Full and true disclosure of income is mandatory under the Income Tax Act for applications to the Settlement Commission, failure results in complete application rejection.

ORDER

This writ petition has been filed against the impugned order dated 11.06.2020 passed by the 1st respondent/Settlement Commission.

2. The breif facts of the case are as follows:

2.1 The petitioner-Company is engaged in the business of manufacturing and trade of jewels and access in the Income Tax Pan No.AAACK2564Q under the jurisdiction of 2nd respondent.

2.2 The petitioner is a closely held company and it is corporate office, functioning from No.252, TTK Road, Alwarpet, Chennai. Shri Kishore Kumar Jain is the Managing Director of the Company and the other Directors are his family members.

2.3 A search, under Section 132 of the Income Tax Act, 1961 (hereinafter called as “IT Act”), was carried out on 21.04.2016. During the course of search proceedings, Shri Kishore Kumar Jain, Managing Director, has admitted, while answering the Q.No.8, in his sworn statement recorded under Section 132(4) of the IT Act on 23.04.2016, that the company’s inflated refinery loss would come across 3% to 5% and siphoned off the excess gold from the refining process and sold them in the black market. By virtue of inflation of refinery loss, the petitioner had generated about a sum of Rs.70.66 Crores from the AY 2011-12 to 2016-17, which was stated by the petitioner in the letter dated 29.06.2016.

2.4 In the aforesaid petitioner's letter, they offered to an extent of Rs.80 Crores (268.200 kg of gold bullion) towards stock in trade kept with and held by employees, Goldsmiths, Agents, etc., in the year of search, i.e., AY 2017-18.

2.5 Consequent to the search, the notices, under Section 153A and 142(1) of the IT Act, were issued for the AYs 2011-12 to 2017-18. Subsequently, the petitioner filed a settlement application dated 16.10.2018 before the Income Tax Settlement Commission-1st respondent herein.

2.6 The 1st respondent, vide its order dated 11.06.2020, which was passed under Section 245D(4) of the IT Act, held that the settlement application for the AYs 2011-12 to 2017-18 filed by the petitioner is not allowed to be proceeded with and treated it as “invalid” as the petitioner did not disclose full and true manner of the income in its settlement application.

2.7 Under these circumstances, the petitioner filed this writ petition against the order dated 11.06.2020 passed by the 1st respondent.

3. Petitioner's submission:

3.1 Mr.P.S.Raman, learned Senior counsel, appearing for the petitioner would submit that in this case, based on the joint verification report, the 1st respondent had accepted the inflation of refinery loss, which had been generated about Rs.70.66 Crores from the AYs 2011-2012 to 2016-2017.

3.2 Now, the issue is pertaining to only with regard to Rs.80 Crores (286.200 kg of gold bullion) of stock in trade kept with and held by the employees, goldsmiths and agents, etc., in the year of search, i.e., 2017-2018.

3.3 He would submit that the petitioner has disclosed the aforesaid Rs.80 Crores in the returns filed for the AY 2017-18. In this regard, he referred the findings of the Tribunal at paragraph No.5.1, wherein it has been stated as follows:

“5.1 ................It is also seen that though the applicant company mentioned that the unaccounted stock of 268.200 kgs of gold amounting to Rs.80 Crores was held as stock in trade with employees, goldsmiths, agents, etc., the applicant company has not produced any documentary evidences to substantiate that source of such unaccounted stock. All these shortfalls leads to the fact that the applicant company has not explained the manner in which, the income has bee