Point of Law: Additional disclosures of income during pendency of Settlement Commission, which were not made available at time of application by assessee under Section 254C of Act there is a sufficient cause to reject the application under Section 245C of Act.

Judgment :-

(Prayer: Writ Petition filed under Article 226 of the Constitution of India, praying for the issue of a Writ of Certiorari, to call for the records on the file of the second respondent in TN/CN.53/2013-14/46/IT dated 14.09.2015 and quash the same as illegal and without jurisdiction.)

1. The order passed by the Income Tax Settlement Commission Additional Bench in proceeding dated 14.09.2015 is sought to be quashed in the present writ petition.

2. The petitioner is the Principal Commissioner of Income Tax, Central-2, Chennai.

3. The facts in nutshell as narrated in the affidavit filed in support of the writ petition are that the petitioner/Income Tax Department conducted search and seizure operation under Section 132(4) of the Income Tax Act on 10.01.2013 at the registered office premises of the 1st respondent and residential premises of the Directors of the first respondent. During the search, huge amount of tax evasion by the first respondent Company was found. Survey u/s 133A was also conducted in the group concerns of the 1st respondent and sworn statements were recorded from Mr.S.Senthilnathan- Finance Director, Mr.Rajendran.

4. After search, Notice u/s 153A dated 23.09.2013 was issued to the 1st respondent for filing Return of Income for Assessment Year 2007-08 to 2012-13 and on 28.02.2014, the 1st respondent filed ROI. Thereafter, the 1st respondent filed Application u/s 245C for Settlement before the 2nd respondent on 27.03.2014.

5. The petitioner states that the first respondent has not made true and full disclosure of their income in the application as mandated under Section 245C(1) of the Act. This was clearly brought out in different reports including Rule 9 Report submitted before the 2nd respondent from time to time in the course of proceedings. Further, the second respondent has not considered the admission made by the Directors of the 1st respondnet in their sworn statement made under Section 132(4), though the same was specifically brought out in the Rule 9 Report. However, the second respondent by the impugned order dated 14.09.2015 had directed the 1st respondent to disclose further additional income to the tune of Rs.7.70 crores under different heads including further disallowance under Section 14A for Rs.57.20 lakhs and granted immunity from prosecution and penalty.

6. The petitioner states that the impugned order restricting the disallowance of expenses u/s.14A is incorrect and erroneous because the disallowance made in the original assessment order for 2008-09 and 2009- 10 were not based on the average value of entire investment in the exempt/tax free income during the year as provided under Rule 8-D(2)(iii) and admittedly there is no separate income attributable to the term loans availed for the purpose of godown, plant etc., unlike the term loans availed for wind mill which fetches income or receipt directly attributable to the total income from the wind mill. Hence the expenditure incurred on payment of interest directly attributable to a particular income or receipt alone is eligible for deduction in terms of Rule 8D(2)(ii), which impliedly excludes payment of interest NOT directly attributable to any particular income or receipt. Moreover, the immunity from prosecution and penalty u/s 245H is available only to the person who has made full and true disclosure but as stated earlier the 1st respondent failed to disclose fully and truly. Accordingly, the petitioner prayed for quasing of the impugned order dated 14.09.2015.

7. The first respondent disputed the contention raised by the petitioner by stating that the writ petition itself is not maintainable. It is an abuse of process of law. Regarding the orders passed by the Settlement Commission under Section 245D of the Income Tax Act, the scope of writ petition under Article 226 of the Constitution of India is limited and the High Court can interfere on