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2014 (12) TMI 685 - HC - Income TaxValidity of order of Settlement Commission u/s 245D(4) - During the pendency of the block assessment proceedings, assessee filed an application before the Settlement Commission - Interference made in the order of Settlement Commission u/s 245D - Nature of jurisdiction exercised - Whether the exercise of its jurisdiction under Article 226 of the Constitution of India, will interfere with orders passed by the Settlement Commission under Section 245D of the Income Tax Act, 1961 and if so, to what extent Held that - Following the decision in THE COMMISSIONER OF INCOME TAX (CENTRAL), KOCHI Versus SETTLEMENT COMMISSION (IT & WT) AND M/s. JOSCO JEWELLERS PVT. LTD. 2014 (11) TMI 734 - KERALA HIGH COURT - in Jyotendrasinhji v. S. I. Tripathi and Others - 1993 (4) TMI 1 - SUPREME Court it has been held that the scope of enquiry, whether by the High Court under article 226 or by this Court under article 136, is also the same - the power of judicial review is not to be exercised to decide the issue on facts or on an interpretation of the documents available - the enquiry by this Court can only be with regard to whether or not the Settlement Commission exercised a jurisdiction that it did not have or, alternatively, if it did have the jurisdiction, whether it erred in the exercise of that jurisdiction. One cannot discount the possibility of the Settlement Commission finding the disclosure of income made by an assessee as being full and true and yet requiring minor adjustments to include even those amounts, which though disputed by the assessee, would nevertheless be offered by the assessee in the interests of putting an end to litigation and in the spirit of settlement - These could be amounts, in respect of which, neither the department nor the assessee have sufficient material to substantiate their contentions, but the assessee is nevertheless willing to give up his claim in the interests of finality to litigation - The consent by an assessee to forgo such amounts, at the suggestion of the Settlement Commission, cannot have the effect of rendering his original disclosure dubious for the purposes of settlement under the Act - it is only in those cases where an assessee resiles from his original declaration of undisclosed income, by suo motu effecting revisions thereto, that he renders his application invalid for the purposes of settlement - the Commission found that there was no material with the Department to justify a demand of further amount from the assessee - Notwithstanding this, additional amounts were offered by the assessee to put a quietus to the matter - the contention of the revenue cannot be accepted that merely by offering additional amounts, the original declaration by the assessee became one that was not full and true for the purposes of settlement thus, there is no reason to interfere with the order passed by the Settlement commission u/s 245D(4) Decided against revenue.
Issues Involved:
1. Legality of the Settlement Commission's order under Section 245D(4) of the Income Tax Act. 2. Full and true disclosure of undisclosed income by the assessee. 3. Jurisdiction of the Settlement Commission. 4. Grant of immunity from penalty and prosecution under Section 245H of the IT Act. 5. Scope of judicial review under Article 226 of the Constitution of India. Issue-wise Detailed Analysis: 1. Legality of the Settlement Commission's order under Section 245D(4) of the Income Tax Act: The writ petition was filed by the Commissioner of Income Tax challenging the order dated 14.3.2008 of the Income Tax Settlement Commission. The order was passed under Section 245D(4) of the IT Act, which pertains to the final settlement of tax liabilities. The Settlement Commission took into account additional amounts offered by the assessee and granted immunity from penalty and prosecution under Section 245H of the IT Act. 2. Full and true disclosure of undisclosed income by the assessee: The petitioner contended that the original application by the assessee did not contain a full and true disclosure of the undisclosed income. This argument was based on the fact that the assessee offered additional amounts during the proceedings before the Settlement Commission. The petitioner relied on the Supreme Court decision in Ajmera Housing Corporation and Another v. Commissioner of Income Tax, arguing that the original application was not valid as it did not contain a full and true disclosure. 3. Jurisdiction of the Settlement Commission: The Settlement Commission's jurisdiction is contingent upon the assessee making a full and true disclosure of undisclosed income. The petitioner argued that by offering additional amounts, the assessee's original declaration was rendered invalid, thereby denuding the Settlement Commission of its jurisdiction. However, the court found that the Settlement Commission had the jurisdiction to proceed as the additional amounts were offered to put a finality to the litigation and not because the original disclosure was false. 4. Grant of immunity from penalty and prosecution under Section 245H of the IT Act: The petitioner argued that the Settlement Commission did not find a full and true disclosure by the assessee, which is a precondition for granting immunity from penalty and prosecution. The court, however, noted that the Settlement Commission's decision to grant immunity was based on the assessee's cooperation during the proceedings and the absence of material with the Department to justify further demands. 5. Scope of judicial review under Article 226 of the Constitution of India: The court emphasized that its role under Article 226 is limited to judicial review and not to conduct a merit review of the Settlement Commission's orders. The court cited several judgments, including Jyotendrasinhji v. S. I. Tripathi and Others, to underline that it would only examine whether the Settlement Commission's order complied with the statutory provisions and principles of natural justice. The court concluded that the Settlement Commission acted within its jurisdiction and followed the statutory provisions, thus there was no ground for interference. Conclusion: The court dismissed the writ petition, upholding the Settlement Commission's order. The court found that the additional amounts offered by the assessee did not invalidate the original disclosure, and the Settlement Commission had appropriately exercised its jurisdiction and granted immunity from penalty and prosecution.
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