Chennai-600 034 v. Income Tax Settlement Commission Additional Bench 640, Anna Salai, Nandanam Chennai-600 035

IN THE HIGH COURT OF JUDICATURE AT MADRAS Commissioner of Income Tax,Central-II,No.46, Mahathma Gandhi Road, Chennai-600 034. ..Petitioner vs. 1.Income Tax Settlement Commission Additional Bench 640, Anna Salai, Nandanam Chennai-600 035. 2.P.Suman ..Respondents PRAYER : Writ Petition filed under Article 226 of theConstitution of India, praying for the issue of a Writ ofCertiorari to call for the records on the file of the firstrespondent in S.A.No.TN/CN.53/2013-14/1/IT dated 31.07.2013 andquash the same as illegal and beyond the jurisdictional andauthority and restore the jurisdiction of assessing officer topass regular assessment order of the 2nd respondent for theAssessment year 2007-08 to 2013-14. For Appellant : Mr.A.P.Srinivas For Responden : No-appearance for R1 Mr.R.Sivaraman for R2 The writ on hand is filed by the Commissioner of Income Taxto quash the order passed by the Income Tax SettlementCommission, Additional Bench, in proceedings dated 31.07.2013 onthe ground that the order of settlement passed is beyond thejurisdiction and authority. Therefore, the High Court shouldrestore the jurisdiction of the Assessing Officer so as to passregular assessment order of the second respondent for theassessment year 2007-2008 to 2013-2014. https://hcservices.ecourts.gov.in/hcservices/ 2. The learned counsel appearing for the secondrespondent/Assessee initially raised the question ofmaintainability of the writ petition on the ground that theorder passed by the Settlement Commission under Section 245C ofthe Act cannot be entertained as the facts in detail wereadjudicated by the Settlement Commission by providing anopportunity to the petitioner/Department. The question of factadjudicated by the Settlement Commission cannot be re-adjudicated in a writ proceedings under Article 226 of theConstitution of India. The nature of proceedings under Section245C of the Income Tax Act is for settlement of disputes. Oncethe settlement of disputes are finalized, then there is no scopefor entertaining the writ petition under Article 226 of theConstitution of India. The learned counsel for the secondrespondent cited the judgments in support of his arguments thatno writ can be entertained against the order of the SettlementCommission, if the facts in detail were adjudicated by theSettlement Commission with reference to the documents andevidences produced by the parties along with the applicationfiled under Section 245C of the Income Tax Act. In this regard,the learned counsel for the second respondent cited the judgmentin the case of JYOTENDRASINHJI vs. S.I.TRIPATHI reported in[1993] 68 Taxman 59(SC). The Apex Court formulated a principlestating that "whether only ground upon which either High Courtunder Article 226 or Supreme Court under article 32 or 136 caninterefere with an order of Settlement Commission is that theorder of Settlement Commission is contrary to the provisions ofthe Act and that such contravention has prejudiced assessee -held yes". Therefore, only in the event of violation of theprovisions of the Income Tax Act, the High Courts are empoweredto entertain the writ under Article 226 and with reference tothe factual details, no such writ proceedings can be entertainedat all. It is contended that the factual aspects wereelaborately considered by the Settlement Commission and thepetitioner/Department has also participated in the adjudication.Thus, there is no scope for entertaining the present writpetition. Thus, the petition is to be dismissed on the ground ofmaintainability. 3. The learned counsel cited the judgment of the HighCourt of Gujarat in the case of Principal Commissioner of IncomeTax, Surat-I vs. Shreyansh Corporation which is also on the sameline. The Gujarat High Court considered the detailed itemssubmitted by the assessee in respect of income and arrived at aconclusion that the issues relating to such facts wereadjudicated in detail. Thus, there is no scope for furtherinterference and accordingly, the case of the assessee wassettled in terms and conditions of the order passed by theSettlement Commission. 4. The learned Senior Standing Counsel appearing onbehalf of the writ petitioner disputed the said contention bystating that the proposition mooted out that the writ petitionis not entertainable is incorrect. The writ petitions areentertained on many occasions by various High Courts and by theHon'ble Supreme Court of India. What is required is, whether theSettlement Commission passed an order in consonance with theingredients contemplated under Section 245C of the Income TaxAct or not. Thus, the High Court is empowered to adjudicatethose issues in order to form an opinion, whether the writpetition is entertainable or not. It is not as if the writpetition is not maintainable at all. The writ petitions aremaintainable subject to the condition that if the terms andconditions stipulated for filing an application under Section245C of the Income Tax Act are complied with. Thus, the verycontention raised is to be rejected. The judgments cited arerelatable to the facts of those cases. As far as the presentwrit petition is concerned, the writ petitioner/Department couldable to establish that there was seizure conducted and duringseizure, large quantity of account books and incriminatingevidences were recovered. Those evidences are to be consideredfor the purpose of assessment under Section 153A of the Act andthe Settlement Commission, without considering the fundamentalpowers of the Assessing Officer, formed an opinion and settledthe matter, which is impermissible, in view of Section 245(C) ofthe Income Tax Act. Thus, the very contention of the secondrespondent that the writ petition is not maintainable deservesno merit consideration. 5. This Court is of the considered opinion that themaintainability of the writ petition is to be considered at thefirst instance as the same has been raised by the secondrespondent. All the writ petitions are entertainable underArticle 226 of the Constitution of India. No writ petition canbe dismissed as not-maintainable. The powers of the High Courtunder Article 226 of the Constitution of India are wider enoughto provide complete justice to the litigants, who are allapproaching the High Court. Thus, the concept of non-maintainability of the writ petition is to be examined withreference to the mixed question of law and facts and not merelyon the ground that the Settlement Commission under the IncomeTax Act passed an order. This being the scheme of constitutionunder Article 226, this Court is of the considered opinion thaton the mere ground that an order was passed by the SettlementCommission settling the disputes between the parties, no writpetition needs to be dismissed as not-maintainable. 6. The learned Senior Standing Counsel cited thejudgment of this Court in the case of ACE Investments Limited https://hcservices.ecourts.gov.in/hcservices/ 6. The learned Senior Standing Counsel cited thejudgment of this Court in the case of ACE Investments Limited https://hcservices.ecourts.gov.in/hcservices/ vs. Settlement Commission reported in [2003] 264 ITR 571 (MAD).This Court, relying on the judgment of the Hon'ble Supreme Courtof India, made an observation that "in so far as the power ofthis Court to exercise its jurisdiction under article 226 of theConstitution of India, the law is well settled that the judicialreview of this Court is not concerned with the decision, butonly with regard to the decision making process. The aboveposition of law was reiterated by the apex court in the judgmentin R.B.Shreeram Durga Prasad and Fatechand Nursing Das's case[1989] 176 ITR 169 and this proposition of law is also notdisputed. Equally, the judicial review of this Court tointerfere with the order of the settlement Commission is notbarred, if the order of the Settlement Commission is incontravention to any of the provisions of the Act. The law onthis question is settled by the Apex court in the judgment inJyotendrasinhji's case [1993] 201 ITR 611. This proposition oflaw is also not disputed. Equally the power of this Court tointerfere in the order of the Settlement Commission unless thereis patent illegality as held by this Court in C.A.Abraham's case[2002] 255 ITR 540 is also not disputed." 7. With reference to the powers of the Assessing Officerunder Section 153A of the Income Tax Act, the learned SeniorStanding Counsel referred the judgment in the case of CANARAJEWELLERS vs. SETTLEMENT COMMISSION reported in [2009] 184Taxman 491 (Madras). This Court held as follows: 11.So far as Section 245F is concerned,though the Settlement Commission is empowered to haveall the powers which are vested in an income-taxAuthority under the Act, in addition to the powerconferred under Chapter XIX-A, but such power can beexercised for the purpose of procedure of settlement ofapplication under Section 245C and not forreasssessment of tax of a particular year which isvested with the Assessing Authority". 8. Relying on the above judgments, the learned SeniorStanding Counsel contended that the writ petition ismaintainable and therefore, the issues are to be adjudicatedregarding the manner in which the decision was taken by theSettlement Commission and the decision making process adoptedwith reference to Section 245C of the Income Tax Act. 9. This Court is of the considered opinion that Section 245(C) of the Income Tax Act enumerates that "An assessee may, atany stage of a case relating to him, make an application in suchform and in such manner as may be prescribed, and containing afull and true disclosure of his income which has not beendisclosed before the Assessing] Officer, the manner in which https://hcservices.ecourts.gov.in/hcservices/ such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may beprescribed, to the Settlement Commission to have the casesettled and any such application shall be disposed of in themanner hereinafter provided". 9. This Court is of the considered opinion that Section 245(C) of the Income Tax Act enumerates that "An assessee may, atany stage of a case relating to him, make an application in suchform and in such manner as may be prescribed, and containing afull and true disclosure of his income which has not beendisclosed before the Assessing] Officer, the manner in which https://hcservices.ecourts.gov.in/hcservices/ such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may beprescribed, to the Settlement Commission to have the casesettled and any such application shall be disposed of in themanner hereinafter provided". 10. A reading of the section portrays that it is a specialprovision contemplated enabling the assessee to settle thedisputes in a peaceful manner with the Department, if they havecome out with full and true disclosure of income. Such specialprovisions are enacted with an intention to provide anopportunity to the assessee to settle the issues, in order torectify certain omissions, commission, mistakes etc., by theAssessee. In view of the complex nature of business by theEntrepreneurs, it is possible for such omission, commission,mistakes etc., while filing income tax returns and furnishingother particulars. Thus, the legislative intention of Section245C is to provide an opportunity to the Assessee to settle theissues, if they found some discrepancy or commissions, omissionsin respect of the disclosures made before the Assessing Officerat the first instance. Since such enabling provisions are madewith good intention and to provide an opportunity to theassessee to correct the mistakes, it is to be done in the mannerprescribed. Section 245(C) unambiguously stipulates that theapplication filed under Section 245(C) is to be disposed of inthe manner provided in the very section itself. Therefore, it isan exclusive provision under the Act, wherein the procedures arealso contemplated and certain terms and conditions are alsostipulated for the purpose of settling the disputes. 11. Law presumes that every assessee discloses his true andfull income at all times. Law mandates that an assessee mustfile his returns and show the income in a true and correctmanner. While the law expects that an assessee to be truthfuland correct in his particulars, the additional provisions forsettlement of the disputes are provided enabling the assessee tosettle the disputes in the event of any correction, omission,commission or mistakes etc. Thus, an application for settlementof cases cannot be construed as an absolute right. But, it is aright of an assessee to approach the Settlement Commission withfull and true disclosure of his income. The right of theassessee is well enumerated in many other provisions of theIncome Tax Act. The assessment made by the Assessing Officer atthe first instance would be the factor for all purposes and thesettlement of the disputes is an additional provision, enablingthe assessee to correct certain mistakes, if at all occurred oron account of various other factors. Thus, the scope of Section245C of the Income Tax Act cannot be compared with the regularassessments to be made in accordance with the procedurescontemplated under the Act nor Section 245(C) can be tagged along with the regular provisions for the purpose of settlingthe disputes between the assessee and the Department. along with the regular provisions for the purpose of settlingthe disputes between the assessee and the Department. 12. In a common parlance, the settlement of disputesare possible, only if there is a consensus between the partiesto the disputes. The dictionary meaning of "settlement" wouldshow that the settlement can be made, if the difference betweenthe parties are narrowed down. Undoubtedly, the SettlementCommission has got certain powers to settle the issues. However,such power of settlement is absolutely guided by the provisionitself. That is the reason why the proviso clauses are providedunder Section 245(C). The proviso clause stipulates that noapplication shall be made unless certain terms and conditionsare fulfilled. But Section 245(C)(1) provides that it is a pre-condition to entertain an application that the assessee mustdisclose full and true facts and the evidence. Thus, Sub-clause(1) to Section 245(C) is the preliminary requirement forentertaining the application under Section 245C. 13. A question arises who will be the deciding Authority forthe full and true disclosure as contemplated under Section 245C.When an application is made by the assessee for settlement, thenan assessee wil1 contend that the particulars provided in theapplication are the full and true disclosure. However, if theDepartment raises an objection regarding such full and truedisclosure made by the assessee, then the Settlement Commissionis empowered to go into the facts and circumstances and find outthe correctness or truthfulness of the disclosure made by theassessee. Therefore, it is always a mixed question of fact andlaw and in order to ascertain the entertainability of the writpetition, the High Court is bound to look into the facts as wellas the laws. In the absence of examining both the facts andlaws, it may not be possible to form an opinion, whether theapplication filed under Section 245(C) of the Income Tax Act isentertainable or not? 14. In the case on hand, the Settlement Commission formed anopinion that the issues can be settled. However, there is noclear finding that the application filed by the secondrespondent contains full and true disclosure of income. If aclear finding is formulated and found in the order of theSettlement Commission, then the High Court can restrict itsscope to deal with the facts. However, in the absence of anysuch clear finding that the application filed by the secondrespondent contains full and true disclosure of the income, thenit is always arguable by the Department that such disclosure isnot in full form and the materials are not considered by theSettlement Commission. 15. With reference to the order passed by the SettlementCommission, regarding the pre-requisite condition under Section245C and regarding full and true disclosure, it is relevant toextract paragraph No.7.4 of the order passed by the SettlementCommission which reads as under: 15. With reference to the order passed by the SettlementCommission, regarding the pre-requisite condition under Section245C and regarding full and true disclosure, it is relevant toextract paragraph No.7.4 of the order passed by the SettlementCommission which reads as under: "7.4. The Applicant has made a prayer for grantingimmunity from penalty and prosecution under the IncomeTax Act. The Applicant has co-operated in theproceedings before us. She has also disclsed the mannerin which such income was derived. We now proceed todiscuss if the Applicant has made full and truedisclosure of income. Admittedly we have directed thatsome additional income is required to be furtherdisclosed in respect of some issues because there seemedto be a possibility that perhaps there could be acomponent of income arising out of the transactionsconcerned. It was only to cover such a possibility thatwe have directed further disclosure to be made. Inrespect of most of the issues, there was no evidence toconclusively establish that there had been any underdisclosure of income. The Applicant also agreed to abideby our directions for further disclsure not because sheaccepted any understatement of income but basically witha view to bring quietus to the matter and in the spiritof settlement. In these circumstances, we find that itcannot be said that the disclosure of income by theApplicant was not full and true. Thus the Applicant hassatisfied the requisite conditions prescribed u/s.245Hof the Act. Accordingly we allow the prayer of theApplicant for immunity from penalty and prosecutionunder the Income Tax Act only so far as the same relateto issues dealt with in this order of settlement." 16. A perusal of the above findings regarding full and truedisclosure reveals that the Settlement Commission itself isdoubtful about the disclosure made. Further, it reveals thatsome additional income and some other particulars were alsoadjudicated by the Settlement Commission, which were notdisclosed by the assessee even at the time of filing of theapplication under Section 245C of the Act. 17. Thus, let us consider the scope as well as the powers ofthe Settlement Commission to entertain an application underSection 245(C) of the Income Tax Act. When the Section inunambiguous terms contemplates that the application in such formand in such manner as may be prescribed containing a "full andtrue disclosure" alone is entertainable, then it becomes a pre-requisite condition for entertaining an application underSection 245(C). The phraseology 'full and true disclosure of his https://hcservices.ecourts.gov.in/hcservices/ income' is contemplated in Section 245(C)(1) itself. Thus, it isfor the assessee to establish at the first instance that theapplication contains full and true disclosure of the income.Once the said factum is established, then alone the question ofsettlement would arise and not otherwise. https://hcservices.ecourts.gov.in/hcservices/ income' is contemplated in Section 245(C)(1) itself. Thus, it isfor the assessee to establish at the first instance that theapplication contains full and true disclosure of the income.Once the said factum is established, then alone the question ofsettlement would arise and not otherwise. 18.The learned counsel appearing for the second respondentmade a submission that the Settlement Commission is empowered toadjudicate the complete facts and circumstances with referenceto the various provisions of the Income Tax Act and even,empowered to make an assessment under the provisions of theIncome Tax Act. The contention as a whole need not be taken intoconsideration in view of the fact that the Settlement Commissionhas got powers to deal with facts and circumstances withreference to the provisions of the Income Tax Act. However, theSettlement Commission cannot make an independent assessment,which is the power of the Assessing Officer under the Act. TheSettlement Commission cannot usurp the powers of the AssessingOfficer. If such an exercise is allowed to be exercised, thenthe very settlement provisions under Section 245C would bedefeated and the purpose and object also would be defeated.Thus, the scope of Section 245C and the procedures contemplatedunder Section 245D are to be scrupulously followed by theSettlement Commission, while dealing with an application filedunder Section 245C. The interpretation of these provisionscannot be expanded so as to confer any additional power to theSettlement Commission, which is otherwise to be exercised by theother Competent Authorities of the Income Tax Department. Inother words, what is not contemplated under Section 245C and245D cannot be conferred on the Settlement Commission by theCourts nor the Settlement Commission is competent to usurp thepowers. Undoubtedly, the Settlement Commission has to considerthe mixed question of law and facts. But, while considering thesame, the Commission is not competent to exercise the powers andthe procedures contemplated beyond the scope of the provisionsof the Act. Thus, the powers of the Settlement Commission todeal with facts, circumstances in consonance with the provisionsof the Act are permitted. However, the Settlement Commissioncannot make an assessment or exercise the powers conferred onthe other Authorities under the provisions of the Act. 19. As far as the original power of the Assessing Officerunder Section 153(A) of the Act is concerned, the Division Benchof this Court in the case of CANARA JEWELLERS vs. SETTLEMENTCOMMISSION reported in [2009] 184 Taxman 491 (Madras) held that"the Settlement Commission is empowered to have all the powerswhich are vested in an income-tax Authority under the Act, inaddition to the power conferred under Chapter XIX-A, but suchpower can be exercised for the purpose of procedure ofsettlement of application under Section 245C and not for reasssessment of tax of a particular year which is vested withthe Assessing Authority". 20. Thus, the power of the Assessing Officer conferred underSection 153(A) cannot usurped by the Settlement Commission,which would defeat the very scheme of the Act nor the originalpowers vested on the Assessing Officer cannot be neutralized. Inother words, in the event of permitting the SettlementCommission to exercise the original power of assessment, thenthe power of assessment of the Assessing Officer is not onlydiluted, but the very provision will be frustrated. Thus, such apower is neither contemplated nor intended. As per the DivisionBench judgment, the original assessment power vested with theAssessing Officer cannot be exercised by the SettlementCommission. reasssessment of tax of a particular year which is vested withthe Assessing Authority". 20. Thus, the power of the Assessing Officer conferred underSection 153(A) cannot usurped by the Settlement Commission,which would defeat the very scheme of the Act nor the originalpowers vested on the Assessing Officer cannot be neutralized. Inother words, in the event of permitting the SettlementCommission to exercise the original power of assessment, thenthe power of assessment of the Assessing Officer is not onlydiluted, but the very provision will be frustrated. Thus, such apower is neither contemplated nor intended. As per the DivisionBench judgment, the original assessment power vested with theAssessing Officer cannot be exercised by the SettlementCommission. 21. In respect of maintainability of the writ petition, thelearned Senior Standing Counsel appearing for the writpetitioner made a submission that the Department had establishedthat during conduct of seizure, they recovered the accountbooks, incriminating evidences to establish that there was nofull and true disclosure in the application and the power ofassessment vested with the Assessing Officer must be allowed tobe exercised for the purpose of assessment. By overtaking thepowers of Assessing Officer, the settlement cannot be made underSection 245(C) of the Income Tax Act. 22. There is a force in the argument as the very purposeand object of the income Tax Act is to ensure that the incomedisclosure must be full and true. In the event of anydiscrepancy, the Department must be provided with an opportunityto make an assessment under Section 153(A) and without makingsuch assessment, the question of settlement would not arise atall. Undoubtedly, if the said assessment made is accepted by theassessee, then the issues can be settled and not otherwise. Thatis the reason why in the event of non-consensus, the settlementof disputes are impermissible. If there is a strong objectionand confrontation regarding full and true disclosure, then thepower of assessment must be given to the Assessment Officer bythe Settlement Commission and the Settlement Commission cannotusurp the power of the Assessing Officer under Section 153(A) ofthe Income Tax Act. 23. In the present case, the petitioner could able toestablish that they have made all the particulars before theSettlement Commission regarding the seizures made and the booksof accounts and incriminating evidences collected from thepremises of the second respondent. The detailed working of eachyear were submitted by the Department on 25.07.2013 before theSettlement Commission. Accordingly, the petitioner/Department found that there is a difference of more than 11 crores indisclosing the true and full income of the second respondent.When such a dispute is raised, then the Settlement Commissionought to have allowed the Assessment officer to make a freshassessment with reference to the newly recovered materials underSection 153A of the Act. It is improper to settle the issuesdespite the fact that there are controversies regarding the trueand full disclosure of income. This being the mixed question oflaw and fact, the High Court is well within its powers toentertain the writ petition under Article 226 of theConstitution of India, in view of the fact that the point ofjurisdiction as well as the powers of the Settlement Commissionis raised as a ground for filing the present writ petition.Thus, the writ petition is maintainable and the said issue isanswered in favour of the petitioner/Department. 24. Let us now consider the grounds raised in the writpetition. 24. Let us now consider the grounds raised in the writpetition. 25. The learned Senior Standing Counsel appearing on behalfof the writ petitioner-Department made a submission that evenbefore filing of an application by the second respondent-assessee under Section 245C of the Act, the petitioner-Department conducted a search under Section 132 of the Act inthe residential premises of the assessee and the said searchrevealed detection of unaccounted stock of gold and diamondjewellery, unaccounted cash and several incriminatory recordsand the assessee, before the authorities, admitted theundisclosed income to the tune of Rs.70.65 crores. After thesearch, notices under Section 153A of the Act were issued forthe assessment years 2007-08 to 2012-13. The assessee filed herreturn of income on 25.03.2013 for these years relying on thesaid search conducted under Section 132 of the Act. 26. The learned Senior Standing Counsel made a submissionthat when large quantity of undisclosed income, incriminatingevidences were recovered by the Department, then the applicationfiled thereafter under Section 245C of the Act, must be verifiedby the Settlement Commission, if those incriminating evidencesrecovered are also included in the application so as toentertain the application, as there is a pre-requisite conditionunder the provision that the assessee must make full and truedisclosure of income. When true and full disclosure of incomeis contemplated as a pre-condition under the Act, then theSettlement Commission is obligated to consider the submissionmade by the Department regarding the incriminating evidences andundisclosed income recovered from the assessee. 27. As far as the application filed by the assessee underSection 245C of the Act is concerned, the disclosure made in the https://hcservices.ecourts.gov.in/hcservices/ application is far lesser than that of the actual income, whichwas identified by the Department more specifically, whileconducting search. Even the difference is not meagre or thedifferential amount of income is huge, therefore, there is noreason for the Settlement Commission to entertain an applicationunder Section 245C of the Act at all. 28. This Court is of the considered opinion that theprovision for settlement is an enabling provision to settle thedispute between the parties. Therefore, law expects that theparties, who are approaching the Settlement Commission by way ofapplication, must disclose full and true income in the event ofany difference or confrontation in this regard such anapplication for settlement cannot be entertained. Contrarily,the Assessing Officer must be permitted to make regularassessment of income under Section 153A of the Act. It isfurther contended that the differential amount of income iscrossing Rs.25 Crores and all these facts were placed before theSettlement Commission by the Department. In this regard, it iscontended that the Settlement Commission has committed an errorin adopting the decision making process, as the process adoptedis totally in contravention to the facts and circumstancesestablished by the Department and further, such facts andcircumstances are not correlating with the application filed bythe assessee under Section 245C of the Act. When there arediscrepancies and doubt arises with regard to the true and fulldisclosure of income, then the natural course of action would bethat the Assessing Officer must be permitted to make a regularassessment under Section 153A of the Act and settlement cannotbe arrived under doubtful circumstances. In such circumstances,settlements are impermissible and cannot be construed assettlement at all. 29. The very concept of settlement is depending on themutual consensus and in the absence of element of mutualconsensus between the parties, the settlement by the SettlementCommission cannot be unilateral and in such an event, SettlementCommission is usurping the powers of the Assessing Officer underother provisions of the Act. In other words, every authorityunder the Income Tax Act, 1961 is expected to exercise thepowers as contemplated. 30. The question of exercise of excessive powers orjurisdiction would arise, if the authority made an attempt totravel beyond the scope of the provision under which, suchpowers are conferred to a particular authority. In the instantcase, the power of the Settlement Commission is well enumeratedunder Section 245C and 245D of the Act. The manner in whichsettlement is to be arrived is also contemplated under the Act.Certain pre-conditions are also stipulated. Thus, the Settlement Commission cannot enter into the venture ofassessment, which is the power of an Assessing Officer underSection 153A of the Act. Therefore, this Court is of an opinionthat in the absence of any true and full disclosure, theSettlement Commission cannot go beyond the scope of Section 245Cof the Act and adjudicate the additional income found by theDepartment during seizure, which is admittedly not disclosed inthe application filed at the first instance by the assessee. 31. In the instant case, the assessee having knowledge aboutthe search and received notice under Section 153A of the Act,ought to have submitted all such particulars along with theapplication including the undisclosed income recovered by theDepartment in the application itself. The very fact is that theassessee had not filed any details regarding the undisclosedincome recovered by the Department in her application underSection 245C of the Act and therefore, the very application forsettlement is certainly not entertainable and prima facie theDepartment established that the assessee had not approached theSettlement Commission with clean hands. 32. To substantiate the said contention, it is relevant toconsider the findings of the Settlement Commission morespecifically, the findings from paragraphs 6.3 to 6.6, which areall extracted hereunder:-“6.3. Cash amounting to Rs.96,44,870/- wasfound during the search though the cash bookshowed a balance of only Rs.3,26,710/-. It hasbeen claimed that certain sales had beeneffected prior to the date of the search whichhad remained to be entered in the books ofaccount. Such unrecorded sales proceedsamounting to Rs.62,71,694/- received by way ofcash are claimed to represent a part of the cashfound during the search. It was argued thatcredit should be given for the same. Thelearned AR pointed out that the physical stockin the shop at the time of the search was lessthan the stock recorded in the other set ofbooks. This indicates that there must have beensome sales, in respect of which bills hadremained to be issued. While this explanationmay perhaps be true but the fact remains that noevidence was found during the search whichestablishes the fact that any sales had remainedto be entered in the books. Hence we are of theview that there is no clinching evidence tosupport the explanation for excess cashamounting to Rs.62,71,694/-. Further disclosureto the extent of Rs.62,71,694/- is, therefore, required to be made on this account. Thelearned AR vehemently argued that the sales hadactually taken place and the corresponding cashreceived formed part of the cash found duringthe search. However, he stated that, in thespirit of settlement and to bring a quietus tothe matter, a further amount of Rs.62,71,694/-is also offered for taxation for the A.Y. 2013-14. required to be made on this account. Thelearned AR vehemently argued that the sales hadactually taken place and the corresponding cashreceived formed part of the cash found duringthe search. However, he stated that, in thespirit of settlement and to bring a quietus tothe matter, a further amount of Rs.62,71,694/-is also offered for taxation for the A.Y. 2013-14. 6.4. During the search, the Applicant hadstated that jewellery weighing 859.300 gramsfound in the locker had been taken from the shopfor personal use. She had made an offer ofRs.23 lakhs as undisclosed income on thisaccount. 225 grams of jewellery was also foundat the residence. It was argued before us that,considering the size of the family, thepossession of 1084.300 grams of gold jewellerywas not abnormal. We admit that, consideringthe size of the family, the possession 1084.300grams of jewellery is not unreasonable. It isquite possible that the explanation of theApplicant is correct. At the same time, we haveto keep in mind the fact that the Applicant hadstated during the search that jewellery weighing859.300 grams pertained to the shop and did notbelong to her. This statement has never beenretracted. We, therefore, of the view that thevalue of the jewellery which was estimated atRs.23 lakhs is required to be further disclosed.The learned AR stated that, though the jewellerywas actually owned by the Applicant and herfamily members, the Applicant was willing tooffer a sum of Rs.23 lakhs for the A.Y. 2013-14in the spirit of settlement. 6.5. As regards payment of 'on money' foracquisition of properties (summarised in paras2.3.2 to 2.3.5 above), it has been argued beforeus that the value of such properties as per theregistered documents was much below than whathas been admitted by the Applicant's son at thetime of the search. It was argued that thisstatement had been given as the son was notaware of the value of the properties as per thedocuments. The necessary records in thisrespect were not available at that time. It hasalso been argued that no material was unearthedduring the search to indicate that there was any'on money' payment in respect of theseproperties over and above the documented value. 6.5. As regards payment of 'on money' foracquisition of properties (summarised in paras2.3.2 to 2.3.5 above), it has been argued beforeus that the value of such properties as per theregistered documents was much below than whathas been admitted by the Applicant's son at thetime of the search. It was argued that thisstatement had been given as the son was notaware of the value of the properties as per thedocuments. The necessary records in thisrespect were not available at that time. It hasalso been argued that no material was unearthedduring the search to indicate that there was any'on money' payment in respect of theseproperties over and above the documented value. After considering the matter, we agree that noevidence was found during the search toestablish that any 'on money' was paid inrespect of these properties. We also agree thatthe Applicant's son did not have the relevantdocuments which is statement was being recordedduring the search. At the same time, it hasalso to be kept in mind that a statement to thiseffect had been made during the search which hasnot been retracted. We, therefore, are of theview that the value of the properties over andabove the documented value (as admitted at thetime of the search) is required to be furtherdisclosed as unaccounted income. The learned ARstated that, even though no evidence wasunearthed during the search in respect of such'on money' payment, the Applicant wishes tobring a quietus to the matter and hence iswilling to offer the following amounts:-PropertyValue stated inValue inDifferenceA.Y.Furtherat132(4)DocumentdisclosurstatementeBangalore60,00,00043,00,00017,00,000 2011-1210,00,0002012-13 7,00,000K.K.Pudur,40,45,000Stampt60,00,00019,55,000 19,7502011-1240,64,750Duty&40,64,750OthersGanapathy27,15,000Stamp Duty40,00,00012,85,000 1,16,6902011-1228,31,690& others28,31,6906.6. There is another aspect in this casewhich we would like to discuss. The Applicanthas quantified the undisclosed income on thebasis of 'Net Accretion to Asset Method'.However, considering the status of theApplicant, there exists a possibility that therewould have been substantial drawings forpersonal purposes out of the undisclosedbusiness income. There is also a possibility ofsome undetected errors and omissions beingpresent in the regular books of account. We areof the view that this possibility is alsorequired to be covered even though there is noevidence to establish any such drawings or errorand omissions. In our opinion, a total sum ofRs.3.30 crores is further required to bedisclosed as given below:-(Amount in Rupees) 33. Perusal of the above findings of the order of theSettlement Commission clearly established that there are manyadditions regarding the undisclosed income by the assessee. Theadditions are made due to the search conducted and theDepartment has stated that the undisclosed income are more and aregular assessment is to be made in order to scrutinise all thebooks of accounts and incriminating evidences for the purpose offorming an opinion and to determine the tax payable by theassessee. When such an exercise to be made under the Act is notpermitted and if the issues are settled, then this Court has nohesitation in holding that the very purpose and object of theprovisions of the Act is defeated. This apart, the very scopeof Section 245C of the Act cannot be widened so as to permit theSettlement Commission to make a regular assessment, which is notcontemplated. 34. The very factum that there are additional disclosures ofincome during the pendency of the Settlement Commission, whichwere not made available at the time of application by theassessee under Section 254C of the Act there is a sufficientcause to reject the application under Section 245C of the Act.The very spirit of the provision is that the application mustcontain full and true disclosure of income. Once it isestablished that the application dose not contain fulldisclosure of income and additions are made during the pendencyof the application, it is sufficient to arrive a conclusion thatthe application made by the assessee is not in consonance withthe provisions of Section 245C of the Act and therefore, thesame is liable to be rejected in limine. Contrarily, in thepresent case, the Settlement Commission travelled beyond thescope of Section 245C of the Act and adjudicated the additionalincome disclosed and further gone to the extent of settling theissues based on the additional income, which were not disclosedat the time of filing of an application under Section 245C ofthe Act. 35. In view of the facts and circumstances, it isestablished that the assessee has not approached the SettlementCommission with clean hands. The assessee has not disclosed thetrue and full income and more specifically, the undisclosedincome recovered during the search were not made availablebefore the Settlement Commission along with the application andthis would be sufficient to reject the application by theSettlement Commission. Contrarily, the Settlement Commissionproceeded by adjudicating the issues on merits on thepresumption that the Settlement Commission can pass anassessment order, which is otherwise not permissible under theprovisions of Section 245C of the Act. Thus, the order passedby the Settlement Commission is perverse and not in consonancewith the provisions of the Income Tax Act, 1961 and theSettlement Commission exceeded its jurisdiction by entering intothe venture of a regular assessment, which is otherwise to bemade by the Assessing Officer under the other provisions of theIncome Tax Act, 1961. 36. Accordingly, the order passed by the first respondent-Settlement Commission in S.A.No.TN/CN.53/2013-14/1/IT, dated31.07.2013 is quashed and consequently, the petitioner-Department is permitted to proceed with the regular assessmentthrough the competent authority under the provisions of the Actand by following procedures as contemplated so as to determinethe tax payable and to initiate all further actions, inaccordance with law. 37. Accordingly, this writ petition stands allowed. Nocosts. s/d- Assistant Registrar(CS VII) True Copy Sub-Assistant Registrar ssb/abrTo The Income Tax Settlement Commission Additional Bench 640, Anna Salai, Nandanam Chennai-600 035.+1 CC to Mr.A.P. Srinivas, Advocate sr 22588 W.P.No.16552 of 2014 SMI(CO)SP(14/06/2021)