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TMI Blog2024 (12) TMI 1267X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Settlement Commissioner (ITSC) to the extent that it has granted immunity from prosecution as well as the penalty to the Respondents. 2. Although in the course of the proceedings before the ITSC, based on the report submitted on behalf of the Revenue, an addition beyond what was originally disclosed by the Assessee was made, the order of the ITSC determining the amount payable by the Respondents was not challenged by them. 3. The grievance of the Revenue is that the ITSC granted the Respondents immunity from penalty and prosecution without recording its satisfaction that there has been full and true disclosure of the income as well as the manner in which such income has been derived by the Respondents. It is submitted this was a mandatory condition in terms of Section 254H (1) of the Income Tax Act 1961 ('Act'). 4. Both the sides have placed reliance on the decision of this Court is Commissioner of Income Tax (Central)-II v. BDR Builders and Developers (2016) 385 ITR 111 (Del). 5. In the aforesaid decision, this Court, in similar circumstances, set aside the order of the ITSC granting immunity from prosecution and penalty and remanded the matter to the ITS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AR that additional taxes with interest has been duly paid in all the cases as per evidences filed along with the applications The intimation to the AO in Form No. 34 BA has been made on 16.12.2011 itself in all the above cases, complying with the requirements u/s 245C (4) of the Income Tax Act. Further, none of the applicants had filed any earlier settlement application after 01.06.2007. 4. In view of the above discussion, we hold that since the applicants have fulfilled all the conditions prescribed under section 245C (1) of the Income Tax Act, the applications are allowed to be proceeded with." 4. It is the submission on behalf of the Assessees that the above-mentioned satisfaction read with the background recorded in the order passed by the Settlement Commission was sufficient to grant immunity. It is his further submission that in terms of Section 245C and Section 245H of the IT Act, an application is filed before the Settlement Commissioner, and upon the said application being filed, the Settlement Commissioner would then record his satisfaction as to the cooperation rendered. The same has been done and recorded in this case vide order dated 28th December 2011. Thereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by High Court. The special leave petitions stand disposed of. Pending applications, if any, stand disposed of." 7. It is pursuant to said liberty that the present petitions have been filed. First of all, this Court notes that the scope of a review petition is fairly limited. Unless there is an error apparent on the face of the record, a review petition would not be entertainable. This Court has considered the submission of the Assessees that in the order dated 28th December 2011, the Settlement Commissioner records that the conditions prescribed under Section 245C (1) of the IT Act have been satisfied. 8. In the opinion of this Court, the mere recording of satisfaction, by itself, would not be sufficient to satisfy the conditions under Sections 245H (1) of the IT Act. A Coordinate bench of this Court, in Commissioner of Income Tax v. BDR Builders and Developers Ltd. has held: "6. The court finds the mandate of section 245H of the Act which spells out the power of the Income-tax Settlement Commission to grant immunity from prosecution and penalty is clear. Section 245H (1) states that the Income-tax Settlement Commission has to be satisfied that the applicant before it : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submission. It must be remembered that the Income-tax Settlement Commission is performing the important task of exercising its discretionary powers under the mandate of section 245H (1) of the Act to grant immunity from prosecution and penalty. The Legislature has in section 245H (1) of Act mandated the recording of satisfaction by the Income-tax Settlement Commission of the fulfilment by the applicant of the aforementioned mandatory requirements. The very object and purpose of having an Income-tax Settlement Commission which is vested with such powers will be defeated if a lenient view is taken of the fulfilment of the requirements in section 245H (1) of the Act" 9. It is thus clear that satisfaction must be recorded with respect to the twin conditions i.e., (i) cooperation rendered by the Assessee with the Income-tax Settlement Commission in proceedings before it and (ii) full and true disclosure made by the Assessee of (a) its income, and (b) the manner in which such income has been derived. In the absence of the same, immunity ought not to be granted. In this context, apart from few paragraphs i.e., Paragraph 12 in order dated 27th June, 2013 and Paragraph 4 in order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and it is not enough if it is shown in proceedings before the ITSC after being confronted with adverse reports, to which it had no answer. In Ajmera Housing Co-operation and another v. CIT, (2010) 326 ITR 642, the Supreme Court held that the fact that the assessee kept revising its application for settlement by disclosing higher income in the revised applications established that it did not make a full and true disclosure of income which it did not disclose to the assessing authority. In the circumstances, the assessee cannot be said to have "co-operated" in the proceedings before the ITSC. It did not voluntarily offer the additional income, being the difference between 117.98 crores and 39.53 crores. It first offered additional income of Rs. 39.53 crores in the settlement application filed under Section 245-C (1); when the ITSC found, pursuant to the report filed by the CIT on 17.10.2012, that by the assessee's own admission, purchase invoices were bogus to the extent of Rs.43.78 crores instead of Rs. 39.53 crores, the assessee made a further disclosure of Rs. 4.25 crores. After all the reports were examined by the ITSC and after considering the evidence adduced by both the sid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alier approach, perhaps driven by the misconception that granting of immunity from penalty and prosecution was ritualistic, once the assessee discloses the entire concealed income, ignoring the vital requirement that it is the stage at which such income is offered that is crucial and that the applicant cannot be permitted to turn honest in instalments. When there is unimpeachable evidence of a much larger amount of concealed income, about which there is no ambiguity, then what was disclosed by the assessee in the application filed under Section 245-C1 cannot be regarded as full and true disclosure of income merely because the assessee, when cornered in the course of the proceedings before the ITSC, offered to disclose the entire concealed income. In as much as the ITSC has ignored this crucial aspect, the majority view expressed by it cannot at all be countenanced." 11. Thus, two aspects are clear. Firstly, the Assessee has to be honest and fairly disclose all the facts at the outset itself. The Assessee cannot make disclosures in instalments in a settlement proceeding. For a disclosure to be considered full and true, the Assessee ought to have disclosed the complete undisclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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