2019 (5) TMI 892 - HC - Income Tax

Settlement commission power u/s 245D - application made in terms of Section 245C - Petitioner Company had made full and true disclosure of income along with the manner in which such income was derived - Settlement Commission, by the order u/s 245D(4) without deciding the application on merit, relegated the Petitioner Company to the AO - HELD THAT - The requirement is that there must be an income disclosed in a return furnished and undisclosed income disclosed to the Commission by a petition u/s 245C. Unlike Section 139 which provides for filing of revised return, there is no provision for revision of an application made in terms of Section 245C. That shows clear legislative intent that the applicant for settlement has to make a true and fair declaration from the threshold. It is on the basis of the application received that the Commission calls for the report to decide whether the application is to be rejected or permitted to be continued. The declaration contemplated in Section 245C is in the nature of voluntary disclosure of concealed income, but as noted above it must be true and fair disclosure. Voluntary disclosure and making a full and true disclosure of the income are necessary preconditions for invoking the Commission s jurisdiction. In the scheme of thing, we are of the considered opinion that the petitioner company is right in contending that the Settlement Commission could have either rejected the application or allowed it to be proceeded further. If the Commission felt that the matter required further inquiry, it could have directed the Principal Commissioner or Commissioner of Income Tax to enquire and submit the report to the Commission to take a decision. The Commission could not get round the application for settlement. When a duty is casts on the Commission, it is expected that the Commission would perform the duty in the manner laid down in the Act, especially when no further remedy is provided in the Act against the order of the Settlement Commission. We set aside the order and dispose of the writ petition with a direction to the Settlement Commission to proceed to decide the application for settlement afresh in accordance with law and pass order.

Summary

Issues:
Assailing order of Settlement Commissioner under Section 245D(4) - Full and true disclosure of income - Legality of Settlement Commissioner's decision to relegate petitioner to Assessing Officer - Interpretation of provisions under Chapter XIX-A of Income Tax Act.

Analysis:
The judgment by the High Court of Madhya Pradesh involved the petitioner challenging the order dated 30.8.2017 passed by the Settlement Commissioner under Section 245D(4) of the Income Tax Act. The petitioner, a Private Limited Company, part of Samdariya Group, filed for settlement under Section 245C(1) after a search and seizure operation in 2013. The Settlement Commissioner, without deciding on the merits, referred the petitioner back to the Assessing Officer, leading to a writ petition challenging this decision. The court considered the arguments presented by both parties, focusing on the legality of the Settlement Commissioner's actions.

The court analyzed the provisions of Chapter XIX-A of the Income Tax Act, which introduced a scheme for settlement of cases. It highlighted that the application for settlement under Section 245-C is a unilateral act by the assessee and must contain full and true disclosure of income along with the manner in which it was derived. The court emphasized that the Settlement Commissioner's power of settlement must be exercised in accordance with the provisions of the Act, ensuring that the terms of settlement do not conflict with mandatory provisions such as tax and interest payments.

Furthermore, the court discussed the importance of voluntary disclosure of concealed income and the requirement for true and fair disclosure from the outset. It noted that the Settlement Commissioner could either reject the application or allow it to proceed further, but could not circumvent the application for settlement. The court emphasized that the Settlement Commissioner must perform the duty as laid down in the Act, especially when no further remedy is provided against the Commissioner's order.

In conclusion, the High Court set aside the order dated 30.8.2017 and directed the Settlement Commission to proceed to decide the application for settlement afresh in accordance with the law. The judgment focused on upholding the principles of full and true disclosure of income, the Settlement Commissioner's powers and duties, and the necessity for adherence to statutory provisions in settlement proceedings under the Income Tax Act.