Paragraph numbers below are the court’s original numbering, recovered from the source text.
14. Next, it was urged by learned senior counsel for the c assessee that the High Court erred in entertaining the writ petition filed by the Commissioner under Article 226 of the Constitution against the order passed by the Settlement Commission because: (i) in terms of Section 2450(1) of the Act, the order made by the Settlement Commission under sub- section (4) of the said Section is conclusive as to the matters stated therein and no. matter covered by such order can be reopened in any proceedings under the Act or under any other law for the time being in force and (ii) in the absence of any illegality in the procedure followed by the Settlement Commission, the power of judicial review could not be exercised by the High Court to interfere with the findings of fact recorded by the Settlement Commission. To buttress his proposition that judicial review is concerned only with the decision making process and not with the final decision, learned counsel referred us to the decisions of this Court in Jyotendrasinhji Vs. S.I. Tripathi & Ors. 1, Mis R.B. Shreeram Durga Prasad & Fatehchand Nursing Das Vs. Settlement Commission (IT & WT) & Anr. 2 and Shriyans Prasad Jain Vs. Income Tax Officer & Ors. 3.
15. It was also argued by the learned counsel that since 1. 1993 Supp (3) sec 389. 2. (1989) 1 sec 628. 3. 1993 Supp (4) sec 121. (2010] 10 S.C.R. A by operation of Section 2450( 1) of the Act read with Rule 6 of the 1987 Rules, annexure, statements and other documents accompanying such annexure were not to be supplied to the Commissioner before the Settlement Commission had decided to proceed with assessee's application, no prejudice was B caused to the Commissioner by the filing of revised annexure by the assessee on 19th September, 1994.
16. Shri Raval, on the other hand, supporting the impugned judgment, submitted that the scheme of Chapter XIX-A does C not envisage revision of the application filed by the assessee under Section 245C(1) of the Act and, therefore, the Settlement Commission committed serious procedural irregularity in permitting the assessee to file revised annexure, declaring higher undisclosed income. Additionally, the learned counsel argued that acceptance of such annexure, after the conclusion D of hearing on 12th September, 1994, behind the back of the departmental representative and after the Settlement Commission had reserved its order under Section 2450(1), was improper and clearly in breach of principles of natural· justice and, therefore, the order passed by the Settlement E Commission on 17th November, 1994, deciding to proceed with the application deserves to be set aside.
17. Learned counsel contended that revision of undisclosed income from Rs.1.94 crores to Rs.11.41 crores, F as projected in the revised annexure and thereafter the two voluntary disclosures during the course of hearing and finally acceptance of Settlement Commission's order determining total income at Rs.42.58 crores without demur shows that the disclosure made by the assessee in their application under G Section 245C of the Act was neither full nor true and, therefore, the Settlement Commission ought to have rejected the application for settlement. It was pleaded that the piecemeal disclosures, in particular the revision of the statement of facts vide assessee's letter dated 25th January, 1999, offering an ad hoc income of Rs.1 crore for the assessment year 1992- AJMERA HOUSING CORPORATION v. COMMISSIONER OF INCOME TAX [D.K. JAIN, J.] 93 and Rs.6 crores for the assessment year 1993-94 to cover up "any discrepancies and/or any unforeseen contingencies" is not c;ontemplated in the scheme of Chapter XIX-A and, therefore, the final order passed by the Settlement Commission on the basis of revised statement of facts and annexures is void ab initio. In support of the submission that a full and true disclosure of income in the application is a sine qua non for an application under Section 245C(1) of the Act, learned couns.el placed reliance on the decisions of this Court in Sanghvi Reconditioners Private Limited Vs. Union of India & Ors. 4 and Commissioner of Income Tax, Jalpaiguri Vs. Om c Prakash Mittal5.
18. Responding to the contention urged on behalf of the assessee regarding entertainment of writ petition by the High Court, learned counsel submitted that having conceded before the High Court that the assessee was not pressing the point of tenability of the writ petition, the assessee is estopped from raising the said issue before this Court.'
19. Lastly, relying on the decision of this Court in Mrs. Margaret Lalita Samuel Vs. The lndo Commercial Bank Ltd. 6, learned counsel for, the Commissioner pleaded that since the High Court has merely remanded the case back to the Settlement Commission for fresh determination of income and penalty etc., this Court may not like to exercise its discretionary power under Article 136 of the Constitution.
20. Before embarking upon the rival contentions, it would be instructive to refer to the scheme of Chapter XIX-A of the Act. The Chapter was inserted in the Act by the Taxation Laws (Amendment) Act, 1975, pursuant to the recommendations of the Justice Wanchoo Committee Report. The recommendation, contained in Chapter 2 of the report under the caption "Black 4. (2010) 2 sec 733. 5. (2005) 2 sec 751. 6. (1979) 2 sec 396. A Money and Tax Evasion'', was for setting up of a statutory settlement machinery, whereby a tax evader could make a clean breast of his past illegitimate affairs, discharge his tax liability as determined by the body so established and thus, buy quittance for himself and in the process accelerate recovery of B taxes by the State, although less than what may have been recovered after protracted litigation and recovery proceedings. The said Chapter, with some amendments, envisages settlement of complex tax disputes and grant of immunity from · criminal proceedings by a Settlement Commission constituted c in this regard. The Chapter sets out in detail the mechanics of application, investigation, consideration, hearing and disposal of the application.
21. Proceedings under the said Chapter commence on the filing of an application by an assessee under Section 245C(1) D of the Act, which reads as follows:- "245-C. Application for settlement of cases.-(1) An assessee may, at any stage of a.case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided: G A bare reading of the provision would reveal that besides such other particulars, as may be prescribed, in an application for settlement, the assessee is required to disclose: (i) a full and true disclosure of the income which has not been disclosed before the assessing officer; (ii) the manner in which such H income has been derived and (iii) the additional amount of AJMERA HOUSING CORPORATION v. COMMISSIONER OF INCOME TAX [D.K. JAIN, J.] income tax payable on such income.
22. It is clear that disclosure of "full and true" particulars of undisclosed income and "the manner'' in which such income had been derived are the pre-requisites for a valid application under Section 245C(1) of the Act. Additionally, the amount of income tax payable on such undisclosed income is to be computed and mentioned in the application. It needs little emphasis that Section 245C(1) of the Act mandates "full and true" disclosure of the particulars of undisclosed income and "the manner'' in which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this aspect, it will not have the jurisdiction to pass any order on the matter covered by the application.
23. Section 2450(1) lays down the procedure to be followed after the receipt of the application under Section 245C(1) of the Act. It reads thus: "Procedure on receipt of an application under s.ection 245C. 2450. (1) On receipt of an application under section 245C, the Settlement Ccmmission shall call for a report from the Commissioner and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application: Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to · the applicant of being heard:· (3) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may c call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case.· (4) After examination of the records and the report of the Commissioner, received under sub-section (1 ), and the report, if any,· of the Commissioner received under sub- section (3), and after giving,.an opportunity to the applicant and to the Commissionert<nbe heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such ori::ler as it thinks fit on the matters covered by the application and any other matter relating to the ·case not covered by the application but referred to in the report of the Commissioner under sub-section (1) or sub-section (3)."
24. Since Rules 6 and 8 of the 1987 Rules have some bearing on the issues involved, for the sake of ready reference, F these are extracted below: "6. Commissioner's report etc., under section 2450 (1 ).-On receipt of a settlement application, a copy of the said application (other than the Annexure and the statements and other documents accompanying such Annexure) shall be forwarded by the Commission to the Commissioner with the direction to furnish his report under sub-section (1) of section 2450 within thirty days of the receipt of the said copy of the application by him or within such further period as the Commission may specify." AJMERA HOUSING CORPORATION v. COMMISSIONER OF INCOME TAX [D.K. JAIN, J.] "8. Commissioner's further report.-Where an order is passed by the Commission under sub-section (1) of section 2450 allowing the settlement application to be proceeded with, copy of the Annexure to the said application, together with a copy of each of the statements and other documents accompanying such annexure, shall be forwarded to the Commissioner along with a copy of the said order with the direction that the Commissioner shall furnish a further report within ninety days of the receipt of the said Annexure (including the statements and other documents accompanying it or within such further period c as the Commission may specify."
25. It will also be useful to extract the rele.vant portions of Form (No.348), prescribed for making an application under Section 245C(1) of the Act: "[FORM NO. 348] [See rule~ 44C and 44CA] Form of application fo r settlement of cases under section 245C(1) of the Income-tax Act, 1961 10. Particulars of the issues to be settled, nature and circumstances of the case and complexities of the investigation involved [See Note 7] 11. Full and true disclosure of income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived and the additional amount of H c [2010) 10 S.C.R. Notes: income-tax payable on such income [See Notes 9 and 1 OJ Signed (Applicant) 7. Full details of issues for which application for settlement is made, the nature and circumstances of the case and complexities of the investigation involved must be indicated against item 10. Where the application relates to more than one assessment year, these details should be furnished for each assessment year. 9. The additional amount of income-tax payable on the income referred to in item 11 should be calculated in the manner laid down in sub-sections (1A) to (1 D) of section 245C . . 10. The details referred to in item 11 shall be given in the Annexure to this application." [Emphasis supplied by us]
26. The procedure laid down in Section 2450 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 G (No. 348), 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 AJMERA HOUSING CORPORATION v. COMMISSIONER OF INCOME TAX [D.K. JAIN, J.] 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 2450(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 c 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 tq 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 [2010) 10 S.C.R. A 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 B 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 c determination of the said question. It is plain from the language of sub-section (4) of Section 2450 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 0 the report of the Commissioner under sub-section (1) or sub- section (3) of the said Section. A "full and true" disclosure of inqome, which had not been previously c;lisclosed 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 E 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 F 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 G indirectly what he cannot otherwise achieve directly and in the process rendering the provision of sub-sect~on (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 tha~ a taxing statute is to be construed AJMERA HOUSING CORPORATION v. COMMISSIONER OF INCOME TAX [D.K. JAIN, J.] 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 Vs. Inland Revenue Commissioners7 and Federation of A.P. Chambers of Commerce & Industry & Ors. Vs. State of A.P. & Ors.8). 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 Sa/es Tax, Uttar Pradesh Vs .. The Modi Sugar Mills Ltd.)9•
28. As afore-stated, in the scheme of Chapter XIX-A, there is no stipulation for reyision 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 7. (1921) 1 KB 64. 8. c2000) 6 sec 550. 9. 1961 (2) SCR 189 (2010] 10 S.C.R. A 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 8 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 C 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 requirem~nt of a valid application under Section D 245C{1) of the Act, the High Court's opinion that it would not be P,roper to set aside the proceedings is clf:larly 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 E illuminating observations in W T Ramsay Ltd. Vs. Inland Revenue Commissioners10, 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 Vs. Duke of Westminster11 dictum, noted in the passage F 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 Gas 490. This is a cardinal principle but it must not be overstated or over-extended .. While obliging the court to accept documents or 10. (1981) 1 All ER 865. H 11. [1936] AC 1, [1935] All ER Rep 259. AJMERA HOUSING CORPORATION v. COMMISSIONER OF INCOME TAX [D.K. JAIN, J.] 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 c 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' E 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 undi~closed 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 w~s no justification for the remand of the case back to the Settlement Commission. (2010] 10 S.C.R. A 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 B 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 c 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 arriount 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 E to the conclusion that the pehalty 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 F 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 G 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 AJMERA HOUSING CORPORATION v. COMMISSIONER OF INCOME TAX [D.K. JAIN, J.] 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 itdifficult 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 c 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 Hig~ Court should not have interfered with the order of the .Settlement Commission in exercise of its p"ower 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 ~desi~. 34. We may now evaluate the submission of learned counsel for the assessee that since the Commissioner was not entitled to receive a . copy of the annexure to the application before the Settlement Commission had decided to proceed A with the application, no prejudice was caused to the Commissioner because of the alleged non-supply of the revised annexure at a stage anterior to the making of order under Section 2450( 1) of the Act. It is true that details of the "full and true" disclosure of income and "the manner" in which such B income is derived is to be given in the form of an annexure to the application, which is treated as confidential and is not to be forwarded to Commissioner for the purpose of his report under sub-section (1) of Section 2450 of the Act and therefore, apparently there is substance in the contention. 6ut when the c argument is tested on the anvil of the scheme of Chapter XIX- A, the revision of the annexure by itself was prejudicial to the interest of the revenue. Apart from the fact, as explained above, revision of the annexure is tantamount to revision of the application, not contemplated in the scheme, withholding of the 0 information regarding filing of revised annexure, disclosing undisclosed income of Rs.11.41 crores as against the income . of Rs.1.94 crores, disclosed in the annexu.re forming part of the . application, deprived the Commissioner of his right to object to the maintainability of assessee's application on the ground that the assessee had not made true and full disclosure of their E income in the previous application, the foundational requirement of a valid application under Section 245C(1) of the Act. Accordingly, we have no hesitation in rejecting the a~ume~. 35. For all the. reasons aforesaid, we do not find any merit in these appeals, which are dismissed accordingly. The Commissioner will be entitled to costs, quantified at Rs.50,000/ G N.J. Appeals dismissed.