We filed a settlement application and then, when the Commissioner's report came in, filed a revised annexure with a much higher figure. Does that revision sink the application?
Yes, it can. The Supreme Court held that a full and true disclosure of undisclosed income and of the manner in which it was derived is a pre-requisite of a valid application under section 245C(1), and that Chapter XIX-A contains no provision for revising an application once filed. Where the applicant raised the disclosure from about Rs. 1.94 crore to Rs. 11.41 crore and then went on adding piecemeal and ad hoc amounts, that was itself proof that the original application was not a full and true disclosure. The appeals were dismissed.
Decided by the Supreme Court (Supreme Court of India, D.K. Jain and H.L. Dattu, JJ.) on 2010-08-20, reported as Civil Appeal Nos. 6827-6848 of 2010 (arising out of SLP (C) Nos. 26364-26385 of 2009); [2010] INSC 654; also reported at (2010) 326 ITR 642 (SC). It bears on section 245C(1), section 245D(4), section 245D(1), section 245C(3) of the Income Tax Act 1961, in Assessment & Scrutiny and Evidence & Burden of Proof matters.
This is the controlling authority on the threshold condition for settlement, and it is still live: the Interim Board disposes of applications pending on 1 February 2021 on the same statutory footing, and orders passed by it are challenged on the same ground. The judgment does two things. It makes full and true disclosure jurisdictional, so a failure cannot be cured later or overlooked by the Commission. And it shuts off revision, reasoning that allowing a revised application would let the applicant do indirectly what section 245C(3) forbids directly by prohibiting withdrawal.
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Searches under section 132(1) in 1989 and 1992 showed that the Ajmera group kept a second set of books written in code. Against returned income of about Rs. 70 lakh and Rs. 4 lakh for assessment years 1989-90 and 1990-91, the assessments determined income of about Rs. 18.93 crore and Rs. 4.01 crore. On 30 September 1993 the assessee applied to the Settlement Commission under section 245C(1) disclosing further income of about Rs. 1.94 crore. On 19 September 1994, after the Commissioner's objections and before the Commission had decided whether to proceed, it filed a revised annexure disclosing about Rs. 11.41 crore. The Commission allowed the application to be proceeded with on 17 November 1994. During the hearings the assessee disclosed a further Rs. 2.76 crore, and in January 1999 offered ad hoc additions of Rs. 1 crore and Rs. 6 crore for two later years. The Commission settled the total income at about Rs. 42.58 crore on 29 January 1999 with a token penalty of Rs. 50 lakh. The High Court eventually remanded the matter, and the assessee appealed.
The appeals were dismissed and the High Court's remand was upheld. The Supreme Court held that disclosure of full and true particulars of undisclosed income and of the manner in which it was derived is a pre-requisite of a valid application under section 245C(1); it goes to the Commission's jurisdiction and is not something that can be satisfied as the proceedings go along. Chapter XIX-A provides no machinery for revising an application, and permitting revision would allow indirectly what section 245C(3) forbids by prohibiting withdrawal, since a revised application is in substance a fresh application with the old one withdrawn. On the facts, the increase from about Rs. 1.94 crore to Rs. 11.41 crore, followed by further piecemeal disclosures and ad hoc offers, showed that the original application had not contained a full and true disclosure. Withholding the revised annexure from the Commissioner before the order under section 245D(1) also deprived him of the chance to object to maintainability.
The Court read section 245C(1) as fixing three things the applicant must state — the undisclosed income, the manner in which it was derived, and the additional tax payable — and treated the first two as conditions on which the Commission's authority to entertain the application depends. If they are jurisdictional, they must be satisfied when the application is made, and the Commission cannot cure a defective application by taking later material on board. The Court then turned to the scheme of the Chapter and found no power of revision anywhere in it. Section 245C(3) forbids withdrawal of an application; a revised application would in substance withdraw the first and substitute another, so reading in a power to revise would defeat that prohibition. From there the reasoning became evidential: the very fact that the applicant put in an annexure nearly six times the original figure, and then kept adding — a further Rs. 2.76 crore during the hearing and round sums of Rs. 1 crore and Rs. 6 crore offered as ad hoc adjustments — was itself the answer to whether the first application had been full and true. The Court also held that the confidentiality of the annexure before the section 245D(1) stage could not be used to keep the revised figures from the Commissioner, because the Commissioner's report is the mechanism by which the maintainability of the application is tested. Since the Commission's power under section 245D(4) extends only to matters covered by a valid application and by the Commissioner's reports, an application failing the threshold could not be validated by anything the Commission afterwards did.
Disclosure of 'full and true' particulars of undisclosed income and 'the manner' in which such income is derived are the pre-requisites for a valid application under Section 245C(1).
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Handle my notice → Ask a CA on WhatsAppYes, it can. The Supreme Court held that a full and true disclosure of undisclosed income and of the manner in which it was derived is a pre-requisite of a valid application under section 245C(1), and that Chapter XIX-A contains no provision for revising an application once filed. Where the applicant raised the disclosure from about Rs. 1.94 crore to Rs. 11.41 crore and then went on adding piecemeal and ad hoc amounts, that was itself proof that the original application was not a full and true disclosure. The appeals were dismissed. This was decided by the Supreme Court (Supreme Court of India, D.K. Jain and H.L. Dattu, JJ.) and bears on section 245C(1), section 245D(4), section 245D(1), section 245C(3) of the Income Tax Act 1961. It is reported as Civil Appeal Nos. 6827-6848 of 2010 (arising out of SLP (C) Nos. 26364-26385 of 2009); [2010] INSC 654; also reported at (2010) 326 ITR 642 (SC). This is the controlling authority on the threshold condition for settlement, and it is still live: the Interim Board disposes of applications pending on 1 February 2021 on the same statutory footing, and orders passed by it are challenged on the same ground. The judgment does two things. It makes full and true disclosure jurisdictional, so a failure cannot be cured later or overlooked by the Commission. And it shuts off revision, reasoning that allowing a revised application would let the applicant do indirectly what section 245C(3) forbids directly by prohibiting withdrawal. If it applies to you, the first step is this: Settle the figure before you file. Treat the annexure to the section 245C(1) application as final, because there is no machinery to revise it and a later increase is evidence against you.
Searches under section 132(1) in 1989 and 1992 showed that the Ajmera group kept a second set of books written in code. Against returned income of about Rs. 70 lakh and Rs. 4 lakh for assessment years 1989-90 and 1990-91, the assessments determined income of about Rs. 18.93 crore and Rs. 4.01 crore. On 30 September 1993 the assessee applied to the Settlement Commission under section 245C(1) disclosing further income of about Rs. 1.94 crore. On 19 September 1994, after the Commissioner's objections and before the Commission had decided whether to proceed, it filed a revised annexure disclosing about Rs. 11.41 crore. The Commission allowed the application to be proceeded with on 17 November 1994. During the hearings the assessee disclosed a further Rs. 2.76 crore, and in January 1999 offered ad hoc additions of Rs. 1 crore and Rs. 6 crore for two later years. The Commission settled the total income at about Rs. 42.58 crore on 29 January 1999 with a token penalty of Rs. 50 lakh. The High Court eventually remanded the matter, and the assessee appealed. The matter was decided on 2010-08-20 by the Supreme Court (Supreme Court of India, D.K. Jain and H.L. Dattu, JJ.). On those facts the Supreme Court held as follows. The appeals were dismissed and the High Court's remand was upheld. The Supreme Court held that disclosure of full and true particulars of undisclosed income and of the manner in which it was derived is a pre-requisite of a valid application under section 245C(1); it goes to the Commission's jurisdiction and is not something that can be satisfied as the proceedings go along. Chapter XIX-A provides no machinery for revising an application, and permitting revision would allow indirectly what section 245C(3) forbids by prohibiting withdrawal, since a revised application is in substance a fresh application with the old one withdrawn. On the facts, the increase from about Rs. 1.94 crore to Rs. 11.41 crore, followed by further piecemeal disclosures and ad hoc offers, showed that the original application had not contained a full and true disclosure. Withholding the revised annexure from the Commissioner before the order under section 245D(1) also deprived him of the chance to object to maintainability.
The Court read section 245C(1) as fixing three things the applicant must state — the undisclosed income, the manner in which it was derived, and the additional tax payable — and treated the first two as conditions on which the Commission's authority to entertain the application depends. If they are jurisdictional, they must be satisfied when the application is made, and the Commission cannot cure a defective application by taking later material on board. The Court then turned to the scheme of the Chapter and found no power of revision anywhere in it. Section 245C(3) forbids withdrawal of an application; a revised application would in substance withdraw the first and substitute another, so reading in a power to revise would defeat that prohibition. From there the reasoning became evidential: the very fact that the applicant put in an annexure nearly six times the original figure, and then kept adding — a further Rs. 2.76 crore during the hearing and round sums of Rs. 1 crore and Rs. 6 crore offered as ad hoc adjustments — was itself the answer to whether the first application had been full and true. The Court also held that the confidentiality of the annexure before the section 245D(1) stage could not be used to keep the revised figures from the Commissioner, because the Commissioner's report is the mechanism by which the maintainability of the application is tested. Since the Commission's power under section 245D(4) extends only to matters covered by a valid application and by the Commissioner's reports, an application failing the threshold could not be validated by anything the Commission afterwards did. In the words reproduced by the source cited on this page: "Disclosure of 'full and true' particulars of undisclosed income and 'the manner' in which such income is derived are the pre-requisites for a valid application under Section 245C(1)."
It was decided by the Supreme Court on 2010-08-20 and is reported as Civil Appeal Nos. 6827-6848 of 2010 (arising out of SLP (C) Nos. 26364-26385 of 2009); [2010] INSC 654; also reported at (2010) 326 ITR 642 (SC). Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 245C(1), section 245D(4), section 245D(1), section 245C(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeals were dismissed and the High Court's remand was upheld. The Supreme Court held that disclosure of full and true particulars of undisclosed income and of the manner in which it was derived is a pre-requisite of a valid application under section 245C(1); it goes to the Commission's jurisdiction and is not something that can be satisfied as the proceedings go along. Chapter XIX-A provides no machinery for revising an application, and permitting revision would allow indirectly what section 245C(3) forbids by prohibiting withdrawal, since a revised application is in substance a fresh application with the old one withdrawn. On the facts, the increase from about Rs. 1.94 crore to Rs. 11.41 crore, followed by further piecemeal disclosures and ad hoc offers, showed that the original application had not contained a full and true disclosure. Withholding the revised annexure from the Commissioner before the order under section 245D(1) also deprived him of the chance to object to maintainability. It arises in Assessment & Scrutiny and Evidence & Burden of Proof matters, on section 245C(1), section 245D(4), section 245D(1), section 245C(3) of the Income Tax Act 1961, and was decided by Supreme Court of India, D.K. Jain and H.L. Dattu, JJ.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Set out the manner in which the income was derived, not merely the amount; the Court treats manner of derivation as a separate and equally jurisdictional requirement. If you are the Revenue, or resisting a settlement order, look for successive or ad hoc enhancements in the record and for anything withheld from the Commissioner before the section 245D(1) order. Do not argue that judicial review of a settlement order is confined to procedure; the Court reviewed the jurisdictional foundation of the application itself.
Still good law. A Supreme Court decision of 20 August 2010 construing section 245C(1) as it stood and still stands for applications made before 1 February 2021. The Settlement Commission has since been replaced by the Interim Board under the Finance Act 2021, but the disclosure condition it construes is unchanged. No later Supreme Court authority doubting it was located. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read on a free reproduction of the Supreme Court's text rather than an official Supreme Court URL. The (2010) 326 ITR 642 citation comes from the audit note and was not checked against the report. The dates and figures of the several High Court rounds were read only in summary, and the exact terms of the final remand direction are not set out here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were dismissed and the High Court's remand was upheld. The Supreme Court held that disclosure of full and true particulars of undisclosed income and of the manner in which it was derived is a pre-requisite of a valid application under section 245C(1); it goes to the Commission's jurisdiction and is not something that can be satisfied as the proceedings go along. Chapter XIX-A provides no machinery for revising an application, and permitting revision would allow indirectly what section 245C(3) forbids by prohibiting withdrawal, since a revised application is in substance a fresh application with the old one withdrawn. On the facts, the increase from about Rs. 1.94 crore to Rs. 11.41 crore, followed by further piecemeal disclosures and ad hoc offers, showed that the original application had not contained a full and true disclosure. Withholding the revised annexure from the Commissioner before the order under section 245D(1) also deprived him of the chance to object to maintainability.
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