Commissioner Of Income Tax v. Income Tax Settlementcommission & Ors

THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 02.07.2013 +WP(C) NO. 1609/2013 COMMISSIONER OF INCOME TAX ... Petitioner versus INCOME TAX SETTLEMENTCOMMISSION & ORS. ... Respondents Advocates who appeared in this case: For the Appellant: Mr Kamal Sawhney, Adv. with Mr. Shashank Singh, Adv.For the Respondent: Mr Mukul Rohtagi, Ms Prem Lata Bansal, Sr. Advs. withMr Saurabh Kirpal, Mr Mahesh Agarwal, Mr Akshay,Mr Ankit Shah, Ms Manasi, Advs. for the Respondents 2 to 5 CORAM:- HON’BLE MR JUSTICE BADAR DURREZ AHMED, THEACTING CHIEF JUSTICEHON’BLE MR JUSTICE R.V.EASWAR JUDGMENT BADAR DURREZ AHMED, ACJ 1.This writ petition is directed against the order dated 24.01.2013passed by the Income Tax Settlement Commission, Principal Bench, NewDelhi under Section 245D(2C) of the Income Tax Act, 1961 (hereinafterreferred to as ‘the said Act’).By virtue of the impugned order dated24.01.2013, the Income Tax Settlement Commission (hereinafter referred to as ‘the Settlement Commission’) held the settlement applications of theRespondent Nos. 2 to 5 to be “not invalid” and were therefore allowed tobe proceeded with inasmuch as the said settlement applications had, inthe view of the Settlement Commission, prima facie, fulfilled all theconditions prescribed under Section 245C(1) and 245D(2C) of the saidAct. The petitioner (Commissioner of Income-tax) is aggrieved by thesaid order dated 24.01.2013 inasmuch as according to the petitioner, thesettlement applications filed on behalf of the respondents 2 to 5 ought notto have been proceeded with and ought to have been held as “invalid”because the settlement applications failed to satisfy the pre-requisitesstipulated in Section 245C of the said Act. Those pre-requisites being,full and true disclosure, the manner in which the undisclosed income hadbeen derived and the additional amount of income tax payable. 2.On behalf of the petitioner, it was sought to be contended that asthere was no true and full disclosure by the respondents 2 to 5 in theirapplications for settlement, the Settlement Commission ought not to haveproceeded with their applications and ought to have passed an orderunder Section 245D(2C) holding the applications to be invalid. It wasalso contended that the manner of deriving the undisclosed income hadnot been indicated by the respondents 2 to 5 and, therefore, on thisground also, the order under Section 245D(2C) passed by the SettlementCommission ought to have been one holding the settlement applicationsto be invalid.Strong reliance was placed by the learned counselappearing for the petitioner on the Supreme Court decision in the case of Ajmera Housing Corporation v. Commissioner of Income Tax: 326ITR 642 (SC) to contend that where there was an established case ofabsence of full and true disclosure on the part of the applicant, thesettlement application ought to be rejected at the threshold by theSettlement Commission. Ajmera Housing Corporation v. Commissioner of Income Tax: 326ITR 642 (SC) to contend that where there was an established case ofabsence of full and true disclosure on the part of the applicant, thesettlement application ought to be rejected at the threshold by theSettlement Commission. 3.In this backdrop, the learned counsel for the petitioner sought toargue on the merits of the matter and to establish that there was in factsubstance in his contention that the respondents 2 to 5 had not made a fulland true disclosure and that they had also not indicated the manner inwhich the undisclosed income had been derived. At the threshold itself,the learned counsel appearing on behalf of the respondents 2 to 5 tookserious objection to the maintainability of the present petition.It wascontended on behalf of the respondents 2 to 5 that the writ petitionchallenging the order dated 24.01.2013 passed under Section 245D(2C)of the said Act as also the earlier orders dated 30.11.2012 and 28.12.2012passed under Section 245D(1) of the said Act was not maintainableinasmuch as those orders were merely orders of ‘admission’. Reliancewas placed by the learned counsel for the respondents 2 to 5 on a decisionof the Supreme Court in the case ofCommissioner of Income Tax v. K.Jayaprakash Narayanan: 184 Taxman 85 (SC).Reliance was alsoplaced on a decision of a Division Bench of this Court in the case ofCommissioner of Central Excise, Vishakapatnam v. True WoodsPrivate Ltd.: 2006 (199) ELT 388 (Del) as also on a decision of theBombay High Court in the case ofUnion of India v. Customs and Central Excise Settlement Commission, Mumbai: 2009 (234) ELT 634(Bom). The learned counsel for the respondents 2 to 5 emphasized thatthe impugned orders were only orders of admission and only indicated aprima facie view. It was open for the Settlement Commission to alter thatview in the course of further proceedings till the final order was passedunder Section 245D(4) of the said Act. It was therefore contended thatthere is no cause for concern on the part of the Department at this stage asthe matter is still under examination by the Settlement Commission and afinal decision has not been taken by it. It was also contended that the writpetition would not be maintainable as this Court, in judicial review, is notconcerned with the merits of the matter, as it would be, had it beenexercising an appellate jurisdiction.It is only the decision makingprocess which can be challenged and can be the subject matter of judicialreview in a writ petition. Since there is no allegation of any proceduralviolation or lack of jurisdiction, the present writ petition which isessentially aimed at a look into the merits of the matter, would not bemaintainable.It was also contended that the impugned order dated24.01.2013 itself records that the issues raised by the Commissioner ofIncome Tax would be open during the course of proceedings underSection 245D(4) of the said Act and that the settlement applications wereheld to be not invalid only upon a prima facie view that the respondents 2to 5 had fulfilled the conditions prescribed under Section 245C(1) and245D(2C) of the said Act. It was submitted that an order of admission,such as the order impugned herein, does not foreclose any argument orany contention of the Department even with regard to the “true and full disclosure” and “the manner in which the income has been derived”. Assuch, there is no occasion, according to the learned counsel for therespondents 2 to 5, to interfere with the proceedings pending before theSettlement Commission. disclosure” and “the manner in which the income has been derived”. Assuch, there is no occasion, according to the learned counsel for therespondents 2 to 5, to interfere with the proceedings pending before theSettlement Commission. 4.Before we examine the submissions made by the learned counselfor the parties, it would be appropriate to set out some of the facts.Respondents 2, 3 and 4 had filed settlement applications under Section245C(1) of the said Act in respect of the Assessment Years 2006-07 to2012-13 on 16.11.2012. The applications filed by respondents 3 and 4who are the parents of respondent 2 were rejected by the SettlementCommission by an order dated 23.11.2012 on the ground that theapplicants had not paid the full amount of the additional tax and interestwhich was payable on or before the filing of the applications.It wastherefore held by the Settlement Commission that the said applications ofrespondents 3 and 4 could not be allowed to be proceeded with andaccordingly the applications were rejected. On the very same day, i.e. on23.11.2012, the respondents 3 and 4 submitted fresh applications underSection 245C(1) after allegedly paying the amount of additional tax andinterest that was payable prior to the filing of the settlement applications.Subsequently on 17.12.2012, the respondent 5 (wife of respondent 2)submitted her settlement application for the above mentioned assessmentyears. The settlement applications were allowed to be proceeded with byvirtue of an order dated 30.11.2012 in respect of respondents 2 to 4. Asimilar order was passed in respect of respondent 5 on 28.12.2012. Those orders were passed under Section 245D(1) of the said Act and had notbeen challenged by the Revenue. Even in the present writ petition, theCommissioner of Income-tax had initially not challenged the said ordersdated 30.11.2012 and 28.12.2012 passed under Section 245D(1) of thesaid Act. It is only by way of the amended writ petition which has beenfiled subsequently that the petitioner also seeks to challenge the saidorders dated 30.11.2012 and 28.12.2012. 5.After the passing of the orders under Section 245D(1), reports werecalled from the Commissioner of Income-tax under Section 245D(2B) ofthe said Act on the validity of the settlement applications. That reportwas received by the Settlement Commission on 09.01.2013 and theapplications were heard in the context of Section 245D(2C) of the saidAct by the Settlement Commission on 21.01.2013.Thereafter theimpugned order dated 24.01.2013 was passed in respect of the foursettlement applications. The petitioner being aggrieved by the said orderas also the earlier orders passed under Section 245D(1) is before us byway of the present writ petition. 6.It must also be pointed out that in the report submitted by theCommissioner of Income-tax under Section 245D(2B) of the said Act, itwas contended that the settlement applications should not be held to bevalid as the applicants had neither disclosed their full and true income northe manner in which such income had been derived. In response to thesaid report, a write-up had been submitted on behalf of the respondents 2 6.It must also be pointed out that in the report submitted by theCommissioner of Income-tax under Section 245D(2B) of the said Act, itwas contended that the settlement applications should not be held to bevalid as the applicants had neither disclosed their full and true income northe manner in which such income had been derived. In response to thesaid report, a write-up had been submitted on behalf of the respondents 2 to 5 seeking to clarify each of the allegations of the Department and thegist of the same has been extracted in the impugned order dated24.01.2013 which we need not elaborate inasmuch as we do not intend toexamine the merits of the matter.After examining the report and thecounter arguments of the respondents 2 to 5, the Settlement Commissionheld that all the four applicants had fulfilled the conditions prescribedunder Section 245C(1) as, in its view, there was no adverse material onrecord to suggest otherwise.The Settlement Commission noted andobserved that the issues raised by the Commissioner of Income-tax in hisreport dated 08.01.2013 would be open for the Bench during the course ofproceedings under Section 245D(4).By virtue of the impugned orderdated 24.01.2013, the Settlement Commission also directed that theconfidential part of the application should be forwarded to theCommissioner of Income-tax who would have an opportunity to examinethe same during the course of proceedings under Section 245D(4) of thesaid Act. The Settlement Commission reiterated that:- “The decision to hold these SAs ‘not invalid’ is withoutprejudice to initiation of penalty and launching ofprosecution proceedings, if required, on facts availableon the records at the relevant time in subsequentproceedings by the Commission.” It was further clarified that the settlement applications were held tobe not invalid and were allowed to be proceeded with inasmuch as theSettlement Commission was of the view that the applicants had “prima facie” fulfilled the conditions prescribed under Section 245C(1) and245D(2C) of the said Act. 7.We shall now briefly examine the scheme of the said Act insofar asit is relevant for our purposes. Under section 245C of the said Act, anassessee is entitled to make an application for settlement. The applicationhas to be made in such form and such manner as may be prescribed. Theapplication must contain (i) a full and true disclosure of the assessee’sincome which has not been disclosed before the assessing officer; (ii) themanner in which such income has been derived; (iii) the additionalamount of income tax payable on such income; and (iv) such otherparticulars as may be prescribed.Furthermore the assessee is alsorequired to pay the additional amount of tax and interest thereon, on orbefore the date of making the application and the proof of such paymentshould be attached with the application. Section 245C(1) stipulates thatwhen such an application is received by the Settlement Commission forhaving the case settled, the same is to be disposed of in the manner asindicated in the said Act. 8.Section 245D of the said Act sets out the procedure which is to beadopted by the Settlement Commission on receipt of an application underSection 245C.Section 245D(1) stipulates that on receipt of anapplication under Section 245C, the Settlement Commission is requiredto, within seven days from the date of receipt of the application, issue anotice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with. Thereafter on hearing theapplicant, the Settlement Commission is required to, within a period of 14days from the date of the application, by an order in writing, reject theapplication or allow the application to be proceeded with. The proviso toSection 245D(1) stipulates that where no order is passed within the abovementioned period by the Settlement Commission, either allowing theapplication or rejecting the application, the application shall be deemed tohave been allowed to be proceeded with. made by him be allowed to be proceeded with. Thereafter on hearing theapplicant, the Settlement Commission is required to, within a period of 14days from the date of the application, by an order in writing, reject theapplication or allow the application to be proceeded with. The proviso toSection 245D(1) stipulates that where no order is passed within the abovementioned period by the Settlement Commission, either allowing theapplication or rejecting the application, the application shall be deemed tohave been allowed to be proceeded with. 9.Sub-section (2B) of Section 245D of the said Act stipulates that theSettlement Commission shall call for a report from the Commissioner andthe Commissioner shall furnish the said report within 30 days of receiptof the communication from the Settlement Commission.Section245D(2C) of the said Act prescribes that where a report of theCommissioner, which has been called for under sub-section (2B), hasbeen furnished within the specified period, the Settlement Commissionmay, on the basis of the report and within a period of 15 days of receiptof the report, by an order in writing, declare the application in question asinvalid and in such eventuality, the Settlement Commission is enjoined tosend a copy of such order to the applicant and the Commissioner. Thefirst proviso to Section 245D(2C) ensures that an application shall not bedeclared invalid by the Settlement Commission unless an opportunity hasbeen given to the applicant of being heard. The second proviso theretostipulates that where the Commissioner has not furnished the report within the specified period, the Settlement Commission is enjoined toproceed further in the matter without the report of the Commissioner. 10.Under Section 245D(3), the Settlement Commission, inter alia, inrespect of an application which has not been declared invalid underSection 245D(2C) of the said Act may call for the records from theCommissioner and after examination of such records, if the SettlementCommission is of the opinion that any further enquiry or investigation inthe matter is necessary, it may direct the Commissioner to make or causeto be made such further enquiry or investigation and to furnish a report onthe matters covered by the application and any other matter relating to thecase. The Commissioner is required to furnish the report within a periodof 90 days of receipt of the communication from the SettlementCommission. It is further provided that where the Commissioner doesnot furnish a report within the said period of 90 days, the SettlementCommission may proceed to pass an order under sub-section (4) withoutsuch report. 11.UnderSection245D(4)ofthesaidAct,theSettlementCommission, after examination of the records and the report of theCommissioner, if any, received under, inter alia, sub-section (2B) or sub-section (3) and after giving an opportunity to the applicant as also to theCommissioner to be heard, may pass such order as it thinks, inaccordance with the provisions of the said Act, on the matters covered by the application and any other matter relating to the case not covered bythe application, but referred to in the report of the Commissioner. 11.UnderSection245D(4)ofthesaidAct,theSettlementCommission, after examination of the records and the report of theCommissioner, if any, received under, inter alia, sub-section (2B) or sub-section (3) and after giving an opportunity to the applicant as also to theCommissioner to be heard, may pass such order as it thinks, inaccordance with the provisions of the said Act, on the matters covered by the application and any other matter relating to the case not covered bythe application, but referred to in the report of the Commissioner. 12.Section 245D(6) is also of some importance. It provides that everyorder passed under sub-section (4) of Section 245D is to provide for theterms of settlement including any demand by way of tax, penalty orinterest, the manner in which any sum due under the settlement is to bepaid and all other matters to make the settlement effective.It isspecifically provided that the terms of settlement are to indicate that thesettlement would be void if it was subsequently found by the SettlementCommission that it had been obtained by fraud or misrepresentation offacts. As a corollary to sub-section (6), sub-section (7) of Section 245Dprovides that where a settlement becomes void under sub-section (6), theproceedings in respect to the matters covered by the settlement shall bedeemed to have been revived from the stage at which the application wasallowed to be proceeded with by the Settlement Commission and theincometaxauthorityconcerned,may,notwithstandinganythingcontained in any other provision of the said Act, complete suchproceedings at any time before the expiry of two years from the end ofthe financial year in which the settlement became void. 13.From the above provisions, it is apparent that the settlementapplication passes through several stages before the final order providingfor the terms of settlement is passed by the Settlement Commission. Thefirst stage is under Section 245D(1). This is followed by the next step under Section 245D(2C) and finally by the order passed under Section245D(4). In the present case, the final order under Section 245D(4) is yetto be passed. The orders under Section 245D(1) and 245D(2C) are notfinal orders and they are subject to the final orders that may be passedunder Section 245D(4). It is, therefore, clear that the issue of full andtrue disclosure on the part of the applicants and the manner in which theundisclosed income was derived is still open for discussion and debateand the Settlement Commission would have to give its final decision onthese aspects before an order of settlement is passed under Section245D(4) of the said Act. Therefore, on a plain reading of the provisions,it is apparent that the submission made by the learned counsel for therespondents 2 to 5 merits acceptance insofar as it was contended by himthat the entire issue remains open and at any stage of the proceedings tillthe order under Section 245D(4) is passed by the Settlement Commission,the issue with regard to full and true disclosure and the manner in whichthe undisclosed income had been derived would be open and can beraised by the Revenue. In fact, it was clarified by the learned counsel forthe respondents 2 to 5 that the said respondents do not even contend thatonce an application has been proceeded with under Section 245D(1) andhas not been held to be invalid under Section 245D(2C), the validity ofthe same in terms of the requisite conditions stipulated in Section245C(1) cannot be gone into at the subsequent stages up to the passing ofthe order under Section 245D(4) of the said Act. 14.Before we examine the case law on the subject, it would also beappropriate if we refer to the provisions of Section 245F of the said Act.The said section deals with the powers and procedures of the SettlementCommission.Sub-section (1) stipulates that in addition to the powersconferred on the Settlement Commission under the said Act, it would alsohave all the powers which are vested in an income tax authority under thesaid Act. Sub-section (2) of Section 245F further stipulates that where anapplication under Section 245C has been allowed to be proceeded withunder Section 245D, the Settlement Commission shall, until an order ispassed under sub-section (4) of Section 245D, have, subject to theprovisions of sub-section (3) of that section, exclusive jurisdiction toexercise the powers and perform the functions of an income tax authorityunder the said Act in relation to the case.We must also notice theproviso to Section 245F(2) which makes it clear that where an applicationhas been made under Section 245C on or after the first day of June, 2007,the Settlement Commission shall have exclusive jurisdiction from thedate on which the application was made.In the present case, we findthat all the four applications made by the respondents 2 to 5 had beenmade after the first day of June, 2007 and therefore it is the aforesaidproviso which would apply.In other words, in the present case, theSettlement Commission had exclusive jurisdiction in respect of the casesof respondents 2 to 5 from the dates on which the applications underSection 245C were made by the said respondents. We have specificallyreferred to this proviso, because the learned counsel for the petitioner hadmade an argument that if an application under Section 245C is allowed to be proceeded with by virtue of an order under Section 245D(1) or underSection 245D(2C), the Settlement Commission would have exclusivejurisdiction and the ongoing investigation, which the income taxauthorities were conducting insofar as respondents 2 to 5 were concerned,would be stultified. We find that this argument is not available to theDepartment inasmuch as in the present case, it is not the passing of theorder under Section 245D(1) or under Section 245D(2C) which wouldenable the Settlement Commission to have exclusive jurisdiction inrelation to the case but, because of the proviso to Section 245F(2), itwould be the date on which the application is made under Section 245Cwhich would trigger the Settlement Commission’s exclusive jurisdictioninsofar as the case of the applicant is concerned. 15.For the sake of completeness, it would also be appropriate for us torefer to the second proviso to Section 245F(2) of the said Act which, interalia, makes it clear that where an application which has been made on orafter the first day of June, 2007 is rejected under Section 245D(1) or isdeclared invalid under Section 245D(2C), the Settlement Commission,inspite of such an application, would have exclusive jurisdiction upto thedate on which the application is rejected or declared invalid as the casemay be.In the present case, the Settlement Commission would haveexclusive jurisdiction in relation to the cases on and from the date onwhich the applications under Section 245C were made by respondents 2to 5 and not from the dates of the orders passed under Section 245D(1)and 245D(2C) of the said Act. Obviously, as the applications have not been rejected or declared invalid, the exclusive jurisdiction of theSettlement Commission continues till the Settlement Commission passesthe final order under Section 245D(4) of the said Act. 16.The learned counsel for the respondents 2 to 5 had, as pointed out,placed strong reliance on an order passed by the Supreme Court in thecase of CIT v. K. Jayaprakash Narayanan (supra).The order waspassed on a Special Leave Petition and the same reads as under:- been rejected or declared invalid, the exclusive jurisdiction of theSettlement Commission continues till the Settlement Commission passesthe final order under Section 245D(4) of the said Act. 16.The learned counsel for the respondents 2 to 5 had, as pointed out,placed strong reliance on an order passed by the Supreme Court in thecase of CIT v. K. Jayaprakash Narayanan (supra).The order waspassed on a Special Leave Petition and the same reads as under:- “1.Delay condoned. This Special Leave Petition isfiled against the decision of the Settlement Commissionadmitting the application of the Assessee under Section245D of the Income-tax Act, 1961. It is the case of theDepartment that the Assessee had failed to make fulland true disclosure in the first instance and that the saiddeclaration made at a later date by way of seconddeclaration cannot be the ground for admitting theapplication under Section 245D.Since this SpecialLeave Petition is filed only against the order of theSettlement Commission admitting the application of theAssessee under Section 245D, we do not wish tointerfere at this stage.However, we make it clear thaton the point of maintainability of the Application, itwould be open to the Department to raise thecontention before the Settlement Commission whowould be entitled to examine that question at the finalhearing of the matter. 2.TheSpecialLeavePetitionisdisposedofaccordingly.”(underlining added) 17.It is apparent that the Supreme Court was considering a matterwherein the decision of the Settlement Commission admitting anapplication of an assessee under Section 245D of the said Act was inquestion. One of the specific pleas taken by the Department was that theassessee had failed to make a full and true disclosure in the first instanceand that a declaration made at a later date could not be ground foradmitting an application under Section 245D.The Supreme Courtrefrained from interfering with the order passed by the SettlementCommission inasmuch as it was only an order admitting the applicationof the assessee under Section 245D. The Supreme Court made it clearthat even on the point of maintainability of the application, it would beopen to the Department to raise the contention before the SettlementCommission which would be entitled to examine that question at the finalhearing of the matter. From this, it is abundantly clear that the point ofmaintainability of an application under Section 245C(1) does not getforeclosed by virtue of the Settlement Commission passing an orderunder Section 245D(1) or Section 245D(2C) of the said Act and that suchan issue could be examined by the Settlement Commission at the finalhearing of the matter, that is, at the stage of passing an order underSection 245D(4) of the said Act. 18.The next decision on which strong reliance had been placed by thelearned counsel for the respondents 2 to 5 was that of a Division Bench ofthis Court in the case of True Woods Pvt. Ltd. (supra). Though that wasa case pertaining to the Customs and Central Excise Settlement 18.The next decision on which strong reliance had been placed by thelearned counsel for the respondents 2 to 5 was that of a Division Bench ofthis Court in the case of True Woods Pvt. Ltd. (supra). Though that wasa case pertaining to the Customs and Central Excise Settlement Commission and was one under the Central Excise Act, 1944, thematerial provisions are similar and, therefore, the observations andfindings would be relevant for our purposes. In that case, the Customsand Central Excise Settlement Commission had, by a majority of 2:1,admitted a settlement application filed before it by the applicant in termsof Section 32D of the Central Excise Act, 1944. A writ petition had beenfiled by the Revenue assailing the correctness of the said order.TheDivision Bench noted that the Commission had, by the order impugnedtherein, simply admitted the applications filed by the applicants.Theorder was by a majority and took a view different from the one taken bythe Chairman of the Commission who was of the view that theapplications ought to be rejected on the ground that the applicants had notmade a full and true disclosure of their liability as required under Section32E(1) of the Central Excise Act, 1944 which is equivalent to Section245C(1) of the said Act. The majority opinion left the issue open on theground that neither side had conclusively proved its version regarding thefiling of the declarations or their genuineness and had reserved liberty forthe Revenue to urge the question regarding the genuineness of theapplications filed by the applicants or the correctness of the duty liabilitydisclosed by them including the manner in which the same had beendetermined, at the final hearing.We can immediately notice thesimilarity in the facts between the present case and the case before theDivision Bench in True Woods Pvt. Ltd. (supra).Here, too, theSettlement Commission has not returned a conclusive finding with regardto the issue of full and true disclosure and the manner in which the undisclosed income had been derived by the applicants. It has left theissue open to be decided at the final hearing of the matter. 19.The Division Bench, in True Woods Pvt. Ltd. (supra), observedas under:- “5.In the light of the above, we find considerationmerit in the contention urged on behalf of therespondents that there is no final opinion expressed bythe Commission regarding the making of a full and truedisclosure of their liability by the applicants.Thequestion whether the applicants are entitled to any reliefin terms of Chapter V of the Central Excise Act, 1944is therefore open to be examined and answered by theCommission while passing a final order on theapplications filed before it. The Revenue shall be freeto urge that the applicants are not entitled to any reliefas the requirement of a full and true disclosurestipulated under Section 32E remains unsatisfied.” 20.Then, after referring to the Supreme Court decision in the case ofCommissioner of Income-tax, Jalpaiguri v. Om Prakash Mittal, 2005(184) ELT 3 (SC), the Division Bench, in True Woods Pvt. Ltd.(supra), observed as under:- “7.The above passage, argued the learned counselfor the petitioner, makes it incumbent upon theSettlement Commission to record a specific finding tothe effect that the applicant has made a full and truedisclosure before it can admit the application or take any further steps on the basis thereof. It was contendedthatthefoundationforsettlementbeforetheCommission is an application made by the assesseewhich must contain a full and true disclosure of therelevant particularsrequired under the provisionsconcerned. In the absence of any such finding, arguedthe learned counsel, the assumption of jurisdiction bythe Commission would be wholly uncalled for.” 21.The argument referred to in the above extract was rejected by theDivision Bench in True Woods Pvt. Ltd. (supra) in the followingwords:- “7.The above passage, argued the learned counselfor the petitioner, makes it incumbent upon theSettlement Commission to record a specific finding tothe effect that the applicant has made a full and truedisclosure before it can admit the application or take any further steps on the basis thereof. It was contendedthatthefoundationforsettlementbeforetheCommission is an application made by the assesseewhich must contain a full and true disclosure of therelevant particularsrequired under the provisionsconcerned. In the absence of any such finding, arguedthe learned counsel, the assumption of jurisdiction bythe Commission would be wholly uncalled for.” 21.The argument referred to in the above extract was rejected by theDivision Bench in True Woods Pvt. Ltd. (supra) in the followingwords:- “8.We regret our inability to accept the line ofreasoning. It is true that the foundation for settlementis an application from the asessee in which the assesseemust make a full and true disclosure as required underthe provision of Section 245C of the Income-tax Act orSection 32E of the Central Excise Act, but it is equallytrue that the requirement of a full and true disclosureneed not be examined and authoritatively determined atthe threshold of any proceedings initiated before theCommission under Chapter V.There may be caseswhere it is possible for the Commission to records afinding that the disclosure made in the application is“full and true”. There may, however, be situations inwhich the Commission may not be able to, at the stageof admission of the application, record a finding withany amount of certainty. In any such situation, it willnot be legally impermissible for the Commission tokeep the question open as it has done in the instant caseto be examined at a later stage or at the stage of finaldisposal of the application.What is important is thatthere must be full and true disclosure to the satisfaction of the Commission before any relief can be granted tothe applicants which implies that the requirement ofsuch a full and true disclosure is a continuingrequirement that needsto be satisfied from thebeginning of the proceedings till the conclusion thereof.The Commission may consequently be justified inthrowing out the application at any stage if it comes tothe conclusion that the disclosure made by the assesseeis either incomplete or untrue. The passage relied uponby the learned counsel for the petitioner simplyemphasises the significance of a full and true disclosurebut stops short of making such a disclosure or a findingon the satisfaction of that requirement as a conditionprecedent for the assumption of jurisdiction.” (underlining added) 22.From the above, it is clear that in True Woods Pvt. Ltd. (supra), aspecific argument had been raised on behalf of the Revenue that it wasincumbent upon the Settlement Commission to record a specific findingto the effect that the applicant had made a full and true disclosure beforeit admitted the application or took any further steps on the basis thereof.This argument was rejected by the Division Bench. The Division Benchwas of the view that while the foundation for settlement was anapplication from the assessee in which the assessee is required to make afull and true disclosure, it was equally true that such requirement need notbe examined and authoritatively determined at the threshold of anyproceeding initiated before the Commission.Importantly, the DivisionBench observed that there may be cases where it is possible for theCommission to record a finding that the disclosure made in the application is full and true.At the same time, there could also besituations in which the Commission may not be able to, at the stage ofadmission of the application, record a finding with any amount ofcertainty.It is in such a situation that it would be permissible for theCommission to keep the question open to be examined at a later stage orat the stage of disposal of the application. As in the case of True WoodsPvt. Ltd. (supra), this is exactly what has happened in the present case.The Settlement Commission has noted the rival contentions of theRevenue and the applicants with regard to the issues of full and truedisclosure and the manner of deriving the undisclosed income and hastaken a prima facie view in favour of the applicants. It is not a definitiveor final view and it is for this reason that the Settlement Commission, inits wisdom, left the issues open to be determined at the stage of finalhearing under Section 245D(4) of the said Act. It may very well be thatthe Settlement Commission, at that stage, may agree with the Revenue onthe basis of the material on record and the report submitted by theCommissioner of Income-tax that the applications were not maintainableunder Section 245C(1) of the said Act.In fact, the SettlementCommission may, at any stage till it passes a final order under Section245D(4), examine the issues and if there is sufficient material on record,determine the question of full and true disclosure and the manner inwhich the undisclosed income was derived conclusively and, dependingon such a decision, the applications may be thrown out or they may beproceeded with further. 23.The Division Bench in True Woods Pvt. Ltd. (supra), explainedthe decision of the Supreme Court in Om Prakash Mittal’s Case (supra)as one simply emphasizing the significance of a true and full disclosurebut, one which stopped short of making such a disclosure or a finding onthe satisfaction of that requirement as a condition precedent for theassumption of jurisdiction. The Special Leave Petition preferred by theRevenue against the decision of the Division Bench in True Woods Pvt.Ltd. (supra) was also dismissed by the Supreme Court by an order dated10.07.2006. 24.We are of the view that the order of the Supreme Court in K.Jayaprakash Narayanan (supra) and the decision of the Division Benchof this Court in True Woods Pvt. Ltd. (supra) clinch the issue in favour ofthe respondents.As such, this Court ought not to interfere with theimpugned orders.However, we need to examine the decision of theSupreme Court in the case of Ajmera Housing (supra) which has beenstrongly relied upon by the learned counsel for the petitioner. In fact, thelearned counsel for the petitioner went to the extent of submitting that inview of the decision of the Supreme Court in Ajmera Housing (supra),the orders/decisions in K. Jayaprakash Narayanan (supra) and TrueWoods Pvt. Ltd. (supra) would no longer be good law. 25.In Ajmera Housing (supra), an order had been passed by theIncomeTaxSettlementCommissionunderSection245D(1)on17.11.1994, allowing the settlement application filed on behalf of the 25.In Ajmera Housing (supra), an order had been passed by theIncomeTaxSettlementCommissionunderSection245D(1)on17.11.1994, allowing the settlement application filed on behalf of the assessee to be proceeded with.That order was not challenged by theRevenue.The Settlement Commission proceeded with the saidsettlement application and passed a final order under Section 245D(4) ofthe said Act on 29.01.1999. That settlement order was challenged by theRevenue before the Bombay High Court which set aside the same on,inter alia, the ground that no finding had been returned by the SettlementCommission as to whether there was a full and true disclosure of incomeon the part of the assessee/applicant. The Bombay High Court also heldthat the order dated 17.11.1994 passed under Section 245D(1) of the saidAct was void and remitted the case to the Settlement Commission for adecision afresh and kept all the questions open. The applicant/assessee,being aggrieved by the said decision of the Bombay High Court, went upin appeal before the Supreme Court which, by an order dated 11.07.2006,set aside the Bombay High Court order and remitted the matter to theHigh Court for a fresh decision. In the second round, the Bombay HighCourt again set aside the Income Tax Settlement Commission’s orderdated 29.01.1999 and remanded the case to the Settlement Commissionfor fresh adjudication. While doing so, the Bombay High Court observedas under:- “In view of the facts and the legal position noted above,even though we find that the respondents had not madefull and true disclosure of their income while makingapplications under Section 245C, it would not be properto set aside the proceeding.However, at the same time,the Commission appears to have misdirected itself onseveral important aspects while passing the final order.The Settlement Commission had not supplied the annexure Dated 19.9.1994 declaring additional incomeof Rs.11.41crore and thus, due opportunity was notgiven to the Revenue to place (sic) its stand properly.Huge amount of unexplained expenses, unexplainedloans and unexplained surplus, total of which is morethan Rs.14 crore, was not taken into considerationwhile passing the final order. Thirdly, the SettlementCommission has imposed token penalty of Rs.50 lakhswhile in its own assessment leviable penalty would be562.87 (sic Rs.562.87). In fact if the amounts, whichwere not taken into consideration while assessing thetotalundisclosedincome,arealsotakenintoconsideration, the amount of leviable penalty may bemuch more. Taking into consideration the multipledisclosures and the fact that the respondents had failedto make true and full disclosure initially as well as atthe time of second disclosure, we do not find anyjustifiable reasons to reduce or waive the amount ofpenalty so drastically. Taking into consideration all these circumstances, inour considered opinion, it will be in the interest ofjustice to set aside the final order passed by theSettlement Commission and to remand the matter backto the Settlement Commission for hearing parties afreshand to pass orders as per law. Facts and circumstancesnoted in respect of writ petition No. 2191 of 1999 arealso relevant for the remaining writ petitions and,therefore, it will be necessary that the final orderspassed in all these proceedings should be set aside.” (underlining added) 26.The matter was again carried to the Supreme Court by theapplicants/assessee.It is at that stage that the decision in Ajmera Housing (supra) was rendered by the Supreme Court. At the outset, wemay point out that the Supreme Court recorded its disapproval with theview of the Bombay High Court that it would not be proper to set asidethe proceedings before the Settlement Commission even though it wasconvinced that the assessee had not made full and true disclosure of theirincome while making an application under Section 245C of the said Act. (underlining added) 26.The matter was again carried to the Supreme Court by theapplicants/assessee.It is at that stage that the decision in Ajmera Housing (supra) was rendered by the Supreme Court. At the outset, wemay point out that the Supreme Court recorded its disapproval with theview of the Bombay High Court that it would not be proper to set asidethe proceedings before the Settlement Commission even though it wasconvinced that the assessee had not made full and true disclosure of theirincome while making an application under Section 245C of the said Act. 27.In Ajmera Housing (supra), the Supreme Court considered theprovisions of the said Act with regard to settlement. In the context ofSection 245C of the said Act, the Supreme Court observed as under:- “27. It is clear that disclosure of “full and true”particulars of undisclosed income and “the manner” inwhichsuchincomehadbeenderivedaretheprerequisites for a valid application under Section 245-C(1) of the Act. Additionally, the amount of income taxpayable on such undisclosed income is to be computedand mentioned in the application. It needs littleemphasis that Section 245-C(1) of the Act mandates“fullandtrue”disclosureoftheparticularsofundisclosed income and “the manner” in which suchincomewasderivedand,therefore,unlesstheSettlement Commission records its satisfaction on thisaspect, it will not have the jurisdiction to pass any orderon the matter covered by the application.” 28.It is clear that it is mandatory for the Settlement Commission torecord its findings with regard to the issues of “full and true disclosure”of particulars of undisclosed income and “the manner” in which suchincome was derived by the assessee.It is also clear that unless the Settlement Commission records its satisfaction on these aspects, it wouldnot have the jurisdiction to pass any order under Section 245D(4) of thesaid Act setting out the terms of settlement. 29.The Supreme Court further observed as under:- “34. Inouropinion,evenwhentheSettlementCommission decides to proceed with the application, itwill not be denuded of its power to examine as towhether in his application under Section 245-C(1) ofthe Act, the assessee has made a full and true disclosureof his undisclosed income. We feel that the report(s) ofthe Commissioner and other documents coming onrecord at different stages of the consideration of thecase, before or after the Settlement Commission hasdecided to proceed with the application would be mostgermane to the determination of the said question.” 30.These observations are extremely significant for the purposes ofthe present case. The Supreme Court has made it clear that even whenthe Settlement Commission decides to proceed with the application whenit passes an order under Section 245D(1) or Section 245D(2C), it wouldnot be denuded of its power to examine as to whether the assessee hasmade a full and true disclosure of his undisclosed income in theapplication for settlement. The Supreme Court specifically noted that thereport of the Commission and other documents would be coming onrecord of the Settlement Commission at different stages of theconsideration of the case, before or after the Settlement Commission has decided to proceed with the application, and, all these would be germaneto the determination of the said question. 31.In the context of the factual matrix of the case before it, theSupreme Court observed that a disclosure made in a settlementapplication cannot be permitted to be revised inasmuch as no suchrevision is contemplated under the scheme of the Act. In this context, theSupreme Court observed as under:- decided to proceed with the application, and, all these would be germaneto the determination of the said question. 31.In the context of the factual matrix of the case before it, theSupreme Court observed that a disclosure made in a settlementapplication cannot be permitted to be revised inasmuch as no suchrevision is contemplated under the scheme