2020 (1) TMI 692 - HC - Income Tax

Rejection of application for settlement of the Case - full and true disclosure of the income - the manner in which such income has been derived - Validity of order of the Settlement Commission - it is contended that, basis of the observations/findings in the initial order, the Settlement Commission, while passing the final order, ought not to have arrived at different conclusions than those arrived at in the initial order - Pursuant to the search, notices u/s 153A of the Act were issued reopening the assessments HELD THAT - Initial order is a preliminary one passed on the basis of information provided in the Settlement Application of the writ petitioner without hearing the Revenue and that by the said order the Settlement Commission only allowed the application to be proceeded with further, subject to the caveat that the said initial order is passed without prejudice to the finding that may be given in the later stage of the proceedings. It is also to be noted that the initial order itself reflects that the view expressed therein is a prima facie view. Therefore, the first set of contentions that on the basis of the observations/findings in the initial order, the Settlement Commission, while passing the final order, ought not to have arrived at different conclusions than those arrived at in the initial order needs no countenance. Nonetheless, we make it clear that we shall further deal with this issue as to whether the Settlement Commission could have arrived at a different conclusion while passing the impugned (final) order under Section 245C(1) of the Act. In the light of the long time gap between the days of search on one hand and the dates of the filing of the affidavit the remittance of tax, the explanations offered by the petitioner to the effect that he was under immense pressure at those distant times are not worthy of credence acceptance, being implausible. Though there is no dispute with regard to the legal position in regard to the right to explain an admission and the evidentiary value of the retracted confessions, since it is not possible in the facts circumstances of the case to accept the contention of the petitioner that the confessions or the information including the affidavit and remittance of part of tax was obtained from the petitioner under fear, threat and coercion etc, the said decisions do not advance the case of the petitioner any further. Dealing now with the other part of these set of the contentions, namely requirement of collection of evidence related to undisclosed income and that the information in the statements or confessions are not in the nature of clinching evidence by themselves and that there should be other credible material to buttress the case of the department and that no material is recovered and no cash was found and, therefore, in any view of the matter, the contents of the statements do not constitute the basis for adverse conclusion against the petitioner, what is to be noted is that admittedly during search Admission when free and voluntary is the best form of proof on which the department can rely. After the days of search seizure, the deponent was not in the custody of the department and was very much free to think coolly and consult his legal counsel and chartered accountants. Therefore, the deponent s contention that he was continuing under fear and/or threat and/or duress etcetera by the times he gave the affidavit and remitted the tax, as already noted, is deplorable, in the facts circumstances peculiar to the case. Hence, this part of set of contentions of the petitioner that there is no additional material is misconceived and is therefore, rejected being devoid of merit. There is no true and full disclosure as to the details of this income from real estate business. As rightly contended by the respondents, the statements of dealers and distributors are not filed insofar as the income admitted in the application filed before the Settlement Commission and the manner of earning income as explained in the application as the amounts were received back from the dealers and distributors towards reimbursement of sales promotion expenses/discounts are not supported by any evidence like the details of dealers from whom the reimbursement of sales promotion was done and to which dealers the discounts were wrongly debited. Names and addresses of those dealers were submitted neither before the department nor the Commission for verification but the extra income was merely admitted. As rightly contended by learned standing counsel for the respondents, there is non disclosure of the details of various transactions related to incomes from real estate business. Hence, we find that the Settlement Commission is justified in concluding that the applicant had stated that the income offered relates to reimbursements of sales promotion expenses and also discounts made to dealers wrongly debited, but, the claim made by the petitioner is not supported by any evidences or details and hence, the manner of earning unaccounted income as claimed by the applicant stands disproved and that the Settlement Commission is further justified in rejecting the Settlement Application since it does not constitute a full and true disclosure of income nor has revealed a true picture of manner in which it has been earned. In the light of the discussion supra, we are of the considered view that there is sufficient material and are also reasons for the Settlement Commission coming to a different conclusion while passing the final order and that the final order is sustainable both under facts and in law for the reasons assigned therein. The above discussed aspects are sufficient to sustain the impugned order. Hence, there is no need, in our considered view, to go into the other aspects related to acquisition of investments and assets viz., investment in Arunachalam Palace, Guntur and Kalyanamandapam in Tutucorin; investment in M/s.Goutham Buddha Textile Park Pvt.Ltd, etcetera. Be it noted that Section 245(C) of the Act is meant for those assessees who seek to disclose income not disclosed before the officer including the manner in which such income has been derived . If the department already knows and has gathered particulars of such income and the manner in which it has been derived, there is no disclosure by the assessee. We answer the points holding that the petitioner failed to make out valid and sufficient grounds in support of the contention that the impugned final order of the Settlement Commission is unsustainable under facts and in law. We accordingly hold that the said order is sustainable.

Summary

Issues Involved:
1. Validity of the Settlement Commission's initial and final orders.
2. Allegations of coercion and duress in obtaining statements from the petitioner.
3. Requirement of full and true disclosure of income and the manner in which it was earned.
4. Evidentiary value of retracted statements and corroborative material.

Issue-wise Detailed Analysis:

1. Validity of the Settlement Commission's Initial and Final Orders:
The petitioner argued that the Settlement Commission's initial order under Section 245D(1) of the Income Tax Act allowed the application to proceed, indicating that the petitioner had made full and true disclosure of income. However, the final order under Section 245D(2C) rejected the application based on the Principal Commissioner of Income Tax's objections without any new material evidence. The court noted that the initial order was preliminary and based on prima facie views without hearing the Revenue. Therefore, the Settlement Commission was justified in arriving at a different conclusion in the final order, considering the objections and additional scrutiny.

2. Allegations of Coercion and Duress:
The petitioner claimed that the statements obtained during the search were under coercion and duress, and hence, lacked evidentiary value. The court found that the petitioner was assisted by qualified accountants and chartered accountants and had ample time to retract the statements but did not do so. The petitioner also paid a significant amount of tax (?5.74 Crores) on the admitted undisclosed income, which further undermined the claim of coercion. Thus, the court rejected the petitioner's contention of coercion and duress.

3. Requirement of Full and True Disclosure:
The petitioner failed to provide complete details of the undisclosed income and the manner in which it was earned. The Settlement Commission observed that the petitioner disclosed only ?2.70 Crores against an earlier admission of ?17.54 Crores and failed to provide corroborative evidence for the claimed reimbursements and discounts. The court agreed with the Settlement Commission's finding that the petitioner did not make a full and true disclosure as required under Section 245C(1) of the Act.

4. Evidentiary Value of Retracted Statements and Corroborative Material:
The petitioner argued that the statements made during the search lacked corroborative evidence and should not be the sole basis for adverse conclusions. However, the court noted that corroborative materials such as notebooks and loose sheets detailing cash receipts were found during the search. Additionally, the petitioner's own admissions and payment of taxes were considered credible evidence. The court held that the Settlement Commission was justified in relying on these materials and the petitioner's admissions to conclude that there was no full and true disclosure.

Conclusion:
The court dismissed the writ petition, upholding the Settlement Commission's final order. The court found that the petitioner failed to make a full and true disclosure of income and the manner in which it was earned. The allegations of coercion and duress were not substantiated, and the corroborative materials found during the search supported the Settlement Commission's findings. The court emphasized that the Settlement Commission's orders were based on a thorough examination of the facts and evidence, and there was no procedural impropriety or violation of natural justice.