2017 (6) TMI 877 - HC - Income Tax

Order passed by Income Tax Settlement Commission u/s 245D challenged - rejecting the petitioner s application for settlement primarily on the ground that the petitioner had not made true and full disclosures of the unaccounted income - Held that - Commission had taken into account the documents and evidence on record and rejected the petitioner s theory of having entered into off market transactions in two different capacities. These findings of the Commission are based on consideration of relevant materials presented before the Commission by both sides. The findings cannot be stated to be perverse in any manner. The scope of judicial review against an order passed by the Settlement Commission has been discussed by various decisions of this Court as well as Supreme Court. The petitioner did produce the affidavits of four persons who claimed that they were the sub-brokers for whom the petitioner had acted as a broker in respect of certain entries made in the seized diary. However, this by itself cannot be clinching evidence, nor can the petitioner contend that such factor cannot be discarded without cross examination of the deponents. The affidavits of such persons would certainly be a relevant factor to be taken into account by the Commission but can neither be sole nor a conclusive factor. In the present case the Commission, as noted earlier, has taken into account all the relevant factors and given cogent reasons to hold that the petitioner s theory that he had acted as a broker in certain transactions was not correct. We find the reasons are quite convincing. It was precisely to demonstrate this that we have taken note of various facts and circumstances taken into account by the Commission. For example, Commission noted that though Bharat Thakkar, according to the petitioner, was a sub-broker in majority of these transactions, the petitioner had not disclosed his identity in his statement under Section 132(4) recorded two months after the search and did so for the first time while filing settlement application nearly two years later. Petition dismissed.

Issues Involved:
1. Validity of the Settlement Commission's rejection of the petitioner's settlement application under Section 245D(4) of the Income Tax Act, 1961.
2. Assessment of whether the petitioner made "true and full disclosure" of unaccounted income.
3. Consideration of affidavits submitted by the petitioner to substantiate his claims.
4. The jurisdiction and scope of judicial review over the Settlement Commission's order.

Detailed Analysis:

1. Validity of the Settlement Commission's Rejection:
The petitioner challenged the order dated 30.08.2016 by the Income Tax Settlement Commission rejecting his settlement application under Section 245D(4) of the Income Tax Act, 1961. The Commission had initially allowed the application to proceed but later rejected it on grounds that the petitioner had not made true and full disclosures of unaccounted income. The petitioner argued that the Commission erred in dismissing the affidavits submitted, which confirmed that certain transactions were brokerage transactions.

2. Assessment of True and Full Disclosure:
The crux of the matter was whether the petitioner made true and full disclosures. The petitioner claimed that the seized documents included both his direct transactions and those where he acted as a broker. The Commission, however, found inconsistencies in the petitioner's claims. The department contended that the entire unaccounted income from off-market commodity trading amounted to ?81.14 crores, contrary to the petitioner's disclosure of ?21.91 crores. The Commission noted that the petitioner did not provide timely or adequate details to substantiate his claims, particularly regarding the identities and roles of alleged sub-brokers.

3. Consideration of Affidavits:
The petitioner submitted affidavits from four individuals claiming to be sub-brokers to support his brokerage theory. The Commission found these affidavits to be self-serving and noted that they were identically worded and filed from the same IP address. The Commission also observed that the returns filed by these sub-brokers were suspiciously timed and did not corroborate the petitioner's claims. The Commission concluded that the affidavits alone were insufficient to prove the petitioner's claims without further corroborative evidence.

4. Jurisdiction and Scope of Judicial Review:
The court emphasized that the scope of judicial review over the Settlement Commission's orders is limited. The Commission's findings were based on relevant materials and were not deemed perverse. The court noted that the Commission is a specialized body, and its decisions should not be interfered with unless they are contrary to statutory provisions or based on irrelevant considerations. The court referenced several precedents, including the Supreme Court's decision in Mehta Parikh & Co. vs. Commissioner of Income-tax, which held that affidavits could not be rejected without cross-examination unless there is contrary evidence.

In conclusion, the court upheld the Settlement Commission's decision, finding no merit in the petitioner's claims. The court ruled that the Commission had acted within its jurisdiction and based its decision on substantial evidence. The petition was dismissed, affirming the Commission's rejection of the petitioner's settlement application.

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