TMI Blog2005 (2) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 18, 1990, to be void and for withdrawing the benefits and immunities granted to the respondent-assessee was not acceptable. The order dated September 18, 1990, was passed under section 245D(4) of the Income-tax Act, 1961 (in short "the Act"). The application by the Commissioner of Income-tax for declaration of the said order to be void was made purportedly under section 245D(6) of the Act. The controversy in the present appeal has arisen in the following factual background: A search was conducted in the premises of the respondent (hereinafter referred to as "the assessee") on February 8,1989 and February 9,1989, and certain seizures were made. The assessee filed an application for settlement in terms of section 245C of the Act on January 13, 1989. It is relevant to note that the application for settlement was made for the financial year 1985-86. The Settlement Commission passed an order on September 18, 1990 in terms of section 245D(4). It is to be noted that in the application for settlement before the Commission the assessee claimed to have received Rs. 1.5 crores from seven persons on March 31, 1985 in cash. All these seven persons were claimed to be residents of Sikkim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any review of the earlier order and in any event the Commission had analysed the factual position. Fresh analysis would amount to sitting in judgment over the earlier decision which power the Commission did not possess. By the impugned order the Commission held that the stand taken by the assessee's counsel was correct. It was held that the Department had not established that the settlement order under section 245D(4) dated September 18, 1990, was obtained by the assessee by fraud and misrepresentation of facts. It was further noted that under section 245D(6) the Commission was not considering whether the loans of Rs. 1.5 crores claimed to have been taken by the assessee from seven persons were genuine or not. It was held that if the Commission would go into the merits regarding genuineness of the loans, that would amount to re-appraisal and re-evaluation of the evidence which was already appraised by the earlier Bench, and it would amount to sitting in judgment over the findings arrived at by the earlier Bench which was not legally permissible to the Commission to review its own decision. Further it was held that the CBI report did not merit acceptance as the alleged lenders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misrepresentation of facts. The Revenue cannot initiate any proceedings in terms of section 245D(6). Further, all the relevant aspects were considered by the Commission earlier. The Commissioner of Income-tax had ample opportunity to object to any statement made in the application for settlement. The Commission while dealing with the application had dealt with the aspects involved and had passed the order. On mere unsubstantiated allegation regarding lack of capacity to advance loans, alleged inherent improbabilities, or the authorities giving a different version after having issued certificates, there is no scope for coming to the conclusion that there was any fraud or misrepresentation of facts. Therefore, the Commission had rightly refused to accept the prayer made by the Commissioner of Income-tax as it would have amounted to review of the earlier order and in essence would have amounted to the subsequent Bench sitting in appeal over the decision of the earlier Bench. Sections 245A to 245V are covered by Chapter XIX-A of the Act. A new Chapter XIX-A was introduced by the Taxation Laws (Amendment) Act, 1975 (in short "the Amendment Act") with effect from April 1, 1976. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax payable on the income disclosed in the application exceeds one hundred thousand rupees. (1A) For the purposes of sub-section (1) of this section and subsections (2A) to (2D) of section 245D, the additional amount of income-tax payable in respect of the income disclosed in an application made under sub-section (1) of this section shall be the amount calculated in accordance with the provisions of sub-sections (1B) to (1D). (1B) Where the income disclosed in the application relates to only one previous year,- (i) if the applicant has not furnished a return in respect of the total income of that year (whether or not an assessment has been made in respect of the total income of that year), then, except in a case covered by clause (iii), tax shall be calculated on the income disclosed in the application as if such income were the total income; (ii) if the applicant has furnished a return in respect of the total income of that year (whether or not an assessment has been made in pursuance of such return), tax shall be calculated on the aggregate of the total income returned and the income disclosed in the application as if such aggregate were the total income; (iii) if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 subsection unless an opportunity has been given to the applicant of being heard: Provided further that the Commissioner shall furnish the report within a period of forty-five days of the receipt of communication from the Settlement Commission in case of all applications made under section 245C on or after the 1st day of July, 1995 and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report .... (2A) Subject to the provisions of sub-section (2B), the assessee shall within thirty-five days of the receipt of a copy of the order under sub-section (1) allowing the application to be proceeded with, pay the additional amount of income-tax payable on the income disclosed in the application and shall furnish proof of such payment to the Settlement Commission. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts." Sub-section (1) of section 245C makes it clear that at any stage of a case relating to him an assessee may make an application to the Commission disclosing fully and truly his income which has not been disclosed before the Assessing Officer. To put it differently, an assessee cannot approach the Commission for settlement of his case in respect of an income which has already been disclosed before the Assessing Officer. The income disclosed as contemplated is in the nature of voluntary disclosure of concealed income. Section 245F dealing with powers and procedure of Settlement Commission provides that in addition to the powers conferred on the Settlement Commission under Chapter XIX-A, it has all the powers which are vested in the income-tax authority under the Act. Sub-section (2) is of vital importance and provides that where an application made under section 245C has been allowed to be proceede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n obtained by fraud or misrepresentation of facts is that of the Commission. But it is not a requirement that the Commission must suo motu initiate the action. If the Revenue has material to show that the order was obtained by fraud or misrepresentation of facts it certainly can move the Commission for decision on that issue. Otherwise, even if in a given case there is material in abundance to establish that the order was obtained by fraud or misrepresentation of facts, yet the void order would continue to be operative because of the fortuitous circumstance that the Commission does not suo motu initiate the proceeding. Merely because section 245-I provides that the order of settlement is conclusive it does not take away the power of the Commission to decide whether the settlement order had been obtained by fraud or misrepresentation of facts. Any other interpretation would render sub-section (6) otiose. The Commission had really missed the true scope and ambit of section 245D(6). If the Commissioner of Income-tax was able to establish that the earlier decision was void because of misrepresentation of the facts, certainly it was open to the Commission to decide that issue. It cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misrepresentation of facts. It cannot be said that there has been a true and fair declaration of income which is the pre-requisite for settlement by the Commission. If an order is obtained by fraud or misrepresentation of facts, it cannot be said that there was true and fair disclosure. It was noted here that unlike section 139 of the Act which provides for filing of a revised return, there is no provision for revision of an application made in terms of section 245C. That shows the clear legislative intent that the applicant for settlement has to make a true and fair declaration from the threshold. It is on the basis of the application received that the Commission calls for a report to decide whether the application is to be rejected or permitted to be continued. The declaration contemplated in section 245C is in the nature of a voluntary disclosure of concealed income, but as noted above it must be a true and fair disclosure. Voluntary disclosure and making a full and true disclosure of the income are necessary preconditions for invoking the Commission's jurisdiction. In the aforesaid background it would be proper to direct the Commission to re-hear the matter. It shall be open ..... X X X X Extracts X X X X X X X X Extracts X X X X
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