DHARMADEV INFRASTRUCTURE LIMITED V. INCOME TAX SETTLEMENT COMMISSION

SCA/4322/2017

AI Insights

The case involves Umang Hiralal Thakkar and Dharmadev Infrastructure Limited, who filed settlement applications following a search and seizure operation under Section 132 of the Income Tax Act, 1961. Initially, their applications were allowed to proceed under Section 245D(1), but were later declared invalid under Section 245D(2C) due to insufficient disclosure of income. The applicants challenged this decision in the Gujarat High Court, arguing that the Commission's rejection was beyond the scope of Section 245D(2C) and that the Commission had erred in its findings. The court, however, found that the Commission had acted within its jurisdiction and upheld the invalidation of the applications.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 768210 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 20-07-2018
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income Tax (Central) vs. Settlement Commission, Ajmera Housing Corporation vs. CIT, Victory Ceratech Pvt. Ltd v. Union of India & Ors, Commissioner of Income Tax vs. Income Tax Settlement Commission, Commissioner of Central Excise vs. True Woods P. Ltd and Ors, Vishnubhai Mafatlal Patel vs. Assistant Commissioner of Income Tax, Arpan Associates vs. Income Tax Settlement Commission
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: M R BHATT; MAUNA BHATT
• Assessee Lawyers: S N SOPARKAR; B S SOPARKAR
• Keywords: Income disclosure; Judicial review; Settlement commission; True and Full Disclosure
• Section: 245C(1); 245D(2C); 245D(1); 245D(2B)

Judgement Text

"C/SCA/4321/2017 CAV JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 4321 of 2017 With CIVIL APPLICATION NO. 1 of 2017 With R/SPECIAL CIVIL APPLICATION NO. 4322 of 2017 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE B.N. KARIA ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ============================================= UMANG HIRALAL THAKKAR Versus INCOME TAX SETTLEMENT COMMISSION ============================================= Appearance: MR. S.N. SOPARKAR, SR. ADV WITH MR B S SOPARKAR(6851) for the PETITIONER(s) No. 1 MR. M.R. BHATT, SR. ADV WITH MRS MAUNA M BHATT(174) for the RESPONDENT(s) No. 2 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE B.N. KARIA Date : 20/07/2018 CAV JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0. As common question of law and facts arise in both these Page 1 of 26 C/SCA/4321/2017 CAV JUDGMENT petitions and as such they arise out of the impugned common order passed by the learned Settlement Commission, both these petitions are decided and disposed of together by this common judgment and order. 2.0. Feeling aggrieved and dissatisfied with the impugned order passed by the learned Settlement Commission dated 27.05.2016 rejecting the settlement application submitted by the respective petitioners ­ original applicants invalid under Section 245D(2C) of the Income Tax Act, 1961, the petitioners ­ original applicants have preferred present Special Civil Applications. 3.0. That for the sake of convenience, facts in Special Civil Application No.4321 of 2017 in the case of the original applicant ­ Umang Thakkar are narrated, as facts in both the cases are common. 4.0. The facts leading to the present Special Civil Applications in nutshell are as under: 4.1. That the petitioner is Director of Dharmadev Infrastructure Limited ­ petitioner of Special Civil Application No.4322 of 2017 engaged in the business of the Construction and Land Development. That on 15.10.2013, a search under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as the \"Act\") was carried out at the residential premises of the petitioner herein­ original applicant as well as group concerns of \"Dharmadev Group\". Therefore, on 22.02.2016, the petitioner herein filed an application Page 2 of 26 C/SCA/4321/2017 CAV JUDGMENT under Section 245 C of the Act for AY 2008­09 to AY 2015­16. That in the case of Umang Hiralal Thakkar, he declared Rs.9,24,16,911/­ as additional income and in the case of applicant himself Dharmadev Infrastructure Limited declared Rs.22,37,92,628/­as additional income. That the said applications were submitted under Section 245 C(1) of the Act. 4.2. That thereafter, the Settlement Commission passed an order under Section 245 D(1) on 11.4.2016 allowing the application to be proceeded with further. That the report under Section 245D(2B) were received on 13.05.2016. That the Settlement Commission fixed the hearing under Section 245D(2C)on 25.5.2016. At this juncture, it is required to be noted that as such prior thereto, Settlement Commission rejected the petitioner's application under Section 245D(1). That thereafter, on 28.03.2016 the petitioner again filed an application under Section 245 C of the Act and made revised disclosure total amounting to Rs. Rs.9,24,16,911/­ in case of applicant Umang Thakkar and Rs.22,37,92,628/­ in the case of applicant himself Dharmadev Infrastructure Limited. As observed herein above, thereafter the Settlement Commission passed an order under Section 245 D(1) allowing the application to be proceeded with the further. That on receipt of the report from the Principal Commissioner of Income Tax under Section 245D(2B) of the Act, the same was furnished to original applicant. The learned Principal CIT objected to the said application and it was stated that there is no true and full disclosure on the part of the applicant. It was stated that there is no explanation regarding seized / impounded papers, source of found and seized jewellery and for Page 3 of 26 C/SCA/4321/2017 CAV JUDGMENT source of cash deposits in Benami accounts. It was also submitted that even the application for AY 2015­16 may not be entertained since no proceedings were pending in both the cases. That the respective applicants replied to the objection raised by the Principal CIT during the course of the hearing. That thereafter, by impugned common order the learned Settlement Commission has rejected the settlement application vide order dated 27.5.2016 on the ground that there was no true and full disclosure on the part of the petitioner. That thereafter, the respective applicants­ petitioners preferred rectification application under Section 154 of the Income Tax Act against the order dated 27.5.2016. However the said application came to be rejected vide order dated 24.08.2016 on the ground that there is no error apparent on the record. Hence, the respective petitioners ­ original applicants are before this Court challenging impugned common order passed by the Settlement Commission rejecting the settlement application preferred by the respective applicants declaring the same as invalid under Section 245D(2C) of the Income Tax Act. 5.0. Shri S.N.Soparkar, learned Senior Advocate has appeared on behalf of the petitioner and Shri M.R. Bhatt, learned Senior Advocate has appeared on behalf of the Revenue. 6.0. Shri Soparkar, learned Senior Advocate appearing on behalf of the respective petitioners has vehemently submitted that the impugned order passed by the learned Settlement Commission is beyond the scope and ambit of Section 245D(2C) of the Act. Page 4 of 26 C/SCA/4321/2017 CAV JUDGMENT 6.1. It is further submitted by Shri Soparkar, learned counsel for the petitioners that at the stage of Section 245D(2C) the validity of the application only is required to be considered and nothing further than that. 6.2. It is further submitted by Shri Soparkar, learned counsel for the petitioners that correctness of the claim / disclosure can be considered at the stage of Section 245D (3) and (4) of the Act. 6.3. It is further submitted by Shri Soparkar, learned counsel for the petitioners that as such in the present case in the second application submitted on 28.3.2016, the petitioner made higher disclosure of Rs.9.25 crores. 6.4. It is further submitted by Shri Soparkar, learned counsel for the petitioners that while passing the order under Section 245D(1) of the Act, the Settlement Commission in fact did consider the correctness of the claim and / or issue whether there is true and full disclosure or not. It is submitted that only thereafter having observed and held that true and full disclosure has been made by the applicant thereafter the settlement applications were permitted / allowed to proceed with further. It is submitted that therefore, thereafter the learned Settlement Commission could not have and / or ought not to have rejected the application at the stage of the Section 245D(2C) and therefore, the same is wholly without jurisdiction and beyond the scope of Section 245D(2C). 6.5. It is further submitted by Shri Soparkar, learned counsel for Page 5 of 26 C/SCA/4321/2017 CAV JUDGMENT the petitioners that the correctness of the disclosure and / or whether there is true and full disclosure or not is required to be considered at the stage of Section 245D(4). It is submitted that therefore, if the application is permitted to be proceeded further, no prejudice shall be caused. It is submitted that on the other hand the applicant will not be permitted to proceed further it shall cause prejudice to the petitioner. It is submitted that therefore, Settlement Commission ought to have permitted / allowed the application to be proceeded further. In support of his above submission, Shri Soparkar, learned Senior Advocate for the petitioners has heavily relied upon the decision of this Court in the case of Principal Commissioner of Income Tax (Central) vs. Settlement Commission reported in (2016) 65 Taxmann. com 309 (Gujarat). 6.6. It is further submitted by Shri Soparkar, learned counsel for the petitioners that even otherwise the impugned order declaring the application invalid under Section 245D(2C) of the Act is liable to be quashed and set aside on the ground that same is based on conjecture and surmise. It is submitted that while declaring application invalid, the Settlement Commission has failed to point out a single material or document which amounts to incomplete disclosure. It is submitted that merely marking that there was no true and full disclosure by the applicant would not sufficient. 6.7. It is further submitted by Shri Soparkar, learned counsel for the petitioners that in the case of Ajmera Housing Corporation vs. CIT reported in (2010) 326 ITR 642, the Hon'ble Supreme Court Page 6 of 26 C/SCA/4321/2017 CAV JUDGMENT has observed that it is mandatory for the Settlement Commission to record its findings with regard to the issues of full and true disclosure of particulars undisclosed income and the manner in which suhc income was derived by the assessee. 6.8. It is further submitted by Shri Soparkar, learned counsel for the petitioners that even in a case where the assessee has any doubt with respect to true and full disclosure, the Settlement Commission would have called for the further report under Section 245D(4) of the Act subject to compliance of technical requirements under Section 245D(1) and 245D(2C). 6.9. It is further submitted by Shri Soparkar, learned counsel for the petitioners that even the impugned order is not sustainable as the same is based on the basis of change of opinion without there being any new material on record. 6.10. It is further submitted by Shri Soparkar, learned counsel for the petitioners that even while observed that there is no true and full disclosure, the learned Settlement Commission has considered wrong facts. It is submitted that view taken by the Settlement Commission is wrong and even the reasons recorded are also wrong. It is submitted that though it was pointed out in the rectification application, the same has been rejected. 6.11. It is further submitted by Shri Soparkar, learned counsel for the petitioners that as such no objection was raised by the Commissioner on 12.5% cash of Rs.42.67 crores. It is further Page 7 of 26 C/SCA/4321/2017 CAV JUDGMENT submitted that so far as observations made by the Settlement Commission that the income offered at 6% is very low is concerned, it is submitted that it is question of evidence which is required to be considered at an appropriate stage viz. 245D(4) of the Act. 6.12. It is further submitted by Shri Soparkar, learned counsel for the petitioners that even allowing the expenditure is also question of evidence. Making above submissions and relying upon the following decisions, it is requested to allow the present petitions and quash and set aside the impugned orders passed by the Settlement Commission. (1). Acron Pharmaceuticals and ors vs. Union of India and ors rendered in SCA No.2694 of 2012 dated 29.08.2013. (2).Mann Pharmaceutical Ltd vs. Union of India and ors reported in 2015(3) GLH 652. (3). Victory Ceratech Pvt. Ltd v. Union of India & Ors reported in 2013 SCC Online Guj 6981. (4). Commissioner of Income Tax vs. Income Tax Settlement Commission reported in (2013) 35 Taxmann. com 56 (Delhi) (5). Principal Commissioner of Income Tax (Central) vs. Settlement Commission reported in (2016) 65 Taxmann. com 309 (Gujarat) (6). Commissioner of Central Excise vs. True Woods P. Ltd and Ors reported in 2005(85) DRJ 575 (DB). 7.0. Present petitions are vehemently opposed by Shri M R Bhatt, learned counsel for the respondent­ Revenue. Page 8 of 26 C/SCA/4321/2017 CAV JUDGMENT 7.1. It is vehemently submitted by Shri Bhatt, learned counsel for the Revenue that impugned order passed by the learned Settlement Commission is absolutely in consonance with the provisions of Section 245D(2C) of the Act, which is not required to be interfered with in exercise of powers under Article 226 of the Constitution of India. 7.2. It is further submitted by Shri Bhatt, learned counsel for the Revenue that while passing the impugned order under Section 245D(2C), the learned Settlement Commission has considered the report submitted by the Principal Commissioner of Income Tax under Section 245D(2B) of the Act as well as relevant documents and evidence so as to come to a conclusion that there is no full and true disclosure by the petitioners. 7.3. t is further submitted by Shri Bhatt, learned counsel for the Revenue that merely because earlier learned Settlement Commission passed an order under Section 245D(1) of the Act admitting the settlement application, it cannot be said that the learned Settlement Commission considered the correctness of the claim and / or issue whether there is true and full disclosure or not. It is submitted that at the stage of Section 245D(1) of the Act, the learned Tribunal is required to consider whether the Settlement application is required to be admitted or not. It is submitted that only thereafter stage of inquiry under Section 245D(2C) will come and / or issue whether there is true and full disclosure or not is required to be considered and thereafter the stage under Section 245D(4) will come. In support of his above submission, Shri Bhatt, Page 9 of 26 C/SCA/4321/2017 CAV JUDGMENT learned counsel for the Revenue has relied upon the decision of the Delhi High Court in the case of Commissioner of Central Excise vs. True Woods P. Ltd and Ors rendered in W.P(C) 21055 of 2005: 2005(85) DRJ 575 (DB). He has also relied upon the decision of the Division Bench of this Court in the case of Vishnubhai Mafatlal Patel vs. Assistant Commissioner of Income Tax reported in (2013) 31 Taxmann. Com 99 (Gujarat) as well as Arpan Associates vs. Income Tax Settlement Commission reported in (2013) 37 Taxmann. com 317 (Gujarat). 7.4. t is further submitted by Shri Bhatt, learned counsel for the Revenue that in the present case there is no allegation of violation of principles of natural justice and / or any procedural lapse. It is submitted that therefore, considering the very limited scope of the judicial review against the order passed by the Settlement Commission, the impugned order passed by the learned Settlement Commission is not required to be interfered with by this Court in exercise of powers under Article 226 of the Constitution of India. 7.5. t is further submitted by Shri Bhatt, learned counsel for the Revenue that in the present case the Settlement Commission has specifically come to the conclusion and has given finding that there is no true and correct disclosure, considering the report filed by the Principal Commissioner of Income Tax under Section 245D(2B) of the Act as well as considering the transaction with Jalaram Finvest Ltd and that the petitioner has offered only 6% p.a on the daily cash balance available in the cash flow of the 41 bank accounts which is very low compared to the prevailing interest rates in FY Page 10 of 26 C/SCA/4321/2017 CAV JUDGMENT 2007­08 to 2014­15. 7.6. So far as submission on behalf of the petitioner that Settlement Commission ought to have held that further inquiry and ought to have called for report under Section 245D(3) is concerned, it is submitted that the same is contrary to the scheme of the Settlement cases under Chapter XIX ­A of the Act. It is submitted that report under Section 245D(3)can be called for by the Settlement Commission only when either an application has not been declared invalid under sub­Section (2C) or an application referred to sub­Section (2D) which has been allowed to be further proceeded with under that Section. It is submitted that in the present case the Settlement Commission under the impugned order under Section 245D(2C) has declared the application of the petitioner as invalid and therefore, there is no question for calling for report from the Commissioner as envisaged under Section 245D(3) of the Act. Making above submissions and relying upon the findings recorded by the learned Settlement Commission, it is requested to dismiss the present petition. 8.0. Heard the learned counsels for the respective parties at length. At the outset, it is required to be noted that what is challenged in the present petition is the impugned order passed by the learned Settlement Commission under Section 245D(2C) of the Act declaring the settlement applications submitted by the petitioners as invalid on the ground that there is no true and full disclosure. Page 11 of 26 C/SCA/4321/2017 CAV JUDGMENT 9.0. Therefore, while considering the challenge to the impugned order, the scope of judicial review of the order passed by the Settlement Commission in exercise of writ jurisdiction is required to be considered. 9.1. In case of Fatechand Nursing Das vs. Settlement Commission (IT And WT) and anr reported in 176 ITR 169 the Supreme Court observed that in exercise of power of judicial review of the decision of the Settlement Commission, the Court is concerned with the legality of the procedure followed and not with the validity of the order. Judicial review is not concerned with the decision but with the decision­making process. 9.2. The limited scope of judicial review against the order of Settlement Commission is well settled proposition. In case of Jyotendrasinhji vs. S.I.Tripathi and ors reported in 201 ITR 611, the Supreme Court while holding that against the order of the Settlement Commission, writ jurisdiction of the High Court is not barred. The Supreme Court further observed that judicial review flowing from exercise of such powers would be restricted to considering whether the order of the Settlement Commission is contrary to the provision of Income Tax Act. It was observed as under: \"Be that as it may, the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee and may waive interest, penalties or prosecution, where it thinks appropriate. Indeed, it would be difficult to predicate the reasons and Page 12 of 26 C/SCA/4321/2017 CAV JUDGMENT considerations which induce the commission to make a particular order, unless of course the commission itself chooses to, give reasons for its order. Even if it gives reasons in a given case, the scope of enquiry in the appeal remains the same as indicated above viz., whether it is,contrary 956 to any of the provisions of the Act. In this context, it is relevant to note that the principle of natural justice (and alteram partem) has been incorporated in Section 245­D itself. The sole overall limitation upon tire Commission thus appears, to be that it should act in accordance with the provisions of the Act. The scope of enquiry, whether by High Court under Article 226 or by this Court under Article 136 is also the same whether the order of the Commission is contrary to any of the provisions of the Act and if so, has it prejudiced the petitioner/appellant apart from ground of bias, fraud & malice which, of course, constitute a separate and independent category. Reference in this behalf may be had to the decision of this Court in Sri Ram Durga Prasad v. Settlement Commission 176 I.T.R. 169, which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji J., speaking for the Bench comprising himself and S.R. Pandian, J. observed that in such a case this Court is \" concerned with the legality of procedure followed and not with the validity of the order.' The learned Judge added 'judicial review is concerned not with the decision but with the decision­making process.\" Reliance was placed upon the decision of the House of Lords in Chief Constable of the N.W. Police v. Evans, [1982] 1 W.L.R.1155. Thus, the appellate power under Article 136 was equated to power of judicial review, where the appeal is directed against the orders' of the Settlement Commission. For all the above reasons, we are of the opinion that the only ground upon which this Court can interfere in these appeals is that order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant The main controversy in these appeals relates to the interpretation of the settlement deeds though it is true, some contentions of law are also raised. The commission has interpreted the trust deeds in Page 13 of 26 C/SCA/4321/2017 CAV JUDGMENT a particular manner, Even if the interpretation placed by the commission the said deeds is not correct, it would not be a ground for interference in these appeals, since a wrong interpretation of a deed of trust cannot be said to be a violation of the provisions of the Income Tax Act. it is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in proceedings relating to other assessment years\". 9.3. The Hon'ble Supreme Court in the case of C.A. Abraham v. Assistant CIT reported in (2002) 255 ITR 540(2000) has held that Court's power of judicial review on the decision of the Settlement Commission was very restricted. It is observed that while exercising the jurisdiction under Article 226 of the Constitution of India, the High Court is not expected to go into facts. 9.4. Applying law laid down by the Hon'ble Supreme Court in the aforesaid decision as well as decision of this Court in the aforesaid decisions, the limited scope of judicial review, the impugned order passed by the learned Settlement Commission is required to be considered. 9.5. It is the case on behalf of the petitioner that once while passing order under Section 245D(1) of the Act, the applications of the petitioners were allowed to be proceeded with further, thereafter, it would not be open for the Settlement Commission to declare the application invalid under Section 245D (2C) of the Act on the ground that there is not true and full disclosure. It is also the case on behalf of the petitioners that while passing the order under Section 245D)(1) of the Act and allowing the application to be proceeded with further the learned Settlement Commission considered all the material on record and come to the conclusion that there is true and full disclosure and therefore, the impugned Page 14 of 26 C/SCA/4321/2017 CAV JUDGMENT order under Section 245D(2C) of the Act declaring the applications invalid on the ground that there is no true and full disclosure, is change of opinion and is not permissible. The aforesaid has no substance. At the outset, it is required to be noted that scope of inquiry at the stage of 245D(1) and inquiry at the stage of 245D(2C) are different and distinct. At this stage, decision of the Division Bench in the case of Vishnubhai Mafatlal Patel (supra) is required to be referred to and considered. In the aforesaid decision, the Division Bench of this Court has considered the scheme of the proceedings before the learned Settlement Commission. In para 6, the Division Bench has considered all relevant provisions of the Act and thereafter the Division Bench has considered the various stages provided under Section 245. In para 6 to 13, the Division Bench has observed and held as under: \"6. Having thus heard learned counsel for the parties and having perused the documents on record, we may at the outset take note of statutory provisions applicable. • Chapter XIXA which was introduced in the Act in the year 1976, pertains to settlement of cases. • Settlement Commission is constituted under Section 245B of the Act. Section 245BA lays down the jurisdiction and powers of Settlement Commission. • Section 245C pertains to application for settlement of cases. Sub­section(1) thereof permits an assessee, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income­ Page 15 of 26 C/SCA/4321/2017 CAV JUDGMENT tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have his case settled. It is further provided that application shall be disposed of in the manner hereinafter provided. • Section 245D of the Act pertains to procedure on receipt of an application under section 245C. Relevant portion of section 245D reads as under : 245D. (1) On receipt of an application under section 245C, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with and on hearing the applicant, the Settlement Commission shall, within a period of fourteen days from the date of the application, by an order in writing, reject the application or allow the application to be proceeded with : Provided that where no order has been passed, within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with. (2B) The Settlement Commission shall, ­ (i)in respect of an application which is allowed to be proceeded with under sub­section (1), within 30 days from the date on which the application was under; or (ii) in respect of an application referred to in sub­section (2A) which is deemed to have been allowed to be proceeded with under that sub­ section, on or before the 7th day of August, 2007, call for a report from the Commissioner, and the Commissioner shall furnish the report within a period of thirty days of the receipt of communication from the Settlement Page 16 of 26 C/SCA/4321/2017 CAV JUDGMENT Commission. (2C) Where a report of the commissioner called for under sub­section (2B) has been furnished within the period specified there in, the Settlement Commission may, on the basis of the report and within the period of fifteen days of the receipt of the report, by an order in writing, declare the application in question as invalid, and shall send the copy of such order to applicant and commissioner : Provided that an application shall not be declared invalid unless an opportunity has been given to the applicant of being heard: Provided further that where the commissioner has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the Commissioner. 3.The Settlement Commission, in respect of- (i) an application which has not been declared invalid under sub­section (2C) ; or (ii) an application referred to in sub­section (2D) which has been allowed to be further proceeded with under that sub­section, may call for the records from the Commissioner and after examination of such records, if the settlement commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case, and the commissioner shall furnish the report within a period of ninety days on the receipt of communication from the Settlement Commission : Page 17 of 26 C/SCA/4321/2017 CAV JUDGMENT Provided that where the commissioner does not furnish the report within the aforesaid period, the Settlement Commission may proceed to pas an order under sub­section (4) without such report. 4. After examination of the records and the report of the Commissioner, if any, received under­ (i) sub­section (2B) or sub­section (3), or (ii) the provision of sub­section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after giving an opportunity to the applicant and to the commissioner to be heard, either in person or through a representative duly authorized in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the commissioner. 7. From the perusal of the statutory provisions noted above, it can be gathered that an assessee may at any stage of the case relating to him, make an application for settlement to the Commission under sub­section(1) of section 245C. Such application has to be made in a prescribed manner and is required to contain a full and true disclosure of the income of the assessee which had not been disclosed before the Assessing Officer and the manner in which such income had been derived besides such other particulars as may be prescribed. When such application is filed, it is to be treated in the manner provided in section 245D. Sub­section(1) of section 245D provides that, on receipt of an application, the Settlement Commission shall, within seven days of receipt, issue a notice to the applicant requiring him to explain why such an application made by him be allowed to be proceeded with. On Page 18 of 26 C/SCA/4321/2017 CAV JUDGMENT hearing the applicant, the Settlement Commission shall, within fourteen days from the date of the application, by an order in writing either reject the application or allow the application to be proceeded with. Proviso to sub­section(1) of section 245D provides that where no order has been passed by the Settlement Commission as aforesaid, the application shall be deemed to have been allowed to be proceeded with. 8. Under sub­section(1) of section 245D thus, the first stage of scrutinising the application of settlement made by an assessee is envisaged. The statute does not provide for grounds on which Settlement Commission may reject such an application or allow the application to be proceeded with. There are however, sufficient indications in the statute itself what would be the purpose and nature of scrutiny of Commission at that stage. As already noted, sub­section(1) of section 245C an assessee may make an application for settlement in the prescribed manner containing true and full disclosure of income not previously disclosed before the Assessing Officer and the manner in which such income had been derived as also the additional amount of income­tax payable on such income and such other particulars as may be prescribed. At the stage of sub­section(1) of section 245D of the Act, therefore, prime scrutiny of the Commission would be whether application of the assessee is in order and in conformity with the requirements of sub­section(1) of section 245C which would include filing of an application in the prescribed manner and also making necessary disclosures as required therein. There are also additional requirements of sub­section(1) of section 245C such as payment of requisite tax and interest thereon which would have been payable under the provisions of the Act, had the income disclosed in the application been declared by the assessee in the return of income before the Assessing Officer. It would thus be well within the jurisdiction of the Settlement Commission to examine whether the application for settlement fulfills such requirements or not. Such scrutiny of­course would be summary in nature. We may recall that the Settlement Commission upon receipt of such an application within seven days Page 19 of 26 C/SCA/4321/2017 CAV JUDGMENT thereof, has to issue notice to the assessee and pass a final order either rejecting the application or allowing the application to be proceeded within fourteen days of the date of application. Proviso to sub­section(1) of section 245D makes it further clear that when no such order is passed rejecting the application within the period prescribed, the application shall be deemed to have been allowed to be proceeded with. 9. Two things therefore, emerge. Firstly, that at the stage of section 245D(1) of the Act, the Commission would have ample powers to examine whether an application of an assessee made under section 245C(1) of the Act fulfills the legal requirements particularly, those provided in section 245C(1) of the Act. Secondly, that such inquiry however, shall have to be summary in nature. The later provisions of sections 245D would also demonstrate that any decision of the Commission to allow the application to be proceeded with would only be prima facie in nature. We would elaborate this aspect a little later. At this stage, therefore, we find that under section 245D(1) of the Act, if the Commission on a summary inquiry comes to the conclusion that an application filed by the assessee under section 245C(1) of the Act does not fulfill the legal requirements, it would be within the jurisdiction of the Commission to reject the same. However, if it is allowed to be proceeded with, such decision would be tentative in nature. 10.Section 245D(2B) provides that the Settlement Commission in respect of an application, which is allowed to be proceeded with under sub­section(1), within thirty days from the date on which the application was made, call for a report from the Commissioner, and the Commissioner shall furnish the report within a period of thirty days of the receipt of communication from the Settlement Commission. Sub­ section(2C) further provides that where a report of the Commissioner under sub­section (2B) has been furnished within the the prescribed period, the Settlement Commission may on the basis of the report within fifteen days of the receipt of the report by an order in writing, declare the application as invalid. Proviso to sub­section(2C) provides that no such Page 20 of 26 C/SCA/4321/2017 CAV JUDGMENT declaration shall be made unless an opportunity is provided to the assessee of being heard. From such provisions, it thus emerges that an application which has been allowed to be proceeded or deemed to have been allowed to be proceeded under section 245D(1) of the Act, it is still open to scrutiny by the Commission at the stage of sub­section(2B) and (2C) of section 245D, this time with the assistance of the report of the Commission if so made within the prescribed time. On the basis of materials contained in such report and after giving an opportunity to the applicant of being heard, if the Commission is so satisfied, can declare the application to be invalid. This is the second stage where the Commission can scrutinise the validity of application for settlement made by the assessee under section 245C(1) of the Act. Thus even if the Commission had previously passed an order under section 245D(1) of the Act, allowing the application to be proceeded with, it would still be open for the Commission if grounds are so available, to declare such an application invalid after obtaining report from the Commissioner and giving an opportunity of being heard to the applicant. 11.If however, no such order is passed declaring an application as invalid, the Commission would in terms of provisions of section 245D of the Act, proceed to decide the same on merits. Sub­section(3) thereof envisages calling for the records from the Commissioner and examining such records and carrying out such inquiry or investigation as the Commission thinks it necessary. Sub­section(4) empowers the Commission after giving an opportunity to the applicant and to the Commissioner to be heard, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner. 12.The twin requirements for an assessee making an application for settlement under section 245C(1) of the Act, of containing full and true disclosure of income which has not been disclosed before the Assessing Officer and the manner in which such income has been derived, are thus of considerable Page 21 of 26 C/SCA/4321/2017 CAV JUDGMENT importance and would be open for the Settlement Commission to examine the fulfillment thereof at several stages of the settlement proceedings. If therefore, while at the threshold, considering the question whether such application should be allowed to be proceeded with or be rejected, the Commission examined such questions on the basis of disclosure made by the applicants and the supporting material produced along with the applications, we do not see that the Commission committed any legal error. As already noted, it was well within the jurisdiction of the Commission at the stage of sub­section(1) of section 245D of the Act to examine whether application for settlement fulfills the statutory requirements contained in sub­section(1) of section 245C of the Act. At this stage we may refer to the decision of the Supreme Court in case of Ajmera Housing Corporation and another(supra). It was a case in which the assessee had made certain disclosures in the initial application under section 245C(1) of the Act. Such disclosures were however, revised and additional income was disclosed in the revised annexures. The Apex Court held that the assessee had no right to revise an application under section 245C(1) of the Act and further that such revised annexure making further disclosure of undisclosed income alone was sufficient to establish that the initial application made by the assessee could not be entertained as it did not contain true and full disclosure of the undisclosed income and the manner in which such income had been derived. 13.It is true that the order that the Settlement Commission has to pass under section 245D(1) of the Act comes with a rigid time frame. The scrutiny or the inquiry at that stage, therefore, necessarily shall have to be summary in nature. This however, does not take away the powers of the Settlement Commission to reject the application for settlement which in its opinion does not satisfy the legal requirements and more particularly, those contained in sub­section(1) of section 245C of the Act.\" We are in complete agreement with the view taken by the Division Bench. Page 22 of 26 C/SCA/4321/2017 CAV JUDGMENT 10. Even otherwise, considering the order passed by the learned Settlement Commission passed under Section 245D(1) allowing the applications to be proceeded with further it can be seen that the learned Settlement Commission has specifically observed that \"as regards the issue of true and full disclosure of income, we are of the opinion that, at present there is no material in our possession which warrants the conclusion that true and full disclosure of income have not been made by the applicants.\" As observed herein above, while considering the application at the stage of 245D(1), Settlement Commission is required to hold a limited inquiry whether applications fulfilled statutory requirement or not and at that stage inquiry would be summary in nature. That thereafter, once the order is passed under Section 245D(1) of the Act thereafter the stage of Section 245D(2B) calling the report from the Principal Commissioner of Income Tax shall come and after considering the report of the Commissioner and after giving an opportunity to the applicant, it will be open for the Settlement Commission to declare the application invalid. Therefore, if the submission on behalf of the petitioner is accepted that once the order is passed under Section 245D(1) of the Act thereafter it will not be open for the Settlement Commission to reject the application or declare the same as invalid is accepted, in that case, the provisions of Section 245D(2B) and (2C) would be otiose and / or become nugatory. Therefore, the impugned order passed under Section 245D(2C) declaring the application as invalid is absolutely in consonance with the scheme and provision of Section 245D of the Act. Page 23 of 26 C/SCA/4321/2017 CAV JUDGMENT 11. Now, so far as submission on behalf of the petitioners that leaned Settlement Commission could have called for further explanation and / or could have held the inquiry while exercising the powers under Section 245D(3) is concerned, the same has also no substance. There is no question of further inquiry contemplated. Only in a case where the application is declared invalid under Section 245D(2C) only thereafter further proceedings are required to be taken place and inquiry is required to be conducted as provided under Section 243D(3) and thereafter final order under Section 245D(4) is required to be passed. 12. Now, so far as submission on behalf of the petitioner on merits is concerned, at the outset, it is required to be noted that the impugned order is passed by the learned Settlement Commission after considering the report submitted by the Principal Commissioner of Income Tax and thereafter after giving an opportunity to the petitioner. The cogent reasons have been given by the learned Settlement Commission and considering the material on record, a specific finding is given that there is no true and full disclosure by the applicant. The relevant discussion is para 9.1 to 9.4. The statutory mandate of Section 245 of the Act is that the application shall \"contain a full and true disclosure\" of the income which has not been derived. Fundamental requirement of the application under Section 245C is that full and true disclosure of the income has to be made along with manner in which such income is derived. 12.1. Considering the findings recorded by the learned Settlement Page 24 of 26 C/SCA/4321/2017 CAV JUDGMENT Commission in para 9.1 to 9.4, we are of the opinion that the impugned order passed by the learned Settlement Commission under Section 245D(2C) declaring the application invalid is not required to be interfered with by this Court in exercise of powers under Article 226 of the Constitution of India. Neither there is any procedural lapse nor any allegation of violation of principles of natural justice. As observed in catena of decisions, against the decision of the Settlement Commission, the High Court will not be sitting as an appellate authority like the assessment order. 13.0. Now, so far as reliance placed upon decision of Delhi High Court in the case of Commissioner of Income Tax vs. Income Tax Settlement Commission reported in (2013) 35 Taxmann. com 56 (Delhi) relied upon by Shri Soparkar, learned counsel for the petitioners is concerned, we are of the opinion that the said decision shall not be applicable to the facts of the case on hand. In the case before the Delhi High Court, the Revenue challenged the order passed by the Settlement Commission under Section 245D(1) and 245D(2C) by which, applicants were not declared invalid. Similarly, the decision of this Court in the case of Principal Commissioner of Income Tax (Central) vs. Settlement Commission reported in (2016) 65 Taxmann. com 309 (Gujarat) also shall not be applicable to the facts of the case on hand, as before the Division Bench considering the report submitted by the Commissioner thereafter Settlement Commission did not reject the application as invalid and therefore, the Division Bench has observed and held that findings of the Settlement Commission on fulfillment of requirements of a valid offer in orders passed under Section Page 25 of 26 C/SCA/4321/2017 CAV JUDGMENT 245D(1) and 245D(2C) are merely tentative and it will be open for the Settlement Commission to examine these aspects before passing final order under sub­Section(4) of Section 245D. 14.0. At this stage, it is required to be noted that during the pendency of the present petitions and on declaring the Settlement application invalid, thereafter the assessment proceedings have taken place and same have been finalized, against which, the assessee is before the CIT(A) by way of appeal. 14.0. In view of the above and for the reasons stated above and the very limited scope of judicial review of the order passed by the Settlement Commission recorded herein above and considering the impugned order passed by the learned Settlement Commission declaring the Settlement Application as invalid and for the reasons stated above challenge to the impugned order passed under Section 245D(2) fails and present petitions deserve to be dismissed and are accordingly dismissed. Rule discharged. No costs. 15. In view of dismissal of Special Civil Application No. 4321 of 2017, Civil Application No.1 of 2017 stands dismissed. sd.­ (M.R. SHAH, J) sd/­ (B.N. KARIA, J) KAUSHIK J. RATHOD Page 26 of 26 "