AJMERA HOUSING CORPORATION & ANR. ETC. ETC. vs. COMMISSIONER OF INCOME TAX

CIVIL APPEAL No. 6827/2010Supreme Court[2010] 10 S.C.R. 18320 August 2010Bench: 2 JudgesAuthor: D.K. JAIN, H.L. DATTU34 pages
AI SummaryDismissed

What were the facts?

The assessee, Ajmera Housing Corporation & Anr., filed an application under Section 245C(1) of the Income Tax Act, 1961, for settlement before the Income Tax Settlement Commission. Initially, they disclosed an additional income of Rs. 1,94,33,580 for assessment years 1989-90 to 1993-94. The Commissioner of Income Tax objected, citing a lack of full and true disclosure. The assessee subsequently filed a revised application disclosing an additional Rs. 11.41 crores. The Settlement Commission decided to proceed and, during hearings, the assessee made further disclosures. Ultimately, the Settlement Commission passed an order under Section 245D(4), determining the total income at Rs. 42.58 crores, imposed a 'token' penalty of Rs. 50 lakhs, and granted immunity. The Commissioner filed a writ petition, which the High Court allowed, setting aside the Settlement Commission's order and remanding the matter for fresh consideration. The Supreme Court is hearing appeals against this High Court order.

What did the Supreme Court hold?

The Supreme Court held that the disclosure of 'full and true' particulars of undisclosed income and 'the manner' in which it was derived, along with the computation of tax payable, are indeed mandatory pre-requisites for a valid application under Section 245C(1). The Settlement Commission lacks jurisdiction to pass any order unless it records its satisfaction on these aspects. The Court further held that even after deciding to proceed with an application, the Settlement Commission is not divested of its power to examine the completeness and truthfulness of the disclosure. Reports from the Commissioner and other documents are relevant for this determination. The scheme of Chapter XIX-A does not contemplate revision of an application filed under Section 245C(1), as this would be tantamount to making a fresh application and would render Section 245C(3) otiose. Therefore, the determination of income must be based on the income disclosed in the original application. The Court found no merit in the assessee's appeals and dismissed them, upholding the High Court's order of remand.

What were the issues?

1. Whether the disclosure of 'full and true' particulars of undisclosed income and 'the manner' in which such income was derived, along with the computation of tax payable thereon, are mandatory pre-requisites for a valid application under Section 245C(1) of the Income Tax Act, 1961, for settlement, and whether the Settlement Commission has jurisdiction to proceed without recording its satisfaction on these aspects? The assessee contended that the Settlement Commission had the discretion to proceed and that the High Court was incorrect in setting aside its order. The revenue argued that the initial application lacked full and true disclosure, and subsequent revisions were not permissible under the Act, thus vitiating the entire process. 2. Whether the Settlement Commission, after deciding to proceed with an application under Section 245C(1), is denuded of its power to examine the completeness and truthfulness of the disclosure made by the assessee? The assessee argued that once the Commission decided to proceed, its order should be final. The revenue contended that the Commission retains the power to examine the disclosure, especially in light of reports from the Commissioner and other evidence, and that the scheme of Chapter XIX-A does not permit revisions of disclosed income.

Which sections of the Income-tax Act were involved?

Section 245C(1),Section 245D(4),Section 245C(3)

AI-generated summary — verify with the full judgment below

[2010] 10 S.C.R. 183 AJMERA HOUSING CORPORATION & ANR. ETC. ETC. A v. COMMISSIONER OF INCOME TAX (Civil Appeal Nos. 6827-6848 of 2010) AUGUST 20, 2010 [D.K. JAIN AND H.L. DATTU, JJ.] Income Tax Act, 1961 - s 245C- Settlement of cases - Pre-requisites for - Held: Section 245C mandates disclosure B of 'full and true' particulars of undisclosed income and 'the C manner' in which such income had been derived - Amount of income tax payable on such undisclosed income is to be computed and mentioned in the application - Income Tax Settlement Commission has the juri iction to pass any order on the matter covered by the application only when it records D its satisfaction on the said aspect - There is no stipulation for ·revision of application filed uls. 245C(1) and thus, determination of income by Settlement Commission has necessarily to be with reference to the income disclosed in the application filed uls. 245C in the prescribed form - On E facts, Income Tax Settlement Commission decided to proceed with the application of the assessee u/s. 245C(1 ), disclosing additional incomes at different stages of proceedings and thereafter, passed final order uls. 2450(4)

The order continues below.

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