Income Tax Act, 1961 – s. 245H – Power of Settlement Commission to grant immunity from prosecution and penalty – Exercise of – Assessee placed material and particulars before the Commission as to the manner in which income pertaining to certain activities was derived and has sought to offer such additional income to tax – On basis thereof, the Settlement Commission proceeded to grant immunity from prosecution and penalty as contemplated u/s. 245H – Correctness: Held: Settlement Commission rightly considered the relevant facts and material and, decided to grant immunity to the assessee from prosecution and penalty – Settlement Commission applied its mind to the aspect of whether there was wilful concealment of income by the assessee – Having noted that non-disclosure was on account of RBI guidelines, the Commission decided to grant immunity to the assessee from prosecution and penalty – Single Judge of the High Court erred in holding that the reasoning of the Settlement Commission was vague, unsound and contrary to established principles – Division Bench also not justified in affirming the said view – Commission adequately applied its mind to the circumstances of the case, as well as to the relevant law and accordingly exercised its discretion to proceed with the application for settlement and grant immunity to the assessee from penalty and prosecution – Thus, the order of the Commission did not suffer from such infirmity as would warrant interference by the High Court, by passing an order of remand – Judgment passed by the High Court is set aside and that of the Settlement Commission is restored. [Paras 7.4, 7.5, 9, and 14] Income Tax Act, 1961 – s. 245H – Power of Settlement Commission to grant immunity from prosecution and penalty – Exercise of – Necessary ingredients:
Held: Under s. 245H(1), if the Settlement Commission is satisfied that assessee has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of its income and the manner in which such income has been derived, it may grant immunity from prosecution or from the imposition of penalty – Even if the pre-conditions prescribed u/s. 245C are to be read into s. 245H, it cannot be said that in every case, the material “disclosed” by the assessee before the Commission must be something apart from what was discovered by the Assessing Officer – What is relevant that the assessee offered to tax, income, in addition to the income recorded in the return of income – s. 245C r/w s. 245H only contemplates full and true disclosure of income to be made before the Settlement Commission, regardless of the disclosures or discoveries made before/by the Assessing Officer. [Paras 6 and 7.1]
Income Tax Act, 1961 – s. 245H – Power of Settlement Commission to grant immunity from prosecution and penalty – Nature of: Held: Power vested with the Settlement Commission u/s. 245H is a discretionary power to be exercised if the Settlement Commission is satisfied that an applicant has complied with the preconditions specified therein – Any judicial, quasi-judicial or administrative authority must while exercising discretion, direct itself properly in law and consider all the facts and material that it is bound to consider. [Para 7.3] Income Tax Act, 1961 – s. 245H – Settlement Commission’s order – Judicial Review – Scope of:
Held: The scope is very narrow – It is only when the order contravenes provisions of the Act or has caused prejudice to the opposite party – Interference may also be open on the grounds of fraud, bias or malice. [Para 10]
Income Tax Act, 1961 – s. 245H – Proceedings of the Settlement Commission – Legislative intent:
Held: Is to avoid frequent interference with the orders or proceedings of the Settlement Commission – Order or proceeding of the Settlement Commission can be judicially reviewed on limited grounds, and not to be scrutinized as an appellate court – Unsettling reasoned orders of the Commission may erode the confidence of the bonafide assessees, leading to multiplicity of litigation where settlement is possible. [Para 13] LIST OF CITATIONS AND OTHER REFERENCES
Ajmera Housing Corporation vs. Commissioner of Income Tax (2010)
8 SCC 739: [2010] 10 SCR 183; Commissioner of Income Tax vs. B.N. Bhattacharjee (1979) 4 SCC 121: [1979] 3 SCR 1133; Commissioner of Income Tax vs. Express Newspapers Ltd. (1994) 2 SCC 374: [1994] 1 SCR 64; Ashirvad Enterprises vs. State of Bihar (2004) 3 SCC 624: [2004] 3 SCR 300; Jyotendrasinhji vs. S.I. Tripathi 1993 Supp (3) SCC 389: [1993]
2 SCR 938 – referred to.
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