2016 (8) TMI 1601 - HC - Income Tax

Validity of Settlement Commission order - scope of judicial review in relation to a decision of Settlement Commission - Settlement Commission essentially, came to the conclusion that the petitioners had not made true and full disclosures -Settlement Commission held that the applicant had not disclosed true and full facts of the trade and the income earned - argument of Breach of principles of natural justice on non-granting of cross-examination - HELD THAT - Settlement Commission is set up under the statute for settlement of revenue claims. Its decision is given finality and it also has power to grant immunity from prosecution, of course, subject to satisfaction of certain conditions. The scope of court's inquiry against the decision of the Settlement Commission, therefore, is necessarily very narrow. The Apex Court in the case of State of U.P. And Another vs. Johri Mal 2004 (4) TMI 588 - SUPREME COURT observed that the scope and extent of power of judicial review of the High Court under Article 226 of the Constitution of India would vary from case to case, the nature of the order, the relevant statute as also other relevant factors including the nature of power exercised by the public authorities, namely, whether the power is statutory, quasi-judicial or administrative. As observed that the power of judicial review is not intended to assume a supervisory role. The power is not intended either to review governance under the rule of law nor for the courts to step into the areas exclusively reserved by the suprema lex to the other organs of the State. Objection regarding non-verification of records does not seem to have been taken during the settlement proceedings and in any case, would not go to the root of the matter being a procedural matter. We, therefore, do not find any scope for interference. All the petitions are, therefore, dismissed.

Summary

Issues Involved:
1. Breach of principles of natural justice.
2. Non-granting of cross-examination.
3. Late production of additional evidence.
4. True and full disclosure by the petitioner.
5. Directives to the Assessing Officer by the Settlement Commission.

Issue-wise Detailed Analysis:

1. Breach of Principles of Natural Justice:
The petitioner argued that the Settlement Commission proceeded in breach of principles of natural justice by relying on statements of several witnesses without offering cross-examination and not granting reasonable time to the petitioner to review voluminous additional evidence produced by the department at the last stage of hearing. The High Court noted that the Supreme Court in Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II, emphasized the importance of cross-examination when statements are relied upon, deeming the lack of cross-examination a serious flaw amounting to a violation of principles of natural justice.

2. Non-Granting of Cross-Examination:
The petitioner consistently requested cross-examination of witnesses, including Shri S.C.Shah, whose statements were used against them. The High Court found that the petitioner had raised this issue as early as 05.01.2015 and reiterated the request multiple times, including through a detailed application on 14.05.2016. The court concluded that the Settlement Commission was required to grant cross-examination since the department relied on these statements, and the failure to do so was a significant procedural lapse.

3. Late Production of Additional Evidence:
The department produced a DVD containing 1540 pages of data on 10.05.2016, just two days before the next hearing on 12.05.2016. The High Court acknowledged the inconvenience caused to the petitioner but noted that the material related to transactions involving the petitioner and Shri S.C.Shah. Since the issue of cross-examination was already critical, the court found that the late production of evidence did not significantly alter the situation.

4. True and Full Disclosure by the Petitioner:
The Settlement Commission concluded that the petitioner had not made true and full disclosures on multiple grounds, including unaccounted income and trades. Specifically, the Commission found discrepancies in the petitioner's disclosed income and actual trade activities, leading to the conclusion that the petitioner had not disclosed true and full facts. The High Court noted that these findings were based on the assessment of evidence and were factual in nature, thus falling within the Commission's jurisdiction.

5. Directives to the Assessing Officer by the Settlement Commission:
The Settlement Commission directed the Assessing Officer to carry out assessments in a particular manner, which the High Court found to be beyond the Commission's powers. The court deleted these directives, agreeing with the petitioner's contention that such observations were inappropriate.

Conclusion:
The High Court dismissed all the petitions, finding no scope for interference with the Settlement Commission's order except for deleting the directives issued to the Assessing Officer. The court emphasized the narrow confines of judicial review, particularly concerning the Settlement Commission's factual findings and procedural conduct, while upholding the importance of cross-examination and natural justice principles.