Pr. Commissioner of Income Tax (Central) vs Maa Vaishno Real Estate

S.C. Sharma, J. - Regard being had to the similar controversy involved in above cases, they have been heard analogously together with the consent of the parties and a common order is being passed in the matter. Facts of W.P. No. 1491/2016 are narrated as under :-

The petitioner before this Court Principal Commissioner of Income Tax (Central), Bhopal has filed this present petition being aggrieved by the order dated 18/05/2015 passed by Income Tax Settlement Commission, Additional Bench-I, Mumbai in case No. MH/BHCC/129/2014-15/IT.

The facts of the case as stated in writ petition reveals that respondent No.1 assessee M/s. Saakar Group is engaged in real estate and construction projects and search and seizure operations were conducted by the Investigating Wing under Section 132 of the Income Tax Act on 21/09/2012 at the premises of M/s. Saakar Reality, its partners and family members. The other major firms of the Group are M/s. S.T. Associates, M/s. Maa Vaishno Real Estate and M/s. S.S. Associates.

It has been further stated that group is owned, managed and controlled by Shri Gopal Goyal and Shri Sanjay Dasot. Shri Gopal Goyal and Shri Sanjay Dasot partners of the firm have voluntarily admitted additional undisclosed income of Rs. 30 crores on behalf of Saakar Group during the search proceedings.

The cases were centralised with the then DCIT (Central), Indore and notices were issued under Section 153A/153 C for the Assessment Years 2008-2009 and 2013-2014. Notice was issued under Section 143(2) for the Assessment year 2014-2015 on 30/06/2014. The assessee has filed an application before the Settlement Commission on 23/03/2015. The application of the assessee was processed by the Settlement Commission in SA No. MP/BCC/128 to 131/2014-15/IT and an order was passed under Section 245 D(1) on 31/03/2015.

It has been further stated that on receipt of order of the ITSC, the Principal Commissioner of Income Tax (Central), Bhopal submitted a detailed report under Section 245D (2B) on 05/05/2015 and prayed for that the Additional Income disclosed before the Settlement Commission cannot be held as full and true disclosure and the settlement application of the respondent assessee be rejected.

It has been further stated that the Settlement Commission vide its impugned Order dated 18/05/2015 passed under Section 245D(2C) of the Act declared the four applications of the Group as ''Not Invalid''. Meaning thereby, the Settlement Commission is proceeding ahead in the matter to decide the issue.

The contention of the learned Counsel appearing on behalf of the Income Tax Department is that based upon the materials seized from the residential premises and other premises of the group, there was huge tax evasion done by Shri Gopal Goyal and Shri Sanjay Dasot and the assessee''s total estimated income comes to Rs. 289.16 crores and the settlement commission is proceeding ahead in the matter by taking into account a meagre amount of Rs. 19.08 crores. The other grounds have also been raised by the petitioner. However, Shri Sumit Nema appearing on behalf of respondent No.1 has vehemently argued before this Court that the order dated 18/05/2015 passed by the Settlement Commission under Section 245D(2C) of the Income Tax Act is only a prima facie order which deals only with the aspect of either accepting the application or rejecting the application. No final order has been passed by the Settlement Commission and the Settlement Commission has to proceed in the matter in accordance with Section 245D(2B), 245D(3), 245D(4),245D(4A), 245D(5), 245D(6)and 245D(6A) of the Act.

It has been further stated that the Income Tax Act provides for complete mechanism for dealing with the settlement applications and said mechanism is a complete code in itself and merely because an interim admission order has been passed under Section 245D(2C), it does not mean any irreparable loss has been caused to the Income Tax Department.

It has also been argued that the petition has been filed after nine months and therefore, it deserves to be dismissed on the ground of delay and latches. It has also been stated that the issue involved in the present case stands concluded as an identical writ petition has been decided by the Division Bench of this Court at Principal seat in the case of Pr. Commissioner of Income Tax (Central) Bhopal v. Dilip Buildcon Limited in W.P.No. 20818 of 2015 [reported as (2016) 143 DTR (MP) 73 - Ed.]. It has also been stated that the Hon''ble Supreme Court of India has taken similar view in the case of K. Jaiprakash Narayanan reported in (2009) 184 Taxman 85 (SC). The respondent No. 1 has prayed for dismissal of the writ petition.

Heard learned Counsel for the parties at length and perused the record.

In the present case, the undisputed facts reveal that respondent No.1 was subjected to Search and Seizure operations conducted by the Investigating Wing under Section 132 of the Income Tax Act on 21/09/2012. It has also been an admitted fact that the Group has voluntarily admitted additional disclosed income of Rs. 30 crores.

It is also an undisputed fact that respondent No. 1 has submitted an application before the Settlement Commission on 23/03/2015 and the matter was processed by the Settlement Commission. The Principal Chief Commissioner of Income Tax (Central) Bhopal has submitted a detailed report in the matter under Section 245D(2B) on 05/05/2015 and a prayer was made to reject the application submitted for settlement. The Settlement Commission vide its order dated 18/05/2015 passed under Section 245D(2C) of the Act has passed an order holding the applications for settlement as maintainable and to be proceeded with further. The order passed by the Settlement Commission reads as under :-

"We find that the department''s only objection was relating to declaration made by the applicants was riot true and full. In this case the department has not adduced any evidence which could conclusively prove that the information submitted by the applicants was incorrect, false or applicants had withheld certain information to the detrimental interest of the revenue. On the other hand the applicants stated that they have made the declaration true and full before the Commission. We are conscious that at the 245D(2C) stage it is not expected by the applicants or the department to establish beyond doubt by adducing of all the evidences at this juncture to prove their versions or stands. What is expected at the level of 245D(2C) is to examine in a macroscopic manner whether there is any information available with the department or with the Commission which would warrant to hold that the information or the income declared by the applicants is not true and full. Here we find that we do not have any such information either at our level or any such information has been provided by the department. Hence as of now we hold that the information and department. Hence as of now we hold that the information and the facts given by the applicants are true and full on the basis of which the income offered by them was to the best belief of the applicants true and full. Therefore, we hold these applications to be not invalid and allow them to be proceeded with further."

In light of the aforesaid order, the Settlement Commission is proceeding ahead with the matter on merits. Various grounds have been raised by the petitioner, however, the fact remains that an identical matter was heard by the Principal seat in W.P. No. 20817/2015 in the case of Pr. Commissioner of Income Tax (Central) Bhopal v. Smt. Seema Suryavanshi and another and the Division Bench of this Court by an order dated 27/07/2016 in paragraph 3 to 9 has held as under :-

"3. Various grounds are raised in the writ petition to say that the procedure followed by the Department is unsustainable and in support thereof reliance is placed on the cases of Bombay High Court and Delhi Court : Commissioner of Income Tax (Central) v. Income Tax Settlement Commissioner (ITSC), (2014) 267 CTR 0007 (BOM); and, Marc Bathing Luxuries Limited v. Income Tax Settlement Commission and Another, (2013) 94 DTR 0241 (DEL), to say that the order passed under section 245-D(2C) without taking note of the Report of the Department is unsustainable and the prayer made is that the matter be remanded back and proceeded with. Writ Petition Nos. : 20817/2015, 20818/2015 & 20892/2015.

Refuting the aforesaid Shri Sumit Nema, learned counsel for the respondent, invites our attention to an order passed by the Supreme Court in the case of Commissioner of Income Tax v. K. Jayaprakash Narayanan, (2009) 184 TAXMAN 85 (SC), to say that interference at this stage is not called for. The proceedings are still pending before the Settlement Commissioner and, therefore, the Department can raise all such question before the Settlement Commissioner, where the matter is pending and the Settlement Commissioner can still take note of the same.

Further reliance is placed on a Division Bench Judgment of this Court in the case of Commissioner of Income Tax, Indore v. Asian Natural Resources India Limited, (2015) 63 taxman.com 169 (MP), wherein similar question was considered and an order was passed admitted an application under section 245-D(1), challenge to which made by the Department, was disposed of with liberty to the Department to raise the grounds before the Settlement Commissioner, who was directed to consider the same.

We have heard learned counsel for the parties at length and perused the records.

We find that merely because the application filed under section 245-D(1) has been admitted and the Report of the Department under section 245-D(2) has not been considered, no case is made out for interference. The matter is still pending before the Settlement Commissioner, the petitioner can raise all the grounds before the Settlement Commissioner, including the objection as are raised in the writ petition, and it is for the Settlement Commissioner to look into this aspect of the matter and proceed in accordance with law. This is the principle which we find from the order passed by the Supreme Court in the case of K. Jayaprakash Narayanan (supra) and the law laid down by a Coordinate Bench of this Court, in the case of Asian Natural Resources India Limited (supra).

The judgments cited by the Revenue based on the decision rendered by the Bombay High Court and the Delhi High Court, in the cases of Commissioner of Income Tax (Central) [supra) and Marc Bathing Luxuries Limited (supra) need not be considered at this stage, when a Coordinate Bench of this Court under similar circumstances in the case of Asian Natural Resources India Limited (supra) has refused to interfere and has relegated the Department to raise the objections before the Settlement Commissioner, who has been directed to proceed in the matter in accordance with law.

Accordingly, finding no ground to interfere in the matter, we dispose of the writ petitions with liberty to the petitioner/Revenue to raise the grounds before the Settlement Commissioner, who shall before deciding the matter consider and proceed in accordance with law."

The matter has also been considered by the Hon''ble Supreme Court of India in the case of K. Jaiprakash Narayanan reported in (2009) 184 TAXMAN 85 (SC). The Hon''ble Supreme Court in Para 1 & 2 has held as under :-

"1. Delay condoned.

This Special Leave petition is filed against the decision of the Settlement Commission admitting the application of the assessee under Section 245D of the Income-Tax Act, 1961. It is the case of the Department that the assessee had failed to make full and true disclosure in the first instance and that the said declaration made at a later date by way of second declaration cannot be the ground for admitting the application under Section 245D. Since this Special Leave petition is filed only against the order of the Settlement Commission admitting the application of the assessee under Section 245D, we do not wish to interfere at this Stage. However, we make it clear that on the point of maintainability of the Application, it would be open to the Department to raise the contention before the Settlement Commission who would be entitled to examine that question at the final hearing of the matter."

The Division Bench of this Court in the case of Commissioner of Income Tax-I, Indore v. Asian natural Resources India Ltd. (2015) 117 DTR (MP) 426 : (2016) 282 CTR (MP) 569, has again decided a similar controversy. Paragraph 21-29 of the aforesaid judgment reads as under :-

The Division Bench of Delhi High Court in the case of Commissioner of Income-tax v. Income Tax Settlement Commission, 2013 (35) Taxmann.com 56 (Delhi) has held the following in para 22, 24, 25 and 34 which reads as under :-

From the above, it is clear that in True Woods Pvt. Ltd. (supra), a specific argument had been raised on behalf of the Revenue that it was incumbent upon the Settlement Commission to record a specific finding to the effect that the applicant had made a full and true disclosure before it admitted the application or took any further steps on the basis thereof. This argument was rejected by the Division Bench. The Division Bench was of the view that while the foundation for settlement was an application from the assessee in which the assessee is required to make a full and true disclosure, it was equally true that such requirement need not be examined and authoritatively determined at the threshold of any proceeding initiated before the Commission. Importantly, the Division Bench observed that there may be cases where it is possible for the Commission to record a finding that the disclosure made in the application is full and true. At the same time, there could also be situations in which the Commission may not be able to, at the stage of admission of the application, record a finding with any amount of certainty. It is in such a situation that it would be permissible for the Commission to keep the question open to be examined at a later stage or at the stage of disposal of the application. As in the case of True Woods Pvt. Ltd. (supra), this is exactly what has happened in the present case. The Settlement Commission has noted the rival contentions of the Revenue and the applicants with regard to the issues of full and true disclosure and the manner of deriving the undisclosed income and has taken a prima facie view in favour of the applicants. It is not a definitive or final view and it is for this reason that the Settlement Commission, in its wisdom, left the issues open to be determined at the stage of final hearing under Section 245D(4) of the said Act. It may very well be that the Settlement Commission, at that stage, may agree with the Revenue on the basis of the material on record and the report submitted by the Commissioner of Income-tax that the applications were not maintainable under Section 245C(1) of the said Act. In fact, the Settlement Commission may, at any stage till it passes a final order under Section 245D(4), examine the issues and if there is sufficient material on record, determine the question of full and true disclosure and the manner in which the undisclosed income was derived conclusively and, depending on such a decision, the applications may be thrown out or they may be proceeded with further.

We are of the view that the order of the Supreme Court in K. Jayaprakash Narayanan (supra) and the decision of the Division Bench of this Court in True Woods Pvt. Ltd. (supra) clinch the issue in favour of the respondents. As such, this Court ought not to interfere with the impugned orders. However, we need to examine the decision of the Supreme Court in the case of Ajmera Housing (supra) which has been strongly relied upon by the learned counsel for the petitioner. In fact, the learned counsel for the petitioner went to the extent of submitting that in view of the decision of the Supreme Court in Ajmera Housing (supra), the orders/decisions in K. Jayaprakash Narayanan (supra) and True Woods Pvt. Ltd. (supra) would no longer be good law.

In Ajmera Housing (supra), an order had been passed by the Income Tax Settlement Commission under Section 245D(1) on 17.11.1994, allowing the settlement application filed on behalf of the assessee to be proceeded with. That order was not challenged by the Revenue. The Settlement Commission proceeded with the said settlement application and passed a final order under Section 245D(4) of the said Act on 29.01.1999. That settlement order was challenged by the Revenue before the Bombay High Court which set aside the same on, inter alia, the ground that no finding had been returned by the Settlement Commission as to whether there was a full and true disclosure of income on the part of the assessee/applicant. The Bombay High Court also held that the order dated 17.11.1994 passed under Section 245D(1) of the said Act was void and remitted the case to the Settlement Commission for a decision afresh and kept all the questions open. The applicant/assessee, being aggrieved by the said decision of the Bombay High Court, went up in appeal before the Supreme Court which, by an order dated 11.07.2006, set aside the Bombay High Court order and remitted the matter to the High Court for a fresh decision. In the second round, the Bombay High Court again set aside the Income Tax Settlement Commission''s order dated 29.01.1999 and remanded the case to the Settlement Commission for fresh adjudication. While doing so, the Bombay High Court observed as under :-

"In view of the facts and the legal position noted above, even though we find that the respondents had not made full and true disclosure of their income while making applications under Section 245C, it would not be proper to set aside the proceeding. However, at the same time, the Commission appears to have misdirected itself on several important aspects while passing the final order. The Settlement Commission had not supplied the annexure Dated 19.9.1994 declaring additional income of Rs. 11.41 crore and thus, due opportunity was not given to the Revenue to place (sic) its stand properly. Huge amount of unexplained expenses, unexplained loans and unexplained surplus, total of which is more than Rs. 14 crore, was not taken into consideration while passing the final order.

Thirdly, the Settlement Commission has imposed token penalty of Rs. 50 lakhs while in its own assessment leviable penalty would be 562.87 (sic Rs. 562.87). In fact if the amounts, which were not taken into consideration while assessing the total undisclosed income, are also taken into consideration, the amount of leviable penalty may be much more. Taking into consideration the multiple disclosures and the fact that the respondents had failed to make true and full disclosure initially as well as at the time of second disclosure, we do not find any justifiable reasons to reduce or waive the amount of penalty so drastically.

Taking into consideration all these circumstances, in our considered opinion, it will be in the interest of justice to set aside the final order passed by the Settlement Commission and to remand the matter back to the Settlement Commission for hearing parties afresh and to pass orders as per law. Facts and circumstances noted in respect of writ petition No. 2191 of 1999 are also relevant for the remaining writ petitions and, therefore, it will be necessary that the final orders passed in all these proceedings should be set aside."

The learned counsel for the petitioner had also taken a point that the settlement applications of respondents 3 and 4 had been rejected for failure to pay the additional tax and therefore the subsequent applications of the said respondents 3 and 4 filed on 23.11.2012 ought not to have been entertained. In our opinion, the learned counsel for the respondents 2 to 5 has given a complete answer to this argument. He has referred to Section 245K(2) of the said Act which stipulates that where a person has made an application under Section 245C on or after the first day of June, 2007, and if such application has been allowed to be proceeded with under Section 245D(1), such person shall not subsequently be entitled to make an application under Section 245C. It was contended by the learned counsel for the respondents 2 to 5 that this bar from making another application under Section 245C would only apply if the earlier application had been allowed to be proceeded with under Section 245D(1). But, in the present case, the earlier applications filed by respondents 3 and 4 had not been allowed to be proceeded with under Section 245D(1) and had been rejected at the threshold for want of payment of the full amount of the additional tax and interest due. Prima facie, we are in agreement with the submission made by the learned counsel for the respondents. However, since we are not inclined to interfere with the impugned orders, we feel that this issue can also be left open to be decided by the Settlement Commission at the time of further proceedings till the order under Section 245D(4) is passed. For all these reasons, we agree with the learned counsel for the respondents 2 to 5 that this is not the stage at which this Court ought to interfere with the impugned orders and the proceedings pending before the Settlement Commission. The writ petition is accordingly dismissed. We make it clear that we have not expressed any opinion on the merits of the issues as to whether the respondents 2 to 5 had made a full and true disclosure and had indicated the manner in which the undisclosed income had been derived. Those and related issues on merits are for the Settlement Commission to decide. There shall be no order as to costs.

Similar view is taken by the Bombay High Court in the case of Commissioner of Income Tax (Central) Pune v. Income Tax Settlement Commission (ITSC), 2013 (40) taxmann.com 201 (Bombay) which reads as under :-

"The Commissioner of Income Tax (Central), Pune has challenged an order passed by the Settlement Commission on 29 August 2013 under the provisions of sub-section (2C) of Section 245D of the Income Tax Act 1961. By the order which has been impugned, the Settlement Commission has held as follows :

"In the totality of facts available to us at present, we are satisfied about the true and full nature of the disclosure made. The manner of making undisclosed income, in the facts of the case, as stated, is on sales kept outside the books resulting in understatement to sales. Needless to say, as observed by the Hon''ble High Court in this very case, that if at a later stage of the proceedings, facts come to our knowledge showing suppression of full material facts or mis-statements thereof, the law will take its own course.

The Commission has accordingly held that the application filed by the Second Respondent is not an invalid application and should be allowed to be proceeded with further. Following the order which was passed by the Settlement Commission on 29 August 2013, further hearings took place before the Commission on 19 September 2013 and 7 October 2013. The grievance of the Petitioner is that the Commission has without ordering an enquiry by the Commissioner under Section 245D(3), directly proceeded under sub-section (4) and a letter was received from the Directorate of Investigation of the Settlement Commission on 4 October 2013 requiring the inspection of the factory premises of the Second Respondent. The contention of the Revenue is that in the present case it was necessary for the Settlement Commission to cause the Commissioner to make or cause to be made a further enquiry or investigation and to furnish a report on the matters covered by the application to the Settlement Commission.

Section 245D(3) provides as follows :

"(3) The Settlement Commission, in respect of- (i)an application which has not been declared invalid under sub-section (2C); or

(ii) an application referred to in sub-section (2D) which has been allowed to be further proceeded with under that sub-section,

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 furnish a report on the matters covered by the application and any other matter relating to the case, and the Commissioner shall furnish the report within a period of ninety days of the receipt of communication from the Settlement Commission;

Provided that where the Commissioner does not furnish the report within the aforesaid period, the Settlement Commission may proceed to pass an order under subsection (4) without such report.

The provisions of sub-section (3) of Section 245D would make it clear that where an application has not been declared to be invalid by the Settlement Commission under sub-section (2C), the Commission is empowered to call for records from the Commissioner and upon the examination of such records, if it is of the opinion that a further enquiry or investigation in the matter is necessary, it may direct the Commissioner to do so. The jurisdiction to determine as to whether a further enquiry or investigation is necessary is thus vested with the Settlement Commission. In the present case, from the compilation of correspondence which is placed on the record, it is clear that on 3 October 2013, the Commissioner of Income Tax (Central) Pune had addressed a communication to the Settlement Commission setting out that an enquiry under subsection (3) of 245D was necessary in respect of certain specific issues. The grievance of the Petitioner, is that on 19 September 2013 at a hearing before the Commission it was indicated that the department would be heard on the issue relating to a Section 245D(3) enquiry on 7 October 2013, but as a matter of fact the Commission has not applied its mind to whether an enquiry under Section 245D(3) should be ordered.

The learned senior counsel appearing on behalf of the Second Respondent on the other had has submitted that the issue as to whether an enquiry under Section 245D(3) should be ordered by the Settlement Commission has not been finally concluded by the Settlement Commission, and during the course of the proceedings, the Settlement Commission would apply its mind to that aspect. As we have noted earlier, by a letter dated 3 October 2013 to the Settlement Commission, the Commissioner of Income Tax (Central) Pune has drawn the attention of the Commission to the specific issues on which a further enquiry or investigation under Section 245D(3) would be necessary.

Sub-section (4) of Section 245D provides as follows :

"(4) After examination of the records and the report of the Commissioner, if any, received under -

(i) sub-section (2B) or sub-section (3), or

(ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after giving an opportunity to the applicant and to the Commissioner to be 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 order 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 (4) of Section 245D the Settlement Commission has to : (i) examine the records; (ii) examine the report of the Commissioner, if any, received under sub-section (2B) or sub-section (3), as the case may be, (or under sub-section (1) as it stood before the Finance Act 2007); (iii) examine such further evidence as may be placed before it or obtained by it. The Settlement Commission is also required to furnish an opportunity to the applicant and to the Commissioner to be heard before it passes an order under sub-section (4). A reading together of the provisions of sub-section (3) and sub-section (4) would indicate that the Settlement Commission is not as a mandate of law required to order a further enquiry or investigation by the Commissioner under Section 245D(3) in every case. Whether the facts of the case are of such a nature or complexity as would require a further enquiry or investigation has to be determined by the Settlement Commission after it has occasion, upon calling for the records from the Commissioner and the examination of those records to decide whether a further enquiry or investigation is necessary. Undoubtedly, if the Settlement Commission holds that a further enquiry or investigation is necessary under sub-section (3), such an enquiry or investigation has to be ordered by the Commissioner because subsection (3) confers jurisdiction on the Commissioner to conduct the enquiry or the investigation, as the case may be. Equally, it is evident both from the language of subsection (3) and the terms of subsection (4) that the Settlement Commission is not required in every case to cause an enquiry or investigation to be made under subsection (3).That is evident by the use of the words "if any" in sub-section (4). Moreover, under sub-section (4) the Settlement Commission, besides considering the report, if any, of the Commissioner under subsection (2B) or sub-section (3) is empowered to examine such further evidence as may be placed before it or obtained by it. Evidence placed before the Commission would include evidence which may be produced either by the assessee or by the Commissioner. Evidence obtained by the Commission would include evidence which the Commission has obtained under its own authority. In that sense the powers of the Settlement Commission are wide. Finally, it may be necessary to note that under subsection (4) the Settlement Commission has to pass an order in accordance with the Act as it thinks fit on matters covered by the application. The Settlement Commission may also pass an order on any other matter relating to the case not covered by the application, but which has been referred to in the report of the Commissioner. Hence, if the Settlement Commission intends to pass an order in respect of any other matter which has not been referred to in the application, that matter must be of a nature such that it is referred to in the report of the Commissioner. At this stage, it would also be necessary to advert to the provisions of subsection (2) of Section 245F under which the Settlement Commission has exclusive jurisdiction to exercise the powers and to perform the functions of the Income Tax authority under the Act, where an application made under Section 245C has been allowed to be proceeded with under Section 245D, until an order is passed under sub-section (4) of Section 245D. This is, however, made subject to the provisions of subsection (3). Consequently, where the Commission in the course of its jurisdiction under Section 245D(3) has ordered an enquiry or investigation by the Commissioner, the exclusive nature of its jurisdiction is subject to Section 245D(3).

On the record of the case, it is common ground between counsel appearing on behalf of the Revenue and learned senior counsel appearing on behalf of the Second Respondent that the Settlement Commission is yet to apply its mind to whether an enquiry under Section 245D(3) should be ordered. In view of the statement which has been made on behalf of the Second Respondent which is consistent with the scheme of the statutory provisions, we are not inclined to entertain the proceedings at this stage, save and except to clarify that the Settlement Commission shall during the course of its proceedings specifically bring to bear its consideration on whether an enquiry under Section 245D(3) should be ordered particularly having regard to the circumstances which have been set out in the letter of the Commissioner of Income Tax dated 3 October 2013. Since the proceedings are pending before the Settlement Commission, it would not be appropriate for this Court to entertain the proceedings any further. We accordingly dispose of the proceedings, having clarified the legal position.

There shall be no order as to costs."

Similar view is taken by the High Court of Andhra Pradesh in the case of Commissioner of Income-tax, Vijaywada v. Settlement Commission (IT & WT), 2014 (49) taxmann.com 165 (Andhra Pradesh). Para 24 and 26 are relevant which reads as under :-

As a matter of fact, what all is required by the Settlement Commission at the stage of entertaining the application is whether a prima facie case is made out or not and in that context only subsequent amendments which have been brought in Sections 245C and 245D of the Act had dispensed with even issuing a preliminary notice to the Commissioner of Income Tax leaving it to the absolute discretion of the Settlement Commission to entertain a case or not for its consideration. The reasons for giving such discretion to the Commission cannot be lost sight particularly keeping in view of the objects of establishment of Settlement Commission and to settle the disputes between the taxpayer and the department in an amicable manner. As a matter of fact, the recent legislative efforts in bringing Section 268A of the Act and in issuing various circulars whereby restraining the department officials to file appeals and further appeals in all and sundry cases recognising futility of such exercise may be noticed. A close perusal of the order passed by the Settlement Commission, both at the stage of admission and also at the stage of passing of the final order, we find, as a matter of fact, ample opportunity was given to the Department to file their objections and also the representatives of the department were heard before passing the orders and in that view of the matter, we are unable to concur with the contention of the learned counsel for the petitioner that the order is vitiated on account of violation of principles of natural justice. Inasmuch as we are satisfied that it was within the discretion of the Settlement Commission at the stage of Section 245D(1) of the Act to admit a case for consideration based on the prima facie view, the aspect of admission of a case by the Settlement Commission except in exceptional circumstances cannot be the subject matter of a judicial review. This becomes clear from the law laid down in catena of judgments with reference to the restricted scope of interference by the Courts even with the final orders of the Settlement Commission. In that view of the matter, we do not see any reasons to order the amendment petition. Accordingly, the W.P.M.P. No. 28188 of 2002 is dismissed.

In the case of Commissioner of Income-tax v. Income Tax Settlement Commission, 2013 (33) taxmann.com 313 (Gujarat) para 6 is relevant which reads as under :-

"6. We are of the opinion that by such order, the Settlement Commission did not finally decide the merit or demerit of the rival contentions. It only allowed the application to be proceeded with. All contentions of both the sides would necessarily be gone into the Commission before passing any final order. The order of Settlement Commission was only in the nature of permitting further enquiry into application of the assessee for settlement. In that view of the matter, no interference is called for. Petition is dismissed. Rule is discharged."

In reply, Shri R.L. Jain, learned Senior counsel for the petitioners has submitted that no order has been passed by the Commissioner under Section 245D (2C) regarding admitting the application for settlement filed by the respondent No. 1 and department has only received a notice by which they came to know about it. He has also drawn our attention to the relevant provisions of the Act and definition as defined in Chapter XIX and submitted that application must contained a full and true disclosure of the income of the assessee, which has not been disclosed before the assessing officer, the manner in which such income has been derived as required under 245(C) (1) of the Act.

His next submission is that before passing of order standing counsel of the department should he heard. He also drawn our attention to the news item Annexures P/1 and P/11 and submits that the disclosure made by the respondent No. 1 was not full and true and thus, the learned authority has committed an error in accepting the application. In support of the aforesaid contention he placed reliance on the following cases CIT (Central) Calcutta v. B.N. Bhattachargee & Anr., 118 ITR 461 (SC), CIT v. Anjum M.H. Ghaswala & Ors., 252, ITR 1 (SC), CIT v. Express Newspapers Ltd., 1994 (206) 443 (SC), Ajmera Housing Corpn. v. CIT, 2010 (193) Taxman 193 (SC), Kuldeep Industrial Corporation v. Income-tax Officer & Ors., 223 ITR pg 840 (SC), Commissioner of Income Tax (Central) Pune v. Income Tax Settlement Commission (ITSC), 2013 (40) taxmann.com 201 (Bombay), Commissioner of Income-tax v. Godwin Steels P. Ltd., 2013 (353) ITR 353 (Delhi), Hassan Ali Khan v. Settlement Commission, 2008 (168) Taxman 78 (Bom), Commissioner of Income-tax v. Income-tax Settlement Commission & Anr., 2009 (310) ITR 10 (Mad) and Commissioner of Income-tax v. Om Prakash Mittal, 2005 (273) ITR pg 326 (SC).

To counter the aforesaid allegations learned counsel for the respondent No. 1 has drawn our attention to Annexure P/1, the stand taken by the department. Statutory report which is at page 53 and para 3.0 and 5.0 of the report. His contention is that no notice to either side is required at the time of considering the application. The rule of the department will start one the application is accepted and notice is issued to them. At the time of admission no objection of any kind was raised as is evident from the report which has been reproduced in the preceding paragraph and submits that interest of the department is well protected. The department just to linger on the proceedings before the Settlement Commission has filed this writ petition whereas they can raise all these objections before the Settlement Commission and in view of the law laid down by the Apex court in the case of Commissioner of Income Tax v. K. Jayaprakash Narayanan (supra). The Hon''ble Apex Court has granted liberty to the department to raise the contention before the settlement Commission who would be entitled to examine that question on the final hearing of the matter.

Since the matter is pending before Settlement Commission and it has to decide as to whether full disclosure was made or not, it is not for the court to enter into it and petitioner is at liberty to raise all objection regarding the maintainability of the application before the commission. With the aforesaid observations, we vacate the ad-interim order dated 9.1.2015 by allowing I.A. No. 378/2015 filed by the respondent No. 1.

It may be mentioned that we have not decided any issue on merits of the case and any observation made in the order will not in any way affect the subject matter pending for consideration before the settlement Commission."

This Court in light of the aforesaid judgment and after taking into account the judgment delivered by the Hon''ble Supreme Court, is of the opinion that as the matter is still pending before the Settlement Commission, the Settlement Commission has to decide whether the full disclosure is made or not. The petitioner is certainly at a liberty to raise all issues and grounds before the Commission. The Settlement Commission has to proceed the matter in accordance with Section 245D (2B), 245 D(3), 245D(4), 245D(4A), 245D(5), 245D(6), 245D(6A) of the Act. Thereafter, after examination of record, after considering report of the Commissioner and the materials brought on record before the Settlement Commission, the Settlement Commission has to pass a final order. The Settlement Commission has the jurisdiction to provide for the terms of settlement including demanding any tax, penalty or interest. The Settlement Commission is also having jurisdiction to examine as to whether any order has been obtained by fraud or misrepresentation of facts. Thus, in short, a complete mechanism has been provided for dealing with Settlement applications and the said mechanism is a complete code in itself and merely because of the fact that an interim admission order has been passed under Section 245(D)(2C), it does not mean that any irreparable loss has been caused to the Income Tax Department.

In the considered opinion of this Court, as the matter is pending before the Settlement Commission and no final order has been passed and as the Commission is now seized with the matter, all the grounds raised by the petitioner shall be looked into and shall be considered by the Settlement Commission while passing a final Order.

Resultantly, no case for interference is made out in the matter. However, by way of abundant caution, it is observed that any observation made by this Court will not affect in any way the subject matter pending for consideration before the Settlement commission. The Settlement Commission shall decide the matter strictly in accordance keeping in view the statutory provisions as contained under the Income Tax Act.

Resultantly, the writ petition is dismissed along with all connected writ petitions.

No order as to costs.

Certified copy as per rules.