Summary
The Supreme Court restored the Settlement Commission’s order granting the bank immunity from penalty and prosecution. Full disclosure before the Commission could include income already discovered by the Assessing Officer but not offered in the return. Cooperation and full, true disclosure supported the discretionary grant here. The High Court had improperly reassessed the sufficiency of the material and ordered reconsideration without establishing a recognised ground for judicial review.
Issues
- Whether immunity required disclosure of income beyond that already discovered by the Assessing Officer.
- Whether the Commission properly exercised its discretion on the bank’s disclosure and cooperation.
- Whether the High Court exceeded the limited scope of judicial review.
Provisions considered
- Sections 245C(1) and 245H(1), Income-tax Act, 1961Cooperation and full, true disclosure of income and its derivation supported discretionary immunity. Income offered beyond the return could include income already discovered by the Assessing Officer; an additional requirement of entirely new discoveries was rejected. (¶¶ 5.1, 5.3, 5.4, 6, 6.1, 7, 7.1, 7.2, 7.3, 7.4, 7.5, 8, 9, 12)
- Section 245D(1), Income-tax Act, 1961The Commissioner’s report and other relevant material had to be considered. The Commission’s references to that report defeated the Revenue’s assertion that the required procedure had not been followed. (¶¶ 5.2, 7.3, 7.4)
Held
- The statutory disclosure is made to the Commission. It need not invariably reveal something beyond the Assessing Officer’s discoveries: the assessee may accept an assessed liability and offer, through full and true disclosure, income additional to that returned. The contrary requirement would artificially obstruct settlement. (¶¶ 7, 7.1, 7.2)
- Immunity remains discretionary and fact-dependent. The Commission must consider the Commissioner’s report, the applicant’s disclosure and sources, and relevant evidence, while excluding irrelevant matters. Cooperation and full, true disclosure must satisfy it; approaching the Commission alone does not confer immunity. (¶¶ 6, 6.1, 7.3, 8, 12)
- Here the Commission considered the bank’s lease-accounting explanation, additional income under several heads, cooperation and the Commissioner’s report. Its order was reasoned and reflected application of mind; the High Court’s finding that the immunity reasoning was vague or unsupported was unjustified. (¶¶ 7.4, 7.5, 9)
- Judicial review of the Commission’s discretionary orders is narrow, addressing statutory contravention or prejudicial illegality and fraud, bias or malice. The High Court could not act as an appellate court on sufficiency of the material supporting this grant. Frequent interference with reasoned settlements would undermine their statutory purpose. (¶¶ 9, 10, 13)
- Express Newspapers was distinguishable because it involved extensive evidence of concealment and only partial disclosure. On the present facts, bona fide additional disclosure and cooperation supported restoration of the immunity order. (¶¶ 11, 12, 14)
Result
Appeal allowed without costs. Both High Court judgments set aside and the Settlement Commission’s order dated 4 March 2008 restored. Pending applications disposed of.