Revision of settlement application u/s 245C(1) offering higher amount not permissible

Revision of settlement application u/s 245C(1) offering another higher amount not allowed as assessee has to make full and true disclosure

ABCAUS Case Law Citation:
ABCAUS 2878 (2019) (04) HC

Important Case Laws Cited/relied upon by the parties
Ajmera Housing Corporation and another v Commissioner of Income Tax (2010) 326 ITR 642

In the instant case, the Income Tax Department (the Revenue) was aggrieved by the order of the Income Tax Settlement Commission (ITSC) which accepted the application made by the respondent assesses.

In pursuance of a search the assessee made a statement recorded under oath under Section 132(4) of the Income Tax Act, 1961 (the Act) admitting over pricing of goods sold to a Group. Though the assessee did not admit that the loan credits were not genuine, he voluntarily offered amount in his group and in personal hands.

Later, notices were issued under Section 153A for filing returns. However, none of the assessees filed returns in respect of all the years. At that stage, the assessees approached the ITSC with an application. under Section 245C of the Act. An affidavit in addition was filed by the assessee retracting from his statement on the grounds that the surrender was made without referring to the seized documents and entirely on ad hoc basis without the help of any professional and secondly that the statement was untenable in law in light of a CBDT Circular.

The Commission passed an order under Section 245D(1) allowing the settlement application to proceed.

In the present case, after noting and brushing aside the Revenue’s objections with regard to the complete lack of explanation by the assessee with respect to credits claimed, the ITSC proceeded to compute the amounts offered and observed that the difference in the net asset and the income declared.

The assessee accepted the difference as their undisclosed income and “in the spirit of settlement” agreed to offer additional income. A letter was filed offering additional income.

The ITSC recorded that the additional offer made during the course of proceedings u/s 2450(4) before it adequately covered all the issues. Therefore, the Commission accepted the offer of additional income.

The Hon’ble High Court opined that the decision of the ITSC was untenable in law. Once the assessee approached it with a certain amount, representing that it constituted full and true disclosure (and had maintained that to be the correct amount till the date of hearing) the question of “offering” another higher amount as a “full” disclosure is impermissible.

The High Court noted that the Hon’ble Supreme Court clearly held that here is no stipulation for revision of an application filed under 245C(1) of the Act and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said Section in the prescribed form.

The Hon’ble High Court opined that the amount offered clearly could not have been considered or accepted. The ITSC, in this regard, fell into error as there was no full and true disclosure by the assessees.

Consequently, the Hon’ble High Court set aside and quashed the impugned order with direction to the AO to proceed in accordance with law and complete the block assessments.

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