Settlement Commission immunity requires recorded satisfaction on full and true disclosure; absence of it led to setting aside and remand.

Immunity from penalty and prosecution under Section 245H(1) of the Income-tax Act is conditional on the Settlement Commission recording satisfaction that the applicant made full and true disclosure of income and explained the manner in which it was derived. Where that recorded satisfaction is absent, the grant of immunity cannot stand. The Delhi High Court therefore set aside the immunity component and remanded the matter to the Settlement Commission for fresh consideration of that question in accordance with law.

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Issues: Whether immunity from penalty and prosecution granted by the Settlement Commission could be sustained without recording satisfaction regarding full and true disclosure of income and the manner in which such income was derived.

Analysis: Immunity under Section 245H(1) of the Income-tax Act, 1961 is conditional upon the Settlement Commission recording the requisite satisfaction on full and true disclosure and the manner of derivation of income. In similar circumstances, the absence of such recorded satisfaction warrants interference. The impugned order was therefore not sustainable to the extent it granted immunity from penalty and prosecution.

Conclusion: The grant of immunity from penalty and prosecution was set aside and the matter was remanded to the Settlement Commission for a fresh decision on that question in accordance with law.

Final Conclusion: The Revenue succeeded on the challenge to the immunity component, and the issue was sent back for reconsideration by the Settlement Commission.

Ratio Decidendi: Immunity from penalty and prosecution under Section 245H(1) can be granted only when the Settlement Commission records satisfaction about full and true disclosure and the manner of derivation of income; failure to do so justifies setting aside and remand.

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