Settlement Commission: S/s. 245C and 245D: Where order passed by Commission u/s. 245D(2C) was not focussed on issues and contentions raised by petitioners and by revenue, same was cryptic and was set aside:

The petitioners had filed two applications u/s. 245C of the Income-tax Act, 1961 and disclosed the entire amount of unaccounted turnover which became subject-matter of orders passed by the Settlement Commission under the Excise Act. Applications were allowed to be proceeded with and a report u/s. 245D(2B) was sought from the concerned Commissioner. The Settlement Commission, however, held that applicants was indulged in suppression of income even before Commission and rejected the application filed by the petitioners. Petitioners filed writ petitions and submitted that the two petitioners were subjected to search under the Central Excise Act, 1944 and thereafter by the Income Tax Department and the Settlement Commission was swayed by factors which even the Commissioner did not consider were relevant. The Delhi High Court allowed the writ petitions and held as under:

 “i) Facts and the dispute inter se parties have not been reflected upon and adverted to in the impugned order. It is recorded that the order under challenge is cryptic and is not focused on the issues and contentions, which were raised by the petitioners and by the Commissioner.

 ii) The Settlement Commissioner earlier had directed and decided to proceed with the applications on 14-01-2013 in the two cases. They had set out points, which had to be adjudicated and decided. These included turnover of the two applicants for the assessment years covered, determination of the issues arising out of the stock, including valuation by the Department, allowability of excise duty for the Assessment year 2009-10 and determination of year-wise additional income. All these factors and facts have been shunned and ignored. The Settlement Commission has rejected the applications for all assessment years, without referring to facts and issues relating to each year.

 iii) Once an application is filed, then the said application must be dealt with in accordance with law, i.e., refer to the contentions of the petitioners, the contention of the revenue and then an objective, considered and a reasoned decision has to be taken. This is only when the stand of the two sides are fully noticed and considered before an order u/s. 245D(2C) is passed. The impugned orders do not meet the said legal requirements.

 iv) The petitioners must come clean and be honest and admit their faults and cannot but declare their true and full undisclosed income. However, their plea and explanation that their declarations are genuine and truthful, cannot be rejected without a legitimate and fair consideration. The two searches were conducted in earlier years and not in the period relevant to the assessment year 2012-13. The Settlement Commission’s order has not referred to any specific issues and documents or made references to the contentions of the Commissioner. Facts stated are incorrect or that Commissioner had not objected to the stock reduction is not adverted to. Maybe, the applications deserve dismissal for the said reasons but full factual position should be noted, before opinion is formed whether there has been full and true disclosure. There has been error and failure in the decision making process and the failure vitiates the order passed.

v) In view of the aforesaid discussion, the impugned order dated 01-03-2013 in the case of the two petitioners is set aside and pass an order of remand.”