2009 (7) TMI 93 - HC - Income Tax

Settlement Commission's Jurisdiction Limited to Settlement Procedure, Not Reassessment.

1. CANARA JEWELLERS 2. YOGESH PALKE alias YOGESH ACHAR (Decd. by LRS) Versus SETTLEMENT COMMISSION AND ANOTHER

The court held that the Settlement Commission exceeded its jurisdiction by enhancing the income when the disclosure was not accepted as genuine. The court ... Difference between closing and opening stock – order of settlement commission – held that - When once the income disclosed by the assessees under section 245C is not accepted as full and true disclosure of their respective income, in view of the judgments of the Supreme Court and this court, as referred to above, we hold that the applications under section 245C preferred by the assessees were not maintainable and, therefore, the Settlement Commission had no jurisdiction to pass any order enhancing the income, showing higher income in respect of the assessees. - So far as section 245F is concerned, though the Settlement Commission is empowered to have all powers which are vested in an income-tax authority under the Act, in addition to the power conferred under Chapter XIX-A, but such power can be exercised for the purpose of procedure of settlement of application under section 245C and not for reassessment of tax of a particular year which is vested with the assessing authority. – Order of settlement commissioner set aside. Issues:1. Jurisdiction of Settlement Commission under section 245C of the Income-tax Act.2. Validity of the order enhancing the income assessed by the Settlement Commission.3. Interpretation of section 245F regarding the powers of the Settlement Commission.Issue 1: Jurisdiction of Settlement Commission under section 245C of the Income-tax ActThe case involved two writ appeals by a partnership firm and a partner regarding the assessment years 1991-92, 1992-93, and 1993-94. The Assessing Officer reopened the assessment for undisclosed stock of gold, leading to discrepancies in the closing stock. The appellants approached the Settlement Commission under section 245C of the Income-tax Act, claiming full and true disclosure of income. The Settlement Commission, despite accepting the disclosure, enhanced the income assessed. The appellants challenged this decision, arguing that if their disclosure was accepted, there should be no increase in income. The Revenue contended that the Commission had the authority to fix income based on reports and records, as per section 243F of the Act.Issue 2: Validity of the order enhancing the income assessed by the Settlement CommissionThe Settlement Commission's power to determine income under section 245C was scrutinized. Previous court decisions emphasized that full and true disclosure of income is crucial for settlement and immunity from penalties. The Commission's order showed discrepancies between the income disclosed by the appellants and the revised income assessed by the Commission. The court held that if the disclosed income is not accepted as full and true, the applications under section 245C are not maintainable. The court concluded that the Settlement Commission exceeded its jurisdiction by enhancing the income when the disclosure was not accepted as genuine.Issue 3: Interpretation of section 245F regarding the powers of the Settlement CommissionSection 245F grants the Settlement Commission powers similar to an income-tax authority under the Act. However, these powers are to be used for settling applications under section 245C, not for reassessment. The court clarified that the Commission's authority is limited to the settlement procedure and not for reassessing tax calculated by the Assessing Officer. Therefore, the court set aside the orders of the Settlement Commission and the single judge, allowing the Assessing Officer to proceed as per law, provided it is not barred by limitation. The judgment did not award costs to any party.This detailed analysis of the judgment from the Madras High Court covers the issues related to the jurisdiction of the Settlement Commission, the validity of the income enhancement order, and the interpretation of powers under section 245F of the Income-tax Act.