Submission of additional disclosure during proceedings would invalidate original application filed before Settlement Commission

Commissioner of Wealth Tax Vs Income Tax Settlement Commission (Madras High Court)

Conclusion: Submission of additional statement of facts providing further disclosure would invalidate the original application as assessee had not filed the application with true and full disclosure. There was reason to believe that assessee had not approached the Settlement Commission with clean hands and thus, Settlement Commission had committed an error apparent and allowed the application filed by assessee in violation of the provisions of the Income Tax Act.

Held:  The order passed by Settlement Commission was mainly challenged on the ground that there was no true and full disclosure by assessee at the time of filing of an application under Section 245(C) of the Income Tax Even during adjudication, Department could able to establish that assessee had not approached the Settlement Commission with true and full facts. In spite of the fact that assessee approached the Settlement Commission with unclean hands, the Settlement Commission entertained the application in violation of the provisions of the Act and further, passed an order, which was not in consonance with the powers conferred to the Settlement Commission under the Income Tax Act. The Court held that true and full disclosure must be with reference to the application submitted by assessee at the first instance. Submission of additional statement of facts providing further disclosure would invalidate the application as assessee had not filed the application with true and full disclosure. Section 245(C) of the Income tax is clear that the application filed under Section 245(C) must contain true and full disclosure of income. During the course of adjudication, if the Income Tax Department was able to establish that certain details and the properties and documents were not filed along with the application filed by assessee or if assessee filed an additional statement of facts for the purpose of settlement, then it was to be construed that the application under Section 245(C) of the Income Tax Act was not filed with true and full disclosure, and the disclosures made could not be trusted upon. Thus, Department must be allowed to proceed with the assessment. In view of the fact that during the course of proceedings, assessee’s offering of additional income and findings of the Settlement Commission would also confirm the same, the said offerings of the additional income would be sufficient for the purpose of arriving a conclusion that assessee filed an application under Section 245(C) without disclosing true and full income. Thus, there was reason to believe that assessee had not approached the Settlement Commission with clean hands and thus, the Department was empowered to go for further. Thus, Settlement Commission had committed an error apparent and allowed the application filed by assessee in violation of the provisions of the Income Tax Act.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The order passed by the Settlement Commission is under challenge in the present writ petition.

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