2016 (7) TMI 1311 - HC - Income Tax

High Court Upholds Settlement Commission's Order Emphasizing Full Disclosure in Settlement Proceedings

Commissioner of Income Tax-I Versus Income Tax Settlement Commission & 1

Commissioner of Income Tax-I Versus Income Tax Settlement Commission & 1 - TMI Issues:1. Challenge to Settlement Commission's order by Income Tax Department2. Estimation of profit and disclosure of under-declared incomeIssue 1: Challenge to Settlement Commission's orderThe Income Tax Department challenged the Settlement Commission's order, arguing that the Commission erred in estimating the profit of the assessee at 15% of the own money received in the construction business. The Department contended that the entire own money receipts belonged to the assessee, while the Commission accepted the assessee's claim that a substantial portion, around 85%, would go towards expenditure. Additionally, the Department raised concerns about the assessee's revised offer during settlement proceedings, where an additional sum of Rs. 50 lakhs was admitted, suggesting that the initial offer did not provide a true and full disclosure of previously under-declared income.Issue 2: Estimation of profit and disclosure of under-declared incomeThe Court referred to a previous case where the Settlement Commission had examined material and concluded that the assessees' offers for settlement, based on a 15% return on revised figures, needed to be accepted. The Court highlighted the importance of true and full disclosure under section 245-C of the Act, emphasizing that an applicant must disclose income not previously revealed to the Assessing Officer. The Supreme Court's ruling in a related case emphasized the significance of initial true disclosures, stating that large-scale revisions indicate the initial disclosures were not genuine. However, in the present case, the Court noted that the revised offers were made in the spirit of settlement, not to replace initial disclosures entirely. The revised offers were seen as marginally adjusting the settlement to resolve the dispute, rather than admitting the initial disclosures were inadequate. Consequently, the Court dismissed the petitions, emphasizing the importance of true and full disclosure at the initial stage.In conclusion, the High Court dismissed the petitions challenging the Settlement Commission's order, emphasizing the significance of true and full disclosure at the initial stage of settlement proceedings and distinguishing between genuine revisions made in the spirit of settlement and attempts to replace initial disclosures. The judgment underlined the importance of transparency and accuracy in disclosing income to ensure fair and lawful settlement processes.