Bharati Soap Works V. Income Tax Settlement Commission

WP/1704/2019

AI Insights

The case involves a writ petition filed by the proprietor of Bharati Soap Works, challenging the order of the Income Tax Settlement Commission which rejected his settlement application. The petitioner had sought to settle undisclosed income for the assessment years 2011-12 to 2017-18, following a search and seizure operation under Section 132 of the Income Tax Act. The Settlement Commission's rejection was based on the petitioner's failure to make a full and true disclosure of the income and the manner of its earning, as required under Section 245C(1) of the Act. The court examined the procedural and substantive aspects of the case, including the legal standards for disclosure and the evidentiary value of the statements and documents presented.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 798068 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 30-10-2019
• Assessment Year: misc
• Other Referred Cases: Kailashben Manharlal Chokshi v. Commissioner of Income Tax, M. Narayanan and Bros v. Assistant Commissioner of Income-Tax, Commission of Income Tax v. Naresh Kumar Agarwal, Deputy Commissioner of Income-tax v. Narendra Garg & Ashok Garg, Commissioner of Income-tax v. Harjeev Aggarwal, CIT v. Express Newspaper Ltd., Ajmera Housing Corporation Ltd., v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: KIRANMAYEE
• Assessee Lawyers: Y RATNAKAR
• Keywords: Coercion; Mandamus; Retraction of statement; Search and seizure; Settlement commission; Undisclosed income; Writ petition
• Section: 132; 153A; 245C(1); 132(4); 245D(2C); 226; 245D(1); 245D(2B)

Judgement Text

"THE HON’BLE SRI JUSTICE M.SEETHARAMA MURTI And THE HON’BLE MS JUSTICE J. UMA DEVI Writ Petition No.1704 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 case of the petitioner, 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; 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 is the proprietor of a proprietary concern, Bharati Soap works. The petitioner is carrying on his business in manufacture of detergent cakes and washing power. The plant for manufacture is located at Gorantla, Guntur. The petitioner is also the Chairman-cum-Executive Director of M/s Bharathi Consumer Care Products Pvt.Ltd. A search was conducted on the petitioner as well as the said company, on 30.08.2016, under Section 132 of the Income Tax Act,1961 [‘the Act’, for brevity]. The search was concluded on 02.09.2016. The petitioner filed a settlement application, on 13.11.2018, before the Income Tax Settlement Commission [‘Settlement Commission’, for brevity], Chennai – 1st respondent, under Section 245C(1) of the Act for the assessment years 2011-12 to 2017-18 for settlement of the case. Pursuant to 2 MSRM,J & JUDJ WP_1704_2019 the search, notices under Section 153A of the Act were issued reopening the petitioner’s 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 – 2nd respondent. 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 2nd respondent. Later, the Settlement Commission heard the matter on 08.01.2019 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 is this: The petitioner filed a petition in respect of his undisclosed income before the Settlement Commission under Section 245C(1) of the Act for the assessment years 2011-12 to 2017-18 for settlement of his claim. Pursuant to the search, notices under section 153A of the Act were issued reopening the assessments of the petitioner 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 petitioner 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 3 MSRM,J & JUDJ WP_1704_2019 occasions. The search party repeatedly suggested that the petitioner 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 petitioner. In the course of search, the petitioner was made to accept that the distributors to whom the petitioner was effecting sales, were paying additional amounts in cash which was not shown in sales, and that the petitioner should accept that cash was paid to him by the distributors at 8% of the turnover shown in the accounts. The petitioner initially declined so to do. But, when the pressure was brought upon him in the form of fear, harassment, long drawn litigation, penal proceedings, criminal proceedings and financial ruining of the petitioner as well as the family members, he signed on the dotted line, as the pressure was so great. 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 petitioner merely signed on the dotted line being helpless. The petitioner 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 at 9% on estimate, as cash paid over and above the sales for the assessment years 2011-124 to 2016-17 was worked out by the search party at Rs.37,84,91,755/-. Search party required that the petitioner should accept the said amount as additional income under Section 132(4) of the Act and the same should be offered to tax. At that point of time, the petitioner has no choice but to accept the same with the hope and expectation that the harassment would abate. The manufacture of detergent cakes and washing power requires purchase of several raw materials. Acid slurry is one of such raw materials for manufacture of washing soap powder and it constitutes nearly 20% of the entire 4 MSRM,J & JUDJ WP_1704_2019 raw material. There are several other raw materials like soda ash, soap stone power, sodium triply phosphate powder, AOS, aluminium sulphate, perfumes etcetera that are needed for manufacture. The petitioner was purchasing acid slurry from one M/s. Mahaveer Surfactants Pvt., Ltd., Pondicherry. It appears that the said supplier deposed on 30.08.2016, that they have supplied, to the petitioner, acid slurry amounting to Rs.9,46,26,216/- in the financial years 2010-11 to 2014-15 and for these purchases the payment was made by the petitioner in cash. Even assuming it is true, it is an item of expenditure for the petitioner being the purchase of raw material. Therefore, it would constitute an expenditure in the hands of the petitioner and not income. The petitioner explained to the investigating officer that the petitioner could not have purchased acid slurry alone, which is only 20% of the raw materials and that the said allegation is not correct. By not recording purchases, the petitioner does not gain any monetary advantage. The petitioner denied payment in cash and the purchases that were said to have been made by the petitioner. Petitioner was told that the petitioner should accept the said purchase as income under Section 132(4) of the Act and that failing which severe action will be taken. The copy of the statement of the said M/s.Mahaveer Surfactants Pvt Ltd., was not supplied to the petitioner. The petitioner was not aware as to what was stated by them. The petitioner was subjected to immense pressure. It was repeatedly pointed out that unless the petitioner accepts, the search would be continued and will not be closed. In order to purchase peace and have peace of mind and being unable to bear the pressure, the petitioner accepted the sum of Rs.9,46,26,216/- as income. The cursory examination of the statement recorded, on 01.09.2016, reveals that the question and the answer was also dictated by the investigating team. The petitioner merely signed on the dotted line. The officer, who recorded the statements computed 5 MSRM,J & JUDJ WP_1704_2019 the additional income to be offered in the returns of income to be filed at Rs.47,31,17,971/-. 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: 9% estimate on turnover towards cash receipts for the assessment years 2011-12 to 2016-17 Rs.37,84,91,755/- Purchase of acid slurry in cash Rs.9,46,26,216/- Rs.47,31,17,971/- The further break up of the said sum is as under: 2011-12 5,81,04,956/- 2012-13 7,00,66,318/- 2013-14 7,95,61,172/- 2014-15 8,68,10,239/- 2015-16 8,45,57,740/- 2016-17 9,40,17,546/- 2017-18 Nil 47,31,17,971/- The above said alleged undisclosed income forming part of declaration 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) as no such income was earned at all. The declaration of the said income was under circumstances explained. The petitioner 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 petitioner, 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 6 MSRM,J & JUDJ WP_1704_2019 surmises. In response to the notices under Section 153A of the Act for the above assessment years, the petitioner filed returns of income. Retraction from the statements was also made at the time of filing of IT returns and the petitioner did not offer the additional income aggregating to Rs.47,31,17,971/- 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 admitted income from real estate business aggregating to Rs.12,95,00,000/-. The break up of the same is as follows: Assessment year Income from real estate (Rs) 2011-12 1,00,00,000/- 2012-13 Nil 2013-14 Ni 2014-15 2,00,00,000/- 2015-16 3,65,00,000/- 2016-17 3,70,00,000/- 2017-18 2,60,00,000/- Total 12,95,00,000/- The additional income declared before the Settlement Commission was not included in the returns of income filed earlier. This income from real estate business was declared in the application filed before the Settlement Commission. The petitioner was acting as a mediator between the purchaser and the seller in respect of the properties, which had potential. Wherever it is 7 MSRM,J & JUDJ WP_1704_2019 feasible, the petitioner was giving token advance to the vendor with a commitment to pay the balance amount within a certain period of time. In such transactions, the petitioner was being able to find a buyer within the said period of time and the land used to be registered by the vendor directly in favour of the buyer as the nominee of the petitioner. The extra price recovered from the buyer over and above the contracted amount was the profit margin of the petitioner. And, the same was declared by the petitioner in the application filed before the Settlement Commission. The application was scrutinized by the Settlement Commission. All the facts were declared by the petitioner and 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 he has not disclosed the manner of earning such income and that all requirements laid under Section 245C(1) 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 2nd respondent on 27.11.2018, as required under the Statute. In response, the 2nd respondent 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. 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 2nd respondent. 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 8 MSRM,J & JUDJ WP_1704_2019 reasons adopted are with biased feeling that the petitioner 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.47,31,17,971/-, the applicant has disclosed Rs.12,95,00,000/-. 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 submissions of the applicant are as follows: ‘In the returns of income, the petitioner has not included the sum of Rs. 47,31,17,971/- and retracted from the said declaration made under Section 132(4) of the Act as no such income was actually earned by the petitioner. 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 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 petitioner merely signed on the dotted line being helpless and being under immense pressure and mental stress. Apart from the statements of the petitioner, which were retracted, the statements from two employees viz., Ramaswamy Ramasankar and Subbaraju Jagan were also 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 9 MSRM,J & JUDJ WP_1704_2019 made available to the petitioner. 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. Additional income of Rs.12,95,00,000/- disclosed before the Settlement Commission is the income from real estate business and has nothing to do with the alleged undisclosed income of Rs.47,31,17,971/-. The Settlement Commission erroneously assumed that while the income declared under Section 132(4) of the Act before the investigating officer was at Rs.47,31,17,971/- and that it was reduced to Rs.12,95,00,000/- before the Settlement Commission, though both are independent. 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 petitioner. The said earlier instance has nothing to do with the present search proceedings. The said income really did not belong to the petitioner. 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 petitioner because it was found in the premises of the petitioner and he could not explain at that time the factual position due to certain compelling factors. The same cannot be taken against the petitioner to infer that the petitioner received cash though as a fact no unaccounted cash was found in the present search. The Commission’s assumption that once a tax defaulter is always a tax defaulter is not a correct manner of appreciating the factual position.’ The Settlement Commission’s next observation is as follows: 10 MSRM,J & JUDJ WP_1704_2019 - ‘It is seen that several statements were recorded from Shri Arunachalam Manickavel (petitioner), who manages the business, on 02.09.2016, 07.09.2016, 30.09.2016 and 20.10.2016 even two months after the search which cannot be statements in a perturbed state of mind.’ To the above objection of the Commission, the submissions of the petitioner are as follows: - ‘Search went on for four full days and day to day statements (6) were recorded from 30.08.2016 to 02.09.2016. Thereafter, further statements were recorded in short intervals. In all 15 statements of the petitioner were recorded. The petitioner 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 petitioner’s education is marginal. He can hardly read, write or understand English. The mental trauma to which the petitioner 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 petitioner 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, 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 (wrongly shown as A/BCCP4/01 by search party) comprises of 35 pages containing the details of expenditure aggregating Rs.49,16,642/- incurred by the company. The expenditure relates to Hamali payments, loading and unloading payments, pooja expenses, machinery and spare parts expenses etc., which are allowable expenditure in computing the income of the company. There is nothing wrong in incurring such legitimate expenditure. The expenditure is not supported by bills or vouchers and, therefore, the company 11 MSRM,J & JUDJ WP_1704_2019 agreed to offer it as income. It is incomprehensible as to the manner in which the Settlement Commission referred to this register as material in proof of declaration made by the petitioner under Section 132(4) of the Act. This is a complete error on the part of the Settlement Commission. The said material has no relevance at all to the declaration made by the petitioner relating to undisclosed income. No question was addressed in respect of this item in the statements recorded. This register is no way proof of cash receipts from distributors. Reference is again made to another annexure BSW/1 of 40 pages. The salesmen employed by the petitioner 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 petitioner 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 petitioner employed number of distributors to whom sales are made. The company has also distributors and some of the distributors are common between the petitioner and the company. One distributor, by name, Gampa Ramesh, is such a common distributor. During the period 01.04.2014 to 31.07.2014 the said Gampa Ramesh effected the following 12 MSRM,J & JUDJ WP_1704_2019 sales: (a) Sale of the petitioner’s products: Rs.77,32,337/-; (b) sales of company products: Rs.70,07,537/-. The said Ramesh was delaying in making payments. The petitioner insisted for payment of the amounts due toward 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 petitioner explaining as to what happened. The amount was subsequently paid to the petitioner 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 objection of the Settlement Commission is that the petitioner 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. The same was retracted in the return of income filed. 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 objection 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 13 MSRM,J & JUDJ WP_1704_2019 sales and purchase manipulations.’ The submissions of the petitioner are as follows: - ‘The allegation of under invoicing of sales and purchase manipulations is denied. The evidence of investment is recorded and forms part of the books of accounts. Petitioner started construction of a house called Arunachalam palace in the financial year 2012-2013. For the said purpose, the petitioner borrowed Rs.5.60 Crores from the Indian Overseas Bank, Guntur. The loan was utilized for construction. There is no such disclosure of any unaccounted income in relation to this item in the declaration. Likewise, petitioner constructed a Kalyana Mandapam in Tuticorin. Petitioner borrowed Rs.4.00 Crores from the said Bank. A further sum of Rs.2.00 Crores was spent out of tax paid profits which are recorded in the books of accounts. This was explained in the statement recorded. There are no unaccounted investments. All investments made are recorded in the books of accounts and have been explained. The Settlement Commissioner either ignored or misunderstood facts. It was alleged that huge cash was seized. The petitioner’s books of accounts contain a balance of Rs.1,52,05,400/- on the date of search. The entire cash is official and is explained. A sum of Rs.4.00 lakhs was available on the date of search. It belonged to the company as per books of accounts of the company. The cash balance of Rs.1,56,05,400/- which is available as per books of accounts of the petitioner and the company has been seized. This does not lead to any inference that there is any declaration under the Act. The next objection of the Settlement Commission is this: ‘The applicant has also now stated that in the proprietary concern, the manner of earning income is through real estate business. The unaccounted income generated is brought out through painstaking investigation at the time of search and more over the claims now made is not supported by any evidences or details. Hence the manner of earning unaccounted income as claimed by the applicant stand 14 MSRM,J & JUDJ WP_1704_2019 disproved.’ The reply of the petitioner is this: ‘The petitioner is a partner in a firm called M/s.Bharat Business Promoters. The main business of the partnership was real estate and identical to the business carried on by the petitioner. The partnership firm filed its return of income on 06.02.2014 for the assessment year 2013-14 and on 14.01.2015 for the assessment year 2014- 15. The petitioner carried on business as partner. He has abundant experience in real estate business. He declared income from real estate business for the assessment years 2011-12, 2014-15 to 2017-18 @ 12.95 Crores. The petitioner explained in the settlement application the manner in which such income has been derived viz., real estate. The requirements of Section 245(c) for settlement of cases is 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 objection of the Settlement Commission is that the petitioner has not explained the manner in which the income was earned through real estate business. The Section merely requires only the manner in which income is earned should be specified. It is nowhere stated that it must be backed up by evidence or details such as who paid, how much paid, names & addresses of the parties etcetera. It is adequate if the manner is indicated. Even the application prescribed in form no.34B does not require any proof of these 15 MSRM,J & JUDJ WP_1704_2019 details. There is no evidence with the Settlement Commission to the contrary. No reason is shown that the manner of earning the income by way of real estate business stated by the petitioner is erroneous. The objection taken is contrary to the requirements of Section 245(c)(1) of the Act. While passing the initial order under Section 245(D)(1) of the Act all the facts & 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 no 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 16 MSRM,J & JUDJ WP_1704_2019 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 17 MSRM,J & JUDJ WP_1704_2019 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 254 C(1) of the Act it would be necessary for the Revenue to prove that there was a non disclosure of primary facts and not merely non acceptance of certain claims made before the commission. Mere non-acceptance of the claim made by the petitioner 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 18 MSRM,J & JUDJ WP_1704_2019 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 2nd 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 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, which was not disclosed to the department earlier. The assessee has admitted several times vide statements dated 2.9.16, 7.9.16, 30.9.2016 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 never stated that there was coercion even before the Settlement Commission. If there was coercion on the day of search, the same should have been brought to light properly. The assessee has disclosed undisclosed income of Rs.12.95 Crores before the Commission and paid taxes of Rs.6.94 Crores on the said undisclosed income. A survey under Section 133A of the Act was conducted at the business premises of M/s.Mahaveer Surfactants Pvt.Ltd., Pondicherry on 30.08.2016. There, the department impounded a diary. It reflects the transactions totaling Rs.9,46,26,216/- relating to unaccounted cash sales of Acid slurry made to the petitioner’s group by the above said company. When asked as to whether sales made by the said company were reflected in the said company’s profit & loss 19 MSRM,J & JUDJ WP_1704_2019 account, the Director of the said company has stated in his statement recorded during survey as follows: - ‘Yes, however, since the Bharati Group wanted it outside the books, the bills are generated against some other name sake parties and booked as cash sales in our books. I would like to add that since all our purchases are booked, we have to mandatorily show the corresponding sales output.’ The petitioner, on 01.09.2016, was shown the contents of the diary and the above statement. The petitioner has not asked for verification of the statement or impounded diary. The petitioner accepted the unrecorded cash purchases and admitted additional income of Rs.9,46,26,216/- on that account. The assessee even filed an affidavit affirming the admission of additional income on 19.10.2016 after lapse of 47 days from the day on which the search concluded. The filing of the affidavit much later to the conclusion of the search shows that the admission of additional income was voluntary and was without any coercion. The petitioner has stated before this Court for the first time that there is coercion. The said allegation was never made before the investigating wing, additional commissioner, assessing officer and even before Principal Commissioner. The petitioner was all along mentioning that taxes would be paid in instalments. The petitioner disputed the undisclosed income of Rs.47,31,17,971/- admitted during the course of search by stating that (I) admission is not represented by an asset, cash, investment; and (ii) no incriminating material was found to support the admission. The averment of the assessee is not correct. Cash of Rs.66,07,000/- (seized Rs.65,00,000/-) was seized in the residential premises of the petitioner and Rs.89,12,090/- (seized Rs.87,05,400/-) was seized in the premises of M/s.Bharati soap works a proprietary concern of the petitioner. Unaccounted jewelry worth Rs.1,56,74,578/- was found during search. Certain documents containing details of investment of Rs.5.20 crores in M/s.Gowtham Buddha Textile Park 20 MSRM,J & JUDJ WP_1704_2019 Pvt Ltd and unsecured loan of Rs.1.00 Crore advanced by the petitioner to M. Chinnathorai were found. The petitioner 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 petitioner 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 subsequently the same were handed over to the head cashier Ramaswamy Ramshanker along with the details 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 petitioner 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 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 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. Moreover, an amount of 21 MSRM,J & JUDJ WP_1704_2019 Rs.58.50 lacs was paid by the petitioner 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. The petitioner furnished details of income of Rs.12,95,00,000/- admitted from real estate business in the application filed before the Settlement Commission. The manner of earning the income as explained from real estate business is vague and without any supporting evidence. The assessee has not furnished the details of persons from whom the money pertaining to real estate business was received and the details of the immovable properties that were purchased and sold and as to when and from whom the amounts were received. The mode of receipt of the said money whether by way of cash and evidence of the same was not admitted by the assessee anywhere before the Settlement Commission. The submission of the assessee that he has admitted the income from real estate business in previous search was not established. Though assessee admitted Rs.80.00 lakhs, Rs.80.00 lakhs and Rs.40.00 lakhs for three years in return of income filed in response to the notice under Section 153A for the assessments years 2008-09, 2009-10 and 2010-11 as part of his statement, later the same has been retracted. This itself shows that the assessee is not doing any real estate business. Inspite of number of opportunities given, the assessee could not furnish the source of income derived from real estate business. The assessing officer proceeded to assess the above amounts as unexplained business income after giving detailed reasoning in the assessment order. Though the assessee has filed an appeal before the Commissioner of Income Tax (Appeals) against the assessment order, he has not contested the assessing officer’s stand that there was no real estate business. The contention of the petitioner that he has been earning income from real estate business is incorrect. There was no income from real 22 MSRM,J & JUDJ WP_1704_2019 estate business even during previous search proceedings. The sole business of the assessee is manufacture and sale of soap and detergent since last several years, which is evident from the returns of income filed. The assessee claims some real estate income was earned only to camouflage the unaccounted business income relating to soaps. The assessee is admitting real estate income only to cover up the unaccounted assets/expenditure found by the department during the search proceedings. Instead of admitting the same as income from the soap business, the same is being camouflaged as the income from real estate business only to evade not only income tax but also sales tax/GST. On examination of the material placed before the Settlement Commission, it held that the application is fit to be allowed to be proceeded with. The said order was passed at admission stage and is not a final order. The Settlement Commission has invalidated the application filed by the assessee, since it does not constitute a full and true disclosure of income nor has revealed a true and correct picture of the manner in which unaccounted income was earned, which are the pre-requisites of Section 245C of the Act. The petitioner’s application before the Settlement Commission was not summarily rejected. The petition was rejected only after receiving the report from the Department and after giving an opportunity to the assessee to file its objections if any to the said report. The Department vide its report before the Settlement Commission has mentioned that statements were recorded from the assessee atleast 4 times on different dates and that the assessee admitted undisclosed income before the department and it was further stated that an affidavit to the said effect was also filed admitting the undisclosed income of Rs.47,31,17,971/- for various assessment years. The statements of the assessee clearly mention the modus operandi of earning unaccounted income. The direct and circumstantial evidences found during the course of search led 23 MSRM,J & JUDJ WP_1704_2019 to admission of unaccounted income by the petitioner company. The Settlement Commission, based on the material placed before it, observed that several statements were recorded from the petitioner, who manages the business, on 02.09.2016 07.09.2016, 30.09.2016 and 20.10.2016 and held that when statements were recorded after two months of search, it cannot be said that statements are recorded in a perturbed state of mind. In the statement recorded under Section 132(4), petitioner has also confirmed the unaccounted profit @8% and later @9% of the sales. It is a fact that the declaration was given by the assessee company based on incriminating material seized by the department at the time of search operations and the said incriminating material was showing cash receipts by M/s.Bharathi Consumer Care Products Pvt.Ltd., while carrying on business operations. Declaration under Section 132(4) of the Act was based on valid documents seized like annexures ABCCP4/01 and BSW/01 both showing cash receipts. BSW/5 is a corroborative evidence in the nature of confirmation by dealers. Settlement Commission observed that the declaration under section 132(4) was given based on valid proof vide annexure BSW/05. The submission of the petitioner that the material seized vide the said annexure has no relevance for declaration made under section 132(4) of the act is incorrect because it contains corroborative evidences in the nature of confirmations by dealers stating that cash was also paid to the assessee. The assessee admitted in his sworn deposition, on 22.10.2016, additional investment of Rs.6.00 Crores for the construction of Kalyanamandapam at Tuticorin and the source of the same was claimed to be money generated on account of cash received through under invoicing of sales. Additional investment in construction of Arunachalam Palace at Guntur is admitted at Rs.1.00 Crore before the Settlement Commission. Whereas in the deposition on 22.10.2016 petitioner admitted an amount of Rs.5.00 Crores. It 24 MSRM,J & JUDJ WP_1704_2019 was also admitted to be from out of unaccounted money generated on account of cash received through under invoicing the sales. The Settlement Commission held that the petitioner has not explained the manner in which the income from real estate was earned. The assessee had not given particulars relating to the properties that were sold through him and the particulars of the commission received by him and the particulars of TDS that was deducted when he had received such huge commission of Rs.12.75 Crores. The Settlement Commission rejected the application filed by the assessee under Section 245C(1) of the Act as the application does not contain a full and true disclosure of the income and the manner in which it has been earned. The case laws are distinguishable and not relevant to the facts and circumstances of the present case in as much as the statements were recorded on various dates and the assessee has admitted the undisclosed income not once but four times in a span of fifty days and in fact has even filed an affidavit after considerable time of initiation of search and also after consulting its legal counsel. The reliance placed on the decisions by the company is misplaced. The assessee has got flourishing business where it is making accounted profits running into Crores and the assessee company and its directors/relatives have acquired more than 20 immovable properties and the extent of one of the immovable property runs to more than 200 acres of land approximately. Hence, the writ petition may be dismissed. The contents of the reply affidavit in brief are as follows: Normally there was no necessity for the petitioner to file any affidavit accepting additional income. Realising that the statement under section 132(4) of the Act obtained from the petitioner cannot be acted upon if retracted the then Assistant Director of Income Tax (Shri Srinath) insisted that the petitioner should sign the affidavit admitting the additional income in line with the 25 MSRM,J & JUDJ WP_1704_2019 statements obtained from him. All the jewellery was taken into custody and was locked up in an almyrah with prohibitory order issued under section 132(3) of the Act. The Assistant Director of Income Tax said that he will not release the prohibitory order and allow the jewellery to be released unless the said affidavit is given. Almost about 50 days were over by then. The entire jewellery was seized. All the jewellery of the ladies of the petitioner was entirely locked up. The petitioner was under great pressure from the family as well as from the income tax authorities. Left with no alternative, the petitioner signed and gave the affidavit on behalf of the company and on behalf of himself to get atleast some jewellery released. The affidavit was prepared to the dictations of the assessing officer and once again it was signed by the petitioner on the dotted line. The petitioner was subjected to immense pressure, fear, coercion and repeated threats. He was threatened that in the event he does not accept additional income as shown in the statement drawn up under section 132(4) of the Act the consequences will be disastrous. He was specifically asked to accept the additional income in his self interest and not to be guided by the chartered accountants. The petitioner was asked to pay tax as per their dictation stating that failure to do so will entail stringent action. Being helpless, the directions were accepted and the statements were signed and taxes were paid in advance as directed. Reference is made to additional income of rupees sixty crores with bifurcation to be submitted later. There was no such bifurcation as no such income was earned at all. The ambiguous manner in which the affidavit was filed will only demonstrate the plea of the petitioner that the statements are signed at the behest and to the dictation of the income tax authorities. It is alleged that the petitioner purchased Acid slurry aggregating to Rs.9,46,26,216/- without recording in the books of accounts. Reference is made to some statement obtained from the Director of 26 MSRM,J & JUDJ WP_1704_2019 M/s.Mahaveer Surfactants Pvt. Ltd., during survey. It is stated that that in the petitioner’s statement recorded on 01.09.2016, the petitioner accepted unrecorded cash purchase of Acid slurry as the petitioner’s income and that the petitioner did not ask for the impounded diary. The question was asked and answer was dictated by the search party. The question and answer are that of the Assistant Director of Income Tax. The petitioner could not have derived any benefit from the purchased acid slurry without recording the same in the books of account. The petitioner derives no advantage in making purchases without recording when it is a part of the petitioner’s expenditure. The petitioner could not have purchased acid slurry only which is 20% of the raw material without buying the remaining 80% raw material in cash if the production were to be made of detergents. There is no allegation that the petitioner bought any other raw material in cash. The petitioner was not furnished copy of statement of Director of the said company. The said dealer appears to be manipulating his accounts and making false entries. The version of the manipulator who is fudging accounts cannot be believed to assess whatever he stated as the petitioner’s undisclosed income. The book balance was Rs.1,52,05,400/- at the time of search. The entire cash is official and is explained. A further cash of Rs.4.00 lakhs was available on the date of search. It belongs to the company as per the books of accounts. The total balance cash which was available as per the books of accounts has been seized. According to the assessing officer the undisclosed income accepted in the statement under Section 132(4) of the Act is Rs.47,31,17,971/-. Such huge amount should reflect in some form or the other. In the case on hand barring the figure of Rs. 47.31 Crores, there is no corresponding asset or utilization of amount. House, factory and offices were searched for 4 long days. Every piece of paper was critically examined. All bank statements were examined. Lockers were 27 MSRM,J & JUDJ WP_1704_2019 examined. Employees were examined. There would have been some trace of this money existing in some form or the other had the income been earned at all. Because the income was never earned, it is not represented by any asset found during search. No incriminating material was found in the course of search to justify the existence of such huge income. The jewellery has been coming for several years by now. It belongs to all our family ladies. Petitioner accepted the value of the jewellery as his income and included in the application made to the Settlement Commission. The source of income is explained as income from real estate business amounting to Rs.12,95,00,000/-. Even this income from real estate business is accepted as unaccounted income in the application filed before the Settlement Commission. Reference was made to the statements, dated 17.09.2016, given by one Ramaswamy Ramasankar and Jagan, who are the employees of the petitioner and also in the company. Ramaswamy Sankar was examined twice and his statements were recorded on 30.8.2016 and 17.09.2016. Ramasamy Sankar in his statement, dated 30.8.2016, made no reference to any cash receipts from the dealer. He was recalled and examined. Even on the second examination he never stated that amounts were received in cash over and above the invoice amount. The company makes cash sales and everyday some sale receipts in cash are received. The average receipt of cash is Rs.2,75,000/- per day as stated by Ramaswamy Ramasankar and it represents cash sales that are recorded in the books of accounts. The turnover of the petitioner and that of the company was more than Rs.200 crores during the year when the search took place. The cash sales work out to Rs.8.25 Crores even if the figures mentioned by Ramaswamy Ramasankar is taken to be true. Mr. Jagan stated that he received cash from cash sales on average at Rs.2,75,000/- to Rs.3,00,000/- per day. Monies were received towards sale proceeds on cash shares which were recorded in the 28 MSRM,J & JUDJ WP_1704_2019 books of accounts. Cash receipts collected by Jagan were passed on to the head cashier – Ramaswamy Ramasankar. Assistant director of Income Tax has not questioned these employees about the nature of payments and whether the amounts received were recorded in the books of accounts. Being aware that all these were recorded sales paid in cash, the Assistant Director of Income tax chose not to examine them further. If really the distributors paid monies in excess of the invoice, an enquiry with the dealers should reveal this position too. In the counter, it is stated that the department conducted enquiries from the dealers of the company on random basis. It is obvious that the dealers denied any such payments made in cash over and above the invoice price. Hence, the counter is silent on the outcome of the enquiry. There was no material or evidence found at all in the course of search to support any receipt of monies in cash over and above the invoice price by the company or by the petitioner. The petitioner reliably understands that in the assessments of dealers made after search, there was no such allegation that they paid cash to the petitioner in excess of invoice price and no such additions were made of any alleged cash payments to the petitioner or the company in the assessment of the dealers. Reference was made to the register numbered as annexure BSW/1. The said annexure and other annexures have nothing to do with the allegation of under invoicing of sales and collecting the alleged differential amounts in cash. The facts are deliberately twisted and false narration is given in the counter affidavit to give sanctity to the statement recorded under section 132(4) of the Act. It is a fact that in the earlier year income from real estate business was declared. On the plea that there is no evidence for carrying on the business, the same was assessed by the assessing officer as unexplained business income. Whether the amount is assessed as income from real estate business or unexplained business the income tax payable is the 29 MSRM,J & JUDJ WP_1704_2019 same. In the appeal, it was accepted that the income is from real estate business and was taxed. The Settlement Commission after going through the particulars mentioned in the statements of facts and while passing the order under Section 245D(1) of the Act held that there is prima facie no material which warrants the conclusion that true and full disclosure has not been made by the applicant or he has not disclosed the matter of earning such income and that hence, all the requirements laid down under Section 245c(1) have been fulfilled by the applicant. The only difference is that the Principal Commissioner later objected to the application. Barring the objection, all facts were before the Settlement Commission, which were gone into at the time when the order under section 245D(1) of the Act was passed. The factual position presented was verified by the Settlement Commission and it formed part of the order while allowing the application to be proceeded with. The material cited for invalidating the application in the order passed under section 245D(2C) is the same material which was considered for passing the order under section 245D(1) of the Act to proceed with the application. No new material was before the Settlement Commission when it passed the impugned order. Settlement Commission was carried away by the misstatements, half truths, twisting of the factual position in the report of the 2nd respondent filed before the Settlement Commission. The findings of the Settlement Commission are erroneous and arbitrary. All facts were not considered. Explanations furnished are omitted. The facts were misstated. Submissions were handpicked for invalidating the application of the petitioner though explanation was adduced for each of the allegation made by the principal commissioner of income tax. The respondent states that the petitioner admitted additional amount of Rs.6.00 Crores for construction of Kalyana Mandapam at Tuticorin and Rs.5.00 Crores towards construction of 30 MSRM,J & JUDJ WP_1704_2019 Arunachalam palace at Guntur and that the petitioner has not included the same in the application for settlement. In the statement recorded on 22.10.2016, the petitioner was compelled to accept these two amounts. The petitioner stated that the petitioner has taken loan for construction of Kalayanamandam and the remaining amount was taken from the books. The entire amount is accounted for. The petitioner also stated that the petitioner obtained loan from the bank for construction of Arunachalam palace by giving land as collateral security. Petitioner invested Rs.5.20 Crores in Gowtham Budha Textile Park Ltd. In the application before the Settlement Commission, it was explained that it is out of the petitioner’s real estate business which was declared as additional income at Rs.12,95,00,000/-. Petitioner also accepted the amount of Rs.1.00 Crore paid to Chinathorai as the income from real estate business. The petitioner paid Rs.58.50 Lakhs to JK ads. This was paid out of books of accounts and was recorded as payment in the books. The immovable properties referred to are acquired by the directors and their relations from the year 1984 year onwards. Every year taxes are paid and the properties are acquired out of tax paid monies. It is alleged that the directors/relatives owned 200 acres of land. This has nothing to do with the petitioner company. All the lands are having paltry values where agriculture is carried on. All the allegations are made to cause prejudice before the Court. We have given earnest consideration to the facts pleaded and the submissions made in line with the pleadings, which are adverted to supra, in detail. Now the point for determination is - ‘Whether the order impugned in the writ petition is unsustainable under facts and in law as being contended by the writ petitioner? And, if so, whether the impugned order is liable to be set aside?’ 31 MSRM,J & JUDJ WP_1704_2019 POINT: Since facts and submissions are dilated supra, we shall now deal with the issues and incidental issues involved in the matter duly adverting to rival submissions. The first and foremost set of contentions of the writ petitioner are as under: - ‘On the Settlement Application being filed, the Settlement Commission passed an initial order under Section 245D(1) of the Act on examination of the SOF, the record and related material and on giving thoughtful consideration and after expressing satisfaction that technical parameters in the application with regard to pendency of assessment proceedings, tax liability exceeding the threshold limit, payment of application fee and intimation to the assessing officer have been duly fulfilled by the writ petitioner. In the said initial order, it was also held that the writ petitioner has explained the manner in which the additional income is derived in the SOF and that there is prima facie no material which warrants the conclusion that true and full disclosure has not been made by the applicant/writ petitioner or that he has not disclosed the manner of earning such income and that all the requirements laid down under Section 245C(1) of the Act have been fulfilled by the writ petitioner. After recording such findings, the Settlement Commission held in the initial order that the Settlement Application of the writ petitioner is fit to be allowed to be proceeded with further. Later, the settlement application is simply rejected by the Settlement Commission on the basis of the objections given by the 2nd respondent/Principal Commissioner of Income Tax contrary to its findings in the said initial order, dated 26.11.2018. While passing the said initial order, all the facts and circumstances were examined and it was observed that all the requirements, namely - that the application contained full and true disclosure of income, which has not been disclosed 32 MSRM,J & JUDJ WP_1704_2019 before the assessing officer, and that the manner in which such income has been derived are fulfilled. Further, the same material was considered, while passing both the orders, under Sections 245D(1) and 245C(1) of the Act; and the same material was reprocessed while passing the final order. Barring the objections of the 2nd respondent, the material on record before the Settlement Commission is the same at the time of passing of the final order and no new material was brought on record by the 2nd respondent. Hence, the Settlement Commission ought not to have come to a different conclusion, while passing the final order under Section 245C(1) of the Act, and the Settlement Commission ought not to have reversed its initial orders on the mere objections of 2nd respondent and without any new material being brought on record to show a contrary position.’ Adverting to these contentions, what is to be first noted is that as rightly contended by the learned standing counsel for the respondents, the initial order is a preliminary one passed on the basis of information provided in the Settlement Application of the writ petitioner without hearing the Revenue and that by the said order the Settlement Commission only allowed the application to be proceeded with further, subject to the caveat that the said initial order is passed without prejudice to the finding that may be given in the later stage of the proceedings. It is also to be noted that the initial order itself reflects that the view expressed therein is a prima facie view. Therefore, the first set of contentions that on the basis of the observations/findings in the initial order, the Settlement Commission, while passing the final order, ought not to have arrived at different conclusions than those arrived at in the initial order needs no countenance. Nonetheless, we make it clear that we shall further deal with this issue as to whether the Settlement Commission could have arrived at a different conclusion while passing the impugned (final) order under Section 245C(1) of the Act. 33 MSRM,J & JUDJ WP_1704_2019 The next set of contentions of the writ petitioner are as under: - ‘The grounds mentioned in the impugned order by the Settlement Commission are that the petitioner disclosed unaccounted income at Rs.47,31,17,971/- before the investigating wing; but, in the settlement application the petitioner disclosed only Rs.12,95,00,000/- as unaccounted income and that there are several statements recorded from the petitioner, on 02.09.2016, 07.09.2016, 30.09.2016 and 20.10.2016, even two months after the search, which cannot be statements made in a perturbed state of mind and that the declaration made under Section 132(4) of the Act was based on valid documents seized, like in annexures A/BCCP4/01 and BSW/1, both showing cash receipts and that BSW/5 is also corroborative evidence in the nature of confirmation by dealers and that the petitioner confirmed unaccounted profits @ 8% and later @ 9% of the sales and that various evidences of investments were found and huge cash seizure was also made corroborating the generation of cash on account of under invoicing of sales and purchase manipulations and that the manner of earning unaccounted income stood disproved. The Settlement Commission also held that the application of the writ petitioner does not constitute true and full disclosure of the income. However, acting under Section 132(4) of the Act statements were obtained from the petitioner in relation to the petitioner’s company and also in relation to his proprietary business. In all, 14 statements were recorded in quick succession during the course of search and seizure. The same itself is an abnormal feature. In these statements, it was recorded as if the petitioner accepted to offer additional income of Rs.47,31,17,971/- calculated at 9% of sales as income over and above invoice price of sale. No document was found in relation to the said income. No such income was found. No evidence was found relatable to the said additional income. Knowing that the disclosure may not stand the test of judicial scrutiny, several 34 MSRM,J & JUDJ WP_1704_2019 statements were recorded repeatedly putting the very same questions time & again and extracting & dictating answers to suit the revenue. No incriminating evidence was found to corroborate the allegation of under invoicing or payments from distributors or dealers over and above invoice price. Enquiries were made by the department with the distributors/dealers. None of them accepted either under invoicing or payments made by them in excess of invoice price. Their assessments were completed after search and no additions were made in the dealers/distributors hands. The statements were obtained under threat, fear, duress & harassment and under the threat of penal & criminal proceedings and on the further threat of financial ruining of all family members. The averments made in this regard in the writ petition are not denied in the counter. The 3rd respondent, who filed the counter affidavit, is not a member of the search party. His counter is to no avail. Central Board of Direct Taxes, is having power to give instructions to subordinates, under Section 119(1) of the Act. The circulars are binding as per settled law. As per the instructions in the Circulars, dated 10.03.2003 and 18.12.2014, confessions, if not based upon credible evidence and are later retracted by the assessee while filing the returns of income, they do not serve any useful purpose and that, therefore, focus and concentration must be on collection of evidence of income, which leads to information on what has not been disclosed or is not likely to be disclosed before the department. The said circulars also mandate that while recording statements during the course of search & seizure and survey operations, no attempt should be made to obtain confession as to undisclosed income; and, they further state that any action contrary shall be viewed adversely. The earlier instructions are reiterated in the later circular and it is also stated in the later circular that any instance of undue influence/coercion in the recording of the statement during 35 MSRM,J & JUDJ WP_1704_2019 search/survey/other proceeding under the Act and/or recording a disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely. In the present case, the authorities acted contrary to the instructions, which are binding. Hence, all the confessions obtained of undisclosed income have to be ignored as they lack credibility and evidentiary value. By filing the returns of income, the petitioner retracted from the confessions. The applicant has only disclosed Rs.12,95,00,000/- by offering Rs.1.00 Crore, Rs.2.00 Crores, Rs.3.65 Crores, Rs.3.70 Crores and Rs.2.60 Crores as income from real estate during the assessment years 2011-12, 2014- 15, 2015-16, 2016-17 and 2017-18 respectively. It is open to the petitioner to show that the admission made in the statement is not correct. If the statement is retracted, the department has to establish its own case independently. A confession without any material to buttress the case of the department is of no avail and, that too, a retracted confession of the assessee or its representative cannot constitute the basis and the evidence found as a result of search would not take within its sweep statements recorded during search and seizure operations unless the information in the statements recorded is relatable to the evidence or material found during search. No doubt, an affidavit was filed, on 19.10.2016, affirming the admission of additional income. However, as all the jewellery of the ladies of the petitioner was entirely locked up and as the petitioner was under great pressure from the family as well as from the income tax authorities and as he was left with no alternative, the said affidavit that was prepared to the dictations of the assessing officer was signed on the dotted line and was given on behalf of the company and on behalf of the deponent to get atleast some jewellery released. Since the said affidavit was also given under tremendous pressure, it has no evidentiary value. Though in a search that was made on 15.10.2009, the 36 MSRM,J & JUDJ WP_1704_2019 department brought to light a huge unaccounted cash of Rs.11.62 crores and the same was accepted as undisclosed income and taxes were paid, in fact, the said money did not belong to the petitioner and it belonged to several other persons; yet, the said 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 reasons. Hence, the said earlier instance has nothing to do with the present search and yet the respondents are relying upon it to cause prejudice to the case of the petitioner. In the present search, no unaccounted cash was found.’ In support of this second set of contentions, reliance is placed upon the following decisions. 1. Kailashben Manharlal Chokshi v. Commissioner of Income Tax [(2010) 328 ITR 411 (Guj)]. 2. M. Narayanan and Bros v. Assistant Commissioner of Income-Tax [(2011) 339 ITR 192 (Mad)] 3. Commission of Income Tax v. Naresh Kumar Agarwal [(2014) 369 ITR 171 (T & AP) 4. Deputy Commissioner of Income-tax v. Narendra Garg & Ashok Garg [(2016) 72 Taxmann.com 355 (Gujarat)]. 5. Commissioner of Income-tax v. Harjeev Aggarwal [(2016) 70 Taxmann.com 95 (Delhi)]. We have gone through the decisions related to evidentiary value of the statements and retracted statements. Per contra, the case of the respondents is this: ‘The statements containing the information and confessions are made voluntarily. The assessee admitted several times vide statements dated 02.09.2016, 07.09.2016, 30.09.2016 and 30.10.2016 that he is under invoicing the sales bills to the extent of 8% to 9% of the total sale invoice and is receiving the differential amount by cash. The search operations were held from 30.08.2016 to 02.09.2016. The contention that the alleged threat and coercion continued 37 MSRM,J & JUDJ WP_1704_2019 even by the time the later statements were made cannot be countenanced more particularly as the petitioner was aided and advised by accountants and chartered accounts, who were well qualified. The later statements were also made with the very same incriminating information. The assessee even filed an affidavit, on 19.10.2016, affirming the admission of additional income. The said affidavit was filed after lapse of 47 days after the search concluded. The said admission of additional income was voluntary and no coercion was involved. Even before the Settlement Commission, while filing the application and admitting the undisclosed income, the petitioner never stated that there was coercion. If really there was coercion during the search operations, the petitioner should have brought the same to the notice of the investigating wing or the higher authorities. The petitioner did not do so. The petitioner was always assisted by more than one qualified chartered accountant. In the case of the company of which the petitioner is the Chairman cum Executive Director, under similar circumstances, the petitioner in his said capacity filed an affidavit in that matter admitting the undisclosed income. In the month of November/December, 2018, the deponent has appeared before the 2nd respondent along with two chartered accountants and stated that they paid more than 50% of the taxes on the undisclosed income and admitted & requested for time to pay the remaining taxes. Unless the assessee had admitted the undisclosed income, he would not have paid huge tax of Rs.6.94 Crores on the same undisclosed income. There cannot be coercion and threat for days, months and years together, especially when the assessee was doing business in hundreds of crores and is being assessed since a long time and is aided and advised by qualified accountants and chartered accountants. Earlier also, in a search that was made on 15.10.2009, the department brought to light a huge unaccounted cash of Rs.11.62 crores and the same was accepted as 38 MSRM,J & JUDJ WP_1704_2019 undisclosed income and taxes were paid. Therefore, and as the present search is a second search operation, the petitioner is very well aware of the statutory procedures. In the said circumstances, if really there was coercion etcetera, the petitioner would have brought the same to the notice of the senior officers. And, in fact, the petitioner would not have paid Rs.6.94 Crores as tax, which the assessee is now claiming as refund.’ On earnest consideration of rival contentions, particularly the contentions regarding the filing of the affidavit, on 19.10.2016, that is, after lapse of about 47 days after the search concluded, affirming therein the admission of additional income and the payment of huge tax of Rs.6.94 Crores on the same undisclosed income by approaching the department in the months of November/December, 2018 and other contentions of the department, which merit consideration, this Court is of the considered view that the contentions of the petitioner that the information in the statements and also the confessions therein are obtained under fear, duress, coercion etcetera need no countenance as it is undisputed that the petitioner was assisted by accountants and chartered accountants, who are well qualified, and as it is not possible, in the facts & circumstances of the case, to believe that the petitioner was under fear, threat and coercion etcetera even after long lapse of time from the days of search & seizure and at the times the affidavit was filed and the tax was remitted. In the light of the long time gap between the days of search on one hand and the dates of the filing of the affidavit & the remittance of tax, the explanations offered by the petitioner to the effect that he was under immense pressure at those distant times are not worthy of credence & acceptance, being implausible. Though there is no dispute with regard to the legal position in regard to the right to explain an admission and the evidentiary value of the retracted confessions, since it is not possible in the facts & circumstances of 39 MSRM,J & JUDJ WP_1704_2019 the case to accept the contention of the petitioner that the confessions or the information including the affidavit and remittance of part of tax was obtained from the petitioner under fear, threat and coercion etcetera, the said decisions do not advance the case of the petitioner any further. Dealing now with the other part of the set of the contentions, namely requirement of collection of evidence related to undisclosed income and that the information in the statements or confessions are not in the nature of clinching evidence by themselves and that there should be other credible material to buttress the case of the department and that no material is recovered and no cash was found and, therefore, in any view of the matter, the contents of the statements do not constitute the basis for adverse conclusion against the petitioner, what is to be noted is that admittedly during search (i) a notebook vide annexure BSW/1 was found and seized, on 31.08.2016, and that it contained date-wise transactions of cash receipts from 08.06.2016 to 28.06.2016 with the names of towns and persons; (ii) a few loose sheets vide annexure A/BCCPL/01 were seized from the factory premises and that they contained details of cash receipts from 03.08.2016 to 26.08.2016; and, (iii) Annexure BSW/5, a copy of FIR, dated 12.08.2014, filed by Govind Ram Attal, was found and seized. The department relies upon these annexures also as necessary corroborative material. However, the petitioner – assessee explains the same as follows: - ‘Annexure BSW/1 is a register containing points earned by the salesmen, who effected sales; that the salesmen are entitled to be presented with gold coins/silver coins based on points; and, therefore, the said annexure does not deal with cash receipts for sales made over and above invoice price. Annexure A/BCCPL/01 relates to expenses incurred and not any receipts; that the total expenditure in that annexure is Rs.49,16,642/-, which is recorded in the books of the petitioner company but under a different head. 40 MSRM,J & JUDJ WP_1704_2019 They are offered to tax in the settlement application since the expenses incurred are not to be allowed as a deduction in computing the income. Annexure BSW/5 is an FIR. It itself reveals that one Ramesh sent Rs.78.00 lakhs in cash as part payment against sales already effected for Rs.1,47,39,874/- and that the said cash was stolen during transit; and, hence, the FIR was registered at his instance; and, that later the entire amount was paid to the petitioner company by RTGS/cheque payments by the said Ramesh.’ According to the petitioner, the said explanations are not considered by the Settlement Commission. Be that as it may. Admittedly, during search and seizure, statements of one Ramaswamy Ramashankar and another Jagan, who are employees of the petitioner company and also in the personal business of the deponent, were also recorded. However, the petitioner explained the statements of above employees. The explanation with regard to statement recorded on 30.08.2016 of Ramaswamy Ramasankar is that he has not admitted any cash receipt from the dealers and that he was again called and his second statement was recorded, on 17.09.2016, and that in his said statement, it was recorded as if he confirmed cash receipt from the distributor/dealer and that the said admission was obtained by instilling fear, duress and coercion and that there was no receipt of any cash from any distributor/dealer and that no statements are obtained from the distributors in proof of cash payments were made available to the deponent. Insofar as the said statements of the said employees, the further explanation of the petitioner is as follows: - ‘The company makes cash sales; everyday some sale receipts in cash are received; the average receipt of cash is Rs.2,75,000/- per day as stated by Ramaswamy Ramasankar; it represents the cash that is recorded in the books of accounts; the turnover of the company and that of the deponent’s proprietary business was more than Rs.200 crores during the year 41 MSRM,J & JUDJ WP_1704_2019 when the search took place; the cash sales work out to Rs.8.25 Crores even if the figures mentioned by Ramaswamy Ramasankar is taken to be true; Jagan stated that he received cash from cash sales on average at Rs.2,75,000/- to Rs.3,00,000/- per day; monies were received towards sale proceeds on cash sales and were recorded in the books of accounts; cash receipts collected by Jagan were passed on to the head cashier – Ramaswamy Ramasankar; Assistant Director of Income Tax has not questioned these employees about the nature of payments and whether the amounts received were recorded in the books of accounts; being aware that all these were recorded sales paid in cash, the Assistant Director of Income tax chose not to examine them further; if really the distributors paid monies in excess of the invoice, an enquiry with the dealers should reveal this position too; in the counter, it is stated that the department conducted enquiries from the dealers of the company on random basis; it is obvious that the dealers denied any such payments made in cash over and above the invoice price; hence, the counter is silent on the outcome of the enquiry; there was no material or evidence found at all in the course of search to support any receipt of monies in cash over and above the invoice price by the company or by the deponent.’ Admittedly, Ramaswamy Ramasankar confirmed cash receipt from the distributor/dealer. He being an employee was under threat and duress cannot be countenanced. In the settlement application, no details of distributors or dealers are furnished. As rightly contended by the department, annexure A/BCCPL/01 contained details of expenditure aggregating to about Rs.49.00 lakhs and odd said to have been incurred by the company. Though the petitioner stated that the details are recorded in a spiral register and in the books of the company under different heads of income, ultimately, the said expenses, which are recorded in the register, were offered to tax as undisclosed income in the settlement 42 MSRM,J & JUDJ WP_1704_2019 application filed before the Settlement Commission. The petitioner – assessee admitted undisclosed income on three occasions and filed an affidavit about unaccounted income and payment of taxes. Cash of Rs.66,07,000/- (seized Rs.65,00,000/-) was seized in the residential premises of the petitioner and Rs.89,12,090/- (seized Rs.87,05,400/-) was seized in the premises of M/s.Bharati soap works a proprietary concern of the petitioner. Unaccounted jewellery worth Rs.1,56,74,578/- was found during search. Though some explanations were offered for cash seizures, insofar as the jewelry, the petitioner accepted that the jewelry may be treated as unaccounted income by explaining the source of acquisition as income from real estate business amounting to 12.95 Crores and the same was accepted in the application filed before the Settlement Commission. It is to be noted that the contention of the petitioner that the admission of additional income should be represented with equal amount of cash, asset or investment does not merit acceptance as there is no such requirement under law. It is enough if one aspect is found by the department viz., either source or modus operandi of unaccounted income generation or destination of unaccounted income and the department need not get corresponding unaccounted assets/cash etcetera during search operations. That apart, the petitioner’s own admission in the affidavit filed after 47 days and payment of huge tax (part) after lapse of a long time and at times when he was assisted by accountants and chartered accountants, who are qualified, are sufficient corroborative material of credible standard. Admission when free and voluntary is the best form of proof on which the department can rely. After the days of search & seizure, the petitioner was not in the custody of the department and was very much free to think coolly and consult his legal counsel and chartered accountants. The Settlement Commission also recorded in the impugned order that subsequently at the demonetization period, that is, 43 MSRM,J & JUDJ WP_1704_2019 19.11.2016, during police inspection, cash of Rs.65,00,000/- was seized from the employee of the applicant and total cash lying with the department is Rs.2,17,05,400/-. Therefore, the petitioner’s contention that he was continuing under fear and/or threat and/or duress etcetera by the times he gave the affidavit and remitted the tax, as already noted, is deplorable, in the facts & circumstances peculiar to the case. Hence, this part of set of contentions of the petitioner that there is no additional material is misconceived and is therefore, rejected being devoid of merit. The next aspect is with regard to admitted income from real estate business aggregating to 12.95 Crores regarding which the petitioner gave a breakup (year wise during the assessment years 2011-2012, 2014-2015, 2015- 2016, 2016-2017 & 2017-2018) in the settlement application. As regards amount of Rs.1.00 Crore paid to Chinnathorai, the petitioner also explains it as the amount given out of income from real estate business. The petitioner barely stated that the income is from the real estate business. However, as rightly contended, only the source is disclosed by stating that the income is from the real estate business; but, the manner of earning the income is not disclosed. The petitioner has not explained the manner in which the income from real estate was earned by giving the particulars of the properties that were sold through him, the commission received by him, the TDS that was deducted when he received such commissions amounting to a huge commission of Rs.12,95,00,000/-. The contention of the petitioner is that he is only required under law to disclose merely the manner in which income is earned and that the manner of earning the income should be specified and that it is nowhere stated that it must be backed up by evidence or details such as who paid, how much paid, names & addresses of the parties etcetera and that it is adequate if the manner is indicated and even the application prescribed in 44 MSRM,J & JUDJ WP_1704_2019 form no.34B does not require any proof of these details. Even according to the submissions of the petitioner, mere mentioning of the source as real estate business or real estate income is not sufficient and the petitioner is required to show the manner in which the income is earned. The petitioner admittedly has not disclosed the real estate transactions and the names of parties to such transactions. The petitioner, having failed to give necessary details, failed to make a full and true disclosure, which is a pre requisite for seeking an order in his favour. In the light of the discussion supra, we are of the considered view that there is sufficient material and also reasons for the Settlement Commission coming to a different conclusion while passing the final order and that the final order is sustainable both under facts and in law for the reasons assigned therein. It is borne out by record that the petitioner purchased acid slurry for an amount of Rs.9,46,26,216/- as per the contentions of the respondents. In this regard, the following aspects require to be restated. ‘A survey under Section 133A of the Act was conducted at the business premises of M/s.Mahaveer Surfactants Pvt.Ltd., Pondicherry, on 30.08.2016. There, the department impounded a diary. It reflects the transactions totaling Rs.9,46,26,216/- relating to unaccounted cash sales of Acid slurry made to the petitioner’s group by the above said company. When the Director of the said company was asked as to whether sales made by the said company were reflected in the said company’s profit & loss account, the said Director of the said company has stated in his statement recorded during survey as follows: - ‘Yes, however, since the Bharati Group wanted it outside the books, the bills are generated against some other name sake parties and booked as cash sales in our books. I would like to add that since all our purchases are booked, we have to 45 MSRM,J & JUDJ WP_1704_2019 mandatorily show the corresponding sales output.’ Further, according to the respondents, the petitioner, on 01.09.2016, was shown the contents of the diary and the above statement, but the petitioner has not asked for verification of the statement or the impounded diary and further accepted in his statement recorded, on 01.01.2016, unrecorded cash sales as his undisclosed income. Now it is to be noted that the petitioner contends that by mere purchase of acid slurry alone, which is 20% of the raw material, the petitioner derives no advantage and that the petitioner was not furnished copies of statement of the said dealer and states that the statement of the dealer is false and that the dealer is a manipulator. Normally, one trader will not have any malice or ill motive against another trader. Therefore, when one trader like M/s.Mahaveer Surfactants Pvt., Ltd., made a statement against the interests of the petitioner herein, it is for the petitioner to explain by giving a valid explanation. The only explanation offered by the petitioner is that the said dealer is a manipulator. Such explanation of the petitioner deserves no acceptance in a Court of law. In our considered view, such a contention cannot be countenanced more particularly as this Court is of the view that it is possible to safely accept that the statements that were made long after the search are voluntary statements and that the contention of the petitioner that the pressure, threat or coercion etcetera continued long after conclusion of the search needs no countenance. Further, the above transaction, which was brought to light by the respondents is sufficient to come to a necessary conclusion that the petitioner is dealing with unaccounted transactions in huge sums of money and, therefore, the petitioner did not make a full and true disclosure of unaccounted income as required under facts and in law. The above discussed aspects are sufficient to sustain the impugned order. Hence, there is no need, in our considered view, to go into the other 46 MSRM,J & JUDJ WP_1704_2019 aspects related to acquisition of investments and assets viz., investment in Arunachalam Palace, Guntur and Kalyanamandapam in Tutucorin; investment in M/s.Goutham Buddha Textile Park Pvt.Ltd, etcetera. Be it noted that Section 245(C) is meant for those assessees who seek to disclose income not disclosed before the officer including ‘the manner in which such income has been derived’. If the department already knows and has gathered particulars of such income and the manner in which it has been derived, there is no ‘disclosure’ by the assessee. The Chapter under which this provision of law occurs is meant for those assesses who want to disclose income not disclosed till then together with the manner in which the said income is derived. (See: CIT v. Express Newspaper Ltd. [(1994) 206 ITR 0443]. In the said decision it is held as follows: - ‘The disclosure under Section 245-C must be of an income not disclosed before the Assessing Officer. If the Assessing Officer (or the income tax authority) has already discovered it and has either gathered the material to establish the particulars of such income or fraud fully or is at a stage of investigation/enquiries where the material gathered by him is likely to establish the particulars of such income or fraud, the assessee cannot be allowed to defeat or forestall, as the case may be, the entire exercise of the income tax authorities just by approaching the Commission. In such a case, it cannot be said that he is acting voluntarily or in good faith. He should not be allowed to take advantage of the comparatively easy course of settlement. He must be allowed to face the normal channels of assessment/appeal etc. Section 245-C is meant for those assessees who seek to disclose income not disclosed before the Officer including \"the manner in which such income has been derived\". If the department already knows and has gathered particulars of such income and the manner in which it has been derived, there is no 'disclosure' by the assessee. Let it be remembered that the words in question [in Section 245-D(I-A)] are not words of limitation nor are they meant to help unscrupulous assessees. Chapter XIX-A is a part of the Income Tax Act and must be construed consistent with the overall scheme and object. The chapter is meant for those assessees who want to disclose income not disclosed till then together with the manner in which the said income is derived. It is not meant for those who come after the event, i.e., after the discovery of the particulars of income and its source or discovery of particulars of fraud perpetrated by the 47 MSRM,J & JUDJ WP_1704_2019 assessee, as the case may be nor even to those who come to the Commission to forestall the investigation/inquiries which have reached a stage where the department is in possession of material which though not sufficient to establish such concealment or fraud, is such that it is likely to establish it maybe some more material is required to establish it fully. The Commission has to keep all this in mind while deciding whether to allow the application to be proceeded before it or to reject it.’ The legal position enunciated in the above decision was followed in the decision in Canara Jewellers v. Settlement Commission and another [(2009) 029 (I) ITCL 0614. As per settled legal position, in the application filed before Settlement Commission, apart from other particulars, which are prescribed, the applicant has to disclose: (i) a full and true disclosure of the income which has not been disclosed before the assessing officer; (ii) the manner in which such income has been derived; and, (iii) the additional income of tax payable on such income. Thus, the Section mandates full and true disclosure of the particulars of the undisclosed income and the manner in which such income was derived. (See: Ajmera Housing Corporation Ltd., v. CIT [(2010) 193 Taxman 0193]). Thus, full and true disclosure is prerequisite for a valid application under Section 245C(1) and an application, which does not contain true and full disclosure, is not a valid application. For the aforesaid reasons coupled with discussion, we answer the points holding that the petitioner failed to make out valid and sufficient grounds in support of the contention that the impugned final order of the Settlement Commission is unsustainable under facts and in law. We accordingly hold that the said order is sustainable. In the result, the Writ Petition is dismissed. There shall be no order as to costs. 48 MSRM,J & JUDJ WP_1704_2019 Miscellaneous petitions pending, if any, shall stand closed. _____________________ M. SEETHARAMA MURTI, J _____________ J. UMA DEVI, J 30.10.2019 Vjl 49 MSRM,J & JUDJ WP_1704_2019 THE HON’BLE SRI JUSTICE M.SEETHARAMA MURTI And THE HON’BLE MS JUSTICE J. UMA DEVI Writ Petition No.1704 of 2019 [Per Hon’ble Sri Justice M. Seetharama Murti] 30.10.2019 Vjl "