2018 (7) TMI 1734 - HC - Income Tax

Application for settlement u/s 245(D)(4) rejected - there was failure to make a full and true disclosure of its income on the part of the petitioner - Held that - We interfere with the orders of the Settlement Commission only when it is contrary to law, perverse or the decision making process is flawed. In this case, we are of the prima-facie view that the basis of rejection is contrary to law laid down by this Court. The failure to disclose was essentially on account of Retention money, Purchase of steel, Sub- contracting and Sales Commissions. We prima-facie find that, on all the aforesaid heads, the petitioners had made a full and complete disclosure of primary facts. It is on the above undisputed facts, that a bonafide claim was made leading to the disclosed income. Non-acceptance of the claim would not ipso-facto lead to making the application for settlement bad for failure to make full and true disclosure of income. Infact this Court in Principal Commissioner of Income- Tax V/s. Income-Tax Settlement Commission, 2017 (2) TMI 861 - BOMBAY HIGH COURT has held, that to establish there was failure to make a full and true disclosure of income as required under Section 254(C)(1) it would be necessary for the Revenue to prove that there was a non-disclosure of primary facts and not merely non-acceptance of certain claims made before the Commission. Moreover, in the present facts, so far as, retention money is concerned, the claim was made by the petitioners on the basis of the decision of this Court in Commissioner of Income-Tax V/s. Associated Cables Pvt. Ltd, 2006 (8) TMI 135 - BOMBAY HIGH COURT .

Summary

Issues:
Challenge to order of Income-Tax Settlement Commission under Section 245(D)(4) of the Income-Tax Act, 1961 for rejection of settlement application due to alleged failure to disclose income fully and truly.

Analysis:

The High Court of BOMBAY HIGH COURT, in the case involving four petitions challenging a common order dated 30th August, 2017 by the Income-Tax Settlement Commission, addressed the issue of rejection of settlement applications for Assessment years 2008-09 to 2014-15. The court noted that the rejection was based on the ground of failure to make a full and true disclosure of income by the petitioners. The court clarified that it intervenes with the orders of the Settlement Commission only if they are contrary to law, perverse, or flawed in the decision-making process. In this instance, the court found the rejection to be contrary to the law established by the court itself, indicating that the failure to disclose income was related to specific financial transactions like Retention money, Purchase of steel, Sub-contracting, and Sales Commissions.

Regarding the disclosure of primary facts, the court observed that the petitioners had made a full and complete disclosure of primary facts on all the mentioned heads. The court highlighted that the mere non-acceptance of certain claims before the Commission does not automatically imply a failure to disclose income fully and truly. Citing a previous judgment, the court emphasized that it is essential for the Revenue to prove non-disclosure of primary facts, not just non-acceptance of claims, to establish a failure to disclose income. Additionally, the court mentioned that the petitioners' claim related to retention money was based on a decision of the court in a previous case.

Consequently, the court determined that the issues raised required further consideration and granted interim relief in all petitions as per the prayer clause. The court expedited the hearing and provided liberty to apply for further relief. The judgment highlighted the importance of proving non-disclosure of primary facts and emphasized the need for a thorough examination of the grounds for rejection of settlement applications under the Income-Tax Act.