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2012 (12) TMI 1020

er 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 contrary to the statutory provisions contained in the Act, interference in exercise of writ jurisdiction under Article 226 of the Constitution of India would not be warranted. - The petitioners, as recorded earlier, made strenuous efforts to convince us that the Commission ought not to have summarily dismissed the application. We are afraid this cannot be the ground on which we would reverse the Commission's order. If on the basis of material on record, the Commission could have come to the conclusion 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 .....

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otal income of ₹ 48 crores. The petitioner had therefore, paid additional tax and interest on the additional disclosures made before the Settlement Commission. 2.3 The application of the petitioner was 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 section 245C of the Act. The Commission noted that the petitioner was required to make true and full disclosures of the income as also the manner in which such income was derived. The Commission formed an opinion that the petitioner had not made true and full disclosures. Subsequent question of the manner in which such income having been derived therefore, cannot be examined. On its belief that the petitioner did not fulfill the requirements of section 245C of the Act, the Commission rejecte .....

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osed the petitions contending that the scope of judicial review against a decision of Settlement Commission is extremely narrow. This Court would not act as an appellate authority. When the Settlement Commission has come to certain factual findings, scope of interference by this Court would be narrow. Counsel further submitted that Commission had every authority to examine the validity of the statements made by the assessee. If at the very threshold it was found that such application did not satisfy the legal requirements, it was open for the Commission to reject the same without any further consideration. 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 scope of judicial review would be restricted to considering whether order is contrary to any pro .....

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been allowed 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 report within a period of thirty days of the receipt of communication from the Settlement Commission. (2C) Where a report of the commissioner called for under sub-section (2B) has been furnished within the period specified there in, the Settlement Commission may, on the basis of the report and within the period of fifteen days of the receipt of the report, by an order in writing, declare the application in question as invalid, and shall send the copy of such order to applicant and commissioner : 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 t .....

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n derived besides such other particulars as may be prescribed. When such application is filed, it is to be treated in the manner provided in section 245D. Sub-section(1) of section 245D provides that, on receipt of an application, the Settlement Commission shall, within seven days of receipt, issue a notice to the applicant requiring him to explain why such an application made by him be allowed to be proceeded 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 scrutinising the application of settlement made by an assessee is envisaged. The statute does not provide for grounds on which Settlement Commission may reject such an application or allow the application to be proceeded with. There are however, sufficient indications in the statute itself what .....

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oceeded 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 Act does not fulfill the legal requirements, it would be within the jurisdiction of the Commission to reject the same. However, if it is allowed to be proceeded with, such decision would be tentative in nature. 10. Section 245D(2B) provides that the Settlement Commission in respect of an application, which is allowed to be proceeded with under sub-section (1), within thirty days from the date on which the application was made, call for a report from the Commissioner, and the Commissioner shall furnish 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 .....

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ngs. If therefore, while at the threshold, considering the question whether such application should be allowed to be proceeded with or be rejected, the Commission examined such questions on the basis of disclosure 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 of Ajmera Housing Corpn. (supra). It was a case in which the assessee had made certain disclosures in the initial application under section 245C(1) of the Act. Such disclosures were however, revised and additional income was disclosed in the revised annexures. The Apex Court held that the assessee had no right to revise an application under section 245C(1) of the Act and further that such revised annexure making further disclosure of undisclosed income alone was sufficient to establish tha .....

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not the question of 'sufficiency' of material which could be correlated to the manner in which additional income has been derived but the total absence of any material with which we are confronted in this case. 10.3 The provision under section 245C(1) of the Income-tax Act 1961 is quoted hereunder : "245C[(1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has 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. This is, in fact, basic eligibility criterion. It was concluded that : "20. Thus we hold .....

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decisions 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 Commission may pass though is binding between the parties, does not lay down a ratio or a precedent. 18. In case of Saurashtra Cement Ltd. v. Commissioner of Customs 2012(3) G.L.H. 235, scope of judicial review by the Supreme Court against the order of Settlement Commission was examined in light of various decisions of the Apex Court and following observations were made : "15. It is well settled that no finality clause in a statute would oust the jurisdiction of the High Court under Article 226 of the 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 tribun .....

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ccasion miscarriage of justice. (v) The courts cannot be called upon to undertake the government duties and functions. The court shall not ordinarily interfere with a policy decision of the State. Social and economic belief of a judge should not be invoked as a substitute for the judgment of the legislative bodies. (See Ira Munn v. State of Illinois.) 17. Despite such narrow confines of judicial review 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 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 contrary to the statutory provisions contained in the Act, interference i .....

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