2010 (8) TMI 35 - SC - Income Tax

Settlement commission full and true disclosure by the party first disclosure was ₹ 1.94 crores second disclosure was ₹ 11.41 crores Held that - It is trite law that a taxing statute is to be construed strictly. - In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. As afore-stated, in the scheme of Chapter XIX-A, there is no stipulation for revision of an application filed under Section 245C(1) of the Act and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said Section in the prescribed form. - the application filed by the assessee before the Settlement Commission was not maintainable as the assessee had not made a full and true disclosure of their undisclosed income were kept open. - the disclosure of ₹ 11.41 crores as additional undisclosed income in the revised annexure, filed on 19th September, 1994 alone was sufficient to establish that the application made by the assessee on 30th September, 1993 under Section 245C(1) of the Act could not be entertained as it did not contain a true and full disclosure of their undisclosed income and the manner in which such income had been derived. - High Court was correct in making the order of remand and no good ground is made out for interference in exercise of our jurisdiction under Article 136 of the Constitution. - The Commissioner will be entitled to costs, quantified at ₹ 50,000/-.

Issues Involved:
1. Validity of the application under Section 245C(1) of the Income Tax Act, 1961.
2. Correctness of the High Court's decision to set aside the Settlement Commission's order.
3. Consideration of the Commissioner's reports by the High Court.
4. Jurisdiction and procedural propriety of the Settlement Commission.
5. Scope of judicial review under Article 226 of the Constitution.

Detailed Analysis:

1. Validity of the Application under Section 245C(1) of the Income Tax Act, 1961:
The Supreme Court emphasized that for an application under Section 245C(1) to be valid, it must contain a "full and true disclosure of income" and "the manner in which such income has been derived." The Court noted that the assessee's application did not meet these criteria, as evidenced by the subsequent disclosure of additional income of Rs. 11.41 crores. The Court held that the High Court's decision not to set aside the proceedings despite finding that the assessee had not made a full and true disclosure was erroneous. The Supreme Court stated, "We are convinced that, in the instant case, the disclosure of Rs.11.41 crores as additional undisclosed income in the revised annexure, filed on 19th September, 1994 alone was sufficient to establish that the application made by the assessee on 30th September, 1993 under Section 245C(1) of the Act could not be entertained as it did not contain a 'true and full' disclosure."

2. Correctness of the High Court's Decision to Set Aside the Settlement Commission's Order:
The Supreme Court upheld the High Court's decision to set aside the Settlement Commission's order and remand the case for fresh adjudication. The High Court had found that the Settlement Commission had not properly considered the Commissioner's reports and had left out significant amounts while determining the undisclosed income. The High Court also noted procedural irregularities, including the non-supply of the revised annexure to the Commissioner. The Supreme Court agreed with these findings, stating, "We are satisfied that under the given scenario, the High Court was correct in making the order of remand and no good ground is made out for interference in exercise of our jurisdiction under Article 136 of the Constitution."

3. Consideration of the Commissioner's Reports by the High Court:
The Supreme Court noted that the High Court had critically examined the Settlement Commission's order in light of the two reports submitted by the Commissioner. The High Court found discrepancies and omissions in the Settlement Commission's consideration of these reports, particularly concerning unexplained expenses and loans. The Supreme Court supported the High Court's findings, stating, "The High Court had found that only that part of the report dated 20th October, 1997, which dealt with 'on money' was highlighted before this Court, while other incomes, investments, receipts or payments were not covered in that part of the statement."

4. Jurisdiction and Procedural Propriety of the Settlement Commission:
The Supreme Court highlighted that the Settlement Commission had acted beyond its jurisdiction by allowing the assessee to revise their application, which is not contemplated in the scheme of Chapter XIX-A of the Act. The Court stated, "In our opinion, the scheme of said Chapter is clear and admits no ambiguity... Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly." The Court further noted that the Settlement Commission's failure to supply the revised annexure to the Commissioner was a breach of natural justice, depriving the Commissioner of the opportunity to object to the maintainability of the application.

5. Scope of Judicial Review under Article 226 of the Constitution:
The Supreme Court rejected the assessee's argument that the High Court should not have interfered with the Settlement Commission's order under Article 226. The Court noted that the assessee had conceded this point before the High Court and could not raise it again. Moreover, the Court observed that the Settlement Commission's handling of the case, including the acceptance of multiple disclosures and the imposition of a token penalty, warranted judicial review. The Court stated, "Even otherwise, as stated above, we have no hesitation in observing that the manner in which assessee's disclosures of additional income at different stages of proceedings were entertained by the Settlement Commission, rubbishing the objection of the Commissioner... leaves much to be desired."

Conclusion:
The Supreme Court dismissed the appeals, upholding the High Court's decision to set aside the Settlement Commission's order and remand the case for fresh adjudication. The Court emphasized the importance of full and true disclosure in applications under Section 245C(1) and highlighted procedural irregularities and jurisdictional overreach by the Settlement Commission. The Court also affirmed the High Court's exercise of judicial review under Article 226, given the circumstances of the case. The Commissioner was awarded costs of Rs. 50,000.

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