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TMI Blog2007 (12) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... 1671 of 2004. J. Balachander for M. Santhanaraman for respondent No. 2 in W. P. Nos. 42178 to 42181 of 2002. JUDGMENT The judgment of the court was delivered by S. J. MUKHOPADHAYA J. - In all these writ petitions as a common question is involved and has been preferred by the petitioners, the respective Commissioners of Income-tax (hereinafter referred to as "the Revenue"), they were heard together and disposed of by this common judgment. 2. The concerned second respondent-assessee of the cases made application under section 245C of the Income-tax Act, 1961 (hereinafter referred to as "the I. T. Act"), in the prescribed form making disclosure of their respective income, stated to be true and had not been disclosed before the Assessing Officer. On receipt of such applications, the Settlement Commission called for reports in each case from the Commissioner of Income-tax and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case, while observed that there is complexity of investigation involved therein, allowed the applications to be proceeded with in accordance with section 245D of the Income-tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Settlement Commission came to a definite conclusion that there is complexity of investigation involved and by different impugned orders allowed the applications to be proceeded with. 7. Learned Solicitor General, referring annexures II and III, submitted that a sum of Rs. 1,72,00,000 purported to have been disclosed as unsecured credits under section 68 cannot be treated to be a full and true disclosure of income, which had not been disclosed before the assessing authority, as such amount had already been noticed by the assessing authority while making earlier assessment. It was also submitted that the assessee had not disclosed the manner in which such income has been derived, the additional amount of income-tax payable on such income and other particulars is required for such disclosure. A vague statement alleged to have been made, such as "in the course of business". 8. Learned Solicitor General submitted that the supplementary statement in annexures II, III and III-A were filed for treating the same as part of the original application, wherein further sum of Rs. 49,01,738 has been added as an amount disallowed in respect of relief under section 80HHC and, thus, vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order under section 245D (1). Thereafter, the second respondent has filed further disclosure by offering the income which had been claimed as being export profits and on which deduction had been claimed under section 80HHC. The very fact that further sum was offered makes the first disclosure neither full nor true. (d) The respondent had argued that in the first disclosure they had only offered the loans as income and in the second disclosure it was giving up the deduction claimed under section 80HHC and as such it cannot be said that the first disclosure was not full and true. Both the claims arise in the same assessment order due to the same proceeding, i.e., there was only one appeal pending before the Commissioner of Income-tax (Appeals), at which stage of the case the second respondent chose to file the settlement application. The claim that certain amounts were loans and not liable to be included in the income, and the claim of deduction of export profits were both part of the same appeal. As such there can be only one disclosure and one application for settlement, which should be full and true. If variations are made and further amounts added to the amount offered for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case as also the complexity of the investigation involved to hold that the cases are suitable for admission. It has noted, inter alia, that the matter would take several years to reach finality in the usual channels apart from the fact that candid verification of 57 creditors involved complexity of investigation in addition to the fact that no opportunity was given to the assessee for cross-examination of the creditors and as such the issue of determination of genuineness of the credits in the case involves certain complexity of investigation. 12. According to Mr. Arun Jaitley, learned senior counsel, there were statements recorded behind the back of the assessee. The Settlement Commission has given a specific conclusion that it is prima facie satisfied about the disclosure of income being full and true and, thus, the Commission has returned a tenable satisfaction on the jurisdictional facts/issues for further consideration. 13. So far as the argument on income not being undisclosed income is concerned, according to learned senior counsel for the second respondent assessee, it is an afterthought and baseless. The income that form the subject-matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r counsel for the second respondent, such submission made on behalf of the petitioner should be rejected for the following reasons: (a) Undisputably there had been no amendment/revision of amounts, which had been mentioned in the application, to contend that the income disclosed earlier is not true or full. (b)The contention premised mainly on the argument that further (supplementary) statements were made before the Commission in January, 2005, and February, 2005, is untenable. Incidentally, supplementary statement dated January 19, 2005, was not preferred to or annexed with the writ petition. The said statement is in respect of disallowance of relief under section 80HHC of the Act. Importantly, the income under this head had been squarely referred to in the application originally filed and had been objected by the Revenue in its objection dated February 9, 2005. However, since the amounts under this head had not been offered for additional tax while filing the application originally, and that it was advised that it could be included in the application, the supplementary statement was submitted. Thus, it was in respect of another head of income, which was in dispute on a techni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and diverse and that the case calls for judicial approach and appreciation of facts. In the said case, the assessee had not disclosed any income not disclosed before the Assessing Officer, but merely offered a small part of losses claimed by it for the said assessment years to tax. In the said case, the Supreme Court, while noticing section 245C, held as follows (pages 451 and 455 of 206 ITR and page 381 of [1994] 2 SCC) : "10. Section 245C provides for filing of an application by an assessee for settlement of his case. Sub-section (1) says that an assessee may 'at any stage of a case relating to him' make an application in the prescribed form and manner, 'containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed' to settle his case. There are certain other requirements which he must fulfil before making such an application but which it is not necessary to notice here. 11. For a proper delineation of the jurisdiction of the Commission, it is necessary to bear in mind th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income or fraud fully or is at a stage of investigation/enquiries where the material gathered by him is likely to establish the particulars of such income or fraud, the assessee cannot be allowed to defeat or forestall, as the case may be, the entire exercise of the income-tax authorities just by approaching the Commission. In such a case, it cannot be said that he is acting voluntarily or in good faith. He should not be allowed to take advantage of the comparatively easy course of settlement. He must be allowed to face the normal channels of assessment/appeal, etc. Section 245C 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 Let it be remembered that the words in question (in section 245D(1A)) are not words of limitation nor are they meant to help unscrupulous assessees. Chapter XTX-A is a part of the Income-tax Act and must be construed consistent with the overall scheme and object. The Chapter is meant for those asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income 14. The Commission's power of settlement has to be exercised in accordance with the provisions of the Act. Though the Commission has sufficient elbow room in assessing the income of the applicant, it cannot make any order with a term of settlement which would be in conflict with the mandatory provisions of the Act, like in the quantum and payment of tax and the interest. The object of the Legislature, in introducing section 245C is to see that protracted proceedings before the authorities or in courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amounts statutorily payable under the Act......... 16. The foundation for settlement is an application which the assessee can file at any stage of a case relating to him in such form and in such manner as is prescribed. The statutory mandate is that the application shall contain 'full and true disclosure' of the income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived. The fundamental requirement of the application under section 245C is that full and true disclosure of the income has to be made, along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and making a full and true disclosure of the income are necessary preconditions for invoking the Commission's jurisdiction." 20. In the present case, the second respondent-assessee had disclosed a total income of Rs. 3,51,788 in the return for the assessment year 1998-99, which was revised to Rs. 4,57,522. Certain reliefs were also sought for under section 80HHC in respect of which assessment had been appealed against the Commissioner of Income-tax (Appeals). It has been accepted by the second respondent-assessee that a sum of Rs.1,72,00,000 for which claim has been made were not the income disclosed by the assessee, but it has not been disputed on behalf of the assessee that the sum of Rs.1,72,00,000 was shown by the assessee as loans from creditors, but it was not accepted by the Assessing Officer, who included the aforesaid amount to the income of the second respondent-assessee. Apart from a plain reading of section 245C, from the judgments of the Supreme Court, as referred to above, it will be evident that the disclosure under the said section 245C must be of an income not disclosed before the Assessing Officer. 21. In the case of Express Newspapers Ltd. [1994] 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question of absence of full and true disclosure and/or absence of manner of deriving the income in the settlement application, as such no case is made out. We agree with such submission as made on behalf of the second respondent-assessee. Merely because in one of the cases, W. P. No. 19772 of 2005 detailed argument has been made to suggest non-application of mind, it will not render all other orders passed by the same Settlement Commission as illegal. 26. We find no merit in the writ petitions, W. P. Nos. 42178, 42179, 42180 and 42181 of 2002, W. P. No. 11671 of 2004, W. P. No. 25825 of 2005 and W.P. No. 23365 of 2005. So far as W. P. No. 19772 of 2005 is concerned, in view of our finding, the order dated February 17, 2005, passed by the Settlement Commission is set aside. The Settlement Commission is directed to reject the application preferred by the second respondent-assessee of W. P. No. 19772 of 2005 with further direction to decide the claim made by the second respondent-assessee of W. P. Nos. 42178, 42179, 42180 and 42181 of 2002, W. P. No. 11671 of 2004, W. P. No. 25825 of 2005 and W. P. No. 23365 of 2005 on an early date so that the matter may come to an end before t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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