2020 (1) TMI 998 - HC - Income Tax

Settlement Application u/s 245C(1) - assessee disclosed additional income during the course of settlement - fresh and substantial disclosure or not - it is far greater than the initial disclosure - Commission accepted the disclosures made by respondent assessee after considering the detailed item -wise explanation submitted by respondent assessee - whether the order of Commission is contrary to any of the provisions of the Act or not and if so, apart from grounds of bias, fraud and malice which of course constitute a separate and independent category, has it prejudiced the petitioner or not? - HELD THAT - Merely because the respondent assessee has disclosed additional income of ₹ 12 Crore during the course of settlement, it cannot be said that Commission has not followed the procedure prescribed under the Act of 1961. The disclosure made during the course of the proceedings before the Commission is not new disclosure as found by the Apex Court in case of Ajmera Housing Corpn. 2010 (8) TMI 35 - SUPREME COURT On perusal of the impugned order passed by the Commission, it is apparent that the application submitted by the respondent has been dealt with as per the provisions of section 245C and 245D of the Act. The Commission has observed detailed procedure while exercising powers under section 245D(4) of the Act of 1961 by examining thoroughly report submitted by the petitioner under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. The Commission has also provided proper opportunity of hearing to the respective parties and therefore the amount which has been determined by the Commission is just and proper. In view of the aforesaid decisions cited by the respondent, the Commission was right in considering the revised offer made by the respondent during the course of the proceedings in the nature of spirit of settlement. Therefore, the decision of the Apex Court in case of Ajmera Housing Corpn. (supra), would not come into operation in facts of the case. We are therefore of the opinion that order passed by the Commission does not call for any interference. In view of exercise of the powers by this Court under Article 226 of the Constitution of India, the examination of the order of the Commission has to be made keeping in mind the scope of judicial review as per the decision of Apex Court in case of Jyotendrasinhji 1993 (4) TMI 1 - SUPREME COURT . Therefore, keeping in view the exercise of extraordinary jurisdiction and in view of the overall background of facts whereby the Commission has thoroughly minutely examined all the details relating to the issue in question and arrived at a particular finding, same cannot be substituted.

Summary

Issues Involved:
1. Legitimacy of the Settlement Commission's order regarding the assessee's disclosure of income.
2. Whether the additional disclosure made by the assessee during the proceedings was substantial and fresh.
3. Applicability of the Supreme Court's decision in Ajmera Housing Corporation v. Commissioner of Income Tax to this case.
4. Scope of judicial review under Article 226 of the Constitution of India concerning the Settlement Commission's order.

Issue-wise Detailed Analysis:

1. Legitimacy of the Settlement Commission's Order:
The petitioner challenged the Settlement Commission's order dated 25th July 2018, arguing that the respondent did not make a "true and full disclosure" of income. The petitioner claimed that a substantial portion of the income was suppressed. The Settlement Commission had accepted the respondent's additional income disclosure of ?12 Crore during the proceedings under section 245D(4) of the Income Tax Act, 1961, and settled the case based on this disclosure.

2. Substantial and Fresh Additional Disclosure:
The petitioner argued that the initial disclosure of ?22.09 Crore by the respondent was not true and full, as evidenced by the subsequent disclosure of ?12 Crore, which was more than 50% of the original declaration. The petitioner cited the Supreme Court's decision in Ajmera Housing Corporation, which emphasized that an assessee must make a full and true disclosure at the initial stage and cannot revise it later. The respondent countered that the additional disclosure was made in the spirit of settlement and was not a fresh disclosure, but rather an extension of the initial one.

3. Applicability of Ajmera Housing Corporation Decision:
The petitioner relied on the Ajmera Housing Corporation case, where the Supreme Court held that an assessee cannot revise their disclosure before the Settlement Commission. However, the respondent argued that this case was different from Ajmera Housing Corporation. The respondent cited several other judgments, including Jyotendrasinhji v. S.I. Tripathi, where the Supreme Court stated that the High Court's review should focus on the legality of the procedure followed by the Commission, not the validity of the order itself.

4. Scope of Judicial Review Under Article 226:
The court examined whether the Settlement Commission's order was contrary to any provisions of the Income Tax Act and whether it prejudiced the petitioner. The court noted that the Commission had followed the detailed procedure under sections 245C and 245D of the Act, providing proper opportunities for hearing to both parties. The court found that the Commission's acceptance of the additional ?12 Crore disclosure was in the spirit of settlement and did not constitute a fresh disclosure as per the Ajmera Housing Corporation decision.

Judgment:
The court concluded that the Settlement Commission had followed the correct procedure and that the additional disclosure of ?12 Crore was not a fresh disclosure but an extension of the initial one. The court held that the Commission's order did not call for interference and dismissed the petitions, discharging the rule with no order as to costs.