2014 (8) TMI 631 - HC - Income Tax

Power of Income-tax Settlement Commission u/s 245D(2C) full and true disclosure of income - Chapter XIX-A of the Act was amended with effect from June 1, 2007 - Held that - application filed prior to June 1, 2007, would be deemed to be admitted provided the requirements of Chapter XIX-A of the Act as then existing are complied with. Requirement for proof of payment of tax and interest must be attached to the application - additional income disclosed - Held that - if the Commission at the final hearing under section 245D(4) of the Act determines higher income, than that disclosed in the original application, the entire process will not be rendered bad only on account of failure to pay the tax along with the application as is subsequently determined by the Commission at the final hearing stage. - the requirement is only to pay the tax on the full and true disclosure of income made at the time of filing the application. Requirement of additional source of income - Held that - There is no requirement that for an application to be entertained by the Commission, the applicant must declare a new source of income from that disclosed earlier to the Department. Whether case was pending - Held that - It is very clear that the application for settlement has not been filed by STAR Ltd. for the assessment year 2000-01, as it is an issue pending before this court in an appeal from the order of the Tribunal. So far as the other parties are concerned, there is nothing in law which prohibits them from filing an application for settlement. Even respondent No. 2-STAR Ltd. can file an application for settlement in respect of the assessment year other than the assessment year for which the appeal is pending before this court. - all applications even pending before the Tribunal or in the appeal/revision before the authorities under the Act could be entertained by the Commission on the date when the respondents filed their application before the Commission on March 5, 2007. Application in respect of TDS - Held that - At this prima facie stage before the Commission it appears that the application made by the respondents is not for the purpose of settling its liability to deduct tax at source but it is an application made, containing full and true disclosure of the petitioner s income which has not been disclosed before the Assessing Officer. Therefore, the aforesaid decision in the case of Shaw Wallace 2003 (6) TMI 19 - CALCUTTA High Court would have no application to the present facts at this stage. - Decided against the revenue.

Issues Involved:

1. Validity of the Settlement Commission's order.
2. Full and true disclosure of income.
3. Jurisdiction of the Settlement Commission.
4. Complexities of investigation.
5. Admissibility of revised income disclosure.
6. Compliance with statutory requirements for settlement applications.

Issue-wise Detailed Analysis:

1. Validity of the Settlement Commission's Order:
The petitioner challenged the order dated September 11, 2007, of the Settlement Commission under section 245D(2C) of the Income-tax Act, 1961, on the grounds that the Commission ignored the statutory requirement of making full and true disclosure by the respondents. The petitioner argued that the additional income of Rs. 150 crores disclosed by the respondents on September 10, 2007, indicated that the original application did not contain a full and true disclosure of income, as required by section 245C(1) of the Act.

2. Full and True Disclosure of Income:
The petitioner contended that the respondents' additional disclosure of Rs. 150 crores was a tacit admission that their original application did not contain a full and true disclosure of income. The petitioner relied on the Supreme Court's decision in Ajmera Housing Corporation v. CIT, which held that the Settlement Commission does not contemplate the revision of income disclosed in the original application. However, the respondents argued that the additional disclosure was made in good faith to buy peace and avoid protracted litigation, and that their original application contained a full and true disclosure of income.

3. Jurisdiction of the Settlement Commission:
The petitioner argued that the Settlement Commission lacked jurisdiction to entertain the application because the applications for settlement were filed before June 1, 2007, and the proceedings were not pending before the Assessing Officer, as required by the amended section 245A(b) of the Act. The respondents countered that their application was filed before the amendment and thus satisfied the requirements of Chapter XIX-A of the Act as then existing.

4. Complexities of Investigation:
The petitioner argued that the mere distribution of income among the various companies within the STAR group did not involve any complex investigation, and thus the Settlement Commission should not have entertained the application. The respondents maintained that the distribution of income between various entities was a complex matter requiring investigation, and the Commission's finding on this issue was not shown to be perverse.

5. Admissibility of Revised Income Disclosure:
The petitioner contended that the additional disclosure of Rs. 150 crores by the respondents was not permissible under the Act, as it amounted to a revision of the original application, which is not allowed. The respondents argued that the additional disclosure was made as a gesture of good faith and to expedite the settlement process, and did not detract from their original application representing a full and true disclosure of income.

6. Compliance with Statutory Requirements for Settlement Applications:
The petitioner argued that the respondents' application for settlement did not satisfy the statutory requirement of attaching proof of payment of tax and interest on the additional income disclosed. The respondents maintained that their original application contained a full and true disclosure of income and that the additional income disclosed was a goodwill measure to expedite the settlement process.

Conclusion:
The court held that the additional disclosure of Rs. 150 crores by the respondents was made in good faith to avoid protracted litigation and did not detract from their original application representing a full and true disclosure of income. The court found that the Settlement Commission had jurisdiction to entertain the application, as it was filed before the amendment to Chapter XIX-A of the Act. The court also held that the Commission's finding on the complexities of investigation was not shown to be perverse. The petition was dismissed, and the order of the Settlement Commission was upheld.

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