2009 (9) TMI 1015 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Settlement Commission.
2. Applicability of Section 158BB in determining undisclosed income.
3. Validity of the Settlement Commission's order based on the evidence considered.
4. Relevance of the Supreme Court judgment in "Commissioner of Income Tax, Madras Vs. Express Newspapers Ltd.".

Summary:

1. Jurisdiction of the Income-tax Settlement Commission:
The petitioner challenged the order passed by the Income-tax Settlement Commission dated 31/3/2008, which excluded regular assessment from its ambit and only subjected block assessment proceedings for settlement. The petitioner contended that the application for settlement should include the assessment years 1998-99, 1999-2000, and 2000-2001.

2. Applicability of Section 158BB in determining undisclosed income:
The petitioner argued that u/s 158BB, the determination of undisclosed income for the block period should be based solely on evidence found during the search or requisition of books of accounts or other documents. The petitioner claimed that the Settlement Commission considered aspects not permissible under this section.

3. Validity of the Settlement Commission's order based on the evidence considered:
The Settlement Commission found discrepancies between the total applications and sources during the block assessment period and directed income computation accordingly. The petitioner contended that the Commission's order was based on impermissible considerations.

4. Relevance of the Supreme Court judgment in "Commissioner of Income Tax, Madras Vs. Express Newspapers Ltd.":
The court referred to the Supreme Court judgment, which emphasized that an application u/s 245C is maintainable only if it discloses income not previously disclosed before the Assessing Officer. The judgment clarified that if the income-tax authorities have already discovered the income, the application for settlement is not tenable. The court held that the petitioner's application u/s 245C was not tenable as it pertained to income already discovered by the authorities during the search.

Conclusion:
The court concluded that the order passed by the Settlement Commission allowing the application u/s 245C was without jurisdiction and non-est in law. The appeal filed before the Commissioner of Appeals, Income-tax, Aurangabad, was directed to be restored and dealt with in accordance with the law. The court granted a stay on the judgment and order for six weeks.

Disposition:
Rule disposed of in the aforesaid terms.