Wa/1171/2017 Of M/S.ayurvedic Beach Resort Pvt.ltd v. The Commissioner Of Income Tax(Central)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI THURSDAY, THE 11 DAY OF NOVEMBER 2021 / 20TH KARTHIKA, 1943 WA NO. 1171 OF 2017 AGAINST THE JUDGMENT IN WPC 34690/2007 OF HIGH COURT OF KERALA, ERNAKULAM APPELLANTS/RESPONDENTS 2 TO 5: 1M/S.AYURVEDIC BEACH RESORT PVT.LTD.CHOWARA, BALARAMAPURAM, TRIVANDRUM-695501.REP. BY ITS MANAGING DIRECTOR.CHOWARA, BALARAMAPURAM, TRIVANDRUM-695501.REP. BY ITS MANAGING DIRECTOR. 2MS MANALTHEERAM BEACH RESORT PVT.LTD.MANAGING DIRECTOR.MANAGING DIRECTOR. CHOWARA, BALARAMAPURAM, TRIVANDRUM-695501.REP. BY ITS 3M/s SOMATHEERAM AYURVEDIC HOSPITAL & YOGA CENTRE PVT. LTD.TRIVANDRUM-695501.REP. BY ITS MANAGING DIRECTOR.LTD.TRIVANDRUM-695501.REP. BY ITS MANAGING DIRECTOR. 4SHRI BABY MATHEWARAMBANKUDY HOUSE,SOMATHEERAM, CHOWARA P.O., BALARAMAPURAM 695501.ARAMBANKUDY HOUSE,SOMATHEERAM, CHOWARA P.O., BALARAMAPURAM 695501. BY ADVS.SRI.JOSEPH KODIANTHARA (SR.)SRI.RAMESH CHERIAN JOHN RESPONDENT/S: 1THE COMMISSIONER OF INCOME TAX(CENTRAL)OFFICE OF THE COMMISSIONER OF INCOME TAX (CENTRAL)5TH FLOOR, KANDAMKULATHY TOWERS, M.G.ROAD, KOCHI-682011.OFFICE OF THE COMMISSIONER OF INCOME TAX (CENTRAL)5TH FLOOR, KANDAMKULATHY TOWERS, M.G.ROAD, KOCHI-682011. 2THE SETTLEMENT COMMISSION (IT & WT)DEPARTMENT OF REVENUE, MINISTRY OF FINANCE,ADDITIONAL BENCH, SATHGURU COMPLEX, 640,ANNA SALAI, CHENNAI 600035.DEPARTMENT OF REVENUE, MINISTRY OF FINANCE,ADDITIONAL BENCH, SATHGURU COMPLEX, 640,ANNA SALAI, CHENNAI 600035. BY ADVS. SRI.P.K.R.MENON SR.COUNSEL GOI TAXESSRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 11.11.2021,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT S.V.Bhatti, J. Ayurvedic Beach Resort Pvt.Ltd. and 3 others/respondents inW.P.(C) No.34690/2007 are the appellants. The Commissioner ofIncome Tax(Central),Kochi/Writ Petitioner is the respondent. Theparties are adverted to as arrayed in the appeal. 2. The appellants, on 3.1.2001, filed application for settlementunder Section 245C of the Income Tax Act (for short 'the Act') for theblock period of 1.4.1990 to 25.4.2000. The applications wereadmitted and the response of the respondent herein was sought for.The Settlement Commissioner through order dated 22.05.2007marked as Ext.P1 accepted the application and determined the termsfor settlement of issues concerning tax payable by the assessee. Inthe proceedings before this Court the issue canvassed is in respect ofadvances taken by the appellants from others amounting toRs.3,54,59,150/- and the claim of advance received from 3[rd] parties islegally and in accordance with the provisions of the Act has beendecided u/s 245D of the Act. The respondent herein contested thedetails offered by the appellants for settlement under the head"advances from others". The Settlement Commissioner accepted the W.A.No.1171 of 2017 3 case of appellants herein and for appreciating the area of controversy before the learned Single Judge and the point urged before us, thebrief portion of consideration by the Settlement Commissioner isexcerpted hereunder: Advances from others: Advances from others shown at Rs.3,54,59,150/- in theoriginal CFSs have been revised to Rs.4,13,52,150/-. The ARpointed out that the details of these loans were available in theseized records and that the relevant Promissory Notes werealso seized during the course of search. Rate of interest onthese loans is also mentioned in the seized records. Further,the confirmation letters from the creditors have also been filedbefore the Addl.DIT. The applicant pointed out that therelevant details are available at pages 39, 70, 80, 308 and 402of APB. The CIT in Rule-9 report stated that the details of theloan creditors were not furnished. Hence, the creditworthinessof the loan cannot be verified. Advances from others: Advances from others shown at Rs.3,54,59,150/- in theoriginal CFSs have been revised to Rs.4,13,52,150/-. The ARpointed out that the details of these loans were available in theseized records and that the relevant Promissory Notes werealso seized during the course of search. Rate of interest onthese loans is also mentioned in the seized records. Further,the confirmation letters from the creditors have also been filedbefore the Addl.DIT. The applicant pointed out that therelevant details are available at pages 39, 70, 80, 308 and 402of APB. The CIT in Rule-9 report stated that the details of theloan creditors were not furnished. Hence, the creditworthinessof the loan cannot be verified. The learned A/R stated that the details of the loans andrepayments were available in various seized records such asAM83, AM85, AM89, BM12, BM23, PQ31, AM4, AM17, AM-46etc. He also pointed out that seized record of M68 containeda number of discharged promissory notes in rspect of loanstaken and repaid. He submitted that the details available inthe seized records have been considered to quantify the loantaken and interest paid on the loans has been taken asoutflow. We have considered the submissions and we are of theview that no addition is called for on this account." 3. The respondent challenged the order in Ext.P1 in WP(C) No.34690/2007. Through the judgment impugned before us, thelearned Single Judge set aside the order in Ext.P1 and remitted thematter to Settlement Commissioner for consideration and disposal W.A.No.1171 of 2017 4 afresh. Learned Judge while reviewing the order in Ext.P1 held asfollows: "The advances from other sources originally shown atRs.3,54,59,150/- in the CFSs were revised toRs.4,13,52,150/-. It is pertinent that the report of theCommissioner had merely been referred to and the contentionwith respect to the advances said to have been obtained fromothers was accepted by the Settlement Commission withoutany discussion. As is evident from the report no details of thecreditors; who are said to have advanced the loans, as per theCFS, was revealed by the petitioner. In this context, thedecision of the Hon'ble Supreme Court in CIT v Om PrakashMittal [(2005) 273 ITR 326] assumes relevance. Om PrakashMittal was a case in which the assessee claimed to havereceived an amount of Rs.1.5 crores on 31.3.1985, by way ofloans from seven persons, in cash. After the order of theSettlement Commission was passed, in which the contentionof advances was accepted, an application was filed by theCommissioner pointed out certain misrepresentations; whichwas refused to be entertained by the Commission finding thatthere is no power of reveiw conferred on the Commission.The Hon'ble Supreme Court found that the Commission hadmissed the true scope and ambit of Section 245D(6) and if theCommissioner was able to establish that the order of theCommission was obtained on misrepresentation of facts, thenit was open to the Commission to decide the issue and thesame would not lead to any review of the earlier orders. Itwas also categorically held so: "Further the conclusions of the Commission regarding thegenuineness of the loan transactions were arrived atwithout indicating reasons. It only referred to the respectivestands and the submissions of the assessee's counsel.That was not the proper way to deal with the matter." The manner in which the Settlement Commission dealt withthe claim of advances is seen at page 5, paragraph 5 ofExt.P1: Advances from others: Advances from others shown at Rs.3,54,59,150/- in theoriginal CFSs have been revised to Rs.4,13,52,150/-. TheAR pointed out that the details of these loans were "Further the conclusions of the Commission regarding thegenuineness of the loan transactions were arrived atwithout indicating reasons. It only referred to the respectivestands and the submissions of the assessee's counsel.That was not the proper way to deal with the matter." The manner in which the Settlement Commission dealt withthe claim of advances is seen at page 5, paragraph 5 ofExt.P1: Advances from others: Advances from others shown at Rs.3,54,59,150/- in theoriginal CFSs have been revised to Rs.4,13,52,150/-. TheAR pointed out that the details of these loans were available in the seized records and that the relevantPromissory Notes were also seized during the course ofsearch. Rate of interest on these loans is also mentionedin the seized records. Further, the confirmation lettersfrom the creditors have also been filed before the Addl.DIT.The applicant pointed out that the relevant details areavailable at pages 39, 70, 80, 308 and 402 of APB. The CIT in Rule-9 report stated that the details of theloan creditors were not furnished. Hence, thecreditworthiness of the loan cannot be verified. The learned A/R stated that the details of the loansand repayments were available in various seized recordssuch as AM83, AM85, AM89, BM12, BM23, PQ31, AM4,AM17, AM-46 etc. He also pointed out that seized recordof M68 contained a number of discharged promissory notesin rspect of loans taken and repaid. He submitted that thedetails available in the seized records have beenconsidered to quantify the loan taken and interest paid onthe loans has been taken as outflow. We have considered the submissions and we are ofthe view that no addition is called for on this account." The manner in which additions have been refused to bemade is without any reasoning especially when theCommissioner of Income Tax had specifically, in his report,stated that the details of the creditors were not furnished andthere was no manner in which the credit-worthiness of the saidpersons could be verified. The loans if not proved have to becomputed as total income and additions made in a normalassessment, which principle regulates the SettlementCommission too. On the above reasoning, it has to be held that theSettlement Commission had not properly considered the issueof addition or the genuineness of claim of advances fromothers. To that extent, Ext.P1 order would stand set aside andthe matter is remanded to the Settlement Commission forconsideration of the particular aspect which this Court hasinterfered with.” Hence the appeal. 4. The learned Senior Advocate Joseph Kodianthara argues W.A.No.1171 of 2017 6 On the above reasoning, it has to be held that theSettlement Commission had not properly considered the issueof addition or the genuineness of claim of advances fromothers. To that extent, Ext.P1 order would stand set aside andthe matter is remanded to the Settlement Commission forconsideration of the particular aspect which this Court hasinterfered with.” Hence the appeal. 4. The learned Senior Advocate Joseph Kodianthara argues W.A.No.1171 of 2017 6 that the scope of judicial review under Article 226 against an ordermade by the Settlement Commissioner under Section 245C of theIncome Tax Act is very limited. The Single Judge by appreciating asolitary circumstance noted above as a ground available for judicialreview of the order made in Ext.P1 remitted the matter to SettlementCommissioner. Such course is unavailable in the circumstances ofthe case. He invites our attention to the very annexures stated tohave been placed by the appellants before the SettlementCommissioner as materials to the brief filed for settlement. Thereforeroutine denial in Rule -9 report filed by the respondent is not a groundat all to interdict Ext.P1 order. He argues that the rejection of theaddition by the Settlement Commissioner is upon being satisfied withthe materials placed by the appellants before the SettlementCommissioner. On the scope of judicial review vis-à-vis the ordersmade under 245D, he places reliance on the judgments reported inJyotendrasinhji v S.I.Tripathi and others[1], Union of India andothers v Ind-Swift Laboratories Ltd.[2], Commissioner of IncomeTax v Om Prakash Mittal[3] and N.Krishnan v SettlementCommission and others[4]andfinally contends that the remand forre-verification by the Settlement Commissioner of advances, is 1(1993(201) ITR 611) 2 (2011) 4 SCC 635 3(2005(273) ITR 326)4(1989 (180) 585)4(1989 (180) 585) W.A.No.1171 of 2017 7 avoidable and prays for setting aside the judgment under appeal. 5. Learned Senior Counsel Mr.Jose Joseph supports thejudgment under appeal by briefly arguing that the very judgmentsrelied on by the appellants demonstrate that the writ jurisdiction ofthis Court is not completely taken away against the orders madeunder Section 245D of the Act. The scope of judicial review availableis clearly laid down by these pronouncements. The case on handcomes within the purview of the available grounds of judicial reviewand the presence of lackadaisical consideration by the SettlementCommissioner could be demonstrated by appreciating the followingcircumstances in this chronology viz. the appellants revised the CashFlow Statement under the head “advances” from 3,54,59,150/- to4,13,52,150/-. The respondent contested the details of loan orcreditors and important objection in this behalf is the creditworthinessof the loan and creditors. The Settlement Commissioner acceptedthe declaration of the appellants by recording the following finding. “We have considered the submissions and we are ofthe view that no addition is called for on this account.” Therefore, it is argued, the conclusion is not in accordance with the provisions of the Act, the assessee/appellants are required todemonstrate the creditworthiness, bona fides of the transaction andappropriate effect, both in the accounts and for tax purpose, in the W.A.No.1171 of 2017 8 “We have considered the submissions and we are ofthe view that no addition is called for on this account.” Therefore, it is argued, the conclusion is not in accordance with the provisions of the Act, the assessee/appellants are required todemonstrate the creditworthiness, bona fides of the transaction andappropriate effect, both in the accounts and for tax purpose, in the W.A.No.1171 of 2017 8 absence of proof of any one of the factors, the claim can't beadmitted. The appellants now invite this Court to examine the detailsand such review is incorrect and unavailable in an intra court appeal.In as much as the scope of judicial review does not facilitatedischarge of function by this Court as an appellate authority on theorders made by the Settlement Commissioner. Supposing thedetails are in fact available with the appellants and not considered bythe Settlement Commissioner, these details could be proved while afresh order is made, Further these details could be established evenafter remand by this Court to Settlement Commission. Theacceptance of case of the appellants by Commissioner is not inaccordance with the provisions of the Act. No ground is made out forwarranting interference against an order of remand made by thelearned Single Judge. The learned counsel prays for dismissing theappeal. 6. We have heard the learned counsel and perused the record. 7. The operative portion of Ext.P1 and the consideration in thejudgment under appeal are already excerpted. For examining thegrounds canvassed by the appellants, we would like to rely on thevery judgment relied on by the appellants. In Jyothindra Singhji case,the Supreme Court has held that the scope of the enquiry whetherby the High Court under Article 226 or before the Supreme Court in W.A.No.1171 of 2017 9 the appeal under Article 136 remains the same viz. to considerwhether the order of the Settlement Commissioner is contrary to theprovisions of the Income Tax Act, and if so whether it has prejudicedthe petitioner. This is, of course, apart from grounds of lies, fraudand malice which constitute a separate and independent category. Areading of the judgment under appeal discloses that the principle inJyothindrasinghji is applied by the learned Single Judge inappreciating whether the settlement in Ext.P1 is in accordance withthe provisions of the Act or not. Om Prakash Mithal case lays downthe object and procedure followed by the Commission in applicationsarising under Section 245D of the Act. The Supreme Court hassummarised the position as follows: A new Chapter XIX-A was introduced by the Taxation Laws(amendment) Act, 1975 (in short the 'Amendment Act') w.e.f.1.4.1976. The Commission is constituted by the CentralGovernment for the settlement of cases under Chapter XIX-A. Theexpression "case" as appearing in Section 245A(b)refers to anyproceeding under the Act for the assessment or re-assessment ofincome of any person in respect of any year or years or by way ofappeal or revision in connection with such assessment or re-assessment which may be pending before any income-taxauthority on the date on which an application under sub- section(1) of Section 245Cis made. It further provides that where anyappeal or application for revision has been preferred after theexpiry of the specified period and which has not been admittedthen the same shall not be deemed to be a proceeding pendingwithin the meaning of clause (b) ofSection 245A. Scheme ofChapter XIX-A shows that the filing of application by the assesseeis a unilateral act, and the department may not be aware of thesame. It has to be noted that if an application for settlement is filedunder Section 245C, it is not automatically admitted.Section245Ddeals with procedure on receipt of an applicationunder Section 245C. Under sub-section (1) thereof, theCommission after following the prescribed procedure can allow the application to be proceeded with or rejected. Only after theCommission allows the petition to be proceeded with, it exercisesthe power of settlement. One basic feature of Chapter XIXA is that it relates to incomewhich was not disclosed before the income-tax authorities. This isevident from Section 245C which reads as follows: "Section 245C: Application for settlement of cases. 245C(1): 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 his incomewhich has not been disclosed before the Assessing Officer, themanner in which such income has been derived, the additionalamount of income-tax payable on such income and such otherparticulars as may be prescribed, to the Settlement Commission tohave the case settled and any such application shall be disposedof in the manner hereinafter provided: Provided that no suchapplication shall be made unless, - (a) the assessee has furnished the return of income which he is orwas required to furnish under any of the provisions of this Act; and (b) the additional amount of income-tax payable on the incomedisclosed in the application exceeds one hundred thousandrupees. (1A) For the purposes of sub-section (1) of this section and sub-sections (2A) to (2D) of section 245D, the additional amount ofincome-tax payable in respect of the income disclosed in anapplication made under sub-section (1) of this section shall be theamount calculated in accordance with the provisions of sub-sections (1B) to (1D). (1B) Where the income disclosed in the application relates to onlyone previous year, - (i) if the applicant has not furnished a return in respect of the totalincome of that year (whether or not an assessment has been madein respect of the total income of that year), then, except in a casecovered by clause (iii), tax shall be calculated on the incomedisclosed in the application as if such income were the totalincome; (ii) if the applicant has furnished a return in respect of the totalincome of that year (whether or not an assessment has beenmade in pursuance of such return), tax shall be calculated on theaggregate of the total income returned and the income disclosed inthe application as if such aggregate were the total income; (iii) if the proceeding pending before the income-tax authority is inthe nature of a proceeding for reassessment of the applicantunder section 147 or by way of appeal or revision in connectionwith such reassessment, and the applicant has not furnished areturn in respect of the total income of that year in the course of such proceeding for reassessment, tax shall be calculated on theaggregate of the total income as assessed in the earlierproceeding for assessment under section 143 or section144 or section 147 and the income disclosed in the application asif such aggregate were the total income. (1C) The additional amount of income-tax payable in respect of theincome disclosed in the application relating to the previous yearreferred to in sub- section (1B) shall be, - (a) in a case referred to in clause (i) of that sub-section, theamount of tax calculated under that clause; (b) in a case referred to in clause (ii) of that sub-section, theamount of tax calculated under that clause as reduced by theamount of tax calculated on the total income returned for thatyear; (iii) in a case referred to in clause (iii) of that sub-section, theamount of tax calculated under that clause as reduced by theamount of tax calculated on the total income assessed in theearlier proceeding for assessment under section 143 or section144 or section 147". (Underlined for emphasis) Prior to substitution by Finance Act,1987 w.e.f. 1.6.1987, the proviso to sub-section (1) read asfollows: "provided that no such application shall be made unless theadditional amount of income tax payable on the income disclosedin the application exceeds fifty thousand rupees." (b) in a case referred to in clause (ii) of that sub-section, theamount of tax calculated under that clause as reduced by theamount of tax calculated on the total income returned for thatyear; (iii) in a case referred to in clause (iii) of that sub-section, theamount of tax calculated under that clause as reduced by theamount of tax calculated on the total income assessed in theearlier proceeding for assessment under section 143 or section144 or section 147". (Underlined for emphasis) Prior to substitution by Finance Act,1987 w.e.f. 1.6.1987, the proviso to sub-section (1) read asfollows: "provided that no such application shall be made unless theadditional amount of income tax payable on the income disclosedin the application exceeds fifty thousand rupees." The word "fifty thousand rupees" in the earlier proviso has beensubstituted by the expression "one hundred thousand rupees" bythe Finance Act, 1995 w.e.f. 1.7.1995. Some changes wereintroduced by Finance Act, 1987 w.e.f. 1.6.1987 in sub section(1B) and (1C) which do not have much importance for the presentappeal. The Commission is not bound to proceed with any applicationfiled under Section 245C as is clear from Section 245D. Thespecial provisions so far as relevant read as follows: Section 245D: Procedure on receipt of an applicationunder section 245C. "245D(1)- On receipt of an application under section 245C, theSettlement Commission shall call for a report from theCommissioner and on the basis of the materials contained in suchreport and having regard to the nature and circumstances of thecase or the complexity of the investigation involved therein, theSettlement Commission may, by order, allow the application to beproceeded with or reject the application : Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant ofbeing heard: Provided further that the Commissioner shall furnish the reportwithin a period of forty-five days of the receipt of communicationfrom the Settlement Commission in case of all applications madeunder section 245C on or after the 1st day of July, 1995 and if theCommissioner fails to furnish the report within the said period, theSettlement Commission may make the order without such report.(2) x x x x x (2A) Subject to the provisions of sub-section (2B), theassessee shall within thirty-five days of the receipt of a copy of theorder under sub-section (1) allowing the application to beproceeded with, pay the additional amount of income-tax payableon the income disclosed in the application and shall furnish proofof such payment to the Settlement Commission. (2B) If the Settlement Commission is satisfied, on an applicationmade in this behalf by the assessee, that he is unable for goodand sufficient reasons to pay the additional amount of income-taxreferred to in sub-section (2A) within the time specified in that sub-section, it may extend the time for payment of the amount whichremains unpaid or allow payment thereof by instalments if theassessee furnishes adequate security for the payment thereof. (2C) Where the additional amount of income-tax is not paid withinthe time specified under sub-section (2A), then, whether or not theSettlement Commission has extended the time for payment of theamount which remains unpaid or has allowed payment thereof byinstalments under sub-section (2B), the assessee shall be liable topay simple interest at fifteen per cent per annum on the amountremaining unpaid from the date of expiry of the period of thirty-fivedays referred to in sub-section (2A). (2C) Where the additional amount of income-tax is not paid withinthe time specified under sub-section (2A), then, whether or not theSettlement Commission has extended the time for payment of theamount which remains unpaid or has allowed payment thereof byinstalments under sub-section (2B), the assessee shall be liable topay simple interest at fifteen per cent per annum on the amountremaining unpaid from the date of expiry of the period of thirty-fivedays referred to in sub-section (2A). (2D) x x x x x (3) Where an application is allowed to be proceededwith under sub-section (1), the Settlement Commission may callfor the relevant records from the Commissioner and afterexamination of such records, if the Settlement Commission is ofthe opinion that any further enquiry or investigation in the matter isnecessary, it may direct the Commissioner to make or cause to bemade such further enquiry or investigation and furnish a report onthe matters covered by the application and any other matterrelating to the case. (4) After examination of the records and the report of theCommissioner, received under sub-section (1), and the report, ifany, of the Commissioner received under sub-section (3), andafter giving an opportunity to the applicant and to theCommissioner to be heard, either in person or through arepresentative duly authorized in this behalf, and after examiningsuch further evidence as may be placed before it or obtained by it,the Settlement Commission may, in accordance with theprovisions of this Act, pass such order as it thinks fit on the matters W.A.No.1171 of 2017 13 covered by the application and any other matter relating to thecase not covered by the application, but referred to in the report ofthe Commissioner under sub-section (1) or sub-section (3). (5) x x x x x (6) Every order passed under sub-section (4) shallprovide for the terms of settlement including any demand by wayof tax, penalty or interest] the manner in which any sum due underthe settlement shall be paid and all other matters to make thesettlement effective and shall also provide that the settlement shallbe void if it is subsequently found by the Settlement Commissionthat it has been obtained by fraud or misrepresentation of facts." (underlined for emphasis) Sub-section (1) of Section 245C makesit clear that at any stage of a case relating to him an assesseemay make an application to the Commission disclosing fully andtruly his income which has not been disclosed before theAssessing Officer. To put it differently, an assessee cannotapproach the Commission for settlement of his case in respect ofan income which has already been disclosed before theAssessing Officer. The income disclosed as contemplated is in thenature of voluntary disclosure of concerned income. (underlined for emphasis) Sub-section (1) of Section 245C makesit clear that at any stage of a case relating to him an assesseemay make an application to the Commission disclosing fully andtruly his income which has not been disclosed before theAssessing Officer. To put it differently, an assessee cannotapproach the Commission for settlement of his case in respect ofan income which has already been disclosed before theAssessing Officer. The income disclosed as contemplated is in thenature of voluntary disclosure of concerned income. Section 245F dealing with powers and procedure of SettlementCommission provides that in addition to the powers conferred onthe Settlement Commission under Chapter XIX-A, it has all thepowers which are vested in the income-tax authority under theAct. Sub-section (2) is of vital importance and provides that wherean application made under Section 245C has been allowed to beproceeded with under Section 245D, the Commission shall untilan order is passed under sub-section (4) of Section 245D, subjectto the provisions of sub-section (3) of that section have exclusivejurisdiction to exercise the powers and perform the functions ofthe income-tax authority under the Act in relation to the case. Inessence, the Commission assumes jurisdiction to deal with thematter after it decides to proceed with the application andcontinues to have the jurisdiction till it makes an orderunder Section 245D. Section 245D(4) is the charging section andsub-section (6) prescribes the modalities to be adopted to giveeffect to the order. It has to be noted that the language usedin Section 245D is "order" and not "assessment". The order is notdescribed as the original assessment or regular assessment or re-assessment. In that sense, the Commission exercises a plenaryjurisdiction. The Commission's power of settlement has to be exercised inaccordance with the provisions of the Act. Though theCommission has sufficient elbowroom in assessing the income ofthe applicant and it cannot make any order with a term ofsettlement which would be in conflict with the mandatoryprovisions of the Act like in the quantum and payment of tax andthe interest. The object of the legislature, in introducing Section245C is to see that protracted proceedings before the authoritiesor in Courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amountsstatutorily payable under the Act. The Commission's power of settlement has to be exercised inaccordance with the provisions of the Act. Though theCommission has sufficient elbowroom in assessing the income ofthe applicant and it cannot make any order with a term ofsettlement which would be in conflict with the mandatoryprovisions of the Act like in the quantum and payment of tax andthe interest. The object of the legislature, in introducing Section245C is to see that protracted proceedings before the authoritiesor in Courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amountsstatutorily payable under the Act. A bare reading of Section 245D(6) shows that every order passedunder sub-section (4) has to provide the terms of the settlementand also to provide that the settlement shall be void if it is foundsubsequently by the Commission that it has been obtained byfraud or by misrepresentation of facts. The plea of the assesseethat the initiation of proceeding to find out as to whether the orderhas been obtained by fraud or misrepresentation of facts has to beinitiated by the Commission suo motu is not spelt out in the saidsub-section. It is a statutory requirement that a condition has to beincorporated in the order passed under sub-section (4) specifyingthat settlement shall be void if it is subsequently found by theCommission that it has been obtained by fraud ormisrepresentation of facts. The decision whether the order hasbeen obtained by fraud or misrepresentation of facts is that of theCommission. But it is not a requirement that the Commission mustsuo motu initiate the action. If the revenue has material to showthat the order was obtained by fraud or misrepresentation of factsit certainly can move the Commission for decision on that issue.Otherwise, even if in a given case there is material in abundanceto establish that the order was obtained by fraud ormisrepresentation of facts, yet the void order would continue to beoperative because of the fortuitous circumstance that theCommission does not suo motu initiate the proceeding. Merelybecause Section 245I provides that the order of Settlement isconclusive it does not take away the power of the Commission todecide whether the settlement order had been obtained by fraudor misrepresentation of facts. Any other interpretation wouldrender sub-section (6) otiose. The Commission had really missedthe true scope and ambit of Section 245D(6). If the CIT was ableto establish that the earlier decision was void because ofmisrepresentation of the facts, certainly it was open to theCommission to decide that issue. It cannot be called by anystretch of imagination to be review of the earlier judgment or thesubsequent Bench sitting in appeal over the earlier Bench'sdecision. Further the conclusions of the Commission regarding thegenuineness of the loan transactions were arrived at withoutindicating reasons. It only referred to the respective stands andthe submissions of the assessee's counsel. That was not theproper way to deal with the matter. The foundation for settlement is an application which assesseecan file at any stage of a case relating to him in such form and insuch manner as is prescribed. The statutory mandate is that theapplication shall contain "full and true disclosure" of the incomewhich has not been disclosed before the assessing officer, themanner in which such income has been derived. The fundamentalrequirement of the application under Section 245C is that full andtrue disclosure of the income has to be made, along with the The foundation for settlement is an application which assesseecan file at any stage of a case relating to him in such form and insuch manner as is prescribed. The statutory mandate is that theapplication shall contain "full and true disclosure" of the incomewhich has not been disclosed before the assessing officer, themanner in which such income has been derived. The fundamentalrequirement of the application under Section 245C is that full andtrue disclosure of the income has to be made, along with the manner in which such income was derived. On receipt of theapplication, the Commission calls for report from theCommissioner and on the basis of the material contained in thereport and having regard to the nature and circumstances of thecase or complexity of the investigation involved therein, it caneither reject the application or allow the application to beproceeded with as provided in Section 245D(1). It has to be noted that the Commission exercises power in respectof income which was not disclosed before the authorities in anyproceeding, but are disclosed in the petition under Section 245C.It is not that any amount of undisclosed income can be brought tothe notice of the Commission in the said petition. Commissionexercises jurisdiction if the additional amount of tax on suchundisclosed income is more than a particular figure (which atdifferent points of time exceeded rupees fifty thousand or rupeesone hundred thousand, as the case may be). The assessee musthave in addition furnished the return of income which he is or wasrequired to furnish under any of the provisions of the Act. Inessence the requirement is that there must be an incomedisclosed in a return furnished and undisclosed income disclosedto the Commission by a petition under Section 245C. 8. The procedure followed by the Settlement Commission in the case on hand in appreciating the advances, CFS etc. definitelydesires a sort of consideration in accordance with the provisions ofthe Act. Ext.P1 tested on the principles enunciated by the SupremeCourt in the case of Om Prakash Mithal the deficiency noted by thejudgment under appeal is correct. The judgment of the KarnatakaHigh Court in N.Krishnan case has stated that the scope of thejudicial review is available where there is no nexus between thereasons given and the decision taken. In the case on hand, Ext.P1could be held to be as not assigning reasons or reflecting the mindof the Settlement Commission for accepting the case of theappellants. The remand is justified in the circumstances of the case. 9. We are also of the view that the scope of judicial review isrelatable to the issues on hand both in fact and law in mattersarising under Secs.245C & 245D. It is not safe or suggested toconvert the scope of judicial review into an abstract application ofmathematical principle on abstract reasons and decide a core issuein the matter. The scope of judicial review is certainly a dynamicjurisdiction dependant on the circumstances of each case. In thecase on hand the learned Single Judge has objectively and withinthe scope of review available under Article 226 against the ordersmade by the Settlement Commission, rightly interdicted andremitted the matter to the Settlement Commission. In the instantintra court appeal, we see no error of jurisdiction in the judgmentunder appeal. The appeal fails and dismissed. No order as to costs. Sd/- S.V.BHATTI, Judge Sd/- BASANT BALAJI, Judge