WP(C)1609/2013 Page 1 of 32
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 02.07.2013
+ WP(C) NO. 1609/2013
COMMISSIONER OF INCOME TAX ... Petitioner
versus
INCOME TAX SETTLEMENT
COMMISSION & ORS. ... Respondents
Advocates who appeared in this case:
For the Appellant : Mr Kamal Sawhney, Adv. with Mr. Shashank Singh, Adv.
For the Respondent : Mr Mukul Rohtagi, Ms Prem Lata Bansal, Sr. Advs. with
Mr Saurabh Kirpal, Mr Mahesh Agarwal, Mr Akshay,
Mr Ankit Shah, Ms Manasi, Advs. for the Respondents 2 to 5
CORAM:-
HON’BLE MR JUSTICE BADAR DURREZ AHMED, THE
ACTING CHIEF JUSTICE
HON’BLE MR JUSTICE R.V.EASWAR
JUDGMENT
BADAR DURREZ AHMED, ACJ

1. This writ petition is directed against the order dated 24.01.2013
passed by the Income Tax Settlement Commission, Principal Bench, New
Delhi under Section 245D(2C) of the Income Tax Act, 1961 (hereinafter
referred to as ‘the said Act’). By virtue of the impugned order dated
24.01.2013, the Income Tax Settlement Commission (hereinafter referredWP(C)1609/2013 Page 2 of 32
to as ‘the Settlement Commission’) held the settlement applications of the
Respondent Nos. 2 to 5 to be “not invalid” and were therefore allowed to
be proceeded with inasmuch as the said settlement applications had, in
the view of the Settlement Commission, prima facie, fulfilled all the
conditions prescribed under Section 245C(1) and 245D(2C) of the said
Act. The petitioner (Commissioner of Income-tax) is aggrieved by the
said order dated 24.01.2013 inasmuch as according to the petitioner, the
settlement applications filed on behalf of the respondents 2 to 5 ought not
to have been proceeded with and ought to have been held as “invalid”
because the settlement applications failed to satisfy the pre-requisites
stipulated in Section 245C of the said Act. Those pre-requisites being,
full and true disclosure, the manner in which the undisclosed income had
been derived and the additional amount of income tax payable.
2. On behalf of the petitioner, it was sought to be contended that as
there was no true and full disclosure by the respondents 2 to 5 in their
applications for settlement, the Settlement Commission ought not to have
proceeded with their applications and ought to have passed an order
under Section 245D(2C) holding the applications to be invalid. It was
also contended that the manner of deriving the undisclosed income had
not been indicated by the respondents 2 to 5 and, therefore, on this
ground also, the order under Section 245D(2C) passed by the Settlement
Commission ought to have been one holding the settlement applications
to be invalid. Strong reliance was placed by the learned counsel
appearing for the petitioner on the Supreme Court decision in the case ofWP(C)1609/2013 Page 3 of 32
Ajmera Housing Corporation v. Commissioner of Income Tax: 326
ITR 642 (SC) to contend that where there was an established case of
absence of full and true disclosure on the part of the applicant, the
settlement application ought to be rejected at the threshold by the
Settlement Commission.

3. In this backdrop, the learned counsel for the petitioner sought to
argue on the merits of the matter and to establish that there was in fact
substance in his contention that the respondents 2 to 5 had not made a full
and true disclosure and that they had also not indicated the manner in
which the undisclosed income had been derived. At the threshold itself,
the learned counsel appearing on behalf of the respondents 2 to 5 took
serious objection to the maintainability of the present petition. It was
contended on behalf of the respondents 2 to 5 that the writ petition
challenging the order dated 24.01.2013 passed under Section 245D(2C)
of the said Act as also the earlier orders dated 30.11.2012 and 28.12.2012
passed under Section 245D(1) of the said Act was not maintainable
inasmuch as those orders were merely orders of ‘admission’. Reliance
was placed by the learned counsel for the respondents 2 to 5 on a decision
of the Supreme Court in the case of Commissioner of Income Tax v. K.
Jayaprakash Narayanan: 184 Taxman 85 (SC). Reliance was also
placed on a decision of a Division Bench of this Court in the case of
Commissioner of Central Excise, Vishakapatnam v. True Woods
Private Ltd.: 2006 (199) ELT 388 (Del) as also on a decision of the
Bombay High Court in the case of Union of India v. Customs andWP(C)1609/2013 Page 4 of 32
Central Excise Settlement Commission, Mumbai: 2009 (234) ELT 634
(Bom). The learned counsel for the respondents 2 to 5 emphasized that
the impugned orders were only orders of admission and only indicated a
prima facie view. It was open for the Settlement Commission to alter that
view in the course of further proceedings till the final order was passed
under Section 245D(4) of the said Act. It was therefore contended that
there is no cause for concern on the part of the Department at this stage as
the matter is still under examination by the Settlement Commission and a
final decision has not been taken by it. It was also contended that the writ
petition would not be maintainable as this Court, in judicial review, is not
concerned with the merits of the matter, as it would be, had it been
exercising an appellate jurisdiction. It is only the decision making
process which can be challenged and can be the subject matter of judicial
review in a writ petition. Since there is no allegation of any procedural
violation or lack of jurisdiction, the present writ petition which is
essentially aimed at a look into the merits of the matter, would not be
maintainable. It was also contended that the impugned order dated
24.01.2013 itself records that the issues raised by the Commissioner of
Income Tax would be open during the course of proceedings under
Section 245D(4) of the said Act and that the settlement applications were
held to be not invalid only upon a prima facie view that the respondents 2
to 5 had fulfilled the conditions prescribed under Section 245C(1) and
245D(2C) of the said Act. It was submitted that an order of admission,
such as the order impugned herein, does not foreclose any argument or
any contention of the Department even with regard to the “true and fullWP(C)1609/2013 Page 5 of 32
disclosure” and “the manner in which the income has been derived”. As
such, there is no occasion, according to the learned counsel for the
respondents 2 to 5, to interfere with the proceedings pending before the
Settlement Commission.

4. Before we examine the submissions made by the learned counsel
for the parties, it would be appropriate to set out some of the facts.
Respondents 2, 3 and 4 had filed settlement applications under Section
245C(1) of the said Act in respect of the Assessment Years 2006-07 to
2012-13 on 16.11.2012. The applications filed by respondents 3 and 4
who are the parents of respondent 2 were rejected by the Settlement
Commission by an order dated 23.11.2012 on the ground that the
applicants had not paid the full amount of the additional tax and interest
which was payable on or before the filing of the applications. It was
therefore held by the Settlement Commission that the said applications of
respondents 3 and 4 could not be allowed to be proceeded with and
accordingly the applications were rejected. On the very same day, i.e. on
23.11.2012, the respondents 3 and 4 submitted fresh applications under
Section 245C(1) after allegedly paying the amount of additional tax and
interest that was payable prior to the filing of the settlement applications.
Subsequently on 17.12.2012, the respondent 5 (wife of respondent 2)
submitted her settlement application for the above mentioned assessment
years. The settlement applications were allowed to be proceeded with by
virtue of an order dated 30.11.2012 in respect of respondents 2 to 4. A
similar order was passed in respect of respondent 5 on 28.12.2012. ThoseWP(C)1609/2013 Page 6 of 32
orders were passed under Section 245D(1) of the said Act and had not
been challenged by the Revenue. Even in the present writ petition, the
Commissioner of Income-tax had initially not challenged the said orders
dated 30.11.2012 and 28.12.2012 passed under Section 245D(1) of the
said Act. It is only by way of the amended writ petition which has been
filed subsequently that the petitioner also seeks to challenge the said
orders dated 30.11.2012 and 28.12.2012.
5. After the passing of the orders under Section 245D(1), reports were
called from the Commissioner of Income-tax under Section 245D(2B) of
the said Act on the validity of the settlement applications. That report
was received by the Settlement Commission on 09.01.2013 and the
applications were heard in the context of Section 245D(2C) of the said
Act by the Settlement Commission on 21.01.2013. Thereafter the
impugned order dated 24.01.2013 was passed in respect of the four
settlement applications. The petitioner being aggrieved by the said order
as also the earlier orders passed under Section 245D(1) is before us by
way of the present writ petition.

6. It must also be pointed out that in the report submitted by the
Commissioner of Income-tax under Section 245D(2B) of the said Act, it
was contended that the settlement applications should not be held to be
valid as the applicants had neither disclosed their full and true income nor
the manner in which such income had been derived. In response to the
said report, a write-up had been submitted on behalf of the respondents 2WP(C)1609/2013 Page 7 of 32
to 5 seeking to clarify each of the allegations of the Department and the
gist of the same has been extracted in the impugned order dated
24.01.2013 which we need not elaborate inasmuch as we do not intend to
examine the merits of the matter. After examining the report and the
counter arguments of the respondents 2 to 5, the Settlement Commission
held that all the four applicants had fulfilled the conditions prescribed
under Section 245C(1) as, in its view, there was no adverse material on
record to suggest otherwise. The Settlement Commission noted and
observed that the issues raised by the Commissioner of Income-tax in his
report dated 08.01.2013 would be open for the Bench during the course of
proceedings under Section 245D(4). By virtue of the impugned order
dated 24.01.2013, the Settlement Commission also directed that the
confidential part of the application should be forwarded to the
Commissioner of Income-tax who would have an opportunity to examine
the same during the course of proceedings under Section 245D(4) of the
said Act. The Settlement Commission reiterated that:-
“The decision to hold these SAs ‘not invalid’ is without
prejudice to initiation of penalty and launching of
prosecution proceedings, if required, on facts available
on the records at the relevant time in subsequent
proceedings by the Commission.”

It was further clarified that the settlement applications were held to
be not invalid and were allowed to be proceeded with inasmuch as the
Settlement Commission was of the view that the applicants had “primaWP(C)1609/2013 Page 8 of 32
facie” fulfilled the conditions prescribed under Section 245C(1) and
245D(2C) of the said Act.

7. We shall now briefly examine the scheme of the said Act insofar as
it is relevant for our purposes. Under section 245C of the said Act, an
assessee is entitled to make an application for settlement. The application
has to be made in such form and such manner as may be prescribed. The
application must contain (i) a full and true disclosure of the assessee’s
income which has not been disclosed before the assessing officer; (ii) the
manner in which such income has been derived; (iii) the additional
amount of income tax payable on such income; and (iv) such other
particulars as may be prescribed. Furthermore the assessee is also
required to pay the additional amount of tax and interest thereon, on or
before the date of making the application and the proof of such payment
should be attached with the application. Section 245C(1) stipulates that
when such an application is received by the Settlement Commission for
having the case settled, the same is to be disposed of in the manner as
indicated in the said Act.

8. Section 245D of the said Act sets out the procedure which is to be
adopted by the Settlement Commission on receipt of an application under
Section 245C. Section 245D(1) stipulates that on receipt of an
application under Section 245C, the Settlement Commission is required
to, within seven days from the date of receipt of the application, issue a
notice to the applicant requiring him to explain as to why the applicationWP(C)1609/2013 Page 9 of 32
made by him be allowed to be proceeded with. Thereafter on hearing the
applicant, the Settlement Commission is required to, within a period of 14
days from the date of the application, by an order in writing, reject the
application or allow the application to be proceeded with. The proviso to
Section 245D(1) stipulates that where no order is passed within the above
mentioned period by the Settlement Commission, either allowing the
application or rejecting the application, the application shall be deemed to
have been allowed to be proceeded with.

9. Sub-section (2B) of Section 245D of the said Act stipulates that the
Settlement Commission shall call for a report from the Commissioner and
the Commissioner shall furnish the said report within 30 days of receipt
of the communication from the Settlement Commission. Section
245D(2C) of the said Act prescribes that where a report of the
Commissioner, which has been called for under sub-section (2B), has
been furnished within the specified period, the Settlement Commission
may, on the basis of the report and within a period of 15 days of receipt
of the report, by an order in writing, declare the application in question as
invalid and in such eventuality, the Settlement Commission is enjoined to
send a copy of such order to the applicant and the Commissioner. The
first proviso to Section 245D(2C) ensures that an application shall not be
declared invalid by the Settlement Commission unless an opportunity has
been given to the applicant of being heard. The second proviso thereto
stipulates that where the Commissioner has not furnished the reportWP(C)1609/2013 Page 10 of 32
within the specified period, the Settlement Commission is enjoined to
proceed further in the matter without the report of the Commissioner.
10. Under Section 245D(3), the Settlement Commission, inter alia, in
respect of an application which has not been declared invalid under
Section 245D(2C) of the said Act may call for the 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 to furnish a report on
the matters covered by the application and any other matter relating to the
case. The Commissioner is required to furnish the report within a period
of 90 days of receipt of the communication from the Settlement
Commission. It is further provided that where the Commissioner does
not furnish a report within the said period of 90 days, the Settlement
Commission may proceed to pass an order under sub-section (4) without
such report.

11. Under Section 245D(4) of the said Act, the Settlement
Commission, after examination of the records and the report of the
Commissioner, if any, received under, inter alia, sub-section (2B) or subsection (3) and after giving an opportunity to the applicant as also to the

Commissioner to be heard, may pass such order as it thinks, in
accordance with the provisions of the said Act, on the matters covered by