Settlement Commission – Section 245C – Settlement of cases – Condition precedent – Full and true disclosure of undisclosed income – Income offered in application for settlement – Additional income offered during proceedings before Settlement Commission – No new source of income – Offer in order to avoid controversy – Acceptance of offer and passing of order by Settlement Commission – Justified

15. Principal CIT vs.
Shankarlal Nebhumal Uttamchandani [2020] 425 ITR 235 (Guj) Date of order: 7^th January,
2020 A.Ys.: 2012-13 to 2016-17

Settlement
Commission – Section 245C – Settlement of cases – Condition precedent – Full
and true disclosure of undisclosed income – Income offered in application for
settlement – Additional income offered during proceedings before Settlement
Commission – No new source of income – Offer in order to avoid controversy –
Acceptance of offer and passing of order by Settlement Commission – Justified

The
assessee was carrying on the business of purchase and sale of land and trading
in textile items of art silk clothes. A survey u/s 133A was carried out on 3^rd
July, 2015 at the office premises of the assessee. During the course of the
survey operation, various loose documents were found and impounded by the
Department. While assessment proceedings were pending, the assessee filed a
settlement application u/s 245(1) before the Settlement Commission offering
additional income for the A.Ys. 2012-13 to 2016-17. The assessee filed its
statement of facts before the Commission, preparing a statement of sources and
application of unaccounted income to demonstrate that investment, application
and rotation of unaccounted funds was covered by the overall source of
unaccounted funds generated and offered to tax. The assessee disclosed
additional income during the course of the hearing u/s 245D(4) aggregating to
Rs. 12 crores for the five years. The Commission accepted the disclosures made
by the assessee after considering the detailed item-wise explanation submitted
by the assessee and accordingly the case of the assessee was settled on the
terms and conditions stated in the order.

The
Department filed a writ petition and challenged the order on the ground that
there was no full and true disclosure of undisclosed income. The Gujarat High
Court dismissed the writ petition and held as under:

‘i)  The disclosure made during the course of the
proceedings before the Commission was not a new disclosure. The Settlement
Commission was right in considering the revised offer made by the assessee
during the course of the proceedings in the spirit of settlement.

ii)  On a perusal of the order passed by the
Commission, it was apparent that the application submitted by the assessee had
been dealt with in accordance with the provisions of sections 245C and 245D of
the Act. The Commission had observed the procedure while exercising powers u/s
245D(4) by examining thoroughly the report submitted by the Department under
rule 9 of the Income-tax Settlement Commission (Procedure) Rules, 1997. The
Commission had also provided proper opportunity of hearing to the respective
parties and therefore the amount which had been determined by the Commission
was just and proper.

iii)         The Commission was right in considering the revised offer
made by the respondent during the course of the proceedings in the nature of
spirit of settlement. We are therefore of the opinion that the order passed by
the Commission does not call for any interference.’