Khazana Jewellery Pvt. Ltd. Vs Income Tax Settlement Commission (Madras High Court)
Madras High Court held that Settlement Commission doesn’t possess power to change the head of income and convert the undisclosed portion of income into income u/s. 699B. Further, Settlement application is bound to be rejected once Settlement Commission arrives at the conclusion that full and true disclosure is not done.
Facts- The petitioner-Company is engaged in the business of manufacturing and trade of jewels. A search, u/s. 132 of the Income Tax Act, 1961, was carried out on 21.04.2016. Consequent to the search, the notices, under Section 153A and 142(1) of the IT Act, were issued for the AYs 2011-12 to 2017-18. Subsequently, the petitioner filed a settlement application dated 16.10.2018 before the Income Tax Settlement Commission-1st respondent herein.
The 1st respondent, vide its order dated 11.06.2020, which was passed u/s. 245D(4) of the IT Act, held that the settlement application for the AYs 2011-12 to 2017-18 filed by the petitioner is not allowed to be proceeded with and treated it as “invalid” as the petitioner. Under these circumstances, the petitioner filed this writ petition against the order dated 11.06.2020 passed by the 1st respondent.
Conclusion- Held that once the Settlement Commission arrived at a conclusion that there was no full and true disclosure, the application filed by the assessee will be rejected in entirety. The question of changing the stand, by converting the undisclosed portion of income into the income under Section 69B, by the Settlement Commission would be beyond the scope of its power and also it is impermissible and against the spirit of the provisions of Law. Only in the normal course of assessment, if the Assessing Officer had arrived at a conclusion that the income disclosed in the returns is not satisfactory, he can treat the said income as “undisclosed income” under Section 69B and impose tax, interest, penalty, etc., under Section 115BBE. However, the 1st respondent will not have any power to take such view, while considering the settlement application. In a Settlement Application, filed under Section 245C(1), if any particular income is disclosed under Section 69B, then certainly, the settlement commission will have power to consider the said income under Section 69B, but not to treat the income disclosed in one head to other head, and impose the tax in terms of Section 115BBE. Therefore, while filing the application, the truthfulness of the disclosure is a serious matter to consider the said application, otherwise, the application will be rejected in entirety.
