The Supreme Court held that there is a real object and purpose of setting up of the Settlement Commission as an Assessee, who is given an opportunity to disclose the undisclosed income in order to seek benefit in the form of immunity from penalty and prosecution.
The division bench of Justice B.V. Nagarathna and Justice Ujjal Bhuyan said, “when the High Court set aside the order of the Settlement Commission, the matter had to be remanded to the Settlement Commission for re-consideration and re-determination of the undisclosed income, after giving an opportunity to both sides.
The appellant is a partnership firm constituted w.e.f. 01.05.2009 is in the business of real estate. The Department conducted a survey under Section 133A of the Income Tax Act, 1961 at the project site of the appellant and found incriminating material during the course of survey. It was the case of the respondent/Department that the appellant had not disclosed certain income to the Assessing Officer. During the course of survey a Diary-BR1, (being incriminating material) was impounded and thereafter a statement of one of the partners of the firm was recorded.
It appeared that he had stated that there was a practice of receiving undisclosed amounts but they had been offered as additional income to an extent of Rs.3 crores for taxation over and above the disclosed income/normal income as such; that it was only a case of a tentative disclosure or non-disclosure and took time to make a complete disclosure.
The Settlement Commission passed an order under Section 245(D) (1) of the Act allowing the case to proceed further. Subsequently, order was passed under Section 245D(2C) of the Act. In response to the application filed by the appellant herein, the Department sent its report under Rule 9 of the Income Tax Settlement Commission Procedure) Rules, 1997 on 16.06.2014. The Department objected to the offer of settlement of Rs.34 lacs being offered as additional income and contended that there was no full disclosure of the material particulars. The Department sought for closure and dismissal of the settlement application.
The Settlement Commission, however, considered the contentions of the respective parties at length and ultimately the representative of the appellant offered Rs.56 lacs as additional income, which has been recorded during the course of the order of the Settlement Commission. Accepting the said amount as additional income, over and above the declared income of Rs.34 lacs, the Settlement Commission passed its order on 04.02.2015.
The supreme court ruled that set aside the order of the High Court as well as the order of the Settlement Commission and remand the matter to the Settlement Commission, which is now substituted by Interim Board for Settlement-V (IBS-V), Mumbai or Interim Board for Settlement – VI (IBS-VI), Mumbai, as the case may be, vide Office Order dated 31.01.2022, issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, Government of India.
Case Ttile: NILKANTH DEVELOPERS APPELLANT(S) VERSUS PRINCIPAL COMMISSIONER OF INCOME TAX