Settlement of cases – Construction business – Receipt of on money – Additional disclosure of undisclosed income for one assessment year during settlement proceedings – Does not amount to untrue disclosure for other assessment years under settlement proceedings – Commission accepting disclosures made by assessees and passing orders on their settlement applications – Order of Settlement Commission not erroneous

48. Principal CIT vs. Income-Tax Settlement Commission
and another; 409 ITR 495 (Guj) Date of order: 13^th June, 2017 A. Ys. 2012-13 to 2014-15 Sections 245C and 245D of ITA 1961 and Article 226 of
Constitution of India

Settlement of cases – Construction business – Receipt of
on money – Additional disclosure of undisclosed income for one assessment year
during settlement proceedings – Does not amount to untrue disclosure for other
assessment years under settlement proceedings – Commission accepting
disclosures made by assessees and passing orders on their settlement
applications – Order of Settlement Commission not erroneous

For the A. Ys. 2012-13 to 2014-15 the assesse filed applications before
the Settlement Commission for settlement of disputes that arose out of pending
assessments. In the settlement applications the assessees made additional
disclosure of undisclosed income on account of receipt of on money through sale
of constructed properties. The assessees projected 15 % profit on the turnover.
On the basis of the turnover of unaccounted receipts disclosed and 15 % profit
rate claimed by them, the assessees made disclosure of additional income in
their applications for settlements. The Department contended before the
Settlement Commission that further inquiry was necessary and that the rate of
15 % profit was on the lower side as in similar business the rate of return was
much higher. The Settlement Commission accepted the disclosure of the turnover
made by the assesse as the Department did not bring any contrary material on
record in that respect and held that the 15 % rate of profit out of the
turnover was reasonable. The Settlement Commission further recorded that during
the course of the proceedings, each of the assessees made a voluntary
disclosure of an additional sum of Rs. 2 crore, i.e., a sum of Rs. 50 lakh each
for the A. Y. 2014-15 “in a spirit of settlement and to put a quietus to the
issue”. Accordingly, the Settlement Commission passed an order u/s. 245D on
21/01/2016.

The Revenue filed a writ petition and challenged the validity of the
order. The Gujarat High Court dismissed the writ petition and held as under:

“i)   It is true that before the
Settlement Commission, the assesses indicated that the additional disclosure of
Rs. 50 lakh each may be accounted for the A. Y. 2014-15. However, we cannot
lose sight of the fact that such disclosures were made in the spirit of
settlement and to put an end to the controversy. The assessees therefore cannot
be pinned down to effect such disclosures in the A. Y. 2014-15 alone.

ii)   We cannot fragment a larger
picture and telescope the additional disclosures for a particular year and
taking into account the comparable figures for that year decide whether such
disclosures would shake the initial disclosures and to hold that the initial
disclosures were untrue projecting the additional disclosures for all the
assessment years, the assessees had sought for settlement.

iii)  We find the Commission
committed no error in accepting them (additional disclosures) and in proceeding
to pass final order on such settlement applications. In the result, the
petitions are dismissed.”