Khazana Jewellery Pvt. Ltd. Vs Income Tax Settlement Commission (Madras High Court)
The appeal before the Madras High Court arose from the dismissal of a writ petition challenging the rejection of a settlement application filed under Section 245C of the Income Tax Act, 1961. The appellant company, engaged in manufacturing and trading of jewellery, was subjected to a search under Section 132 on 21.04.2016. During the search, the Managing Director admitted in his sworn statement that refinery losses had been inflated by about 3% to 5%, and excess gold siphoned off and sold in the black market. It was stated that this inflation of refinery loss generated approximately ₹70.66 crores from Assessment Years 2011-12 to 2016-17. Subsequently, by letter dated 29.06.2016, the company offered ₹80 crores (268.200 kg of gold bullion) as stock-in-trade held with employees and agents for AY 2017-18.
During assessment proceedings under Section 153, the appellant filed a settlement application dated 16.10.2018 before the competent authority. The application was rejected on the ground that there was no “full and true disclosure” as required under Section 245C(1). The learned Single Judge upheld the rejection, observing that eligibility for settlement requires full and true disclosure, and that the authority’s finding on lack of disclosure could not be faulted. It was also held that converting undisclosed income into income under Section 69B was beyond the scope of settlement proceedings.
