Gujarat High CourtUmang Hiralal Thakkar vs Income Tax Settlement Commission on 20 July, 2018Bench:M.R. Shah,B.N. KariaC/SCA/4321/2017                                         CAV JUDGMENT



             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

              R/SPECIAL CIVIL APPLICATION NO.  4321 of 2017
                                  With 
                    CIVIL APPLICATION NO. 1 of 2017
                                  With 
              R/SPECIAL CIVIL APPLICATION NO. 4322 of 2017
 
FOR APPROVAL AND SIGNATURE: 
 

HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE B.N. KARIA
=========================================
1      Whether Reporters of Local Papers may be allowed to see 
       the judgment ?

2      To be referred to the Reporter or not ?

3      Whether their Lordships wish to see the fair copy of the 
       judgment ?

4      Whether this case involves a substantial question of law as 
       to the interpretation of the Constitution of India or any 
       order made thereunder ?

=============================================
                         UMANG HIRALAL THAKKAR
                                  Versus
                    INCOME TAX SETTLEMENT COMMISSION
=============================================
Appearance:
MR.   S.N.   SOPARKAR,   SR.   ADV   WITH   MR   B   S   SOPARKAR(6851)   for   the 
PETITIONER(s) No. 1
MR.   M.R.   BHATT,   SR.   ADV   WITH   MRS   MAUNA   M   BHATT(174)   for   the 
RESPONDENT(s) No. 2
=============================================
  CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
         and
         HONOURABLE MR.JUSTICE B.N. KARIA
                      Date : 20/07/2018

                             CAV JUDGMENT(PER : HONOURABLE MR.JUSTICE M.R. SHAH)


1.0. As   common   question   of   law   and   facts   arise   in   both   thesePage 1 of 26C/SCA/4321/2017                                         CAV JUDGMENTpetitions and as such they arise out of the impugned common order 
passed by the learned Settlement Commission, both these petitions 
are decided and disposed of together by this common judgment and 
order.2.0. Feeling aggrieved and dissatisfied with the impugned order 
passed   by   the   learned   Settlement   Commission   dated   27.05.2016 
rejecting   the   settlement   application   submitted   by   the   respective 
petitioners ­ original applicants invalid underSection 245D(2C)of 
the Income Tax Act, 1961, the petitioners ­ original applicants have 
preferred present Special Civil Applications.3.0.   That   for   the   sake   of   convenience,   facts   in   Special   Civil 
Application No.4321 of 2017 in the case of the original applicant ­ 
Umang   Thakkar   are   narrated,   as   facts   in   both   the   cases   are 
common.4.0. The facts leading to the present Special Civil Applications in 
nutshell are as under:4.1. That  the  petitioner  is Director  of  Dharmadev Infrastructure 
Limited ­ petitioner of Special Civil Application No.4322 of 2017 
engaged   in   the   business   of   the   Construction   and   Land 
Development. That on 15.10.2013, a search underSection 132of 
the Income Tax Act, 1961 (hereinafter referred to as the "Act") was 
carried   out   at   the   residential   premises   of   the   petitioner   herein­ 
original applicant as well as group concerns of "Dharmadev Group".Therefore, on 22.02.2016, the petitioner herein filed an applicationPage 2 of 26C/SCA/4321/2017                                           CAV JUDGMENTunderSection 245 Cof the Act for AY 2008­09 to AY 2015­16. That 
in the case of Umang Hiralal Thakkar, he declared Rs.9,24,16,911/­ 
as   additional   income   and   in   the   case   of   applicant   himself 
Dharmadev   Infrastructure   Limited   declared   Rs.22,37,92,628/­as 
additional income. That the said applications were submitted underSection 245C(1) of the Act.4.2. That thereafter, the Settlement Commission passed an order 
underSection 245D(1) on 11.4.2016 allowing the application to 
be proceeded with further. That the report underSection 245D(2B)were   received   on   13.05.2016.   That   the   Settlement   Commission 
fixed   the   hearing   underSection   245D(2C)on   25.5.2016.   At   this 
juncture,   it   is   required   to   be   noted   that   as   such   prior   thereto, 
Settlement Commission rejected the petitioner's application underSection   245D(1).   That   thereafter,   on   28.03.2016   the   petitioner 
again filed an application underSection 245 Cof the Act and made 
revised disclosure total amounting to Rs. Rs.9,24,16,911/­ in case 
of applicant Umang Thakkar and Rs.22,37,92,628/­ in the case of 
applicant   himself   Dharmadev   Infrastructure   Limited.   As   observed 
herein   above,   thereafter   the   Settlement   Commission   passed   an 
order   underSection   245D(1)   allowing   the   application   to   be 
proceeded with the further. That on receipt of the report from the 
Principal Commissioner of Income Tax underSection 245D(2B)of 
the Act,  the same was furnished to original applicant. The learned 
Principal CIT objected to the said application and it was stated that 
there is no true and full disclosure on the part of the applicant.  It 
was   stated   that   there   is   no   explanation   regarding   seized   / 
impounded papers, source  of found and seized jewellery  and forPage 3 of 26C/SCA/4321/2017                                          CAV JUDGMENTsource of cash deposits in Benami accounts. It was also submitted 
that even the application for AY 2015­16 may not be entertained 
since   no   proceedings   were   pending   in   both   the   cases.   That   the 
respective applicants replied to the objection raised by the Principal 
CIT during the course of the hearing. That thereafter, by impugned 
common order the learned Settlement Commission has rejected the 
settlement application vide order dated 27.5.2016 on the ground 
that   there   was   no   true   and   full   disclosure   on   the   part   of   the 
petitioner.   That   thereafter,   the   respective   applicants­   petitioners 
preferred rectification application underSection 154of the Income 
Tax   Act   against   the   order   dated   27.5.2016.   However   the   said 
application came to be rejected vide order dated 24.08.2016 on the 
ground that there is no error apparent on the record. Hence, the 
respective   petitioners   ­   original   applicants   are   before   this   Court 
challenging   impugned   common   order   passed   by   the   Settlement 
Commission   rejecting  the  settlement  application   preferred  by  the 
respective applicants declaring the same as invalid underSection 
245D(2C)of the Income Tax Act.5.0. Shri S.N.Soparkar, learned Senior Advocate has appeared on 
behalf   of   the   petitioner   and   Shri   M.R.   Bhatt,   learned   Senior 
Advocate has appeared on behalf of the Revenue.6.0. Shri Soparkar, learned Senior Advocate appearing on behalf 
of   the   respective   petitioners   has   vehemently   submitted   that   the 
impugned order passed by   the learned Settlement Commission is 
beyond the scope and ambit ofSection 245D(2C)of the Act.Page 4 of 26C/SCA/4321/2017                                          CAV JUDGMENT6.1. It is further submitted by Shri Soparkar, learned counsel for 
the petitioners that at the stage ofSection 245D(2C)the validity of 
the   application   only   is   required   to   be   considered   and   nothing 
further than that.6.2. It is further submitted by Shri Soparkar, learned counsel for 
the   petitioners   that   correctness   of   the   claim   /   disclosure   can   be 
considered at the stage ofSection 245D (3)and (4) of the Act.6.3. It is further submitted by Shri Soparkar, learned counsel for 
the   petitioners   that   as   such   in   the   present   case   in   the   second 
application   submitted   on   28.3.2016,   the   petitioner   made   higher 
disclosure of Rs.9.25 crores.6.4. It is further submitted by Shri Soparkar, learned counsel for 
the petitioners that while passing the order underSection 245D(1)of   the   Act,   the   Settlement   Commission   in   fact   did   consider   the 
correctness of the claim and / or issue whether there is true and full 
disclosure   or   not.   It   is   submitted   that   only   thereafter   having 
observed and held that true and full disclosure  has been made by 
the   applicant   thereafter   the   settlement   applications   were 
permitted / allowed to proceed with further. It is submitted that 
therefore, thereafter the learned Settlement Commission could not 
have   and  /  or   ought   not   to  have   rejected  the   application   at   the 
stage of theSection 245D(2C)and therefore, the same is wholly 
without jurisdiction and beyond the scope ofSection 245D(2C).6.5. It is further submitted by Shri Soparkar, learned counsel forPage 5 of 26C/SCA/4321/2017                                          CAV JUDGMENTthe   petitioners   that   the   correctness   of   the   disclosure   and   /   or 
whether there is true and full disclosure or not is required to be 
considered   at   the   stage   ofSection   245D(4).   It   is   submitted   that 
therefore, if the application is permitted to be proceeded further, no 
prejudice shall be caused. It is submitted that on the other hand the 
applicant   will   not   be   permitted   to  proceed   further   it   shall   cause 
prejudice   to   the   petitioner.   It   is   submitted   that   therefore, 
Settlement   Commission   ought   to   have   permitted   /   allowed   the 
application   to   be   proceeded   further.In   support   of   his   above 
submission,   Shri   Soparkar,   learned   Senior   Advocate   for   the 
petitioners has heavily relied upon the decision of this Court in the 
case   ofPrincipal   Commissioner   of   Income   Tax   (Central)   vs. 
Settlement Commissionreported in (2016) 65 Taxmann. com 309 
(Gujarat).6.6. It is further submitted by Shri Soparkar, learned counsel for 
the petitioners that even otherwise the impugned order declaring 
the application invalid underSection 245D(2C)of the Act is liable 
to be quashed and set aside on the ground that same is based on 
conjecture   and   surmise.   It   is   submitted   that   while   declaring 
application invalid, the Settlement Commission has failed to point 
out  a  single   material  or  document  which amounts to  incomplete 
disclosure. It is submitted that merely marking that there was no 
true and full disclosure by the applicant would not sufficient.6.7. It is further submitted by Shri Soparkar, learned counsel for 
the petitioners that in the case ofAjmera Housing Corporation vs. 
CITreported in (2010) 326 ITR 642, the Hon'ble Supreme CourtPage 6 of 26C/SCA/4321/2017                                          CAV JUDGMENThas observed that it is mandatory for the Settlement Commission to 
record   its   findings   with   regard   to   the   issues   of   full   and   true 
disclosure   of   particulars   undisclosed   income   and   the   manner   in 
which suhc income was derived by the assessee.6.8. It is further submitted by Shri Soparkar, learned counsel for 
the petitioners that even in a case where the assessee has any doubt 
with respect to true and full disclosure, the Settlement Commission 
would have called for the further report underSection 245D(4)of 
the   Act   subject   to   compliance   of   technical   requirements   underSection 245D(1)and245D(2C).6.9. It is further submitted by Shri Soparkar, learned counsel for 
the petitioners that even the impugned order is not sustainable as 
the same is based on the basis of change of opinion without there 
being any new material on record.6.10. It is further submitted by Shri Soparkar, learned counsel for 
the petitioners that even while observed that there is no true and 
full disclosure, the learned Settlement Commission has considered 
wrong   facts.   It   is   submitted   that   view   taken   by   the   Settlement 
Commission   is   wrong   and   even   the   reasons   recorded   are   also 
wrong.   It   is   submitted   that   though   it   was   pointed   out   in   the 
rectification application, the same has been rejected.6.11. It is further submitted by Shri Soparkar, learned counsel for 
the   petitioners   that   as   such   no   objection   was   raised   by   the 
Commissioner   on   12.5%   cash   of   Rs.42.67   crores.   It   is   furtherPage 7 of 26C/SCA/4321/2017                                       CAV JUDGMENTsubmitted   that   so   far   as   observations   made     by   the   Settlement 
Commission that the income offered at 6% is very low is concerned, 
it is submitted that it is question of evidence which is required to be 
considered at an appropriate stage viz. 245D(4) of the Act.6.12.  It is further submitted by Shri Soparkar, learned counsel for 
the petitioners that even allowing the expenditure is also question 
of evidence.Making   above   submissions   and   relying   upon   the   following 
decisions, it is requested to allow the present petitions and quash 
and   set   aside   the   impugned   orders   passed   by   the   Settlement 
Commission.(1).Acron   Pharmaceuticals   and   ors   vs.   Union   of   India   and   orsrendered in SCA No.2694 of 2012 dated 29.08.2013.(2).Mann Pharmaceutical Ltd vs. Union of India and ors reported in 
2015(3) GLH 652.(3). Victory Ceratech Pvt. Ltd v. Union of India & Ors reported in 
2013 SCC Online Guj 6981.(4).Commissioner   of   Income   Tax   vs.   Income   Tax   Settlement 
Commissionreported in (2013) 35 Taxmann. com 56 (Delhi)
(5).Principal   Commissioner   of   Income   Tax   (Central)   vs. 
Settlement Commissionreported in (2016) 65 Taxmann. com 309 
(Gujarat) 
(6).Commissioner of Central Excise vs. True Woods P. Ltd and 
Orsreported in 2005(85) DRJ 575 (DB).7.0. Present petitions are vehemently opposed by Shri M R Bhatt, 
learned counsel for the respondent­ Revenue.Page 8 of 26C/SCA/4321/2017                                        CAV JUDGMENT7.1. It is vehemently submitted by Shri Bhatt, learned counsel for 
the Revenue that impugned order passed by the learned Settlement 
Commission   is   absolutely   in   consonance   with   the   provisions   ofSection 245D(2C)of the Act, which is not required to be interfered 
with in exercise of powers underArticle 226of the Constitution of 
India.7.2. It is further submitted by Shri Bhatt, learned counsel for the 
Revenue   that   while   passing   the   impugned     order   underSection 
245D(2C), the learned Settlement Commission has considered the 
report   submitted   by   the   Principal   Commissioner   of   Income   Tax 
underSection 245D(2B)of the Act as well as relevant documents 
and evidence so as to come to a conclusion that there is no full and 
true disclosure by the petitioners.7.3. t is further submitted by Shri Bhatt, learned counsel for the 
Revenue   that   merely   because   earlier   learned   Settlement 
Commission   passed   an   order   underSection   245D(1)of   the   Act 
admitting   the   settlement   application,   it   cannot   be   said   that   the 
learned Settlement Commission considered the correctness of the 
claim and / or issue whether there is true and full disclosure or not. 
It is submitted that at the stage ofSection 245D(1)of the Act, the 
learned   Tribunal   is   required   to   consider   whether   the   Settlement 
application is required to be admitted or not. It is submitted that 
only thereafter stage of inquiry underSection 245D(2C)will come 
and / or issue whether there is true and full disclosure   or not is 
required to be considered and thereafter the stage underSection 
245D(4)will come.In support of his above submission, Shri Bhatt,Page 9 of 26C/SCA/4321/2017                                         CAV JUDGMENTlearned counsel for the Revenue has relied upon the decision of the 
Delhi High Court in the case ofCommissioner of Central Excise vs. 
True Woods  P. Ltd and Orsrendered in W.P(C)  21055 of 2005:2005(85) DRJ 575 (DB). He has also relied upon the decision of the 
Division   Bench   of   this   Court   in   the   case   ofVishnubhai   Mafatlal 
Patel vs. Assistant Commissioner of Income Taxreported in (2013) 
31   Taxmann.Com   99   (Gujarat)   as   well   asArpan   Associates   vs. 
Income   Tax   Settlement   Commissionreported   in   (2013)   37 
Taxmann. com 317 (Gujarat).7.4. t is further submitted by Shri Bhatt, learned counsel for the 
Revenue that in the present case there is no allegation of violation 
of principles of natural justice and / or any procedural lapse. It is 
submitted that therefore, considering the very limited scope of the 
judicial   review   against   the   order   passed   by   the   Settlement 
Commission, the impugned order passed by the learned Settlement 
Commission is not required to be interfered with by this Court in 
exercise of powers underArticle 226of the Constitution of India.7.5. t is further submitted by Shri Bhatt, learned counsel for the 
Revenue that in the present case the Settlement Commission has 
specifically come to the conclusion  and has given finding that there 
is no true and correct disclosure, considering the report filed by the 
Principal Commissioner of Income Tax underSection 245D(2B)of 
the Act as well as considering the transaction with Jalaram Finvest 
Ltd and that the petitioner has offered only 6% p.a on the daily 
cash  balance   available  in  the  cash  flow of  the  41  bank accounts 
which is very low compared to the   prevailing interest rates in FYPage 10 of 26C/SCA/4321/2017                                           CAV JUDGMENT2007­08 to 2014­15.7.6. So   far   as   submission   on   behalf   of   the   petitioner   that 
Settlement Commission ought to have held that further inquiry and 
ought   to   have   called   for   report   underSection   245D(3)is 
concerned, it is submitted that the same is contrary to the scheme 
of   the   Settlement   cases   under   Chapter   XIX   ­A   of   the   Act.   It   is 
submitted that report underSection 245D(3)can be called for by 
the Settlement Commission only when either an application has not 
been   declared   invalid   under   sub­Section   (2C)     or   an   application 
referred to sub­Section (2D) which has been allowed to be further 
proceeded   with   under   that   Section.   It   is   submitted   that   in   the 
present case the Settlement Commission under the impugned order 
underSection   245D(2C)has   declared   the   application   of   the 
petitioner as invalid and therefore, there is no question for calling 
for   report   from   the   Commissioner   as   envisaged   underSection 
245D(3)of the Act.Making   above   submissions   and   relying   upon   the   findings 
recorded by the learned Settlement Commission, it is requested to 
dismiss the present petition.8.0. Heard   the   learned   counsels   for   the   respective   parties   at 
length.   At   the   outset,   it   is   required   to   be   noted   that   what   is 
challenged in the present petition is the impugned order passed by 
the learned Settlement Commission underSection 245D(2C)of the 
Act   declaring   the   settlement   applications   submitted   by   the 
petitioners as invalid on the ground that there is no true and full 
disclosure.Page 11 of 26C/SCA/4321/2017                                                     CAV JUDGMENT9.0. Therefore, while considering the challenge to the impugned 
order,    the   scope   of   judicial   review   of   the   order   passed   by   the 
Settlement Commission in exercise of writ jurisdiction is required to 
be considered.9.1. In   case   of  Fatechand   Nursing   Das   vs.   Settlement  
Commission (IT And WT) and anr  reported in  176 ITR 169  the 
Supreme Court observed that in exercise of power of judicial review 
of   the   decision   of   the   Settlement   Commission,   the   Court   is 
concerned with the legality of the procedure followed and not with 
the validity of the order. Judicial review is not concerned with the 
decision but with the decision­making process.9.2.   The   limited   scope   of   judicial   review   against   the   order   of 
Settlement   Commission   is   well   settled   proposition.In   case   ofJyotendrasinhji vs. S.I.Tripathi and orsreported in 201 ITR 611, 
the   Supreme   Court   while   holding   that   against   the   order   of   the 
Settlement Commission, writ jurisdiction of the High Court is not 
barred.  The  Supreme  Court   further  observed   that   judicial  review 
flowing   from   exercise   of   such   powers   would   be   restricted   to 
considering   whether   the   order   of   the   Settlement   Commission   is 
contrary   to  the   provision   ofIncome   Tax  Act.   It   was  observed   as 
under:"Be that as it may, the fact remains that it is open  
                         to the Commission to accept an amount of tax by 
                         way of settlement and to prescribe the manner in  
                         which   the   said   amount   shall   be   paid.   It   may  
                         condone the defaults and lapses on the part of the  
                         assessee   and   may   waive   interest,   penalties   or  
                         prosecution, where it thinks appropriate. Indeed,  
                         it would be difficult to predicate the reasons andPage 12 of 26C/SCA/4321/2017                                                        CAV JUDGMENTconsiderations   which   induce   the   commission   to  
                  make   a   particular   order,   unless   of   course   the  
                  commission itself chooses to, give reasons for its  
                  order. Even if it gives reasons in a given case, the  
                  scope of enquiry in the appeal remains the same  
                  as   indicated   above   viz.,   whether   it   is,contrary  
                  956 to any of the provisions of the Act. In this  
                  context, it is relevant to note that the principle of  
                  natural   justice   (and   alteram   partem)  has   been  
                  incorporated   inSection   245­D  itself.   The   sole  
                  overall   limitation   upon   tire   Commission   thus  
                  appears,  to  be  that it  should  act  in  accordance  
                  with   the   provisions   of   the   Act.   The   scope   of  
                  enquiry,   whether   by   High   Court   underArticle  
                  226or by this Court underArticle 136is also the  
                  same   whether   the   order   of   the   Commission   is  
                  contrary to any of the provisions of the Act and if  
                  so,   has   it   prejudiced   the   petitioner/appellant  
                  apart from ground of bias, fraud & malice which,  
                  of course, constitute a separate and independent  
                  category. Reference in this behalf may be had to  
                  the   decision   of   this   Court   inSri   Ram   Durga  
                  Prasad v. Settlement Commission176 I.T.R. 169,  
                  which too was an appeal against the orders of the  
                  Settlement Commission. Sabyasachi Mukharji J.,  
                  speaking   for   the   Bench   comprising   himself   and  
                  S.R. Pandian, J. observed that in such a case this  
                  Court is " concerned with the legality of procedure  
                  followed and not with the validity of the order.'  
                  The   learned   Judge   added   'judicial   review   is  
                  concerned   not   with   the   decision   but   with   the  
                  decision­making   process."Reliance   was   placed  
                  upon the decision of the House of Lords in Chief  
                  Constable of the N.W. Police v. Evans, [1982] 1  
                  W.L.R.1155.   Thus,   the   appellate   power   underArticle   136was   equated   to   power   of   judicial  
                  review, where the appeal is directed against the  
                  orders' of the Settlement Commission. For all the  
                  above reasons, we are of the opinion that the only  
                  ground   upon   which   this   Court   can   interfere   in  
                  these appeals is that order of the Commission is 
                  contrary   to   the   provisions   of   the   Act   and   that  
                  such contravention has prejudiced  the appellant 
                  The main controversy in these appeals relates to  
                  the interpretation of the settlement deeds though  
                  it is true, some contentions of law are also raised.  
                  The commission has interpreted the trust deeds inPage 13 of 26C/SCA/4321/2017                                                     CAV JUDGMENTa   particular   manner,   Even   if   the   interpretation  
                         placed  by the  commission   the  said  deeds  is  not  
                         correct, it would not be a ground for interference  
                         in these appeals, since a wrong interpretation of a  
                         deed of trust cannot be said to be a violation of  
                         the provisions of theIncome Tax Act. it is equally  
                         clear that the interpretation placed upon the said  
                         deeds   by   the   Commission   does   not   bind   the  
                         authorities under the Act in proceedings relating  
                         to other assessment years".9.3. The Hon'ble Supreme Court in the case ofC.A. Abraham v. 
Assistant CITreported in (2002) 255 ITR 540(2000) has held that 
Court's power of judicial review on the decision of the Settlement 
Commission was very restricted. It is observed that while exercising 
the jurisdiction underArticle 226of the Constitution of India, the 
High Court is not expected to go into facts.9.4. Applying lawlaid down bythe Hon'ble Supreme Court in the 
aforesaid decision as well as decision of this Court in the aforesaid 
decisions, the limited scope of judicial review, the impugned order 
passed   by   the   learned   Settlement   Commission   is   required   to   be 
considered.9.5. It   is   the   case   on   behalf   of   the   petitioner   that   once   while 
passing order underSection 245D(1)of the Act, the applications of 
the   petitioners   were   allowed   to   be   proceeded   with   further, 
thereafter, it would not be open for the Settlement Commission to 
declare the application invalid underSection 245D (2C)of the Act 
on the ground that there is not true and full disclosure. It is also the 
case on behalf of the petitioners that while passing the order underSection   245D)(1)   of   the   Act   and   allowing   the   application   to   be 
proceeded   with   further   the   learned   Settlement   Commission 
considered all the material on record and come to the conclusion 
that there is true and full disclosure and therefore, the impugnedPage 14 of 26C/SCA/4321/2017                                                CAV JUDGMENTorder underSection 245D(2C)of the Act declaring the applications 
invalid on the ground that there is no true and full disclosure, is 
change   of   opinion   and   is   not   permissible.   The   aforesaid   has   no 
substance. At the outset, it is required to be noted that scope of 
inquiry   at   the   stage   of   245D(1)   and   inquiry   at   the   stage   of 
245D(2C) are different and distinct. At this stage, decision of the 
Division Bench in the case ofVishnubhai Mafatlal Patel(supra) is 
required to be referred to and considered. In the aforesaid decision, 
the Division Bench of this Court has considered the scheme of the 
proceedings before the learned Settlement Commission. In para 6, 
the Division Bench has considered all relevant provisions of the Act 
and thereafter the Division Bench has considered the various stages 
provided underSection 245. In para 6 to 13, the Division Bench 
has observed and held as under:"6. Having thus heard learned counsel for the parties  
                 and having perused the documents on record, we may 
                 at   the   outset   take   note   of   statutory   provisions  
                 applicable.Chapter XIXA which was introduced in the  
                           Act in the year 1976, pertains to settlement  
                           of cases.Settlement Commission is constituted underSection 245Bof the Act.Section 245BAlays  
                           down   the   jurisdiction   and   powers   of  
                           Settlement Commission.Section   245Cpertains   to   application   for  
                           settlement   of   cases.   Sub­section(1)   thereof  
                           permits an assessee, at any stage of a case  
                           relating to him, make an application in such  
                           form   and   in   such   manner   as   may   be  
                           prescribed,   and   containing   a   full   and   true  
                           disclosure of his income which has not been  
                           disclosed   before   the   Assessing   Officer,   the  
                           manner   in   which   such   income   has   been 
                           derived,   the   additional   amount   of   income­Page 15 of 26C/SCA/4321/2017                                                    CAV JUDGMENTtax payable on such income and such other  
                      particulars   as   may   be   prescribed,   to   the  
                      Settlement   Commission   to   have   his   case  
                      settled.   It   is   further   provided   that  
                      application   shall   be   disposed   of   in   the  
                      manner hereinafter provided.Section   245Dof   the   Act   pertains   to  
                      procedure on receipt of an application undersection   245C.   Relevant   portion   ofsection  
                      245Dreads as under :245D.  (1) On receipt of an application undersection 245C, the Settlement Commission shall,  
                  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  
                  application   made   by   him   be   allowed   to   be  
                  proceeded   with   and   on   hearing   the   applicant,  
                  the   Settlement   Commission   shall,   within   a 
                  period   of   fourteen   days   from   the   date   of   the 
                  application,   by   an   order   in   writing,   reject   the  
                  application   or   allow   the   application   to   be  
                  proceeded with :Provided  that where no order has been passed,  
                  within   the   aforesaid   period   by   the   Settlement  
                  Commission, the application shall be deemed to  
                  have been allowed to be proceeded with.(2B) The Settlement Commission shall, ­(i)in respect of an application which is allowed  
                  to   be   proceeded   with   under   sub­section   (1), 
                  within   30   days   from   the   date   on   which   the  
                  application was under; or(ii) in respect of an application referred to in  
                  sub­section (2A) which is deemed to have been 
                  allowed   to   be   proceeded   with   under   that   sub­
                  section,   on   or   before   the   7th  day   of   August,  
                  2007, call for a report from the Commissioner,  
                  and the Commissioner shall furnish the report  
                  within a period of thirty days of the receipt of  
                  communication   from   the   SettlementPage 16 of 26C/SCA/4321/2017                                                   CAV JUDGMENTCommission.(2C) Where a report of the commissioner called  
                  for  under  sub­section  (2B)   has   been  furnished  
                  within   the   period   specified   there   in,   the  
                  Settlement Commission may, on the basis of the  
                  report and within the period of fifteen days of  
                  the receipt of the report, by an order in writing,  
                  declare   the   application   in   question   as   invalid,  
                  and   shall   send   the   copy   of   such   order   to 
                  applicant and commissioner :Provided  that   an   application   shall   not   be  
                  declared invalid unless an opportunity has been  
                  given to the applicant of being heard:Provided   further  that   where   the   commissioner  
                  has   not   furnished   the   report   within   the  
                  aforesaid   period,   the   Settlement   Commission  
                  shall proceed further in the matter without the  
                  report of the Commissioner.3.The Settlement Commission, in respect of-(i) an application which has not been declared  
                  invalid under sub­section (2C) ; or(ii)   an   application   referred   to   in   sub­section 
                  (2D)   which   has   been   allowed   to   be   further  
                  proceeded with under that sub­section, 

                  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   on   the   receipt   of 
                  communication   from   the   Settlement  
                  Commission :Page 17 of 26C/SCA/4321/2017                                                   CAV JUDGMENTProvided that where the commissioner does not  
                  furnish the report within the aforesaid period, 
                  the Settlement Commission may proceed to pas  
                  an   order   under   sub­section   (4)   without   such  
                  report.4. After   examination   of   the   records   and   the  
                     report   of   the   Commissioner,   if   any,   received  
                     under­(i) sub­section (2B) or sub­section (3), or(ii)   the   provision   of   sub­section   (1)   as   they  
                  stood   immediately   before   their   amendment   by  
                  theFinance   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 authorized 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.7. From   the   perusal   of   the   statutory   provisions   noted 
          above, it can be gathered that an assessee may at any  
          stage of the case relating to him, make an application  
          for settlement to the Commission under sub­section(1)  
          ofsection 245C. Such application has to be made in a  
          prescribed   manner   and   is   required   to   contain   a   full  
          and true disclosure of the income of the assessee which  
          had not been disclosed before the Assessing Officer and 
          the   manner  in  which  such   income   had   been  derived  
          besides   such   other   particulars   as   may   be   prescribed.  
          When such application is filed, it is to be treated in the  
          manner   provided   insection   245D.   Sub­section(1)   ofsection   245Dprovides   that,   on   receipt   of   an 
          application, the Settlement Commission shall, within  
          seven days of receipt, issue a notice to the applicant  
          requiring   him   to   explain   why   such   an   application  
          made   by   him   be   allowed   to   be   proceeded   with.   OnPage 18 of 26C/SCA/4321/2017                                                   CAV JUDGMENThearing   the   applicant,   the   Settlement   Commission  
          shall,   within   fourteen   days   from   the   date   of   the  
          application,   by   an   order   in   writing   either   reject   the  
          application or  allow  the  application  to  be  proceeded  
          with.   Proviso   to   sub­section(1)   ofsection   245Dprovides that where no order has been passed by the  
          Settlement   Commission   as   aforesaid,   the   application  
          shall be deemed to have been allowed to be proceeded  
          with.8. Under   sub­section(1)   ofsection   245Dthus,   the   first  
          stage of scrutinising the application of settlement made  
          by   an   assessee   is   envisaged.   The   statute   does   not  
          provide for grounds on which Settlement Commission  
          may reject such an application or allow the application  
          to   be   proceeded   with.   There   are   however,   sufficient  
          indications   in   the   statute   itself   what   would   be   the  
          purpose and nature of scrutiny of Commission at that  
          stage. As already noted, sub­section(1) ofsection 245Can assessee may make an application for settlement in  
          the   prescribed   manner   containing   true   and   full  
          disclosure of income not previously disclosed before the  
          Assessing   Officer   and   the   manner   in   which   such  
          income   had   been   derived   as   also   the   additional  
          amount   of   income­tax   payable   on   such   income   and  
          such   other   particulars   as   may   be   prescribed.   At   the 
          stage   of   sub­section(1)   ofsection   245Dof   the   Act,  
          therefore, prime scrutiny of the Commission would be  
          whether application of the assessee is in order and in  
          conformity with the requirements of sub­section(1) ofsection   245Cwhich   would   include   filing   of   an  
          application in the prescribed manner and also making  
          necessary   disclosures   as   required   therein.   There   are 
          also   additional   requirements   of   sub­section(1)   ofsection   245Csuch   as   payment   of   requisite   tax   and 
          interest thereon which would have been payable under  
          the provisions of the Act, had the income disclosed in 
          the   application   been   declared   by   the   assessee   in   the  
          return of income before the Assessing Officer. It would  
          thus be well within the jurisdiction of the Settlement  
          Commission   to   examine   whether   the   application   for 
          settlement   fulfills   such   requirements   or   not.   Such  
          scrutiny   of­course   would   be  summary   in  nature.  We  
          may   recall   that   the   Settlement   Commission   upon  
          receipt   of   such   an   application   within   seven   daysPage 19 of 26C/SCA/4321/2017                                                  CAV JUDGMENTthereof, has to issue notice to the assessee and pass a  
          final order either rejecting the application or allowing  
          the application to be proceeded within fourteen days of  
          the   date   of   application.   Proviso   to   sub­section(1)   ofsection 245Dmakes it further clear that when no such  
          order   is   passed   rejecting   the   application   within   the  
          period prescribed, the application shall be deemed to  
          have been allowed to be proceeded with.9. Two things therefore, emerge. Firstly, that at the stage 
          ofsection 245D(1)of the Act, the Commission would  
          have ample powers to examine whether an application  
          of an assessee made undersection 245C(1)of the Act  
          fulfills   the   legal   requirements   particularly,   those  
          provided insection 245C(1)of the Act. Secondly, that  
          such   inquiry   however,   shall   have   to   be   summary   in 
          nature.   The   later   provisions   ofsections   245Dwould  
          also demonstrate that any decision of the Commission  
          to allow the application to be proceeded with would  
          only be prima facie in nature. We would elaborate this  
          aspect a little later. At this stage, therefore, we find  
          that   undersection   245D(1)of   the   Act,   if   the  
          Commission   on   a   summary   inquiry   comes   to   the  
          conclusion   that   an   application   filed   by   the   assessee  
          undersection 245C(1)of the Act does not fulfill the  
          legal requirements, it would be within the jurisdiction  
          of the Commission to reject the same. However, if it is  
          allowed to be proceeded with, such decision would be  
          tentative in nature.10.Section   245D(2B)provides   that   the   Settlement  
         Commission   in   respect   of   an   application,   which   is  
         allowed   to   be   proceeded   with   under   sub­section(1),  
         within   thirty   days   from   the   date   on   which   the  
         application   was   made,   call   for   a   report   from   the  
         Commissioner, and the Commissioner shall furnish the  
         report within a period of thirty days of the receipt of  
         communication from the Settlement Commission. Sub­
         section(2C) further provides that where a report of the  
         Commissioner   under   sub­section   (2B)   has   been  
         furnished   within   the   the   prescribed   period,   the  
         Settlement Commission may on the basis of the report  
         within fifteen days of the receipt of the report by an  
         order   in   writing,   declare   the   application   as   invalid.  
         Proviso   to   sub­section(2C)   provides   that   no   suchPage 20 of 26C/SCA/4321/2017                                                   CAV JUDGMENTdeclaration   shall   be   made   unless   an   opportunity   is  
          provided   to   the   assessee   of   being   heard.   From   such  
          provisions, it thus emerges that an application which  
          has been allowed to be proceeded or deemed to have  
          been allowed to be proceeded undersection 245D(1)of  
          the Act, it is still open to scrutiny by the Commission  
          at   the   stage   of   sub­section(2B)   and   (2C)   ofsection  
          245D, this time with the assistance of the report of the  
          Commission if so made within the prescribed time. On  
          the   basis   of   materials   contained   in   such   report   and  
          after giving an opportunity to the applicant of being  
          heard, if the Commission is so satisfied, can declare the  
          application   to   be   invalid.   This   is   the   second   stage  
          where   the   Commission   can   scrutinise   the   validity   of  
          application for settlement made by the assessee undersection   245C(1)of   the   Act.   Thus   even   if   the  
          Commission   had   previously   passed   an   order   undersection 245D(1)of the Act, allowing the application to 
          be   proceeded   with,   it   would   still   be   open   for   the  
          Commission   if   grounds   are   so   available,   to   declare  
          such an application invalid after obtaining report from  
          the Commissioner and giving an opportunity of being  
          heard to the applicant.11.If   however,   no   such   order   is   passed   declaring   an  
         application as invalid, the Commission would in terms  
         of   provisions   ofsection   245Dof   the   Act,   proceed   to 
         decide   the   same   on   merits.   Sub­section(3)   thereof  
         envisages   calling   for   the   records   from   the  
         Commissioner   and   examining   such   records   and  
         carrying   out   such   inquiry   or   investigation   as   the  
         Commission   thinks   it   necessary.   Sub­section(4)  
         empowers the Commission after giving an opportunity  
         to the applicant and to the Commissioner to be heard,  
         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.12.The   twin   requirements   for   an   assessee   making   an  
         application   for   settlement   undersection   245C(1)of  
         the   Act,   of   containing   full   and   true   disclosure   of  
         income   which   has   not   been   disclosed   before   the  
         Assessing   Officer   and   the   manner   in   which   such  
         income   has   been   derived,   are   thus   of   considerablePage 21 of 26C/SCA/4321/2017                                                  CAV JUDGMENTimportance   and   would   be   open   for   the   Settlement  
               Commission   to   examine   the   fulfillment   thereof   at  
               several   stages   of   the   settlement   proceedings.   If 
               therefore,   while   at   the   threshold,   considering   the  
               question whether such application should be allowed  
               to be proceeded with or be rejected, the Commission  
               examined   such   questions   on   the   basis   of   disclosure  
               made  by the applicants and the supporting material  
               produced along with the applications, we do not see  
               that   the   Commission   committed   any   legal   error.   As  
               already noted, it was well within the jurisdiction of the  
               Commission at the stage of sub­section(1)  ofsection  
               245Dof the Act to examine whether application for  
               settlement fulfills the statutory requirements contained  
               in sub­section(1) ofsection 245Cof the Act. At this 
               stage   we   may   refer   to   the   decision   of   the   Supreme  
               Court in case ofAjmera Housing Corporation and  
               another(supra). It was a case in which the assessee  
               had made certain disclosures in the initial application  
               undersection   245C(1)of   the   Act.   Such   disclosures  
               were   however,   revised   and   additional   income   was  
               disclosed   in   the   revised   annexures.   The   Apex   Court  
               held   that   the   assessee   had   no   right   to   revise   an  
               application   undersection   245C(1)of   the   Act   and  
               further   that   such   revised   annexure   making   further  
               disclosure of undisclosed income alone was sufficient to  
               establish   that   the   initial   application   made   by   the  
               assessee could not be entertained as it did not contain  
               true and full disclosure of the undisclosed income and  
               the manner in which such income had been derived.13.It   is   true   that   the   order   that   the   Settlement  
              Commission has to pass undersection 245D(1)of the  
              Act comes with a rigid time frame. The scrutiny or the  
              inquiry at that stage, therefore, necessarily shall have 
              to be summary in nature. This however, does not take  
              away   the   powers   of   the   Settlement   Commission   to  
              reject   the   application   for   settlement   which   in   its  
              opinion   does   not   satisfy   the   legal   requirements   and  
              more particularly, those contained in sub­section(1) ofsection 245Cof the Act."We are in complete agreement with the view taken by the 
Division Bench.Page 22 of 26C/SCA/4321/2017                                          CAV JUDGMENT10.    Even otherwise, considering the order passed by the learned 
Settlement Commission passed underSection 245D(1)allowing the 
applications to be proceeded with further it can be seen that the 
learned Settlement Commission has specifically observed that "as 
regards the issue of true and full disclosure of income, we are of 
the opinion that, at present there is no material in our possession 
which   warrants   the   conclusion   that   true   and   full   disclosure   of 
income have not been made by the applicants." As observed herein 
above, while considering the application at the stage of 245D(1), 
Settlement   Commission   is   required   to   hold   a   limited   inquiry 
whether applications fulfilled statutory requirement or not and at 
that stage inquiry would  be summary in nature.  That thereafter, 
once   the   order   is   passed   underSection   245D(1)of   the   Act 
thereafter the stage ofSection 245D(2B)calling the report from the 
Principal   Commissioner   of   Income   Tax   shall   come   and   after 
considering   the   report   of   the   Commissioner   and   after   giving   an 
opportunity   to   the   applicant,   it   will   be   open   for   the   Settlement 
Commission   to   declare   the   application   invalid.   Therefore,   if   the 
submission   on   behalf   of   the   petitioner   is   accepted   that   once   the 
order is passed underSection 245D(1)of the Act thereafter it will 
not be open for the Settlement Commission to reject the application 
or   declare   the   same   as   invalid   is   accepted,in   that   case,   the 
provisions ofSection 245D(2B)and (2C) would be otiose and / or 
become   nugatory.   Therefore,   the   impugned   order   passed   underSection 245D(2C)declaring the application as invalid is absolutely 
in consonance with the scheme and provision ofSection 245Dof 
the Act.Page 23 of 26C/SCA/4321/2017                                          CAV JUDGMENT11.    Now, so far as submission on behalf of the petitioners that 
leaned   Settlement   Commission   could   have   called   for   further 
explanation and / or could have held the inquiry while exercising 
the powers underSection 245D(3)is concerned, the same has also 
no substance. There is no question of further inquiry contemplated. 
Only   in   a   case   where   the   application   is   declared   invalid   underSection 245D(2C)only thereafter further proceedings are required 
to   be   taken   place   and   inquiry   is   required   to   be   conducted   as 
provided under Section 243D(3) and thereafter final order underSection 245D(4)is required to be passed.12.    Now,   so   far   as   submission   on   behalf   of   the   petitioner   on 
merits is concerned, at the outset, it is required to be noted that the 
impugned order is passed by the learned Settlement Commission 
after   considering   the   report   submitted   by   the   Principal 
Commissioner   of   Income   Tax   and   thereafter   after   giving   an 
opportunity to the petitioner. The cogent reasons have been given 
by   the   learned   Settlement   Commission   and   considering   the 
material on record, a specific finding is given that there is no true 
and full disclosure by the applicant. The relevant discussion is para 
9.1 to 9.4.  The statutory mandate ofSection 245of the Act is that 
the   application   shall  "contain   a   full   and   true   disclosure"   of   the 
income which has not been derived. Fundamental requirement of 
the application underSection 245Cis that full and true disclosure 
of the income has to be made along with manner in which such 
income is derived.12.1. Considering the findings recorded by the learned SettlementPage 24 of 26C/SCA/4321/2017                                          CAV JUDGMENTCommission   in   para   9.1   to   9.4,   we   are   of   the   opinion   that   the 
impugned   order   passed   by   the   learned   Settlement   Commission 
underSection   245D(2C)declaring   the   application   invalid   is   not 
required to be interfered with by this Court in exercise of powers 
underArticle 226of the Constitution of India. Neither there is any 
procedural   lapse   nor   any   allegation   of   violation   of   principles   of 
natural   justice.   As   observed   in   catena   of   decisions,   against   the 
decision of the Settlement Commission, the High Court will not be 
sitting as an appellate authority like the assessment order.13.0. Now, so far as reliance placed upon decision of Delhi High 
Court in the case ofCommissioner of Income Tax vs. Income Tax 
Settlement Commissionreported in (2013) 35 Taxmann. com 56 
(Delhi)   relied   upon   by   Shri   Soparkar,   learned   counsel   for   the 
petitioners   is   concerned,   we   are   of   the   opinion   thatthe   said 
decisionshall not be applicable to the facts of the case on hand. In 
the case before the Delhi High Court, the Revenue challenged the 
order passed by the Settlement Commission underSection 245D(1)and245D(2C)by   which,   applicants   were   not   declared   invalid.Similarly,   the   decision   of   this   Court   in   the   case   ofPrincipal 
Commissioner of Income Tax (Central) vs. Settlement Commissionreported in (2016) 65 Taxmann. com 309 (Gujarat) also shall not 
be applicable to the facts of the case on hand, as before the Division 
Bench   considering   the   report   submitted   by   the   Commissioner 
thereafter Settlement Commission did not reject the application as 
invalid  and therefore,   the  Division   Bench  has  observed  and held 
that   findings   of   the   Settlement   Commission   on   fulfillment   of 
requirements   of   a   valid   offer   in   orders   passed   under   SectionPage 25 of 26C/SCA/4321/2017                                         CAV JUDGMENT245D(1) and 245D(2C) are merely tentative and it will be open for 
the Settlement Commission to examine these aspects before passing 
final order under sub­Section(4) ofSection 245D.14.0. At   this   stage,   it   is   required   to   be   noted   that   during   the 
pendency of the present petitions and on declaring the Settlement 
application   invalid,   thereafter   the   assessment   proceedings   have 
taken   place   and   same   have   been   finalized,   against   which,   the 
assessee is before the CIT(A) by way of appeal.14.0. In view of the above and for the reasons stated above and 
the very limited scope of judicial review of the order passed by the 
Settlement Commission recorded herein above and considering the 
impugned   order   passed   by   the   learned   Settlement   Commission 
declaring the Settlement Application as invalid and for the reasons 
stated above challenge to the impugned order passed underSection 
245D(2)fails and present petitions deserve to be dismissed and are 
accordingly dismissed. Rule discharged. No costs.15.      In view of dismissal of Special Civil Application No. 4321 of 
2017, Civil Application No.1 of 2017 stands dismissed.sd.­
                                                                   (M.R. SHAH, J) 

                                                                              sd/­
                                                                   (B.N. KARIA, J) 
KAUSHIK J. RATHODPage 26 of 26