Non Fulfilment of Conditions Prescribed in Provisions of Section 245C(1) of Income Tax Act: Kerala HC Dismisses Writ Petition

In a single judge verdict of the Kerala High Court rejected the assessee’s writ petition as the conditions prescribed in the provisions of Section 245C(1) of Income Tax Act have not been fulfilled.

Notice for assessment under Section 153-A of the Income Tax Act was issued to the petitioner on 18.03.2020 for the Assessment Years 2015-16 to 2019-20. The assessment for all the years was completed under Section 143(3) of the Income Tax Act read with 153-A of the Income Tax Act vide order dated 28.09.2021 with ‘nil’ demand. Though the decision was taken to discontinue the Income Tax Settlement Commission with effect from 01.02.2021, the 2nd respondent issued notification No.F.No.299/22/2021-Director (Inv. III)/174 dated 28.09.2021 under Section 119(2)(b) of the Income Tax Act extending the time limit for filing of the application before the Interim Board for Settlement till 30.09.2021 under conditions prescribed therein. During the search and seizure under Section 132 of Income Tax Act, in the case of the petitioner, RJ Williams’ firm, incriminating material evidencing unaccounted sales by the under-invoicing of sales receipts and collecting a part in cash was found.

Assessee contended that the petitioner had filed an objection to the report, and it was not considered by the Settlement Commission..

Revenue contended that the assessee had not adduced any reason or basis for apportioning the undisclosed income in the hands of the petitioner and the Company M/s Hailstone Innovations Private Limited during the hearing, and no explanation came forward to explain the difference between the unaccounted sales calculated by the Principal Commissioner of Income Tax on the basis of the seized material and the unaccounted sale computed by the petitioner.

In a single judge verdict the court held that the assessee has not approached the Settlement Commission, with his application under Section 245-C of the Income Tax Act, with clean hands and has failed to disclose true and correct facts and had not offered full and true particulars of his income. Section 245C(1) of the Income Tax Act provides disclosure of full and true particulars of the income and the manner in which that income had been derived and apportioned in order to get the settlement. As the conditions prescribed in the provisions of Section 245C(1) of the Income Tax Act have not been fulfilled in the case, the application was rejected by the impugned order.

The Court further observed that it had  gone through the reply, but this Court has been unable to discern the basis for apportionment of unaccounted sales, unaccounted expenditures and unaccounted income between the petitioner and the Company.

The assessee was represented by Anil D Nair and Telma Raju. Revenue was represented by Navaneeth. N Nath and Sushie B Varghese.

To Read the full text of the Order CLICK HERE

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