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of <h1>Settlement Commission's Order Quashed for Failing to Verify Application Validity</h1> <h3>Commissioner of Income Tax (Central), Pune Versus Income Tax Settlement Commission (ITSC), Additional Bench, Mumbai</h3> Commissioner of Income Tax (Central), Pune Versus Income Tax Settlement Commission (ITSC), Additional Bench, Mumbai - [2014] 365 ITR 68 Issues Involved:1. Validity of the Settlement Commission's order under Section 245D of the Income Tax Act, 1961.2. Requirement of true and full disclosure of income and the manner in which it was derived under Section 245C(1) of the Income Tax Act.3. Jurisdiction of the Settlement Commission to proceed with an application under Section 245C(1).Issue-wise Detailed Analysis:1. Validity of the Settlement Commission's order under Section 245D of the Income Tax Act, 1961:The Revenue challenged the validity of the Settlement Commission's order under Section 245D. The Commission had allowed the application of the Second Respondent to proceed without determining whether the application was invalid as per Section 245D(2C). The Commission deferred this consideration to a later stage under Section 245D(4), which was deemed incorrect by the court. The court emphasized that the Commission must determine the validity of the application at the stage of Section 245D(2C) based on the report submitted by the Commissioner and after hearing the applicant.2. Requirement of true and full disclosure of income and the manner in which it was derived under Section 245C(1) of the Income Tax Act:The court highlighted that Section 245C(1) mandates an application to contain a full and true disclosure of income not disclosed before the assessing officer, the manner in which such income was derived, and the additional amount of income tax payable. The Commission's jurisdiction to proceed can only be invoked on the basis of an application that complies with these requirements. The court referred to the Supreme Court's decision in Ajmera Housing Corporation, which reiterated the necessity of full and true disclosure for a valid application under Section 245C(1).3. Jurisdiction of the Settlement Commission to proceed with an application under Section 245C(1):The court explained that the Settlement Commission is a statutory body with its jurisdiction defined by the statute. The Commission must adhere to the statutory provisions and cannot proceed with an application unless the jurisdictional requirements under Section 245C(1) are fulfilled. The court noted that the Commission had erred in allowing the application to proceed without being satisfied that the application met the prerequisites of a valid application. The Commission's role is to ensure that the application is not invalid at the stage of Section 245D(2C) before proceeding further.Conclusion:The court quashed and set aside the impugned order of the Settlement Commission dated 9 November 2012 and restored the proceedings back to the Commission for reconsideration in terms of the observations contained in the judgment. The court emphasized the importance of the Commission determining the validity of the application at the appropriate stage and ensuring compliance with the statutory requirements for a valid application under Section 245C(1).
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