Court remands matter to Interim Board for fresh consideration, emphasizing natural justice and timely disposal.

The court set aside the orders of the Settlement Commission and the learned Judge, remanding the matter back to the Interim Board for fresh consideration. The Interim Board was directed to dispose of the applications within six weeks, ensuring compliance with the principles of natural justice and statutory provisions. The court emphasized that the appellants must be given sufficient opportunity to present their case and respond to any reports or findings.

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Issues Involved:
1. Jurisdiction and Maintainability of Settlement Applications
2. Compliance with Principles of Natural Justice
3. Full and True Disclosure Requirement
4. Powers and Functions of the Settlement Commission
5. Scope of Judicial Review by High Court
6. Impact of Abolishment of Settlement Commission and Formation of Interim Board

Issue-Wise Detailed Analysis:

1. Jurisdiction and Maintainability of Settlement Applications:
The appellants filed writ petitions seeking a Writ of Certiorarified Mandamus to quash the orders rejecting their applications under Section 245C of the Income Tax Act, 1961, on the grounds that the Settlement Commission lacked jurisdiction due to the Black Money Act, 2015. The court noted that the applications were initially rejected because the Settlement Commission believed it lacked jurisdiction under the Black Money Act. However, this court had previously set aside the rejection and directed the applications to be reconsidered. The Settlement Commission later rejected the applications again under Section 245D(4), which led to the current appeals.

2. Compliance with Principles of Natural Justice:
The appellants argued that the Settlement Commission's rejection of their applications violated the principles of natural justice. They contended that they were not given sufficient time to respond to the Principal Commissioner of Income Tax's report, which was served on them on 23.11.2017 with a deadline to respond by 27.11.2017. The court emphasized that the Settlement Commission must grant a reasonable period for the appellants to respond and that the appellants were not afforded a personal hearing as required under Section 245D(4). The court found that the Settlement Commission's procedure violated the principles of natural justice and the statutory requirements under the Income Tax Act.

3. Full and True Disclosure Requirement:
The court examined whether the appellants made a "full and true disclosure" of their income as required under Section 245C. The appellants contended that they disclosed all primary facts and provided documentary evidence. The court referred to precedents stating that full and true disclosure involves disclosing all primary facts necessary for assessment, but does not extend to inferences or legal conclusions. The court found that the appellants had disclosed all primary facts and that any additional information provided during the proceedings did not constitute new disclosures but were clarifications or supplementary details.

4. Powers and Functions of the Settlement Commission:
The court discussed the powers and functions of the Settlement Commission under Chapter XIX-A of the Income Tax Act, emphasizing that the Commission's role is to facilitate the settlement of tax disputes by ensuring full and true disclosure of income by the assessee. The court noted that the Settlement Commission's powers include examining the records, calling for reports, and conducting further inquiries if necessary. However, the Commission must adhere to the principles of natural justice and provide sufficient opportunities for the assessee to respond to any reports or findings.

5. Scope of Judicial Review by High Court:
The court outlined the scope of judicial review under Article 226 of the Constitution, stating that it can intervene if there is a jurisdictional error, violation of principles of natural justice, or if the decision is based on no evidence or irrelevant considerations. The court emphasized that it does not act as an appellate authority but can quash decisions that are procedurally flawed or violate statutory provisions. The court found that the Settlement Commission's decision in this case was procedurally flawed and violated the principles of natural justice.

6. Impact of Abolishment of Settlement Commission and Formation of Interim Board:
The court addressed the impact of the Finance Act, 2021, which abolished the Settlement Commission and established an Interim Board for Settlement. The court noted that the Interim Board has the authority to consider pending applications and that the appellants' applications should be treated as pending due to the procedural violations in the Settlement Commission's decision. The court directed the Interim Board to reconsider the applications on merits, following the principles of natural justice and statutory requirements.

Conclusion:
The court set aside the orders of the Settlement Commission and the learned Judge, remanding the matter back to the Interim Board for fresh consideration. The Interim Board was directed to dispose of the applications within six weeks, ensuring compliance with the principles of natural justice and statutory provisions. The court emphasized that the appellants must be given sufficient opportunity to present their case and respond to any reports or findings.

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