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High Court of Delhi
BADAR DURREZ AHMED & R.V. EASWAR, JJ.
Commissioner of Income Tax
Versus
Income Tax Settlement Commission & Others
W P(C) No. 1609 of 2013
Decided on : 02-07-2013.
Income Tax - Settlement Commission - Section 245D(2C) of the Income Tax Act, 1961 - Section 245C(1) - Section 245D(4) - Section 245F(2) - Section 245D(1) - Section 245D(2B) - Section 245D(3) - Section 245D(6) - Section 245D(7 - Full and true disclosure of income, manner of deriving undisclosed income, and additional amount of income tax payable are prerequisites for a valid application under Section 245C(1). The Settlement Commission must record its satisfaction on these aspects before passing any order under Section 245D(4) setting out the terms of settlement. The Settlement Commission retains the power to examine the full and true disclosure of income even after deciding to proceed with the settlement application under Section 245D(1) or Section 245D(2C. The Settlement Commission's jurisdiction extends to matters referred to in the report of the Commissioner under Section 245D(1) or Section 245D(3). The scheme of Chapter XIX-A does not contemplate the revision of disclosed income in a settlement application. The Settlement Commission must determine the disclosed income with reference to the income disclosed in the application filed under Section 245C(1).
Fact of the Case:
The writ petition challenges the order of the Income Tax Settlement Commission, Principal Bench, New Delhi, passed under Section 245D(2C) of the Income Tax Act, 1961, allowing the settlement applications of Respondent Nos. 2 to 5 to be proceeded with. The Commissioner of Income-tax contends that the settlement applications failed to satisfy the prerequisites stipulated in Section 245C(1) of the said Act, including full and true disclosure of income, the manner in which the undisclosed income had been derived, and the additional amount of income tax payable.
Finding of the Court:
The Settlement Commission retains the power to examine the full and true disclosure of income even after deciding to proceed with the settlement application under Section 245D(1) or Section 245D(2C. The Settlement Commission's jurisdiction extends to matters referred to in the report of the Commissioner under Section 245D(1) or Section 245D(3). The scheme of Chapter XIX-A does not contemplate the revision of disclosed income in a settlement application. The Settlement Commission must determine the disclosed income with reference to the income disclosed in the application filed under Section 245C(1).
Issues: The issues raised include whether the settlement applications fulfilled the prerequisites stipulated in Section 245C(1) of the Income Tax Act, 1961, and whether the Settlement Commission had the jurisdiction to proceed with the settlement applications under Section 245D(1) or Section 245D(2C.
Ratio Decidendi: The Settlement Commission retains the power to examine the full and true disclosure of income even after deciding to proceed with the settlement application under Section 245D(1) or Section 245D(2C. The Settlement Commission's jurisdiction extends to matters referred to in the report of the Commissioner under Section 245D(1) or Section 245D(3). The scheme of Chapter XIX-A does not contemplate the revision of disclosed income in a settlement application. The Settlement Commission must determine the disclosed income with reference to the income disclosed in the application filed under Section 245C(1).
Final Decision: The writ petition is dismissed, and the Court has not expressed any opinion on the merits of the issues as to whether the respondents 2 to 5 had made a full and true disclosure and had indicated the manner in which the undisclosed income had been derived. Those and related issues on merits are for the Settlement Commission to decide.
Badar Durrez Ahmed, ACJ
1. This writ petition is directed against the order dated 24.01.2013 passed by the Income Tax Settlement Commission, Principal Bench, New Delhi under Section 245D(2C) of the Income Tax Act, 1961 (hereinafter referred to as ‘the said Act’). By virtue of the impugned order dated 24.01.2013, the Income Tax Settlement Commission (hereinafter referredto as ‘the Settlement Commission’) held the settlement applications of the Respondent Nos. 2 to 5 to be “not invalid” and were therefore allowed to be proceeded with inasmuch as the said settlement applications had, in the view of the Settlement Commission, prima facie, fulfilled all the conditions prescribed under Section 245C(1) and 245D(2C) of the said Act. The petitioner (Commissioner of Income-tax) is aggrieved by the said order dated 24.01.2013 inasmuch as according to the petitioner, the settlement applications filed on behalf of the respondents 2 to 5 ought not to have been proceeded with and ought to have been held as “invalid” because the settlement applications failed to satisfy the pre-requisites stipulated in Section 245C of the said Act. Those pre-requisites being, full and true disclosure, the manner in which the undisclosed income had been derived and the additional amount of income tax payable.
2. On behalf of the petitioner, it was sought to be contended that as there was no true and full disclosure by the respondents 2 to 5 in their applications for settlement, the Settlement Commission ought not to have proceeded with their applications and ought to have passed an order under Section 245D(2C) holding the applications to be invalid. It was also contended that the manner of deriving the undisclosed income had not been indicated by the respondents 2 to 5 and, therefore, on this ground also, the order under Section 245D(2C) passed by the Settlement Commission ought to have been one holding the settlement applications to be invalid. Strong reliance was placed by the learned counsel appearing for the petitioner on the Supreme Court decision in the case of Ajmera Housing Corporation v. Commissioner of Income Tax: 326 ITR 642 (SC) to contend that where there was an established case of absence of full and true disclosure on the part of the applicant, the settlement application ought to be rejected at the threshold by the Settlement Commission.
3. In this backdrop, the learned counsel for the petitioner sought to argue on the merits of the matter and to establish that there was in fact substance in his contention that the respondents 2 to 5 had not made a full and true disclosure and that they had also not indicated the manner in which the undisclosed income had been derived. At the threshold itself, the learned counsel appearing on behalf of the respondents 2 to 5 took serious objection to the maintainability of the present petition. It was contended on behalf of the respondents 2 to 5 that the writ petition challenging the order dated 24.01.2013 passed under Section 245D(2C) of the said Act as also the earlier orders dated 30.11.2012 and 28.12.2012 passed under Section 245D(1) of the said Act was not maintainable inasmuch as those orders were merely orders of ‘admission’. Reliance was placed by the learned counsel for the respondents 2 to 5 on a decision of the Supreme Court in the case of Commissioner of Income Tax v. K. Jayaprakash Narayanan: 184 Taxman 85 (SC). Reliance was also placed on a decision of a Division Bench of this Court in the case of Commissioner of Central Excise, Vishakapatnam v. True Woods Private Ltd.: 2006 (199) ELT 388 (Del) as also on a decision of the Bombay High Court in the case of Union of India v. Customs and Central Excise Settlement Commission, Mumbai: 2009 (234) ELT 634 (Bom). The learned counsel for the respondents 2 to 5 emphasized that the impugned orders were only orders of admission and only indicated a prima facie view. It was open for the Settlement Commission to alter that view in the course of furth
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