Provisions of Section 245D (2C) can be invoked only if the assessee does not deposit income tax payable on income disclosed

Issue before court:

• Whether assessee has defaulted in payment in payment of additional amount of income-tax payable on the income disclosed in the original application and provision of section 245D (2C) can be invoked in such circumstances.

Brief facts:

• A search u/s 132 was conducted in the premises of K.C. Group of cases on 5.10.2001. During the search beside cash of Rs. 2,16,500/- and stock worth Rs. 53,21 ,218/- ,a number of incriminating documents and books of accounts were seized.
• Notice u/s 158BC of the Act was served upon these assessees on 8.10.2002. In response, assessee filed return for the block period ending 5.10.2001 on 10.12.2002 declaring nil undisclosed income.
• Immediately thereafter on 11.12.2002, applications u/s 245C(1) of the Act were filed before the Settlement Commission, disclosing income of Rs. 10,00,000/- in the hands of each of the four assessees i.e an amount of Rs. 40,00,000/- @2% of the turnover of Rs. 20 crores.
• The applications were admitted u/s 245D(1) of the Act vide the order dated 23.10.2003.
• Subsequently , these assesses deposited tax of Rs. 6,12,000/- each on 26.12.2003 in terms of aforesaid order dated 23.10.20030.
• Later, assesse deposited Rs. 12,240/- on 24.07.2007. After admission of the application u/s 245D(1) of the Act, the Commission called for a report under Rule 9 of the Settlement Commission Rules, from the concerned CIT. In the light of said report, the Settlement Commission passed and an order u/s 245D(4) of the Act on 26.03.2010.
• The final order directed the revenue to accept the offer of additional income of Rs. 1,48,16,160/- referred to in the body of settlement commission’s order.
• Consequently, interest under Section 220(2) in terms of Section 245D(2C) was directed to be recovered. While computing the amounts payable, the AO passed in his consequential order dated 4.5.2010, Rs. 13,03,211/- as interest recoverable for the period between 1.1.2004 and 26.3.2010.

Contention of the revenue: