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Issues: Whether the Settlement Commission was justified in entertaining and allowing the settlement application despite the absence of full and true disclosure of undisclosed income, including for the search assessment year, and whether the impugned settlement order was liable to be interfered with in writ jurisdiction.
Analysis: The application under Chapter XIX-A was required to rest on a full and true disclosure of the income not previously disclosed in the regular returns. The search revealed substantial suppression of receipts for the earlier assessment years and also non-disclosure for the search assessment year. The Court found that the assessee had not made a bona fide disclosure in the settlement application, since the income offered did not reflect the true undisclosed income and the claim of expenses was not supported by the material relied upon by the Commission. The Court further held that the Settlement Commission ought to have rejected the application when the foundational requirement of true and full disclosure was not satisfied. The limited scope of writ review did not prevent interference where the decision-making process was vitiated by such an error.
Conclusion: The settlement order was unsustainable and was set aside. The writ petition was allowed, and the matter was remitted to the jurisdictional Assessing Officer for completion of assessments in accordance with law.
Ratio Decidendi: A settlement application under Chapter XIX-A of the Income-tax Act, 1961 is maintainable only where there is a bona fide full and true disclosure of undisclosed income, and failure of that foundational requirement justifies rejection of the application and judicial interference with the settlement order.
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