2018 (7) TMI 1320 - HC - Income Tax

High Court Upholds Rejection of Settlement Application for Inconsistent Disclosures

The High Court upheld the decision of the Settlement Commission to reject the application for settlement for the Assessment Years 1991-92 to 1994-95. The ... Rejecting the application for settlement for all the Assessment Years on the ground that the petitioner had not made true and full disclosures - Held that:- The Supreme Court in the case of Ajmera Housing Corporation and another v. Commissioner of Income ­Tax, [2010 (8) TMI 35 - SUPREME COURT OF INDIA] had emphasized the requirement of true and full disclosure in settlement proceedings and high­ lighted that such disclosures should be made at the outset in the application for settlement itself. It was a case in which a person, who had applied for settlement, had made sizable further disclosures after filing the application for settlement. The Supreme Court was of the view that this itself would show that the initial disclosure was not true. It was observed that full and true disclosure of income, which had not been previously disclosed, is a precondition for valid application u/s.245C(1) of the Act. The Scheme of Chapter XIX­A does not contemplate revision of the income as disclosed in the application. If the assessee is permitted to revise his disclosure, it would, in a sense, mean making a fresh application in relation to the said case by withdrawing the earlier application. Thus, the assessee cannot revise the application. Issues:Challenge to order of Settlement Commission rejecting application for settlement for A.Y. 1991-92 to 1994-95.Analysis:The petitioner challenged the order of the Settlement Commission rejecting their application for settlement for the Assessment Years 1991-92 to 1994-95. The petitioner, an individual, had applied for settlement after a search action under section 132 of the Income Tax Act, 1961. The Settlement Commission rejected the application based on the petitioner's alleged failure to make true and full disclosures. The High Court, in a previous judgment, had remanded the proceedings back to the Settlement Commission for further hearing. The Settlement Commission, after detailed consideration, again rejected the offer of settlement for all the Assessment Years.The main contention of the petitioner was that the Settlement Commission erred in rejecting the application for settlement, as there was no specific instance cited of non-disclosure. The petitioner argued that revised offers were made in the spirit of settlement and should not be seen as a failure to disclose initially. The petitioner also emphasized that the revised disclosures only pertained to two Assessment Years, not all four. The petitioner relied on a court decision to support the argument that settlement applications should be considered separately for each year.The High Court, after examining the facts, noted the settled principle that the order of the Settlement Commission can only be interfered with if it is against the principles of natural justice, mala fides, or the provisions of the Income Tax Act. The Settlement Commission found discrepancies in the petitioner's disclosures, particularly regarding the existence of an Association of Persons (AOP) and multiple revisions in disclosed income. The Settlement Commission concluded that the petitioner had not made true and full disclosures, leading to the rejection of the settlement application for all Assessment Years.The High Court upheld the decision of the Settlement Commission, emphasizing the importance of true and full disclosure in settlement proceedings. Referring to legal precedents, the court highlighted that once an application for settlement is made, revisions to disclosed income are not permissible. The court noted the petitioner's inconsistent disclosures and attempts to shift income to an AOP, which was not accepted. The court concluded that the petitioner's actions showed a lack of regard for truth and upheld the rejection of the settlement application for all Assessment Years.In conclusion, the High Court dismissed the petition, affirming the decision of the Settlement Commission to reject the application for settlement for the Assessment Years 1991-92 to 1994-95. The court emphasized the importance of true and full disclosure in settlement proceedings and upheld the principle that applications for settlement should be considered separately for each year.