Settlement Commission order not perverse when objection raised as to non-disclosure well discussed – HC

Settlement Commission order not perverse when every objection raised by the Commissioner, Income Tax as regarding non-disclosure by the assessee is well discussed – HC

ABCAUS Case Law Citation:
ABCAUS 2706 (2019) (01) HC

The Income Tax Department had filed the instant writ petitioner objecting to the order passed by the Settlement Commission u/s 245D(4) of the Income Tax Act, 1961 (the Act).

The assessee was a company was registered under the Companies Act, 1956 and was engaged in the construction of apartments as developers. The company had been filing their returns regularly.

A search and seizure operation was carried out in the business premises of the Company as well as on the residential premises of its Managing Director and following which the Assessing Officer issued notice under section 153A and 153C of ‘the Act’ and the assessee filed its returns for the assessment years in question.

The assessee looking into the complexity of the proceeding so initiated took recourse to the remedy available to him under Chapter XIXA of ‘the Act’ by filing an application for settlement of his case and filed application under section 245C(1)of the Act.

The Settlement Commission passed an order under section 245D(2C) treating the application as not invalid and thus fit to be proceeded with. The notice was issued to the Commissioner of Income Tax for submission of his report under Rule 9 of the Rules framed thereunder

Finally, after considering the objections of the Department, the Commission accepted the application by passing an order to such effect under section 245D(1) of the Act.

However, the Income Tax Department objected to the order. According to the Department, the order allowing the settlement application was not correct because the assessee had not made full and true disclosure of his income and the order was passed without having regard to the objection raised by the Department.

The thrust of objections taken by the Commissioner, Income Tax in was that there has been a discrepancy which needed to be added to the total undisclosed income for the assessment years in questions for which disclosure had not been made by the assessee before the Commission.

The Hon’ble High Court noted that every objection raised by the Commissioner, Income Tax as regarding non-disclosure by the assessee was well discussed and disposed with reasons by the Commission and therefore, the Department could not raise objections on this count.

Ut was noted that the Commission also took considered the submission of the assessee that during the course of search operation, the Managing Director was coerced and cajoled to make disclosure of undisclosed income in respect of his business activities.

The Hon’ble High Court opined that Chapter XIXA of ‘the Act’ incorporates a special procedure for settlement on the basis of full and true disclosure of income by an assessee and considering that the Commission had taken note of each of the objections raised by the Commissioner in his report and after testing the same against the disclosure made by the assessee in his application, proceeded to dispose of the matter by the order impugned, it was on a misconception of a legal position that the writ petition had been filed which did not raise any issue having lawful support warranting any indulgence.

The Hon’ble High Court pointed out that the power exercised by the Bench to examine an order passed by the Settlement Commission is limited on its statutory compliance or perversity and no such instance was present in the order impugned requiring interference by the High Court.

The Hon’ble High Court also observed the Chairman and the Vice Chairman of a Settlement Commission are appointed from amongst serving Chief Commissioners or Principal Chief Commissioners or Principal Commissioner of Income Tax of equivalent rank and which again is a relevant factor for the Department to think, whether at all any order of a Settlement Commission unless staring on statutory violation or on perversity, should be assailed in a routine manner as had been done in the present case.

Accordingly, the Writ Petition was dismissed.

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