2014 (5) TMI 1006 - HC - Income Tax

Maintainability of writ petition - order of settlement commission - Non-disclosure of income Penalty u/s 271(1)(c) of the Act Commission found that since the petitioner had committed a default and did not truly disclose his income, the penalty could not be waived. - Held that - Even if there is an error of law or fact in calculating the penalty, where the assessee volunteered to appear before the Settlement Commission for settlement of his matter, the discretion exercised by the Settlement Commission requires no interference unless the exercise of power made by the Settlement Commission was perverse requiring interference under Article 226 of the Constitution - The Writ Court, under Article 226 of the Constitution is not bound to interfere in its discretionary remedy even if there was an error of law or fact - Article 226 merely vest a discretion to the Court to interfere in exceptional cases and even if the impugned order was not in conformity with law, the Court was not bound to set aside the order - an order passed by the Settlement Commission attains finality u/s 245(i) of the Act - the Court is not inclined to exercise its discretionary jurisdiction under Article 226 of the Constitution to interfere in the orders passed by the Settlement Commission Decided against Assessee.

Summary

Issues:
1. Assessment of undisclosed income and imposition of tax.
2. Settlement application under Section 245-C(1) of the Income Tax Act, 1961.
3. Calculation of penalty under Section 271(1)(c) of the Act.
4. Rectification application for penalty calculation.
5. Discretionary jurisdiction under Article 226 of the Constitution.

Analysis:
1. The petitioner, engaged in liquor business and other activities, declared income including long-term capital gains from share sales for assessment years 2001-02 and 2002-03. The assessing officer found no evidence of share transactions, adding undisclosed income and imposing tax at 30%.
2. The petitioner filed a settlement application before the Settlement Commission, which computed total income and imposed penalties for non-disclosure. The Commission held that penalties could not be waived due to default in income disclosure.
3. The petitioner challenged penalty calculation under Section 271(1)(c) of the Act, arguing for a lower penalty based on tax difference. The Court examined the Act's provisions and upheld the Commission's penalty imposition, emphasizing discretion in penalty reduction.
4. Despite the petitioner's plea for rectification of penalty calculation, the Settlement Commission's decision was upheld, citing finality under Section 245(i) of the Act. The Court highlighted the discretionary nature of interference under Article 226 of the Constitution, emphasizing the need for substantial injustice for intervention.
5. Citing precedents, the Court emphasized the discretionary nature of Article 226 jurisdiction, requiring a balance of interests and equity. Finding no equity in favor of the petitioner and considering the finality of the Commission's orders, the Court dismissed the writ petition, declining to interfere in the Settlement Commission's decisions.