Madras High Court
P.Udaya Shankar vs Income Tax Settlement Commission on 17 April, 2021
W.P.No.20141 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 17.04.2021
CORAM
THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAM
W.P.No.20141 of 2018
and
W.M.P.Nos.23611 & 23622 of 2018
P.Udaya Shankar ..Petitioner
Vs.
1.Income Tax Settlement Commission,
Additional Bench, Chennai,
Ministry of Finance,
Department of Revenue,
640, Anna Salai, Nandanam,
Chennai – 600 035.
2.Assistant Commissioner of Income Tax,
Central Circle 3(2), Chennai,
New No.46, Mahatma Gandhi Road,
Chennai – 600 034. ..Respondents
Prayer : Writ Petition filed under Article 226 of the Constitution of India, to
issue a Writ of Certiorarified Mandamus, calling for the records of the 1st
respondent contained in its impugned order bearing No.No.TN/CN/51/2016-
17/97-IT dated 27.06.2018 and to quash the same as arbitrary, unjust and
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W.P.No.20141 of 2018
illegal, and to consequently, direct the 1st respondent to reconsider the
application filed by the petitioner bearing No.TN/CN/51/2016-17/97-IT and
pass a fresh order under Section 245D(4) of the Income Tax Act, 1961 after
affording the petitioner a sufficient opportunity of being heard, in
accordance with law.
For Petitioner : Mr.R.Sivaraman
For Respondents : Mr.A.P.Srinivas
Senior Standing Counsel
ORDER
The order passed by the Settlement Commission dated 27.06.2018
is sought to be quashed in the present writ petition. A direction is sought for
to reconsider the application and to pass a fresh order under Section
245(D)(4) of the Income Tax Act after affording opportunity to the
petitioner.
2. The learned counsel appearing on behalf of the writ petitioner
mainly contended that an application was filed under Section 245(C) of the
Income Tax Act before the Settlement Commission to resolve the disputes
with the Department. The petitioner claims that he made true and full
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W.P.No.20141 of 2018
disclosure in respect of his income and place the facts before the Settlement
Commission. However, the Settlement Commission misunderstood the facts
and circumstances, more specifically, with reference to the loan transaction
between the petitioner and Mr.J.Srinivasan and rejected the application on
the said ground. The Settlement Commission erroneously made a finding
that the petitioner has admitted the loan advance to Mr.J.Srinivasan and
contribution made in the chit business with the said Mr.J.Srinivasan on three
different dates and having made an offer of additional income in respect of
such amounts at the time of the search action. The petitioner has chosen to
retract from all the above statements. Such a finding is not correct, in view of
the fact that in respect of the amount received, Mr.J.Srinivasan paid tax in
his regular assessment and those facts were not considered by the Settlement
Commission and the learned counsel for the petitioner is of an opinion that
there cannot be any double taxation in respect of the same amount.
3. Relying on Section 245(C) of the Income Tax Act, the learned
counsel for the petitioner contended that the petitioner had approached the
Commission with clean hands and by stating all the facts and circumstances.
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W.P.No.20141 of 2018
However, by way of misinterpretation, the facts were unnecessary twisted
and the application itself was rejected. It is a one time opportunity provided
to the assessee and therefore, the matter is to be remanded back to the
Settlement Commission for fresh adjudication, enabling the petitioner to
explain the facts and circumstances and further, to clarify the wrong
understanding of facts by the Settlement Commission.
4. The learned Senior Standing counsel appearing on behalf of the
respondents/Department disputed the said contentions by stating that it is a
pre-condition for an assessee filing an application under Section 245(C)
must come with full and true disclosure and with clean hands. Once it is
established that true and full disclosure are not made and the facts are
controverted, then the application itself is to be rejected in limini, in view of
the pre-requisite condition contemplated under Section 245(C) of the Income
Tax Act. In the present case, the Settlement Commission categorically made
a finding that there is no cogent reason given for retracting the statements
made on three different occasions except for a vague assertion that the
petitioner wish to help Mr.J.Srinivasan and that he was unaware of the
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W.P.No.20141 of 2018
financial implications of the statements made during the course of search
and immediately thereafter. Further, it is observed that the facts make it
different for the Commission to accept the contention advanced by the
petitioner that the statements were made, helped Mr.J.Srinivasan. Thus, the
condition that the petitioner has made full and true disclosure of the
particulars of income and all the material facts cannot be said to be fulfilled.
Thus, the Commission formed an opinion that the Commission is unable to
lay down any terms of settlement as required in Sub Section (6) of Section
245D. Accordingly, the Commission was constrained to send the case back
to the Department for determining the taxable income of the petitioner for
the years under consideration.
5. Relying on the categorical findings of the Settlement
Commission, the learned Senior Standing counsel appearing on behalf of the
respondents cited the judgment of the High Court of Madras in the case of
S.V.Shankar Vs. Settlement Commission, reported in [2007] 292 ITR 633
(Madras). The High Court made the following observations:
“6. It may be noted that the jurisdiction of this court
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W.P.No.20141 of 2018
under article 226 of the Constitution of India is not that of the
appellate court. The provision for settlement under Chapter
XIX-A is in the nature of a statutory arbitration to which a
person may submit himself voluntarily. Hence, the power to
review that may be exercised under article 226 of the
Constitution of India could only be in cases where there are
mistakes apparent on the face of the record, but may not be
exercised on the ground that the decision is erroneous on
merits. The decisions of the Supreme Court reported in
[1993] 201 ITR 611) (Jyotendrasinhji v. S.I. Tripathi) and
[1997] 223 ITR 840(Kuldeep Industrial Corporation v. ITO)
clearly lays down the parameters of the scope of the enquiry
by the High Court under article 226 or by the Supreme Court
under article 136 of the Constitution of India. In the
circumstances, where the Commission has, on the basis of
materials on record, come to a decision, it would not be open
to the High Court to substitute its view on the materials
disclosed in preference to that of the Settlement Commission.
In [1993] 204 ITR 616 (Shriyans Prasad Jain v. ITO), the
apex court held that the court could not go into the questions
of fact recorded by the Commission.
Considering the limited jurisdiction and the fact that after
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due appreciation of the facts, the Settlement Commission had
arrived at its finding, we do not find any merit to accept the
plea of the petitioner herein. Consequently, the writ petition
stands dismissed. There will be no order as to costs.”
6. In the case of Abdul rahim Vs. Income Tax Settlement
Commission, Chennai, reported in [2018] 96 taxmann.com 571(Madras),
the High Court made the following observations:
“16. It is to be noted at this juncture that the
Settlement Commission is vested with power to reject the
Settlement Application at three stages, as provided
under Section 245D of the said Act. Rejection at the
threshold is contemplated under Section 245D(1). Rejection
after notice to the Revenue and on perusing the report filed
by the Revenue could be made under Section 245D(2).
While rejection under Section 245D(1) is a dismissal at the
admission stage, rejection under Section 245D(2) is after
notice to the revenue and on being satisfied with non
disclosure of true and full undisclosed income. The third
stage of rejection is contemplated under Section 245D(4),
after directing the Revenue to furnish records and
thereafter to conduct an investigation or enquiry. In all
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W.P.No.20141 of 2018
these stages, the satisfaction of the Commission with regard
to true and full disclosure of income must continue to exist
so as to carry over the proceedings from one stage to
another and finally, to pass an order determining the terms
of settlement as provided under Section 245D(6). In other
words, true and full disclosure is the life line, satisfaction
of the same should remain to live in the mind of the
Commission till the final order is passed. On the other
hand, if the Commission finds, at any stage of the
proceedings under Section 245D that the applicant has not
come before the Commission with clean hands and by
disclosing true and full income, it is empowered to reject
the application, thereby driving the applicant to face the
regular assessment proceedings. The applicant cannot, as a
matter of right, seek the Commission to carry over the
application from one stage to another, notwithstanding the
fact as to whether true and full disclosure of income was
made or not. In other words, the applicant who approaches
the Commission, bypassing the regular assessment
proceedings, must provide material facts without any
suppression and establish that the disclosure of income in
the application is true and full in its strict sense. Otherwise,
the applicant cannot find fault with the Commission in
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W.P.No.20141 of 2018
showing him the door to face the regular assessment
proceedings. The term "true and full disclosure" does not
mean that whatever the amount shown by the applicant,
which according to him is undisclosed income, is in fact, the
true and full disclosure. It may be the disclosure of
undisclosed income in the view of the applicant. But
whether such disclosure is "true and full", in its strict
sense, is a question that should fetch an answer in favour of
the petitioner/applicant at all stages even after hearing the
revenue. In other words, such disclosure should not give
room for deduction of concealed fact with regard to any
other income either after getting a report from the Revenue
or conducting an investigation or enquiry at the instance of
the Commission.”
7. Relying on the above judgments, the learned Senior Standing
counsel is of an opinion that the writ petition is not entertainable as the
findings of the Settlement Commission are unambiguous regarding the true
and full disclosure of income by the writ petitioner. When the pre-requisite
condition for filing an application under Section 245(C) of the Income Tax
Act has not been satisfied, then there is no reason to entertain the writ
petition under Article 226 of the Constitution of India.
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W.P.No.20141 of 2018
8. Section 245(C) of the Income Tax Act contemplates 'Application
for Settlement of cases'. Sub clause 1 enumerates that '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 disposed of in the manner
hereinafter provided.”
9. Section 245(D) contemplates 'Procedure on receipt of an
application under section 245C'. Therefore, to entertain an application for
settlement, these preliminary factors are to be considered by the Settlement
Commission. Once on facts, Settlement Commission made a finding that the
petitioner has not approached the Commission with full and true disclosure,
then there is no reason to proceed further to settle the disputes between the
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parties.
10. In the present case, the findings of the Settlement Commission
are unambiguous and specific facts and circumstances were also relied on by
the Settlement Commission to arrive a decision regarding true and full
disclosure by the petitioner. Such a finding of fact need not be interfered
with by the High Court under Article 226 of the Constitution of India, unless
such facts are found to be error apparent. When there was an adjudication of
facts and the Settlement Commission arrived a finding that factually the
petitioner has not established that he filed an application under Section
245(C) with true and full disclosure, then the High Court is expected to
exercise restraint in entertaining a writ proceedings under Article 226 of the
Constitution of India.
11. In the present case, the petitioner could not able to establish
that he approached the Settlement Commission with clean hands and the
element of true and full disclosure as contemplated under Section 245(C)
had not been established before the Settlement Commission and therefore,
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there is no perversity or infirmity as such in respect of the findings arrived.
12. It is brought to the notice of this Court that the Settlement
Commission has already been abolished with effect from 01.02.2021. This
being the factum established, the writ petition fails and accordingly, stands
dismissed. No costs. Consequently, connected miscellaneous petitions are
closed.
17.04.2021
Kak
Index : Yes/No
Speaking /Non-speaking order
To
1.Income Tax Settlement Commission,
Additional Bench, Chennai,
Ministry of Finance,
Department of Revenue,
640, Anna Salai, Nandanam,
Chennai – 600 035.
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W.P.No.20141 of 2018
2.Assistant Commissioner of Income Tax,
Central Circle 3(2), Chennai,
New No.46, Mahatma Gandhi Road,
Chennai – 600 034.
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W.P.No.20141 of 2018
S.M.SUBRAMANIAM, J.
Kak
W.P.No.20141 of 2018
17.04.2021
http://www.judis.nic.in
