1992 (10) TMI 48 - HC - Income Tax

Summary

Issues Involved:

1. Applicability of the amended Section 245C of the Income-tax Act, 1961.
2. Requirement of full and true disclosure in the application for settlement.
3. Necessity of a personal hearing before rejecting the application.
4. Procedural versus substantive rights in the context of tax settlement applications.

Detailed Analysis:

1. Applicability of the Amended Section 245C:

The primary issue was whether the application for settlement filed under Section 245C of the Income-tax Act, 1961, should comply with the amended provisions effective from October 1, 1984, or the unamended provisions applicable during the assessment year 1980-81. The court held that since the application was filed on August 9, 1989, long after the amendment came into force, the petitioner must comply with the amended Section 245C. The court emphasized that the Settlement Commission has jurisdiction only if the application meets the requirements of the law as it stood on the date of submission. Consequently, the application was rightly rejected for non-compliance with the amended Section 245C.

2. Requirement of Full and True Disclosure:

The amended Section 245C mandates that an assessee must make a full and true disclosure of income not disclosed before the Income-tax Officer, the manner in which such income was derived, and the additional amount of income-tax payable. The petitioner failed to meet these requirements, as the application did not disclose any additional income or the manner of its derivation. Therefore, the application was deemed non-maintainable. The court underscored that the disclosure requirements are essential for the validity of a settlement application.

3. Necessity of a Personal Hearing:

The petitioner contended that the rejection of the application without a personal hearing was unjust. The court dismissed this argument, stating that if the application is prima facie non-maintainable due to non-disclosure of additional income and its source, a personal hearing is not obligatory. The court found no merit in the contention that the absence of a personal hearing vitiated the order.

4. Procedural versus Substantive Rights:

The court examined whether the amended procedural requirements of Section 245C could be applied retrospectively to applications concerning earlier assessment years. It was held that Section 245C is a procedural provision designed to facilitate the settlement of tax disputes and does not confer a vested right. The court distinguished between substantive rights, such as the right of appeal, and procedural provisions, which can be altered and applied to pending proceedings. The court cited various precedents to support the view that procedural changes apply to all pending proceedings unless explicitly stated otherwise.

The court also referenced decisions emphasizing that procedural amendments, even if inconvenient, must be adhered to. The court concluded that the appellant's application, filed in 1989, must comply with the procedural requirements in force at that time, including the necessity for full and true disclosure and the additional tax payable exceeding Rs. 50,000.

Conclusion:

The court dismissed the writ petition and the subsequent appeal, affirming that the application under Section 245C did not meet the amended requirements and was rightly rejected. The judgment clarified the applicability of procedural amendments to pending applications and reinforced the necessity for full and true disclosure in settlement applications. The court also upheld that personal hearings are not mandatory in cases where the application is fundamentally non-compliant. The appeal was dismissed with costs, reinforcing the procedural rigor required for tax settlement applications.