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Vishnubhai Mafatlal Patel Versus Assistant Commissioner of Income-tax

2012 (12) TMI 1020 - GUJARAT HIGH COURT

Settlement Commission order eligibility - scope of judicial review in exercise of writ jurisdiction under Articles 226 and 227 of the Constitution of India while examining the validity of an order of the Settlement Commission - Held that:- When the Settlement Commission examines an application in terms of statutory powers and finds that such application does not satisfy the legal requirements, as contained in section 245C(1) of the Act, in our view, unless such decision of the Commission is cont .....

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clusion that application was not valid, it had every authority to reject the same even at the stage of first screening under section 245D(1) of the Act. - We are not convinced with the petitioners' contention that if such application was allowed to be proceeded, the petitioners would have produced additional materials in support of the requirement that the petitioner made true and full disclosure of undisclosed income and the manner of deriving the same. The petitioners were required to mak .....

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ons arise out of common background. They have been heard together and are being disposed of by this common judgment. 2. For the purpose of this order, we may notice the facts as arising in Special Civil Application No.12060/2012. 2.1 The petitioner is an individual and is assessed to tax as such. The petitioner claims to be engaged in the business of infrastructure development activities. On 5.10.2010, search operations were carried out at the residential and business premises of the petitioner .....

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he assessment years 2008-2009 to 2011-2012. The petitioner disclosed additional income of ₹ 49,24,14,630/- for different years in the following manner : Assessment Year Additional Income of ₹ 49,24,14,630/- Disclosed in Return/Application filed Return u/s 139 (1) Return u/s 139(5) Revised After Search within the permitted time Return u/s 153A Before Settlement Commission Total Income Disclosed due to Search 2008-09 Nil Nil Nil 6,22,92,000 6,22,92,000 2009-10 Nil 12,32,07,000 31,32,50 .....

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s taken for hearing on 6.6.2012 by the Settlement Commission. The Commission vide its impugned order dated 8.6.2012 rejected the application of the petitioner on the ground that requirements of section 245D(1) of the Act were not fulfilled. It is this order of the Settlement Commission which the petitioner has challenged in this petition. 2.4 Before passing the impugned order the Settlement Commission heard the representative of the petitioner on the question of fulfillment of requirements of se .....

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application at the very threshold which has prompted the petitioners to approach this Court. 3. Material facts are common in all the petitions. 4. Learned senior counsel Shri S.N.Soparkar appearing for Shri R.K.Patel for the petitioners taking us through the statutory provisions and case laws on the point submitted that the Commission committed grave error in rejecting the application at the very threshold. Counsel would contend that at the stage of section 245D(1) of the Act, it was not open to .....

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nt opportunity to produce additional documents and evidence, if so required by the Commission during the course of hearing of the settlement proceedings, the petitioners would have done so. The Commission committed a grave error in shutting out any such further inquiry or an opportunity to the petitioners to produce additional material. 4.3 Counsel also took us through the impugned decision of the Commission to contend that the Commission's findings were dehors the material on record and the .....

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the manner in which income was earned, this Court held and observed that even if such statement does not specify the manner in which the income is derived, if the income is declared and the tax thereon is paid, there would be substantial compliance not warranting any further denial of the benefit of immunity. 5. On the other hand, learned senior counsel Shri Manish Bhatt for the Revenue opposed the petitions contending that the scope of judicial review against a decision of Settlement Commissio .....

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ration. In the present case the Commission came to the conclusion that the petitioners had not made true and full disclosures about their income. Counsel relied on the following decisions: (1) In case of Jyotendrasinhji v. S.I. Tripathi [1993] 201 ITR 611/68 Taxman 59 (SC), in which the Apex Court held that though the order of Settlement Commission has been given finality, such finality would not bar a writ petition before the High Court or jurisdiction of the Supreme Court, nevertheless, the sc .....

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cation under section 245C(1) of the Act. It was held that an assessee has no right to revise his disclosure. 6. Having thus heard learned counsel for the parties and having perused the documents on record, we may at the outset take note of statutory provisions applicable. ♦ Chapter XIXA which was introduced in the Act in the year 1976, pertains to settlement of cases. ♦ Settlement Commission is constituted under Section 245B of the Act. Section 245BA lays down the jurisdiction and po .....

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rticulars as may be prescribed, to the Settlement Commission to have his case settled. It is further provided that application shall be disposed of in the manner hereinafter provided. ♦ Section 245D of the Act pertains to procedure on receipt of an application under section 245C. Relevant portion of section 245D reads as under : "245D. (1) On receipt of an application under section 245C, the Settlement Commission shall, within seven days from the date of receipt of the application, is .....

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llowed to be proceeded with. (2B) The Settlement Commission shall, - (i) in respect of an application which is allowed to be proceeded with under sub-section (1), within 30 days from the date on which the application was under; or (ii) in respect of an application referred to in sub-section (2A) which is deemed to have been allowed to be proceeded with under that subsection, on or before the 7th day of August, 2007, call for a report from the Commissioner, and the Commissioner shall furnish the .....

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Provided that an application shall not be declared invalid unless an opportunity has been given to the applicant of being heard: Provided further that where the commissioner has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the Commissioner. (3) The Settlement Commission, in respect of- (i) an application which has not been declared invalid under sub-section (2C) ; or (ii) an application referred to in s .....

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d the commissioner shall furnish the report within a period of ninety days on the receipt of communication from the Settlement Commission : Provided that where the commissioner does not furnish the report within the aforesaid period, the Settlement Commission may proceed to pas an order under sub-section (4) without such report. (4) After examination of the records and the report of the Commissioner, if any, received under- (i) sub-section (2B) or sub-section (3), or (ii) the provision of sub-se .....

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er matter relating to the case not covered by the application, but referred to in the report of the commissioner." 7. From the perusal of the statutory provisions noted above, it can be gathered that an assessee may at any stage of the case relating to him, make an application for settlement to the Commission under sub-section(1) of section 245C. Such application has to be made in a prescribed manner and is required to contain a full and true disclosure of the income of the assessee which h .....

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oceeded with. On hearing the applicant, the Settlement Commission shall, within fourteen days from the date of the application, by an order in writing either reject the application or allow the application to be proceeded with. Proviso to sub-section(1) of section 245D provides that where no order has been passed by the Settlement Commission as aforesaid, the application shall be deemed to have been allowed to be proceeded with. 8. Under sub-section (1) of section 245D thus, the first stage of s .....

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ing true and full disclosure of income not previously disclosed before the Assessing Officer and the manner in which such income had been derived as also the additional amount of income-tax payable on such income and such other particulars as may be prescribed. At the stage of sub-section (1) of section 245D of the Act, therefore, prime scrutiny of the Commission would be whether application of the assessee is in order and in conformity with the requirements of sub-section (1) of section 245C wh .....

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ettlement Commission to examine whether the application for settlement fulfills such requirements or not. Such scrutiny of-course would be summary in nature. We may recall that the Settlement Commission upon receipt of such an application within seven days thereof, has to issue notice to the assessee and pass a final order either rejecting the application or allowing the application to be proceeded within fourteen days of the date of application. Proviso to sub-section (1) of section 245D makes .....

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that such inquiry however, shall have to be summary in nature. The later provisions of sections 245D would also demonstrate that any decision of the Commission to allow the application to be proceeded with would only be prima facie in nature. We would elaborate this aspect a little later. At this stage, therefore, we find that under section 245D(1) of the Act, if the Commission on a summary inquiry comes to the conclusion that an application filed by the assessee under section 245C(1) of the Ac .....

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nish the report within a period of thirty days of the receipt of communication from the Settlement Commission. Sub-section(2C) further provides that where a report of the Commissioner under sub-section (2B) has been furnished within the prescribed period, the Settlement Commission may on the basis of the report within fifteen days of the receipt of the report by an order in writing, declare the application as invalid. Proviso to sub-section(2C) provides that no such declaration shall be made unl .....

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d after giving an opportunity to the applicant of being heard, if the Commission is so satisfied, can declare the application to be invalid. This is the second stage where the Commission can scrutinise the validity of application for settlement made by the assessee under section 245C (1) of the Act. Thus even if the Commission had previously passed an order under section 245D(1) of the Act, allowing the application to be proceeded with, it would still be open for the Commission if grounds are so .....

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he Commission thinks it necessary. Sub-section (4) empowers the Commission after giving an opportunity to the applicant and to the Commissioner to be heard, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner. 12. The twin requirements for an assessee making an application for settlement under section 245C(1) of the Act, of containing full and true di .....

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closure made by the applicants and the supporting material produced along with the applications, we do not see that the Commission committed any legal error. As already noted, it was well within the jurisdiction of the Commission at the stage of sub-section (1) of section 245D of the Act to examine whether application for settlement fulfills the statutory requirements contained in sub-section (1) of section 245C of the Act. At this stage we may refer to the decision of the Supreme Court in case .....

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initial application made by the assessee could not be entertained as it did not contain true and full disclosure of the undisclosed income and the manner in which such income had been derived. 13. It is true that the order that the Settlement Commission has to pass under section 245D(1) of the Act comes with a rigid time frame. The scrutiny or the inquiry at that stage, therefore, necessarily shall have to be summary in nature. This however, does not take away the powers of the Settlement Commis .....

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uch income was derived. The Commission recorded that the representative of the applicants admitted that there was no evidence found during the search or other-wise with the applicants in this regard. It was further submitted that the applicants are old and reputed business leaders in their domain and the income earned has been mostly applied in the share capital of group companies. It was submitted before the Commission that the applicants used to participate in bidding process for securing the .....

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arned AR and he admitted that there is not an iota of 'material' to relate to the so called 'manner' of earning income. 10.2 We have considered the facts of the case and also the submissions made by Learned AR. In our view the explanation offered by Learned AR is only a make believe story which is neither credible nor worthy of any credence. We would like to stress that it is not the question of 'sufficiency' of material which could be correlated to the manner in which ad .....

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been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposes of in the manner hereinafter provided. . . . . ." It was further observed that : There is not even a whisper to suggest that at the stage of admission of an application, the issue of the "manner in which such income has been derived" could be left open or ignored. .....

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to arrive at the conclusion as to whether the disclosure of additional income is true and full or all the primary facts have been brought before the Commission. In view of this settled position of law and facts and circumstances of the case we here by hold that the requirements mentioned in section 245D(1) of the Income-tax Acts, 1961/ Wealth tax Act, 1957 have not been fulfilled in the case of both the applicants. For this reason we do not allow the applications to be proceeded with under secti .....

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f the Commission be interfered in exercise of writ jurisdiction? The scope of judicial review in exercise of writ jurisdiction under Articles 226 and 227 of the Constitution of India while examining the validity of an order of the Settlement Commission has come up for consideration before various Courts in the past. In case of Jyotendrasinhji (supra), the Apex Court held and observed that the sole overall limitation upon the Commission appears to be that it should act in accordance with the prov .....

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ions pertain to the final adjudication of an application for settlement by the Commission. However, limitations recognized by the Courts in exercising powers of judicial review against the orders of the Settlement Commission, in our opinion, would not be of much difference even where an order of the Settlement Commission passed at the interim stage is called in question. Settlement Commission is a special body created and constituted for a special purpose. The order that the Settlement Commissio .....

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he Constitution or that of the Supreme court under Article 32 or 136 of the Constitution. Nevertheless, the parameters of judicial intervention in a decision rendered by an administrative tribunal are well recognised and well laid down. Ordinarily, the court would interfere if the Tribunal has acted without jurisdiction or failed to exercise jurisdiction vested in it or the decision of the Tribunal is wholly arbitrary or perverse or malafide or is against the principles of natural justice or whe .....

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the decision of the Settlement Commission, therefore, is necessarily very narrow. The Apex Court in the case of State of U.P. And Another v. Johri Mal reported in [2004] 4 SCC 714 observed that the scope and extent of power of judicial review of the High Court under Article 226 of the Constitution of India would vary from case to case, the nature of the order, the relevant statute as also other relevant factors including the nature of power exercised by the public authorities, namely, whether th .....

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isions of administrative bodies; (ii) A petition for a judicial review would lie only on certain well-defined grounds (iii) An order passed by an administrative authority exercising discretion vested in it, cannot be interfered in judicial review unless it is shown that exercise of discretion itself is perverse or illegal. (iv) A mere wrong decision without anything more is not enough to attract the power of judicial review; the supervisory jurisdiction conferred on a Court is limited to seeing .....

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of the decision of the Settlement Commission, it is undeniable that the jurisdiction under Article 226 of the Constitution is not totally ousted. In a given situation if the Settlement Commission has taken into consideration irrelevant facts and such consideration has gone into its decision-making process resulting into grave injustice and prejudice to the party then within the narrow confines of the judicial review, interference would still be open." 19. When the Settlement Commission exam .....

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