2025 (1) TMI 1298 - HC - Income Tax

Gujarat HC upholds Settlement Commission's acceptance of assessee's settlement under Section 245D(4) despite third party mobile evidence

Principal Commissioner Of Income Tax (Central) Versus Navinchandra Dalpatlal Mehta & Anr.

Gujarat HC upheld Settlement Commission's order accepting assessee's settlement amount under Section 245D(4). The Commission found assessee was not ... Validity of Settlement Commission order accepting the settlement amount offered by the assessee u/s 245D (4) - HELD THAT:- Settlement Commission has, arrived at a finding that the assessee was not directly dealing with land from which income has been earned which has been invested in the land and therefore, it would not be possible for the assessee to disclose the manner in which such undisclosed income was earned from the real estate transactions. \In view of such finding of fact arrived at by the Settlement Commission and in absence of any further evidence produced by the petitioner before the Settlement Commission and more particularly when the statement made in the application for settlement to the effect that it is based on full and true disclosure, which is to be accepted unless there is evidence found contrary to the disclosure made, therefore, the impugned order passed by the Settlement Commission is just and proper and requires no interference while exercising jurisdiction under Article 227 of the Constitution of India. Contention raised on behalf of petitioner with regard to documents found in the mobile phone of Mr. Kishor Koshiya pertaining to the assessee - As in view of the order passed by the Settlement Commission in case of Mr. Kishor Koshiya accepting the disclosure made by him as per the application for settlement, no further addition could have been made by the Settlement Commission in the hands of the assessee on such grounds as no further evidence was produced by the department during the joint verification of such documents found from the mobile phone of Shri Kishor Koshiya. Therefore, the Settlement Commission cannot be said to have committed any error while accepting the rejoinder of the assessee to the Rule 9 report. Thus findings arrived at by the Settlement Commission, it is for Mr. Kishor Koshiya to explain the documents found his mobile phone and the assessee could not be subjected to any further disclosure on the basis of such assumption and presumption in absence of any evidence. It is true that this Court is not required to go into the merits of the matter on issues which are decided by the Settlement Commission while exercising the jurisdiction under Article 227 of the Constitution of India. Appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe primary legal issues considered in this judgment are:Whether the Settlement Commission's acceptance of the assessee's disclosure of additional income was in accordance with the Income Tax Act, particularly in light of the documents found during the search.Whether the Settlement Commission erred in its decision by not considering the manner in which the undisclosed income was earned, as required by the Act.Whether the addition of Rs. 25 Lakhs during the settlement proceedings constituted a revision of the application, thereby rendering the application invalid.Whether the documents found on the mobile phone of Mr. Kishor P. Koshiya should have been considered as evidence against the assessee.The maintainability of the petition challenging the Settlement Commission's order under Articles 226 and 227 of the Constitution of India.ISSUE-WISE DETAILED ANALYSIS1. Acceptance of Assessee's DisclosureThe relevant legal framework involves Section 245C and Section 245D of the Income Tax Act, which govern the settlement of cases before the Settlement Commission. The Court interpreted that the Settlement Commission's role is to ensure a full and true disclosure of income by the assessee. The petitioner argued that the assessee did not disclose the manner of earning the additional income, which is a requirement under the Act. However, the Court found that the Settlement Commission had considered the nature of the transactions and the role of the assessee in land dealings through Mr. Kishor P. Koshiya. The Court concluded that the Settlement Commission's acceptance of the disclosure was justified, as it was based on the available evidence and the affidavit provided by Mr. Kishor P. Koshiya.2. Manner of Earning Undisclosed IncomeThe petitioner contended that the assessee failed to disclose the manner of earning the undisclosed income. The Court noted that the Settlement Commission had accepted the explanation that the income was derived through transactions conducted by Mr. Kishor P. Koshiya, and the assessee had provided funds for these transactions. The Court found no error in the Settlement Commission's decision, as the petitioner failed to provide further evidence to dispute the assessee's claims.3. Addition of Rs. 25 LakhsThe petitioner argued that the addition of Rs. 25 Lakhs during the settlement proceedings constituted a revision of the application, which should invalidate the application. The Court referenced previous cases, such as Ajmera Housing Corporation, to analyze whether the additional disclosure was a revision. The Court distinguished the present case by noting that the additional Rs. 25 Lakhs was offered voluntarily to resolve any issues with the initial investment, and thus did not constitute a revision of the application.4. Documents from Mr. Kishor P. Koshiya's Mobile PhoneThe petitioner raised concerns about documents found on Mr. Kishor P. Koshiya's mobile phone, suggesting they implicated the assessee in diamond trading. The Court noted that the Settlement Commission had accepted the explanation that the documents were unrelated to the assessee. The Court emphasized that the onus to explain the documents lay with Mr. Kishor P. Koshiya, from whose possession they were seized, and no further evidence was provided to link the documents to the assessee.5. Maintainability of the PetitionThe petitioner challenged the Settlement Commission's order under Articles 226 and 227 of the Constitution of India. The Court reiterated the principles of judicial review, emphasizing that interference is warranted only if the order is contrary to the provisions of the Act or if there is a procedural irregularity. The Court found no such contravention or irregularity in the Settlement Commission's order.SIGNIFICANT HOLDINGSThe Court upheld the Settlement Commission's acceptance of the assessee's disclosure, finding it consistent with the provisions of the Income Tax Act.The Court determined that the additional Rs. 25 Lakhs offered by the assessee did not constitute a revision of the settlement application, distinguishing the facts from those in Ajmera Housing Corporation.The Court confirmed that the documents found on Mr. Kishor P. Koshiya's mobile phone did not provide sufficient evidence against the assessee, as the responsibility to explain them lay with Mr. Kishor P. Koshiya.The petition was dismissed as the Court found no grounds for interference under Articles 226 and 227 of the Constitution.The Court concluded that the Settlement Commission's order was not contrary to the provisions of the Act and that the petition lacked merit. The rule was discharged, and the petition was dismissed.