2013 (2) TMI 778 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the Income Tax Settlement Commission's order dated 24th April 2003.
2. Alleged arbitrary addition of Rs. 30 lakhs to the petitioner's income.
3. Alleged violation of principles of natural justice by the Settlement Commission.
4. Scope of judicial review of the Settlement Commission's order.

Summary:

Legality of the Income Tax Settlement Commission's Order:
The petitioner challenged the order of the Income Tax Settlement Commission (Settlement Commission) dated 24th April 2003 u/s 226 of the Constitution of India, seeking to quash the order and restore the matter for a fresh decision. The petitioner argued that the order was illegal and contrary to law.

Alleged Arbitrary Addition of Rs. 30 Lakhs:
The petitioner, a partnership firm engaged in project consultancy and real estate coordination, was subjected to search and seizure operations u/s 132 of the Income-tax Act, 1961. The petitioner filed an application u/s 245D [1] of the Act, offering additional income of Rs. 6,30,325 for settlement. The Settlement Commission, however, determined the undisclosed income at Rs. 1,06,30,325, adding Rs. 30 lakhs on an estimate basis for AYs 1994-95 and 1995-96. The petitioner contended that this addition was arbitrary and lacked a rational basis.

Alleged Violation of Principles of Natural Justice:
The petitioner argued that the Settlement Commission acted in gross violation of the principles of natural justice by not providing a proper opportunity to address the on-money receipts issue. The petitioner claimed that the method adopted for the additional estimate was irrational and perverse.

Scope of Judicial Review of the Settlement Commission's Order:
The court examined the scope of judicial review of the Settlement Commission's orders, referencing several precedents. It was noted that the Commission's decisions could be reviewed only if they were contrary to the provisions of the Act or if there was bias, fraud, or malice. The court emphasized that the proceedings before the Settlement Commission are distinct from regular assessment proceedings and that the Commission's orders carry a certain finality.

Court's Findings:
The court found that the Settlement Commission had provided cogent reasons for the addition of Rs. 30 lakhs, based on discrepancies in the on-money receipts and the lack of full and true disclosure by the petitioner. The court noted that the Commission had acted within its powers and had given sufficient opportunity for hearing. The court concluded that there was no arbitrary exercise of power or violation of natural justice principles warranting interference.

Conclusion:
The petition was dismissed, with the court upholding the Settlement Commission's order and finding no grounds for judicial review. The court emphasized that the Settlement Commission's decision-making process was unimpeachable and that the petitioner's contentions did not demonstrate any serious prejudice or breach of provisions.