The Commissioner Of } Income Tax – 15 Mumbai } Having His Office v. S. C. Dharmadhikari & A. K. Menon, Jj. :- April 24, 2015 :- May 8, 2015

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1767 OF 2013 The Commissioner of}Income Tax – 15 Mumbai}having his office 124, Matru}Mandir, 1[st] floor, Tardeo Road}Mumbai – 400 007}Petitionerversus1. Income Tax Settlement}Commission Additional Bench}S. K. Rathod Marg}Mahalaxmi Chambers, }Mumbai – 400 034}}2. M/s. Rasiklal Kantilal & Co.}145, 1[st] floor, Kika Street}Gulalwadi, Mumbai – 400 004}Respondents Mr. P. C. Chhotaray for the Petitioner. Mr. J. D. Mistri-Senior Advocate withMr.Nishant Thakkar i/b. M/s. Haresh Mehtaand Co. for the Respondents. CORAM :- Reserved on Pronounced on S. C. DHARMADHIKARI &A. K. MENON, JJ.:- April 24, 2015:- May 8, 2015 JUDGMENT :- (Per S.C.Dharmadhikari) 1)Rule. Respondents waive service. By consent of theparties, Rule made returnable forthwith. 2)By this Writ Petition under Article 226 of the Constitutionof India, the Petitioner has prayed for issuance of a writ of certiorari orwrit in the nature of certiorari or any other appropriate writ, directionor order to quash and set aside orders passed on 26[th] March, 2013 and10[th] May, 2013, Annexures 'I' and 'J' to the Writ Petition. 3)The principal relief is claimed in the following factualbackground:- A Commission entitled as Income Tax SettlementCommission has its office at Mumbai. The second Respondent is anAssessee, who is taxed for its income by the Mumbai Income TaxCommissionerate, the Petitioner before us. It is this second Respondentwho approached the Respondent No. 1 Commission seeking itsintervention and under the statutory scheme. This statutory scheme isevolved within the framework of the Income Tax Act, 1961 (hereinafterreferred to as “the IT Act”). We shall make a reference to this scheme alittle later. 4)From the record, it appears that in the assessment year2010-11, a scrutiny assessment was undertaken, in which it was noticedthat the second Respondent (for short “the Assessee”) had purchasedmaterials/goods from various parties. Some parties, whose namesappeared in the list, were suspicious. It is alleged that they issued bogus bills. There was no delivery of goods nor was there a transactiondescribed and defined as “sale” within the meaning of the then BombaySales Tax Act, 1959/Central Sales Tax Act, 1956/Maharashtra ValueAdded Tax Act, 2002. Thus, no transaction of the nature referred to inthese enactments was reported. The names of such suspicious, bogusdealers were put up on the website of the Maharashtra Sales TaxDepartment. 5)To verify the genuineness of purchase transactions fromone such party, namely, M/s. Nutan Metals, information under section133(6) of the IT Act was called for but the said notice was returnedback. However, on 12[th] February, 2013, one Shri. Panchanmal BokadiaProprietor of M/s. Nutan Metals made a statement before the AssessingOfficer confirming that the said M/s. Nutan Metals issues bills forearning commission without giving delivery of goods. Accordingly, theAssessing Officer determined the highest credit balance atRs.28,09,288/- as appearing on 10[th] December, 2009 in the ledgeraccount of M/s. Nutan Metals as the peak credit and the same was thustreated as unexplained expenditure under section 69C of the IT Act andthis amount was deemed to be income of the Assessee for the relevantassessment year 2010-11. 6)As per information received from the Director of IncomeTax (Intelligence and Criminal Investigation) dated 8[th] March, 2013,one Shri. Mahendra S. Vora was found to have made huge cash depositsduring financial year 2009-10. In a statement before the Income TaxOfficer (Intelligence and Criminal Investigation) - II, Mumbai,Shri.Mahendra S. Vora admitted that the deposits in the bank accountdid not pertain to him but to the Assessee firm. Further, statement ofShri. Rasiklal M. Morakhia, partner in the Assessee firm was alsorecorded on the same day and the said Shri. Rasiklal M. Morakhiaadmitted that these deposits pertained to the Assessee firm and did notpertain to Shri. Mahendra S. Vora. The Assessing Officer, therefore,held that the cash deposits and other deposit as agreed by Shri.Mahendra S. Vora and subsequently agreed by Shri. Rasiklal M.Morakhia totaling Rs.1,86,48,101/- belonged to the Assessee firm andthe same was added as income in the hands of the Assessee firm. 7)The Assessment order dated 18[th] March, 2013 forAssessment year 2010-11 was not only passed but also sent to theAssessee firm through Registered Speed Post on 18[th] March, 2013 itselfand the necessary entry on the computerized system of the Department(AST) was also made on 18[th] March, 2013 itself. 8)For assessment year 2011-12, a notice under section 148was issued on 15[th] March, 2013 and it was served on the Assessee firmon 18[th] March, 2013. Thus, both, the assessment for assessment year2010-11 and the notice under section 148 for assessment year 2011-12have been deemed to be served/served respectively on the Assessee firmbefore the Assessee filed application before the Settlement Commissionunder section 245C of the IT Act. Annexure 'B' is the copy of the noticeissued under section 148 of the IT Act dated 15[th] March, 2013,Annexure 'C' is the copy of reasons recorded for issuance of noticeunder section 147 of the IT Act, Annexure 'D' is the copy ofacknowledgment of service of notice under section 148 of the IT Actand Annexure 'E' is the copy of acknowledgment of the assessmentorder. 9)The Assessee firm, knowing fully well that the boguspurchases shown by the Assessee had been detected by the Income TaxDepartment for all the years, namely, assessment year 2010-11 to 2012-13 and also that concealed income in the form of cash deposits hadbeen detected by the Department, filed a settlement application forassessment years 2010-11 to 2012-13 on 18[th] March, 2013 undersection 245C of the IT Act. In this settlement application, additionalincome was declared as follows:- WP.1767.2013.Judgment.doc 10)The relevant facts, as received from the Director of IncomeTax (Intelligence and Criminal Investigation) Mumbai etc., werebrought to the notice of the Settlement Commission on 21[st] March,2013 itself by a letter No. CIT-15/Rasiklal & Co./2013-14/1688 dated19[th] March, 2013. Copy of the assessment order for assessment year2010-11 in the case of the Assessee firm was also before the SettlementCommission on 21[st] March, 2013 itself. Thus, before the date of hearingunder section 245D(1) of the IT Act on 22[nd] March, 2013, all therelevant facts were before the Settlement Commission. TheCommission was requested to take a considered view in the matter butall these were simply brushed aside and not even have been commentedupon in the order of the Settlement Commission passed under section245D(1) of the IT Act. The settlement application made under section245C of the IT Act was allowed to be proceeded with vide order dated26[th] March, 2013 passed by the Settlement Commission under section245D(1) of the IT Act, copy of which is annexed as Annexure 'H'. Acopy of the said order dated 26[th] March, 2013 was forwarded by theSettlement Commission to the Petitioner asking for a report undersection 245D(2B) of the IT Act. In response to this letter, the required report under section 245D(2B) dated 1[st] May, 2013 was submitted tothe Settlement Commission. 11)In the report of the Petitioner, filed under section245D(2B) of the IT Act, it was brought to the notice of the SettlementCommission that there was no pending assessment for assessment year2010-11, as the assessment order was already issued before the filing ofthe settlement application under section 245C of the IT Act. Further,notice under section 148 for assessment year 2011-12 was also servedon the Assessee firm before the Assessee filed the application before theSettlement Commission under section 245C of the IT Act. Hence, forboth these assessment years, the settlement application filed undersection 245C of the IT Act was invalid. Further still, it was also broughtto the notice of the Settlement Commission that bogus purchases shownby the Assessee had been detected by the Income Tax Department forall the years, namely, assessment years 2010-11 to 2012-13 and alsothat concealed income in the form of cash deposits had been detectedby the Department before the filing of the said settlement applicationunder section 245C of the IT Act, which was much more than theundisclosed income declared by the Assessee firm. It was pointed out tothe Settlement Commission that even the copies of the detected bankaccounts were not submitted by the applicant in the application for settlement and thus, the application did not disclose relevant crucialmaterial facts. Hence, the Assessee firm had not fulfilled one of themain requirements for availing the jurisdiction of SettlementCommission under section 245(1), which was to make a full and truedisclosure of its income which has not been disclosed before theAssessing Officer and to specify the manner in which such income hasbeen derived. It is submitted that if at any stage including the stage ofadmission or otherwise, the Department could demonstrate that theAssessee has failed on any of these counts, the application as per settledlaw is liable to be thrown out by the Settlement Commission. 12)The Settlement Commission did not consider thearguments of the Petitioner and has brushed aside the case of thePetitioner. The order of the Settlement Commission dated 10[th] May,2013 not declaring the application of the Assessee firm as invalid undersection 245D(2C) of the IT Act is woefully silent on the objectionsraised by the Petitioner. The Settlement Commission, in its orderpassed under section 245D(2C), in its majority view, merely agreedwith the Assessee firm by holding that the matter had not reachedfinality as yet and as such it was debatable whether the issues and theobservation made by the Petitioner would apply in the facts andcircumstances of the case of the Assessee firm. The dissenting note of the 3[rd] Member Shri. S. K. Mishra, which was in accordance with thelaw relating to settlement of disputes as envisaged under the IT Act,was erroneously shot down by the majority view of the Members of theSettlement Commission. It is in the above facts and circumstances thatthe Petitioner impugns the orders passed by the SettlementCommission. the 3[rd] Member Shri. S. K. Mishra, which was in accordance with thelaw relating to settlement of disputes as envisaged under the IT Act,was erroneously shot down by the majority view of the Members of theSettlement Commission. It is in the above facts and circumstances thatthe Petitioner impugns the orders passed by the SettlementCommission. 13)Mr. Chhotaray learned Counsel appearing for the Petitionersubmitted that the matter involves three assessment years, namely,2010-11, 2011-12 and 2012-13. He submits that an assessment orderwas passed for assessment year 2010-11, in which, it was disclosed thatthe Assessee firm is engaged in the business of trading in ferrous andnon-ferrous metals. It consist of three partners, namely Sevantilal M.Morakhia, Rasiklal M. Morakhia and Ashok M. Morakhia. Rasiklal M.Morakhia has 34% shares in the profits and losses of the firm, whereas,the others two have 33% each. During the year under consideration,the Assessee earned gross profit of 2.47% and net profit 0.94% on aturnover of Rs.7,62,41,888/-. Mr. Chhotaray submits that during thecourse of scrutiny, the Assessee submitted details and claimedpurchases to the tune of Rs.7,75,62,590/- and sales of Rs.7,62,41,888/-.The major items purchased by the Assessee include stainless steel, P.bronze and aluminum pipes, tubes, rods, sheets plates etc. In order to verify the genuineness of purchases, notices were issued under section133(6) of the IT Act to the two parties, namely Nutan Metals andMumbai Metals. Notices were issued on 9[th] January, 2013. MumbaiMetals gave a written reply/submission on 23[rd] January, 2013 and filedcopy of Ledger Account of M/s. Rasiklal Kantilal and Company and itsown return of income, which was filed for assessment years 2009-10and 2010-11. It stated that there was no transaction with M/s. Rasiklaland Company for assessment year 2008-09. In respect of Nutan Metals,there was no compliance. On 2[nd] January, 2013, Shri.Dinesh Joshi C. A.attended and stated that all the details called for were filed but it wasnoticed that the notice under section 133(6) issued to this party wasreturned back by postal authorities. Therefore, the Assessee wasdirected by a letter in writing to attend the proceedings on 11[th]February, 2013 and that is how the Assessee's representative attendedalong with the proprietor of M/s. Nutan Metals. The summons wasissued and served on the proprietor of Nutan Metals and Mr. Chhotarayrelies upon the answers given by this person to some of the questionsposed during the course of assessment proceedings. Mr.Chhotarayrelied upon para 5.3 of the assessment order to urge that if the Assesseefails to substantiate any expenditure debited to the trading/profit andloss account with adequate supporting evidence and by establishing thegenuineness of the purchases, then, it is apparent that the adverse inference drawn must be sustained. The Settlement Commission failedto notice that if the Assessment has proceeded and resulted in anassessment order, then, the application for settlement and made to theCommission in terms of section 245C of the IT Act was notmaintainable. There was no pending assessment for assessment year2010-11, as the assessment order was already issued before the filing ofthe settlement application under section 245 of the IT Act. Further,notice under section 148 of the IT Act for assessment year 2011-12 wasalso served on the Assessee firm before the Assessee filed theapplication. The pendency of proceedings under the IT Act is a sine quanon for the admission of the application before the Commission. Thus,when a notice had been served and assessment order has been passedfor two assessment years referred above, the Settlement Commissionhad no jurisdiction to accept the application. Mr. Chhotaray criticisedthe approach of the Commission and submitted that the Commissionshould have not accepted the stand of the Assessee that he had notreceived the assessment order. In the circumstances, Mr. Chhotaraywould submit that the Commission's order is ex-facie erroneous, withoutjurisdiction and illegal. Mr. Chhotaray relied upon the observations ofthe Assessing Officer in the assessment order. He also relied upon thereasons which have been recorded for issuance of notice under section144 of the IT Act. According to Shri. Chhotaray, this would indicate as to how the Assessee indulged in manipulation of accounts. There wasno genuine business activity and the alleged purchases were not backedby strong and reliable evidence. These are accommodation entries andas deposed by the concerned persons during the assessmentproceedings. Shri. Mahendra S. Vora has admitted the fact that thedetails were bogus and were sufficient to accommodate parties like theAssessee. 14)Mr. Chhotaray then submits that the Commission's ordersfailed to take note of the fact that the Respondent No. 2 was required tomake a full and true disclosure of income and the manner in which thesame was derived. He should have, in the application itself, disclosedas to how conditions precedent for a valid application are satisfied.These conditions have to be strictly complied with. Section 245C of theIT Act mandates a full and true disclosure. Unless these conditions arecomplied with, the application of Respondent No. 2 under section 245Cof the IT Act was not maintainable. The Respondent No. 2 has admittedand owned up the two undisclosed bank accounts. He had admitted theentries reflected in these bank accounts as far as capital and profit fromthe undisclosed trading. He offered the amounts to tax. However,copies of the accounts did not form part of the settlement application.The disclosure of undisclosed income for assessment year 2010-11 of Rs.1,05,25,216/-, of Rs.8,97,111/- for assessment year 2011-12 andRs.41,72,337/- for assessment year 2012-13 was much less than whathad already been detected by the Department as bogus purchases andconcealed income by way of cash deposit. Further, the inquiry whichwas made by the Directorate of Intelligence and Criminal Investigation,Mumbai, which included recording of statement of both, of the AssesseeApplicant and his accomplice, were not disclosed before the SettlementCommission. The fact that M/s. Nutan Metals had denied making salesto the Assessee and that all this was known to the Department was alsohidden by Respondent No. 2 from the Settlement Commission. Thisentire material was brought before the Settlement Commission togetherwith supporting documents. There is also a copy of the assessmentorder, wherein the partner of Respondent No. 2/Assessee's admissionwas recorded on 1[st] February, 2013. This was also not in theapplication filed before the Settlement Commission. It is apparent fromthe procedure followed that an application before the Commission is intwo parts. One is open and the other is confidential. The submissionsof Mr.Chhotaray pertain to the open part of this application and which,according to him, is silent on the aforestated material facts. If theapplication was not truthful and complete, then, the Commission wasnot obliged to entertain it is the submission of Mr. Chhotaray. 15)In the written arguments tendered by Mr. Chhotaray, it issubmitted that in the report under section 245D(2B) of theCommissioner to the Settlement Commission, the Commissioner hadalso highlighted that the Assessee had not made a full and truedisclosure of its income in the settlement application. Along with hiscommunication dated 19[th] March, 2013, the Commissioner had alsoenclosed a copy of the assessment order dated 18[th] March, 2013 passedby the Assessing Officer. The above two reports may kindly be perused.Two preconditions should be satisfied before proceeding with thesettlement application. The Assessee should make a full and truedisclosure of his income which has not been disclosed before theAssessing Officer and the Assessee should also disclose the manner inwhich such income has been derived. Through these twocommunications of the Commissioner to the Settlement Commissiondated 19[th] March, 2013 and report under section 245D(2B) of the ITAct, it was brought to the notice of the Settlement Commission aboutthe assessment made and that the Assessee had not made a full and truedisclosure of its income and the manner of earning such income. 16)The Settlement Commission was apprised of the boguspurchases by these two communications of the Commissioner to theSettlement Commission, namely, the communication dated 19[th] March, 2013 and the report under section 245D(2B) of the IT Act. It was alsoargued during the hearing before the Settlement Commission.Therefore, the Settlement Commission had material before it to holdthat the Assessee had not made full and true disclosure of income andthe manner of earning the same. Therefore, the Settlement Commissionshould have rejected the application on the ground that the disclosurewas not full and true. 17)Thus, the assessee had knowledge that the Department wasaware of its bogus purchases when it made the settlement application.Yet, it did not make a disclosure of these transactions in the settlementapplication. The Settlement Commission also was aware through thetwo captioned reports of the Commissioner and at the hearing aboutthese bogus purchases before it considered the applications for passingthe orders under sections 245D(1) and 245D(2C). Still it held by amajority view that full and true disclosure has been made. As rightlyheld by the third dissenting Member, the Assessee had not made a fulland true disclosure of income and the manner of earning the income. 18)In support of the above contentions, Mr. Chhotaray reliesupon the following decisions:- 17)Thus, the assessee had knowledge that the Department wasaware of its bogus purchases when it made the settlement application.Yet, it did not make a disclosure of these transactions in the settlementapplication. The Settlement Commission also was aware through thetwo captioned reports of the Commissioner and at the hearing aboutthese bogus purchases before it considered the applications for passingthe orders under sections 245D(1) and 245D(2C). Still it held by amajority view that full and true disclosure has been made. As rightlyheld by the third dissenting Member, the Assessee had not made a fulland true disclosure of income and the manner of earning the income. 18)In support of the above contentions, Mr. Chhotaray reliesupon the following decisions:- 1(1979) 4 SCC 121 in the case of Commissioner of Income Tax(Central) vs. B. N. Bhattacharjee and Another.(Central) vs. B. N. Bhattacharjee and Another. 2(1993) 203 ITR 848 in the case of Rasik Ramji Kamani vs. S. K.Tripathi and Others.Tripathi and Others. 3(1994) 206 ITR 443 (SC) in the case of Commissioner of IncomeTax vs. Express Newspapers Ltd.Tax vs. Express Newspapers Ltd. 4(1999) 236 ITR 581 (Madras) in the case of V. M. ShaikMohammed Rowther vs. Settlement Commission (IT & WT) and OrsMohammed Rowther vs. Settlement Commission (IT & WT) and Ors 5(2001) 252 ITR 1 (SC) in the case of Commissioner of Income Taxvs. Anjum M. H. Ghaswala and Ors.vs. Anjum M. H. Ghaswala and Ors. 6Order in Writ Petition No. 3990 of 2013 dated 13[th] June, 2013passed by a Division Bench of this Court in the case ofCommissioner of Income Tax (Central), Pune vs. Income TaxSettlement Commission (ITSC), Additional Bench, Mumbai.passed by a Division Bench of this Court in the case ofCommissioner of Income Tax (Central), Pune vs. Income TaxSettlement Commission (ITSC), Additional Bench, Mumbai. 19)On the other hand, Mr. Mistri-learned Senior Counselappearing for the original Applicant/Respondent No. 2 Assessee submitsthat the Writ Petition has no merit and must be dismissed. This Courtcannot substitute its views with that of the Settlement Commissionunless it concludes that the order of the Settlement Commission isvitiated by arbitrariness, perversity and malafides. The SettlementCommission is wholly empowered to entertain and admit theapplication. While admitting and entertaining it, the Commission is notobliged to consider the merits or demerits of the application or theclaims raised therein. At the stage at which the matter has beenconsidered by the Commission it is required to express only a primafacie opinion. It found that the disclosure made was adequate andsufficient for the purpose of admitting the Assessee's application. Suchtentative and prima facie view should not be interfered in the WritJurisdiction, as that would result in complete failure of the Settlementmechanism. Mr.Mistri then submitted that the entire matter proceedsPage 16 of 46 on a misconception that the Settlement Commission, while admitting anapplication, is obliged to go into and consider minute details and thecontroversy or issue on merits. In the present case, the mechanism ofsettlement is being stalled by the Revenue itself. That will never servethe larger public interest. The learned Senior Counsel has invited ourattention to the fact that the Writ Petition is premature. Secondly, it issubmitted that it is erroneous to assume that the Assessee was aware ofthe assessment order under section 143(3) of the IT Act. That orderwas never served on the Assessee. Thirdly, the proceedings before theSettlement Commission, by way of an application, were initiatedunmindful of any assessment order. The application was filed on 18[th]March, 2013. The circumstances in this regard have been narrated inthe affidavit in reply. It is urged that the requisite details have beendisclosed in the application. The declaration is truthful and honest. Inany event, the Settlement Commission is obliged to decide the matter inaccordance with law. When the matter proceeds further, the Revenuecan point out to the Settlement Commission that on the basis of thedisclosures made, no relief be granted to the present RespondentNo.2/Assessee/Applicant. Mr. Mistri, therefore, relies upon the standtaken by the Respondent No. 2 in the affidavit and the findings of theSettlement Commission, to urge that the Writ Petition has no merits andmust be dismissed. 20)In the rejoinder, Mr. Chhotaray submits that the presentWrit Petition questions the jurisdiction of the Settlement Commission toentertain the application and which was not meeting the requirementsset out in law. If the statutory requirements are not complied with,then, the Settlement Commission must dismiss the application at thethreshold. In the present case, the Settlement Commission has erred innot noticing the fact that the assessment order is already passed andserved on the Assessee. Secondly, the disclosure as made is not enoughand in law for enabling the Settlement Commission to entertain theapplication/admit it. In the present case, Respondent No. 2 did notinclude the bank statements which formed the basis and other crucialdocuments in order to arrive at a true and full disclosure of income.The candid admission of the Respondent No. 2 that the bank statementswere handed over to the Commission only on 25[th] March, 2013 confirmsthat the settlement application was not complete at the time of filing asvital documents were not incorporated therein. 21)Mr. Mistry has relied upon para 7 of the affidavit in reply tosubmit that there is no merit in the contentions of the Petitioner. It ispointed out that between 4[th] February, 2013 and 15[th] March, 2013,Respondent No. 2 has paid income tax in the sum of Rs.66,28,053/-.The breakup of the same is given in para 7, at page 94 of the paperbook. It is specifically stated that till 15[th] March, 2013, no notice was J.V.Salunke,PA 21)Mr. Mistry has relied upon para 7 of the affidavit in reply tosubmit that there is no merit in the contentions of the Petitioner. It ispointed out that between 4[th] February, 2013 and 15[th] March, 2013,Respondent No. 2 has paid income tax in the sum of Rs.66,28,053/-.The breakup of the same is given in para 7, at page 94 of the paperbook. It is specifically stated that till 15[th] March, 2013, no notice was J.V.Salunke,PA received by Respondent No. 2 for either of the three assessment years,namely, 2010-11, 2011-12 and 2012-13. It is stated that on 15[th] March,2013, the second Respondent firm paid the sum of Rs.500/- as the feeprescribed for filing the application before the Settlement Commission.It is stated that if the Assessing Officer claims to have made an orderunder section 143(3) of the IT Act for the assessment year 2010-11,then, Responent No. 2 had no knowledge of the same at the time offiling of the application before the Settlement Commission. It is statedthat this assessment order was dispatched at 8:49 p.m. (20:49 hours)on 18[th] March, 2013. Relying upon Circular No. 3 of 2008 dated 12[th]March, 2008 issued by the Central Board of Direct Taxes (CBDT), it isurged that the service of the Assessment Order is the crucial andrelevant aspect of the matter. Then, there is a grievance made as tohow the Assessing Officer, who was supposed to have acknowledged areceipt of the application for settlement, sought to force the Assessee toaccept a notice under section 148 of the IT Act. It has been stated andin this paragraph as to how the Commission acted on receipt of theapplication and passed an order on 10[th] May, 2013, but this WritPetition has been filed after two months of the said order and with aview to delay the further proceedings before the Commission. 22)Mr. Mistry submits that there is a rejoinder affidavit, but inpara 3 thereof, paras 1 to 7 of the affidavit in reply have been generallydealt with. There is no denial of the fact that the assessment order wasnot served on Respondent No. 2/Assessee. There is only a denial aboutforcing the Assessee to accept the notice under section 148 of the IT Actas alleged in the affidavit in reply. Therefore, Mr. Mistry would submitthat this is a case where none of the submissions and canvassed onbehalf of the Petitioner deserve to be accepted. It is urged that there isno merit in the Writ Petition and it deserves to be dismissed. 23)With the assistance of the learned Counsel appearing forboth sides, we have perused the Writ Petition and its all Annexures andthe affidavits placed on record. 24)At the outset, it must be indicated that there are limits onthis Court's jurisdiction under Article 226 of the Constitution of India,in entertaining a Writ Petition challenging a preliminary or prima facieopinion of the Settlement Commission. 25)Mr. Chhotaray himself has relied upon a Judgment of theHon'ble Supreme Court in the case of Commissioner of Income Tax vs.Anjum M. H. Ghaswala and Ors. reported in (2001) 252 ITR 1. TheConstitution Bench of the Hon'ble Supreme Court in this case hasanalysed the entire chapter and held as under:- “..... 23)With the assistance of the learned Counsel appearing forboth sides, we have perused the Writ Petition and its all Annexures andthe affidavits placed on record. 24)At the outset, it must be indicated that there are limits onthis Court's jurisdiction under Article 226 of the Constitution of India,in entertaining a Writ Petition challenging a preliminary or prima facieopinion of the Settlement Commission. 25)Mr. Chhotaray himself has relied upon a Judgment of theHon'ble Supreme Court in the case of Commissioner of Income Tax vs.Anjum M. H. Ghaswala and Ors. reported in (2001) 252 ITR 1. TheConstitution Bench of the Hon'ble Supreme Court in this case hasanalysed the entire chapter and held as under:- “..... It is no doubt true that the terminology “settlement” has avery wide dictionary meaning and in the absence of a statutorydefinition generally the word “settlement” in sub-section (4) ofsection 245D would give the Commission sufficient power toarrive at a settlement which it deems fit, but when the statutequalifies such expression like “settlement” with mandatory wordslike “in accordance with the provisions of this Act” the width ofthe term “settlement” becomes subject to the mandate found inthat section, which would mean that while a Commission hassufficient elbow room in assessing the income of the applicantunder section 245D(4) it cannot make any order with a term ofthe settlement which would be in conflict with the mandatoryprovisions of the section like in the quantum and payment of taxand/or interest. In this view of the matter, we are of the opinionthat assuming that there is any room for interpretation of theprovisions of Part F of Chapter XVII and Chapter XIX andChapter XIX-A, we would hold that it would not in any mannerempower the Commission to either waive or reduce interestwhich is statutorily payable under the provisions of Part F ofChapter XVII.” 26)The observations that Mr. Chhotaray relies upon and at page 15 of this report indicate that the intention of the legislature inintroducing this section is to see that protracted proceedings before theauthorities or in Courts are avoided by resorting to settlement of cases.Further, in an earlier decision of this Court and of a Division Bench inthe case of Commissioner of Income Tax vs. Income Tax SettlementCommission and Ors reported in (2000) 246 ITR 63, this Courtconcluded that it has limited powers and cannot interfere with the orderof the Settlement Commission as if it is an Appellate Court. This Courtheld as under:- “..... Findings on the rival submissions: 26)The observations that Mr. Chhotaray relies upon and at page 15 of this report indicate that the intention of the legislature inintroducing this section is to see that protracted proceedings before theauthorities or in Courts are avoided by resorting to settlement of cases.Further, in an earlier decision of this Court and of a Division Bench inthe case of Commissioner of Income Tax vs. Income Tax SettlementCommission and Ors reported in (2000) 246 ITR 63, this Courtconcluded that it has limited powers and cannot interfere with the orderof the Settlement Commission as if it is an Appellate Court. This Courtheld as under:- “..... Findings on the rival submissions: The first question we have to consider is what is the scopeof the writ jurisdiction under article 226 of the Constitution ofIndia while examining the order of the Settlement Commission?Broadly speaking an essential feature of the writ of certiorari isthat the control which is exercised through it over judicial orquasi-judicial bodies is not in an appellate but supervisorycapacity. One consequence of this is that the court will notreview findings of fact reached by the inferior court or Tribunal,even if they be erroneous. A writ of certiorari can be issued tocorrect an error of law. But it is essential that it should besomething more than a mere error; it must be one which must bemanifest on the face of the record. The principles are well settledwhen the writ jurisdiction should be exercised. It should beissued in grave cases where the subordinate Tribunals, bodies orofficers act wholly without jurisdiction or in excess of it, or inviolation of principles of natural justice or refuse to exercisejurisdiction vested in them. There is an error apparent on theface of the record. Whether there is an excess exercise ofjurisdiction may depend upon the existence of some facts in eachcase. There are cases where jurisdiction of the inferior Tribunaldepends upon fulfilment of some conditions precedent uponexistence of some particular fact. Such a fact is collateral to theactual matter, which the inferior Tribunal has to try anddetermine. Whether it exists or not is logically and in sequenceprior to the determination of the actual question which theinferior Tribunal, has to try. In such a case, in certiorariproceedings the court can enquire into the correctness of thedecision of the inferior Tribunal as to the collateral fact and mayreverse that decision if it appears to it on material before it to beerroneous. The certiorari jurisdiction can also be exercised ifconclusions are perverse and, therefore, suffer from patent erroron the face of the record. With the aforesaid principles in mind, if we turn to thescheme of Chapter XIX-A of the Act then it would be clear thatthe said Chapter was inserted by the Taxation Law (amendment)Act, 1975, with effect from April 1, 1976. Provisions more or lesssimilar to it contained in sub-sections (1A) to (1D) of section 34of the Indian Income-tax Act, 1922, were introduced in 1954.The provisions of Chapter XIX-A were, however, qualitativelydifferent and more elaborate than the said provisions in the 1922Act. The said Chapter thereafter went through a number ofchanges from the date of its insertion in the Income-tax Act byvirtue of amendments from time to time. Under the provisions asthey stand today, the proceedings under this Chapter commenceby an application made by the assessee as contemplated by With the aforesaid principles in mind, if we turn to thescheme of Chapter XIX-A of the Act then it would be clear thatthe said Chapter was inserted by the Taxation Law (amendment)Act, 1975, with effect from April 1, 1976. Provisions more or lesssimilar to it contained in sub-sections (1A) to (1D) of section 34of the Indian Income-tax Act, 1922, were introduced in 1954.The provisions of Chapter XIX-A were, however, qualitativelydifferent and more elaborate than the said provisions in the 1922Act. The said Chapter thereafter went through a number ofchanges from the date of its insertion in the Income-tax Act byvirtue of amendments from time to time. Under the provisions asthey stand today, the proceedings under this Chapter commenceby an application made by the assessee as contemplated by section 245C. Section 245D prescribes the procedure to befollowed by the Commission on receipt of application undersection 245C and thereafter the Commission is obliged to followthe procedure as provided in sub-sections details of which arealready enumerated while taking stock of the legislativeprovisions in this behalf. Section 245L of the Act declares thatany proceeding under this Chapter before the SettlementCommission shall be deemed to be a judicial proceeding withinthe meaning of sections 193 and 228 and for the purposes ofsection 196 of the Indian Penal Code. When it is declared to be ajudicial proceeding, the prescribed procedure has to be followed.…..” 27)These principles, therefore, would guide us in decidingwhether the Commission erred in admitting and entertaining theapplication of the second Respondent. 28)The Commission had before it the application from thesecond Respondent filed on 18[th] March, 2013 for three assessmentyears. This application was filed under section 245(1) of the IT Act.The Settlement Commission can be approached with an application forsettlement of cases. The term 'case' is defined in section 245A(b) tomean any proceeding for assessment under this Act, of any person inrespect of any assessment year or assessment years which may bepending before an Assessing Officer on the date on which an applicationunder sub-section (1) of section 245C is made. The application forsettlement of case is contemplated by section 245(1) and whichprovides that an Assesse may, at any stage of a case relating to him,make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his incomewhich has not been disclosed before the Assessing Officer, the mannerin which such income has been derived, the additional amount ofincome tax payable on such income and such other particulars as maybe prescribed, to the Settlement Commission to have the case settledand any such application shall be disposed of in the manner hereinafterprovided. The proviso to this sub section states that no such applicationshall be made unless in a case where proceedings for assessment orreassessment for any of the assessment years referred to in clause (b) ofsub-section (1) of section 153A or clause (b) of sub-section (1) ofsection 153B in case of a person referred to in section 153A or section153C have been initiated, the additional amount of income tax payableon the income disclosed in the application exceeds fifty lakh rupees, andin a case where sub-clauses (A) and (B) of clause (ia) of the proviso isattracted or where clause (ii) of the proviso is attracted. Upon receiptof this application, the Commission has to deal with it in terms of theprocedure set out in section 245D of the IT Act. That section hasvarious sub-sections, but we are concerned with sub-sections (2A),(2B), (2C) and (2D). These sub-sections read as under:- “(2A) Where an application was made under section 245Cbefore the 1[st] day of June, 2007, but an order under theprovisions of sub-section (1) of this section as they stoodimmediately before their amendment by the Finance Act, 2007,has not been made before the 1[st] day of June, 2007, such application shall be deemed to have been allowed to beproceeded with if the additional tax on the income disclosed insuch application and the interest thereon is paid on or beforethe 31[st] day of July, 2007.Explanation. - In respect of the applications referred to in thissub-section, the 31[st] day of July, 2007 shall be deemed to be thedate of the order of rejection or allowing the application to beproceeded with under sub-section (1). (2B) The Settlement Commission shall, - (i) in respect of an application which is allowed to beproceeded with under sub-section (1), within thirty days fromthe 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 to beproceeded with under that sub-section, on or before the 7[th] dayof August, 2007, call for a report from the Principal Commissioner orCommissioner, and the Principal Commissioner orCommissioner shall furnish the report within a period of thirtydays of the receipt of communication from the SettlementCommission. (2C) Where a report of the Principal Commissioner orCommissioner called for under sub-section (2B) has beenfurnished within the period specified therein, the SettlementCommission may, on the basis of the report and within a periodof fifteen days of the receipt of the report, by an order inwriting, declare the application in question as invalid, and shallsent the copy of such order to the applicant and the PrincipalCommissioner or Commissioner: Provided that an application shall not be declared invalid unlessan opportunity has been given to the applicant of being heard: Provided further that where the Principal Commissioner orCommissioner has not furnished the report within the aforesaidperiod, the Settlement Commission shall proceed further in thematter without the report of the Principal Commissioner orCommissioner. (2D) Where an application was made under sub-section (1) ofsection 245C before the 1[st] day of June, 2007 and an orderunder the provisions of sub-section (1) of this section, as theystood immediately before their amendment by the Finance Act,2007, allowing the application to have been proceeded with, hasbeen passed before the 1[st] day of June, 2007, but an order under the provisions of sub-section (4), as they stood immediatelybefore their amendment by the Finance Act, 2007, was notpassed before the 1[st] day of June, 2007, such application shallnot be allowed to be further proceeded with unless theadditional tax on the income disclosed in such application andthe interest thereon, is, notwithstanding any extension of timealready granted by the Settlement Commission, paid on orbefore the 31[st] day of July, 2007.” 29)We are mindful of the fact that the Settlement Commission the provisions of sub-section (4), as they stood immediatelybefore their amendment by the Finance Act, 2007, was notpassed before the 1[st] day of June, 2007, such application shallnot be allowed to be further proceeded with unless theadditional tax on the income disclosed in such application andthe interest thereon, is, notwithstanding any extension of timealready granted by the Settlement Commission, paid on orbefore the 31[st] day of July, 2007.” 29)We are mindful of the fact that the Settlement Commission has been set up with a laudable and avowed object. That is to promotethe settlement. It is not as suggested by Mr. Chhotaray to confer a rightin any tax payer to be dishonest. We are further mindful of the fact thatsection 245C of the Act is meant for those Assessees who seek todisclose income not disclosed before the Assessing Officer including themanner in which such income has been derived, as the Hon'bleSupreme Court held in the case of Commissioner of Income-tax vs.Express Newspapers Ltd. reported in (1994) 206 ITR 443 that ChapterXIX-A is a part of the Income Tax Act and must be construed consistentwith the overall scheme and object. Thus, it is to enable those Assesseeswho want to disclose income not disclosed till then together with themanner in which the same income is derived and the provisions are notmeant for such Assessees who come after the event or who are guilty ofa fraud perpetrated on the Revenue. We are also aware of therecommendations made by the Wanchoo Committee and we haveperused them with the assistance of Mr. Chhotaray. Therefore, once theCommission has been approached, then, it has to deal with the application in terms of the sections contained in the Chapter. We arealso aware of and have perused carefully the observations of theHon'ble Supreme Court in a Judgment in the case of Commissioner ofIncome Tax vs. B. N. Bhattacharjee and Anr. reported in (1979) 4 SCC121. We are not deviating from the principle that the Commission hasto ensure that the Settlement is fair, prompt and independent. It mustnot enable those who wish to evade taxes or avoid the consequencesfollowing the same as provided by law and particularly by the IT Act. 30)It is in that light that we have perused the impugned orderpassed by the Settlement Commission. It held that the Assessee'srepresentative took it through the entire application and submitted thatthe technical requirements of admission have been complied with. Theapplication so filed before the Commission on 18[th] March, 2013 and theintimation of filing, in Form B, has been given on the same date to theAssessing Officer. The Commission refers to the returns for assessmentyears in question and finds that for assessment year 2010-11 noticeunder section 143(2) of the IT Act was issued on 29[th] September, 2011.Thus, it found that the returns of income for the