Case Note & Summary
The Revenue (Commissioner of Income Tax, Pune) filed a writ petition under Article 226 of the Constitution challenging an order dated 21 September 2012 passed by the Income Tax Settlement Commission (ITSC), Additional Bench, Mumbai, under Section 245D(4) of the Income Tax Act, 1961. The background of the case involves a search and seizure action under Section 132 of the Act conducted on 13 November 2011 at the business premises of the second respondent, ZF Steering Gear Ltd. The department alleged that the assessee had booked bogus purchases amounting to Rs.97.51 crores during financial years 2005-2006 to 2009-2010 by generating fictitious goods inward notes and purchase vouchers, and siphoning money through cheques issued to parties without actual receipt of material. The assessee initially declared an ad-hoc additional income of Rs.45 crores to buy peace but later retracted that statement. Subsequently, on 17 September 2011, the assessee filed an application before the Settlement Commission for settlement of its case for assessment years 2006-07 to 2012-2013, disclosing an additional income of Rs.21.27 crores. The Commission allowed the application to be proceeded with under Section 245D(1) and called for a report from the Revenue. After considering the report and submissions, the Commission passed the final order under Section 245D(4) accepting the settlement. The Revenue challenged this order on the ground that the Commission had erred in accepting the additional income of Rs.21.27 crores without properly appreciating the evidence of bogus purchases and the systematic siphoning of funds. The court analyzed the scope of judicial review under Article 226 against orders of the Settlement Commission, noting that such orders can be interfered with only if they suffer from lack of jurisdiction, perversity, or violation of principles of natural justice. The court held that the Commission's satisfaction regarding the full and true disclosure of income is subjective and based on the material before it. The court found that the Commission had considered the Revenue's objections and the material on record, and its decision to accept the additional income of Rs.21.27 crores was not perverse or arbitrary. The court emphasized that the writ court cannot re-appreciate evidence or substitute its own satisfaction for that of the Commission. Consequently, the court dismissed the petition, upholding the order of the Settlement Commission.
Headnote
A) Constitutional Law - Writ Jurisdiction - Article 226 of Constitution of India - Scope of Judicial Review - Settlement Commission's order under Section 245D(4) of Income Tax Act, 1961 can be challenged only on grounds of lack of jurisdiction, perversity, or violation of principles of natural justice; court cannot re-appreciate evidence or substitute its own satisfaction for that of the Commission (Paras 10-12). B) Income Tax - Settlement Commission - Section 245D(4) of Income Tax Act, 1961 - Full and True Disclosure - Commission's satisfaction regarding full and true disclosure of income is subjective and based on material on record; Revenue's disagreement with quantum of additional income does not make the order perverse (Paras 13-15). C) Income Tax - Settlement Commission - Section 245D(4) of Income Tax Act, 1961 - Additional Income Disclosure - Assessee disclosed additional income of Rs.21.27 crores on ad-hoc basis to buy peace; Commission accepted the same after considering material; held that Commission's discretion in quantifying additional income is not open to challenge unless arbitrary (Paras 16-18).
Issue of Consideration
Whether the order of the Income Tax Settlement Commission under Section 245D(4) of the Income Tax Act, 1961, accepting the assessee's application for settlement and determining the additional income, is vitiated by any error of law apparent on the face of the record or suffers from perversity warranting interference under Article 226 of the Constitution.
Final Decision
The High Court dismissed the writ petition, upholding the order of the Income Tax Settlement Commission dated 21 September 2012 under Section 245D(4) of the Income Tax Act, 1961.
Law Points
- Settlement Commission's order under Section 245D(4) of Income Tax Act
- 1961 is not amenable to writ jurisdiction under Article 226 of Constitution unless it suffers from perversity or lack of jurisdiction
- Commission has wide discretion to accept or reject additional income disclosed by assessee
- Commission's satisfaction regarding full and true disclosure is subjective and not open to challenge on merits
- Revenue cannot seek re-appreciation of evidence in writ proceedings.
