Additional Income can be disclosed before settlement Commission : HC

JUDGMENT

Bhargav D. Karia, J. – Having regard to the controversy involved in the present case which lies in a very narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for final hearing.

2. The petitioner has filed, in all, five petitions for different assessment years i.e. 2012-2013 to 2016-2017 challenging the common order dated 25^th July, 2018 passed by the Settlement Commission (‘the Commission’ for short) on the ground that the respondent did not make true and full disclosure and major portion of the income required to be disclosed for assessment was suppressed by the respondent assessee. Therefore, all the petitions are heard analogously and are disposed of by this common judgment.

3. For the sake of convenience, facts are recorded from Special Civil Application No. 13251/2019. Respondent herein has been carrying on the business of purchase and sale of land and trading in textile items of art silk clothes. A survey under section 133A of the Income-tax Act, 1961 (“the Act of 1961”) was carried out on 3^rd July, 2015 at the office premises of the respondent.

3.1 During the course of survey operation, various loose documents were found and impounded by the department.

In the statement recorded under section 131 of the Act of 1961 on 3^rd July, 2015, respondent assessee offered additional income of Rs. 2,77,35,875/- and Rs. 4,51,20,308/- for the assessment years 2014-2015 and 2015-2016 respectively, aggregating to Rs. 7,28,56,183/-which was in relation to long term capital gain claimed as exempt under section 10(38) of the Act on the sale of shares of M/s. Surbhi Chemicals Ltd.

3.2 The respondent assessee filed Settlement Application under section 245C(1) of the Act of 1961 before the Commission on 1^st January, 2017 offering additional income for the assessment years as under :

3.3 Respondent-assessee filed its statement of fact before the Commission, preparing a statement of sources and application of unaccounted income to demonstrate that investment/application and rotation of unaccounted funds is covered by overall source of unaccounted funds generated and offered to tax. It was submitted that applications thereof being explained by sources offered, the same were not separately liable to be treated as income. The respondent-assessee submitted that during the course of survey, the books of account of the respondent was under finalisation hence provisional balance-sheet as available in computer system was submitted to Survey Party. The respondent-assessee also submitted that some accounting entries were pending as on date of survey which were entered in the post survey and there is no major differences in the provisional balance sheet and one which is filed along with return of income.

3.4 The petitioner filed report as per Rule 9 of the Income-tax Settlement Commission (Procedure) Rules 1997 (for short “the Rules”) in the course of hearing before Commission. It was submitted in the report that on examination of impounded documents, it is found that the quantum of additional income disclosed by the assessee before the Commission was not true and full disclosure and accordingly year-wise unaccounted income, investment, expenditure, advances, unsecured loans of the respondent assessee were added by the investigation wing based on the detailed examination of impounded material/document/facts/statement of respondent assessee recorded in the course of survey and post-survey proceedings worked out at Rs. 113,25,78,426/- for the A.Y. 2012-2013 to 2016-2017 as under :

3.5 It was therefore, submitted before the Commission that respondent assessee did not make true and full disclosure of Rs. 79,16,78,426/- in the statement of income filed before the Commission.

3.6 The respondent submitted reply to Rule 9 report giving explanation to each of the points therein. Further, the respondent assessee disclosed additional income during the course of hearing under section 245D(4) of the Act of 1961 aggregating to Rs. 12,00,00,000/- for the five years from assessment years 2012-2013 to 2016-2017.

3.7 The Commission by impugned order 25^th July, 2018 accepted the disclosures made by respondent assessee after considering the detailed item-wise explanation submitted by respondent assessee in respect of income of Rs. 113 Crore suggested by the petitioner and arrived at the conclusion that all the issues raised by the petitioner are covered in the additional income offered in the statement of fact and additional income further disclosed by the respondent assessee amounting to Rs. 12 Crore and accordingly the case of the respondent assessee was settled on the terms and conditions stated in the impugned order in paragraph no. 14 to 18.

4. Heard learned advocate Mr. Nikunt Raval appearing for learned advocate Mrs. Kalpana Raval for the petitioner and learned Senior Counsel Mr. S.N. Sopakar with learned advocate Mr. Bandish Soparkar for the respondent-assessee.

5. Learned advocate for the petitioner submitted that after making initial disclosure of Rs. 22.09 Crore, in the statement of fact filed before the Commission, the respondent assessee made further substantial disclosure of Rs. 12 Crore which is more than 50% of the original declaration. It was therefore, submitted that initial disclosure made by respondent assessee before the Commission was not true and full disclosure.

5.1 Learned counsel for the petitioner placed reliance upon the decision of Supreme Court in case of Ajmera Housing Corpn. v. CIT [2010] 326 ITR 642 (SC) dated 20^th August, 2010. It was submitted that it is not open for the respondent-assessee to revise its disclosure before the Commission as observed by the Apex Court in the aforesaid decision that in an application for settlement, the assessee is required to disclose a full and true disclosure of the income which has not been disclosed before the Assessing Officer and the manner in which such income has been derived so as to pay the additional amount of tax payable on such income.

5.2 Learned advocate for the petitioner further placed reliance upon the decision of this Court in case of Pr. CIT v. Shree Nilkanth Developers [2016] dated 23^rd August, 2016 in which relying upon the decision of Supreme Court in case of Ajmera Housing Corpn. (supra), order of Commission was set aside as it was found in that case that the assessee had at belated stage, made fresh and further disclosures which are substantial in nature. It was therefore, submitted that additional disclosures made by the respondent-assessee before the Commission under section 245C(1) of the Act of 1961 could not have been entertained as it did not contain “true and full disclosures” of its undisclosed income and the “manner” in which such income had been derived.

5.3 Learned advocate therefore, submitted that Commission has arrived at the conclusion contrary to law inasmuch as the amount of additional income offered before the Commission were insufficient to explain the total detected unaccounted income, investment, expenditure, advances etc. It was therefore, submitted that in view of the fact that there was no true and proper disclosure by respondent assessee, the Commission could not have accepted the explanation offered by the respondent assessee in absence of any evidence or material provided by the respondent assessee as against the unaccounted income detected during the course of survey.

5.4 It was therefore, submitted that the impugned order passed by the Commission is required to be quashed and set aside.

6. Per contra, learned Senior Advocate Mr. S.N. Soparkar assisted by learned advocate Mr. Bandish Soparkar for the respondent assessee submitted that the facts of the present case are different than the facts before the Supreme Court in case of Ajmera Housing Corpn. (supra). Reliance was placed upon the decision of Apex Court in case of Jyotendrasinhji v. S.T. Tripathi [1993] 201 ITR 611 (SC) dated 2^nd April, 1993 to submit that this Court is required to consider the legality of the procedure followed by the Commission and not the validity of the order. He relied upon the following observations made by the Apex Court in the said decision :

“15. It is true that the finality clause contained in section 245-I does not and cannot bar the jurisdiction of the High Court under article 226 or the jurisdiction of this court under article 32 or under article 136, as the case may be. But that does not mean that the jurisdiction of this Court in the appeal preferred directly in this court is any different than what it would be if the assessee had first approached the High Court under Article 226 and then come up in appeal to this court under article 136. A party does not and cannot gain any advantage by approaching this Court directly under article 136, instead of approaching the High Court under article 226. This is not a limitation inherent in Article 136; it is a limitation which this court imposes on itself having regard to the nature of the function performed by the Commission and keeping in view the principles of judicial review. May be, there is also some force in what Dr. Gauri Shankar says viz., that the order of commission is in the nature of a package deal and that it may not be possible, ordinarily speaking, to dissect its order and that the assessee should not be permitted to accept what is favourable to him and reject what is not. According to learned counsel, the Commission is not even required or obligated to pass a reasoned order. Be that as it may, the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee and may waive interest, penalties or prosecution, where it thinks appropriate. Indeed, it would be difficult to predicate the reasons and considerations which induce the commission to make a particular order, unless of course the commission itself chooses to, give reasons for its order. Even if it gives reasons in a given case, the scope of enquiry in the appeal remains the same as indicated above viz., whether it is, contrary to any of the provisions of the Act. In this context, it is relevant to note that the principle of natural justice (audi alteram parterri) has been incorporated in section 245-D itself. The sole overall limitation upon the Commission thus appears, to be that it should act in accordance with the provisions of the Act. The scope of enquiry, whether by High Court under article 226 or by this Court under article 136 is also the same-whether the order of the Commission is contrary to any of the provisions of the Act and if so, apart from ground of bias, fraud & malice which, of course, constitute a separate an independent category has it prejudiced the petitioner/appellant. Reference in this behalf may be had to the decision of this Court in RB Shreeram Durga Prasad & Fatechand Nursing Das v. Settlement Commission [1989] 176 I.T.R. 169, which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji J., speaking for the Bench comprising himself and S.R. Pandian, J. observed that in such a case this Court is “concerned with the legality of procedure followed and not with the validity of the order.’ The learned Judge added ‘judicial review is concerned not with the decision but with the decision-making process.” Reliance was placed upon the decision of the House of Lords in Chief Constable of the N.W. Police v. Evans [1982] 1 W.L.R.1155. Thus, the appellate power under article 136 was equated to power of judicial review, where the appeal is directed against the orders’ of the Settlement Commission. For all the above reasons, we are of the opinion that the only ground upon which this Court can interfere in these appeals is that order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant The main controversy in these appeals relates to the interpretation of the settlement deeds though it is true, some contentions of law are also raised. The commission has interpreted the trust deeds in a particular manner. Even if the interpretation placed by the commission on the said deeds is not correct, it would not be a ground for interference in these appeals, since a wrong interpretation of a deed of trust cannot be said to be a violation of the provisions of the Income-tax Act. it is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in proceedings relating to other assessment years.”

6.1 Learned Senior Counsel for the respondent assessee further relied upon the decision of this Court in case of CIT v. Income Tax Settlement Commission [2016] [2017] 390 ITR 306 (Guj.) dated 12^th July, 2016, wherein this Court has held as under :

“10. It can thus be seen that on the issue of true and full disclosure, stage at which such disclosures should be made and the effect of making further disclosures by revising initial offers of settlement was examined by the Supreme Court in the case of Ajmera Housing Corporation (supra). The manner in which the Supreme Court has dealt with such issue and has made elaborate and conclusive observations, it cannot be stated contrary to what was argued before us that the above-noted portion of the judgment should not be seen as ration of the judgment of the Supreme Court. Ratio of this judgment is that the true and full disclosure of the income must be made at the initial stage and large scale remissions in such disclosure itself would show that the initial disclosures were not true.

11. However, the facts of the present case are somewhat different. The applicants had initially offered on money rotation of Rs. 25 lakhs, Rs. 21 lakhs and Rs. 30 lakhs respectively and income at the rate of 12.5 per cent thereof by way of interest earned which during the course of assessment proceedings was revised to Rs. 50 lakhs, Rs. 50 lakhs and Rs. 75 lakhs respectively with rate of return at 15 per cent. With respect to revised rate of return, even counsel for the Revenue would not be in a position to argue that the same would form part of declaration of two incomes since whether rate of return should be estimated to 12.5 per cent or 15 per cent would be would be substantially in the realm of estimation of not profit. He would however, strenuously contend that revised declaration of on money should be enough to establish that initial disclosures made by the assessees were not full or true disclosures of such income. In this context, we had called for the letter written by the applicants making such revised offers. Copies of such letters dated 6.2.2014 written by the partners of the firm are produced on record. In such letters, it was conveyed that the applicants had filed a petition for settlement in which offered a sum of Rs. 7,75,000/- at the rate of 12 per cent on peak balance of funds deployed in money lending activity. It was further stated that the applicant during the course of hearing under section 245D(4), in the spirit of settlement, agreed to further additional income of Rs. 39,12,667/- which is computed on the basis stated hereinbelow:

12. Similar declarations were made in the case of other applicants as well. It can thus be seen that these revised offers of tax was in the nature of spirit of settlement and cannot be seen in strict sense of abandoning initial disclosures and replacing the same by fresh disclosures on the basis of such revised offers. What in essence the assessee did was to raise their offers marginally to put an end to the entire dispute through settlement or in the spirit of settlement as is referred to in the said letter. This cannot be seen as accepting that original or initial declaration was not true and full disclosure thereby paving way for the application of judgment in the case of Ajmera Housing Corporation (supra).”

6.2 Reliance was also placed on the decision of the Court in case of CIT v. Income Tax Settlement Commission [2016] (Guj.) dated 2^nd September, 2016, wherein it is held as under :

“8. In view of the above facts and circumstances, more particularly, in view of the fact that this Court is dealing with and examining the order of said commission in exercise of writ jurisdiction keeping in view the scope of judicial review and keeping in view the exercise of extra ordinary jurisdiction, this Court is of the opinion that from the overall background of the fact without said Commission has thoroughly examined minutely all the details related to the issue in question and arrived at a particular finding which this Court found not to substitute the same. In the background of these facts and circumstances, resultantly, the petition deserves to be dismissed.”

6.3 Reliance was also placed on the decision of this Court in case of Pr. CIT v. Income Tax Settlement Commission [2017] [2018] 409 ITR 495 (Guj.) dated 13^th June, 2017, wherein it is held as under :

“14. It is true that before the Settlement Commission, the assessees indicated that the additional disclosure of Rs. 50 lakhs each may be accounted for the assessment year 2014-15. However, we cannot lose sight of the fact that such disclosures were, as noted above, in the spirit of settlement and to put an end to the controversy. The assessees therefore cannot be pinned down to the effect of such disclosures in the year 2014-15 alone. 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 as to apply the ratio laid down by the Supreme Court in case of Ajmera Housing (supra) and to hold that the initial disclosures themselves were untrue projecting the additional disclosures for all years the assessees had sought settlement, we find the Commission committed no error in accepting them and in proceeding to pass final order on such settlement applications.”

6.4 Reliance was also placed on the recent decision of this Court in case of Pr. CIT v. Income Tax Settlement Commission [2019] /[2020] ,wherein it is held as under :

“50. In the above backdrop, the decision of the Supreme Court in the case of Ajmera Housing Corporation v. Commissioner of Income-tax (supra), on which reliance has been placed by the learned counsel for the petitioner would, in the opinion of this court, have no applicability to the facts of the present case, inasmuch as, in the facts of the said case, the assessee had filed application under section 245C before the Settlement Commission disclosing an amount of Rs. 1,94,33,580/- for the relevant assessment year in addition to the income declared in the return of income submitted by them earlier. During the course of the proceedings before the Settlement Commission, the assessee filed a revised settlement application containing confidential annexures and related papers declaring therein an additional income of Rs. 11.41 crore. Thus, while in the application under section 245C(1) of the IT Act, the disclosure was of Rs. 1.94 crores, in the revision application the additional income of Rs. 11.41 crore, which was approximately five times the amount originally disclosed, came to be made. Besides, in that case, a revised settlement application had been made and it is in the backdrop of such facts and circumstances that the Supreme Court held that full and true disclosure of income which had not been previously disclosed by the assessee being a precondition for a valid application under section 245C(1) of the Act. The scheme of Chapter XIXA does not contemplate revision of income so disclosed in the application against item 11 for the form. The court further held that if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application and that in this regard, section 245C(3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said section is instructive inasmuch as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings.

51. Adverting to the facts of the present case, as noticed earlier, the contesting respondents have not resiled from their stand in the application made under section 245C of the IT Act. The contesting respondents have also not made any further disclosure during the course of settlement proceedings but have only agreed to pay additional tax on the basis of the computation made by the revenue in respect of the disclosure made by them.”

6.5 Referring to the aforesaid decisions, it was submitted that in facts of the present case, the respondent-assessee has offered and disclosed further amount of Rs. 12 Crore in addition to disclosed amount of Rs. 22.09 Crore so as to put an end to the controversy and in spirit of the settlement before the Commission. The respondent has made overall additional disclosure of Rs. 12 Crore in all five years before the Commission altogether. It was therefore, submitted that in view of the aforesaid legal pronouncements and settled legal position, considering the facts of the case of the respondent before the Commission, the decision of the Apex Court in case of Ajmera Housing Corpn. (supra), cannot be made applicable to the facts of the present case. It was further submitted that the Commission is convinced by the item-wise explanation submitted by the respondent assessee in response to the income of Rs. 113 Crore suggested by the petitioner. It was therefore submitted that in view of the decision of the Apex Court in case of Jyotendrasinhji (supra), Commission is not required to give any reason, as the Commission has acted in accordance with the provisions of the Act of 1961. He further submitted that as the scope of the inquiry is very limited, no interference is required to be made in the impugned order passed by the Commission.

7. Having considered submissions made by learned counsel for the respective parties and the order passed by the Commission, only question which arises for consideration in facts of the present case is that whether additional income disclosed to the tune of Rs. 12 Crore by the respondent assessee during the course of proceedings before the Commission can be said to be fresh and substantial disclosure or not and to come to conclusion that it is far greater than the initial disclosure made by respondent assessee so as to apply decision of the Apex Court in case of Ajmera Housing Corpn. (supra) and in case of Shree Nilkanth Developers (supra) ?

8. In view of the aforesaid observations made by the Apex Court, this Court is required to examine and inquire as to whether the order of Commission is contrary to any of the provisions of the Act or not and if so, apart from grounds of bias, fraud and malice which of-course constitute a separate and independent category, has it prejudiced the petitioner or not. In facts of the present case, merely because the respondent assessee has disclosed additional income of Rs. 12 Crore during the course of settlement, it cannot be said that Commission has not followed the procedure prescribed under the Act of 1961.

9. The disclosure made during the course of the proceedings before the Commission is not new disclosure as found by the Apex Court in case of Ajmera Housing Corpn. (supra) as under :

“26. The procedure laid down in section 245D of the Act, contemplates that on receipt of the application under section 245C(1) of the Act, the Settlement Commission is required to forward a copy of the application filed in the prescribed form (No. 34B), containing full details of issues for which application for settlement is made, the nature and circumstances of the case and complexities of the investigation involved, save and except the annexures, referred to in item No. 11 of the form and to call for report from the Commissioner. The Commissioner is obliged to furnish such report within a period of 45 days from the date of communication by the Settlement Commission. Thereafter, the Settlement Commission, on the basis of the material contained in the said report and having regard to the facts and circumstances of the case and/or complexity of the investigation involved therein may by an order, allow the application to be proceeded with or reject the application. After an order under section 245D(1) is made, by the Settlement Commission, Rule 8 of the 1987 Rules mandates that a copy of the annexure to the application, together with a copy of each of the statements and other documents accompanying such annexure shall be forwarded to the Commissioner and further report shall be called from the Commissioner. The Settlement Commission can also direct the Commissioner to make further enquiry and investigations in the matter and furnish his report. Thereafter, after examining the record, Commissioner’s report and such further evidence that may be laid before it or obtained by it, the Settlement Commission is required to pass an order as it thinks fit on the matter covered by the application and in every matter relating to the case not covered by the application and referred to in the report of the Commissioner under sub-section (1) or sub-section (3) of the said Section. It bears repetition that as per the scheme of the Chapter, in the first instance, the report of the Commissioner is based on the bare information furnished by the assessee against item No. 10 of the prescribed form, and the material gathered by the revenue by way of its own investigation. It is evident from the language of Section 245C(1) of the Act that the report of the Commissioner is primarily on the nature of the case and the complexities of the investigation, as the annexure filed in support of the disclosure of undisclosed income against item No. 11 of the form and the manner in which such income had been derived are treated as confidential and are not supplied to the Commissioner. It is only after the Settlement Commission has decided to proceed with the application that a copy of the annexure to the said application and other statements and documents accompanying such annexure, containing the aforesaid information are required to be furnished to the Commissioner. In our opinion even when the Settlement Commission decides to proceed with the application, it will not be denuded of its power to examine as to whether in his application under section 245C(1) of the Act, the assessee has made a full and true disclosure of his undisclosed income. We feel that the report(s) of the Commissioner and other documents coming on record at different stages of the consideration of the case, before or after the Settlement Commission has decided to proceed with the application would be most germane to determination of the said question. It is plain from the language of sub-section (4) of section 245D of the Act that the jurisdiction of the Settlement Commission to pass such orders as it may think fit is confined to the matters covered by the application and it can extend only to such matters which are referred to in the report of the Commissioner under sub-section (1) or sub-section (3) of the said section. A “full and true” disclosure of income, which had not been previously disclosed by the assessee, being a pre-condition for a valid application under section 245C(1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against item No. 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, section 245C(3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said Section is instructive in as much as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and in the process rendering the provision of sub-section (3) of section 245C of the Act otiose and meaningless. In our opinion, the scheme of said Chapter is clear and admits no ambiguity.

27. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See: Cape Brandy Syndicate v. Inland Revenue Commissioners (1921) 1 KB 64 and Federation of A.P. Chambers of Commerce & Industry & Ors. v. State of A.P. (2001) 247 ITR 36 (SC) In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also see: Commissioner of Sales Tax, Uttar Pradesh v. Modi Sugar Mills Ltd. AIR 1961 SC 1047.

28. As afore-stated, in the scheme of Chapter XIX-A, there is no stipulation for revision of an application filed under section 245C(1) of the Act and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said Section in the prescribed form.

29. Having noticed the scheme of Chapter XIX-A of the Act, we shall now advert to the facts at hand and evaluate the rival submissions.

30. Before addressing the other issues, at the outset, we record our disapproval with the view of the High Court that it would not be proper to set aside the proceedings before the Settlement Commission even though it was convinced that the assessee had not made full and true disclosure of their income while making application under section 245C of the Act. As stated above, in its earlier order dated 28th July, 2000 while declaring order dated 17th November, 1994, as ab initio void and setting aside order dated 29th January, 1999, the High Court had remitted the case to the Settlement Commission to decide the entire matter afresh, including the question of maintainability of the application under section 245C(1) of the Act. The said order of the High Court was put in issue before this Court and was set aside vide order dated 11th July, 2006 and the case was remanded back to the High Court for fresh consideration. Nevertheless, all points raised by the parties, including the plea of the revenue that the application filed by the assessee before the Settlement Commission was not maintainable as the assessee had not made a full and true disclosure of their undisclosed income were kept open. The High Court addressed itself on the said issue and found that the assessee had not made a full and true disclosure of their income while making the application under section 245C(1) of the Act, yet did not find it proper to set aside the proceedings on that ground. Having recorded the said adverse finding on the very basic requirement of a valid application under section 245C(1) of the Act, the High Court’s opinion that it would not be proper to set aside the proceedings is clearly erroneous. The High Court appears to have not appreciated the object and scope of the scheme of settlement under Chapter XIX- A of the Act. At this juncture, it would be appropriate to notice a few illuminating observations in W T Ramsay Ltd. v. Inland Revenue Commissioners (1981) 1 All ER 865, which was considered to be a turning point in the interpretation of tax laws in England and was a significant departure from Inland Revenue Commissioners v. Duke of Westminster (1935) All ER Rep 259 dictum, noted in the passage extracted below :—

“Given that a document or transaction is genuine, the court cannot go behind it to some supposed underlying substance. This is the well-known principle of Inland Revenue Comrs v Duke of Westminster [1936] AC 1, [1935] All ER Rep 259, 19 Tax Cas 490. This is a cardinal principle but it must not be overstated or over-extended. While obliging the court to accept documents or transactions, found to be genuine, as such, it does not compel the court to look at a document or a transaction in blinkers, isolated from any context to which it properly belongs. If it can be seen that a document or transaction was intended to have effect as part of a nexus or series of transactions, or as an ingredient of a wider transaction intended as a whole, there is nothing in the doctrine to prevent it being so regarded; to do so is not to prefer form to substance, or substance to form. It is the task of the court to ascertain the legal nature of any transactions to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions, intended to operate as such, it is that series or combination which may be regarded.”

31. We are convinced that, in the instant case, the disclosure of Rs. 11.41 crores as additional undisclosed income in the revised annexure, filed on 19th September, 1994 alone was sufficient to establish that the application made by the assessee on 30th September, 1993 under section 245C(1) of the Act could not be entertained as it did not contain a “true and full” disclosure of their undisclosed income and “the manner” in which such income had been derived. However, we say nothing more on this aspect of the matter as the Commissioner, for reasons best known to him, has chosen not to challenge this part of the impugned order.

32. We shall now deal with the principal argument of learned counsel for the assessee that the High Court had failed to consider, in their correct perspective the two reports submitted by the Commissioner on 30th August, 1995 and 20th October, 1997, in as much as, in the latter report the Commissioner had himself computed the undisclosed income at Rs. 42.52 crores, which was equivalent to the amount finally determined by the Settlement Commission. Therefore, according to the learned counsel, there was no justification for the remand of the case back to the Settlement Commission. At the first blush, the argument appears to be attractive but on a deeper scrutiny, it does not merit acceptance. In the impugned order, on a critical examination of the order passed by the Settlement Commission with reference to the said two reports, in particular the reconciliation report submitted by the Commissioner on 20th October, 1997, estimating the undisclosed income at Rs. 187.20 crores, the High Court had found that only that part of the report dated 20th October, 1997, which dealt with “on money” was highlighted before this Court, while other incomes, investments, receipts or payments were not covered in that part of the statement. The High Court also observed that the manner in which expenses had been shown, created a serious doubt about the expenditure of Rs. 734.02 lakhs. The High Court has also noted that the Settlement Commission had not properly dealt with the amount of Rs. 911.51 lakhs on account of unexplained expenses, loans and surplus amount of Rs. 488.98 lakhs, while assessing the total income and thus an amount of Rs. 14.49 crores had been left out while determining the undisclosed income of the assessee. Besides, the High Court has also commented that having come to the conclusion that the penalty leviable worked out to be Rs. 562.87 lakhs, the Settlement Commission had no reason for levying a token penalty of Rs. 50 lakhs, which was not even 10% of the minimum leviable penalty. Ultimately the High Court observed that : (i) since the Settlement Commission had not supplied annexure filed on 19th September, 1994, declaring additional income of Rs. 11.41 crores, due opportunity had not been given to the revenue to place its stand properly; (ii) huge amount of unexplained expenses, unexplained loans and unexplained surplus, total of which was more than Rs. 14 crores, was not taken into consideration while passing the final order and (iii) the Settlement Commission had imposed token penalty of Rs. 50 lakhs while on its own assessment leviable penalty would have been Rs. 562.87 lakhs. Further, if the amount which had not been taken into consideration while assessing the total undisclosed income was to be taken into account, the amount of leviable penalty would have been much more. In light of these facts, the High Court formed the opinion that it would be in the interest of justice to set aside the final order passed by the Settlement Commission and to remand the case back to it for fresh adjudication on assessee’s application. Bearing in mind the afore-stated factual position, as emanating from the material on record, we find it difficult to persuade ourselves to agree with learned counsel for the assessee that there was no justification for order of remand by the High Court and that the order passed by the Settlement Commission should have been affirmed. We are satisfied that under the given scenario, the High Court was correct in making the order of remand and no good ground is made out for interference in exercise of our jurisdiction under article 136 of the Constitution.

33. As regards the argument of learned counsel for the assessee that the scope of judicial review being limited, the High Court should not have interfered with the order of the Settlement Commission in exercise of its power under article 226 of the Constitution, in our opinion, the argument is stated to be rejected. Having conceded before the High Court that the assessee was not pressing the point of maintainability of the writ petition before the High Court, the assessee cannot be now permitted to resile from its earlier stand and raise the same issue before us. Even otherwise, as stated above, we have no hesitation in observing that the manner in which assessee’s disclosures of additional income at different stages of proceedings were entertained by the Settlement Commission, rubbishing the objection of the Commissioner that the assessee had not made a full and true disclosure of their income in the application under section 245C(1) of the Act, leaves much to be desired.”

10. Thus the facts before the Apex Court were quite different than the facts of the present case as before the Apex Court revised disclosure was made whereas in the facts of the present case, additional disclosure is made to the tune of Rs. 12 Crore and therefore, judgments in case of Income Tax Settlement Commission (supra) Income Tax Settlement Commission (supra) Income Tax Settlement Commission (supra) and Income Tax Settlement Commission (supra) would be applicable to the facts of the present case and as such no interference is called for while exercising jurisdiction under Article 226 of the Constitution of India, more particularly, when the Commission has arrived at the conclusion that further additional income of Rs. 12 Crore offered during section 245D(4) proceedings can be accepted with reference to income disclosed in the settlement application.

11. On perusal of the impugned order passed by the Commission, it is apparent that the application submitted by the respondent has been dealt with as per the provisions of section 245C and 245D of the Act. The Commission has observed detailed procedure while exercising powers under section 245D(4) of the Act of 1961 by examining thoroughly report submitted by the petitioner under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. The Commission has also provided proper opportunity of hearing to the respective parties and therefore the amount which has been determined by the Commission is just and proper. In view of the aforesaid decisions cited by the respondent, 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. Therefore, the decision of the Apex Court in case of Ajmera Housing Corpn. (supra), would not come into operation in facts of the case. We are therefore of the opinion that order passed by the Commission does not call for any interference.

12. In view of the foregoing reasons and facts and circumstances and more particularly, in view of exercise of the powers by this Court under article 226 of the Constitution of India, the examination of the order of the Commission has to be made keeping in mind the scope of judicial review as per the decision of Apex Court in case of Jyotendrasinhji (supra). Therefore, keeping in view the exercise of extraordinary jurisdiction and in view of the overall background of facts whereby the Commission has thoroughly minutely examined all the details relating to the issue in question and arrived at a particular finding, same cannot be substituted.

13. In view of the foregoing reasons, petitions fail and accordingly are dismissed. Rule is discharged. No order as to costs.