2019 (3) TMI 74 - HC - Income Tax

Settlement application filed u/s 245C - full and true disclosure of the undisclosed income - Settlement commission direct commissioner to file report which was filed - Assessee offered voluntarily additional income after report - Settlement commission directed assessee to reconcile difference with Department - Assessee again offered additional income - offer of additional incomes should be presumed that the original application under Section 245C, did not contain a full and true disclosure of the undisclosed income - Assessment framed determining undisclosed income - HELD THAT - This is not a case in which the assessee had merely accepted the additions suggested by the Commission, to settle the matter once and for all times. At the first stage, even before the assessee was directed to sit along with the A.O. and the officer of the Commission to reconcile the differences, which led to the suggestions from the side of the Commission; a disclosure of further income was made, which was not available in the original application made under Section 245C. This leads to a definite conclusion that there was no full and true disclosure of the undisclosed income and the source from which it derived in the application filed under Section 245C as held in Ajmera Housing Corporation 2010 (8) TMI 35 - SUPREME COURT OF INDIA We hence set aside the judgment of the learned Single Judge, as also the order of the Settlement Commission for reason of the assessee having not made full and true disclosure under Section 245C. The Commission ought not to have proceeded with the application when the assessee made a voluntary offer of additional income, when the application was pending, in addition to that disclosed in its application under Section 245C. Noticing the long pendency of the matter before the Settlement Commission and before this Court, it is only proper that the assessee be permitted to file an appeal from the assessment order. The assessee shall be permitted to file an appeal within thirty days from the date of receipt of a copy of the judgment of this Court in the Writ Appeal

Issues Involved:
1. Validity of the Settlement Commission's order under Section 245D(4).
2. Full and true disclosure of undisclosed income by the assessee under Section 245C.
3. Jurisdiction and powers of the Settlement Commission under Chapter XIX-A of the Income Tax Act.
4. Distinction between the present case and the precedent set by Ajmera Housing Corporation v. C.I.T.
5. Impact of additional income disclosure during settlement proceedings.

Issue-wise Detailed Analysis:

1. Validity of the Settlement Commission's Order under Section 245D(4):
The appeal was filed by the Commissioner of Income Tax against the judgment of the learned Single Judge, which upheld the Settlement Commission's order under Section 245D(4). The Settlement Commission concluded the proceedings by determining the total undisclosed income of the assessee to be ?34,49,966/-, which included the original income disclosed by the assessee and additional amounts conceded later. The learned Single Judge found no reason to interfere with the Settlement Commission's order, and the challenge raised under Article 226 was permissible.

2. Full and True Disclosure of Undisclosed Income by the Assessee under Section 245C:
The Department contended that the additional amounts offered by the assessee before the Settlement Commission indicated that the original application under Section 245C did not contain a full and true disclosure of the undisclosed income. The learned Single Judge, however, found that the amounts were offered by the assessee to settle the matter finally, and it was difficult to accept the Department's contention that the original declaration was not full and true merely because additional amounts were offered at the suggestion of the Commission.

3. Jurisdiction and Powers of the Settlement Commission under Chapter XIX-A of the Income Tax Act:
The Settlement Commission's jurisdiction under Chapter XIX-A is akin to a statutory settlement, empowering it to make adjustments and additions to the income disclosed in the application under Section 245C. The Commission's power to make orders "as it thinks fit" includes determining the undisclosed income based on the materials before it. The learned Single Judge agreed that the Commission is not divested of power to make additions and that such additions do not necessarily imply a lack of full and true disclosure in the original application.

4. Distinction between the Present Case and the Precedent Set by Ajmera Housing Corporation v. C.I.T.:
The learned Single Judge distinguished the present case from Ajmera Housing Corporation v. C.I.T. by noting that in Ajmera, the assessee consistently made applications offering more undisclosed income than initially declared. In contrast, the present case involved additional income offered at the Commission's suggestion to settle the matter. The Bombay High Court's decision in Director of Income Tax (International Taxation) v. Income Tax Settlement Commission, which distinguished Ajmera Housing Corporation, was also referenced.

5. Impact of Additional Income Disclosure During Settlement Proceedings:
The Department argued that the additional undisclosed income offered by the assessee should result in the conclusion that the application under Section 245C did not have full and true disclosure. However, the learned Single Judge and the Settlement Commission found that the additional income was offered to reconcile disputes and settle the matter, not as an admission of incomplete disclosure. The Commission's direction for the assessee to sit with the A.O. and the Additional Director to reconcile issues was part of the settlement process.

Conclusion:
The judgment concluded that the Settlement Commission's order was valid and that the additional income offered by the assessee did not imply a lack of full and true disclosure in the original application under Section 245C. The Commission's jurisdiction and powers under Chapter XIX-A were upheld, and the distinction between the present case and Ajmera Housing Corporation was recognized. The assessee was permitted to file an appeal from the assessment order within thirty days, considering the long pendency of the matter. The Writ Appeal was allowed, and no order as to costs was made.

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