Full and true disclosure in settlement proceedings is mandatory; the Commission cannot exceed jurisdiction or waive statutory interest unlawfully.

A settlement application under the Income-tax Act must be based on a full and true disclosure of undisclosed income; inconsistent disclosures and material figures introduced only at rectification showed the requirement was not met, so the application was liable to be rejected. The Settlement Commission also acted beyond its limited jurisdiction by relying on receipts in the account of a non-applicant, treating already-assessed sums as part of the settlement, and using rectification to alter the original order in substance. It further could not waive statutory interest without a legal basis, as that power is confined by the statute and binding circulars. The impugned settlement orders were therefore set aside.

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Issues: (i) Whether the applicants before the Settlement Commission had made a full and true disclosure of undisclosed income as required for a valid settlement application; (ii) whether the Commission could sustain its findings by adjusting receipts standing in the account of a non-applicant and by allowing rectification that materially altered the original settlement order; (iii) whether the Commission could waive statutory interest without legal authority.

Issue (i): Whether the applicants before the Settlement Commission had made a full and true disclosure of undisclosed income as required for a valid settlement application.

Analysis: The statutory scheme of settlement requires a truthful disclosure of undisclosed income at the stage of application itself. The disclosed figures before the Commission materially differed from the amounts surrendered during search, and further undisclosed receipts were brought in only at the rectification stage. Such shifting disclosures showed that the applicants had not maintained a consistent and complete stand on their undisclosed income. The objections raised by the Department, supported by seized material and search statements, were not meaningfully examined.

Conclusion: The disclosure was not full and true, and the settlement application ought to have been rejected. This issue was decided in favour of the petitioner.

Issue (ii): Whether the Commission could sustain its findings by adjusting receipts standing in the account of a non-applicant and by allowing rectification that materially altered the original settlement order.

Analysis: The Commission treated receipts in the bank account of a person who was not before it as if they formed part of the applicants' settlement, despite the fact that those receipts had already been assessed in regular proceedings. The Commission also entertained rectification in a manner that effectively revised the original disclosure and altered the liability fixed earlier. Such exercise went beyond the limited settlement jurisdiction and amounted to an impermissible review in substance. The failure to consider the Department's objections also vitiated the decision-making process.

Conclusion: The Commission acted beyond jurisdiction in both respects, and its findings on these aspects could not stand. This issue was decided in favour of the petitioner.

Issue (iii): Whether the Commission could waive statutory interest without legal authority.

Analysis: The power to waive interest under the settlement provisions is confined by statute and by binding circulars of the Board. In the absence of satisfaction of the legally permitted basis, the Commission could not grant a blanket waiver of interest payable under the relevant charging provisions.

Conclusion: The waiver of interest was unsustainable. This issue was decided in favour of the petitioner.

Final Conclusion: The impugned settlement orders were vitiated by non-consideration of the Department's objections, lack of full and true disclosure, excess of jurisdiction, and an impermissible waiver of statutory interest, and were therefore set aside.

Ratio Decidendi: A settlement application under the Income-tax Act must rest on a full and true disclosure of undisclosed income, and the Settlement Commission must confine itself to the statutory settlement jurisdiction, consider the rival material, and refrain from exercising a power of review or waiving statutory interest beyond the limits expressly permitted by law.

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