1) but also for the purposes of the working of the additional amount of tax payable on the admission of the application and referred to in sections 245D(2A) to (2D). He claimed that section 245C(1D), which contained provisions regarding how to work out the additional tax payable where the income disclosed in the application related to more than one previous year, was redundant in so far as section 245C(1) was concerned, as section 245C(1) related to a single assessment year. It could be relevant, he said, only for the purpose of sections 245D(2A) to (2D). This was poor drafting and nothing more and no inference could be drawn from section 245C(1D) that the aggregate of the taxes payable taking the application as a whole need only be more than Rs. 50,000.

The requirement that there should be additional income disclosed for each year and the additional tax for each year should exceed Rs. 50,000 was according to him abundantly clear. The question of two views being possible did not arise, he claimed. He also stated that the provisions contained in section 245C(1) were special provisions and there should be strict conformity with these provisions.

Dr. Balasubramanian did not also find any merit in the contention that income could include losses even for the purpose of settlement under Chapter XIX-A. He also perceived a situation, if the view advocated by him was not accepted, of the Settlement Commission being flooded with a large number of petty cases. The intention of the Legislature could never have been to make this high-level body deal with petty cases, he opined.

Shri D. M. Harish in his submissions referred to the issue referred to the Special Bench and claimed that the answer was apparent from the very provisions of section 245C(1). From the language of that section it was clear, according to him, that there was need only for a disclosure of income in the application. He submitted that there was nothing in the language contained therein to come to the conclusion that such requirement was present in respect of each and every assessment year covered in the application.

Shri Harish then took us through the provisions of section 245C(1B). He pointed out how that section referred to cases where the income declared in the application related to one year. He claimed that it was not so worded as to say that it related to cases where the application itself related to one year. He, therefore, claimed that it was contemplated that there could be an application for settlement for a number of years with additional income being offered only for one of them. He then took us through the language of section 245C(1D) and claimed that from the opening words of that section it was clear that the situation contemplated was one in which the application was for a number of years but the income disclosed in the application related to more than one year. Nothing was there in the language of that section, he claimed, to indicate that there should be additional income disclosed for every one of the years covered by the application. Shri Harish, therefore, claimed that both in section 245C(1) as well as in the provisions contained in sections 245C(1B) and 245C(1D), which related to the calculation of additional tax payable, there was no requirement for disclosure of income for each and every year.

He then claimed that from proviso (b) to section 245C(1) also it was clear that the additional amount of income-tax payable had to be in respect of the income disclosed in the application as a whole. It could be that proviso (a) related to every one of the years covered in the application but that would not mean that proviso (b) should also be related to every one of the years, as there was no ambiguity in this regard in the language of proviso (b), he contended.

The form prescribed for the making of the application (Form No. 34B) was then referred to by Shri Harish. He claimed that from the form itself it was clear that what was contemplated was only a single application for a number of years. He also stated that it could be that in the procedure adopted for making assessments, etc., every assessment year had to be separately dealt with, but that would not mean that there could not be provisions in the Act under which a number of years could be taken up together. Thus though Chapter XIX-A was only a part of the Act, this part of the Act related to dealing with the matters covering a number of years together, he submitted. Shri Harish did not also find any merit in the contention that if the requirement of the additional tax being more than Rs. 50,000 was to be satisfied only for the application as a whole, there would be a flood of petty cases for settlement. He said the amount of Rs. 50,000 itself was not small. Parliament in its wisdom had decided that this would be a proper amount for limiting the number of cases to be considered by the Settlement Commission. That apart, he said, an application was just not admitted by the Settlement Commission only because the additional tax resulting from the disclosure of additional income exceeded Rs. 50,000. The Settlement Commission, he stated, took into account factors like the nature and circumstances of the case and the complexity of investigation involved in deciding whether a case should be admitted or rejected.

Shri Harish referred to the provisions of section 245E relating to reopening of completed proceedings by the Settlement Commission. He pointed out that there was no requirement therein that there should be an offer of additional income for the year for which the proceedings were reopened. This, according to him, also showed that offer of additional income for every year for which the settlement was being effected was not contemplated.

Shri Harish concluded his arguments saying that there was no ambiguity at all in any part of section 245C(1). It was clear, according to him, from both the language of the section and the prescribed form for making the application, that there could be a single application covering a number of assessment years with the only requirements that there should be an additional income disclosed in the application as a whole and that the additional tax as worked out under section 245C(1A) to (1D) should be more than Rs. 50,000.

To answer the issue referred to us and to consider the questions that emerge from the points made out before us on behalf of the applicants and on behalf of the Department, it would be necessary to go into the very genesis of Chapter XIX-A, which contains the provisions relating to settlement of cases. The introduction of this Chapter in the income-tax statute was the result of the acceptance by the Government of one of the recommendations of the Direct Taxes Enquiry Committee, popularly known as the Wanchoo Committee, whose final report was submitted to the Government of India in December, 1971. The Committee considered both the introduction of a voluntary disclosure scheme and the provision in the statute for a settlement mechanism. It preferred the latter. It observed in this regard as follows : " In the administration of fiscal laws, whose primary objective is to raise revenue, there has to be room for compromise and settlement. A rigid attitude would not only inhibit a one-time tax-evader or an unintending defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigational resources of the Department in cases of doubtful benefit to the Revenue, while needlessly proliferating litigation and holding up collections. We would, therefore, suggest that there should be a provision in the law for a settlement with the taxpayer at any stage of the proceedings. "

The Bill which was introduced to give effect to the Wanchoo Committee's recommendations was the Taxation Laws (Amendment) Bill, 1973. The Notes on Clauses appended to the Bill stated that the provisions proposed in the Chapter XIX-A were "mainly intended to give a statutory basis for settlement of cases which are necessitated at times in the interest of the Revenue" (Notes on Clause 58). After passing through the Select Committee of Parliament, the Bill was enacted as the Taxation Laws (Amendment) Act, 1975, and came into force with effect from April 1, 1976. Section 245C(1), as it then was read as under :

" 245C. Application for settlement of cases. (1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner and containing such particulars as may be prescribed to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereafter provided. "

In paragraph 45 of the Board's Circular No. 204 (see [1977] 110 ITR (St.) 21), dated July 24, 1976, which contained the explanatory notes in respect of a part of the provisions of the Taxation Laws (Amendment) Act, 1975, this is what was stated in regard to the insertion of Chapter XIX-A (at page 41 of 110 ITR (St.) ) :

" 45. Section 57 of the Amending Act has inserted a new Chapter XIX-A in the Income-tax Act, which makes provisions for settlement of cases. These provisions come into force with effect from April 1, 1976. They are mainly intended to provide a statutory basis for settlement of cases which is at times necessitated by the nature and circumstances of certain cases or the complexity of the investigation involved therein."

It is obvious from the foregoing that the purpose of the introduction of Chapter XIX-A in the Income-tax Act for the settlement of cases was only to have a statutory basis for settlement which at times becomes necessary because of the nature and circumstances of the cases or the complexity of the investigation involved. In the Taxation Laws (Amendment) Act, 1984, sub-section (1) of section 245C was substituted by sub-sections (1), (1A), (1B), (1C), (1D) and (1E) with effect from October 1, 1984. Sub-section (1E) is not relevant to be considered for our purposes. The provisions of sub-sections (1A) to (1D) will of course be considered, but at a later stage. We find that the substituted provision came in sub-section (1) as follows :

" 245C(1). An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Income-tax Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided :

Provided no such application shall be made unless the additional amount of income-tax payable on the income disclosed in the application exceeds fifty thousand rupees. ''

The above proviso was again substituted by a proviso containing two clauses. This was by the Finance Act, 1987, and with effect from June 1, 1987. The substituted proviso is as follows :

" Provided that no such application shall be made unless, (a) the assessee has furnished the return of income which he is or was required to furnish under any of the provisions of this Act ; and

(b) the additional amount of income-tax payable on the income disclosed in the application exceeds fifty thousand rupees. ''

Section 245C has not undergone any further change except for the substitution of the words "Income-tax Officer" contained therein by the words "Assessing Officer".

It will be seen that the requirements that there should be a disclosure of income which has not been disclosed to the Income-tax Officer (now Assessing Officer) and that the additional income-tax payable on the income so disclosed should exceed fifty thousand rupees came into effect only from October 1, 1984. This is what was stated in the Notes on Clauses in regard to the changes introduced in the Taxation Laws Amendment Bill, 1984 (see [1984] 149 ITR (St.) 59) :

" The substituted sub-section (1) seeks to secure that an application for settlement shall contain, inter alia, a full and true disclosure of the applicant's income which has not been disclosed before the Incometax Officer, the manner in which such income has been derived and the additional amount of income-tax payable on such income. It also seeks to provide that no application for settlement of a case shall be made unless the additional amount of income-tax payable on the income disclosed in the application exceeds fifty thousand rupees. "

The instructions issued to the field officers in Departmental Circular No. 394 dated September 14, 1984, had this to say in this regard (see [1984] 150 ITR (St.) 17) :

" 28.2. New sub-section (1) provides that an assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which had not been disclosed before the Income-tax Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner provided in the provisions of Chapter XIX-A of the Act.

28.3. The proviso to sub-section (1) lays down that no such application shall be made unless the additional amount of income-tax payable on the income disclosed in the application exceeds Rs. 50,000.

28.4. The portions underlined above indicate the salient features of the difference between the earlier sub-section (1) and the new subsection (1) of section 245C. It will be observed that under the new provision, the application to the Settlement Commission will have to contain :-

(a) a full and true disclosure of the applicant's income which has not been disclosed before the Income-tax Officer ;

(b) the manner in which such income has been derived ; and

Besides, the new sub-section, for the first time, precludes persons from making an application to the Settlement Commission unless the additional amount of income-tax payable on the income disclosed in the application exceeds Rs. 50,000. ''

It would thus appear that though initially Chapter XIX-A was introduced only for the purposes of having a mechanism for the settlement of cases, without there being any requirement that there should be any disclosure of additional income, it was felt necessary at later stage to bring in a provision by which settlement was effected only in cases where there was disclosure of additional income. Neither the Notes on Clauses nor the departmental instructions clarify the reasons why this provision was introduced. It could be that this provision was introduced only to see that the Settlement Commission was not saddled with a large number of small cases. A plain reading of the provisions would only indicate that there should be disclosure of additional income in the application as a whole and the tax relating to such additional income should exceed fifty thousand rupees. If it had been contemplated that the requirement of additional tax should be with reference to each and every year covered in the application, that would have been made explicit in the language of proviso (b) to section 245C(1), which has not been done.

In a brochure published by the Directorate of Income-tax, Taxpayers' Information Series 5 on the subject of Settlement of Cases under the Direct Taxes Acts, in paragraph 4(iii) of Chapter III thereof, this is what is stated :

" While preparing the application it should be ensured that : -

(i) . . . . ;

(ii) . . . . ;

(iii) the additional amount of tax payable on the income disclosed before the Commission calculated in the manner laid down in subsections (1B) to (1D) of section 245C exceeds Rs. 50,000 as required under proviso (b) to section 245C(1). The amount of additional tax exceeding Rs. 50,000 relates to all years for which the application is being made taken together. ''

The intention that there should be an additional tax exceeding Rs. 50,000 for all the years in the application taken as a whole is also very evident from the abovequoted extract. In these circumstances, we can only conclude that the requirement that the amount of additional tax should exceed Rs. 50,000 relates to the application as a whole and not to every single assessment year involved in the application.

The matter that now requires to be considered is whether, even if the additional amount of tax for the application as a whole exceeds Rs. 50,000, there should be a disclosure of additional income for every single assessment year involved in the application. Reference may now be made to the provisions of sections 245C(1) to (1D) in this regard. These sub-sections are reproduced below : " (1A) For the purposes of sub-section (1) of this section and subsections (2A) to (2D) of section 245D, the additional amount of incometax payable in respect of the income disclosed in an application made under sub-section (1) of this section shall be the amount calculated in accordance with the provisions of sub-sections (1B) to (1D). (1B) Where the income disclosed in the application relates to only one previous year, (i) if the applicant has not furnished a return in respect of the total income of that year (whether or not an assessment has been made in respect of the total income of that year), then, except in a case covered by clause (iii), tax shall be calculated on the income disclosed in the application as if such income were the total income ;

(ii) if the applicant has furnished a return in respect of the total income of that year (whether or not an assessment has been made in pursuance of such return), tax shall be calculated on the aggregate of the total income returned and the income disclosed in the application as if such aggregate were the total income ;

(iii) if the proceeding pending before the income-tax authority is in the nature of a proceeding for reassessment of the applicant under section 147 or by way of appeal or revision in connection with such reassessment, and the applicant has not furnished a return in respect of the total income of that year in the course of such proceeding for reassessment, tax shall be calculated on the aggregate of the total income as assessed in the earlier proceeding for assessment under section 143 or section 144 or section 147 and the income disclosed in the application as if such aggregate were the total income.

(1C) The additional amount of income-tax payable in respect of the income disclosed in the application relating to the previous year referred to in sub-section (1B) shall be, (a) in a case referred to in clause (i) of that sub-section, the amount of tax calculated under that clause ;

(b) in a case referred to in clause (ii) of that sub-section, the amount of tax calculated under that clause as reduced by the amount of tax calculated on the total income returned for that year ;

(c) in a case referred to in clause (iii) of that sub-section, the amount of tax calculated under that clause as reduced by the amount of tax calculated on the total income assessed in the earlier proceeding for assessment under section 143 or section 144 or section 147. (1D) Where the income disclosed in the application relates to more than one previous year, the additional amount of income-tax payable in respect of the income disclosed for each of the years shall first be calculated in accordance with the provisions of sub-sections (1B) and (1C) and the aggregate of the amount so arrived at in respect of each of the years for which the application has been made under sub-section (1) shall be the additional amount of income-tax payable in respect of the income disclosed in the application. ''

These provisions relate not only to working out the additional tax payable for the purposes of proviso (b) to section 245C(1) but also for the purposes of section 245D(2A) to (2D), which relate to the payment of the additional income-tax on the admission of the application. Dr. Balasubramanian in the course of his arguments stated that section 245C(1D) was relevant only for the purposes of section 245D(2A) to (2D) and not for the purposes of section 245C(1). We are unable to see any merit in this contention. These sub-sections are applicable as much for the purposes of section 245C(1) as for the purposes of section 245D(2A) to (2D).

Section 245C(1B) starts with the words "where the income disclosed in the application relates only to one previous year". It is clear from the language used that it contemplates a situation wherein the application can be in respect of one year or more than one but the income disclosure is only in respect of one year. Section 245C(1D) has the following initial words:

" Where the income disclosed in the application relates to more than one previous year. " It is obvious from these words that this would cover a case where in an application covering a number of years the income disclosed relates to more than one year. These provisions thus make it amply clear that the application can be for a number of years but the income disclosure can be for one year or for more than one year. Accordingly, section 245C(1B) to 245C(1D) provide for the computation of additional tax in two different situations. Thus neither in the provisions of section 245C(1), which specify the conditions to be satisfied for treating the application as maintainable, nor in the provisions contained in the sections which relate to the computation of additional tax on the income disclosed in the application, is there any requirement that there should be income disclosure for each and every one of the years covered in the application.

Much emphasis was placed by Dr. Balasubramanian on the fact that proviso (a) to section 245C(1) could only relate to a single assessment year. His argument was that accordingly proviso (b) could also relate only to a single assessment year. In the use of the term "years" in the definition of the term "case", the pendency of proceedings for a number of years is contemplated. The format of Form No. 34B in which the application is to be filed also requires the assessment years for which the application is being made to be specified. In the circumstances, it can only be stated that though the requirement of proviso (a) is to be satisfied for every single assessment year, proviso (b) can very well be applied to the application as a whole. In fact, this can be the only construction which will be harmonious with the entire scheme in regard to settlement of cases.

In section 245C(1D) in regard to the aggregation of additional tax for the years for which additional incomes have been disclosed this is what has been stated :

" aggregate of the amount so arrived at in respect of each of the years for which the application has been made under sub-section (1)." (emphasis supplied).

We did consider whether, in view of the words underlined above, a meaning could be drawn that there should be disclosure of additional income for each and every one of the years covered in the application. In our view, in view of the opening words of section 245C(1D) from which it can be clearly inferred that the provisions relate only to cases where the income disclosed in the application is only for some of the years, it cannot be taken as a requirement that there should be disclosure of income for each one of the years.

We have also taken into account the provisions of section 245E. Section 245E is the provision enabling the Settlement Commission to reopen any proceeding concluded by an income-tax authority. Once such a proceeding is reopened, it will stand to get the same status as any other proceeding in respect of which an application has been admitted. There is no requirement in that section that there should be an offer of any additional income for the year in respect of which action has been taken under section 245E. This provision also reinforces our inference that disclosure of income for every year is not a requirement.

We may now put down the conclusions we have drawn. They are -

(a) A single application for settlement can cover a number of assessment years ;

(b) An application for settlement should disclose income not disclosed to the Assessing Officer ;

(c) The tax payable relating to the additional income so disclosed should, for the application as a whole, exceed Rs. 50,000 ; and

(d) Though there should be disclosure of additional income in the application as a whole, there need not be disclosure of additional income for each and every one of the assessment years covered in the application.

The last of the above conclusions answers the reference made to this Special Bench. It is accordingly answered as follows :

There is no requirement that the application under section 245C(1) must contain some disclosure of additional income for each and every assessment year comprised in it.

A matter on which we feel a clarification is required to be given before we dispose of the reference is in regard to the contention taken up by Shri Aggarwal that the income referred to in section 245C(1) could include losses. His claim was that even the application as a whole need not disclose a positive income. He depended on the decision of the Supreme Court in CIT v. J. H. Gotla [1985] 156 ITR 323. As we can see that decision has no relevance to the provisions of the Act with which we are concerned. It is obvious that whatever might have been the purpose initially behind introducing the statutory provision for the settlement of cases, later a requirement was brought in which provided that there should be additional income disclosed in a settlement application. It is obvious that in the context in which the word "income" has been used in section 245C(1), it can only refer to a positive income and not a negative one. We, therefore, wish to express the view that though the application under section 245C need not disclose any additional income for each and every one of the assessment years comprised in it, for the application as a whole, that is, for all the years taken together, there should be additional positive income disclosed ; otherwise, it cannot be taken that there is disclosure of additional income in the application.

The applications in the cases of Airteck Pvt. Ltd., New Delhi, and Hari Chand, Sirsa (Applications Nos. 2/2/92/9/I. T. and 8A/1/119/90-I. T., respectively, will now go back to the principal Bench of the Settlement Commission, New Delhi, and the application in the case of Messrs. Damani Bros., Bombay (Application No. 5/IV/53/92-93/I. T.), to the Additional Bench of the Settlement Commission, Bombay, for appropriate orders to be passed by them under section 245D(1).

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