Kandathil M. Mammen17, Boat Club Roadthird Avenue, R.a. Puramchennai, Tamil Nadu – 600 028Rep. By His Power Agentmr. Jossy Joseph v. Income Tax Settlement Commission Additional Bench, Chennai Ministry Of Finance Department Of Revenue 488-489, Anna Salai Chennai – 600 035

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 27.06.2022 CORAM : THE HONOURABLE MR. JUSTICE R. MAHADEVANand THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD Writ Appeal Nos.2629 and 2632 of 2021&CMP Nos.17167, 17169, 17185 and 17186 of 2021W.A. No. 2629 of 2021 Kandathil M. Mammen17, Boat Club RoadThird Avenue, R.A. PuramChennai, Tamil Nadu – 600 028rep. by his power agentMr. Jossy Joseph.. Appellant Versus 1. Income Tax Settlement Commission Additional Bench, Chennai Ministry of Finance Department of Revenue 488-489, Anna Salai Chennai – 600 035 2. Deputy Commissioner of Income Tax Central Circle 1 (1) Investigation Wing, Room No.320 New No.46, Mahatma Gandhi Road Chennai – 600 034 (Cause title accepted as per order dated 14.09.2021 made in CMP Nos. 14649 & 14647 of 2021 in WA SR Nos. 77923 & 77922 of 2021).. RespondentsW.A. No. 2632 of 2021Arun Mammen11, Boat Club RoadThird Avenue, R.A. PuramChennai, Tamil Nadu – 600 028rep. By his power agentMr. Jossy Joseph.. Appellant Versus 1. Income Tax Settlement Commission Additional Bench, Chennai Ministry of Finance Department of Revenue 488-489, Anna Salai Chennai – 600 035 2. Deputy Commissioner of Income Tax Central Circle 1 (1) Investigation Wing, Room No.320 New No.46, Mahatma Gandhi Road Chennai – 600 034 (Cause title accepted as per order dated 14.09.2021 made in CMP Nos. 14649 & 14647 of 2021 in WA SR Nos. 77923 & 77922 of 2021).. Respondents Writ Appeals filed under Clause 15 of The Letters Patentagainst the common order dated 03.08.2021 passed in WP Nos.33432 and 33431 of 2017 respectively on the file of this Court.Prayer in W.P.No.33431 of 2017 is filed under Article 226 of theConstitution of India, praying for the issuance of a Writ ofCertiorarified Mandamus, calling for the records of the 1strespondent contained in its impugned order bearingNo.TN/CN51/2015-16/ 34&35/IT dated 6.12.2017 and to quash thesame as arbitrary unjust and illegal and to consequentlydirect the 1st respondent to reconsider the application filed bythe petitioner bearing No.TN/CN51/2015-16/34/IT and pass a freshorder under Section 245D(4) of the Income Tax Act 1961 afteraffording the petitioner a sufficient opportunity of being heardin accordance with law. Prayer in W.P.No.33432 of 2017 is filed under Article 226 of theConstitution of India, praying for the issuance of a Writ ofCertiorarified Mandamus, calling for the records of the 1strespondent contained in its impugned order bearingNo.TN/CN51/2015-16/ 34&35/IT dated 6.12.2017 and to quash thesame as arbitrary unjust and illegal and to consequentlydirect the 1st respondent to reconsider the application filed bythe petitioner bearing No.TN/CN51/2015-16/34/IT and pass a freshorder under Section 245D(4) of the Income Tax Act 1961 afteraffording the petitioner a sufficient opportunity of being heardin accordance with law. For Appellant: Mr. R.V. Easwar (WA.No.2629/2021) and Mr.N.L.Rajah (WA No.2632/2021)Senior Advocatesfor Mr. Suhrith Parthasarathy For Respondents: Mr. A.P. SrinivasSenior Standing Counselin both the Writ Appeals R.MAHADEVAN, J. COMMON JUDGMENT Both these intra-court appeals are filed as against a commonorder dated 03.08.2021 passed by the learned Judge in WPNos.33431 and 33432 of 2017. 2.The appellants have preferred the aforesaid writpetitions for issuance of a Writ of Certiorarified Mandamus,calling for the records of the first respondent contained in itsorder bearing No.TN/CN51/2015-16/34 & 35/IT dated 06.12.2017 andto quash the same as arbitrary, unjust and illegal and toconsequently direct the first respondent to reconsider theapplications filed by the appellants bearing No.TN/CN-51/2015-16/34 & 35/IT and pass a fresh order under section 245D(4) ofthe Income Tax Act, 1961, after affording sufficientopportunities of being heard to the appellants in accordancewith law. Both these intra-court appeals are filed as against a commonorder dated 03.08.2021 passed by the learned Judge in WPNos.33431 and 33432 of 2017. 2.The appellants have preferred the aforesaid writpetitions for issuance of a Writ of Certiorarified Mandamus,calling for the records of the first respondent contained in itsorder bearing No.TN/CN51/2015-16/34 & 35/IT dated 06.12.2017 andto quash the same as arbitrary, unjust and illegal and toconsequently direct the first respondent to reconsider theapplications filed by the appellants bearing No.TN/CN-51/2015-16/34 & 35/IT and pass a fresh order under section 245D(4) ofthe Income Tax Act, 1961, after affording sufficientopportunities of being heard to the appellants in accordancewith law. 3.For the purpose of disposal of these appeals, it isessential to look into the common averments made in theaffidavits filed in support of the writ petitions and they areelucidated hereunder, in brief. 4.1. The appellant in W.A. No. 2632 of 2021 is the ManagingDirector of MRF Limited, dealing in tyre and rubber industry,finance and investment business as also consultancy and advisoryservices. It is stated that during the year 2005, for thepurpose of commencing the consultancy and advisory servicerelated business activities outside India, he opened a JointBank Account (US Dollar Account) along with his brotherKandathil M. Mammen (appellant in W.A. No. 2629 of 2021) withStandard Chartered Bank, Dubai Branch. In 2010, the name of Mr.Samir Thariyan Mappillai (brother's son) was also added as ajoint holder. Subsequently, the appellants opened a joint bankaccount with UBS AG Bank, Singapore Branch, besides openingvarious other sub accounts in different currencies with the saidbanks. During the year 2007, it was decided to carry on thebusiness activities substantially in the name of Moon MistyEnterprises Limited and it was registered in the British VirginIsland, in which the appellants and brother's son mentionedabove, were shareholders, however, the entire management andadministration of the said company vested with the appellantsalone. Subsequently, on 17.07.2007, a bank account was opened in the name of the said company Moon Mist Enterprises Limited withUBS Bank, Singapore Branch, apart from opening various other subaccounts. On 03.05.2007, the appellants settled a trust known asWebster International Trust and the Trust in turn floated acompany named as Fairwood Services Limited. The said FairwoodServices Limited opened account with UBS Bank, Singapore Branchon 11.05.2007 apart from various other sub-accounts. However,during the year 2011, Moon Mist Enterprise Limited and FairwoodServices Limited were liquidated, besides the Trust formed bythe appellants was also terminated. Thereafter, the appellantshave opened a joint account with First Gulf Bank, Dubai, closedthe bank accounts opened in the name of Fairwood ServicesLimited and transferred the closing balance to the newly openedjoint account with First Gulf Bank, Dubai Branch during July andAugust 2013. 4.2. At this stage, on 28.08.2013, a summons was issued bythe Deputy Director of Income Tax under Section 131 of the Actcalling upon the appellants to produce documents mentionedtherein. The appellants submitted reply on 18.09.2013 narratingthe above facts. They also appeared before the officials of theIncome Tax Department in connection with the enquiry conductedon 22.01.2015. During such enquiry, the appellants werequestioned about the transactions through the company calledMoon Mist Enterprises, the reason for the closure of the saidcompany during 2011 etc. Thereafter, the appellants filed arevised return for the assessment years 2005-2006 to 2012-2013on 21.05.2015. On receipt of the revised returns, a notice underSection 148 of the Act was issued on 29.05.2015. On receipt ofthe notice dated 29.05.2015, the appellants also submitted theirreturn on 01.06.2015. 4.3. In the above circumstances, the appellants filedapplications under Section 245C of the Act in Form 34B beforethe second respondent – Settlement Commission for settlement ofall the pending cases by making a full and true disclosure ofthe facts in relation to the income earned by them for theassessment years 2005-2006 to 2014-2015, as, at that time, theassessment for the said assessment years was pending. Theappellants also paid a sum of Rs.18,30,00,000/- towards incometax together with interest. However, the first respondent,without taking note of the disclosure of income of theappellants, rejected the Applications on 30.06.2015 on theground that the first respondent has no jurisdiction to acceptthe applications in view of the notification dated 27.05.2015issued under the provisions of Black Money (Undisclosed ForeignIncome and Assets) and Imposition of Tax Act, 2015 (in short,Black Money Act). It is further stated that by virtue of thenotification dated 27.05.2015, all the undisclosed income willbe dealt with under the said statute i.e., Black Money Act, 2015. 4.4. Pursuant to the order dated 30.06.2015, the appellantssent a letter dated 03.07.2015 clarifying that the Black MoneyAct, 2015 would come into force only from 01.07.2015 and it hasno application to the applications dated 02.06.2015 filed by theappellants. The appellants also filed a fresh application dated10.07.2015 under Section 245C of the Act specifically statingthat the applications are maintainable and the first respondenthas jurisdiction to entertain it without reference to the BlackMoney Act. However, the applications were dismissed by thesecond respondent on 15.07.2015 against which WP Nos. 22216,22217, 22218 and 22219 of 2015 were filed by the appellants. Byorder dated 21.06.2016, this Court allowed the writ petitions,by setting aside the rejection orders of the second respondentwith a direction to entertain the applications submitted by theappellants. 4.5. Pursuant to the order dated 21.06.2016 passed by thisCourt, the appellants' through their authorised representative,participated in the enquiry conducted by the first respondent.After considering the oral and documentary evidence, the firstrespondent passed an order dated 07.10.2016, allowing theapplications filed by the appellants by concluding that a primafacie case is made out and directed the department to determinethe tax amount due and payable by the appellants. Pursuant tosuch direction, the Principal Commissioner of Income Tax,Chennai submitted a report dated 11.11.2016 under Section 245D(2B) of the Act stating that the appellants havefulfilled/satisfied the conditions laid down under Section 245D(1) of the Act. It was also stated that the correctness andadequacy of the additional taxes paid by the appellants areproper. However, at the same blush, it was stated by thePrincipal Commissioner of Income Tax that the appellants havenot produced the opening and closing forms of various accountsand therefore, he could not effectively conclude hisinvestigation. Objecting to the report dated 11.11.2016, theappellants sent separate letters dated 22.11.2016 narrating thesequences of facts supported by documentary proof. Onconsideration of the reply dated 22.11.2016, the firstrespondent passed an order on the same day viz., 22.11.2016under Section 245D (2C) of the Act stating that all prescribedconditions have been fulfilled by the appellants forentertaining the said applications. Accordingly, the settlementapplications of the appellants were allowed with a direction tothe Principal Commissioner of Income Tax to submit a reportunder Rule 9 of the Income Tax Settlement Commission (Procedure)Rules, within 45 days of receipt of the said order. Accordingly,a report dated 08.02.2017 was submitted to the effect that anenquiry is required to be conducted under Section 245D (3)through FT & TR, a division of the CBDT to find out the natureof credit and debit appearing in the foreign bank accounts disclosed by the appellants and other transactions relatedthereto. In effect, the Principal Commissioner of Income Taxrequested the first respondent to permit him to conduct anenquiry to verify the domestic income and expenditure of theappellants. The appellants also submitted reply dated 23.02.2017to the report dated 08.02.2017 of the Principal Commissioner ofIncome Tax Department contending that no further enquiry isrequired to be conducted inasmuch as the income earned by theappellants have been truly and fully disclosed along withdocumentary evidence. disclosed by the appellants and other transactions relatedthereto. In effect, the Principal Commissioner of Income Taxrequested the first respondent to permit him to conduct anenquiry to verify the domestic income and expenditure of theappellants. The appellants also submitted reply dated 23.02.2017to the report dated 08.02.2017 of the Principal Commissioner ofIncome Tax Department contending that no further enquiry isrequired to be conducted inasmuch as the income earned by theappellants have been truly and fully disclosed along withdocumentary evidence. 4.6. Notwithstanding the objections raised by theappellants, the first respondent passed an order dated11.05.2017 under Section 245D (3) of the Act, directing thedepartment to carry out an enquiry/investigation with respect tocertain income said to have been derived by the appellants, witha further direction to post the applications for further hearingafter receipt of a report. Pursuant to the said order dated11.05.2017, the second respondent, by a communication dated14.07.2017, called upon the appellants to furnish certaininformation and they were furnished by the appellants on21.07.2017 and 27.07.2017. Based on the details furnished by theappellants, a report dated 09.08.2017 was submitted by thePrincipal Commissioner of Income Tax under Section 245D (3) ofthe Act, for which the appellants also submitted their replydated 06.09.2017. On 06.10.2017, the appellants and therepresentative of the department were heard by the firstrespondent and written submissions were also made. Onconsideration of the written submissions and other documentaryevidence, the first respondent passed an order dated 06.12.2017under Section 245D (4) of the Act rejecting the settlementapplications of the appellants. Aggrieved by the same, theappellants have filed the writ petitions under Article 226 ofthe Constitution of India. 5.The learned Judge, on appreciation of the rivalsubmissions, concluded that the non-disclosure of certain incomeby the appellants cannot be construed as a mere omission or lackof knowledge about the information, but the non-furnishing oftrue and complete material particulars has disabled theSettlement Commission to arrive at a conclusion and there aresuppression of material facts by the appellants. The learnedJudge recorded a finding that if the assessee has not furnishedthe details regarding the income and the manner in which suchincome has been derived, it may not be possible for theSettlement Commission to complete the process of determinationof income. Therefore, the learned Judge refused to interferewith the order passed by the Settlement Commission and dismissedthe writ petitions. 6.1. Mr.R.V.Easwar, learned senior counsel appearing for theappellant in WA.No.2629 of 2021 submitted that Section 245 (D3)provides that if an application for settlement is treated asvalid, then the Settlement Commissioner shall allow suchapplication and call for further report or records from theCommissioner or Principal Commissioner of Income Tax, as thecase may be. In this case, on receipt of the application of theappellants, reports have been called for from the PrincipalCommissioner of Income Tax and various reports have beenfurnished to the Settlement Commissioner. After receipt of suchreports, the Settlement Commissioner has to give opportunity ofhearing to the appellants as provided in Section 245D (4) of theAct. In the present case, a notice dated 15.11.2017 was issuedto the appellants directing them to appear for an enquiry on23.11.2017 at 11.30 am. On the date of hearing namely23.11.2017, a report of the learned Principal Commissioner dated22.11.2017 was served on the authorised representative of theappellants stating that the appellants have not made true andfull disclosure of the undisclosed income. For the report dated22.11.2017 served on 23.11.2017 at 11.30 am, the appellants wereasked to submit their response together with documentaryevidence by 27.11.2017 by 12 noon, allowing just one and halfworking day. Nevertheless, the response was submitted by theappellants within the time allowed by the first respondent.According to the learned Senior counsel, in compliance with thedirections of the settlement commission on 23.11.2017, theappellants prepared a reply stating that upon verifying the copyof the report submitted by the Principal Commissioner of IncomeTax along with the bank statement and documents received fromSingapore & UAE including a compact disc, the appellants havenot found mismatch with the records furnished to the Income TaxSettlement Commission. However, this submission of theappellants was not recorded by the first respondent whilepassing the order of rejection. In this context, the learnedSenior counsel pointed out the reply dated 27[th] November 2017submitted by the appellants, wherein it was clearly stated asfollows: “......Hope we have clarified all the issues raisedby the learned PCIT in his report. Though the reportof the ld.PCIT was made available to us only at 11.30am on 23.11.2017 and we were asked to submit ourclarifications and documents in support of ourcontention by 27.11.2017 by 12 noon, thus allowing usonly one and half working day, yet we have tried ourlevel best to furnish the desired details/particularswithin the time frame. We wish to reiterate that the applicants haveall along tried their level best to obtain andfurnish all particulars and explanations available with them. It has never been their intention towithhold or misrepresent any information or fact fromthe Honourable Settlement Commission since suchaction may invite the risk/mischief of section 245D(6) of the Income Tax Act, 1961, which no sensibleperson can afford to take.” 6.2. By pointing out the reply dated 27.11.2017, the learnedsenior counsel would submit that the appellant has truly andfully disclosed the material particulars in the settlementapplicationwithoutwithholdinganyparticularsforconsideration. While so, without following the provisions undersub-section (4) of Section 245D of Income Tax Act, 1961, thefirst respondent proceeded to pass the order of rejection. Ineffect, it is the submission of the learned senior counsel thatas stipulated under sub-section (4) of Section 245D of the Act,sufficient opportunity was not afforded to the appellant andtherefore, he prayed for remanding the matter back to the firstrespondent for fresh consideration. 6.2. By pointing out the reply dated 27.11.2017, the learnedsenior counsel would submit that the appellant has truly andfully disclosed the material particulars in the settlementapplicationwithoutwithholdinganyparticularsforconsideration. While so, without following the provisions undersub-section (4) of Section 245D of Income Tax Act, 1961, thefirst respondent proceeded to pass the order of rejection. Ineffect, it is the submission of the learned senior counsel thatas stipulated under sub-section (4) of Section 245D of the Act,sufficient opportunity was not afforded to the appellant andtherefore, he prayed for remanding the matter back to the firstrespondent for fresh consideration. 6.3. It is also submitted by the learned senior counsel thatthe time-limit for completion of the settlement proceedingsexpired only on 31.03.2018. Yet, the appellant was served with areport by the Principal Commissioner of Income Tax dated22.11.2017 on 23.11.2017 and was expected to file a responsethereto on 27.11.2017 i.e., barely one and half working days. Assuch, the order dated 06.12.2017 was passed without affordingsufficient opportunities to the appellant to respond to thereport of the PCIT, the contents of which represent the chiefreasoning offered by the first respondent. The learned seniorcounsel placed reliance on the decision in the case ofAutomotive tyre manufacturers Association vs. DesignatedAuthority and others, [(2011) 2 SCC 258] wherein it was heldthat the written submissions furnished by a litigant cannot be asubstitute for oral hearing. In that decision, it was held asfollows: "...82. In the light of the afore noted legal positionand the elaborate procedure prescribed in Rule 6 ofthe 1995 Rules, which the DA is obliged to adhere towhile conducting investigations, we are convinced thatduty to follow the principles of natural justice isimplicit in the exercise of power conferred on himunder the said Rules. Insofar as the instant case isconcerned, though it was sought to be pleaded onbehalf of the respondents concerned, though it wassought to be placed on behalf of the respondents thatthe incumbent DA had issued a common notice to theadvocates for ATMA and Ningbo Nylon, for oral hearingthat pursuant to ATMA's letter dated 24-1-2005, noticefor oral hearing was issued to them by the incumbentDA. Moreover, the alleged opportunity of oral hearing on 9-3-2005, being in relation to the priceundertaking offer by Ningbo Nylon, cannot be likenedto public hearing contemplated under Rule 6(6) of the1995 Rules. 83. The procedure prescribed in the 1995 Rules imposesa duty on the DA to afford to all the parties, whohave filed objections and adduced evidence, a personalhearing before taking a final decision in the matter.Even written arguments are no substitute for an oralhearing. A personal hearing enables the authorityconcerned to watch the demeanour of the witnesses,etc. and also clears up his doubts during the courseof the arguments. Moreover, it was also observed inGullapalli, if one person hears and other decides,then personal hearing becomes an empty formality" on 9-3-2005, being in relation to the priceundertaking offer by Ningbo Nylon, cannot be likenedto public hearing contemplated under Rule 6(6) of the1995 Rules. 83. The procedure prescribed in the 1995 Rules imposesa duty on the DA to afford to all the parties, whohave filed objections and adduced evidence, a personalhearing before taking a final decision in the matter.Even written arguments are no substitute for an oralhearing. A personal hearing enables the authorityconcerned to watch the demeanour of the witnesses,etc. and also clears up his doubts during the courseof the arguments. Moreover, it was also observed inGullapalli, if one person hears and other decides,then personal hearing becomes an empty formality" 6.4. The learned senior counsel for the appellant proceededto contend that the Settlement commission is not an adjudicatoryauthority. The appellant approached the Settlement Commissiondisclosing all the incomes truly and correctly to resolve theirtax dispute in an expeditious manner. The object of approachingthe Settlement Commission is to rectify the past mistakesinadvertently done by the appellant. Such past mistake done bythe appellants cannot itself be a ground to reject theapplication for settlement which would defeat the very purposeof constitution of the Settlement Commission. Chapter XIX-A ofthe Act is provided to aid bilateral dispute resolution and toprovide a fast and effective means of settling disagreements incomplicated cases that might otherwise result in an unwarrantedstrain on the investigative resources of the tax department. Bythis process, the assessee can pay the tax and interest onadmitted income before filing the application for settlementitself. However, the Settlement Commission failed to exerciseits statutory powers to arrive at a settlement with theappellant on technicalities. 6.5. The learned senior counsel further submitted that theSettlement Commission has been abolished by virtue of thenotification dated 10.08.2021 with effect from 01.02.2021 and inits place, an Interim Board for settlement has been constituted.The Interim board has been formed to consider the pendingapplications and it has the powers to resolve the tax disputeraised by the appellants. While so, the discontinuance of theSettlement Commission will have no bearing in the case of theappellants and the Interim Board has the powers to adjudicatethe dispute in the place of the Settlement Commission in theevent of the matter being remanded back to the Interim Board.The learned senior counsel therefore prayed this court to allowthis appeal and to remand the matter back to the Interim Boardfor settlement of the tax dispute. 7.1. Mr.N.L. Rajah, learned senior counsel appearingfor the appellant in W.A. No. 2632 of 2021, at the outset, wouldcontend that the order passed by the first respondent-SettlementCommission is in violation of the principles of natural justice.According to the learned senior counsel, the appellants hereinare brothers and they have filed two settlement applicationsbearing Nos. TN/CN51/2015-16/34/IT and TN/CN51/2015-16/35/IT on10.07.2015 before the first respondent invoking Section 254C (1)of the Act relating to the assessment years 2005-2006 to 2014-2015. On 07.10.2016, the applications were admitted by way of anorder passed under Section 245D (1) of the Act. Subsequently,on 11.11.2016, the Department submitted the Rule-6 report underSection 245D (2B) of the Act. On 22.11.2016, the appellantssubmitted detailed reply to the Rule-6 report. After taking noteof the same, the first respondent-Commission passed an orderunder Section 245D (2C) declaring that the claim of theappellants for settlement of the tax dispute is valid.Thereafter, the Department filed a Rule-9 report alleging thatthere are deficiencies in the settlement applications and soughtfor an investigation to be conducted under Section 245D (3) ofthe Act. In response, on 23.02.2017, the appellants submittedtheir response. On 02.05.2017, the settlement applications weretaken up for hearing under Section 245D(3). After hearing bothsides, the first respondent passed an order allowing thedepartment to conduct an enquiry. Pursuant to such direction ofthe first respondent, on 11.08.2017, a report was submittedunder Section 245D (3) of the Act, for which a reply was givenby the appellant on 11.08.2017. Subsequently, on 06.10.2017, theDepartment furnished a further report for which the appellantshave submitted their response on 11.10.2017. On 18.11.2017, theappellants have also filed their written submissions. However,on the last date of hearing on 22.11.2017, the departmentsubmitted a report under Section 245D (3) and the appellant wascalled upon to submit their response on 23.11.2017 viz., on thenext day. Even then, the appellant filed a sworn affidavitclarifying the various issues raised. The first respondentthereafter did not afford an opportunity of hearing to theappellant, but passed the order dated 06.12.2017 rejecting thesettlement application of the appellant. Therefore, the learnedsenior counsel would submit that the order, which was impugnedbefore the learned Judge, has been passed without affordingproper and sufficient opportunity to the appellant. 7.2. The learned senior counsel would further contend thatthe counter affidavit filed by the Department in these writappeals was solely on merits. On the other hand, the appellantis not inclined to venture into the merits of the case, but onlyrequire sufficient opportunity to be given to put forth hissubmissions. It is also submitted that the appellant had fully 7.2. The learned senior counsel would further contend thatthe counter affidavit filed by the Department in these writappeals was solely on merits. On the other hand, the appellantis not inclined to venture into the merits of the case, but onlyrequire sufficient opportunity to be given to put forth hissubmissions. It is also submitted that the appellant had fully and truly disclosed the income and any other details are whollyextraneous to the determination of an application forsettlement. The appellant had fully cooperated with the firstrespondent for conclusion of the proceedings, which standstestimony to the fact that the Department, in the variousreports filed before the first respondent, do not indicate anynon-cooperation on the part of the appellant. However, whilepassing the order, which was impugned before the learned Judge,the first respondent failed to adhere to the basic principles ofnatural justice and it infringes the fundamental rights asguaranteed to the appellant under Articles 14, 19 (1) (g) and 21of The Constitution of India. Therefore, it is submitted by thelearned senior counsel that the gay abandon with which the firstrespondent proceeded to pass the order dated 06.12.2017 is basedon preconceived notions. As such, the order dated 06.12.2017 ofthe first respondent has to be set aside with a direction togive sufficient opportunity to the appellant to put forth theirsubmission. Without considering the said aspects, the learnedJudge erred in dismissing the writ petitions filed by theappellants. Therefore, the learned senior counsel prayed toallow this writ appeal by setting aside the order passed by thelearned Judge. 8.1. Opposing the writ appeals, Mr.A.P.Srinivas, learnedsenior standing counsel appearing for the respondents submittedthat the applications submitted by the appellants before theSettlement Commission stood disposed of on 06.12.2017 and thereis no case pending before the Settlement Commission prior toit's discontinuance with effect from 01.02.2021. On and from01.02.2021, the Income Tax Settlement Commission has beendiscontinued and in its place Interim Board has been constitutedas provided under the Finance Act, 2021 to consider the pendingapplications only. Therefore, no direction could be given to theSettlement Commission which has been discontinued from01.02.2021 onwards. Therefore, on this ground, the writ appealshave to be dismissed by confirming the orders passed by thelearned Judge. 8.2. It is further submitted that the appellants have notexplained the nature of transfer of funds from foreign bankaccounts which are revenue receipts in the hands of theappellants. Any appreciation arising on revenue account as aresult of foreign exchange fluctuation has to be offered asincome in the respective years. The outstanding is a revenueitem and every year at the close of the accounting year, theappellants have to value the foreign currency revenue income andoffer the exchange fluctuation to tax. In this context, reliancehas been placed on the decision of the Honouable Supreme Courtin the case of Commissioner of Income Tax vs. Woodward GovernorIndia Private Limited [312 ITR 254 (SC)] wherein it was heldthat accretion on account of foreign exchange fluctuations have to be brought to tax. to be brought to tax. 8.3. The learned Senior Standing Counsel also submitted thatthe Income Computation and Disclosure Standard-VI relating tothe effects of changes in foreign exchange rates and alsoAccounting Standards AS-11 provides that exchange differencesarising on foreign currency transactions should be recognised asincome or as expenses in the period during which they arise. Allmonies received abroad are commission receipts to be treated asbusiness receipts, which have been used for investing in funds,bonds etc., and earned income therefrom, which are tradingreceipts in the revenue account as has been held by theHonourable Supreme Court in the case of Sutlej Cotton MillsLimited vs. CIT [116 ITR 1]. In the present case, the appellantshave followed accrual basis of accounting in respect of theincome received from ABN Amro Bank but in respect of acommission income, the appellants followed 'cash basis'accounting. The amounts are already lying in the bank accountand whatever benefit arises out of the foreign exchange gain isalready available in the bank accounts itself and hence taxablein either system of accounting by treating it as income receivedby the appellants. As per Section 6 of the Act, the totalincome includes all income that accrues or arises outside India.It has to be necessarily taxed in the mercantile system ofaccounting. However, the appellants have not disclosed anyincome on account of foreign exchange rate fluctuation in theyear of remittances also. Further, in the absence of productionof balance sheet or statement of accounts, the full and trueincome of the appellants cannot be determined. Even as on date,the appellants have not produced the bank statement of theaccount No. 1685646 held with First Gulf Bank, Dubai andtherefore also, the Settlement Commission is right in rejectingthe application submitted by the appellants for settlement ofthe dispute. Similarly, the appellants have not produced anyproof to show that the address in Singapore belongs to theirfriend. Even before the Settlement Commission, the appellantshave not filed the statement of affairs for the financial years2004-2005 to 2013-2014. After repeated demands, a statement wasproduced without including the foreign transactions and bankaccounts. Thus, the appellants did not cooperate with theDepartment by furnishing all the particulars, truly andcorrectly. 8.4. In response to the submissions made by the learnedsenior counsel for the appellants, it is replied by the learnedSenior Standing Counsel that more than three days time was givento the appellants to submit their reply to the report of thePrincipal Commissioner of Income Tax. In fact, theclarifications made in the report filed by the PrincipalCommissioner of Income Tax ought to have been furnished by theappellants themselves. As they failed to file the documents, an 8.4. In response to the submissions made by the learnedsenior counsel for the appellants, it is replied by the learnedSenior Standing Counsel that more than three days time was givento the appellants to submit their reply to the report of thePrincipal Commissioner of Income Tax. In fact, theclarifications made in the report filed by the PrincipalCommissioner of Income Tax ought to have been furnished by theappellants themselves. As they failed to file the documents, an ultimatum was given by the Settlement Commissioner to producethose documents so as to expedite the settlement proceedings.While so, it cannot be said that the proceedings of theSettlement Commission have been conducted in violation ofprinciples of natural justice. Whatever the documents or reportfiled by the Principal Commissioner of Income Tax will befurnished to the appellants and their report was sought forbefore proceeding further. While so, the question of violationof principles of natural justice does not arise in this case.Therefore, it is submitted by the learned Senior StandingCounsel that sufficient opportunities were provided to theappellants by the Settlement Commissioner before passing theorder rejecting their applications. In any event, theappellants have not complied with the requirements containedunder Section 245C of the Act by truly and correctly disclosingall the material particulars in relation to the income earned bythem. The provisions under sub-section (4) of Section 245D ofIncome Tax Act, 1961 stipulates that there must be full andfinal disclosure of the documents. There are several informationwithheld by the appellants. This was pointed out by theSettlement Commission as mentioned below: “When questioned during the hearing, the ARstated that the applicant is not aware of anycompany by name Moon Water Limited and the salaryincome mentioned in the account opening form wasfiled up just like that. Later, the applicants tooka position in the further submissions dated27.11.2017, that it represents the salary income ofAED 3,50,000/- per month, coming to approx Rs.6.8crores per annum earned in India. The applicant alsosubmitted that Shri Arun Mammen was never anemployee of the so called company Moon water Limitedand the applicant was also not aware of theexistence of any such company. We find that thestatements recorded in the account opening form dulysigned by the applicant and that given in theSOF/further submissions by the applicant arecontradictory. The salary income shown in India inthe Returns of Income is around Rs.2.57 crores (AY2013-14) and Rs.5.79 crores (AY 2014-15) from MRFLtd. in respect of Shri Arun Mammen. Hence, thedisclosure made by the applicant in the statement offacts is not full both in respect of Moon Water Ltdand the salary income. Further, whatever is statedin the Statement of Facts on the manner in which theincome has been derived has not been corroboratedwith any specific evidence by the applicants. Thedisclosure is not full and true and the manner inwhich the income earned has also not been properly corroborated. Thus it is not possible to hold thata full and true disclosure has been made by theapplicants and the manner in which the income hasbeen derived is correct. Hence, the applicationsare not maintainable.” corroborated. Thus it is not possible to hold thata full and true disclosure has been made by theapplicants and the manner in which the income hasbeen derived is correct. Hence, the applicationsare not maintainable.” 8.5. By pointing out the above portion of the observationmade by the Settlement Commissioner, the learned Senior StandingCounsel submitted that the order of rejection of the settlementapplications filed by the appellants is wholly justified and itdoes not call for any interference by this Court. For the sameproposition, the learned Senior standing counsel for thedepartment also placed reliance on the decisions in (i) ACEInvestment Ltd v. Settlement Commission [(2003) 264 ITR 571(Mad)], (ii)Ajmera Housing Corpn. v. CIT [(2010) 193 Taxman 193(SC)] and (iii)Rashmi Infrastructure Developers Ltd v. IncomeTax Settlement Commission and others [(2017) 396 ITR 210 (Bom)].The learned counsel therefore prayed for dismissal of the writappeals. 9.We have heard the learned counsel for both sides andperused the materials placed on record. 10.Before we proceed further, it is necessary to look intothe relevant provisions regarding the powers and functioning ofthe Settlement Commission. Chapter XIX-A of the Income Tax dealswith Settlement of Cases. The relevant provisions are extractedas under: “Section 245C. Application for settlement of cases.—(1) An assessee may, at any stage of a case relatingto him, make an application in such form and in suchmanner as may be prescribed, and containing a full andtrue disclosure of his income which has not beendisclosed before the Assessing Officer, the manner inwhich such income has been derived, the additionalamount of income-tax payable on such income and suchother particulars as may be prescribed, to theSettlement Commission to have the case settled and anysuch application shall be disposed of in the mannerhereinafter provided: Provided that no such application shall be madeunless,— (i) in a case where proceedings for assessment orreassessment for any of the assessment years referredto in clause (b) of sub-section (1) of section 153A orclause (b) of sub-section (1) of section 153B in caseof a person referred to in section 153A or section 153C have been initiated, the additional amount ofincome-tax payable on the income disclosed in theapplication exceeds fifty lakh rupees, (ia) in a case where— A) the applicant is related to the person referred toin clause (i) who has filed an application (hereafterin this sub-section referred to as -specifiedperson?); and (B) the proceedings for assessment or re-assessmentfor any of the assessment years referred to in clause(b) of sub-section (1) of section 153Aor clause (b) ofsub-section (1) of section 153B in case of theapplicant, being a person referred to in section 153Aor section 153C, have been initiated,the additionalamount of income-tax payable on the income disclosedin the application exceeds ten lakh rupees, (ii) in any other case, the additional amount ofincome-tax payable on the income disclosed in theapplication exceeds ten lakh rupees, and such tax and the interest thereon, which wouldhave been paid under the provisions of this Act hadthe income disclosed in the application been declaredin the return of income before the Assessing Officeron the date of application, has been paid on or beforethe date of making the application and the proof ofsuch payment is attached with the application. …… (4) An assessee shall, on the date on which he makesan application under sub-section (1) to the SettlementCommission, also intimate the Assessing Officer in theprescribed manner of having made such application tothe said Commission (ii) in any other case, the additional amount ofincome-tax payable on the income disclosed in theapplication exceeds ten lakh rupees, and such tax and the interest thereon, which wouldhave been paid under the provisions of this Act hadthe income disclosed in the application been declaredin the return of income before the Assessing Officeron the date of application, has been paid on or beforethe date of making the application and the proof ofsuch payment is attached with the application. …… (4) An assessee shall, on the date on which he makesan application under sub-section (1) to the SettlementCommission, also intimate the Assessing Officer in theprescribed manner of having made such application tothe said Commission 245D. Procedure on receipt of an application undersection 245C.—(1) On receipt of an application undersection 245C, the Settlement Commission shall, withinseven days from the date of receipt of theapplication, issue a notice to the applicant requiringhim to explain as to why the application made by himbe allowed to be proceeded with, and on hearing theapplicant, the Settlement Commission shall, within aperiod of fourteen days from the date of theapplication, by an order in writing, reject theapplication or allow the application to be proceededwith: Provided that where no order has been passed withinthe aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to beproceeded with. (2) A copy of every order under sub-section (1) shallbe sent to the applicant and to the PrincipalCommissioner or Commissioner ……… (2B) The Settlement Commission shall,— (i) in respect of an application which is allowed tobe proceeded with under sub-section (1), within thirtydays from the date on which the application was made;or (ii) in respect of an application referred to in sub-section (2A) which is deemed to have been allowed tobe proceeded with under that sub-section, on or beforethe 7th day of August, 2007, call for a report from the Principal Commissioner orCommissioner and the Principal Commissioner orCommissioner shall furnish the report within a periodof thirty days of the receipt of communication fromthe Settlement Commission (2C) Where a report of the Principal Commissioner orCommissioner called for under sub-section (2B) hasbeen furnished within the period specified therein,the Settlement Commission may, on the basis of thereport and within a period of fifteen days of thereceipt of the report, by an order in writing, declarethe application in question as invalid, and shall sendthe copy of such order to the applicant and thePrincipal Commissioner or Commissioner: Provided that an application shall not be declaredinvalid unless an opportunity has been given to theapplicant of being heard: Provided further that where the Principal Commissioneror Commissioner] has not furnished the report withinthe aforesaid period, the Settlement Commission shallproceed further in the matter without the report ofthe Principal Commissioner or Commissioner (2D) Where an application was made under sub-section(1) of section 245C before the 1st day of June, 2007and an order under the provisions of sub-section (1)of this se