2012 (12) TMI 1020 - HC - Income Tax

Court affirms Settlement Commission's decision to reject petitioner's application under Income Tax Act

Vishnubhai Mafatlal Patel Versus Assistant Commissioner of Income-tax

The Court upheld the Settlement Commission's decision to reject the petitioner's application under Section 245D(1) of the Income Tax Act, 1961, as the ... Settlement Commission order eligibility - scope of judicial review in exercise of writ jurisdiction under Articles 226 and 227 of the Constitution of India while examining the validity of an order of the Settlement Commission - Held that:- When the Settlement Commission examines an application in terms of statutory powers and finds that such application does not satisfy the legal requirements, as contained in section 245C(1) of the Act, in our view, unless such decision of the Commission is contrary to the statutory provisions contained in the Act, interference in exercise of writ jurisdiction under Article 226 of the Constitution of India would not be warranted. The petitioners, as recorded earlier, made strenuous efforts to convince us that the Commission ought not to have summarily dismissed the application. We are afraid this cannot be the ground on which we would reverse the Commission's order. If on the basis of material on record, the Commission could have come to the conclusion that application was not valid, it had every authority to reject the same even at the stage of first screening under section 245D(1) of the Act. We are not convinced with the petitioners' contention that if such application was allowed to be proceeded, the petitioners would have produced additional materials in support of the requirement that the petitioner made true and full disclosure of undisclosed income and the manner of deriving the same. The petitioners were required to make an application and make such declarations as required under section 245C(1) of the Act. They could not have hoped for or insisted upon a second innings to do so beyond the stage of section 245D(1) of the Act - petition dismissed. Issues Involved:1. Legality of the rejection of the application by the Settlement Commission under Section 245D(1) of the Income Tax Act, 1961.2. Examination of 'true and full disclosure' of income and the manner in which such income was derived as required under Section 245C(1) of the Act.3. Scope of judicial review against the decision of the Settlement Commission.Detailed Analysis:1. Legality of the rejection of the application by the Settlement Commission under Section 245D(1) of the Income Tax Act, 1961:The petitioner, an individual engaged in infrastructure development activities, filed an application under Section 245C of the Income Tax Act for settlement of tax liabilities for assessment years 2008-2009 to 2011-2012. The application disclosed additional income and paid the requisite tax and interest. The Settlement Commission, however, rejected the application on the grounds that the requirements of Section 245D(1) were not fulfilled. The Commission noted that the petitioner failed to make 'true and full disclosures' of income and the manner in which such income was derived. The petitioner challenged this rejection, arguing that the Commission committed a grave error by conducting a detailed inquiry at the initial stage, which should have been summary in nature.2. Examination of 'true and full disclosure' of income and the manner in which such income was derived as required under Section 245C(1) of the Act:The Court examined the statutory provisions under Chapter XIXA of the Income Tax Act, which pertain to the settlement of cases. Section 245C(1) requires an assessee to make an application containing a 'full and true disclosure' of income not previously disclosed before the Assessing Officer and the manner in which such income was derived. The Settlement Commission, upon receiving the application, is mandated to issue a notice to the applicant within seven days and decide within fourteen days whether to reject the application or allow it to proceed. The Court noted that the Commission has the authority to scrutinize whether the application fulfills the statutory requirements, even if such scrutiny is summary in nature. The Commission found that the petitioner did not provide credible material to support the manner in which the additional income was derived, leading to the rejection of the application.3. Scope of judicial review against the decision of the Settlement Commission:The Court emphasized that the scope of judicial review against the Settlement Commission's decision is narrow. The Court's intervention is limited to examining whether the Commission's order is contrary to the provisions of the Income Tax Act or if it results in grave injustice or prejudice to the petitioner. The Court referred to the Supreme Court's decision in Jyotendrasinhji v. S.I. Tripathi, which held that the Settlement Commission's order is final, but judicial review is permissible to ensure the order is not contrary to the Act. The Court also cited Ajmera Housing Corpn. v. CIT, where it was held that an assessee cannot revise the disclosure of income once the application is filed, and the initial application must contain true and full disclosure. The Court found that the Commission acted within its jurisdiction in rejecting the application based on the lack of true and full disclosure and the manner in which the income was derived.Conclusion:The Court upheld the Settlement Commission's decision to reject the petitioner's application under Section 245D(1) of the Income Tax Act, 1961, on the grounds that the petitioner failed to fulfill the statutory requirements of making true and full disclosures of income and the manner in which such income was derived. The Court dismissed the petitions, emphasizing the limited scope of judicial review in such matters and the Commission's authority to summarily reject applications that do not meet the legal criteria.