Mr.arun Mammen 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 : 03-08-2021 CORAM THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAMWP Nos.33431 and 33432 of 2017AndWMP Nos.36924 to 36927 of 2017 Mr.Arun Mammen ...Petitioner in WP 33431/2017Mr.Kandathil M.Mammen ...Petitioner in WP 33432/2017 vs. 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. ...Respondents in both WPs WP 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 firstrespondent contained in its impugned order bearingNo.TN/CN51/2015-16/34&35/IT, dated 06.12.2017, and to quash thesame as arbitrary, unjust and illegal and to consequently directthe first respondent to reconsider the application filed by thepetitioner bearing No.TN/CN-51/2015-16/34/IT and pass a freshorder under Section 245D(4) of the Income Tax Act, 1961, afteraffording the petitioner a sufficient opportunity of beingheard, in accordance with law. WP 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 firstrespondent contained in its impugned order bearingNo.TN/CN51/2015-16/34&35/IT, dated 06.12.2017, and to quash thesame as arbitrary, unjust and illegal and to consequently direct the first respondent to reconsider the application filed by thepetitioner bearing No.TN/CN-51/2015-16/34/IT and pass a freshorder under Section 245D(4) of the Income Tax Act, 1961, afteraffording the petitioner a sufficient opportunity of beingheard, in accordance with law. The orders of rejection dated 06.12.2017 passed by theIncome Tax Settlement Commission, rejecting the applicationssubmitted by the writ petitioners under Section 245D of theincome Tax Act, as not maintainable, are under challenge inthese writ petitions. 2. The petitioners state that they had rich and diverseexperience over several decades in the tyre and rubber industry,financeandinvestmentbusinessandrenderingConsulting/Advisory Services. The petitioners state that theyare the Managing Director and Chairman and Managing Director ofMRF Limited, a renowned Corporation with worldwide reputation. 3. It is stated that in the year 2005, with a view topursue the Consulting/Advisory Services related businessactivities outside India, the petitioners opened a Joint BankAccount (US Dollar Account) bearing No.18341724701 with StandardChartered Bank, Dubai Branch. Further, a Joint Bank Account wasopened with UBS AG Bank, Singapore Branch. In addition to this,various sub accounts were also opened subsequently in differentcurrencies with the said Banks. 4. In the year 2007, it was jointly decided between thepetitioners Shri Arun Mammen and Kandathil M.Mammen, the accountholders, to carry on the aforementioned business activitiessubstantially in the name of 'Moon Mist Enterprise Limited'('Moon Mist'). 'Moon Mist' was registered in the British VirginIsland (BVI) in 2007. The said 'Moon Mist' opened the accountwith UBS Bank, Singapore Branch. In addition to this, varioussub accounts were also opened subsequently in different https://hcservices.ecourts.gov.in/hcservices/ currencies with the said Banks. It was decided to close theJoint Bank Accounts with Standard Chartered Bank, Dubai Branchand UBS Bank, Singapore Branch and transfer the closing balanceto Moon Mist's account in UBS Bank, Singapore Branch. It isstated that Mr.Kandathil M.Mammen and Mr.Arun Mammen settled aTrust known as 'Webster International Trust' and the deed forthe same was executed by the Settlors and the Trustees, M/s.UBSTrustees (Singapore) Ltd., Singapore. https://hcservices.ecourts.gov.in/hcservices/ currencies with the said Banks. It was decided to close theJoint Bank Accounts with Standard Chartered Bank, Dubai Branchand UBS Bank, Singapore Branch and transfer the closing balanceto Moon Mist's account in UBS Bank, Singapore Branch. It isstated that Mr.Kandathil M.Mammen and Mr.Arun Mammen settled aTrust known as 'Webster International Trust' and the deed forthe same was executed by the Settlors and the Trustees, M/s.UBSTrustees (Singapore) Ltd., Singapore. 5. The said Trust floated a company namely, FairwoodServices Limited ('Fairwood') and the beneficial owners of'Fairwood' were the petitioners. The 'Fairwood' opened anaccount with UBS Bank Singapore Branch and in addition to this,'Fairwood' also opened various sub accounts subsequently indifferent currencies with the said Bank. 6. It is contended that in the year 2011, 'Moon Mist'and 'Fairwood' were liquidated and the Trust was alsoterminated. The petitioners opened a new Joint Account withFirst Gulf Bank, Dubai Branch. It was decided to closeFairwood's Bank Accounts with UBS Bank, Singapore Branch andtransfer the closing balance to the Joint Account in First GulfBank, Dubai Branch. 7. On 28.08.2013, the Deputy Director of Income Tax(Investigation Wing) issued summons under Section 131 of theIncome Tax Act to produce the documents as listed in thesummons. The petitioners replied to this on 18.09.2013, statingthat the petitioners had no investments in assets outside Indiaand had no direct or indirect connection with Moon MistEnterprises Ltd., Singapore, Portcullis Trust (Singapore) Ltd.,Share Corp Ltd., and UBS AG Limited. Further summons were issuedthereafter on 25.11.2013 and 17.12.2014 respectively by theDeputy Director of Income Tax (Investigation Wing) ['DDIT'] andthe petitioners appeared before the DDIT on 22.01.2015 and thestatements were recorded. The DDIT had confronted thepetitioners stating that information has been received from theMinistry of Finance, British Virgin Island that a Company wasincorporated under the name of Moon Mist Enterprises Limited inthat jurisdiction in 2007 and closed in 2011. TheDirectors/Shareholders of Moon Mist Enterprises Limited are thepetitioners and Mr.Rahul Mammen and the said Company does nothave any Bank Account in that jurisdiction. 8. When the Deputy Director of Income Tax(Investigation Wing) gathered informations about the foreignaccounts maintained as well as the details regarding certaintransactions, search was conducted and the process ofassessment/reassessment was commenced. The petitioners had filedapplications under Section 245C of the Income Tax Act before the Settlement Commission, seeking to settle the income taxassessment for the assessment years 2005-2006 to 2014-2015. 9. The petitioners earlier filed WP Nos.22216 to 22219of 2015 before this Court, to set aside the order passed by theIncome Tax Settlement Commission, rejecting the applications onthe ground of maintainability and for remanding the matter backfor fresh consideration. 10. This Court passed an order on 21.06.2016 andthereafter a common order was passed by the SettlementCommission under Section 245D(1) of the Income Tax Act, allowingthe applications to be proceeded with. A report was filed on16.11.2016 by the Principal Commissioner of Income Tax ('PCIT')under Section 245D(2B) of the Income Tax Act. A common reply wasfiled by the petitioners through their representatives beforethe Settlement Commission, setting forth the objections to thereport filed by the PCIT. 9. The petitioners earlier filed WP Nos.22216 to 22219of 2015 before this Court, to set aside the order passed by theIncome Tax Settlement Commission, rejecting the applications onthe ground of maintainability and for remanding the matter backfor fresh consideration. 10. This Court passed an order on 21.06.2016 andthereafter a common order was passed by the SettlementCommission under Section 245D(1) of the Income Tax Act, allowingthe applications to be proceeded with. A report was filed on16.11.2016 by the Principal Commissioner of Income Tax ('PCIT')under Section 245D(2B) of the Income Tax Act. A common reply wasfiled by the petitioners through their representatives beforethe Settlement Commission, setting forth the objections to thereport filed by the PCIT. 11. On 22.11.2016, the Income Tax Settlement Commissionpassed an order under Section 245D(2C) of the Income Tax Act,directing the PCIT to file its report under Rule 9 of the IncomeTax Settlement Commission (Procedure) Rule. Accordingly, underRule 9 of the Income Tax Settlement Commission (Procedure) Rule,a report was filed raising certain objections on 09.02.2017.Petitioners filed their reply on 23.02.2017 to the Rule 9report. 12. On 11.05.2017, a common order was passed by theIncome Tax Settlement Commission under Section 245D(3) of theIncome Tax Act, allowing the applications to be proceeded withsubject to such enquiries as ordered. On 11.08.2017, objectionswere raised regarding the report filed by the PCIT under Section245D(3) of the Income Tax Act. The petitioners submitted theirreply on 06.09.2017 and the Principal Commissioner of IncomeTax, Central-1, Chennai, submitted their reply on 05.10.2017 tothe Settlement Commission. In response, the petitionerssubmitted their reply on 10.10.2017 and further objections werealso submitted by the PCIT. Fresh submissions were alsosubmitted on 22.11.2017. For all the objections submitted by thePCIT, the petitioners submitted a written note reply to thesubmissions made by the PCIT. On 23.11.2017, hearing wasconducted by the Settlement Commission. However, the SettlementCommission has not considered any of the objections as well asthe contentions raised and rejected the application filed forsettlement in the impugned proceedings dated 06.12.2017. Thus,the petitioners are constrained to move these writ petitions. 13. The learned Senior Counsel, appearing on behalf ofthe petitioners, contended that the applications for settlement https://hcservices.ecourts.gov.in/hcservices/ filed under Section 245C of the Income Tax Act were rejected inan improper manner and without considering the disclosures madeby the petitioners in a truthful manner. The disclosure ofmaterials by the petitioners and full disclosure are to beconsidered as it is not a case where the petitioners have failedto disclose informations or materials. Petitioners submitted allthe materials available within their knowledge and certaininformations which were not within their knowledge, which wasnot produced, cannot be a ground for rejection of theapplication as not maintainable. Thus, a distinction is to bedrawn with reference to the provisions of the Income Tax Act,that full and truthful disclosure means, the disclosure made bythe petitioners, which is within their knowledge and not inrespect of the informations, which all are not within theknowledge of the petitioners. 14. In the present cases, the writ petitioners areready and willing to accept such informations gathered duringinvestigations and ready to settle the issues and pay the tax asper the demand, if any, is to be raised. This being thegenuinity put forth by the petitioners-Assessees, the SettlementCommission ought to have considered the spirit of the provisionsas well as the purpose of the settlement provisions andconsidered the objections raised by the petitioners for thepurpose of settling the issues in the manner contemplated underthe Act. 15. In order to substantiate the said contentionsraised by the learned Senior Counsel for the petitioners, thefindings made by the Settlement Commission is relied upon. Thedecisions elaborately made by the Settlement Commission wouldreveal that certain primary facts were not disclosed by theapplicants in their statement of facts being submitted by thembefore the Settlement Commission or in written statements filedbefore the Income Tax Department. 16. The learned Senior Counsel, appearing on behalf ofthe petitioners, read over the findings in paragraphs-6.1, 6.2,6.3 and 6.4 and made submissions that an inference is to bedrawn from and out of the said finding of the SettlementCommission. Throughout the findings, the Settlement Commissionformed an opinion that the petitioners-Assessees have notfurnished complete details with reference to the foreign bankaccounts. However, the Settlement Commission failed to considerthe fact that the Assessees had submitted the details of all theforeign bank accounts except, two accounts, which were closed.Further, it was informed by the Assessees that after closure ofthose two accounts, a new account was opened and the funds fromthe old accounts were transferred to the new accounts andtherefore, the funds transferred from the old account to new account is to be taken into consideration for the purpose ofdetermining the tax to be demanded. 17. When the petitioners-Assessees have establishedtheir bona fide and the non-availability of foreign bankaccounts details which were closed, the Settlement Commissionought to have considered the case of the petitioners based onthe provisions of the Income Tax Act. Contrarily, the SettlementCommission has gone to the extent of stating that thepetitioners have not furnished fully, the complete detailsregarding their foreign accounts merely based on certain factualdiscrepancies identified by the Investigation Wing and rejectedthe application, which is not in consonance with the spirit ofthe settlement provisions contemplated under the Income Tax Act,1961. 18. The learned Senior Counsel, appearing on behalf ofthe petitioners, referred the fringe issues and the manner inwhich such fringe issues were erroneously appreciated by theSettlement Commission. For each and every issue, the petitionershave submitted their detailed explanations establishing thatthey have not suppressed any fact and in fact, they areintending to settle the issues by paying the tax, which is to bedetermined by the Settlement Commission. 19. This being the bona fides explicitly expressed bythe petitioners-Assessees, the Settlement Commission rejectedthe applications based on certain factual inferences, which areimmaterial and flimsy and cannot constitute legal ground for thepurpose of rejection of applications submitted for settlement. 20. In support of the said contentions, the learnedSenior Counsel appearing on behalf of the petitioners relied onthe judgment of the Hon'ble Supreme Court of India in the caseof Brij Lal vs. Commissioner of Income Tax [(2011) 1 SCC 1],paragraphs 29, 33 and 34, it has been held as under:- 19. This being the bona fides explicitly expressed bythe petitioners-Assessees, the Settlement Commission rejectedthe applications based on certain factual inferences, which areimmaterial and flimsy and cannot constitute legal ground for thepurpose of rejection of applications submitted for settlement. 20. In support of the said contentions, the learnedSenior Counsel appearing on behalf of the petitioners relied onthe judgment of the Hon'ble Supreme Court of India in the caseof Brij Lal vs. Commissioner of Income Tax [(2011) 1 SCC 1],paragraphs 29, 33 and 34, it has been held as under:- “29. This position is clarified bySections 140-A(1-A) and (1-B) under whichinter alia interest payable for default inpayment of advance tax under Section 234-Ashall be computed on the amount of tax on thetotal income as declared in the return minusthe advance tax paid. Similarly, it isclarified vide sub-section (1-B) to Section140-A that interest payable under Section 234-B for default in payment of advance tax shallbe computed on an amount equal to the assessedtax [same words are used in Section 234-B(1)]or on the amount by which the advance tax falls short of the assessed tax. However, whatis “assessed tax” for the purposes of Section140-A is explained by Explanation. It saysthat assessed tax will be tax on the totalincome as declared in the return minus theamount of tax deducted at source or collectedat source in accordance with the provisions ofChapter XVII (which covers Sections 207, 209and 215 of the Act).” 33. Under Sections 245-C(1-B) and (1-C)the additional amount of income tax payable onthe undisclosed income shall be on the totalincome as calculated under Section 245-C(1-B).On computation of total income under Sections245-C(1-B) and (1-C), interest follows suchcomputation. It is important to note thatinterest follows computation of total income.Once such computation takes place underSection 245-C(1-B) then Section 234-B(2)applies. The said sub-section deals with thesituation where before determination of thetotal income under Section 143(1) or Section143(3) tax is paid under Section 140-A orotherwise interest shall be calculated inaccordance with Section 234-B(1) up to thedate on which tax is so paid. In that sense anapplication under Section 245-C(1) is areturn.Section245-C(1)dealswithcomputation of total income. 34. There is one more way of looking atthe Act. Chapter XIX-A refers to the procedureof settlement [see Section 245-D(1)]. Asstated above, Section 245-D(1) provides forexpeditious recovery of tax by way of pre-assessment collection. Interest on default inpayment of advance tax comes under Sections234-A, 234-B, 234-C, which fall in ChapterXVII which deals with collection and recoveryof tax. It is important to note that interestfollows computation of additional payment ofincome tax under Sections 245-C(1-B) and (1-C). This is how Sections 234-A, 234-B and 234-C get engrafted into Chapter XIX-A at thestage of Section 245-D(1).” 21. Following the above judgment, the Delhi High Courtin the case of Agson Global Pvt. Ltd vs. Income Tax Settlement https://hcservices.ecourts.gov.in/hcservices/ Commission [(2016) 380 ITR 343], wherein in paragraphs-21 and22, it has been observed as under:- 21. Following the above judgment, the Delhi High Courtin the case of Agson Global Pvt. Ltd vs. Income Tax Settlement https://hcservices.ecourts.gov.in/hcservices/ Commission [(2016) 380 ITR 343], wherein in paragraphs-21 and22, it has been observed as under:- “21. We have already expressed a similarview above. The exclusive jurisdiction of thesettlement commission to exercise the powersand perform the functions of an income taxauthority, in terms of section 245F(2) of thesaid Act, is to be exercised and performedfor the purpose of settlement of the caseunder Chapter XIX-A and not for assessmentunder Chapter XIV. That being the case, thepowers and functions which are in theexclusive jurisdiction of the settlementcommission are circumscribed by the objectand role which has been ascribed to thesettlement commission, which is to settle thecase in terms of the procedure stipulated inChapter XIX-A. Since assessment of the typecontemplated under section 143(3) is outsidethe purview of settlement proceedings, aspecial audit under section 142(2A), which isin aid of assessment, would also be beyondthe scope of settlement proceedings. Theother decisions referred to by the learnedcounsel for the revenue do not militateagainst the view we have taken. 22. In sum, we hold that theincome tax settlement commission does nothave the power to direct a special auditunder section 142(2A) in the course ofsettlement proceedings under Chapter XIX-A ofthe said Act. Consequently, the impugnedorder dated 26.04.2013, to the extent itdirects the conduct of a special audit, isquashed. The matter be placed before thesettlementcommissionforfurtherconsideration of the petitioners' settlementapplications in accordance with theprescribed procedure under Chapter XIX-A. Thewrit petition is allowed to the aforesaidextent. We are making it clear that we havenot commented upon the merits of thesettlement applications. The parties are leftto bear their own costs.” 22. The High Court of Karnataka in the case ofN.Krishnan vs. Settlement Commission , whereinin paragraph-15, it has been observed as under:- 22. The High Court of Karnataka in the case ofN.Krishnan vs. Settlement Commission , whereinin paragraph-15, it has been observed as under:- “15. With reference to the secondquestion arising for our consideration, as wehave pointed out earlier, the provision forconstitution of the Settlement Commission wasnot in existence earlier. This legislativestep was taken on the recommendation of theWanchoo Committee. As observed by us earlier,the Settlement Commission was to beconstituted for settling the complicatedclaims of chronic tax evaders as anextraordinary measure, for giving anopportunity to such persons to make trueconfession and to have the matters settledonce for all, and earn peace of mind. It is aForum for self surrender and seeking reliefand not a Forum for challenging the legalityof assessment order or orders passed in anyother proceedings. This is not only evidentfrom the provision of the Act which preventsthe application made, from being withdrawn asalso the provision which makes the decisionof the Settlement Commission final andconclusive both on question of law and fact.The power conferred on the SettlementCommission is so wide that it can take anyview on any questions of law, which itconsiders appropriate, having regard to thefacts and circumstances of a case, whichwould be applicable only to that case and ithas also the power to give immunity againstprosecution or imposition of penalty. It isin this background we should find out theanswer to the second question, namely, thescope for interference against a decision ofSettlement Commission in a petition underArticle 226 of the Constitution of India. Theprovision for settlement would show that itis in the nature or statutory arbitration, towhich a person may submit himselfvoluntarily. Therefore, it appears to us thatthe scope is much more restricted than thepower of the Court to interfere with anarbitration award. Regarding the jurisdictionof the Civil Court to deal with anarbitration award, the Supreme Court in thecase of Coimbatore District Podu ThozillarSamgam v. Bala Subramania Foundry [(1987) 3SCC 723 : AIR 1987 SC 2045.] has stated thus: “The Court was alsoentrusted with the power to modifyor correct the award on the groundof imperfect form or clericalerrors, or decision on questionsnot referred, which were severablefrom those referred. The Court hadalso power to remit, the award whenit had left some matters referredundetermined or when the award wasindefinite, where the objection tothe legality of the award wasapparent on the face of the award.The Court might also set aside theaward on the ground of corruptionor misconduct of the arbitrator, orthat a party had been guilty offradulent concealment or wilfuldeception. But the Court could notinterfere with the award ifotherwise proper on the ground thatthe decision appeared to it to beerroneous. The award of thearbitrator was ordinarily final andconclusive, unless a contraryintention was disclosed by theagreement. The award was thedecision of a domestic Tribunalchosen by the parties, and theCivil Courts which were entrustedwith the power to facilitatearbitration and to effectuate theawards,couldnotexerciseappellate powers over the decision.Wrong or right the decision wasbinding, if it be reached fairlyafter giving adequate opportunityto the parties to place theirgrievances in the manner providedby the arbitration agreement. ThisCourt reiterated in the saiddecision that it was now firmlyestablished that an award was badon the ground of error of law onthe face of it, when in the awarditself or in a document actuallyincorporated in it, there was foundsome legal proposition which wasthe basis of the award and whichwas erroneous.” In our opinion, many of the groundson which arbitration award could be setaside, would not be available in view of thenature and jurisdiction of the SettlementCommission. We are of the view that adecision of Settlement Commission could beinterfered with only. (i) if grave procedural defect such asviolation of the mandatory proceduralrequirements of the provisions in the ChapterXIX-A and/or violation of Rules of naturaljustice is made out; (ii) if it is found that there is no nexusbetween the reasons given and the decisiontaken by the Settlement Commission. (iii) this Court cannot interfere eitherwith an error of fact or error of law,alleged to have been committed by theSettlement Commission. We answer the second question accordingly.” 23. Relying on the abovesaid judgments, the learnedSenior Counsel for the petitioners, is of an opinion that whenthe petitioners have approached with true disclosure ofmaterials, in the present cases regarding the foreign bankaccounts details and certain particulars, which all are notwithin their knowledge could not able to be produced, theSettlement Commission ought to have considered the genuinity ofthe petitioners-Assessees in entirety and considered theapplications for settling the issues. 24. Contrarily, the Settlement Commission on certainfringe issues and based on the flimsy grounds formed an opinionthat the petitioners have not submitted the details of theirbank accounts truly and fully and rejected the applications. Inview of the facts and circumstances, the orders of SettlementCommission are to be construed as in violation of the truespirit of the settlement provisions contemplated under theIncome Tax Act. 25. The learned Senior Standing Counsel, appearing onbehalf of the second respondent, objected the contentions raisedon behalf of the petitioners, by stating that the preconditionfor entertaining an application under Section 245C is todisclose the facts truly and fully. The proviso clause is self-explanatory and unless the ingredients of the Section iscomplied with the Settlement Commission is not obligated toentertain the applications for settling the issues.Therefore,the findings of the Settlement Commission are relevant for the https://hcservices.ecourts.gov.in/hcservices/ purpose of considering the preliminary requirements contemplatedunder Section 245C of the Income Tax Act. 26. The learned Senior Standing Counsel appearing onbehalf of the second respondent contended that it is a specialprovision contemplated for the benefit of the Assessees tosettle the issues on certain circumstances. The Income TaxAuthorities are empowered to investigate and initiate action forassessment or reassessment by following the procedures. However,the Assessees are granted with the benefits to settle the issuesin the manner contemplated under Section 245C and the relatedprovisions. Thus, the precondition to be complied with isimportant and in the event of non-compliance, the applicationitself is liable to be rejected and in the present cases, it wasrejected by recording the findings and thus, there is noinfirmity as such. 27. The learned Senior Standing Counsel, appearing onbehalf of the second respondent, drew the attention of thisCourt with reference to the findings of the SettlementCommission in its order as well as the manner in which thepetitioners had approached the Settlement Commission forsettling the issues. By reading those relevant paragraphs, thelearned Senior Standing Counsel asserted by stating that theSettlement Commission has rightly rejected the application asnot maintainable in view of the fact that the petitioners-Assessees have not approached the Settlement Commission withclean hands. 27. The learned Senior Standing Counsel, appearing onbehalf of the second respondent, drew the attention of thisCourt with reference to the findings of the SettlementCommission in its order as well as the manner in which thepetitioners had approached the Settlement Commission forsettling the issues. By reading those relevant paragraphs, thelearned Senior Standing Counsel asserted by stating that theSettlement Commission has rightly rejected the application asnot maintainable in view of the fact that the petitioners-Assessees have not approached the Settlement Commission withclean hands. 28. Considering the arguments as advanced by thelearned Senior Counsel for the petitioners as well as thelearned Senior Standing Counsel for the Income Tax Department,this Court is of the considered opinion that the benefit ofsettlement of cases are provided under the Income Tax Act forthe benefit of the Assessees and therefore, the applicationsubmitted by any Assessee must be in compliance with thepreconditions and ingredients contemplated under Section 245C ofthe Income Tax Act. 29. The dictionary meaning of the word 'Settlement' is“an official agreement intended to resolve a dispute orconflict”. Therefore, it is necessary that a party approachingthe Income Tax Department by filing an application forsettlement of cases must approach with clean hands and bycomplying with the preconditions stipulated for entertaining anapplication in the present cases under Section 245C of theIncome Tax Act, 1961. 30.Let us consider the conditions stipulated forentertaining an application for settlement of cases under Section 245C of the Income Tax Act. Sub-clause (1) of Section245C 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 suchincome has been derived, the additional amount of income-taxpayable 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 under the Act”. 31.The procedures for disposal of the application arealso contemplated. Therefore, the Settlement Commission is boundto follow the procedures contemplated scrupulously not only atthe time of entertaining an application, but also whileproceeding with the application, which is entertained till itsdisposal. 32. The first condition is that the application must bein the prescribed format. The second condition is that theapplication must contain full and true disclosure of the incomehas not been disclosed before the Assessing Officer. The thirdcondition is that in the manner in which such income has beenderived must be stated in the application and fourth conditionis that the additional amount of income tax payable on suchincome and such other particulars also may be prescribed to theSettlement Commission. 33.In the event of complying with all the abovesaidconditions, the Settlement Commission is empowered to entertainthe application and dispose of the said application by followingthe procedures contemplated under Section 245D of the Income TaxAct, 1961. Section 245D contemplates the procedures on receiptof an application under Section 245C. Therefore, the function ofthe Settlement Commission, at the first instance, would be toascertain whether the application is filed by any Assessee incompliance with the conditions stipulated under Section 245C ornot. 33.In the event of complying with all the abovesaidconditions, the Settlement Commission is empowered to entertainthe application and dispose of the said application by followingthe procedures contemplated under Section 245D of the Income TaxAct, 1961. Section 245D contemplates the procedures on receiptof an application under Section 245C. Therefore, the function ofthe Settlement Commission, at the first instance, would be toascertain whether the application is filed by any Assessee incompliance with the conditions stipulated under Section 245C ornot. 34. In this context, this Court has to consider thereasons for rejection of the applications submitted by thepetitioners as not maintainable and the sustainability of thefindings recorded by the Settlement Commission with reference tothe conditions stipulated under Section 245C of the Income TaxAct. 35. Firstly, it is relevant to look into the contentsof the applicants/ petitioners in their applications filed underSection 245C of the Income Tax Act, which reads as under:- “The applicants stated that theyhave been filing their returns regularlywithout declaring their income deposited inforeign bank accounts in their own names or inthe name of Moon Mist Enterprises Ltd andFairwoodServicesLimited. MoonMistEnterprises Ltd., is a company registered in2007 in British Virgin Island (BVI). Theapplicants settled a trust known as WebsterInternational Trust which floated a company,which is Fairwood Services Ltd. FairwoodServices Ltd opened an account with UBS Bank,Singapore Branch and funds were transferredMoon Mist Enterprises Ltd with UBS Bank fromtime to time to Fairwood Services Ltd with UBSBank. The Companies Moon Mist Enterprises Ltdand Fairwood Services Ltd., were liquidated in2011 and the Trust Webster International wasterminated in 2011. Thereafter all recordspertaining to the said entities weredestroyed. The information relating toundisclosed foreign bank accounts/assets hascome to the notice of the Department in theyear 2013. The Applicants were served withnotices under Section 131/131(1A) dated28.08.2013 and 25.11.2013 (pg nos.50/1 and50/2, APB Vol.I) and the statements wererecorded from them. In 2014, more informationhad come under Section 90 or 90A of the Act tothe Department under the exchange ofinformation and the Applicants were againserved with notices under Section 131 of theAct on 17.12.2014 (pg no.50/3, APB Vol.I) andonce again statements were recorded from them.With a view to disclose the income depositedin foreign accounts in their names or in thebank accounts of companies namely Moon MistEnterprises Ltd and Fairwood Services Limitedbefore the Department, they have filed revisedreturns on 21.05.2015 for A.Ys 2005-2006 to2012-2014 in order to get the same regularisedby way of issuance of notice under Section 148of the I.T. Act, 1961. The revised returnsfiled were non-est. The Assessing Officer inturn issued notices under Section 148 for A.Ys2005-2006 to 2012-2013 on 29.05.2015. Inresponse to the notices, the applicants havefiled their returns on 01.06.2015.” 36. The petitioners-Assessees have categoricallyadmitted that they have been filing their returns regularlywithout declaring their income deposited in foreign bankaccounts in their own name or in the names of Moon MistEnterprises Limited and Fairwood Services Limited. Thus, thepetitioners have made a clear admission that they have not atall submitted the details regarding the foreign bank accounts intheir names and the connected details. Thus, it is the dutymandated on the part of the Assessees to furnish all the detailsrelating to such foreign bank accounts and any omission or non-disclosure of true and full facts would be a ground to rejectthe application filed for settlement. 36. The petitioners-Assessees have categoricallyadmitted that they have been filing their returns regularlywithout declaring their income deposited in foreign bankaccounts in their own name or in the names of Moon MistEnterprises Limited and Fairwood Services Limited. Thus, thepetitioners have made a clear admission that they have not atall submitted the details regarding the foreign bank accounts intheir names and the connected details. Thus, it is the dutymandated on the part of the Assessees to furnish all the detailsrelating to such foreign bank accounts and any omission or non-disclosure of true and full facts would be a ground to rejectthe application filed for settlement. 37.The learned Senior Counsel for the petitionerswould urge this Court by stating that it is not as if thepetitioners have not furnished the details. They have furnishedthe details which all are within their knowledge and certaininformations and details, which were not within their knowledge.Thus, the details were not produced and therefore, it is to beconstrued that the petitioners approached the SettlementCommission with clean hands. 38.The question arose whether the petitioners havedisclosed fully and truly all the informations and the materialsrelating to their foreign bank accounts and certain informationsnot produced by the Assessees may be construed as not withintheir knowledge. In this regard, the findings of the SettlementCommission are relevant. Close reading of the findings of theSettlement Commission under the caption 'DECISION' inparagraphs-6.1, 6.2, 6.3 and 6.4 would provide a clear picturethat it is not a mere non-disclosure on the ground of lack ofknowledge about the information and the non-furnishing of trueand complete full facts not only established but the SettlementCommission could able to arrive a conclusion that there wassuppression of facts on the part of the petitioners-Assessees.The abovesaid paragraphs are extracted for the benefit ofunderstanding the relevancy of the findings made by theSettlement Commission:- “6.1 We have considered the submissionsmade by th Department, learned AR, the reportsincluding information received from FT&TRDivision and the relevant records. On thefresh submissions relating to foreign bankaccounts and documents, further opportunitywas given to the learned AR to make theirwritten submissions. The applicants disclosedthe accumulated balances in the foreign bankaccounts in the name of Moon Mist EnterprisesLimited, a British Island Virgin Company andFairwood Services Limited (Company floated by Webster International Trust) on the basis ofbank statements. We observe that certainprimary facts were not disclosed by theapplicants in their Statement of Facts formingpart of the settlement application or in thereturn of income filed before the Department.In spite of our directions in 245D(3) order,the applicants cooperation was not forthcomingin this regard. Further the manner in whichthe income was derived is also not statedfully and truly. Webster International Trust) on the basis ofbank statements. We observe that certainprimary facts were not disclosed by theapplicants in their Statement of Facts formingpart of the settlement application or in thereturn of income filed before the Department.In spite of our directions in 245D(3) order,the applicants cooperation was not forthcomingin this regard. Further the manner in whichthe income was derived is also not statedfully and truly. 6.2 The applicant is unable to furnishcomplete details with reference to A/cNo.2244535 – Standard Chartered Bank Dubai,Fixed Deposit accounts, salary income, trailof banking transactions with Mr.PercyBenhamin, etc. The Commission is of the viewthat there is suppression of facts relating tosource of foreign bank credits, the year andthe manner in which such income were earned.This requires deeper investigation into thecase of the applicants. In the statement offacts, the applicants stated that they had 10foreign bank accounts each. But the applicantsadmitted in the final submission stage afterthe PCIT pointed out during 245D(4) hearingand subsequently in the Affidavit that theyhad running A/c Nos.2244535 Standard CharteredBank and opened A/s No.1685646 of FGB, Dubai.The credits in the bank account No.2244535 arevital information which were not shown in theSOF to determine the correct total income forthe relevant assessment years. The applicantsstated that in spite of their best efforts,they were not able to gather the details ofthis bank account. It is the applicants ownaccount and in order to determine theirincome, it is their responsibility to furnishthe full facts and account details forsettlement of their case. There is deliberatesuppression and the applicants have not comeforward do disclose fully and truly all facts.The information about bank account No.2244535and date of credits and source of funds forall the credits including US $ 499512.37 isessential to determine the correct additionalincome for the Assessment Year 2005-2006.Income cannot be determined by the applicantskeeping the date of transfer of A/cNo.18341724701 as the basis, which is not envisaged in the provisions of Income Tax Act.It is incorrect proposition to tax suchtransfers on the basis of 'date of transfer'instead of 'year in which such income orcredit arose' to the applicants. Eachassessment year is a separate unit/period forassessment of total income under theprovisions of Income Tax Act. The learned ARduring the hearing argued that once the fundstransferred is disclosed, there is no need toexamine further with regard to the source.This is not an acceptable proposition. We haveto determine correct total income only inaccordance with the provisions of Income TaxAct. We cannot shift the income from earlieryear to next year or to previous year forassessment. To determine correct income in aparticular assessment year, applicants shouldhave furnished full and true date of creditsor receipts of income including those in thebank account No.2244535 of Standard CharteredBank, Dubai, which they failed. For anapplication to be full and true, it isimperative for the applicants to furnishcomplete details relating to the bankaccounts. The data and information availableare also incomplete to determine the correcttotal income in accordance with the provisionsof Income Tax Act. In the absence of full andtrue facts in the SOF filed with thesettlement application, the Commission alsofeels that justice will be done only by makingfurther detailed investigation for properassessment of correct income by theDepartment. Any adhoc settlement may not servethe purposes of provisions of the I.T Act.Further, enquiries in the case of theapplicants activities in China and details oftrail of banking transactions with Mr.Percyare still in progress through FT&TR Division.As per the Death Certificate of PercyBenhamin, the usual address given is 4/88, TheRamble,Booragoon,WesternAustralia,Australia. But the applicants in their SOF(page 17) filed along with the settlementapplications have given the following address:Mr.Percy Benhamin, L-26, Rufino Pacific Tower,6784 Ayala Avenue, Makati City, 1226Philippines. Therefore, the information givenin the Statement of Facts filed along with the applications are incomplete and not full.6.3 According to the information receivedfrom FT&TR Division, there was a Fixed Deposit(No.93417247001) in the name of the applicantswith maturity amount of USD 1,05,285. Theapplicants have neither disclosed this entryin the books nor the exact source ofinvestment for the same. The date of depositas per information received from the U.A.E.Authorities is 12/02/2005. The Department'scontention on this issue is that though theapplicants have disclosed the proceeds of FDof USD 1,05,285 as commission income in FY2010-2011 on the date of maturity, the amountof deposit should have been disclosed asincome in FY 2004-2005 and the interest shouldhave been declared in each year till FY 2010-2011 in accordance with the provisions of I.T.Act. Hence the applicants have not disclosedcorrectly and truly the unaccounted income andthe manner in which such income has beenearned. The applicants claimed that the F.Damount as well as the interest thereon relatedto commission income. Accordingly, both theyear of disclosure and the nature of source ofincome are not disclosed truly and correctly. 6.4 According to the Department, thoughthe applicants have filed copy of AED A/cNo.10360011666284010 in FG Bank, Dubai, thetransactions in the bank a/c have not beenmade part of the books of accounts prepared bythe applicants for the purpose of disclosurebefore the Commission. There is a credit entryof AED 5000 on 03.07.2013 which has not beendisclosed. But, when questioned during thehearing, the applicants have merely submittedthat this deposit wa