Court invalidates settlement application for failure to pay self-assessment tax on additional income.

The High Court held that the respondent's failure to pay self-assessment tax on the additional income declared under Section 153A rendered the settlement application invalid under Section 245D(2C) of the Income Tax Act. As a result, the court quashed the Settlement Commission's order admitting the application and granted the writ petition filed by the Commissioner of Income Tax, without costs.

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Issues Involved:
1. Validity of the Settlement Commission's order under Section 245D(2C) of the Income Tax Act, 1961.
2. Full and true disclosure of income by the respondent.
3. Payment of self-assessment tax on additional income declared under Section 153A.
4. Compliance with Section 245C(1) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Settlement Commission's Order:
The Commissioner of Income Tax (Central), Bhopal challenged the Settlement Commission's order dated 26.05.2014, which admitted the settlement application filed by the respondent under Section 245C(1) of the Income Tax Act. The Settlement Commission had concluded that the application did not suffer from any infirmity and allowed it to proceed further.

2. Full and True Disclosure of Income:
The respondent, a limited company engaged in infrastructure projects, had declared an undisclosed income of Rs. 1.58 crores in the settlement application. However, the department's investigation revealed an undisclosed income of Rs. 240,04,38,487/-. The petitioner argued that the respondent's disclosure was not full and true, as it was significantly lower than the department's estimate and the amount previously admitted under Section 132(4).

3. Payment of Self-Assessment Tax:
The respondent had filed returns under Section 153A for various assessment years, declaring additional income totaling Rs. 34,74,47,123/-. The petitioner contended that the respondent failed to pay self-assessment tax on this additional income, which was a prerequisite for a valid settlement application under Section 245C. The Settlement Commission, however, noted that there was no specific provision in the Act requiring payment of self-assessment tax on income declared under Section 153A for the application to be valid.

4. Compliance with Section 245C(1):
The petitioner argued that the respondent did not comply with Section 245C(1), which mandates full and true disclosure of income and payment of additional tax and interest. The respondent retracted the disclosure made during the search, claiming it was obtained under duress, and requested to treat the returns filed under Section 139(1) as returns filed in compliance with Section 153A notices. The Settlement Commission admitted the application, stating that the conditions regarding the threshold limit for tax on additional income, payment of additional tax and interest, and pendency of proceedings were fulfilled.

Judgment:
The High Court held that the respondent had not paid the self-assessment tax on the additional income declared in the returns filed under Section 153A. Consequently, the application was not valid under Section 245D(2C). The court quashed the Settlement Commission's order dated 26.05.2014 and allowed the writ petition filed by the Commissioner of Income Tax, with no order as to costs.

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