2010 (5) TMI 582 - HC - Income Tax

High Court upholds Settlement Commission's undisclosed income determination for block period, rejects Revenue's challenge.

The High Court dismissed the Revenue's writ petition challenging Settlement Commission proceedings. The Court upheld the Commission's determination of ... Search and seizure - Block assessment - Undisclosed income - Application to Settlement Commission - Estimation of net profit - whether this Court in a writ petition, can interfere with such findings made on certain questions of fact -it was observed that the proper method for determining the total income of the applicant in the block period would be the net wealth accretion over the years in the block period and the Commission has totally deviated from the same - Held that: interference can be made only if it is found that the order is contrary to any of the provisions of the Act - There is no violation of the provisions of the Act and there is no error apparent on the proceedings also - The writ petition is therefore dismissed Issues:1. Challenge to Settlement Commission proceedings by Revenue.2. Method adopted by Settlement Commission for determining undisclosed income.3. Reliability of voluntary statement made by assessee.4. Comparison of assessment method with similar cases.5. Jurisdiction of High Court to interfere with Settlement Commission findings.Analysis:1. The writ petition was filed by the Revenue challenging the Settlement Commission proceedings. The petition raised concerns regarding the undisclosed income determined for the block period and the order passed by the Commission (Ext.P2) admitting the application (Ext.P4).2. The Settlement Commission estimated the net profit for the block period, focusing on the total turnover and income from food sales. The Revenue argued that the Commission did not consider the effect of the sworn statement by the assessee and that the method adopted varied from the proposed principle. However, the Commission defended its method by citing consistency with similar cases and the retraction of the admission by the assessee.3. The reliability of the voluntary statement made by the assessee was a key point of contention. The Revenue relied on a previous court decision supporting the acceptance of such statements, while the Commission justified its decision not to exclusively rely on the statement due to lack of supporting materials and the retraction of the admission by the assessee.4. The comparison of the assessment method with a similar case involving M/s. Hotel Vysali & Mayur Bar was crucial. The Commission determined the net profit at 3.75% of the total turnover, similar to the method used in the other case. The High Court noted that the Revenue did not challenge the method used in the other case, indicating consistency in the Commission's approach.5. The High Court deliberated on its jurisdiction to interfere with Settlement Commission findings. Citing various legal precedents, the Court emphasized that interference is warranted only in cases of grave procedural defects or violation of statutory provisions, not for errors of fact or law. The Court concluded that there were no legal infirmities in the Commission's order (Ext.P2) justifying interference.In conclusion, the High Court dismissed the writ petition, highlighting that there was no violation of statutory provisions or errors apparent on the record, thus upholding the Settlement Commission's decision.