Erroneous Grant of immunity by Settlement Commission from Penalty and Prosecution under section 245H(1) of the IT Act 1961 - order of Delhi High Court dated 10.02.2014 in W.1\(C)5262/2013 in the case of CIT(C-II), versus ITSC & Another. - Income Tax - F. No. 299/130/2013-IT-(Inv-III)

F. No. 299/130/2013-IT-(Inv-III) Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes) New Delhi, Dated : 27.02.2014 To All the Chief Commissioners of Income Tax (CCA) All the Directors General of Income Tax (Inv) All the Chief Commissioners of Income Tax (Central) All the Commissioners of Income Tax (DR), ITSC Sir/Madam, Sub : Erroneous Grant of immunity by Settlement Commission from Penalty and Prosecution under section 245H(1) of the IT Act 1961 - order of Delhi High Court dated 10.02.2014 in W.1\(C)5262/2013 in the case of CIT(C-II), versus ITSC Another. I am desired to refer to the above mentioned order of Hon ble Delhi High Court on the issue of erroneous grant of immunity from penalty and prosecution by the Settlement Commission. 2. The Hon ble Court has, inter alia, held that it is certainly open to the ITSC to grant immunity to an applicant from penalty and prosecution. This power, however, has to be exercised only in accordance with law i.e. on satisfaction of the conditions of Section 245H(1). We are constrained to observe that the majority view taken by the ITSC in the present case reflects a somewhat cavalier approach, perhaps driven by the misconception that granting of immunity from penalty and prosecution was ritualistic, once the assessee disclosed the entire concealed income, ignoring the vital requirement that it is the stage at which such income is offered that is crucial and that the applicant cannot be permitted to turn honest in installments . When there is unimpeachable evidence of a much larger amount of concealed income, about which there is no ambiguity, then what was disclosed by the assessee in the application filed under Section 245C(1) cannot be regarded as full and true disclosure of income merely because the assessee, when cornered in the course of the proceedings before the ITSC, offered to disclose the entire concealed income. In as much as the ITSC has ignored this crucial aspect, the majority view expressed by it cannot at all be countenanced. Accordingly the Hon ble High Court upheld the contention of the Revenue and quashed the majority view of the ITSC granting immunity to the assessee from penalty and prosecution. 3. The above mentioned judgment may be perused and ratio thereof brought to the notice of all concerned for making appropriate submissions before the ITSC on the issue of immunity from penally and prosecution in cases where the department has evidence to the effect that the additional income offered by the applicants in their application did not amount to true and full disclosure of their income. Further, immunity cannot be granted if the disclosure is made in parts subsequently and not in the original application. Yours faithfully, (R.K. Yadav) Commissioner (Inv.)