2020 (3) TMI 636 - HC - Income Tax

High Court Upholds Income Tax Settlement Commission Order

The High Court upheld the order of the Income Tax Settlement Commission under Section 245D of the Income Tax Act, dismissing the petition challenging the ... Application filed before the Settlement Commission - Settlement Commission passed the impugned order though there was no true and full disclosure by the assessee in the application for settlement filed before the Commission - HELD THAT:- On perusal of the impugned order passed by the Commission, it is apparent that the application submitted by the respondent has been dealt with as per the provisions of section 245C and 245D of the Act. The Commission has observed detailed procedure while exercising powers under section 245D(4) by examining thoroughly report submitted by the petitioner under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. Commission has also provided proper opportunity of hearing to the respective parties and therefore the amount which has been determined by the Commission is just and proper. Commission was right in considering the revised offer made by the respondent during the course of the proceedings in the nature of spirit of settlement. Therefore, the decision of the Apex Court in case of Ajmera Housing Corpn. [2010 (8) TMI 35 - SUPREME COURT] would not come into operation in facts of the case. We are therefore of the opinion that order passed by the Commission does not call for any interference. When we compare the disclosure made by the assessee to the tune of ₹ 11,33,02,651/- in the application filed before the Settlement Commission and the grievance made by the writ-applicant with regard to the amount of ₹ 2,04,88,560/-, the same is very marginal as compared to the disclosure made by the assessee. Accordingly, when the assessee had agreed for addition of ₹ 1,02,44,280/-to put quietus to the issue and to settle the matter, no interference is called for in the impugned order passed by the Settlement Commission. The petition, therefore, fails and is accordingly dismissed. Issues Involved:1. Challenge to the order of the Income Tax Settlement Commission under Section 245D of the Income Tax Act, 1961.2. Allegation of no true and full disclosure by the assessee.3. Consideration of the Supreme Court's decision in Ajmera Housing Corporation Vs. Commissioner of Income Tax.4. Examination of the Settlement Commission's findings and the legality of the procedure followed.Issue-Wise Detailed Analysis:1. Challenge to the order of the Income Tax Settlement Commission under Section 245D of the Income Tax Act, 1961:The petitioner challenged the order dated 17.10.2018, passed by the Income Tax Settlement Commission, under Article 226 and 227 of the Constitution of India. The challenge was based on the assertion that the Settlement Commission passed the impugned order despite the absence of a true and full disclosure by the assessee in the settlement application.2. Allegation of no true and full disclosure by the assessee:The petitioner, represented by Mrs. Mauna Bhatt, contended that the assessee failed to disclose the valuation of jewelry amounting to Rs. 2,04,88,650/- as per the valuation report dated 07.10.2010, which was found during search proceedings. This non-disclosure was argued to be a violation of the requirement for true and full disclosure under the Income Tax Act.3. Consideration of the Supreme Court's decision in Ajmera Housing Corporation Vs. Commissioner of Income Tax:The petitioner relied on the Supreme Court's decision in Ajmera Housing Corporation to argue that the absence of true and full disclosure necessitated the quashing of the Settlement Commission's order. The Supreme Court in Ajmera Housing Corporation emphasized that true and full disclosure of income must be made at the initial stage, and any significant revisions indicate that the initial disclosures were not true.4. Examination of the Settlement Commission's findings and the legality of the procedure followed:The Settlement Commission found that although no physical stock of jewelry was found from the possession of the applicant, the applicant provided detailed explanations for obtaining the valuation report in 2010, stating it was for contemplating a real estate investment and loan purposes. The Commission accepted the applicant's consensus to add 50% of the proposed undisclosed investment (Rs. 1,02,44,280/-) to the income for AY 2010-11 to settle the matter.The High Court examined whether the Settlement Commission's order was contrary to any provisions of the Act or prejudiced the petitioner. It was observed that the additional disclosure made by the assessee was in the spirit of settlement and not a fresh disclosure, distinguishing it from the facts in Ajmera Housing Corporation. The court cited several precedents, including Jyotendrasinhji v. S.I. Tripathi and other Gujarat High Court decisions, to support the view that the Settlement Commission's procedure was legal and proper.Conclusion:The High Court concluded that the Settlement Commission had followed the prescribed procedure under Sections 245C and 245D of the Income Tax Act, provided proper opportunities for hearing, and the additional disclosure by the assessee was marginal compared to the total disclosed amount. Therefore, the court found no reason to interfere with the Settlement Commission's order, leading to the dismissal of the petition.