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TMI Blog2013 (6) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... ) without entering upon the fundamental issue as to whether the application was or was not invalid. This exercise had to be carried out by the Commission at the stage of the proceedings under sub-section 2C of Section 245D on the basis of the report submitted by the Commissioner and after hearing the applicant. The Commission has abdicated the discharge of that obligation at that stage, by deferring its consideration at a later stage. The Commission, thus was completely in error in holding that unless it is established by a competent authority that the purchases are all bogus, that the application at this stage could not be held to be invalid, though the department may have in its possession certain evidence indicating the fact that the income has not been truly and fully disclosed, or that the quantum of income disclosed in the application in comparison to the claim of the department is meager. The Commission could not have declined to determine as to whether the application fulfilled the requirements or prerequisites of a valid application under Section 245C(1). The Commission has to consider as to whether or not the application is invalid. Thus the impugned order of the Sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. This statement, however, was retracted on 31 May 2012. 4. The Second Respondent filed an application on 17 September 2011 before the Settlement Commission ("the Commission") for settlement of its case for A.Ys.2006-07 to 2012-2013 and disclosed an additional income of Rs.21.27 crores. The Commission passed an order on 21 September 2012 under Section 245D(1) allowing the application to be proceeded with. By a communication dated 25 September 2012, the Petitioner was called upon to furnish a report, inter alia, on the validity of the application for the relevant years; the correctness and adequacy of additional taxes and interest paid by the applicant and on compliance by the applicant. The Petitioner submitted a report dated 15 October 2012. The Commission passed an order thereupon under Section 245D (2C) on 9 November 2012. 5. During the course of the hearing before the Commission, the Revenue contended that the assessee had failed to fulfill the jurisdictional requirements namely : (i) of a true and full disclosure of income; and (ii) of the manner in which the income was earned. The contention of the department is that it is in possession of evidence to indicate that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed. The contention of the Revenue is that these jurisdictional requirements must be fulfilled at the stage of the proceeding under Section 245D(2C). It is urged that the object of the provisions of Chapter XIX-A is to enable an assessee, who has come clean with a full and true disclosure of his income and of the manner in which it has been derived, to move the Settlement Commission. An assessee who has not done so fails to fulfill the jurisdictional requirements and in consequence such an application - it is urged - is liable to be rejected under sub section 2C of Section 245D. 8. On the other hand, it has been urged by the Senior Counsel for the Second Respondent that the Commission is not bound to consider whether there has been a full and true disclosure at the stage of a proceeding under sub-section 2C of Section 245D. Such a determination, it is urged, can be made even at the stage of Section 245D(4) when the Commission examines the report submitted by the Commissioner either under sub-section 2B or sub-section 3 of Section 245D. It has been urged that though sub-section 6 of Section 245 provides for the contents of every order passed under sub-section 4, namely, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... X A charts out. The Commission has its role and jurisdiction defined by the statute. The cases which can be brought for settlement, the jurisdiction of the Commission and the manner in which the Commission must proceed in carriage of the cases brought before it are circumscribed by statutory provisions. All these provisions have been enacted in order to subserve the object which Parliament intended to fulfill in enacting the provisions which are conceived in the public interest. The Commission must scrupulously adhere to the statute : a body which traces its origin and jurisdiction to the statute must not transcend the limits subject to which the statute confers jurisdiction. 11. Section 245D lays down the procedure which has to be followed on the receipt of an application under Section 245C. Subsection 1 requires the Commission to issue a notice to the applicant to explain why the application made by him should be allowed to be proceeded with. The Commission at that stage is empowered by an order in writing to reject the application or to allow the application to be proceeded with. Where an application has been allowed to be proceeded with under sub-section 1, clause (i) of Sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the commissioner. (5) ... ... ... ... (6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts." Hence, upon examining the report which was submitted by the Commissioner under sub-section 2B or sub-section 3, the Commission may in accordance with the provisions of the Act, pass such order as it thinks fit on the matters covered by the application and upon any other matter relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice issued to the applicant following which the Commission is empowered either to reject the application or to allow the application to be proceeded with. Where an application is rejected, nothing further remains. But where an application is allowed to be proceeded with, the Commission has to call for a report from the Commissioner. In the second stage, subsection 2C enables the Commission upon considering the report, to declare by its order the application as invalid. If the Commission does not issue an order declaring the application as invalid, the Commission is still empowered to order a further investigation or inquiry and thereafter under sub-section 4, upon an examination of the records and the report of the Commissioner received under subsection 2B or sub-section 3 to pass such orders as it thinks fit on the matters covered by the application and any other matter not covered by the application but referred to in the report of the Commissioner. Sub-section 6 provides that every order under Sub-section 4 shall provide for the terms of settlement which includes the demand by way of tax, penalty or interest, the manner in which the amount is to be paid and all other matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts satisfaction on this aspect, it will not have the jurisdiction to pass any order on the matter covered by the application. 17. In a judgment of a learned Single Judge of the Madras High Court in V.M.Shaik Mohammed Rowther Vs. Settlement Commission (IT WT) and others (1999)236-ITR-581 (Mad) the following principles were laid down : "5. ... ... ... No assessee has a right to approach the Commission without disclosing or making a full and true disclosure of his income, as such disclosure is a necessary precondition for invoking the Commission's jurisdiction under S.245C. An application to the Commission is not intended to enable the dishonest assessee to continue his dishonest conduct and still claim the benefits which can be conferred by the Commission if the Commission were to ultimately make an order for settlement. The Settlement Commission is not meant to be an optional forum chosen at the option of the assessee for the settlement of the tax liability of the assessee as also his liability for further proceedings or prosecution under this Act or other Acts, even while the assessee continues to be dishonest and deliberately fails to make a true and full disclosure of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Housing Corporation is a clear authority for the principle that in order to constitute a valid application under Section 245C(1), there must be a full and true disclosure of income which has not been disclosed and of the manner in which it has been derived besides a computation of the income tax payable on such undisclosed income. It is only upon the satisfaction of the Commission that the application meets the prerequisites of a valid application that the Commission shall have the jurisdiction to proceed. The Commission is bound to determine in the course of its proceedings under sub-section 2C of Section 245D as to whether the application is invalid. The Commission has to be satisfied from the report of the Commissioner and upon hearing the applicant that the application is not invalid. For, it is only then that the Commission has the jurisdiction to proceed. 20. The error in the order of the Commission in the present case lies in permitting the application to proceed without that satisfaction being recorded by the Commission, which is a fundamental aspect which goes to the root of its jurisdiction to entertain an application under Section 245C. The Commission has proceeded on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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