Settlement disclosure must remain full and true through the final stage; judicial review is limited to procedural legality and natural justice.

In settlement proceedings, full and true disclosure of income and of the manner in which it was derived remains a continuing jurisdictional requirement through the final stage. The Settlement Commission may re-examine the applications at the stage of final hearing on the basis of material in the Commissioner's reports, including undisclosed turnover, accounting inconsistencies, unverifiable expenses and abnormal profit rates. Earlier permission to proceed does not prevent such review. Judicial review of the Commission's order is limited to legality of process, procedural defect, natural justice, or lack of nexus between reasons and conclusion. The rejection of the settlement applications was upheld and no ground for writ interference was found.

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Issues: (i) Whether the Settlement Commission was justified in rejecting the settlement applications at the stage of final hearing for want of full and true disclosure of income and the manner in which the income was derived. (ii) Whether the writ court should interfere with the Commission's order in exercise of judicial review.

Issue (i): Whether the Settlement Commission was justified in rejecting the settlement applications at the stage of final hearing for want of full and true disclosure of income and the manner in which the income was derived.

Analysis: The requirement under Section 245C(1) of the Income-tax Act, 1961 is not confined to an initial disclosure but continues throughout the settlement proceedings. The Commission was entitled to examine material emerging in the reports under Section 245D(2C) and Section 245D(3), including the undisclosed turnover, the inconsistency between the claimed cash basis and the admitted mercantile system of accounting, the unverifiable expenses, and the abnormal profit rates. The earlier decision to allow the applications to proceed did not create a final bar against re-examination at the stage of Section 245D(4). The Commission could also consider whether the disclosure of the manner in which income was derived was complete.

Conclusion: The rejection of the settlement applications was justified and is upheld.

Issue (ii): Whether the writ court should interfere with the Commission's order in exercise of judicial review.

Analysis: Judicial review in settlement matters is confined to the legality of the decision-making process, grave procedural defect, violation of natural justice, or absence of nexus between reasons and conclusion. The record did not disclose any such infirmity. The Commission acted on relevant material, considered the reports of the Commissioner, and gave reasons for its conclusion. No case was made out for interference merely because a different view on facts was possible.

Conclusion: No ground for interference was made out.

Final Conclusion: The impugned order of the Settlement Commission was sustained and the writ petitions failed.

Ratio Decidendi: In settlement proceedings, full and true disclosure of income and the manner of its derivation is a continuing jurisdictional requirement that may be tested at the final stage on the basis of material subsequently placed before the Commission, and judicial review will not interfere absent procedural illegality, violation of natural justice, or absence of nexus between reasons and conclusion.

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