1994 (1) TMI 1 - SC - Income Tax

Appeals against the order of the Settlement Commission - jurisdiction of the Settlement Commission under Chapter XIX-A - Commission has no right to hold that they will not look into the material collected after the date of filing of the application under section 245C - mere filing of the application did not mean that department should fold their hands and stop their investigation and enquiries in their tracks - order of the Settlement Commission under appeal is set aside

Issues Involved:
1. Jurisdiction of the Settlement Commission under Chapter XIX-A of the Income-tax Act, 1961.
2. Compliance with Section 245C(1) regarding the disclosure of income.
3. Relevance of material collected after the filing of the application under Section 245C.
4. Validity of the Settlement Commission's decision to proceed with the application.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Settlement Commission under Chapter XIX-A of the Income-tax Act, 1961:

The Supreme Court examined the jurisdiction of the Settlement Commission, emphasizing that Chapter XIX-A of the Income-tax Act was introduced to allow assessees to settle their cases by making a full and true disclosure of their income not disclosed before the Assessing Officer. The Court clarified that the Settlement Commission can only entertain applications that comply with the requirements of Section 245C, which mandates a full and true disclosure of previously undisclosed income.

2. Compliance with Section 245C(1) regarding the disclosure of income:

The Court found that the respondent-assessee did not comply with Section 245C(1) as it did not disclose any income not previously disclosed before the Assessing Officer. Instead, the respondent merely offered a part of the losses claimed as taxable income, which did not fulfill the requirement of disclosing concealed income. The Court stated, "An application under section 245C is maintainable only if it discloses income which has not been disclosed before the Assessing Officer."

3. Relevance of material collected after the filing of the application under Section 245C:

The Supreme Court held that the Settlement Commission erred in disregarding material collected by the income-tax authorities after the filing of the application under Section 245C. The Court emphasized that the filing of an application is a unilateral act by the assessee, and the income-tax authorities are entitled to continue their investigation. The Court stated, "The proper line-ordinarily speaking is to be drawn with reference to the date of submission of the report by the Commissioner."

4. Validity of the Settlement Commission's decision to proceed with the application:

The Supreme Court concluded that the Settlement Commission's decision to proceed with the application was vitiated by a misdirection in law and a misapprehension of the true legal position. The Commission failed to recognize that the application did not disclose any new income and that the income-tax authorities had already gathered substantial material indicating concealment of income. The Court held, "The application filed by the respondent before the Commission was not maintainable and could not have been allowed to be proceeded with."

Conclusion:

The Supreme Court allowed the appeals, set aside the order of the Settlement Commission, and directed that the assessments for the relevant assessment years should proceed according to law. The Court also provided the respondent an opportunity to file an appeal before the Tribunal within one month. The decision emphasized the importance of adhering to the statutory requirements for disclosure under Section 245C and the relevance of material gathered by the income-tax authorities up to the date of the Commissioner's report. The respondent was ordered to pay the costs of the appellant, assessed at Rs. 10,000.

← Previous Next →