2015 (5) TMI 826 - HC - Income Tax

Validity of prima facie conclusions of the Settlement Commission - bogus purchases - revenue alleges that the disclosure was not full and true - order of the Settlement Commission not declaring the application of the Assessee firm as invalid under section 245D (2C) - Held that - The Commission has recorded by a majority that disclosure of additional income at this stage appears to be prima facie full and true and at present there is no material to reject the contentions of the second Respondent. However, this would require detailed examination in the subsequent proceedings and therefore, it is left open. We also find that the majority has made separate orders and for assessment years 2010-11 to 2012-13. In paras 8 and 9 of its order dated 26th March, 2013, the Commission has recorded distinct conclusions on this aspect. It noted that there is a difference in perception on the requirement of true and full disclosure of income. It does not wish to express a final opinion on the adequacy of disclosure. Thus, the disclosure is not termed to be untrue and incomplete. What is held is whether the disclosure as made is adequate and complete would require detailed examination. A disclosure is termed as true and full but a difference in the perception of the Assessee and the Revenue has been noted. Equally, the Commission did not ignore the reports of the Commissioner as complained. There is a reference to it and the contentions of the Revenue qua them in the order dated 10th May, 2013. Thus, all statutory requirements and conditions are complied with. The admission of the Assessee s application for settlement causes no prejudice to the Revenue nor does it conclude the matter in favour of Respondent No. 2. The dissenting Member, however, concludes that the application is not maintainable for all three assessment years, but at the same time, finds force in the argument of the Commissioner that without the statement of the two bank accounts, it is not possible for the Commission to quantify the additional income as it has a direct bearing on the cash deposits made by the Assessee in the bank accounts. His contrary reasoning in para 7 of the order at pages 86 and 87 has been noted by us above. It is in these circumstances that we do not find the reliance placed by Mr.Chhotaray on the Judgment of the Division Bench to be well placed. The view that we have taken, it is not necessary to make any reference to the Judgments cited by Mr. Mistri or other Judgments outlining the ambit and scope of the powers of the Settlement Commission. Suffice it to hold that we are not inclined to interfere in the prima facie conclusions of the Settlement Commission as they are not vitiated by perversity, arbitrariness or malafides. W.P. dismissed.

Issues Involved:
1. Validity of the Settlement Commission's jurisdiction to entertain the application under section 245C of the Income Tax Act.
2. Full and true disclosure of income by the assessee.
3. Service of the assessment order and its implications on the pending assessment proceedings.
4. Adequacy and sufficiency of the Settlement Commission's findings.

Issue-wise Detailed Analysis:

1. Validity of the Settlement Commission's jurisdiction to entertain the application under section 245C of the Income Tax Act:
The petitioner argued that the Settlement Commission lacked jurisdiction to entertain the application because the assessment order for the assessment year 2010-11 was already issued and served before the filing of the settlement application. The Court noted that the Settlement Commission found the assessment order was signed and dispatched on 18th March 2013 but returned unserved. The Commission concluded that the service was not made by 18th March 2013, and thus, the proceedings were pending when the application was filed. The Court upheld this view, stating that the delivery of the envelope to the postal authorities on 18th March 2013 could not be termed as service to the applicant on the same date.

2. Full and true disclosure of income by the assessee:
The petitioner contended that the assessee did not make a full and true disclosure of income, particularly regarding bogus purchases and concealed income through cash deposits. The Settlement Commission, in its majority view, found that the disclosure of additional income at this stage appeared to be prima facie full and true. The Court agreed with this preliminary finding, emphasizing that the detailed examination of the disclosure would occur in subsequent proceedings. The dissenting member's opinion that the disclosure was not full and true was noted but not accepted as conclusive.

3. Service of the assessment order and its implications on the pending assessment proceedings:
The petitioner argued that the assessment order for the assessment year 2010-11 was served on the assessee, thus concluding the assessment proceedings. The Court noted that the Settlement Commission found the service was refused after the filing of the settlement application. The Court upheld the Commission's view that the dispatch of the assessment order did not constitute service, and the proceedings were pending when the application was filed.

4. Adequacy and sufficiency of the Settlement Commission's findings:
The petitioner criticized the Settlement Commission for not adequately considering the arguments and material presented by the Department, including the reports highlighting the bogus purchases. The Court observed that the Settlement Commission had considered the arguments and concluded that the disclosure appeared to be prima facie full and true. The Court emphasized that its jurisdiction under Article 226 of the Constitution of India is limited and should not interfere with the preliminary or prima facie opinion of the Settlement Commission unless it is vitiated by arbitrariness, perversity, or malafides. The Court found no such vitiation in the Commission's findings and dismissed the writ petition.

Conclusion:
The Court upheld the Settlement Commission's jurisdiction to entertain the application under section 245C of the Income Tax Act, finding that the assessment proceedings were pending when the application was filed. The Court also agreed with the Commission's preliminary finding that the disclosure of additional income appeared to be prima facie full and true. The petitioner's arguments regarding the service of the assessment order and the adequacy of the Commission's findings were rejected. The writ petition was dismissed, and the rule was discharged.

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