Full and true disclosure of undisclosed income and their manner of acquisitions is mandatory for settlement
In a significant judgement, the Supreme Court has said that the full and true disclosure of undisclosed income and their manner of acquisitions is mandatory for the settlement of the cases and grant of immunity from criminal prosecution.
The Income Tax Settlement Commission, even after commencing the proceedings, is empowered to examine the authenticity of such full and true disclosure of the unaccounted return of the assessees, said the apex court dismissing the plea of real estate major Ajmera Housing Corporation and others.
“In our opinion even when the Settlement Commission decides to proceed with the application (for settlement), it will not be denuded of its power to examine as to whether in his application under section 245C(1) of the act (Income Tax Act, 1961), the assessee has made a full and true disclosure of his undisclosed income”, said a bench comprising Justice DK Jain and Justice HL Dattu on Friday.
The court said, “disclosure of ‘full and true’ particulars of undisclosed income and ‘the manner’ in which such income had been derived are the pre-requisites for a valid application under section 245C(1) of the act. Additionally, the amount of income tax payable on such undisclosed income is to be computed and mentioned in the application”.
Section 245C(1) of the act mandates ‘full and true’ disclosure of the particulars of undisclosed income and ‘the manner’ in which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this aspect, it will not have the jurisdiction to pass any order on the matter covered by the application, court pointed out.
It said, “in the scheme of Chapter XIX-A (IT Act), 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”.
It was inserted in the act by the Taxation Laws (Amendment) Act, 1975, pursuant to the recommendations of the Justice Wanchoo Committee Report. It had suggested for setting up of 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. The Chapter envisages settlement of complex tax disputes and grant of immunity from criminal proceedings by a Settlement Commission.