INCOME TAX ACT, 1961

Section 245D (2C) Section 245C(1) Article 226

Settlement Commission - Rejection of application under section 245C - Neither there was full and true disclosure nor manner in which income derived - Validity of order of Settlement Commission

Petition stated that Settlement Application filed by the petitioner was not allowed to be proceeded with and was treated as invalid under section 245D(2C). According to the Settlement Commission's observations, the application filed did not constitute true and full disclosure and was rejected. The Commission observed that in the application filed before ITSC, as against unaccounted income disclosed before the investigation wing at Rs. 17,54,21,838, the applicant had disclosed Rs. 2,70,93,064. A perusal of the applicant's submissions would show that the retraction was mainly based on the ground that the earlier declaration was not based on any material evidence if it were to be sustained. Various evidences of investments were also found. Huge cash seizure were also made further corroborating the generation of cash as above on account of under invoicing of sales and purchase manipulations. The applicant had also now stated that the income offered relates to reimbursement of sales promotion expenses and also discounts made of dealers wrongly debited to profit and loss account. The petitioner stated that the undisclosed income declared was earned in the course of business. It represents discounts to the distributors not payable, expenses incurred not supported by bills or vouchers or erroneous debit to the profit & loss account. The petitioner stated that the objection that the manner of earning unaccounted income had not been declared, does not apply to the facts explained by the petitioner. While passing the initial order under section 245D(1) all the above facts and circumstances were examined and were found to have been fulfilled. Hence, the Settlement Commission ought not to have come to a different conclusion, while passing the final order under section 245C(1) and ought not to have reversed its initial orders on the mere objections of 2nd respondent and without any new material brought on record to show a contrary position.Held: The initial order is a preliminary one passed on the basis of information provided in the Settlement Application of the writ petitioner without hearing the revenue. It was also to be noted that the initial order itself reflects that the view expressed therein is a prima facie view. Therefore, the first set of contentions that on the basis of the observations/findings in the initial order, the Settlement Commission, while passing the final order, ought not to have arrived at different conclusions than those arrived at in the initial order needs no countenance. Though there is no dispute with regard to the legal position in regard to the right to explain an admission and the evidentiary value of the retracted confessions, since it is not possible in the facts & circumstances of the case to accept the contention of the petitioner that the confessions or the information including the affidavit and remittance of part of tax was obtained from the petitioner under fear, threat and coercion etcetera, the said decisions do not advance the case of the petitioner any further. No material was recovered and no cash was found and, therefore, in any view of the matter, the contents of the statements do not constitute the basis for adverse conclusion against the petitioner, Settlement Commission was justified in concluding that the applicant had stated that the income offered relates to reimbursements of sales promotion expenses and also discounts made to dealers wrongly debited, but claim made by the petitioner was not supported by any evidences or details and hence, the manner of earning unaccounted income as claimed by the applicant stands disproved and that the Settlement Commission was further justified in rejecting the Settlement Application since it does not constitute a full and true disclosure of income nor had revealed a true picture of manner in which it had been earned. There was sufficient material and were also reasons for the Settlement Commission coming to a different conclusion while passing the final order and that the final order was sustainable both under facts and in law for the reasons assigned therein. If the department already knows and had gathered particulars of such income and the manner in which it had been derived, there was no 'disclosure' by the assessee. Petitioner failed to make out valid and sufficient grounds in support of the contention that the impugned final order of the Settlemen Commission was unsustainable under facts and in law.

SUBSCRIBE FOR FULL CONTENT