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2013 (7) TMI 95 - HC - Income TaxValidity of proceedings before Settlement commission - Full and true disclosure - Validity of settlement applications - Commissioner of Income tax objected on orders passes on settlement application that Applicants had neither disclosed their full and true income nor the manner in which such income had been derived - Held that - Point of maintainability of an application under Section 245C(1) does not get foreclosed by virtue of the Settlement Commission passing an order under Section 245D(1) or Section 245D(2C) and that such an issue could be examined by the Settlement Commission at the final hearing of the matter, that is, at the stage of passing an order under Section 245D(4) - 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 - There is no stipulation for revision of an application filed under Section 245-C(1) and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said section in the prescribed form. All the conclusions made by the Settlement Commission up till now are only prima facie conclusions and do not foreclose the issues raised by the Revenue - According to Section 245K(2) which stipulates that where a person has made an application under Section 245C on or after the first day of June, 2007, and if such application has been allowed to be proceeded with under Section 245D(1), such person shall not subsequently be entitled to make an application under Section 245C - This is not the stage at which this Court ought to interfere with the impugned orders and the proceedings pending before the Settlement Commission - Following the decision of Commissioner of Income Tax v. K. Jayaprakash Narayanan 2009 (2) TMI 740 - SUPREME COURT OF INDIA , Commissioner of Central Excise, Vishakapatnam v. True Woods Private Ltd. 2005 (11) TMI 12 - HIGH COURT OF DELHI and Ajmera Housing Corporation v. Commissioner of Income Tax 2010 (8) TMI 35 - SUPREME COURT OF INDIA - Decided against the revenue.
Issues Involved:
1. Validity of settlement applications under Section 245C of the Income Tax Act, 1961. 2. Requirement of full and true disclosure by the applicants. 3. Jurisdiction and procedural aspects of the Settlement Commission. 4. Maintainability of the writ petition challenging the Settlement Commission's order. Detailed Analysis: 1. Validity of Settlement Applications: The primary issue revolves around the validity of the settlement applications filed by the respondents under Section 245C of the Income Tax Act, 1961. The petitioner argued that the applications should be deemed invalid due to the lack of full and true disclosure, the manner in which the undisclosed income was derived, and the additional amount of income tax payable. The Settlement Commission, however, held that the applications were "not invalid" and allowed them to proceed, as they prima facie fulfilled the conditions under Sections 245C(1) and 245D(2C). 2. Requirement of Full and True Disclosure: The petitioner contended that the respondents did not make a full and true disclosure of their income or explain the manner in which the undisclosed income was derived. The petitioner relied on the Supreme Court decision in Ajmera Housing Corporation v. Commissioner of Income Tax to argue that the absence of full and true disclosure should result in the rejection of the settlement application. The respondents countered that the writ petition was not maintainable since the orders in question were merely orders of admission and did not constitute final decisions. 3. Jurisdiction and Procedural Aspects of the Settlement Commission: The court examined the procedural framework of the Settlement Commission as outlined in Sections 245C and 245D of the Income Tax Act. It was noted that the Settlement Commission has exclusive jurisdiction from the date the application is made under Section 245C, and this jurisdiction continues until a final order is passed under Section 245D(4). The court emphasized that the issues of full and true disclosure and the manner of deriving undisclosed income remain open for examination until the final order is passed. 4. Maintainability of the Writ Petition: The respondents argued that the writ petition challenging the orders under Sections 245D(1) and 245D(2C) was not maintainable as these were merely orders of admission and not final orders. The court agreed, stating that the issues raised by the petitioner could still be examined by the Settlement Commission during the final hearing under Section 245D(4). The court also referred to previous decisions, including CIT v. K. Jayaprakash Narayanan and True Woods Pvt. Ltd., which supported the view that the Settlement Commission's initial orders do not preclude further examination of the issues at the final stage. Conclusion: The court dismissed the writ petition, emphasizing that the issues of full and true disclosure and the manner of deriving undisclosed income remain open for determination by the Settlement Commission at the final hearing. The court did not express any opinion on the merits of these issues, leaving them for the Settlement Commission to decide. The decision underscores the procedural safeguards and the multi-stage process involved in settlement applications under the Income Tax Act.
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