Settlement Commission's Order Accepting Explanation 'In The Spirit Of Settlement' Doesn't Require Interference: Karnataka High Court

The Karnataka High Court has held that the Settlement Commission, by accepting the explanation 'in the spirit of settlement', cannot be faulted for calling for interference in exercise of the limited jurisdiction.

The bench of Justice S. Sunil Dutt Yadav has observed that the Settlement Commission has taken note of the declaration made under Rule 8 of the Income Tax Settlement Commission (Procedure) Rules and has accepted the assertion of cash gifts. If indeed the applicant had disclosed the cash gifts as 'cash in hand' in the wealth tax returns, the alleged unaccounted cash would have stood explained as noticed in the search, and there would have been no occasion for disclosure as made before the Settlement Commission. The Commission deemed the additional income offered for tax of Rs. 2,20,00,000 as being fair and reasonable and proceeded to dispose of the application.

The petitioner had filed an application under Section 235C of the Act on 18.11.2019 seeking settlement for the assessment years 2012-2013 to 2019-2020. In terms of the procedure under Section 245D(1) of the Income Tax Act, the application was permitted to be proceeded with by order dated November 25, 2019.

The petitioner is an individual assessee, and his source of income was from salaries. The Department carried out a search under Section 132, during which records, documents, and jewelry are stated to have been seized. The statements under Section 132(4) were also stated to have been recorded, and during the search, an undisclosed income was stated to have been offered for tax, which was retracted subsequently.

The additional income offered before the Settlement Commission was stated to be Rs. 2,20,00,000/-, which is asserted to be an amount constituting cash gifts received from the relatives and well wishers during the Assessment Years 2012-2013 to 2016-2017. The cash payment made for the purchase of jewelry from the vendors of Neerav Modi Group was Rs. 2,16,00,000.

The petitioner filed an affidavit under Rule 8 of the Income Tax Settlement Commission (Procedure) Rules, 1997, and declared that she had not maintained the details of cash gifts.

The PCIT has also filed a report under Rule 9 and raised various objections. The Settlement Commission has passed the order dealing with the objections raised by the Department.

The department has challenged an order passed by the Settlement Commission by which the application of the petitioner for settlement under Section 245C of the Income Tax Act, 1961, for the Assessment Years 2012-2013 to 2019-2020 was accepted. It was ordered that the additional income offered of Rs. 2,20,00,000 was reasonable and fair; immunity from penalty and prosecution was also ordered; however, interest under Section 234A, 234B, and 234C was to be levied by applying the provisions of Section 234B (2A).

The court, while rejecting the department's petition, held that the order of the Settlement Commission, with elaborate reasoning that has a nexus with the objective of settlement as regards the statutory provisions in Chapter XIX-A of the Income Tax Act, does not call for interference.

Counsel For Petitioner: Ravi Raj Y.V.

Counsel For Respondent: K. K. Chaithanya

Case Title: PCIT Versus Smt. Umah Agarwal

Citation: 2024 LiveLaw (Kar) 364

Case No.: Writ Petition No.11153 Of 2020 (T-IT)

Click Here To Read The Order