TMI Blog2010 (8) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... not made a full and true disclosure of their undisclosed income were kept open. - the disclosure of ₹ 11.41 crores as additional undisclosed income in the revised annexure, filed on 19th September, 1994 alone was sufficient to establish that the application made by the assessee on 30th September, 1993 under Section 245C(1) of the Act could not be entertained as it did not contain a "true and full" disclosure of their undisclosed income and "the manner" in which such income had been derived. - High Court was correct in making the order of remand and no good ground is made out for interference in exercise of our jurisdiction under Article 136 of the Constitution. - The Commissioner will be entitled to costs, quantified at ₹ 50,000/-. - 6827-6848 0F 2010 - - - Dated:- 20-8-2010 - JUDGMENT D.K. JAIN, J.: 1. Leave granted. 2. These appeals, by special leave, arise out of the judgment and order dated 8th July, 2009 delivered by the High Court of Judicature at Bombay in a batch of 22 writ petitions. By the impugned common judgment, the High Court has set aside order dated 29th January, 1999 passed by the Income Tax Settlement Commission (for short "the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared in the returns of income submitted by them earlier. The Settlement Commission called for a report from the Commissioner of Income Tax, (for short "the Commissioner") in terms of Section 245D(1) of the Act read with Rule 6 of the Income Tax Settlement Commission (Procedure) Rules, 1987 (for short "the 1987 Rules"). On 27th January, 1994, the Commissioner, while objecting to the entertainment of the application for settlement submitted by the assessee, as not being a full and true disclosure of their income, suggested that, at any rate, the income of the group should not be settled at less than Rs. 223.55 crores. 5. Arguments on the question of whether or not the Settlement Commission should proceed with the application were concluded on 12th September, 1994 and orders were reserved. However, on 19th September, 1994, the assessee filed a revised settlement application containing "confidential annexure and related papers", declaring therein an additional income of Rs.11.41 crores. On 17th November, 1994, the Settlement Commission passed an order under Section 245D(1) of the Act deciding to proceed with the application. Accordingly, the Settlement Commission asked the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst prosecution and in respect of other penalties under the Act. 8. Dis-satisfied with the order by the Settlement Commission, the Commissioner challenged it by preferring a writ petition in the High Court of Bombay. Holding that the Settlement Commission had not given any finding as to whether there was full and true disclosure of the income by the assessee, by a strongly worded order, dated 28th July, 2000, the High Court allowed the writ petition and set aside the order. It would be useful to extract the relevant observations in the judgment: "In the instant case, if we look at the facts in the light of the legal canvass, in our opinion, the Commission at the very inception ought to have addressed itself on the question as to whether the application was in compliance with the first and foremost requirement of Section 245-C(1). The Commission ought to have noticed that in the application made under Section 245-C(1) disclosure was to the extent of Rs. 1.94 crores. The report of the Commissioner as envisaged under Section 245-D(1) was called for and submitted and thereafter just before the order could be passed under Section 245-D(1) the assessee respondent No. 2 declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... January, 1999, the High Court remitted the proceedings back to the Settlement Commission, keeping all the questions open, with a direction to decide the application afresh in accordance with law. 9. Aggrieved by the decision of the High Court, the assessee challenged the same before this Court. By order dated 11th July, 2006, this Court set aside the order of the High Court solely on the ground that the second report submitted by the Commissioner on 20th October, 1997, estimating the undisclosed income at Rs. 42.5 crores, which approximately coincided with the figures arrived at by the Settlement Commission, and accepted by the assessee, had not been taken into consideration by the High Court, which fact was also conceded by learned counsel appearing for the revenue. The special leave petition was disposed of in the following terms: "Without expressing any opinion on the merits of the dispute, the findings recorded on the first report or the effect of not recording a finding on the second report, we set aside the impugned order and remit the case back to the High Court for a fresh decision, leaving the parties to raise all points including the point raised before us on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest of justice to set aside the final order passed by the Settlement Commission and to remand the matter back to the Settlement Commission for hearing parties afresh and to pass orders as per law. Facts and circumstances noted in respect of writ petition no. 2191 of 1999 are also relevant for the remaining writ petitions and, therefore, it will be necessary that the final orders passed in all these proceedings should be set aside." (Emphasis added) Thus, the remand of the case by the High Court to the Settlement Commission was confined only to the question of determination of total income, penalty etc. and the Settlement Commission was not required to go into the question of maintainability of application under Section 245C(1) of the Act. 11. Still being dissatisfied, all the applicants before the Settlement Commission are before us in these appeals. 12. We have heard Dr. A.M. Singhvi, learned senior counsel appearing for the assessee and Shri H.P. Raval, learned Additional Solicitor General, on behalf of the Commissioner. 13. Dr. Singhvi strenuously urged that the impugned order is clearly fallacious as the High Court has again failed to consider the two re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w is concerned only with the decision making process and not with the final decision, learned counsel referred us to the decisions of this Court in Jyotendrasinhji Vs. S.I. Tripathi Ors. 1993 Supp (3) SCC 389, M/s R.B. Shreeram Durga Prasad Fatehchand Nursing Das Vs. Settlement Commission (IT WT) Anr. (1989) 1 SCC 628 and Shriyans Prasad Jain Vs. Income Tax Officer Ors.1993 Supp (4) SCC 727. 15. It was also argued by the learned counsel that since by operation of Section 245D(1) of the Act read with Rule 6 of the 1987 Rules, annexure, statements and other documents accompanying such annexure were not to be supplied to the Commissioner before the Settlement Commission had decided to proceed with assessee's application, no prejudice was caused to the Commissioner by the filing of revised annexure by the assessee on 19th September, 1994. 16. Shri Raval, on the other hand, supporting the impugned judgment, submitted that the scheme of Chapter XIX-A does not envisage revision of the application filed by the assessee under Section 245C(1) of the Act and, therefore, the Settlement Commission committed serious procedural irregularity in permitting the assessee to file rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of this Court in Mrs. Margaret Lalita Samuel Vs. The Indo Commercial Bank Ltd. (1979) 2 SCC 396, learned counsel for the Commissioner pleaded that since the High Court has merely remanded the case back to the Settlement Commission for fresh determination of income and penalty etc., this Court may not like to exercise its discretionary power under Article 136 of the Constitution. 20. Before embarking upon the rival contentions, it would be instructive to refer to the scheme of Chapter XIX-A of the Act. The Chapter was inserted in the Act by the Taxation Laws (Amendment) Act, 1975, pursuant to the recommendations of the Justice Wanchoo Committee Report. The recommendation, contained in Chapter 2 of the report under the caption "Black Money and Tax Evasion", was for setting up of a statutory settlement machinery, whereby a tax evader could make a clean breast of his past illegitimate affairs, discharge his tax liability as determined by the body so established and thus, buy quittance for himself and in the process accelerate recovery of taxes by the State, although less than what may have been recovered after protracted litigation and recovery proceedings. The said Chapter, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: "Procedure on receipt of an application under section 245C. 245D. (1) On receipt of an application under section 245C, the Settlement Commission shall call for a report from the Commissioner and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application: Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant of being heard: .............................................................................. ......................................................................................... (3) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication for settlement of cases under section 245C(1) of the Income-tax Act, 1961 ........................................................................... ........................................................................... 10. Particulars of the issues to be settled, nature and circumstances of the case and complexities of the investigation involved [See Note 7] 11. Full and true disclosure of income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived and the additional amount of income-tax payable on such income [See Notes 9 and 10] ........................... Signed (Applicant) Notes: ........................................................................... ........................................................................... 7. Full details of issues for which application for settlement is made, the nature and circumstances of the case and complexities of the investigation involved must be indicated against item 10. Where the application relates to more than one assessment year, these details should be furnished for each assessment year. ...................................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee against item No. 10 of the prescribed form, and the material gathered by the revenue by way of its own investigation. It is evident from the language of Section 245C(1) of the Act that the report of the Commissioner is primarily on the nature of the case and the complexities of the investigation, as the annexure filed in support of the disclosure of undisclosed income against item No. 11 of the form and the manner in which such income had been derived are treated as confidential and are not supplied to the Commissioner. It is only after the Settlement Commission has decided to proceed with the application that a copy of the annexure to the said application and other statements and documents accompanying such annexure, containing the aforesaid information are required to be furnished to the Commissioner. In our opinion even when the Settlement Commission decides to proceed with the application, it will not be denuded of its power to examine as to whether in his application under Section 245C(1) of the Act, the assessee has made a full and true disclosure of his undisclosed income. We feel that the report(s) of the Commissioner and other documents coming on record at d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Also see: Commissioner of Sales Tax, Uttar Pradesh Vs. The Modi Sugar Mills Ltd.) 1961 (2) SCR 189. 28. As afore-stated, in the scheme of Chapter XIX-A, there is no stipulation for revision of an application filed under Section 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. 29. Having noticed the scheme of Chapter XIX-A of the Act, we shall now advert to the facts at hand and evaluate the rival submissions. 30. Before addressing the other issues, at the outset, we record our disapproval with the view of the High Court that it would not be proper to set aside the proceedings before the Settlement Commission even though it was convinced that the assessee had not made full and true disclosure of their income while making application under Section 245C of the Act. As stated above, in its earlier order dated 28th July, 2000 while declaring order dated 17th November, 1994, as ab initio void and setting aside order dated 29th January, 1999, the High Court had remitted the case to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction intended as a whole, there is nothing in the doctrine to prevent it being so regarded; to do so is not to prefer form to substance, or substance to form. It is the task of the court to ascertain the legal nature of any transactions to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions, intended to operate as such, it is that series or combination which may be regarded." 31. We are convinced that, in the instant case, the disclosure of Rs.11.41 crores as additional undisclosed income in the revised annexure, filed on 19th September, 1994 alone was sufficient to establish that the application made by the assessee on 30th September, 1993 under Section 245C(1) of the Act could not be entertained as it did not contain a "true and full" disclosure of their undisclosed income and "the manner" in which such income had been derived. However, we say nothing more on this aspect of the matter as the Commissioner, for reasons best known to him, has chosen not to challenge this part of the impugned order. 32. We shall now deal with the principal argument of learned counsel for the assessee that the High Court had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d token penalty of Rs.50 lakhs while on its own assessment leviable penalty would have been Rs.562.87 lakhs. Further, if the amount which had not been taken into consideration while assessing the total undisclosed income was to be taken into account, the amount of leviable penalty would have been much more. In light of these facts, the High Court formed the opinion that it would be in the interest of justice to set aside the final order passed by the Settlement Commission and to remand the case back to it for fresh adjudication on assessee's application. Bearing in mind the afore-stated factual position, as emanating from the material on record, we find it difficult to persuade ourselves to agree with learned counsel for the assessee that there was no justification for order of remand by the High Court and that the order passed by the Settlement Commission should have been affirmed. We are satisfied that under the given scenario, the High Court was correct in making the order of remand and no good ground is made out for interference in exercise of our jurisdiction under Article 136 of the Constitution. 33. As regards the argument of learned counsel for the assessee that the sco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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