Settlement Commission ought to reject application on failure of Assessee to make full and true disclosure of Undisclosed Income: Madras HC [Read Order]

The Madras High Court held that the Settlement Commission ought to have rejected the application on the failure of the assessee to make full and true disclosure of undisclosed income.

The petitioner, Income Tax Department conducted search and seizure operation under Section 132(4) of the Income Tax Act at the registered office premises of the respondent-assessee, M/s.Rasi Seeds (P) Ltd. and residential premises of the Directors of the assessee. During the search, a huge amount of tax evasion by the respondent Company was found.

After a search, Notice u/s 153A was issued to the respondent company for filing Return of Income for Assessment Year 2007-08 to 2012-13 and the respondent company filed ROI. Thereafter, the respondent company filed Application u/s 245C for Settlement before the Settlement Commission.

The petitioner stated that the respondent company has not made true and full disclosure of their income in the application as mandated under Section 245C(1) of the Act. This was clearly brought out in different reports including Rule 9 Report submitted before the Settlement Commission from time to time in the course of proceedings.

Further, the petitioner added that the Settlement Commission has not considered the admission made by the Directors of the respondent in their sworn statement made under Section 132(4), though the same was specifically brought out in the Rule 9 Report. However, the Settlement Commission by the impugned order had directed the respondent to disclose further additional income to the tune of Rs.7.70 crores under different heads including further disallowance under Section 14A for Rs.57.20 lakhs, and granted immunity from prosecution and penalty.

The single-judge bench of Justice S.M.Subramaniam held that the respondent has not approached the Settlement Commission with true and full disclosure of his income and during the course of proceedings, offered additional income and the findings of the Settlement Commission would also confirm the same, the said offerings of the additional income would be sufficient for the purpose of arriving a conclusion that the first respondent filed an application under Section 245C of the Act without disclosing true and full income.

Therefore, the court while quashing the order said that the Settlement Commission ought to have rejected the application, at the stage when it noticed that the respondent has not disclosed true and full facts which were not done. Thus, the Settlement Commission has committed an error apparent and allowed the application filed by the respondent which is in violation of the provisions of the Act.

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