Court sets aside Settlement Commission's order for lack of full income disclosure, remits case to assessing officer within 3 months.

The court set aside the Settlement Commission's order as the assessee failed to make a true and full disclosure of income. The case was remitted to the assessing officer for assessment within three months, emphasizing compliance with natural justice principles. The writ petition was allowed without costs.

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Issues Involved:
1. Validity of the Settlement Commission's order under Section 245D(4) of the Income Tax Act, 1961.
2. Full and true disclosure of income by the assessee.
3. Deduction of expenses claimed by the assessee.
4. Suppression of pharmacy sales.
5. Taxability of unaccounted jewellery.
6. Waiver of interest and immunity from penalty and prosecution.

Detailed Analysis:

1. Validity of the Settlement Commission's Order:
The Commissioner of Income Tax filed a writ petition to quash the order dated 5.8.2013 passed by the Settlement Commission under Section 245D(4) of the Income Tax Act, 1961. The Settlement Commission allowed the application filed by the assessee, adding a further sum of Rs. 11,44,97,620/- to the additional income of Rs. 15,88,70,598/- offered by the assessee for the assessment years 2006-07 to 2011-12. For the assessment year 2012-13, the Commission added Rs. 5,20,92,283/- though no additional amount was offered over the declared taxable income.

2. Full and True Disclosure of Income:
The court emphasized that the essential requirement under Section 245C is the full and true disclosure of income not disclosed before the assessing officer. The search revealed suppression of income amounting to Rs. 35,30,63,554/- for the assessment years 2006-07 to 2011-12 and improper maintenance of accounts during the search year. The assessee offered tax on 44% of the undisclosed gross receipt, claiming a 56% deduction towards expenses. The Settlement Commission restricted the deduction to 7%, enhancing the additional income to Rs. 27,33,76,219/- for the assessment years 2006-07 to 2011-12. The court found that the assessee did not make a true and full disclosure, which is a mandatory requirement under Section 245C.

3. Deduction of Expenses Claimed by the Assessee:
The assessee claimed a 56% deduction towards expenses, which was reduced to 7% by the Settlement Commission. The court noted that even in normal assessment, such a high deduction would not have been allowed. The court found that the attempt to claim such a high deduction was not bona fide, indicating a lack of true and full disclosure.

4. Suppression of Pharmacy Sales:
The Settlement Commission found no under-disclosure of pharmacy sales, attributing the confusion to the inclusion of medicines and surgical items under the 'package scheme' as direct sales to customers. The court did not find any substantial error in this finding.

5. Taxability of Unaccounted Jewellery:
Unaccounted jewellery valued at Rs. 12,07,40,183/- was found during the search. The Settlement Commission did not require a separate disclosure for this, considering it covered by the additional income already disclosed. The court found this approach reasonable and based on the powers of settlement.

6. Waiver of Interest and Immunity from Penalty and Prosecution:
The Settlement Commission did not grant a waiver of interest but granted immunity from penalty and prosecution, noting that the assessee had satisfied the conditions under Section 245H. The court did not interfere with this aspect.

Conclusion:
The court set aside the impugned order of the Settlement Commission, finding that the assessee did not make a true and full disclosure of income. The case was remitted back to the jurisdictional assessing officer to complete the assessments within three months, complying with the principles of natural justice. The writ petition was allowed, and no costs were awarded.

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