Wp/1703/2019 Of Bharathi Consumer Care Prd Pvt Ltd v. Income Tax

THE HON’BLE SRI JUSTICE M.SEETHARAMA MURTIAnd THE HON’BLE MS JUSTICE J. UMA DEVI Writ Petition No.1703 of 2019 ORDER [Per Hon’ble Sri Justice M. Seetharama Murti] This writ petition, under Article 226 of the Constitution of India is filed seeking verbatim the following relief/s: “..to issue a writ in the nature of Mandamus or any other Writ, order or direction setting aside the impugned order dated 09.01.2019 passed by the respondent No.1 under Section 245D(2c) of the IT Act in the petitioner’s case, as arbitrary, unreasonable, irrational and unsupportable in law and consequently direct the respondent no.1 to proceed with the Settlement application filed by the petitioner company; and pass such other order or orders as this Honourable Court may deem fit and proper in the circumstances of the case.” direction setting aside the impugned order dated 09.01.2019 passed by the respondent No.1 under Section 245D(2c) of the IT Act in the petitioner’s case, as arbitrary, unreasonable, irrational and unsupportable in law and consequently direct the respondent no.1 to proceed with the Settlement application filed by the petitioner company; and pass such other order or orders as this Honourable Court may deem fit and proper in the circumstances of the case.” We have heard the submissions of Sri Y. Ratnakar, learned senior counsel appearing for the writ petitioner; and, of Ms. Kiranmayee, learned standing counsel appearing for the respondents. We have perused the material record. The introductory facts are as follows: The petitioner company is carrying on its business in manufacture of detergent cakes and washing power. The plant for manufacture is located at Gorantla, Guntur. The deponent of the writ affidavit is the Chairman-cum-Executive Director of M/s Bharathi Consumer Care Products Pvt.Ltd. He is also the proprietor of Bharathi Soap Works. A search was conducted on the petitioner company as well as the deponent, on 30.08.2016, under Section 132 of the Income Tax Act,1961 [‘the Act’, for brevity]. The search was conducted from 30.08.2016 to 02.09.2016. The petitioner filed a Settlement application, on 13.11.2018, before the Income Tax Settlement Commission [‘Settlement Commission’, for brevity], Chennai – 1[st] respondent, under Section 245C(1) of the Act. Notices under Section 153A of the Act were issued reopening the assessments for the assessment years 2011-12 to 2016-17 for filing the returns of income. On 26.11.2018, order under Section 245D(1) was passed allowing the Settlement application to be proceeded with further under Section 245D(1) of the Act. Later the Settlement Commission called for a report from the Principal Commissioner of Income Tax. The Principal Commissioner of Income Tax submitted a report, dated 24.12.2018, under Section 245D(2B) of the Act objecting to the Settlement application being proceeded with by the Commission. The said report was forwarded to the petitioner and was received by the petitioner’s Chartered Accountant on 28.12.2018. A reply, dated 04.01.2019, was filed responding to the points raised by the Principal Commissioner of Income Tax. Later the Settlement Commission heard the matter and passed orders, on 09.01.2019, rejecting the petitioner’s application. Aggrieved thereof, the present writ petition is filed. In this backdrop, the case of the petitioner company as stated by its Chairman-cum-Executive Director, [hereinafter referred to as ‘the deponent’] is this: In this backdrop, the case of the petitioner company as stated by its Chairman-cum-Executive Director, [hereinafter referred to as ‘the deponent’] is this: The petitioner company filed a petition in respect of its undisclosed income before the Settlement Commission under Section 245C(1) of the Act for the assessment years 2013-14 to 2017-18 for Settlement of its claim. Pursuant to the search, notices under section 153A of the Act were issued reopening the assessments of the petitioner company for the assessment years 2011-12 to 2016-17 for filing returns of income. The said returns were filed. As regards assessment year 2017-18 initial assessment is still pending. Hence, there was no reopening for the said assessment year. During the course of search enquiry, the deponent was subjected to intense and grueling examination for several hours and statements were recorded from him under Section 132(4) of the Act. He was examined between the dates 30.08.2016 and 28.11.2016 for 15 times as stated in the writ affidavit and his statements were recorded on those fifteen occasions. The search party repeatedly suggested that the deponent should accept substantial additional income for assessment of the petitioner and it should be commensurate with the degree and intensity of search conducted on the company. In the course of search, the deponent was made to accept that the distributors who were effecting sales were paying additional amounts in cash which was not shown in sales and that cash was paid to the petitioner company by the distributors at 8% of the turnover shown in the accounts. The deponent initially declined so to do. But, when pressure was brought upon him in the form of fear, harassment, long drawn litigation, penal proceedings, criminal proceedings and financial ruining of the deponent as well as the family members, the deponent signed on the dotted line. He and his family members were not allowed to sleep for three days. He became blank and lost his faculty of reasoning during the period of search. Questions were put by search party and even answers were dictated by them. The deponent merely signed on the dotted line being helpless. The deponent is not sufficiently educated to read and understand what was being recorded. The investigating officers themselves calculated the cash amount at 9% of the turnover. The addition of 9% on estimate, as cash paid over and above the sales for the assessment years 2013-14 to 2016-17 was worked out by the search party at Rs.17,54,21,383/-. Search party required that the deponent should accept the said amount as additional income under Section 132(4) of the Act of the petitioner company and that the same should be offered to tax. At that point of time, the deponent had no choice but to accept the same with the hope and expectation that the harassment would abate. Quantification of additional income as per statement under Section 132(4) of the Act with the break up of the said sum is as under: The above said alleged undisclosed income forming part of declaration under Section 132(4) of the Act is not represented by an asset, cash, investment or visible in any other manner. No incriminating material was found to support the declaration under Section 132(4) of the Act as no such income was earned at all. The declaration of the said income was under circumstances explained. The deponent retracted the disclosure made being not true and not voluntary. There was no incriminating material evidence to corroborate the allegation of under invoicing/payments from distributors. There was no such evidence found in regard to any cash payments made to the deponent, over and above the sales. The report furnished by the authorities does not indicate the existence of any such proof of the income declared. The allegations made are wild guess work based on conjectures and surmises. In response to the notices under Section 153A of the Act for the above assessment years, the petitioner company filed returns of income. Retraction from the statements was also made at the time of filing of IT returns and the petitioner company did not offer the additional income aggregating to Rs.17,54,21,383/- in the returns filed pursuant to the notice under Section 153A of the Act. It was because of this omission to include the above income in returns filed pursuant to the notice issued under Section 153A of the Act, the Settlement Application filed by the petitioner was not allowed to be proceeded with and was treated as invalid under Section 245D(2C) of the Act. According to the Settlement Commission’s observations, the application filed did not constitute true and full disclosure and was rejected. In the application filed before the Settlement Commission, the petitioner declared the following additional incomes. The petitioner company advertises its products and a portion of the advertisement costs are borne by the distributors. These distributors remitted funds to the extent of Rs.94,97,907/- by crossed account payee cheques towards their share of advertisement cost. The same was omitted to be taken as income while filing the original return for the assessment year 2016-17 though the amount so received was shown in the balance sheet. Hence, the said amount was declared as undisclosed income in the application filed before the Settlement Commission. A sum of Rs.1,20,95,157/- was claimed as expenditure towards discounts payable to the distributor. Though the accounting entry was made in the books of accounts for the said amount, payment was not made. Hence, the entry should have been reversed. The expenditure should not have been claimed as a deduction. Since the said amount was claimed as a deduction in the returns originally filed for the assessment year 2017-18, it was offered as undisclosed income in the application filed before the Settlement Commission. The company incurred expenditure of Rs.55,00,000/- towards business. The same were recorded in a spiral register numbered as A/BCCPL/1 by the search party. All these expenses were recorded in the books of the company under different heads of income, so that the expenses are not disallowed on the plea that they represent expenditure which is not allowable as a deduction. These expenses were not supported by bills or vouchers. Hence, they are not to be allowed as deduction. Therefore, these expenses, which are recorded in the above-said register were disallowed and offered for tax as undisclosed income in the application filed before the Settlement Commission. The application was scrutinized by the Settlement Commission. All the facts that were declared by the deponent were gone through and an initial order was passed by the Commission holding that on the basis of the material placed before the Commission, there is prima facie no material, which warrants the conclusion that true and full disclosure has not been made by the applicant nor it has not disclosed the manner of earning such income and that all requirements laid under Section 245C(1) of the Act have been fulfilled by the applicant and, therefore, the application is fit to be allowed to be proceeded with further. The Settlement Commission called for report from the Principal Commissioner of Income Tax, on 27.11.2018, as required under the Statute. In response, the Principal Commissioner submitted a report, dated 24.12.2018, under Section 245D(2B) of the Act objecting to the Settlement Application being proceeded with by the Commission. The report was forwarded and was received on 28.12.2018 by the Chartered Accountant of the petitioner company. Even within the short time of four days given, the petitioner filed a reply, on 04.01.2019, responding to the points raised by the Principal Commissioner of Income Tax. The Settlement Commission brushed aside the explanation given in a summary manner. The entire reasoning was given in two short paragraphs. The reasoning adopted was based on wrong facts and assumptions, which are not true, and improper appreciation of submissions of the applicant. The reasons adopted are with biased feeling that the petitioner company has not made full and true disclosure of income. The Commission observed as follows: - ‘In the application filed before ITSC, as against unaccounted income disclosed before the investigation wing at Rs.17,54,21,838/-, the applicant has disclosed Rs.2,70,93,064/-. A perusal of the applicant’s submissions would show that the retraction is mainly based on the ground that the earlier declaration was not based on any material evidence if it were to be sustained.’ To the above observation of the Commission, the objections of the applicant are as follows: ‘In the returns of income, the petitioner has not included the sum of Rs.17,54,21,838/- and retracted from the said declaration made under Section 132(4) of the Act as no such income was actually earned by the company. The said sum is not reflected in the form of any investment, asset, cash or in any other form. If any such income was really earned, it would have manifested itself in the form of some asset or the other, in the intense search that was conducted on the petitioner and the deponent for almost four days. Repeated statements were recorded only because no evidence was found. Questions were put by search party and even answers were dictated by them. The deponent merely signed on the dotted line being helpless. Apart from the statements of the petitioner, which were retracted, the statements from two employees viz., Ramaswamy Ramasankar and Subbaraju Jagan were also recorded. In the first statement recorded on 30.08.2016, Ramaswamy Ramasankar has not admitted any cash receipt from the dealers. He was again called and his second statement was recorded on 17.09.2016. In his said statement, it was recorded as if he confirmed cash receipt from the distributor/dealer. Admission was obtained by instilling fear, duress and coercion. There was no receipt of any cash from any distributor/dealer. No statements obtained from the distributors in proof of cash payments were made available to the deponent. The Settlement Commission started on the basic premise that any disclosure under Section 132(4) of the Act should be taken as a gospel truth and cannot be departed from. Where an assessee retracts the declaration under Section 132(4) of the Act, the said statement becomes non est and the correctness of the assessment of the undisclosed income will have to be substantiated by other evidence. Retraction of declaration of income in the statement recorded under Section 132(4) of the Act at any point of time destroys the evidentiary value of any such disclosure. Reference was made to an earlier search conducted on 15.10.2009 wherein cash of Rs.11,62,00,000/- was found and which was admitted as the income of the deponent. The said earlier instance has nothing to do with the present search proceedings. The said income really did not belong to the deponent. It belonged to several other persons. The earlier search has nothing to do with the present search. The cash was assessed as income of the deponent because it was found in the premises of the deponent and he could not explain at that time the factual position due to certain compelling factors. The same cannot be held to infer that the petitioner company received cash though as a fact no unaccounted cash was found in the present search.’ The Settlement Commission’s next observation is as follows: - ‘It is seen that several statements of Shri Arunachalam Manickavel, who manages the business, were recorded on 2.9.2016, 7.9.2016, 30.9.2016 and 20.10.2016 even two months after the search which cannot be statements in a perturbed state of mind.’ To the above observation of the Commission, the objections of the petitioner are as follows: - ‘Search went on for four full days and day to day statements were recorded from 30.8.2016 to 2.9.2016. Thereafter, further statements were recorded in short intervals. In all 15 statements of the deponent were recorded. The deponent retracted from the disclosure given under Section 132(4) of the Act and has not offered the same to tax in returns of income filed. The deponent’s education is marginal. He can hardly read, write or understand English. The mental trauma to which the deponent was subjected is inexplicable. He lost his faculty of reasoning and simply nodded to whatever the investigating officer stated. The Settlement Commission was completely in error in assuming that the deponent was not in any perturbed state of mind. The observation of the Commission is erroneous, imaginary and borders on absurdity.’ The further observation of the Commission is as follows: ‘Moreover, the declaration u/s.132(4) was based on valid documents seized like in Annexure A/BCCP4/01 and Annexure BSW/1, both showing cash receipts.’ The objections of the applicant are as follows: - ‘The observation is based on incorrect factual position. The material numbered as A/BCCPL/01 by search party comprises of 35 pages containing the details of expenditure aggregating Rs.49,16,642/- incurred by the company. The company in all incurred Rs.55,00,000/- towards expenditure relating to the business of the company. Details of this expenditure were recorded in spiral register. All these expenses were recorded in the books of company under different heads of income so that the expenses are not disallowed on the plea that they represent expenditure which is not allowable as a deduction. These expenses were not supported by bills or vouchers. Hence, they are not to be allowed as deduction. Therefore, these expenses, which are recorded in the register, were disallowed and offered for tax as undisclosed income in the application filed before the Commission. This register has nothing to do with cash receipts and nothing was written that distributors has paid the cash. Reference is again made to another annexure BSW/1 of 40 pages. The salesmen employed by the deponent were deputed to various areas for effecting sales. Based on the orders booked, they were given points; and, at the end of the year based on the number of points earned by them, small gold coins and silver coins were given to them as incentives. The pages in the register merely contain the points earned by the employees. There is no nexus between this material and the declaration made by the deponent under Section 132(4) of the Act. The gold coins and silver coins were also seized by the search party during the course of search. Even the Principal Commissioner of Income Tax who gave his report, is not certain of the contents of this annexure.’ The next observation of the Settlement Commission is this: - ‘BSW/5 is also a corroborative evidence in the nature of confirmation by dealers.’ To the above observation, the submissions of the petitioner are as under: ‘The said material BSW/5 is not a part of the declaration made under Section 132(4) of the Act. It was never addressed in the statement taken under the said provision of law. The deponent employed number of distributors to whom sales are made. The petitioner company has also distributors and some of the distributors are common between the deponent - Chairman-cum-Executive Director of the company and the company. One distributor by name Gampa Ramesh is such a common distributor. During the period 1.4.2014 to 31.7.2014 the said Gampa Ramesh effected the following sales: (a) Sale of the products of the deponent: Rs.77,32,337/-; (b) sales of company products: Rs.70,07,537/-. The said Ramesh was delaying in making payments. The deponent insisted for payment of the amounts due towards sale proceeds of materials sold to him. Ramesh sent a sum of about Rs.78.00 lakhs in cash which was reported as stolen in transit. The amount was sent by Ramesh through his sub distributor. FIR was registered in Guntur about the theft of money by the said Ramesh. Copy of the said report is sent to the deponent explaining as to what happened. The amount was subsequently paid to the company by cheque/RTGS. This transaction has nothing to do with this declaration under the provisions of the Act. It is an admitted position that sale proceeds of sales effected are all included in the books of accounts. They are all accounted sales. Hence, the material has no relevance. The description by the Settlement Commission that BSW/5 is confirmation by the dealer of payment in cash is absolutely not correct. There is no nexus between the material found and the conclusion drawn. The said G.Ramesh was not examined. Except guess work there is no proof available to substantiate that the amount represents the cash receipt outside the books of accounts.’ The next observation of the Settlement Commission is that the deponent had also confirmed unaccounted profits @ 8% and later @ 9% of the sales. The submission of the petitioner is as under: ‘The declaration under section 132(4) of the Act was obtained when the petitioner was under duress and mental stress. There were no unaccounted profits as alleged and as observed by the Settlement Commission. This was explained to the assessing officer in reply to the show cause notice.’ The next observation of the Commission is this: - ‘Various evidences of investments were also found. Huge cash seizure were also made further corroborating the generation of cash as above on account of under invoicing of sales and purchase manipulations.’ The submission of the petitioner is that the only asset found pertaining to the petitioner company is the sum of rupees four lakhs; the said cash represents the balance available in the books of accounts; there was no cash found at all unrecorded; there was no other undisclosed asset found in the course of search, which belongs to the petitioner company; and, therefore, the criticism is routinely made regardless of the factual position. The next observation of the Settlement Commission is this: ‘The applicant has also now stated that the income offered relates to reimbursement of sales promotion expenses and also discounts made to dealers wrongly debited to profit and loss account? The reply of the petitioner is this: ‘The additional incomes offered before the Settlement Commission for the assessment years 2016-17 and 2017-18 are already explained. None of these items represents cash receipts not recorded in the books of accounts. The undisclosed income for the assessment year 2016-17 represents payments received by account payee cheques and recorded in the books of accounts. As regards the undisclosed income declared for the assessment years 2017-18, it does not pertain to any receipt of cash. These items are offered for assessment in the application filed before the Settlement Commission because they are not allowable expenditure. That apart the requirements under section 245 of the Act for Settlement of cases are as under: a) the application to be made in such form and in such manner as may be prescribed. b) the application should contain full and true disclosure of income which has not been disclosed before the Assessing Officer c) the manner in which such income has been derived; d) the additional amount of income tax payable on such income and such other particulars as may be prescribed to be stated in the application filed before the Settlement Commission. The undisclosed income declared was earned in the course of business. It represents discounts to the distributors not payable, expenses incurred not supported by bills or vouchers or erroneous debit to the profit & loss account. The objection that the manner of earning unaccounted income has not been declared, does not apply to the facts explained by the petitioner. While passing the initial order under Section 245D(1) of the Act all the above facts and circumstances were examined and were found to have been fulfilled. Thus, the reasons namely there is no nexus between the material cited and the decision taken by the Settlement Commission; wrong facts are assumed; the reasoning adopted was based on wrong facts; there are no grave procedural defects and there is violation of natural justice as the time given is very short; mere non acceptance of claim is assumed to be synonymous with the application for Settlement being bad for failure to make full and true disclosure of income; and the test applied for arriving at true and full disclosure is contrary to the provisions of statute, for rejection of the Settlement application are untenable. If the statement is retracted, the assessing officer has to establish his own case independently. There must be corroborating documentary evidence and the statement recorded under section 132(4) of the Act alone should not be the basis for arriving at any adverse decision against the assessee. There must be something more than bare suspicion to support the assessment or addition and the assessing officer cannot proceed on presumptions under Section 134(2) of the Act. The undisclosed income of an assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment but only to the extent it is relatable to the incriminating evidence or material unearthed or found during search. There must be nexus between the statement recorded and the evidence or material found during search in order to make the statement a basis for the assessment. It is always open to the person who made the admission to show that the admission is not correct. The statements made under Section 132(4) of the Act cannot be taken as conclusive. If it is retracted, it cannot be considered at all for making the assessment. The CBDT instructions are binding on the authorities. Some such instructions are dated 10.03.2003 and 18.12.2014. As per the decision of the Delhi High Court in CIT v. Godwin Steels P.Ltd (Delhi) [353 ITR page 353], which was rendered referring to the entire legal position and also the decision of the Supreme Court in State of UP v. zjojri Mal [(2004) 4 SCC 714, the following legal position is discernible: The limits of judicial review of an order of a Tribunal under Article 226 have been laid down by the Supreme Court in several judgments. Suffice to refer to the observations of S.B.Sinha, J. in State of U.P. and Anr. Vs. Johrimal MANU/SC/0396/2004 : (2004) 4 SCC 714. The following observations sum up the entire legal position:- It is well-settled that while exercising the power of judicial review the Court is more concerned with the decision making process than the merit of the decision itself. In doing so, it is often argued by the defender of an impugned decision that the Court is not competent to exercise its power when there are serious disputed questions of facts; when the decision of the Tribunal or the decision of the fact finding body or the arbitrator is given finality by the statute which governs a given situation or which, by nature of the activity the decision maker's opinion on facts is final. But while examining and scrutinizing the decision making process it becomes inevitable to also appreciate the facts of a given case as otherwise the decision cannot be tested under the grounds of illegality, irrationality or procedural impropriety. How far the court of judicial review can reappreciate the findings of facts depends on the ground of judicial review. For example, if a decision is challenged as irrational, it would be well-nigh impossible to record a finding whether a decision is rational or irrational without first evaluating the facts of the case and coming to a plausible conclusion and then testing the decision of the authority on the touch-stone of the tests laid down by the Court with special reference to a given case. This position is well settled in Indian administrative law. Therefore, to a limited extent of scrutinizing the decision making process, it is always open to the Court to review the evaluation of facts by the decision maker. Having regard to the fact that there was a difference of more than Rs. 25 lacs, even for the period of four months for which data was available, between the figure of net profit shown by the computer data and the figure of net profit shown in the books of accounts meant for production before the income tax authorities, it was expected of the ITSC to independently apply their mind to the assessee's explanation, whatever that was, and to the materials found and relied upon by the CIT in his report and cross verify both in an attempt to find out whether the explanation was plausible or acceptable. This important step in the decision-making process has been omitted to be done. Our jurisdiction is only to examine if the decision-making process has suffered from some fundamental errors. The judgment of the Division Bench of the Karnataka High Court in N. Krishan & Ors. vs. Settlement Commission & Ors MANU/KA/0065/1989 : (1989) 180 ITR 585, cited by the learned counsel for the respondent actually supports our decision. In para 21 of the judgment, Rama Jois, J, speaking for the court held:- In our opinion, many of the grounds on which arbitration awards could be set aside would not be available in view of the nature and jurisdiction of the Settlement Commission. We are of the view that a decision of the Settlement Commission could be interfered with only: (i) if grave procedural defects such as violation of the mandatory procedural requirements of the provisions in Chapter XIX-A and/or violation of the rules of natural justice is made out; (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission. (iii) this court cannot interfere either with an error of fact or error of law alleged to have been committed by the Settlement Commission. Non acceptance of the claim would not ipso facto lead to making the application for Settlement bad for failure to make full and true disclosure of income. As per the decision of the Bombay High Court in Shreem Engineering Industries v. ITSC reported in (2018) 95 taxmann.com 190 to establish that there was failure to make full and true disclosure of income as required under 254C(1) of the Act it would be necessary for the Revenue to prove that there was a non disclosure of primary facts and ntr merely non acceptance of certain claims made before the Commission. Mere non acceptance of the claim made by the deponent is treated as failure to make full and true disclosure of income, erroneously; and, hence the impugned order deserves to be set aside. The findings of the Settlement Commission are irrational and arbitrary. The Settlement Commission should have independently applied its mind to the explanation furnished to it but it failed to do so. The objections of the Principal Commissioner of income tax were simply taken as final and sacrosanct. There is no nexus between the material cited, reasons given and the decision taken by the Settlement Commission. Adverse decision is taken based on facts non existent or facts assumed. The Settlement Application is rejected by the first respondent on the basis of objections given by the 2[nd]respondent on the grounds irrational, unreasonable and unsupportable in law. Hence, the present writ petition is filed. The case of the respondents as stated in the counter affidavit filed by Deputy Commissioner of Income Tax, in brief, is this: The case of the respondents as stated in the counter affidavit filed by Deputy Commissioner of Income Tax, in brief, is this: The order passed under Section 245D(1) of the Act is a preliminary one. It was passed on the basis of the information provided in the application filed by the assessee under Section 245C(1) of the Act without hearing the Revenue. The said order only allows the application to be proceeded with subject to the application of the other provisions of the Act. On the Commission calling for a report under Section 245D(2B) of the Act, and on submission of such a report within the stipulated time, the Commission may under Section 245D(2c) of the Act on the basis of the report furnished by the Commissioner and after hearing the applicant declare the application of the assessee as invalid. The order impugned passed under Section 245D(2C) of the Act is an independent order from the one passed under section 245D(1) of the Act. The application of the petitioner was held invalid on the basis of the report of the Commissioner and after hearing the petitioner. The Settlement Commission followed the due procedure laid down under the Act while dealing with the application of the assessee and there has been no violation of the provisions of the Act. Hence, the writ petition is liable for dismissal. The averments in the writ affidavit pertain to search conducted by the investigation wing of the department, which were concluded long back. The petitioner never challenged the proceedings of the department in conducting the search. The same have become final. The allegations made against the department are incorrect. The search record shows that the assessee voluntarily admitted the additional income when confronted with material found at the time of search expressing his inability to explain the issues. The assessee has admitted several times vide statements dated 02.09.16, 07.09.16, 30.09.2016 and 21.10.2016 that he is ‘under invoicing’ the sales bills to the extent of 8% to 9% of the total sale invoice and the differential amount was received by cash. The assessee has even filed an affidavit affirming the admission of additional income on 19.10.2016, after a lapse of 47 days from the date on which search was concluded. The filing of the affidavit at stage later to the conclusion of search shows that the admission of additional income was voluntary and no coercion was involved. The assessee has never stated even before the Settlement Commission that there was coercion. Further, while filing petition before the Settlement Commission undisclosed income of Rs.2.71 Crore is admitted. If there was coercion on the day of search, the same should have been brought before the investigation wing or other higher authorities. The petitioner was always assisted by more than one qualified chartered accountant and was helped by them. The Chairman and Managing Director was attending the income tax office along with his qualified chartered accountant and was always MSRM,J & JUD,J wp_1703_2019 MSRM,J & JUD,J wp_1703_2019 promising to pay taxes on undisclosed income admitted by him. In fact in the month of November/December 2018, the Chairman and Managing Director has appeared before the 2[nd] respondent along with two chartered accountants and stated that they paid more than 50% of the taxes on undisclosed income admitted and requested some time to pay the remaining taxes. Unless the assessee admits the undisclosed income he would not have paid huge tax of Rs.5.74 Crore on the same undisclosed income. There cannot be any coercion for years together especially when the business of the assessee runs into hundreds of crores and when the assessee is aided/advised by accountants and Chartered accountants who are well qualified. The assessee company is being assessed to tax since a very long time and the assessee is very well aware of its rights besides the legal positions under the Act. The assessee group was searched twice and a survey under Section 133A was also conducted. During the last search operation under Section 132 of the Act huge cash of more than rupees eleven crores was found and the assessee’s group admitted the same as undisclosed income after the search and paid taxes. Thus, in the earlier search, the department had brought to light huge unaccounted cash of more than rupees eleven crores in the assessee’s group case and assessee group admitted the same as undisclosed income and paid taxes. Since this is the second search operation under Section 132 of the Act, apart from survey on assessee under Section 133A, the petitioner is very well aware of the statutory procedures; and, if really there was coercion they would have brought the same to the notice of the senior officers and in fact the assessee would not have paid taxes of Rs.5.74 crores which the assessee is claiming the same as refund. If there was coercion to admit undisclosed income the assessee would not have filed a petition before the Settlement Commission admitting the undisclosed income of Rs.2.71 crores. Thus, there is no sum and substance in the allegation of the assessee that there was coercion on the part of the department to admit undisclosed income. The petitioner company disputed the undisclosed income of Rs.17,54,21,383/- which was admitted by stating that (I) admission is not represented by an asset, cash, investment; and (ii) no incriminating material was found to support the admission. Under the provisions of the Act, there is no provision, which provides that admission of additional income should be represented with equal amount of cash, asset or investment. The assessee knows best as to whether the unaccounted investments are made, because the department does not conduct inspection on assessee everyday. If the department gets the source of income given and the corresponding unaccounted asset, it would be the best case for department. But, it is enough even if one aspect is found by the department either source or modus operandi of unaccounted income generation or destination of unaccounted income. The department need not get corresponding unaccounted assets/cash etcetera during search operations especially when the assessee and his staff admit about the unaccounted income. The assessee has admitted undisclosed income on three occasions and filed an affidavit about the unaccounted income and payment of taxes. Cash of Rs.66,07,000/- (seized Rs.65,00,000/-) and unaccounted jewellery worth Rs.1,56,74,578/- were found during search in the residential premises of the deponent and cash of Rs.4,50,000/- (seized Rs.4,00,000/-) was found in the factory premises of the petitioner company besides cash of Rs.89,12,090/- (Seized Rs.87,05,400/-) was found in the premises of M/s.Bharati soap works a proprietary concern of the deponent of the writ affidavit. Certain documents containing details of investment of Rs.5.20 crores in M/s.Gowtham Buddha Textile Park Pvt Ltd and unsecured loan of Rs.1.00 Crore advanced by the Chairman and Managing Director to M. Chinnathorai were found. The chairman and managing director while answering question no.8 of his deposition, on 22.10.2016, has stated about the above investments and a part of investment in construction of a residential building ‘arunachalam palace’ at Guntur and Kalyanamandapam at Tuticorin and also the cash found during the course of search were out of the unaccounted money generated on account of the cash received by under invoicing at 9% of turnover from distributors. The issue was questioned and Chairman and Managing Director has admitted several times by his statements that he is under invoicing the sales bills to the extent of 8% to 9% of the total sale invoice and the differential amount was received by cash. These amounts by way of cash were received by the petty cashier – Subbaiah Jagan and were subsequently handed to head cashier Ramaswamy Ramshanker along with the details as to from whom the cash was received. These facts were confirmed by the said Subbaiah Jagan and Ramaswamy Shanker vide statements, dated 17.09.2016. In their statements they stated that the cash was received from the dealers and that at the end of the day the head cashier used to hand over the cash to his boss – the Chairman & Managing Director along with the details of dealers from whom such cash is received. Subsequent to the statement, the department conducted enquiries with dealers of the petitioner company on random basis. Moreover during the course of search a note book was found and seized, on 31.8.2016, vide annexure BSW/1 which contains date wise written transactions of cash receipts from 8.6.2016 to 28.08.2016 with the names of towns/persons. Further, some loose sheets were found and seized as annexure A/BCCPL/01 from the factory premises of the petitioner company which contained hand written details of cash receipts from 03.08.2016 to 26.08.2016. The assessee failed to explain the nature of the contents of such material found at the time of search and voluntarily admitted the unaccounted income of Rs.17,54,21,383/-. Moreover, an amount of Rs.58.50 lacs was paid by the Chairman and Managing Director to M/s.JK Ads by way of cash to promote his son as film hero in the film ‘Player’ and the same is unexplained expenditure and part of application of undisclosed income earned by the petitioner MSRM,J & JUD,J wp_1703_2019 MSRM,J & JUD,J wp_1703_2019 company. Further, the seized material annexure BSW/5, is a copy of an FIR, dated 12.08.2014, filed by Govinda Ram Attal. The said Govinda Ram Attal is the sub distributor of the petitioner company under the distributorship of Gampa Ramesh. Gampa Ramesh handed over cash of Rs.78,58,460/- to Govinda Ram Attal to be given to the petitioner company but the cash was lost in transit and an FIR was filed. This fact establishes the continuous practice of under invoicing the sale and collecting the differential amount from distributors by way of cash. The contention of the Chairman & Managing Director that he retracted from his original statement recorded on oath during the course of search proceedings is incorrect inasmuch as he never retracted from the earlier statement either by addressing a latter to the department or by way of a statement made on oath. Merely because he has not disclosed the undisclosed income of Rs.17,54,21,383/-, which was detected by the department during the course of search proceedings, in the returns filed pursuant to the notices issued u/s 153A of the Act, it would not amount to retraction. During the course of search, it has been stated on behalf of the assessee that it is under invoicing the sale invoices to an extent of 8% to 9% of the total sale value. The details of the income admitted in the application filed before the Settlement Commission are correct. The manner of earning the income as explained in the application as the amounts were received back from the dealers and distributors towards reimbursement of sales promotion expenses/discounts given to them is vague and without any supporting proof. The assessee did not file any evidences as to who are the dealers from whom the reimbursement of sales promotion was done and to which dealers the discounts were wrongly debited. The names and addresses of these dealers were submitted neither before the department nor before the Settlement Commission for verification. The assessee company admitted the above extra income just to camouflage the unaccounted business income relating to soaps. The assessee company is admitting the above nature of income only to cover up the unaccounted assets/expenditure found by the department during search proceedings. Instead of admitting the same as income from soap business, the same is being camouflaged as ‘reimbursement of sales promotion expenses/discounts given to distributors’ because the assessee company wanted to evade not only income tax but also sales tax/GST. The manner of earning the income as explained in the application that the amounts were received back from dealers and distributors is vague and without any supporting proof. The petitioner has stated in the writ affidavit that for the assessment year 2017-18 Rs.1,20,95,157/- was wrongly claimed as discount payable to distributors and the said amount was admitted as additional income in the application filed before the Settlement Commission. The manner of earning the said income as explained in the Settlement application that on account of wrong claim of discounts is vague and without any supporting proof. The assessee has not filed evidence as to who are all the dealers to whom these discounts were wrongly claimed in its books. The names were submitted neither before the department nor the Settlement Commission for verification. In the writ affidavit it is submitted that the petitioner has stated that Rs.55,00,000/- was the expenditure that was found recorded in a spiral register numbered as A/BCCPL/01 by the search party. This expenditure is not supported by vouchers and this amount was admitted as additional income in the application filed before the Settlement Commission. The assessee has not filed details of expenditure neither before the department nor before the Settlement Commission. The petitioner has stated that the Settlement Commission passed an order under section 245D(1) of the Act allowing its application to be proceeded with, on examination of material placed before the Commission and that the Commission has held that the application is fit to be allowed to be proceeded with further. Since the said order was passed only at the admission stage, it is not an order in favour of assessee. The petitioner has stated that Settlement Commission has passed the impugned order summarily rejecting its application. Settlement Commission heard the case on 08.01.2019 and then passed the order. The Settlement Commission invalidated the application filed by the assessee since it does not constitute a full and true disclosure of income and as the assessee has not revealed a true and correct picture of the manner in which unaccounted income was earned, which are prerequisites of section 245C of the Act. Hence, the assessee’s petition before Settlement Commission was not summarily rejected. Only after receiving the inputs from department and after giving an opportunity to argue the case and file written submissions by assessee company, the assessee’s petition was rightly rejected by Settlement Commission. In the writ affidavit, the petitioner analysed the reasons given by the Settlement Commission in its orders. The principal Commissioner in his parawise comments before Settlement Commission has mentioned that statements were recorded from the assessee atleast four times on different dates an