Madras H.C : The Settlement Application filed by the petitioner was not allowed to be proceeded with and treated as invalid under Section 245D(2C)

High Court Of Madras

Abdul Rahim vs. Income Tax Settlement Commission

Section 245D(2C)

Asst. Year 2010-11 to 2016-17

K. Ravichandrabaabu, J.

W.P. No. 14404 of 2018 and W.M.P. No. 17004 & 17005 of 2018

24th August, 2018

Counsel appeared:

R. Sivaraman for the Petitioner.: A.P. Srinivas, Sr.Standing Counsel for the Respondent

ORDER

The petitioner is an assessee under the 2nd respondent. He is aggrieved against the order passed by the Settlement Commission under Section 245D(2C) of the Income Tax Act, 1961, dated 21.03.2018, wherein and whereby, the Settlement Application filed by the petitioner was not allowed to be proceeded with and treated as invalid under Section 245D(2C) of the said Act. In other words, the Settlement Application filed by the petitioner was rejected by the Settlement Commission. Consequently, the petitioner seeks for a direction to the 1st respondent to reconsider the said application and to pass fresh orders under Section 245D(2C) of the said Act.

The following are the facts and circumstances, as projected by the petitioner, resulted in filing the present Writ Petition. i) Survey operation under Section 133-A of the Income Tax Act,1961, was conducted on 24.08.2015 at the residential and business premise of the petitioner. A CPU and 5 pen drives were impounded. Subsequently, a search and seizure operation was initiated under Section 132 of the said Act on the very same day at the residential and business premises of the petitioner. Certain documents were seized and sworn statements were recorded on various dates. The petitioner approached the 1st respondent, Settlement Commission and filed an application under Section 245C of the Act for settling the following issues. a) To settle the issue of the undisclosed income of the applicant for AY’s 2010-11 to 2016-17 arising out of the materials seized/found/impounded pursuant to search proceedings initiated u/s 132 of the IT Act 1961 on 24-08-2015, at the residence of the applicant at No.34, Amman Kovil Street, Chicken Market, Chennai-1 and the business premises of the applicant at 34 & 35, Amman Kovil Street, Chicken Market, Chennai-1 and also to determine the consequential tax and interest thereon payable under the Act. b) The applicant be granted immunity from all the penalties and prosecution under the Act.

c) The applicant be granted capitalization of the undisclosed income offered before the Hon’ble Settlement Commission; d) The applicant be granted such other reliefs as may be deemed fit and property by the Hon’ble Settlement Commission having regard to the facts and nature and circumstances of the applicant’s case. ii) The petitioner had paid the additional tax and interest thereon for the impugned assessment years 2010-11 to 2016-17 covered in their settlement application. The first respondent, by order dated 02.02.2018 made under section 245D(1) of the said Act, allowed the Settlement Application to be proceeded with further. The 1st respondent, in that proceedings held that there was no material on record to prove that full and true disclosure had not been made by the applicant in the Settlement Application. In pursuant to the said order dated 02.02.2018 and on notice, the Principal Commissioner of Income Tax, filed a report under Section 245D(2B) of the said Act on 05.02.2018. It was the contention of the Department that the undisclosed amount as per the impounded CPU and pen drives is Rs.9.29 crores whereas the petitioner has only offered additional income of Rs.32,00,000/-before the 1st respondent; that gold jewelery weighing 1535.6 grams with value of Rs.37,76,097/-was not explained satisfactorily and therefore, the same was treated as acquired from unaccounted sources and that rental income of Rs.25,000/-per month from Ernavur property was an undisclosed income from house property. A copy of the said report was furnished to the petitioner. The petitioner filed their reply on 19.03.2018 to the said report. However, the 1st respondent, vide impugned order held that the petitioner had caused suppression and misrepresentation of facts thereby violated the requirement of the full and true disclosure of additional income. Thus, the first respondent, not allowed the petitioner’s application to be proceeded with and treated the same as invalid under Section 245D(2C) of the said Act. Hence, the present Writ Petition.

3. The 2nd respondent filed a counter. The sum and substance of the averments made in the counter affidavit are as follows: i) The assessee is an individual engaged in trading Basmati rice and owns a restaurant which has branches in four places. The assessee derives share of profit from a firm M/s. A R.Rahman Biryani, besides rental receipts for the property situated at Ernavur. The assessee is the brothe of one Abdul Samad, who is the Founder-Director of SS Hyderabad Biryani Private Limited. A search nd seizure operation was conducted in the business premises of the assessee as part of search operation in the case of SS Hyderabad Biryani Private Limited group on 24.08.2015. Consequent to search, a notice unde section 153-A dated 20.06.2017 was issued and served on 24.06.2017 requiring the assessee to file a true and correct return of income. The assessee filed his returns. A notice under Section 142(1) dated 13.12.2017 was issued to the assessee calling for certain details. Further, a show cause notice dated 15.12.2017 was issued and served on the assessee on 18.12.2017, through which, it was brought to the notice of the assessee that an analysis of the impounded material showed that the assessee had, for various Assessment Years made unaccounted purchases, suppressed sales, inflated purchases and expenses etc., totaling to the tune of Rs.9,29 98,552/-. The assessee was not able to explain the sources for purchase of gold jewelery of 1535.600 gms. He was asked to show cause as to why the said purchase should not be treated as acquired from unaccounted sources. Therefore, his sworn statement was recorded on 25.08.2015. The assessee admitted that he derived rental income of Rs.25,000/-per month from Ernavur property but has not offered the same for taxation in his return of income. Subsequently, vide letter dated 28.12.2017, the assessee filed Form No.34BA intimating filing of application before the first respondent, Settlement Commission under Section 245C of the said Act. The Settlement Commission rejected the application on 09.01.2018 under Section 245D(1) on the reason that the Settlement Application in the case of specified person viz., S.Abdul Samad was rejected due to deficiency in payment of tax and interest in his application. Subsequently, by another letter dated 22.01.2018, the assessee filed Form No.34BA once again intimating the filing of application before the first respondent Commission under section 245C dated 22.01.2018. Vide order dated 02.02.2018, the 1st respondent Commission allowed the application to be proceeded with. Report under Section 245D(2B) was called for. The said report was submitted on 07.03.2018 with a request to reject the application of the assessee on the reason that he has not made a true and full disclosure of his undisclosed income. The 1st respondent, thus, rejected the assessee’s application by the impugned order dated 21.03.2018. Subsequently, a show cause notice dated 04.05.2018 was issued to the assessee. Thereafter, the present writ petition is filed before this Court. The 1st respondent Commission found that the petitioner has not brought the facts arising out of the impounded material viz., CPU and pen drives to the notice of the 1st respondent Commission in his Settlement Application. The discrepancy arising out of those impounded materials was brought to the notice of the applicant vide show cause notice dated 15.12.2017. The applicant has not explained the source for purchase of gold jewellery and also not offered to tax, the rental income from Ernavur property. The applicant has not made a true and full disclosure of his undisclosed income before the 1st respondent Commission as he has offered only Rs.32,00,000/-as his undisclosed income, whereas on an analysis of the impounded material, the undisclosed income works out to Rs.9,29,98,552/-. Therefore, the 1st respondent Commission, rightly not allowed the applicant’s settlement application to be proceeded with and treated the same as invalid.

4. Mr.R.Sivaraman, learned counsel for the petitioner made his submissions. He also filed written submissions. The sum and substance of the submissions made on behalf of the petitioner are as follows: The 1st respondent treated the application as invalid under section 245D (2C) of the Income Tax Act on the reason that the application has not satisfied the primary condition as to the true and full disclosure and the manner of earning the income. The fact of true and full disclosure of income need not be examined at the threshold of the proceedings and can be kept open to be examined at a later stage. The Settlement Commission may at any stage, till it passes the final order under section 245D(4), examine the issues regarding the full and true disclosure of income and the manner, in which, an undisclosed income was derived conclusively. Therefore, throwing out the petitioner at the threshold stage without providing any sufficient opportunity and without any evidence is absolutely wrong. The report by the Principal Commissioner of Income Tax was forwarded on 08.03.2018 to the 1st respondent and the said report was furnished to the petitioner on 12.03.2018. The petitioner filed a reply to the said report on 19.03.2018. However, without affording much opportunity, the Settlement Commission rejected the application on 19.03.2018 itself under section 245D(2C). The 1st respondent has not conclusively determined whether the offer made by the petitioner is full and true disclosure. The 1st respondent had merely relied upon the report of the Prin ipal Commissioner of Income Tax and not taken into consideration the submission made by the petitioner that the impounded material is only a rough or a suspense, which is to be cleared and does not intimate the undisclosed income. The 1st respondent ought to have directed further enquiry or an investigation in respect of the submissions made by the petitioner. The 1st respondent rejected the application under section 245D(2C) without having regard to the provisions of Section 245K (2). When the 1st respondent finds that the petitioner had not fully and truly disclosed the materials, it ought to have rejected the Settlement Application, at th stage of passing an order under Section 245D(1) itself. In view of a specific bar under Section 245K(2) the petitioner is totally prevented in making any further application of any kind on any issue in future before the Settlement Commission and thus, it affects and prejudice the petitioner’s right in approaching the Settlement Commission once for all.

5. In support of his contention, the l arned counsel relied on the decision of the Delhi High court reported in (2013) 35 taxman.com 56 (Delhi) (Commissioner of Income-tax vs. Income Tax Settlement Commission).

6. Mr.A.P.Srinivas, learned Senior Standing Counsel appeared for the respondents and made his submissions. He also filed written submission. The sum and substance of the submissions made on behalf of the respondents are as follows: The Settlement Commission initially passed an order under Section 245D(1) on examination of this application and after the admission of the application, notice is given by the Settlement Commission to the Department under Section 245D(2B) to file its report. When the petitioner has not made full and true disclosure on mandatory particulars, he cannot question the order passed by the Settlement Commission. In other words, when the Settlement Commission is empowered to reject the application for want of full and true disclosure at any stage either under Section 245D(2C) or under sections 245D(3) and 245D(4), the petitioner is not entitled to canvass that the Settlement Commission ought to have rejected the application at the threshold under Section 245D(1) itself, since he is barred from filing further application as per Section 245K, if such application was rejected under any of the other provisions as stated supra. The petitioner has not made any attempt to prove that there is full and true disclosure of income in the application. The petitioner was provided sufficient opportunity by forwarding the report of the Principal Commissioner and that he has also filed his reply to such report. Therefore, it is incorrect to contend that no sufficient opportunity was provided to the petitioner. There need not be any further enquiry under section 245D(3), when there are sufficient and hand full materials available before the Commission to reject the application at the stage under section 245(2C) itself. In other words, only when the application successfully crosses the stage of Section 245(2C), the conduct of further enquiry or investigation under section 245D(3) would arise.

7. Heard both sides and perused the materials placed before this Court.

8. The point for consideration is as to whether the order passed by the Settlement Commission under section 245 D(2C) of the Income Tax Act, 1961, needs any interference by exercising this Court’s discretionary jurisdiction under Article 226 of the Constitution of India.

9. Before answering the above question, it is better to understand the Scheme of various provisions made for Settlement of Cases under Income Tax Act, 1961. Chapter XIX-A of Income Tax, 1961 deals with settlement of cases. Section 245C deals with Application to be filed for settlement of cases before the Settlement Commission. Section 245C(1) contemplates that an assessee may make an application at any stage of the case relating to him containing a full and true disclosure of his income, which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled. Section 245D deals with the various procedures to be followed on receipt of an application under section 245C. Section 245D(1) stipulates issuance of notice by the Commission to the applicant, within seven days from the date of receipt of such application calling upon him to explain as to why the said application has to be allowed to proceed further. It is further contemplated therein that the Settlement Commission, upon hearing the applicant and within a period of fourteen days from the date of such applicati n, shall either reject or allow the application to be proceeded with further. If no order has been passed within such prescribed time, such application is deemed to have been allowed to be proceeded with

10. If the application is allowed to be proceeded with under section 245D(1), further procedure to be followed is spelt out under section 245D(2B), wherein the Settlem nt Commission is required to call for report from the Principal Commissioner or Commissioner, as the case may be, within a period of thirty days. Section 245D(2C) contemplates that the Settlement Commission, on the basis of the report filed by the Principal Commissioner or Commissioner and within a period of fifte n days of the receipt of such report, by an order in writing, declare the application in question as invalid after affording an opportunity of hearing to the applicant. Needless to say that such rejection is based on the report received from revenue and on satisfaction that what is disclosed in the application is not true and full disclosure.

11. On the other hand, as contemplated under section 245D(3), if an application has not been declared invalid under sub-section (2C), the Settlement Commission may call for records from the Principal Commissioner or Commissioner and after examination of such records, it may direct the Principal Commissioner or Commissioner to make such further enquiry or investigation and furnish a further report on the matters covered by the application and any other matter relating to the case. The Principal Commissioner or Commissioner, thus, shall furnish such report within a period of ninety days. After examination of the records and the report of the Principal Commissioner or Commissioner and after giving an opportunity of hearing to the applicant and to the Principal Commissioner or Commissioner and after examining such further evidence as may be placed before the Commission or obtained by it, the Settlement Commission may pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application referred to in the report of the Principal Commissioner or Commissioner. Every order passed by the Settlement Commission under sub section 4 of Section 245D shall provide for the terms of settlement including any demand by way of tax penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective. Section 245(I) stipulates that every order of settlement passed under Section 245D(4) shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any proceedings under the said Act or under any other law for the time being in force. Section 245K deals with bar of subsequent application for Settlement. Under sub-Section 2 of Section 245K , a person is not entitled to make application under Section 245C subsequently, if his earlier application filed under Section 245C has been allowed to be proceeded with under sub-section (1) of Section 245D. Likewise, an application under Section 245C(1) cannot be withdrawn by the applicant as well, as prohibited under Section 245C(3).

12. The relevant provisions under Section 245D (1), (2C), (3), (4) & (6) are extracted hereunder.

(1) On receipt of an application under section 245C, the Settlement Commission shall, within seven days from the dte of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant, the settlement Commission shall, within a period of fourteen days from the date of the application, by an order in writing, reject the application or allow the application to be proceeded with. …. (2C) Where a report of the Principal Commissioner or Commissioner called for under subsection (2B) has been furnished within the period specified therein, the Settlement Commission may, on the basis of the report and within a period of fifteen days of the receipt of the report, by an order in writing, declare the application in question as invalid, and shall send the copy of such order to the applicant and the Principal Commissioner or Commissioner. ….

(3) The Settlement Commission, in respect of

(i) an application which has not been declared invalid under sub-section (2C); or

(ii) an application referred to in sub-section (2D) which has been allowed to be further proceeded with under that sub-section, may call for the records from the Principal Commissioner or Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Principal Commissioner or commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case, and the Principal Commissioner or Commissioner shall furnish the report within a period of ninety days of the receipt of communication from the settlement Commission. ….

(4) After examination of the records and he report of the Principal Commissioner or Commissioner, if any, received under

(i) sub-section (2B) or sub-section (3), or

(ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act,
2007, and after giving an opportunity to the applicant and to the Principal Commissioner or Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Principal Commissioner or Commissioner. ….

(6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts.

13. Keeping these statutory position of law in mind regarding Settlement of Cases before the Settlement Commission, let me now consider the merits of the present case.

14. The facts and circumstances which warranted the petitioner to approach the Settlement Commission, have been narrated in detail supra and therefore, I am not reiterating the same once again hereunder. The petitioner earlier filed Settlement Application on 28.12.2017 and the same was rejected on 09.01.2018 itself on the reason that the requirements of section 245(C) were not satisfied i.e., the application of the specified person (brother of the petitioner) was not allowed to be proceeded with on account of non-payment of tax on the additional income in the specified petitioner’s application. Since the said application was rejected at the stage under section 245D(1) itself, the petitioner filed subsequent application on 01.02.2018 under section 245C of the said Act. The Settlement Commission, by its order dated 02.02.2018, allowed the Settlement Application under section 245D(1) of the said Act to be proceeded with further. It is true that the Settlement Commission observed in the said order that the applicant has made a full and true disclosure of the additional income before the Settlement Commission, which were not declared before the Assessing Officer and that the manner, in which, the additional income derived has been explained. Undoubtedly, such observation of the Settlement Commission is based on prima facie view on the averments and details furnished in the application, in the absence of any other contra materials in its possession, which warrants contra view that the true and full disclosure has not been made by the applicant or that he has not disclosed the manner of earning such income. It is relevant to note at this juncture that the prima facie view expressed by the Settlement Commission resulting out of the said order passed under section 245D(1) in allowing the Settlement Application to be proceeded with further, was based solely on the materials placed by the petitioner and in the absence of any contra materials available with the Commission. Thus, the said order passed under section 245D(1) is indisputably an exparte order, in so far as the revenue is concerned, that too, expressing only a prima facie view in allowing the Settlement Application to be proceeded further with. Admittedly, at this stage, the Revenue is neither put on notice nor heard. Therefore, any prima facie view expressed by the Settlement Commission for allowing the application to be proceeded with further, cannot mean or be taken advantage of by the petitioner, as if such view expressed is the only view that could be arrived by the Settlement Commission at all stages, especially, when procedures contemplated under Section 245D at various stages empower the Commission to reject the application even at a later stage either under section 245D(2C) or under Sections 245D(2D)(3) or (4).

15. Perusal of the above provisions would show that an application, though allowed to be proceeded with under Section 245D(1), can still be rejected under Section 245D(2C), after perusal of the report filed by the Principal Commissioner or Commissioner of Income tax. It is to be noted that once the Commission has chosen to proceed further with the application by passing an order under section 245D(1), a report is called for by the Commission from the Principal Commissioner or Commissioner, as the case may be, under section 245D(2B). Thus, it is apparent that only when a report is filed under Section 245D(2B), the Commission will be in a position to find out as to whethe the prima facie view taken by the Commission under section 245D(1), for allowing the application to be proceeded with further solely based on the details furnished by the applicant, is right or wrong. In other words, the Commission is entitled to change its view, based on the report submitted by the Principal Commissioner or Commissioner with regard to the full and true disclosure of the material details furnished in the Settlement Application. Therefore, the report filed under Section 245D(2B) is a crucial document for the Settlement Commission to decide as to whether the application is to be declared as invalid at this stage itself or to push it to the next stage for calling the records from the Principal commissioner or Commissioner and after examination of such records whether to order for conducting any further enquiry or investigation by the Principal Commissioner or Commissioner. However, before taking such decision based on such report, the applicant is provided an opportunity of being heard as contemplated under Section 245D(2C). In this case, such opportunity was, admittedly, given to the petitioner by forwarding such report to him on 13.03.2018 itself. It is also not in dispute that the petitioner filed his reply on 19.02.2018. However, such reply was not to the satisfaction of the Settlement Commission. On the other hand, it has been found that the assessee’s representative failed to explain the facts on the impounded materials viz., CPU and pen drives and the failure in not disclosing the same in the Statement of facts before the Commission. The Settlement Commission has also found that the assessee’s representative merely stated that the contents of the pen drive and hard disc are only an estimate prepared for bank purposes and that he could not explain the figures satisfactorily, even though the specific query was put to him that the figures are not round sum but accurate and that inflation and boosting of certain figures were made clear. Therefore, the Settlement Commission found that the estimate of additional income of Rs.40 lakhs is made without any basis and there is clear suppression of facts relating to undisclosed income in the statement of facts. The Settlement Commission also found that the suppression of basic facts relating to income and misrepresentation of facts to full and true disclosure of additional income were brought to the knowledge of the Commission by the Revenue. The Settlement Commission specifically pointed out that even after repeated questioning regarding the deficiency in disclosure of contents of pen drives and hard disc, the assessee’s representative failed to explain and remained silent during the hearing. These factual findings rendered by the Settlement Commission, not only based on the report submitted by the Revenue and also in view of the conduct and inability of the assessee to satisfy the Commission with regard to the deficiency in the disclosure of contents in pen drive/ hard disc which contained accurate figures, would certainly show that the Commission is fully justified in holding against the petitioner regarding full and true disclosure. Hence, the petitioner, undoubtedly, is not entitled to seek for carrying over the proceedings to the next stage under section 245D(2D)(3), as a matter of right. Evidently, the petitioner has failed to cross the stage of Section 245(2C) successfully. Therefore, there is no question of asking the Commission to proceed further under section 245 D(2D)(3). As already stated supra when the Commission is fully satisfied that there is suppression of materials and that there is no valid and true disclosure of income, even while hearing the matter at the stage of 245D(2C), it has ample power o reject the application at that stage itself. Therefore, the petitioner is not entitled to question such order m rely because such rejection would bar the petitioner from approaching the Commission as contemplated under Section 245K(2). Needless to say that settlement procedures under Chapter XIX-A of the Income Tax Act are intended only for such of those persons who come with honest intention to settle by furnishing full and true disclosure of undisclosed income and material facts.

16. It is to be noted at this juncture that the Settlement Commission is vested with power to reject the Settlement Application at three stages, as provided under Section 245D of the said Act. Rejection at the threshold is contemplated under Section 245D(1) Rejection after notice to the Revenue and on perusing the report filed by the Revenue could be mad under Section 245D(2). While rejection under Section 245D(1) is a dismissal at the admission stage, rejection under Section 245D(2) is after notice to the revenue and on being satisfied with non disclosure of true and full undisclosed income. The third stage of rejection is contemplated under Section 245D(4), after directing the Revenue to furnish records and thereafter to conduct an investigation or enquiry. In all these stages, the satisfaction of the Commission with regard to true and full disclosure of income must continue to exist so as to carry over the proceedings from one stage to another and finally, to pass an order determining the terms of settlement as provided under Section 245D(6). In other words, true and full disclosure is the life line, satisfaction of the same should remain to live in the mind of the Commission till the final order is passed. On the other hand, if the Commission finds, at any stage of the proceedings under Section
245D that the applicant has not come before the Commission with clean hands and by disclosing true and full income, it is empowered to reject the application, thereby driving the applicant to face the regular assessment proceedings. The applicant cannot, as a matter of right, seek the Commission to carry over the application from one stage to another, notwithstanding the fact as to whether true and full disclosure of income was made or not. In other words, the applicant who approaches the Commission, bypassing the regular assessment proceedings, must provide material facts without any suppression and establish that the disclosure of income in the application is true and full in its strict sense. Otherwise, the applicant cannot find fault with the Commission in showing him the door to face the regular assessment proceedings. The term “true and full disclosure” does not mean that whatever the amount shown by the applicant, which according to him is undisclosed income, is in fact, the true and full disclosure. It may be the disclosure of undisclosed income in the view of the applicant. But whether such disclosure is “true and full”, in its strict sense, is a question that should fetch an answer in favour of the petitioner/applicant at all stages even after hearing the revenue. In other words, such disclosure should not give room for deduction of concealed fact with regard to any other income either after getting a report from the Revenue or conducting an investigation or enquiry at the instance of the Commission.

17. Learned counsel for the petitioner relied on the decision of the Delhi High Court reported in (2013) 35 taxman.com 56 (Commissioner of Income-tax vs. Income Tax Settlement Commission). A careful perusal of the said decision, more particularly, the facts and circumstances referred to therein, would disclose that the said decision is not applicable to the present facts and circumstances. In that case, the Settlement Commission passed an order under Section 245D(2C) by holding that the Settlement Applications are not invalid and therefore, they were allowed to be proceeded with, since the Settlement Commission, prima facie found that the Settlement Application therein fulfilled all the conditions prescribed under Section 245C(1)and 245(2C) of the said Act. The said order of the Settlement Commission was challenged before the Delhi High Court by filing a writ petition. The contention of the Revenue was that the Settlement Application ought to have been rejected at the stage of Section 245D (2C) itself since the Settlement Application failed to satisfy the pre-requisites stipulated under section 245C of the said Act, namely, full and true disclosure, the manner in which the undisclosed income had been derived and the additional amount of income tax payable. The Delhi High Court, after considering the various stages in which the Settlement Application can be considered or rejected, observed that the settlement application passes through several stages before the final order provided for the terms of settlement and that the orders under section 245D(1), 245D(2C) are not final orders and they are subject to final orders that may be passed under section 245D(4) and that the issue of full and true disclosure on the part of the applicant’s therein and the manner, in which, undisclosed income was derived is still open for discussion and debate. Therefore, it is clear that in that case the Settlement Commission has not only formed a prima facie opinion exparte at the stage of 245D(1) to proceed further with the application and also satisfied, further under section 245D(2C) as well about the true and full disclosure. But in the present case, it is vice versa. The Settlement Commission though initially found prima facie that there was true and full disclosure while dealing with the application under Section 245D(1), has however subsequently, after hearing the Revenue through their report, has categorically found against the appl cant at the stage of 245D(2C) with regard to full and true disclosure of income. Thus, the Settlement Commission has chosen to reject the application at that stage itself which is permissible as contemplated unde section 245 D(2C). Thus, I find that the above decision is not helping the petitioner in any manner.

18. The other submission made by th learned counsel is based on an apprehension that the petitioner herein is totally barred in filing any further application in future before the Settlement Commission, in view of the rejection order passed under Section 245D(2C). In other words, it is contended that Section 245K(2) bars all subsequent applications for settlement, if an application made under Section 245C has been allowed to be proceeded with under Section 245D(1). Therefore, it is contended that the Commission, instead of rejecting the application under Section 245D(2C), ought to have proceeded further to order further enquiry or investigation in the matter so as to arrive at a final conclusion on the issue of full and true disclosure.

19. I have given my careful consideration to the above said submission. I have also perused the relevant provision made under Section 245K(1) & (2) which read as follows:

245K. (1) Where

(i) an order of settlement passed under sub-section (4) of section 245D provides for the imposition of a penalty on the person who made the application under section 245C for settlement, on the ground of concealment of particulars of his income; or

(ii) after the passing of an order of settlement under the said sub-section (4) in relation to a case, such person is convicted of any offence under Chapter XXII in relation to that case; or

(iii) the case of such person was sent back to the Assessing Officer by the Settlement Commission on or before the 1st day of June,2002. Then, he or any person related to such person (herein referred to as related person) shall not be entitled to apply for settlement under section 245C in relation to any other matter.

(2) Where a person has made an application under section 245C on or after the 1st day of June, 2007 and if such application has been allowed to be proceeded with under subsection (1) of section 245D, such person or any related person shall not be subsequently entitled to make an application under section 245C. Explanation-For the purposes of this section, “related person” with respect to a person means,

(i) where such person is an individual, any company in which such person holds more than fifty per cent of the shares of voting rights at any time, or any firm or association of persons or body of individuals in which such person is entitled to more than fifty per cent of the profits at any time, or any Hindu undivided family in which such person is a karta;

(ii) Where such person is a company, any individual who held more than fifty per cent of the shares or voting right sin such company at any time before the date of application before the Settlement Commission by such person;

(iii) Where such person is a firm or association or persons or body of individuals, any individual who was entitled to more than fifty per cent of the profits in such firm, association of persons or body of individuals, at any time before the date of application before the Settlement Commission by such person;

(iv) where such person is a Hindu undivided family, the karta of that Hindu undivided family.

20. A careful perusal of the above said provision of law would indicate that two categories are referred to therein for imposing bar on subsequent application for settlement in respect of those cases. Sub-section (1) of Section 245K(1) deals with first category consisting of three types of cases i.e., where an order of settlement passed under Section 245D(4) provides for imposition of penalty on the ground of concealment of particulars of income or if a person who made such application is convicted of any offence under Chapter XXII in relation to that case, after passing of order of sett ement under Section 245D(4) or if the case of such person is sent back to the Assessing Officer by the Commis ion on or before the 1st day of June,2002. In respect of those three cases which form first category under Section 245K, neither the applicant nor any person relating to such person shall be entitled to apply further for se tlement under section 245C in relation to “any other matter”. Therefore, it is evident that a total bar or prohibition is imposed against the said person or any person related to such person in making any application in future for settlement under section 245C not only in relation to the subject matter case but also in respect of any other matter.

21. On the other hand, the bar imposed under sub-clause 2 of Section 245K stands on a different footing. Under this category, a person or related person is barred from making an application under Section 245C, if his earlier application filed under the said provision has been allowed to be proceeded with under section 245D(1). Here, the phrase “any other matter” as contemplated under section 245K(1) is conspicuously absent or omitted. Thus, the bar stipulated under section 245K(2) is to be read along with Section 245C in order to find out whether such bar is against another application under section 245C in respect of that particular assessment year, which is the subject matter in the application filed already, by such person under section 245C or in respect of any application in relation to any other matter, as specifically provided under section 245K(1).

22. Section 245C deals with an application for settlement of cases. Sub-section (1) of Section 245C permits an assessee to make an application before the Settlement Commission containing a full and true disclosure of his income etc., “at any stage of a case relating to him”. Therefore, the phrase “at any stage of a case relating to him” used under section 245C is significant, which would only indicate that the case relating to the assessee in respect of a particular assessment year, in which, a full and true disclosure of income has not been disclosed before the Assessing Officer etc. Therefore, the bar provided under section 245K(2) for making subsequent application under section 245C is to be construed as a bar in respect of such assessment year, which is already the subject matter in the earlier application, and not in respect of any future application in respect of any other assessment year/years, being not the subject matter of the application already filed under section 245C, which was allowed to be proceeded with under sub-section (1) of Section 245D.

23. At this juncture, it is useful to refer to the observation made by the Apex Court in C.I.T. vs. Express
Newspaper Ltd., reported in 206 ITR 443, as follows:

Once the application is allowed to be proceeded by the Commission, the proceedings pending before any authority under the Act relating to that assessment year have to be transferred to the Commission and the entire case for that assessment year will be dealt with by the Commission itself. The words “at any stage of a case relating to him” only make it clear that the pendency of proceedings relating to that assessment year, whether before the Assessing Officer or before the appellate or revisional authority, is no bar to the filing of an application under section 245C so long as the application complies with the requirement of section 245C.

(emphasis supplied)

Thus, in my considered view section 245K(2) is not imposing total bar on subsequent application, as apprehended by the petitioner in this case. On the other hand, such total bar is applicable only in respect of cases falling under Section 245K(1). As already stated supra the bar under Section 245K(2) is against an application in respect of the same assessment year, so long as the applicant has not suffered any such disqualifications as stated under section 245K (1). Thus, I find that the apprehension of the petitioner about the anticipated total bar in approaching the commission in future is not well-founded.

Considering the above stated facts and circumstances, I find that the order passed by the Settlement Commission, impugned in this writ petition, does not warrant any interference, more particularly, by exercising the discretionary jurisdiction of this Court under Article 226 of the Constitution of India. Thus, the Writ Petition fails and the same is dismissed. No costs. Consequently, connected miscellaneous petitions are closed.

[Citation : 408 ITR 467]

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