Puranchandra J. Rao vs Income Tax Settlement Commission and Others

Petitioner has moved this Court seeking to challenge the order dt. 9th June, 2006 passed by the Settlement Commission u/s 245D(1) of the IT Act and the order dt. 2nd Aug., 2006 u/s 142(2A) of the IT Act.

Insofar as the order of the Settlement Commission is concerned, learned Counsel submits that the application was rejected on two counts. Firstly that there was no complexity of investigation and secondly there was no full and true disclosure.

Insofar as 2nd order dt. 2nd Aug., 2006, it is submitted that the special audit has been ordered considering the complexity of accounts. This was done without giving a hearing to the petitioner as required by law. Apart from that it is submitted that once the authority had come to the conclusion that a special audit is required on complexity of account, the natural corollary is that this will include expression complexity of investigation, consequently order of the Settlement Commission is liable to be set aside. Our attention was invited to the judgment of this Court in Centurion Bank of Punjab Ltd. (Earlier Known as Centurion Bank Ltd.) Vs. The Income Tax Settlement Commission and Others, .

On the other hand, on behalf of the respondent learned Counsel submits that Settlement Commission has rightly rejected the application of the petitioner as there was no true and full disclosure.

We have heard learned Counsel for the parties. The Settlement Commission in the impugned order at para 9 firstly held that they do not see any complexity of investigation in resolving the disputes. Insofar as full and true disclosure, it held, that both the quantum and the manner of the disclosure do not pass the test of being full and true.

It is also held that the issues emerging out of the search are not satisfactorily addressed while making the disclosure, after having carefully gone through the legal submissions and paper book.

We find from the report of the CIT and the application made by the petitioner herein that he had disclosed income as managing agent of two petrol pumps. On investigation, it had come on record that the petitioner was not managing the petrol pump but in fact, was running the same and paying commission to the licence-holders therein. It is this material which was before the Settlement Commission.

In the instant case it is clearly set out that the issues emerging out of the search are not satisfactorily addressed. In our opinion, this cannot be said to be the case of "no reasons". We are therefore, of the opinion that insofar as challenge to the order of the Commission, this would not be a fit case where we should exercise our extraordinary jurisdiction.

Insofar as consequential order dt. 2nd Aug., 2006 u/s 142(2A) of the IT Act, learned Counsel fairly conceded that they would give hearing to the petitioner. In the light of that, order dt. 2nd Aug., 2006 is quashed and set aside. The matter is referred back to the respondent No. 2 to pass fresh order after giving the petitioner an opportunity of hearing.

Rule made partly absolute accordingly with no order as to costs.