P.udaya Shankar v. Income Tax Settlement Commission, Additional Bench, Chennai, Ministry Of Finance, Department Of Revenue, 640, Anna Salai, Nandanam, Chennai – 600 035

P.Udaya Shankar ..PetitionerVs.Vs. 1. Income Tax Settlement Commission, Additional Bench, Chennai, Ministry of Finance, Department of Revenue, 640, Anna Salai, Nandanam, Chennai – 600 035. 2. Assistant Commissioner of Income Tax, Central Circle 3(2), Chennai, New No.46, Mahatma Gandhi Road, Chennai – 600 034. ..Respondents Prayer : Writ Petition filed under Article 226 of theConstitution of India, to issue a Writ of CertiorarifiedMandamus, calling for the records of the 1[st] respondent containedin its impugned order bearing No.No.TN/CN/51/2016-17/97-IT dated27.06.2018 and to quash the same as arbitrary, unjust andillegal, and to consequently, direct the 1[st] respondent toreconsider the application filed by the petitioner bearingNo.TN/CN/51/2016-17/97-IT and pass a fresh order under Section245D(4) of the Income Tax Act, 1961 after affording thepetitioner a sufficient opportunity of being heard, inaccordance with law. ORDER The order passed by the Settlement Commission dated27.06.2018 is sought to be quashed in the present writ petition.A direction is sought for to reconsider the application and topass a fresh order under Section 245(D)(4) of the Income Tax Actafter affording opportunity to the petitioner. https://hcservices.ecourts.gov.in/hcservices/ 2. The learned counsel appearing on behalf of the writpetitioner mainly contended that an application was filed underSection 245(C) of the Income Tax Act before the SettlementCommission to resolve the disputes with the Department. Thepetitioner claims that he made true and full disclosure inrespect of his income and place the facts before the SettlementCommission. However, the Settlement Commission misunderstood thefacts and circumstances, more specifically, with reference tothe loan transaction between the petitioner and Mr.J.Srinivasanand rejected the application on the said ground. The SettlementCommission erroneously made a finding that the petitioner hasadmitted the loan advance to Mr.J.Srinivasan and contributionmade in the chit business with the said Mr.J.Srinivasan on threedifferent dates and having made an offer of additional income inrespect of such amounts at the time of the search action. Thepetitioner has chosen to retract from all the above statements.Such a finding is not correct, in view of the fact that inrespect of the amount received, Mr.J.Srinivasan paid tax in hisregular assessment and those facts were not considered by theSettlement Commission and the learned counsel for the petitioneris of an opinion that there cannot be any double taxation inrespect of the same amount. 3. Relying on Section 245(C) of the Income Tax Act, thelearned counsel for the petitioner contended that the petitionerhad approached the Commission with clean hands and by statingall the facts and circumstances. However, by way ofmisinterpretation, the facts were unnecessary twisted and theapplication itself was rejected. It is a one time opportunityprovided to the assessee and therefore, the matter is to beremanded back to the Settlement Commission for freshadjudication, enabling the petitioner to explain the facts andcircumstances and further, to clarify the wrong understanding offacts by the Settlement Commission. 3. Relying on Section 245(C) of the Income Tax Act, thelearned counsel for the petitioner contended that the petitionerhad approached the Commission with clean hands and by statingall the facts and circumstances. However, by way ofmisinterpretation, the facts were unnecessary twisted and theapplication itself was rejected. It is a one time opportunityprovided to the assessee and therefore, the matter is to beremanded back to the Settlement Commission for freshadjudication, enabling the petitioner to explain the facts andcircumstances and further, to clarify the wrong understanding offacts by the Settlement Commission. 4. The learned Senior Standing counsel appearing on behalfof the respondents/Department disputed the said contentions bystating that it is a pre-condition for an assessee filing anapplication under Section 245(C) must come with full and truedisclosure and with clean hands. Once it is established thattrue and full disclosure are not made and the facts arecontroverted, then the application itself is to be rejected inlimini, in view of the pre-requisite condition contemplatedunder Section 245(C) of the Income Tax Act. In the present case,the Settlement Commission categorically made a finding thatthere is no cogent reason given for retracting the statementsmade on three different occasions except for a vague assertionthat the petitioner wish to help Mr.J.Srinivasan and that he wasunaware of the financial implications of the statements made during the course of search and immediately thereafter. Further,it is observed that the facts make it different for theCommission to accept the contention advanced by the petitionerthat the statements were made, helped Mr.J.Srinivasan. Thus, thecondition that the petitioner has made full and true disclosureof the particulars of income and all the material facts cannotbe said to be fulfilled. Thus, the Commission formed an opinionthat the Commission is unable to lay down any terms ofsettlement as required in Sub Section (6) of Section 245D.Accordingly, the Commission was constrained to send the caseback to the Department for determining the taxable income of thepetitioner for the years under consideration. 5. Relying on the categorical findings of the SettlementCommission, the learned Senior Standing counsel appearing onbehalf of the respondents cited the judgment of the High Courtof Madras in the case of S.V.Shankar Vs. Settlement Commission,reported in [2007] 292 ITR 633 (Madras). The High Court made thefollowing observations: “6. It may be noted that the jurisdiction of thiscourt under article 226 of the Constitution of Indiais not that of the appellate court. The provision forsettlement under Chapter XIX-A is in the nature of astatutory arbitration to which a person may submithimself voluntarily. Hence, the power to review thatmay be exercised under article 226 of the Constitutionof India could only be in cases where there aremistakes apparent on the face of the record, but maynot be exercised on the ground that the decision iserroneous on merits. The decisions of the SupremeCourtreportedin[1993]201ITR611)(Jyotendrasinhji v. S.I. Tripathi) and [1997] 223 ITR840(Kuldeep Industrial Corporation v. ITO) clearlylays down the parameters of the scope of the enquiryby the High Court under article 226 or by the SupremeCourt under article 136 of the Constitution of India.In the circumstances, where the Commission has, on thebasis of materials on record, come to a decision, itwould not be open to the High Court to substitute itsview on the materials disclosed in preference to thatof the Settlement Commission. In [1993] 204 ITR 616(Shriyans Prasad Jain v. ITO), the apex court heldthat the court could not go into the questions of factrecorded by the Commission. Considering the limited jurisdiction and the fact thatafter due appreciation of the facts, the SettlementCommission had arrived at its finding, we do not findany merit to accept the plea of the petitioner herein. Consequently, the writ petition stands dismissed.There will be no order as to costs.” 6. In the case of Abdul rahim Vs. Income Tax SettlementCommission, Chennai, reported in [2018] 96 taxmann.com 571(Madras), the High Court made the following observations: “16. It is to be noted at this juncture that theSettlement Commission is vested with power to rejectthe Settlement Application at three stages, asprovided under Section 245D of the said Act.Rejection at the threshold is contemplatedunder Section 245D(1). Rejection after notice to theRevenue and on perusing the report filed by theRevenue could be made under Section 245D(2). Whilerejection under Section 245D(1) is a dismissal at theadmission stage, rejection under Section 245D(2) isafter notice to the revenue and on being satisfiedwith non disclosure of true and full undisclosedincome. The third stage of rejection is contemplatedunder Section 245D(4), after directing the Revenue tofurnish records and thereafter to conduct aninvestigation or enquiry. In all these stages, thesatisfaction of the Commission with regard to trueand full disclosure of income must continue to existso as to carry over the proceedings from one stage toanother and finally, to pass an order determining theterms of settlement as provided under Section 245D(6). In other words, true and full disclosure is thelife line, satisfaction of the same should remain tolive in the mind of the Commission till the finalorder is passed. On the other hand, if the Commissionfinds, at any stage of the proceedings under Section245D that the applicant has not come before theCommission with clean hands and by disclosing trueand full income, it is empowered to reject theapplication, thereby driving the applicant to facethe regular assessment proceedings. The applicantcannot, as a matter of right, seek the Commission tocarry over the application from one stage to another,notwithstanding the fact as to whether true and fulldisclosure of income was made or not. In other words,the applicant who approaches the Commission,bypassing the regular assessment proceedings, mustprovide material facts without any suppression andestablish that the disclosure of income in theapplication is true and full in its strict sense.Otherwise, the applicant cannot find fault with theCommission in showing him the door to face theregular assessment proceedings. The term "true andfull disclosure" does not mean that whatever the amount shown by the applicant, which according to himis undisclosed income, is in fact, the true and fulldisclosure. It may be the disclosure of undisclosedincome in the view of the applicant. But whether suchdisclosure is "true and full", in its strict sense,is a question that should fetch an answer in favourof the petitioner/applicant at all stages even afterhearing the revenue. In other words, such disclosureshould not give room for deduction of concealed factwith regard to any other income either after gettinga report from the Revenue or conducting aninvestigation or enquiry at the instance of theCommission.” 7. Relying on the above judgments, the learned SeniorStanding counsel is of an opinion that the writ petition is notentertainable as the findings of the Settlement Commission areunambiguous regarding the true and full disclosure of income bythe writ petitioner. When the pre-requisite condition for filingan application under Section 245(C) of the Income Tax Act hasnot been satisfied, then there is no reason to entertain thewrit petition under Article 226 of the Constitution of India. 7. Relying on the above judgments, the learned SeniorStanding counsel is of an opinion that the writ petition is notentertainable as the findings of the Settlement Commission areunambiguous regarding the true and full disclosure of income bythe writ petitioner. When the pre-requisite condition for filingan application under Section 245(C) of the Income Tax Act hasnot been satisfied, then there is no reason to entertain thewrit petition under Article 226 of the Constitution of India. 8. Section 245(C) of the Income Tax Act contemplates'Application for Settlement of cases'. Sub clause 1 enumeratesthat 'An assessee may, at any stage of a case relating to him,make an application in such form and in such manner as may beprescribed, and containing a full and true disclosure of hisincome which has not been disclosed before the AssessingOfficer, the manner in which such income has been derived, theadditional amount of income-tax payable on such income and suchother particulars as may be prescribed, to the SettlementCommission to have the case settled and any such applicationshall be disposed of in the manner hereinafter provided.” 9. Section 245(D) contemplates 'Procedure on receipt of anapplication under section 245C'. Therefore, to entertain anapplication for settlement, these preliminary factors are to beconsidered by the Settlement Commission. Once on facts,Settlement Commission made a finding that the petitioner has notapproached the Commission with full and true disclosure, thenthere is no reason to proceed further to settle the disputesbetween the parties. 10. In the present case, the findings of the SettlementCommission are unambiguous and specific facts and circumstanceswere also relied on by the Settlement Commission to arrive adecision regarding true and full disclosure by the petitioner.Such a finding of fact need not be interfered with by the HighCourt under Article 226 of the Constitution of India, unless such facts are found to be error apparent. When there was anadjudication of facts and the Settlement Commission arrived afinding that factually the petitioner has not established thathe filed an application under Section 245(C) with true and fulldisclosure, then the High Court is expected to exerciserestraint in entertaining a writ proceedings under Article 226of the Constitution of India. 11. In the present case, the petitioner could not able toestablish that he approached the Settlement Commission withclean hands and the element of true and full disclosure ascontemplated under Section 245(C) had not been establishedbefore the Settlement Commission and therefore, there is noperversity or infirmity as such in respect of the findingsarrived. 12. It is brought to the notice of this Court that theSettlement Commission has already been abolished with effectfrom 01.02.2021. This being the factum established, the writpetition fails and accordingly, stands dismissed. No costs.Consequently, connected miscellaneous petitions are closed. s/d- Assistant Registrar(CS-III) True Copy Sub-Assistant Registrar KakTo1. Income Tax Settlement Commission, Additional Bench, Chennai, Ministry of Finance, Department of Revenue, 640, Anna Salai, Nandanam, Chennai – 600 035. 2. Assistant Commissioner of Income Tax, Central Circle 3(2), Chennai, New No.46, Mahatma Gandhi Road, Chennai – 600 034.+1 CC to Mr.R. Sivaraman, Advocate sr 23334+1 CC to Mr.A.P. Srinivas, Advocate sr 23300. PCH(CO)SP(18/05/2021) W.P.No.20141 of 2018