2021 (9) TMI 725 - HC - Income Tax

Validity of order of Settlement Commission - acceptance of additional income disclosed by the assessee - ambit and scope of interference by the High Court in its Constitutional writ jurisdiction under Article 226 of the Constitution of India - proof of any legal infirmity in decision making process in course of impugned income tax settlement proceeding - HELD THAT - We am not inclined to interfere with the impugned order of the Settlement Commission in this Writ Petition and dismissing the same for the following reasons i) Petitioner/Income Tax authorities have failed to make out any case in this Writ Petition that the learned Settlement Commission has acted in any manner contrary to or in violation of any provision of law in course of impugned settlement proceeding or in passing the impugned order or that the same is not legal and valid or without jurisdiction and in disregard to the materials available before the learned Income Tax Settlement Commission. ii) Petitioner/Income Tax authorities have failed to make out any case that any documents or materials which they had placed or filed by it before the learned Income Tax Settlement Commission/respondent no.1 was sufficient for rejection of the application of settlement filed by the petitioner. iii) On perusal of report under Rule 9 of Income Tax Settlement Commission (Procedure) Rules, 1997, which was filed by the petitioner before the learned Settlement commission in objection to the settlement application of the assessee/respondent no.2, I do not find any specific and cogent material for rejection of the settlement application in question rather petitioner itself has admitted that the respondent no. 2 has disclosed the undisclosed income though under compulsion and itself prayed for further enquiry to find out material against the assessee/respondent no.2 for contradicting the claim of the assessee/respondent no. 2 which shows that its Report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997, had no sufficient materials and had no substance for rejection of the claim made under settlement application in question filed by the assessee/respondent no. 2. iv) Petitioner/Income Tax authority could not make out any exceptional case in this Writ Petition for exercising constitutional writ jurisdiction of this Court under Article 226 of the Constitution for scrutinizing or reappreciating the facts, evidence or findings of the learned Settlement Commission in reaching to its conclusion for allowing the claim of the assessee/respondent no. 2 made in settlement application and further Court in exercise of its constitutional jurisdiction under Article 226 of the Constitution of India cannot substitute the findings of the Income Tax Settlement Commission with its own findings and come to a different conclusion. v) Petitioner could not demonstrate before this Court any legal infirmity in decision making process in course of impugned income tax settlement proceeding

Issues Involved:
1. Validity of the Income Tax Settlement Commission's order dated 29th July 2016.
2. Allegations of non-disclosure of true income by the assessee.
3. Scope of judicial review under Article 226 concerning the Settlement Commission's decisions.

Detailed Analysis:

1. Validity of the Income Tax Settlement Commission's Order:
The petitioner challenged the impugned order dated 29th July 2016 passed by the Income Tax Settlement Commission, seeking its revocation. The Settlement Commission had allowed the settlement application of the assessee/respondent no. 2 for the Assessment Year 2012-13, disclosing an income of ?3,93,93,544/-. The Commission's decision was based on the presumption that the contents of documents impounded during a survey were true as per Section 292C of the Income Tax Act. The Commission accepted the additional income shown by the applicant and included a proposed addition on account of commission paid for the introduction of share capital.

2. Allegations of Non-Disclosure of True Income:
The petitioner/Principle Commissioner of Income Tax objected to the settlement, alleging that the assessee had not made true and correct disclosure of its undisclosed income. The petitioner contended that the assessee's profit figures were inconsistent with its gross receipts and that the assessee had a habit of not disclosing its true income unless compelled by survey operations. The petitioner argued that the assessee's disclosure was made under compulsion and requested further enquiry to determine the true undisclosed income. The assessee/respondent no. 2 countered these allegations, asserting that no specific instances of non-disclosure were cited and that the petitioner's objections were based on surmises and conjectures without material evidence.

3. Scope of Judicial Review under Article 226:
The court examined the scope of its jurisdiction under Article 226 in reviewing the Settlement Commission's decisions. Citing precedents, the court emphasized that judicial review is concerned with the decision-making process rather than the merits of the decision itself. The court referred to several judgments, including those of the Supreme Court, which established that interference is warranted only if the Commission's order is contrary to the provisions of the Act or if there is a procedural impropriety, bias, fraud, or malice.

Conclusion:
The court concluded that the petitioner/Income Tax authorities failed to demonstrate that the Settlement Commission acted contrary to any legal provisions or that the impugned order was illegal, invalid, or without jurisdiction. The petitioner could not provide sufficient materials to warrant the rejection of the settlement application. The court found no exceptional circumstances to justify its interference in the Settlement Commission's findings and decisions. Consequently, the writ petition was dismissed, upholding the Settlement Commission's order.

Summary of Judgment:
The court dismissed the writ petition challenging the Income Tax Settlement Commission's order dated 29th July 2016, allowing the assessee's settlement application. The petitioner failed to establish any legal infirmity or procedural impropriety in the Commission's decision-making process. The court reiterated that its jurisdiction under Article 226 is limited to reviewing the legality of the procedure followed by the Commission and not the merits of its decision.

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