Order passed by Settlement Commission liable to be set aside.

(S.J. Mukhopadhaya, J.)

In all these writ petitions as 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 2nd respondent-assessee of the cases made application u/s 245-C of the Income Tax Act, 1961, (hereinafter referred to as IT Act) in 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 245-D of the IT Act. Such orders u/s 245-D passed by the Settlement Commission in respective cases have been challenged by the Revenue, mainly on the ground that the applications preferred by the assessee did not fulfil the requirements of Section 245-C and there being gross non-application of mind by the Settlement Commission on the issue, the impugned orders to proceed u/s 245-D is bad.

3. Mr. G.E.Vahanvati, learned Solicitor General led the case, W.P. No.19772/05, wherein order dated 17th Feb., 2005, passed by the Settlement Commission u/s 245-D (1), allowing the application to be proceeded, is under challenge. For the said reason, we intend to deliberate with the relevant facts of assessee, the 2nd respondent to the writ petition, W.P. No.19772/05.

4. The 2nd respondent-assessee, filed a return for the assessment year 1998-99 disclosing total income of Rs.3,51,788/=, which was revised to Rs.4,57,520/=. Certain additions were made to the assessment, including addition u/s 68 of the IT Act of a sum of Rs.1.72 Crores in respect of loans from creditors. Further relief sought for u/s 80 HHC of the IT Act being restricted to Rs.2.45 lakhs as against Rs.56.06 lakhs claimed by the said respondent. The assessment as was made had been appealed against before the Commissioner of Income Tax (Appeals). During the pendency of the said appeal, the 2nd respondent-assessee filed application u/s 245-C (1) before the Settlement Commission in the form prescribed with Annexures I to III as enclosed with the paper-book. The Settlement Commission, thereafter, asked for a report from the Commissioner, Income Tax. On receipt of such report, the Settlement Commission, on a consideration of the matter, including the nature and circumstances of the case, came to a conclusion that there is complexity of investigation involved and allowed the application to be proceeded with by impugned order dated 17th Feb., 2005. Similar applications u/s 245-C were preferred by the other assessees, who are the 2nd respondent to the respective writ petitions. In all those cases, respective reports were called for from the Commissioner of Income Tax and after receipt of report, averting to each of the case and taking into consideration the nature and circumstances of each case, 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.

5. 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 credit u/s 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