2003 (9) TMI 72 - HC - Income Tax

Maintainability of application of the company made under section 245C(1) application without making true and full disclosure of the income is not maintainable and the order of the Settlement Commission passed on such application is bad, illegal, void and unsustainable in the eye of law - this court could interfere in the decision making process. Hence, the order of the first respondent Settlement Commission dated January 13, 1995, is liable to be set aside and accordingly the same is set aside

Issues Involved:
1. Maintainability of an application under section 245C(1) of the Income-tax Act, 1961, before the Settlement Commission.
2. Jurisdiction of the Settlement Commission to entertain the application.
3. Judicial review of the Settlement Commission's order by the High Court under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Maintainability of an Application under Section 245C(1):
The primary issue was whether an application filed under section 245C(1) of the Income-tax Act, 1961, is maintainable before the Settlement Commission only if it discloses income that has not been disclosed before the Assessing Officer. The court emphasized that an application under section 245C(1) is maintainable only if it discloses income which has not been disclosed before the Assessing Officer. This position was supported by the apex court's judgment in CIT v. Express Newspapers Ltd. [1994] 206 ITR 443, which stated, "An application under section 245C is maintainable only if it discloses income which has not been disclosed before the Assessing Officer." The court reiterated that the disclosure must be a voluntary disclosure of concealed income, and unless the income disclosed exceeds Rs. 50,000, the application is not maintainable.

2. Jurisdiction of the Settlement Commission:
The petitioners argued that the Settlement Commission lacked jurisdiction as the company did not make a full and true disclosure of the income. The court noted that the facts were undisputed, and even the Settlement Commission's order proceeded on the basis that the company had not made a full and true disclosure. Sections 245C and 245H of the Act require full and true disclosure of income and the manner in which such income has been derived. The court held that since the company did not make a full and true disclosure, the Settlement Commission ought to have dismissed the application. The court declared the order of the Settlement Commission dated January 13, 1995, as bad, illegal, and void.

3. Judicial Review of the Settlement Commission's Order:
The court discussed the scope of judicial review under Article 226 of the Constitution of India. It was established that judicial review is concerned with the decision-making process rather than the decision itself. The court referred to the apex court's judgments in R. B. Shreeram Durga Prasad and Fatechand Nursing Das v. Settlement Commission (IT and WT) [1989] 176 ITR 169 and Jyotendrasinhji v. S. I. Tripathi [1993] 201 ITR 611, which clarified that judicial review is not barred when the order of the Settlement Commission is in contravention of any provisions of the Act. The court emphasized that the law declared by the apex court is binding on all courts and the Settlement Commission. The court rejected the Department's argument that the petitioners were estopped from questioning the jurisdiction after participating in the proceedings, stating that there cannot be a plea of estoppel against the statute and the law declared by the apex court.

The court concluded that since the application was not maintainable due to the lack of full and true disclosure, any decision on such an application would be outside the power of the Settlement Commission. The court set aside the order of the Settlement Commission and allowed the petitioners to proceed with their appeal pending before the Income-tax Appellate Tribunal. The writ petition was allowed with no costs, and the related miscellaneous petition was closed.

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