The Tax Publishers2013 TaxPub(DT) 2101 (Del-HC) : (2014) 056 (I) ITCL 0374 : (2014) 360 ITR 0407 : (2013) 262 CTR 0010 : (2013) 217 TAXMAN 0039 : (2013) 090 DTR 0001

Income Tax Act, 1961

--Settlement Commission--Admissibility of application Full and true disclosure--This writ petition was directed against order passed by Settlement Commission under section 245D(2C). By virtue of impugned order Settlement Commission held the settlement application of assessees Nos. 2 to 5 to be 'not invalid' and therefore, allowed to be proceeded with inasmuch as the said settlement application had in the view of Settlement Commission, prima facie fulfilled all the conditions prescribed under sections 245C(1) and 245D(2C). Revenue contended that settlement application of assessees 2 to 5 ought to have been held as invalid because the settlement application of assessee failed to satisfy the pre-requisite stipulations in section 245C. Those pre-requisites being full and true disclosure, the manner in which the undisclosed income had been derived and additional amount of income-tax payable. After passing of order under section 245D(1), reports were called from Commissioner under section 245D(2B) on validity of settlement applications and after receiving report, applications were heard in the context of section 245D(2C). Thereafter, impugned order was passed. Held: The Settlement Commission has noted the rival contentions of the Revenue and the applicants with regard to the issues of full and true disclosure and the manner of deriving the undisclosed income had taken a prima facie view in favour of the applicants. It is not a definitive or final view and it is for this reason that the Settlement Commission, in its wisdom, left the issues open to be determined at the stage of final hearing under section 245D(4). It may very well be that the Settlement Commission, at that stage, may agree with the Revenue on the basis of the material on record and the report submitted by the Commissioner that the applications were not maintainable under section 245C(1) therefore, there was no illegality in impugned order.

While the foundation for settlement was an application from the assessee in which the assessee is required to make a full and true disclosure, it was equally true that such requirement need not be examined and authoritatively determined at the threshold of any proceeding initiated before the Commission. There may be cases where it is possible for the Commission to record a finding that the disclosure made in the application is full and true. At the same time, there could also be situations in which the Commission may not be able to, at the stage of admission of the application, record a finding with any amount of certainty. It is in such a situation that it would be permissible for the Commission to keep the question open to be examined at a later stage or at the stage of disposal of the application. The Settlement Commission has noted the rival contentions of the Revenue and the applicants with regard to the issues of full and true disclosure and the manner of deriving the undisclosed income and has taken a prima facie view in favour of the applicants. It is not a definitive or final view and it is for this reason that the Settlement Commission, in its wisdom, left the issues open to be determined at the stage of final hearing under section 245D(4). It may very well be that the Settlement Commission, at that stage, may agree with the Revenue on the basis of the material on record and the report submitted by the Commissioner that the applications were not maintainable under section 245C(1). In fact, the Settlement Commission may, at any stage till it passes a final order under section 245D(4), examine the issues and if there is sufficient material on record, determine the question of full and true disclosure and the manner in which the undisclosed income was derived conclusively and, depending on such a decision, the applications may be thrown out or they may be proceeded with further. [Para 22] The order of the Supreme Court in K. Jayaprakash Narayanan (supra) and the decision of the Division Bench of this Court in True Woods Pvt. Ltd. (supra) clinch the issue in favour of the assessees. As such, this Court ought not to interfere with the impugned orders. However, this court need to examine the decision of the Supreme Court in the case of Ajmera Housing (supra) which has been strongly relied upon by the counsel for the petitioner. In fact, the petitioner went to the extent of submitting that in view of the decision of the Supreme Court in Ajmera Housing (supra), the orders/decisions in K. Jayaprakash Narayanan (supra) and True Woods Pvt. Ltd. (supra) would no longer be good law. [Para 24] It is mandatory for the Settlement Commission to record its findings with regard to the issues of 'full and true disclosure' of particulars of undisclosed income and 'the manner' in which such income was derived by the assessee. Unless the Settlement Commission records its satisfaction on these aspects, it would not have the jurisdiction to pass any order under section 245D(4). [Para 28] The Supreme Court has made it clear that even when the Settlement Commission decides to proceed with the application when it passes an order under section 245D(1) or section 245D(2C), it would not be denuded of its power to examine as to whether the assessee has made a full and true disclosure of his undisclosed income in the application for settlement. The Supreme Court specifically noted that the report of the Commission and other documents would be coming on record of the Settlement Commission at different stages of the consideration of the case, before or after the Settlement Commission has decided to proceed with the application, and, all these would be germane to the determination of the said question. [Para 30] It is obvious that revision of a disclosure made in a settlement application would clearly imply that the initial disclosure was neither true nor full. In the case before the Supreme Court, the disclosure had been revised and it is for that reason that the Supreme Court expressed its opinion that the same was neither true nor full. However, the Supreme Court did not pursue that avenue any further inasmuch as the Commissioner had chosen not to challenge that part of the impugned order. On the facts of the case before it, the Supreme Court refrained from interfering with the remand order passed by the Bombay High Court in the second round even though it had expressed its disapproval with regard to certain observations made by the said High Court as already noticed above. [Para 32] Here, as already pointed out above, the proceedings are pending before the Settlement Commission and the final order is yet to be passed by the Settlement Commission under section 245D(4). All the conclusions made by the Settlement Commission up till now, in the present case, are only prima facie conclusions and do not foreclose the issues raised by the Revenue in the present proceedings. [Para 33] This is not the stage at which this Court ought to interfere with the impugned orders and the proceedings pending before the Settlement Commission. The writ petition is accordingly dismissed. [Para 34]

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