Settlement application scrutiny must be comprehensive; technical objections and marginal disclosure gaps cannot by themselves justify rejection.

Settlement applications should not be rejected on isolated or technical grounds where the statutory scheme requires a composite examination. Non-response to a questionnaire issued by the Assessing Officer could not justify adverse inference once settlement proceedings were before the Settlement Commission and the assessment stood in abeyance. A marginal discrepancy between disclosed income and seized material, or an incorrect description of the entity's status, did not by itself negate full and true disclosure where the facts showed restructuring rather than a new set-up. The rejection was set aside and the applications were directed to be considered together in accordance with law.

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Issues: (i) Whether rejection of the settlement application could be sustained on the ground that the assessee did not answer the questionnaire issued by the Assessing Officer; (ii) Whether the assessee failed to make a full and true disclosure of income or took contradictory stands so as to justify rejection of the settlement application.

Issue (i): Whether rejection of the settlement application could be sustained on the ground that the assessee did not answer the questionnaire issued by the Assessing Officer.

Analysis: Once settlement proceedings proceed before the Settlement Commission, the assessment proceedings before the Assessing Officer remain in abeyance by virtue of the statutory scheme. In that situation, no adverse inference could be drawn merely because the questionnaire issued by the Assessing Officer had not been answered.

Conclusion: This ground could not justify rejection of the settlement application and was against the Revenue.

Issue (ii): Whether the assessee failed to make a full and true disclosure of income or took contradictory stands so as to justify rejection of the settlement application.

Analysis: The discrepancy between the income disclosed and the amount inferred from seized material was marginal in relation to the total disclosure and could have been reconciled in the settlement process. The supposed contradiction regarding whether the assessee was a successor company or a new set-up was found to rest on a premise, since the facts showed restructuring of shareholding rather than creation of a new company. The pending application of the associated entity also required a composite examination rather than isolated rejection.

Conclusion: The rejection on the ground of lack of full and true disclosure and contradictory stands was unsustainable and was in favour of the Petitioner.

Final Conclusion: The impugned order of the Settlement Commission was set aside and the settlement applications were directed to be proceeded with and considered along with the connected application in accordance with law.

Ratio Decidendi: A settlement application cannot be rejected on isolated or technical grounds where the statutory scheme requires the matter to be examined comprehensively, and a marginal discrepancy or misdescription that does not negate the overall disclosure does not by itself establish absence of full and true disclosure.

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