M/s Bharathi Consumer Care Products Pvt. Ltd. V. Income Tax Settlement Commission, Chennai

WP/1703/2019

AI Insights

The case involves M/s Bharathi Consumer Care Products Pvt. Ltd., which filed a writ petition challenging the order of the Income Tax Settlement Commission that rejected its settlement application. The Commission's rejection was based on the grounds that the application did not meet the statutory requirements of full and true disclosure of undisclosed income and the manner of earning such income. The petitioner argued that the admissions made during the search were under duress and coercion, which the Commission and the court found unconvincing. The court dismissed the writ petition, supporting the Commission's decision.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 685614 (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; 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

"1 MSRM,J & JUD,J WP_1703_2019 THE HON’BLE SRI JUSTICE M.SEETHARAMA MURTI And THE HON’BLE MS JUSTICE J. UMA DEVI Writ Petition No.1703 of 2019 ORDER [Per Hon’ble Sri Justice M. Seetharama Murti] This writ petition, under Article 226 of the Constitution of India is filed seeking verbatim the following relief/s: “..to issue a writ in the nature of Mandamus or any other Writ, order or direction setting aside the impugned order dated 09.01.2019 passed by the respondent No.1 under Section 245D(2c) of the IT Act in the petitioner’s case, as arbitrary, unreasonable, irrational and unsupportable in law and consequently direct the respondent no.1 to proceed with the Settlement application filed by the petitioner company; and pass such other order or orders as this Honourable Court may deem fit and proper in the circumstances of the case.” We have heard the submissions of Sri Y. Ratnakar, learned senior counsel appearing for the writ petitioner; and, of Ms. Kiranmayee, learned standing counsel appearing for the respondents. We have perused the material record. The introductory facts are as follows: The petitioner company is carrying on its business in manufacture of detergent cakes and washing power. The plant for manufacture is located at Gorantla, Guntur. The deponent of the writ affidavit is the Chairman-cum- Executive Director of M/s Bharathi Consumer Care Products Pvt.Ltd. He is also the proprietor of Bharathi Soap Works. A search was conducted on the petitioner company as well as the deponent, on 30.08.2016, under Section 132 of the Income Tax Act,1961 [‘the Act’, for brevity]. The search was conducted from 30.08.2016 to 02.09.2016. The petitioner filed a Settlement application, on 13.11.2018, before the Income Tax Settlement Commission [‘Settlement Commission’, for brevity], Chennai – 1st respondent, under Section 245C(1) of the Act. Notices under Section 153A of the Act were issued reopening the 2 MSRM,J & JUD,J wp_1703_2019 assessments for the assessment years 2011-12 to 2016-17 for filing the returns of income. On 26.11.2018, order under Section 245D(1) was passed allowing the Settlement application to be proceeded with further under Section 245D(1) of the Act. Later the Settlement Commission called for a report from the Principal Commissioner of Income Tax. The Principal Commissioner of Income Tax submitted a report, dated 24.12.2018, under Section 245D(2B) of the Act objecting to the Settlement application being proceeded with by the Commission. The said report was forwarded to the petitioner and was received by the petitioner’s Chartered Accountant on 28.12.2018. A reply, dated 04.01.2019, was filed responding to the points raised by the Principal Commissioner of Income Tax. Later the Settlement Commission heard the matter and passed orders, on 09.01.2019, rejecting the petitioner’s application. Aggrieved thereof, the present writ petition is filed. In this backdrop, the case of the petitioner company as stated by its Chairman-cum-Executive Director, [hereinafter referred to as ‘the deponent’] is this: The petitioner company filed a petition in respect of its undisclosed income before the Settlement Commission under Section 245C(1) of the Act for the assessment years 2013-14 to 2017-18 for Settlement of its claim. Pursuant to the search, notices under section 153A of the Act were issued reopening the assessments of the petitioner company for the assessment years 2011-12 to 2016-17 for filing returns of income. The said returns were filed. As regards assessment year 2017-18 initial assessment is still pending. Hence, there was no reopening for the said assessment year. During the course of search enquiry, the deponent was subjected to intense and grueling examination for several hours and statements were recorded from him under Section 132(4) of the Act. He was examined between the dates 30.08.2016 and 28.11.2016 for 15 times as stated in the writ affidavit and his statements were recorded on 3 MSRM,J & JUD,J wp_1703_2019 those fifteen occasions. The search party repeatedly suggested that the deponent should accept substantial additional income for assessment of the petitioner and it should be commensurate with the degree and intensity of search conducted on the company. In the course of search, the deponent was made to accept that the distributors who were effecting sales were paying additional amounts in cash which was not shown in sales and that cash was paid to the petitioner company by the distributors at 8% of the turnover shown in the accounts. The deponent initially declined so to do. But, when pressure was brought upon him in the form of fear, harassment, long drawn litigation, penal proceedings, criminal proceedings and financial ruining of the deponent as well as the family members, the deponent signed on the dotted line. He and his family members were not allowed to sleep for three days. He became blank and lost his faculty of reasoning during the period of search. Questions were put by search party and even answers were dictated by them. The deponent merely signed on the dotted line being helpless. The deponent is not sufficiently educated to read and understand what was being recorded. The investigating officers themselves calculated the cash amount at 9% of the turnover. The addition of 9% on estimate, as cash paid over and above the sales for the assessment years 2013-14 to 2016-17 was worked out by the search party at Rs.17,54,21,383/-. Search party required that the deponent should accept the said amount as additional income under Section 132(4) of the Act of the petitioner company and that the same should be offered to tax. At that point of time, the deponent had no choice but to accept the same with the hope and expectation that the harassment would abate. Quantification of additional income as per statement under Section 132(4) of the Act with the break up of the said sum is as under: 4 MSRM,J & JUD,J wp_1703_2019 Assessment Year Additional Income (Rs) 2013-14 67,19,801 2014-15 2,12,80,610 2015-16 5,58,53,658 2016-17 9,15,67,314 17,54,21,383 The above said alleged undisclosed income forming part of declaration under Section 132(4) of the Act is not represented by an asset, cash, investment or visible in any other manner. No incriminating material was found to support the declaration under Section 132(4) of the Act as no such income was earned at all. The declaration of the said income was under circumstances explained. The deponent retracted the disclosure made being not true and not voluntary. There was no incriminating material evidence to corroborate the allegation of under invoicing/payments from distributors. There was no such evidence found in regard to any cash payments made to the deponent, over and above the sales. The report furnished by the authorities does not indicate the existence of any such proof of the income declared. The allegations made are wild guess work based on conjectures and surmises. In response to the notices under Section 153A of the Act for the above assessment years, the petitioner company filed returns of income. Retraction from the statements was also made at the time of filing of IT returns and the petitioner company did not offer the additional income aggregating to Rs.17,54,21,383/- in the returns filed pursuant to the notice under Section 153A of the Act. It was because of this omission to include the above income in returns filed pursuant to the notice issued under Section 153A of the Act, the Settlement Application filed by the petitioner was not allowed to be proceeded with and was treated as invalid under Section 245D(2C) of the Act. According to the Settlement Commission’s observations, the application filed did not constitute true and full 5 MSRM,J & JUD,J wp_1703_2019 disclosure and was rejected. In the application filed before the Settlement Commission, the petitioner declared the following additional incomes. Assessment year Additional income (Rs) Description 2016-17 94,97,907/- Reimbursement from the distributors by account payee cheques not offered as income 2017-18 1,20,95,157/- 55,00,000/- __________ 1,75,95,157/- Discounts payable to distributors. Expenses incurred not allowable claimed as deduction offered for tax. The petitioner company advertises its products and a portion of the advertisement costs are borne by the distributors. These distributors remitted funds to the extent of Rs.94,97,907/- by crossed account payee cheques towards their share of advertisement cost. The same was omitted to be taken as income while filing the original return for the assessment year 2016-17 though the amount so received was shown in the balance sheet. Hence, the said amount was declared as undisclosed income in the application filed before the Settlement Commission. A sum of Rs.1,20,95,157/- was claimed as expenditure towards discounts payable to the distributor. Though the accounting entry was made in the books of accounts for the said amount, payment was not made. Hence, the entry should have been reversed. The expenditure should not have been claimed as a deduction. Since the said amount was claimed as a deduction in the returns originally filed for the assessment year 2017-18, it was offered as undisclosed income in the application filed before the Settlement Commission. The company incurred expenditure of Rs.55,00,000/- towards business. The same were recorded in a spiral register numbered as A/BCCPL/1 by the search party. All these expenses 6 MSRM,J & JUD,J wp_1703_2019 were recorded in the books of the company under different heads of income, so that the expenses are not disallowed on the plea that they represent expenditure which is not allowable as a deduction. These expenses were not supported by bills or vouchers. Hence, they are not to be allowed as deduction. Therefore, these expenses, which are recorded in the above-said register were disallowed and offered for tax as undisclosed income in the application filed before the Settlement Commission. The application was scrutinized by the Settlement Commission. All the facts that were declared by the deponent were gone through and an initial order was passed by the Commission holding that on the basis of the material placed before the Commission, there is prima facie no material, which warrants the conclusion that true and full disclosure has not been made by the applicant nor it has not disclosed the manner of earning such income and that all requirements laid under Section 245C(1) of the Act have been fulfilled by the applicant and, therefore, the application is fit to be allowed to be proceeded with further. The Settlement Commission called for report from the Principal Commissioner of Income Tax, on 27.11.2018, as required under the Statute. In response, the Principal Commissioner submitted a report, dated 24.12.2018, under Section 245D(2B) of the Act objecting to the Settlement Application being proceeded with by the Commission. The report was forwarded and was received on 28.12.2018 by the Chartered Accountant of the petitioner company. Even within the short time of four days given, the petitioner filed a reply, on 04.01.2019, responding to the points raised by the Principal Commissioner of Income Tax. The Settlement Commission brushed aside the explanation given in a summary manner. The entire reasoning was given in two short paragraphs. The reasoning adopted was based on wrong facts and assumptions, which are not true, and improper appreciation of submissions of the applicant. The reasons adopted are with biased feeling that the petitioner company has not 7 MSRM,J & JUD,J wp_1703_2019 made full and true disclosure of income. The Commission observed as follows: - ‘In the application filed before ITSC, as against unaccounted income disclosed before the investigation wing at Rs.17,54,21,838/-, the applicant has disclosed Rs.2,70,93,064/-. A perusal of the applicant’s submissions would show that the retraction is mainly based on the ground that the earlier declaration was not based on any material evidence if it were to be sustained.’ To the above observation of the Commission, the objections of the applicant are as follows: ‘In the returns of income, the petitioner has not included the sum of Rs.17,54,21,838/- and retracted from the said declaration made under Section 132(4) of the Act as no such income was actually earned by the company. The said sum is not reflected in the form of any investment, asset, cash or in any other form. If any such income was really earned, it would have manifested itself in the form of some asset or the other, in the intense search that was conducted on the petitioner and the deponent for almost four days. Repeated statements were recorded only because no evidence was found. Questions were put by search party and even answers were dictated by them. The deponent merely signed on the dotted line being helpless. Apart from the statements of the petitioner, which were retracted, the statements from two employees viz., Ramaswamy Ramasankar and Subbaraju Jagan were also recorded. In the first statement recorded on 30.08.2016, Ramaswamy Ramasankar has not admitted any cash receipt from the dealers. He was again called and his second statement was recorded on 17.09.2016. In his said statement, it was recorded as if he confirmed cash receipt from the distributor/dealer. Admission was obtained by instilling fear, duress and coercion. There was no receipt of any cash from any distributor/dealer. No statements obtained from the distributors in proof of cash payments were made available to the deponent. The Settlement Commission started on the basic premise that any disclosure under Section 132(4) of the Act should be 8 MSRM,J & JUD,J wp_1703_2019 taken as a gospel truth and cannot be departed from. Where an assessee retracts the declaration under Section 132(4) of the Act, the said statement becomes non est and the correctness of the assessment of the undisclosed income will have to be substantiated by other evidence. Retraction of declaration of income in the statement recorded under Section 132(4) of the Act at any point of time destroys the evidentiary value of any such disclosure. Reference was made to an earlier search conducted on 15.10.2009 wherein cash of Rs.11,62,00,000/- was found and which was admitted as the income of the deponent. The said earlier instance has nothing to do with the present search proceedings. The said income really did not belong to the deponent. It belonged to several other persons. The earlier search has nothing to do with the present search. The cash was assessed as income of the deponent because it was found in the premises of the deponent and he could not explain at that time the factual position due to certain compelling factors. The same cannot be held to infer that the petitioner company received cash though as a fact no unaccounted cash was found in the present search.’ The Settlement Commission’s next observation is as follows: - ‘It is seen that several statements of Shri Arunachalam Manickavel, who manages the business, were recorded on 2.9.2016, 7.9.2016, 30.9.2016 and 20.10.2016 even two months after the search which cannot be statements in a perturbed state of mind.’ To the above observation of the Commission, the objections of the petitioner are as follows: - ‘Search went on for four full days and day to day statements were recorded from 30.8.2016 to 2.9.2016. Thereafter, further statements were recorded in short intervals. In all 15 statements of the deponent were recorded. The deponent retracted from the disclosure given under Section 132(4) of the Act and has not offered the same to tax in returns of income filed. The deponent’s education is marginal. He can hardly read, write or understand English. The mental trauma to which the deponent was subjected 9 MSRM,J & JUD,J wp_1703_2019 is inexplicable. He lost his faculty of reasoning and simply nodded to whatever the investigating officer stated. The Settlement Commission was completely in error in assuming that the deponent was not in any perturbed state of mind. The observation of the Commission is erroneous, imaginary and borders on absurdity.’ The further observation of the Commission is as follows: ‘Moreover, the declaration u/s.132(4) was based on valid documents seized like in Annexure A/BCCP4/01 and Annexure BSW/1, both showing cash receipts.’ The objections of the applicant are as follows: - ‘The observation is based on incorrect factual position. The material numbered as A/BCCPL/01 by search party comprises of 35 pages containing the details of expenditure aggregating Rs.49,16,642/- incurred by the company. The company in all incurred Rs.55,00,000/- towards expenditure relating to the business of the company. Details of this expenditure were recorded in spiral register. All these expenses were recorded in the books of company under different heads of income so that the expenses are not disallowed on the plea that they represent expenditure which is not allowable as a deduction. These expenses were not supported by bills or vouchers. Hence, they are not to be allowed as deduction. Therefore, these expenses, which are recorded in the register, were disallowed and offered for tax as undisclosed income in the application filed before the Commission. This register has nothing to do with cash receipts and nothing was written that distributors has paid the cash. Reference is again made to another annexure BSW/1 of 40 pages. The salesmen employed by the deponent were deputed to various areas for effecting sales. Based on the orders booked, they were given points; and, at the end of the year based on the number of points earned by them, small gold coins and silver coins were given to them as incentives. The pages in the register merely contain the points earned by the employees. There is no nexus between this material and the declaration made by the deponent under Section 132(4) of the Act. The gold coins and silver 10 MSRM,J & JUD,J wp_1703_2019 coins were also seized by the search party during the course of search. Even the Principal Commissioner of Income Tax who gave his report, is not certain of the contents of this annexure.’ The next observation of the Settlement Commission is this: - ‘BSW/5 is also a corroborative evidence in the nature of confirmation by dealers.’ To the above observation, the submissions of the petitioner are as under: ‘The said material BSW/5 is not a part of the declaration made under Section 132(4) of the Act. It was never addressed in the statement taken under the said provision of law. The deponent employed number of distributors to whom sales are made. The petitioner company has also distributors and some of the distributors are common between the deponent - Chairman-cum-Executive Director of the company and the company. One distributor by name Gampa Ramesh is such a common distributor. During the period 1.4.2014 to 31.7.2014 the said Gampa Ramesh effected the following sales: (a) Sale of the products of the deponent: Rs.77,32,337/-; (b) sales of company products: Rs.70,07,537/-. The said Ramesh was delaying in making payments. The deponent insisted for payment of the amounts due towards sale proceeds of materials sold to him. Ramesh sent a sum of about Rs.78.00 lakhs in cash which was reported as stolen in transit. The amount was sent by Ramesh through his sub distributor. FIR was registered in Guntur about the theft of money by the said Ramesh. Copy of the said report is sent to the deponent explaining as to what happened. The amount was subsequently paid to the company by cheque/RTGS. This transaction has nothing to do with this declaration under the provisions of the Act. It is an admitted position that sale proceeds of sales effected are all included in the books of accounts. They are all accounted sales. Hence, the material has no relevance. The description by the Settlement Commission that BSW/5 is confirmation by the dealer of payment in cash is absolutely not correct. There is no nexus between the material found and the conclusion drawn. The said G.Ramesh was not 11 MSRM,J & JUD,J wp_1703_2019 examined. Except guess work there is no proof available to substantiate that the amount represents the cash receipt outside the books of accounts.’ The next observation of the Settlement Commission is that the deponent had also confirmed unaccounted profits @ 8% and later @ 9% of the sales. The submission of the petitioner is as under: ‘The declaration under section 132(4) of the Act was obtained when the petitioner was under duress and mental stress. There were no unaccounted profits as alleged and as observed by the Settlement Commission. This was explained to the assessing officer in reply to the show cause notice.’ The next observation of the Commission is this: - ‘Various evidences of investments were also found. Huge cash seizure were also made further corroborating the generation of cash as above on account of under invoicing of sales and purchase manipulations.’ The submission of the petitioner is that the only asset found pertaining to the petitioner company is the sum of rupees four lakhs; the said cash represents the balance available in the books of accounts; there was no cash found at all unrecorded; there was no other undisclosed asset found in the course of search, which belongs to the petitioner company; and, therefore, the criticism is routinely made regardless of the factual position. The next observation of the Settlement Commission is this: ‘The applicant has also now stated that the income offered relates to reimbursement of sales promotion expenses and also discounts made to dealers wrongly debited to profit and loss account? The reply of the petitioner is this: ‘The additional incomes offered before the Settlement Commission for the assessment years 2016-17 and 2017-18 are already explained. None of these items represents cash receipts not recorded in the books of accounts. The undisclosed income for the assessment year 2016-17 represents payments received by account payee cheques and recorded in the books of accounts. As regards the undisclosed income declared for the assessment years 2017-18, it does not pertain to any receipt of cash. These items are offered for 12 MSRM,J & JUD,J wp_1703_2019 assessment in the application filed before the Settlement Commission because they are not allowable expenditure. That apart the requirements under section 245 of the Act for Settlement of cases are as under: a) the application to be made in such form and in such manner as may be prescribed. b) the application should contain full and true disclosure of income which has not been disclosed before the Assessing Officer c) the manner in which such income has been derived; d) the additional amount of income tax payable on such income and such other particulars as may be prescribed to be stated in the application filed before the Settlement Commission. The undisclosed income declared was earned in the course of business. It represents discounts to the distributors not payable, expenses incurred not supported by bills or vouchers or erroneous debit to the profit & loss account. The objection that the manner of earning unaccounted income has not been declared, does not apply to the facts explained by the petitioner. While passing the initial order under Section 245D(1) of the Act all the above facts and circumstances were examined and were found to have been fulfilled. Thus, the reasons namely there is no nexus between the material cited and the decision taken by the Settlement Commission; wrong facts are assumed; the reasoning adopted was based on wrong facts; there are no grave procedural defects and there is violation of natural justice as the time given is very short; mere non acceptance of claim is assumed to be synonymous with the application for Settlement being bad for failure to make full and true disclosure of income; and the test applied for arriving at true and full disclosure is contrary to the provisions of statute, for rejection of the Settlement application are untenable. If the statement is retracted, the 13 MSRM,J & JUD,J wp_1703_2019 assessing officer has to establish his own case independently. There must be corroborating documentary evidence and the statement recorded under section 132(4) of the Act alone should not be the basis for arriving at any adverse decision against the assessee. There must be something more than bare suspicion to support the assessment or addition and the assessing officer cannot proceed on presumptions under Section 134(2) of the Act. The undisclosed income of an assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment but only to the extent it is relatable to the incriminating evidence or material unearthed or found during search. There must be nexus between the statement recorded and the evidence or material found during search in order to make the statement a basis for the assessment. It is always open to the person who made the admission to show that the admission is not correct. The statements made under Section 132(4) of the Act cannot be taken as conclusive. If it is retracted, it cannot be considered at all for making the assessment. The CBDT instructions are binding on the authorities. Some such instructions are dated 10.03.2003 and 18.12.2014. As per the decision of the Delhi High Court in CIT v. Godwin Steels P.Ltd (Delhi) [353 ITR page 353], which was rendered referring to the entire legal position and also the decision of the Supreme Court in State of UP v. zjojri Mal [(2004) 4 SCC 714, the following legal position is discernible: The limits of judicial review of an order of a Tribunal under Article 226 have been laid down by the Supreme Court in several judgments. Suffice to refer to the observations of S.B.Sinha, J. in State of U.P. and Anr. Vs. Johrimal MANU/SC/0396/2004 : (2004) 4 SCC 714. The following observations sum up the entire legal position:- It is well-settled that while exercising the power of judicial review the Court is more concerned with the decision making process than the merit of the decision itself. In doing so, it is often argued by the defender of an impugned decision that the Court is not competent to exercise its power when there are serious disputed questions of facts; when the decision of the Tribunal or the decision of the fact finding body or 14 MSRM,J & JUD,J wp_1703_2019 the arbitrator is given finality by the statute which governs a given situation or which, by nature of the activity the decision maker's opinion on facts is final. But while examining and scrutinizing the decision making process it becomes inevitable to also appreciate the facts of a given case as otherwise the decision cannot be tested under the grounds of illegality, irrationality or procedural impropriety. How far the court of judicial review can reappreciate the findings of facts depends on the ground of judicial review. For example, if a decision is challenged as irrational, it would be well-nigh impossible to record a finding whether a decision is rational or irrational without first evaluating the facts of the case and coming to a plausible conclusion and then testing the decision of the authority on the touch-stone of the tests laid down by the Court with special reference to a given case. This position is well settled in Indian administrative law. Therefore, to a limited extent of scrutinizing the decision making process, it is always open to the Court to review the evaluation of facts by the decision maker. Having regard to the fact that there was a difference of more than Rs. 25 lacs, even for the period of four months for which data was available, between the figure of net profit shown by the computer data and the figure of net profit shown in the books of accounts meant for production before the income tax authorities, it was expected of the ITSC to independently apply their mind to the assessee's explanation, whatever that was, and to the materials found and relied upon by the CIT in his report and cross verify both in an attempt to find out whether the explanation was plausible or acceptable. This important step in the decision-making process has been omitted to be done. Our jurisdiction is only to examine if the decision-making process has suffered from some fundamental errors. The judgment of the Division Bench of the Karnataka High Court in N. Krishan & Ors. vs. Settlement Commission & Ors MANU/KA/0065/1989 : (1989) 180 ITR 585, cited by the learned counsel for the respondent actually supports our decision. In para 21 of the judgment, Rama Jois, J, speaking for the court held:- In our opinion, many of the grounds on which arbitration awards could be set aside would not be available in view of the nature and jurisdiction of the Settlement Commission. We are of the view that a decision of the Settlement Commission could be interfered with only: (i) if grave procedural defects such as violation of the mandatory procedural requirements of the provisions in Chapter XIX-A and/or violation of the rules of natural justice is made out; (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission. (iii) this court cannot interfere either with an error of fact or error of law alleged to have been committed by the Settlement Commission. Non acceptance of the claim would not ipso facto lead to making the application for Settlement bad for failure to make full and true disclosure of income. As per the decision of the Bombay High Court in Shreem Engineering Industries v. ITSC reported in (2018) 95 taxmann.com 190 to establish that 15 MSRM,J & JUD,J wp_1703_2019 there was failure to make full and true disclosure of income as required under 254C(1) of the Act it would be necessary for the Revenue to prove that there was a non disclosure of primary facts and ntr merely non acceptance of certain claims made before the Commission. Mere non acceptance of the claim made by the deponent is treated as failure to make full and true disclosure of income, erroneously; and, hence the impugned order deserves to be set aside. The findings of the Settlement Commission are irrational and arbitrary. The Settlement Commission should have independently applied its mind to the explanation furnished to it but it failed to do so. The objections of the Principal Commissioner of income tax were simply taken as final and sacrosanct. There is no nexus between the material cited, reasons given and the decision taken by the Settlement Commission. Adverse decision is taken based on facts non existent or facts assumed. The Settlement Application is rejected by the first respondent on the basis of objections given by the 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 order passed under Section 245D(1) of the Act is a preliminary one. It was passed on the basis of the information provided in the application filed by the assessee under Section 245C(1) of the Act without hearing the Revenue. The said order only allows the application to be proceeded with subject to the application of the other provisions of the Act. On the Commission calling for a report under Section 245D(2B) of the Act, and on submission of such a report within the stipulated time, the Commission may under Section 245D(2c) of the Act on the basis of the report furnished by the Commissioner and after hearing the applicant declare the application of the assessee as invalid. The order impugned passed under Section 245D(2C) of the Act is an independent order 16 MSRM,J & JUD,J wp_1703_2019 from the one passed under section 245D(1) of the Act. The application of the petitioner was held invalid on the basis of the report of the Commissioner and after hearing the petitioner. The Settlement Commission followed the due procedure laid down under the Act while dealing with the application of the assessee and there has been no violation of the provisions of the Act. Hence, the writ petition is liable for dismissal. The averments in the writ affidavit pertain to search conducted by the investigation wing of the department, which were concluded long back. The petitioner never challenged the proceedings of the department in conducting the search. The same have become final. The allegations made against the department are incorrect. The search record shows that the assessee voluntarily admitted the additional income when confronted with material found at the time of search expressing his inability to explain the issues. The assessee has admitted several times vide statements dated 02.09.16, 07.09.16, 30.09.2016 and 21.10.2016 that he is ‘under invoicing’ the sales bills to the extent of 8% to 9% of the total sale invoice and the differential amount was received by cash. The assessee has even filed an affidavit affirming the admission of additional income on 19.10.2016, after a lapse of 47 days from the date on which search was concluded. The filing of the affidavit at stage later to the conclusion of search shows that the admission of additional income was voluntary and no coercion was involved. The assessee has never stated even before the Settlement Commission that there was coercion. Further, while filing petition before the Settlement Commission undisclosed income of Rs.2.71 Crore is admitted. If there was coercion on the day of search, the same should have been brought before the investigation wing or other higher authorities. The petitioner was always assisted by more than one qualified chartered accountant and was helped by them. The Chairman and Managing Director was attending the income tax office along with his qualified chartered accountant and was always 17 MSRM,J & JUD,J wp_1703_2019 promising to pay taxes on undisclosed income admitted by him. In fact in the month of November/December 2018, the Chairman and Managing Director has appeared before the 2nd respondent along with two chartered accountants and stated that they paid more than 50% of the taxes on undisclosed income admitted and requested some time to pay the remaining taxes. Unless the assessee admits the undisclosed income he would not have paid huge tax of Rs.5.74 Crore on the same undisclosed income. There cannot be any coercion for years together especially when the business of the assessee runs into hundreds of crores and when the assessee is aided/advised by accountants and Chartered accountants who are well qualified. The assessee company is being assessed to tax since a very long time and the assessee is very well aware of its rights besides the legal positions under the Act. The assessee group was searched twice and a survey under Section 133A was also conducted. During the last search operation under Section 132 of the Act huge cash of more than rupees eleven crores was found and the assessee’s group admitted the same as undisclosed income after the search and paid taxes. Thus, in the earlier search, the department had brought to light huge unaccounted cash of more than rupees eleven crores in the assessee’s group case and assessee group admitted the same as undisclosed income and paid taxes. Since this is the second search operation under Section 132 of the Act, apart from survey on assessee under Section 133A, the petitioner is very well aware of the statutory procedures; and, if really there was coercion they would have brought the same to the notice of the senior officers and in fact the assessee would not have paid taxes of Rs.5.74 crores which the assessee is claiming the same as refund. If there was coercion to admit undisclosed income the assessee would not have filed a petition before the Settlement Commission admitting the undisclosed income of Rs.2.71 crores. Thus, there is no sum and substance in the allegation of the assessee that there was coercion on the part of the 18 MSRM,J & JUD,J wp_1703_2019 department to admit undisclosed income. The petitioner company disputed the undisclosed income of Rs.17,54,21,383/- which was admitted by stating that (I) admission is not represented by an asset, cash, investment; and (ii) no incriminating material was found to support the admission. Under the provisions of the Act, there is no provision, which provides that admission of additional income should be represented with equal amount of cash, asset or investment. The assessee knows best as to whether the unaccounted investments are made, because the department does not conduct inspection on assessee everyday. If the department gets the source of income given and the corresponding unaccounted asset, it would be the best case for department. But, it is enough even if one aspect is found by the department either source or modus operandi of unaccounted income generation or destination of unaccounted income. The department need not get corresponding unaccounted assets/cash etcetera during search operations especially when the assessee and his staff admit about the unaccounted income. The assessee has admitted undisclosed income on three occasions and filed an affidavit about the unaccounted income and payment of taxes. Cash of Rs.66,07,000/- (seized Rs.65,00,000/-) and unaccounted jewellery worth Rs.1,56,74,578/- were found during search in the residential premises of the deponent and cash of Rs.4,50,000/- (seized Rs.4,00,000/-) was found in the factory premises of the petitioner company besides cash of Rs.89,12,090/- (Seized Rs.87,05,400/-) was found in the premises of M/s.Bharati soap works a proprietary concern of the deponent of the writ affidavit. Certain documents containing details of investment of Rs.5.20 crores in M/s.Gowtham Buddha Textile Park Pvt Ltd and unsecured loan of Rs.1.00 Crore advanced by the Chairman and Managing Director to M. Chinnathorai were found. The chairman and managing director while answering question no.8 of his deposition, on 22.10.2016, has stated about the above investments and a part of investment in construction of a 19 MSRM,J & JUD,J wp_1703_2019 residential building ‘arunachalam palace’ at Guntur and Kalyanamandapam at Tuticorin and also the cash found during the course of search were out of the unaccounted money generated on account of the cash received by under invoicing at 9% of turnover from distributors. The issue was questioned and Chairman and Managing Director has admitted several times by his statements that he is under invoicing the sales bills to the extent of 8% to 9% of the total sale invoice and the differential amount was received by cash. These amounts by way of cash were received by the petty cashier – Subbaiah Jagan and were subsequently handed to head cashier Ramaswamy Ramshanker along with the details as to from whom the cash was received. These facts were confirmed by the said Subbaiah Jagan and Ramaswamy Shanker vide statements, dated 17.09.2016. In their statements they stated that the cash was received from the dealers and that at the end of the day the head cashier used to hand over the cash to his boss – the Chairman & Managing Director along with the details of dealers from whom such cash is received. Subsequent to the statement, the department conducted enquiries with dealers of the petitioner company on random basis. Moreover during the course of search a note book was found and seized, on 31.8.2016, vide annexure BSW/1 which contains date wise written transactions of cash receipts from 8.6.2016 to 28.08.2016 with the names of towns/persons. Further, some loose sheets were found and seized as annexure A/BCCPL/01 from the factory premises of the petitioner company which contained hand written details of cash receipts from 03.08.2016 to 26.08.2016. The assessee failed to explain the nature of the contents of such material found at the time of search and voluntarily admitted the unaccounted income of Rs.17,54,21,383/-. Moreover, an amount of Rs.58.50 lacs was paid by the Chairman and Managing Director to M/s.JK Ads by way of cash to promote his son as film hero in the film ‘Player’ and the same is unexplained expenditure and part of application of undisclosed income earned by the petitioner 20 MSRM,J & JUD,J wp_1703_2019 company. Further, the seized material annexure BSW/5, is a copy of an FIR, dated 12.08.2014, filed by Govinda Ram Attal. The said Govinda Ram Attal is the sub distributor of the petitioner company under the distributorship of Gampa Ramesh. Gampa Ramesh handed over cash of Rs.78,58,460/- to Govinda Ram Attal to be given to the petitioner company but the cash was lost in transit and an FIR was filed. This fact establishes the continuous practice of under invoicing the sale and collecting the differential amount from distributors by way of cash. The contention of the Chairman & Managing Director that he retracted from his original statement recorded on oath during the course of search proceedings is incorrect inasmuch as he never retracted from the earlier statement either by addressing a latter to the department or by way of a statement made on oath. Merely because he has not disclosed the undisclosed income of Rs.17,54,21,383/-, which was detected by the department during the course of search proceedings, in the returns filed pursuant to the notices issued u/s 153A of the Act, it would not amount to retraction. During the course of search, it has been stated on behalf of the assessee that it is under invoicing the sale invoices to an extent of 8% to 9% of the total sale value. The details of the income admitted in the application filed before the Settlement Commission are correct. The manner of earning the income as explained in the application as the amounts were received back from the dealers and distributors towards reimbursement of sales promotion expenses/discounts given to them is vague and without any supporting proof. The assessee did not file any evidences as to who are the dealers from whom the reimbursement of sales promotion was done and to which dealers the discounts were wrongly debited. The names and addresses of these dealers were submitted neither before the department nor before the Settlement Commission for verification. The assessee company admitted the above extra income just to camouflage the unaccounted business income relating to soaps. 21 MSRM,J & JUD,J wp_1703_2019 The assessee company is admitting the above nature of income only to cover up the unaccounted assets/expenditure found by the department during search proceedings. Instead of admitting the same as income from soap business, the same is being camouflaged as ‘reimbursement of sales promotion expenses/discounts given to distributors’ because the assessee company wanted to evade not only income tax but also sales tax/GST. The manner of earning the income as explained in the application that the amounts were received back from dealers and distributors is vague and without any supporting proof. The petitioner has stated in the writ affidavit that for the assessment year 2017-18 Rs.1,20,95,157/- was wrongly claimed as discount payable to distributors and the said amount was admitted as additional income in the application filed before the Settlement Commission. The manner of earning the said income as explained in the Settlement application that on account of wrong claim of discounts is vague and without any supporting proof. The assessee has not filed evidence as to who are all the dealers to whom these discounts were wrongly claimed in its books. The names were submitted neither before the department nor the Settlement Commission for verification. In the writ affidavit it is submitted that the petitioner has stated that Rs.55,00,000/- was the expenditure that was found recorded in a spiral register numbered as A/BCCPL/01 by the search party. This expenditure is not supported by vouchers and this amount was admitted as additional income in the application filed before the Settlement Commission. The assessee has not filed details of expenditure neither before the department nor before the Settlement Commission. The petitioner has stated that the Settlement Commission passed an order under section 245D(1) of the Act allowing its application to be proceeded with, on examination of material placed before the Commission and that the Commission has held that the application is fit to be allowed to be proceeded with further. Since the said order was passed only 22 MSRM,J & JUD,J wp_1703_2019 at the admission stage, it is not an order in favour of assessee. The petitioner has stated that Settlement Commission has passed the impugned order summarily rejecting its application. Settlement Commission heard the case on 08.01.2019 and then passed the order. The Settlement Commission invalidated the application filed by the assessee since it does not constitute a full and true disclosure of income and as the assessee has not revealed a true and correct picture of the manner in which unaccounted income was earned, which are prerequisites of section 245C of the Act. Hence, the assessee’s petition before Settlement Commission was not summarily rejected. Only after receiving the inputs from department and after giving an opportunity to argue the case and file written submissions by assessee company, the assessee’s petition was rightly rejected by Settlement Commission. In the writ affidavit, the petitioner analysed the reasons given by the Settlement Commission in its orders. The principal Commissioner in his parawise comments before Settlement Commission has mentioned that statements were recorded from the assessee atleast four times on different dates and assessee admitted undisclosed income before department and even an affidavit was filed admitting the undisclosed income of Rs.60 Crores for various assessment years. The statements clearly mention the modus operandi of earning unaccounted income. The direct and circumstantial evidences found during the search led to admission of unaccounted income by assessee company. The deponent has explained the circumstances and mental trauma he has underwent while his statement under section 132(4) of the Act were recorded. The Settlement Commission observed that from the chairman and managing director, who manages the business, several statements were recorded 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. Infact the assessee filed an affidavit admitting the unaccounted income. 23 MSRM,J & JUD,J wp_1703_2019 The last statement was recorded from the assessee after fifty days of search. Subsequent to search proceedings, the assessee had been taking legal advice continuously before giving statements to department. The assessee was not in custody of department all these fifty days and he was very much free to think cool and consult his legal counsel. Hence, his submission of perturbed mind is only an after thought to avoid tax on unaccounted income. The Settlement Commission observed that in view of the fact that the assessee company has admitted the unaccounted income four times on various dates, the assessee cannot be said to be in a perturbed state of mind while giving statements to department. Settlement Commission observed that the declaration under section 132(4) of the Act was given by the assessee company based on valid proof seized by the department at the time of search operations and that the incriminating material received showed cash receipts by the assessee company while carrying out the 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 receipt; 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 company. The Settlement Commission observed that the chairman and executive director confirmed unaccounted profits @ 8% & later 9% of the sales. The Settlement Commission observed that there cannot be duress or mental stress even after two months of initiation of search especially when the assessee was being aided by legally competent counsel during that period. The petitioner stated that Rs.4.00 lacs only was found and no other undisclosed 24 MSRM,J & JUD,J wp_1703_2019 asset was found at the time of search. Huge cash of Rs.91,05,400/- was also seized from the premises of the assessee company and residence of managing director as per the appraisal report of investigation wing of income tax department. Hence, the Settlement Commission has come to a conclusion that this cash represents further corroborative evidence of generation of cash on account of under invoicing the sales and purchases manipulation. Settlement Commission has observed that the unaccounted income generated is brought out through painstaking investigation at the time of search and the claims now being made are not supported by any evidences and details. It is a fact that the assessee company filed an affidavit before the investigation wing of the income tax department admitting additional income of Rs.60.00 crore in the hands of assessee company and others. The Settlement Commission has invalidated the application filed by the assessee since it does not constitute a full and true disclosure of income and as it does not reveal a true picture of the manner in which it has been earned. The petitioner submitted several case laws on the issue of evidentiary value of statement recorded under section 132(4) of the Act. 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 assessee 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. 25 MSRM,J & JUD,J wp_1703_2019 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 was obtained from the deponent cannot be acted upon if retracted, the then Assistant Director of Income Tax (Shri Srinath) insisted that the deponent should sign the affidavit admitting the additional income in line with the statements obtained from the deponent. 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 deponent was entirely locked up. The deponent was under great pressure from the family as well as from the income tax authorities. Left with no alternative, the deponent 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 deponent on the dotted line. The deponent was subjected to immense pressure, fear, coercion and repeated threats. He was threatened that the consequences will be disastrous in the event he does not accept additional income as shown in the statement drawn up under section 132(4) of the Act. He was specifically asked to accept the additional income in his self interest and not to be guided by the chartered accountants. The deponent was asked to pay tax as per the dictation of the income tax authorities 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 26 MSRM,J & JUD,J wp_1703_2019 income was earned at all. The ambiguous manner in which the affidavit was filed will only demonstrate the plea of the deponent that the statements are signed at the behest and to the dictation of the income tax authorities. Reference was made to an earlier search on 15.10.2009. As already explained in the writ affidavit a sum of Rs.11.62 crores was accepted by the deponent as income in the search in the year 2009 though it was not his income and it belonged to several third parties. However, since the amount was found in his premises, he was compelled to accept the assessment of the said amount as his income. Reference to the earlier search is made only to create a bias against the deponent having realised the factual position in the search made from 30.8.2016 to 02.09.2016 now stands on a different footing. Reference was also made to the statements dated 17.09.2016 given by one Ramaswamy Ramasankar and Jagan, who are the employees of the petitioner company and also in the personal business of the deponent. Ramaswamy Ramasankar 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 company and that of the deponent’s proprietary business 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 are taken to be true. Mr. Jagan, in his statement, dated 17.09.2016, 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 27 MSRM,J & JUD,J wp_1703_2019 proceeds on cash sales which 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 as sales made 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. The deponent 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 company or the deponent 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. The respondent says that retraction can only be done by addressing a letter to the department or by way of a statement made on oath and that non inclusion of income in the return of income according to the respondent does not amount to retraction. There is no fixed manner of retracting any statement made. It can be made in a variety of ways. CBDT 28 MSRM,J & JUD,J wp_1703_2019 circular, dated 10.03.2003, itself says that the retraction can be made by the concerned assessee while filing the return of income by not including the income. The revenue itself accepts in the circular issued that non inclusion of income in the return of income which was admitted under Section 132(4) of the Act is to be viewed as retraction. Hence, the plea that there is no retraction is erroneous. The names and addressees of dealers from whom amounts were received aggregating to Rs.94,97,907/- through crossed account payee cheques towards reimbursement of sales promotion expenses have been submitted before the Settlement Commission. The procedure envisaged in chapter XIX relating to the Settlement of cases require that the details should be furnished to the Settlement Commission and not to the income tax department. Hence, all the details were furnished to the Settlement Commission. A sum of Rs.1,20,95,157/- were shown as discounts payable to the distributors and the same was initially claimed as deduction. Since this is a wrong entry the same is offered for tax in the Settlement application. There is no question of payment being received from any of the dealers relatable to this item. The claim for deduction is withdrawn while computing the income as the entry itself is wrong. Therefore, the said sum was offered to tax. A sum of Rs.55.00 lakhs was incurred towards expenses which is recorded in annexure A/BCCPL/01 seized by the search party. The details of all expenses incurred by the company can be verified from the annexure itself. The amount incurred represents expenditure incurred under various heads and is recorded in the books of accounts of the company. Since most of it constitutes expenses not allowable as deduction, the same was offered as income before the Settlement Commission. All the facts have been stated in the application filed before the Settlement Commission. The same were scrutinised by the Settlement Commission before passing the order under section 245D(1) of the Act. The very same factual position existed while passing the impugned order under 29 MSRM,J & JUD,J wp_1703_2019 section 245D(2c) of the Act invalidating the application. The only difference was principal Commissioner repeatedly objected to in his report before the Settlement Commission. 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 was presented and verified by the Settlement Commission and it formed part of the order 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. Coming to the affidavit filed admitting undisclosed income of Rs.60 crores, the statements and the affidavit were to the dictation of the search party and the Assistant Director of Income Tax and the deponent signed wherever he was required to sign by the said authorities on the dotted line. There was no evidence or material found and seized in the course of search which corresponded to the alleged admitted income. There was no such asset or cash available because no such income was earned as alleged over and above the invoice price by under invoicing. The 3rd respondent who filed the counter affidavit was not a member of the search party. He was not even associated with any of the proceedings during the relevant period. Therefore, he is not 30 MSRM,J & JUD,J wp_1703_2019 competent to deny what transpired at the time of search, the manner of recording of statements under section 139(4) of the Act and also the events that led to the filing of the affidavit as narrated by the deponent. The counter affidavit filed does not state that the 3rd respondent verified from the concerned officers about the veracity of contents of his affidavit. Since the deponent admitted unaccounted income four times in the statements recorded on various dates it cannot be said that he was not in perturbed state of mind. Everytime statement was recorded he was put to mental stress, duress and threat. The language and the manner in which answers were recorded in quick succession would make it clear that the same officer who wrote the questions also wrote the answers. This deponent barely understands English. He could not have replied in the language in which the answers to questions were recorded in the statements. Annexures A/BCCPL/01, BSW/01 and BSW/05 do not substantiate even in any remote manner that the petitioner company has received cash in excess of sale price by any under invoicing of sales. The said annexures are no proof at all and do not support the correctness of declaration under section 132(4) of the Act obtained from the deponent. The deponent never stated that he received unaccounted cash at 8% and later at 9% of the sale price by under invoicing. The answers were written by search party/Assistant Director of Income Tax who has recorded the statement. He was asked to sign on the dotted line, while under duress, stress and coercion and pressure. No under invoicing was done. The same was not included in the return filed by the deponent and also by the petitioner company. The statement was recorded from the deponent under section 132(4) of the Act was retracted later at the time of filing of return. The books of accounts contained a book balance of Rs.1,52,05,400/- on the date of search. The entire cash is officially explained. The cash balance of Rs.1,56,05,400/- which was available as per books of accounts was seized. According to the Assessing Officer the 31 MSRM,J & JUD,J wp_1703_2019 undisclosed income accepted in the statement under section 132(4) of the Act is Rs.17,54,21,387/-. Such huge amount should reflect in some form or the other. In the case on hand barring the figure of Rs.17.54 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 are examined. There would have been some trace of this money existing in some form or the other had the income been earned at all. The income was never earned. Hence, 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. Reference is made to the investment of Rs.5.20 crores in M/s.Gowtham Buddha Textiles Pakt Pvt.Ltd and unsecured loan of Rs.1 crore advanced to Chinnathorai relate to the personal file of the petitioner and has no relationship with the petitioner company. Likewise investment in Arunachalam Palace, Guntur and Kalyana Mandapam at Tuticorin were referred in the counter. These are personal assets of the deponent. They have nothing to do with the petitioner company. The immovable properties referred to are acquired by the directors and their relations from the year 1984 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 before the Court to cause prejudice. 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 32 MSRM,J & JUD,J wp_1703_2019 writ petitioner? And, if so, whether the impugned order is liable to be set aside?’ 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 is as under: - ‘On the Settlement Application being filed on 13.11.2018, 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 it 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 order, dated 26.11.2018. While passing the said initial order, all the facts and circumstances were examined and it was 33 MSRM,J & JUD,J wp_1703_2019 observed that all the requirements, namely - that the application contained full and true disclosure of income, which has not been disclosed 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 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 ought not to have reversed its initial orders on the mere objections of 2nd respondent and without any new material 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 34 MSRM,J & JUD,J wp_1703_2019 different conclusion while passing the impugned (final) order under Section 245C(1) of the Act. The next set of contentions of the writ petitioner is as under: - ‘The first ground mentioned by the Settlement Commission is 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 Chairman-cum-Executive Director of the petitioner (hereinafter ‘deponent’, for short), under Section 132(4) of the Act, disclosing the unaccounted income at Rs.47,31,17,971/- and that the annexures A/BCCPL/01, BSW/1 and BSW/5, which are seized, are the corroborating evidences; and, hence, the application of the writ petitioner does not constitute true and full disclosure of the income. Acting under Section 132(4) of the Act statements were obtained from the deponent in relation to the petitioner 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 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 35 MSRM,J & JUD,J wp_1703_2019 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, if confessions not based upon credible evidence 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. 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 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 by not including the sum of Rs.17,54,21,838/-. The applicant has 36 MSRM,J & JUD,J wp_1703_2019 only disclosed Rs.2,70,93,064/-. It is open to the petitioner to show that the admission made in the statement by the person, who made 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. 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 deponent was entirely locked up and as the deponent 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 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/deponent and it belonged to several other person; yet, the said cash was accepted 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 37 MSRM,J & JUD,J wp_1703_2019 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 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 of Rs.2.71 Crores, 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 38 MSRM,J & JUD,J wp_1703_2019 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 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.5.74 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 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.5.74 Crores as tax, which the assessee is now claiming as refund.’ On earnest consideration of rival contentions, particularly to 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.5.74 Crores on the same undisclosed income by approaching the department in the months of November/December, 2018 and the 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 the confessions are obtained under fear, duress, coercion etcetera need no 39 MSRM,J & JUD,J wp_1703_2019 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 deponent 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 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 these 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) some loose sheets vide annexure A/BCCPL/01 were seized from the factory premises and 40 MSRM,J & JUD,J wp_1703_2019 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. 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 41 MSRM,J & JUD,J wp_1703_2019 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 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 42 MSRM,J & JUD,J wp_1703_2019 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 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/-) and unaccounted jewellery worth Rs.1,56,74,578/- were found during the search in the residential premises of the deponent besides cash of Rs.4,50,000/- (seized Rs.4,00,000/-) was found in the factory premises of the petitioner besides cash of Rs.89,12,090/- (seized Rs.87,05,400/-) was found in the premises of the proprietary concern of the deponent. 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. 43 MSRM,J & JUD,J wp_1703_2019 That apart, the petitioner’s own admission in the affidavit filed after 47 days and payment of huge tax (part) in a sum of Rs.5.74 Crores 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 deponent was not in the custody of the department and was very much free to think coolly and consult his legal counsel and chartered accountants. Therefore, the deponent’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. The Settlement Commission on this aspect held in the final order verbatim as follows: - ‘The applicant has also now stated the income offered relates to reimbursements of sales promotion expenses and also discounts made to dealers wrongly debited to profit and loss account. The unaccounted income generated is brought out through painstaking investigation at the time of search and moreover the claims now made is not supported by any evidences or details. Hence the manner of earning unaccounted income as claimed by the applicants stand disproved.’ On this aspect, the petitioner explains that the manner in which additional income is derived is explained in the Settlement Application and that on the basis of material placed before the Settlement Commission, while 44 MSRM,J & JUD,J wp_1703_2019 passing the initial order, the Settlement Commission expressed a view that at present there is prima facie no material, which warrants the conclusion that true and full disclosure has not been made by the applicant or it has not disclosed the manner of such income and hence all the requirements laid under Section 245(c) of the Act have been fulfilled by the applicant. The petitioner admittedly has not disclosed the real estate transactions and the names of parties to such transactions. Be that as it may. In the application before the Settlement Commission the petitioner declared additional income in the assessment year 2016-17 in a sum of Rs.94,97,907/- towards reimbursement from the distributors by account payee cheques not offered as income besides additional income in the assessment year 2017-18 in a sum of Rs.1,20,95,157/- towards discounts payable to distributors. The details of the distributors to whom the discounts are payable are not disclosed. Though an accounting entry was stated to have been made in the books of accounts for the said amount, admittedly, no payment was made; hence, the entry was said to have been reversed and was offered as undisclosed income in the application filed before the Settlement Commission. As regards amount of Rs.1.00 Crore paid to Chinnathorai, the petitioner explains it as the amount given out of income from real estate business. There is no true and full disclosure as to the details of this income from real estate business. As rightly contended by the respondents, the statements of dealers and distributors are not filed insofar as the income admitted in the application filed before the Settlement Commission and the manner of earning income as explained in the application as the amounts were received back from the dealers and distributors towards reimbursement of sales promotion expenses/discounts are not supported by any evidence like the details of dealers from whom the reimbursement of sales promotion was done and to which dealers the discounts were wrongly debited. Names and addresses of those dealers were submitted neither before the department nor 45 MSRM,J & JUD,J wp_1703_2019 the Commission for verification but the extra income was merely admitted. As rightly contended by learned standing counsel for the respondents, there is non disclosure of the details of various transactions related to incomes from real estate business. Hence, we find that the Settlement Commission is justified in concluding that the applicant had stated that the income offered relates to reimbursements of sales promotion expenses and also discounts made to dealers wrongly debited, but, the claim made by the petitioner is not supported by any evidences or details and hence, the manner of earning unaccounted income as claimed by the applicant stands disproved and that the Settlement Commission is further justified in rejecting the Settlement Application since it does not constitute a full and true disclosure of income nor has revealed a true picture of manner in which it has been earned. In the light of the discussion supra, we are of the considered view that there is sufficient material and are 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. 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 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) of the Act 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 46 MSRM,J & JUD,J wp_1703_2019 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 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.’ 47 MSRM,J & JUD,J wp_1703_2019 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) of the Act 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. Miscellaneous petitions pending, if any, shall stand closed. _____________________ M. SEETHARAMA MURTI, J _____________ J. UMA DEVI, J 30.10.2019 Vjl 48 MSRM,J & JUD,J wp_1703_2019 49 MSRM,J & JUD,J wp_1703_2019 THE HON’BLE SRI JUSTICE M.SEETHARAMA MURTI And THE HON’BLE MS JUSTICE J. UMA DEVI Writ Petition No.1703 of 2019 [Per Hon’ble Sri Justice M. Seetharama Murti] 30.10.2019 Vjl "