IMPORTANT POINT
The court affirmed that the Settlement Commission's findings are conclusive unless there are grave procedural defects, emphasizing the limited scope of judicial review over such orders.

JUDGMENT :

A.K.Jayasankaran Nambiar, J.

The petitioner in W.P.(C).No.1175 of 2024 is the appellant before us aggrieved by the judgment dated 21.02.2024 of the learned Single Judge in the writ petition.

2. The brief facts necessary for disposal of this Writ Appeal are as follows:

The appellant has a 70% shareholding in two companies, namely M/s Delta Aggregators and Sand Pvt. Ltd. and M/s Delta Msand Pvt. Ltd. A search and seizure action under Section 132 of the Income Tax Act [hereinafter referred to as the “I.T. Act”] was carried out on 13.10.2017 at the business premises of the two companies as also at the residence of the appellant. Consequent to the search, notices under Section 153A of the I.T. Act were issued on 07.06.2018 to the companies as well as to the appellant for the assessment years 2012-13 to 2017-18. A notice under Section 143(2) of the I.T. Act was also issued on 23.09.2019 for the assessment year 2018-19.

3. During the pendency of the proceedings initiated under Section 153A, the appellant, along with the two companies, preferred settlement applications before the Interim Board for Settlement [IBS]. In this Writ Appeal, we are concerned only with the settlement application put in by the appellant in his personal capacity. That application was filed on 26.02.2021, and the appellant admitted an undisclosed income of Rs.44,00,000/- towards remuneration earned outside the banking channels for the assessment years 2013-14 to 2018-19.

4. On the settlement application being entertained by the IBS, a report was called for in terms of Rule 9 of the Income Tax Settlement Commission (Procedure) Rules from the Principal Commissioner of Income Tax, Kochi. In the report that was submitted before the IBS, the Principal Commissioner opined that the appellant had not disclosed an additional income to the extent of Rs.10,52,12,443/- for the assessment years 2012-13 to 2018-19. Although the appellant preferred a detailed objection to the said report, the proceedings before the IBS ultimately culminated in the final order which was impugned in the writ petition. By the said order of the IBS, the total income of the appellant was settled at Rs.35,36,42,238/- together with applicable interest thereon. The appellant was also granted immunity from prosecution and from imposition of penalty under various provisions of the I.T. Act. The plea of the appellant for capitalisation of the amount offered as additional income was also allowed.

5. In the writ petition, the challenge of the appellant to the impugned order of the IBS was essentially confined to the finding of the IBS on the issue of deemed dividend, which the IBS found had to be treated as undisclosed income of the appellant. The appellant, as the majority shareholder in the two companies referred above, had availed a loan of Rs.1,62,88,442/- from M/s Delta Aggregates and Sand Pvt. Ltd. during the financial year relevant to the assessment year 2014-15. The latter was a company in which the appellant held 70% shares and 10% voting right. In the same year, the appellant also availed a loan of Rs.1,20,00,000/- from M/s Metro Aggregates and Sand Pvt. Ltd. in which he held 23% shares and more than 10% of the voting right. Further, during the financial year relevant to the assessment year 2018-19, he had availed a loan of Rs.11,54,10,055/-from M/s Delta Msand Pvt. Ltd., in which he was a 70% shareholder and held more than 10% of the voting right. The Principal Commissioner, who had submitted the report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, opined that the said borrowings were in the nature of 'deemed dividend' under Section 2(22)(e) of the I.T. Act and recommended an addition of the loan amount to the undisclosed income of the appellant. After overruling the objections of the appellant, the IBS had confirmed the addition of this amount as undisclosed income of the appellant for the purposes of settlement.

6. The learned Single Judge, who considered the writ