Income Tax Settlement Commission lacks jurisdiction under Section 245C without full and true disclosure by assessee

Delhi HC held that Income Tax Settlement Commission (ITSC) lacked jurisdiction to proceed with settlement application under Section 245C of Income Tax Act, 1961, where assessee failed to make full and true disclosure. ITSC had accepted Revenue's contention that unaccounted money was introduced as bogus share capital through share repurchase transactions at unreasonably low prices. Court ruled that full and true disclosure is mandatory prerequisite for ITSC jurisdiction, and revision/amendment of applications is impermissible as it would undermine disclosure requirement. ITSC erred in granting immunity from penalty and prosecution under Section 245H despite incomplete disclosure. Writ petition allowed.

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Issues Involved:
1. Statutory requirement of "full and true disclosure" u/s 245C of the Income Tax Act, 1961.
2. Pre-conditions for an application under Chapter XIX-A of the Act.
3. Jurisdiction of the Income Tax Settlement Commission (ITSC) in case of violation of pre-conditions.
4. Fate of the application filed by the respondent-assessee group.
5. Granting of immunity from penalty and prosecution u/s 245H of the Act.

Summary:

Issue 1: Statutory Requirement of "Full and True Disclosure" u/s 245C
The court examined the statutory requirement of "full and true disclosure" u/s 245C of the Income Tax Act, 1961. It was highlighted that the respondent-assessee group did not make a full and true disclosure of its income in the application filed before the ITSC. The ITSC's acceptance of additional income disclosed during proceedings indicated that the initial application was neither full nor true.

Issue 2: Pre-conditions for an Application under Chapter XIX-A
The pre-condition for an application under Chapter XIX-A is that it must include a full and true disclosure of income, the manner in which it was derived, and the additional tax payable. The court noted that the respondent-assessee group's application failed to meet these pre-conditions, as the full extent of the undisclosed income was only revealed after the CIT's report.

Issue 3: Jurisdiction of ITSC in Case of Violation of Pre-conditions
The court determined that the ITSC lacked jurisdiction to proceed with the application once it was established that the respondent-assessee group did not make a full and true disclosure initially. The ITSC's decision to proceed with the application and make substantial additions to the disclosed income was found to be erroneous.

Issue 4: Fate of the Application Filed by the Respondent-Assessee Group
The ITSC's order dated 09 June 2014, which admitted the application and settled the income tax liability of the respondent-assessee group, was set aside. The court held that the application should have been rejected at the outset due to the lack of full and true disclosure.

Issue 5: Granting of Immunity from Penalty and Prosecution u/s 245H
The court emphasized that granting immunity from penalty and prosecution u/s 245H requires full and true disclosure and cooperation from the applicant. Since the respondent-assessee group failed to meet these conditions, the ITSC's decision to grant immunity was deemed to be in excess of its jurisdiction and was set aside.

Conclusion:
The writ petition was allowed, and the ITSC's order dated 09 June 2014 was set aside due to the respondent-assessee group's failure to make a full and true disclosure of income in their application u/s 245C of the Act. The ITSC's jurisdiction to proceed with the application and grant immunity from penalty and prosecution was found to be invalid.

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