# Sri Subodh Agarwal v. Principal Chief Commissioner of Income Tax, Kanpur & Ors

- **Citation:** (2023) 2 ILRA 1106
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-01-25
- **Case number:** Writ Tax No. 1290 of 2022
- **Bench:** Rajesh Bindal, C.J. J.J. Munir
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/sri-subodh-agarwal-v-principal-chief-commissioner-of-income-tax-kanpur-ors-49703
- **Pages:** 16

## Text

_Characters 0–39,800 of 55,874. This is a partial read: ask again with offset=39800 for what follows._

2 All. Principal Commissioner of Income Tax (Central) Vs. U.O.I. & Ors.
1091

3. Out of the 5 entities which were
subject to search on 31/07/2013, three of
them
made
separate
applications
on
27.02.2015
before
the
Settlement
Commission under Section 245 of the
Income
Tax
Act,
disclosing
their
unaccounted income as under:-

Table- II
1.
Ms. Richa Mishra
1,93,16,254/-
2.
Shri Balaji Charitable Trust
1,69,04,560/-
3.
Shekhar Hospital (P) Ltd
4,84,46,020/-

4. The Settlement Commission on
receipt of the application, decided to
proceed further with the application, and
sent a copy to the concerned Principal
Commissioner of Income Tax seeking his
response as per Rule 9 of the Income Tax
Settlement (Procedure) Rules, 1997 and
finally settled the matter rejecting the
objections
raised
by
Income
Tax
Department vide impugned order dated
19/22.8.2016.

5. Present Writ Petition was filed
challenging the order of the Settlement
Commission. During pendency of the
present
petition
the
Settlement
Commission further proceeded at the
behest of only two of the applicants to
rectify the order in exercise of the powers
under Section 3 WRIT TAX No. 208 of
2017 245D(6B) of the Income Tax Act,
1961(hereinafter referred to as ''Act of
1961') and gave further benefit to the
applicants by order dated 17.02.2017
which has also been assailed in the
present petition, after amendment to the
writ was carried out.

THE
PARTIES
BEFORE
THE
SETTLEMENT COMMISSION :

6. Applications before the Settlement
Commission were filed by following
entities/persons, the description of which
are as follows:-

A:- Ms. Richa Mishra:- The
applicant has described herself in the
application as the Director controlling the
administration of M/s Shekhar Hospital
(Pvt. Ltd.) which is running a hospital and
rendering nursing and health services.
Further, she is also controlling and
managing the affairs of M/s Shri Balaji
Charitable Trust as a trustee, which is
running a nursing college and rendering
health services. She has further submitted
that apart from managing these two
institutions she is also running other
institutions, wife of Dr. A.K. Sachan, who
is working as regular employee and a
Professor of Clinical Pharmacology in King
George Medical University, Lucknow.

B:- Shekhar Hospital (Pvt.)
Ltd.:- The applicant Shekhar Hospital
(Pvt.) Ltd. was incorporated on 26.12.1995
and is engaged in running a hospital at
Indira Nagar, Lucknow, Uttar Pradesh. The
Directors of the hospital are: (I) Dr. Rich
Mishra; (2) Mr. K.K. Sachan; (3) Dr.
Harish Chandra and (4) Dr. A. K. Sachan.

C:- M/s Balaji Charitable Trust
:- Ms. Richa Mishra is the managing trustee
and Dr. A. K. Sachan is also a trustee of the
said trust. The trust is running a nursing
college and rendering health services. Dr
A.K.Sachan is a regular4 WRIT TAX No.
208 of 2017 employee and a Professor of
Clinical Pharmacology in King George
Medical University, Lucknow.

7. In the application filed before the
Settlement Commission on behalf of
aforesaid three applicants, the amount of
1092 INDIAN LAW REPORTS ALLAHABAD SERIES
disclosure
was
recomputed
and
redistributed as stated in Table II.

ARGUMENTS

8. Sri Manish Mishra, learned counsel
appearing for the petitioner has assailed the
orders of Settlement Commission

A. Firstly on the ground that the
disclosure made by the applicants in their
applications for settlement was not a full
and true disclosure of the unaccounted
income as mandated by Section 245(C) of
the Act of 1961. It was submitted that it is a
precondition for making an application
before the Settlement Commission that the
declaration of unaccounted income should
be full and true, hence on this ground alone
the application should have been dismissed
by the Settlement Commission.

B. The second ground urged by
the Counsel for petitioner was that Dr A. K.
Sachan was subjected to search operation
and number of undisclosed bank accounts
were discovered, but receipts in the said
bank accounts were sought to be attributed
as income of M/s Hind Charitable Trust. It
wassubmitted that Dr A. K. Sachan was not
a party before the Commission, nor did he
appear before the Commission. He did not
give any evidence, hence, the Commission
could not have returned finding in this
regard in favour of respondents.

C. It was further submitted that
Dr A. K. Sachan was subjected to regular
assessment, and the Income Tax department
had assessed the receipts found in the 5
WRIT TAX No. 208 of 2017 undisclosed
account as his income, which could not
have been subject matter for Settlement
before the Commission as it no longer
remained "undisclosed income". Further it
was never the stand of Dr. A. K. Sachan
that the income belongs to someone else
and not him. Therefore the impugned order
is illegal and without jurisdiction.

D. The order of Commission
dated 17.02.2017 has also been assailed on
the ground that while allowing the
rectification application the Commission
has materially altered and reviewed its
initial order dated 19/22.08.2016, on the
basis of newly pleaded facts, which was
without jurisdiction as the Commission
does not have any power of review.

E. The Commission has waived
off the interest in favour of the respondents,
which according to the learned Counsel for
the petitioner could not have been done in
light of the judgment of the Supreme Court
in the case of Commissioner of Income
Tax vs Anjum M. H. Ghaswala &
others1. He submitted that the Commission
has not given any reasons or considered the
guidelines of the Board.

F. Lastly it was contended that the
manner in which the Commission has
proceeded and settled the matter is on the
face of it arbitrary in as much as the
objections of the Income Tax department
have not even been considered or dealt
with, which shows that the impugned order
is violative of principles of natural justice.

9. Sri D.D. Chopra, Senior Advocate
appearing for the respondents supported the
impugned order passed by the Settlement
Commission. He submitted that during the
search operations the details 1 (2002) 1
SCC 633 6 WRIT TAX No. 208 of 2017 of
accounts were not available with the
private respondents. Subsequently accounts
were examined and looked into while filing
application before the Commission. He
further submitted that the jurisdiction of the
Settlement Commission was confined only
to settle a matter rather than to adjudicate
on all the grounds raised by the department,
hence, submitted that there was no
2 All. Principal Commissioner of Income Tax (Central) Vs. U.O.I. & Ors.
1093
illegality in the order passed by the
Commission.

DISCUSSIONS

10. To consider the questions raised in
the present petition one has to have regard
to the scheme of Chapter XIX-A of the
Income Tax Act,1961. The Apex Court in
the case of Jyotendrasinhji v. S.I.
Tripathi and others2, has delineated the
scope and jurisdiction of the Commission,
which is as follows:

"15. The first question we have to
answer is the scope of these appeals
preferred
under Article
136
of
the
Constitution against the orders of the
Settlement Commission. The question is
whether all the questions of fact and law as
may have been decided by the Commission
are open to review in this appeal. For
answering this question one has to have
regard to the scheme of Chapter XIX-A.
The said chapter was inserted by the
Taxation Laws (Amendment) Act, 1975
with effect from April 1, 1976. A somewhat
similar provision was contained in subsections(1-A) to (1-D) of Section 34 of the
Income Tax Act, 1922, introduced in the
year 1954. The provisions of Chapter XIXA are, however, qualitatively different and
more elaborate than the said provisions in
the 1922 Act. The proceedings under this
chapter commence by an application made
by the assessee as contemplated by Section
245-C. Section 245-D prescribes 2 1993
Supp.(3) SCC 389 at page 399 7 WRIT
TAX No. 208 of 2017 the procedure to be
followed by the Commission on receipt of
an application under Section 245-C. Subsection (4) says: "After examination of the
records and the report of the Commissioner,
received under sub-section(1), and the
report, if any, of the Commissioner
received under sub-section(3), and after
giving an opportunity to the applicant and
to the Commissioner to be heard, either in
person or through a representative duly
authorised 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 under sub-section (1) or
sub-section

(3)."Section 245-E empowers the
Commission to re-open the completed
proceedings in appropriate cases, while
Section 245-F confers all the powers of an
Income
Tax
authority
upon
the
Commission. Section 245-H empowers the
Commission to grant immunity from
penalty and prosecution, with or without
conditions, in cases where it is satisfied that
the assessee has made a full disclosure of
his income and its sources. Under Section
245-HA, the Commission can send back
the matter to the assessing officer, where it
finds that the applicant is not cooperating
with it. Section 245-I declares that every
order of settlement passed under subsection (4) of Section 245-D shall be
conclusive as to the matters stated therein
and no matter 8 WRIT TAX No. 208 of
2017 covered by such order shall, save as
otherwise provided in Chapter XIX-A, be
re-opened in any proceeding under the Act
or under any other law for the time being in
force. Section 245-L declares that any
proceedings under Chapter XIX-A before
the
Settlement
Commission
shall
be
deemed to be a judicial proceeding within
the meaning of Sections 193 and 228 and
for the purposes of Section 196 of the Penal
Code, 1860.
1094 INDIAN LAW REPORTS ALLAHABAD SERIES

16. It is true that the finality
clause contained in Section 245-I does not
and cannot bar the jurisdiction of the High
Court under Article 226 or the jurisdiction
of this Court under Article 32 or under
Article 136, as the case may be. But that
does not mean that the jurisdiction of this
Court in the appeal preferred directly in this
Court is any different than what it would be
if the assessee had first approached the
High Court under Article 226 and then
come up in appeal to this Court under
Article 136. A party does not and cannot
gain any advantage by approaching this
Court directly under Article 136, instead of
approaching the High Court under Article
226. This is not a limitation inherent in
Article 136; it is a limitation which this
Court imposes on itself having regard to the
nature of the function performed by the
Commission and keeping in view the
principles of judicial review. Maybe, there
is also some force in what Dr Gauri
Shankar says viz., that the order of the
Commission is in the nature of a package
deal and that it may not be possible,
ordinarily speaking, to dissect its order and
that the assessee should not be permitted to
accept what is favourable to him and reject
what is not. According to learned counsel,
the Commission is not even required or
obligated to pass a reasoned order. Be that
as it may, the fact remains that it is 9 WRIT
TAX No. 208 of 2017 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
and considerations 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 to any of the provisions of the Act.
In this context, it is relevant to note that the
principle of natural justice (audi alteram
partem) has been incorporated in Section
245-D itself. The sole overall limitation
upon the 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 under Article 226 or
by this Court under Article 136 is 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 and malice
which, of course, constitute a separate and
independent category. Reference in this
behalf may be had to the decision of this
Court in R.B. Shreeram Durga Prasad and
Fatechand Nursing Das v. Settlement
Commission (IT and WT) [(1989) 1 SCC
628 : 1989 SCC (Tax) 124 : (1989) 176
ITR 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 10 WRIT TAX
No. 208 of 2017 with the validity of the
order". The learned Judge added "judicial
review is concerned not with the decision
but with the decision-making process".
Reliance was placed upon the decision of
the House of Lords in Chief Constable of
the N.W. Police v. Evans [(1982) 1 WLR
1155 : (1982) 3 All ER 141]. Thus, the
appellate power under Article 136 was
equated to power of judicial review, where
the appeal is directed against the orders of
the Settlement Commission. For all the
2 All. Principal Commissioner of Income Tax (Central) Vs. U.O.I. & Ors.
1095
above reasons, we are of the opinion that
the only ground upon which this Court can
interfere in these appeals is that the 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
in a particular manner. Even if the
interpretation placed by the Commission on
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 a violation of the
provisions of the Income 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."

TRUE AND FULL DISCLOSURE OF
INCOME :

11. The first contentions raised by
learned counsel for the petitioner was that
the respondents had not made full and true
disclosure
of
income
while
making
application under Section 245(C) of the Act
of 1961 and consequently the Commission
on noticing the facts should have dismissed
the application. In support of his argument,
it was submitted 11 WRIT TAX No. 208 of
2017 that during search proceedings the
assessee had voluntarily surrendered 8.00
crores as undisclosed income in the
₹1,76,94,500/-
was
seized
following
manner. ₹1,76,94,500/- was seized5.00
crore was said to be undisclosed income by
Ms. Richa Mishra, ₹1,76,94,500/- was
seized1.50 crores by Sri Balaji Charitable
Trust and ₹1,76,94,500/- was seized1.50
crores
by
Shekhar
Hospitals
Private
Limited but in the applications made before
the Commission the said figures were
changed. The income and disclosure was
made
of
₹1,76,94,500/-
was
seized1,93,16,254/- by Dr. Richa Mishra,
₹1,76,94,500/- was seized1,69,04,560/- and
₹1,76,94,500/- was seized4,84,46,020/- by
M/s Balaji Charitable Trust and Shekhar
Hospital, respectively. It was further stated
that the applications were filed by the
department on 7.7.2015 to conduct further
inquiries but no orders were passed by the
Commission. Finally, it was also argued
that
a
sum
of
₹1,76,94,500/-
was
seized1.20 crores the alleged receipts from
Sri B. D. Agarwal with Allahabad Bank,
was for the first time disclosed and
considered in rectification application. This
was sufficient to place the matter beyond
any doubt that the respondents had not
made true and full disclosures of the
income and, hence, blatantly violated the
statutory requirement of Section 245(C) of
the Act. The receipt of ₹1,76,94,500/- was
seized1.20 crores was deliberately and
willfully not disclosed when the application
of Statement of Facts (S.O.F.) was filed
before the Settlement Commission. Rather
it was an explanation given introducing
new facts in the rectification application.
The Settlement Commission ought to have
rejected the application for settlement as
invalid for not truly and fully disclosing the
undisclosed income.

12. During search, ₹1,76,94,500/- was
seized8.00 crores were declared by Ms.
Richa Mishra as undisclosed income
pertaining to the three entities as mentioned
in Table I. The application was filed before
Settlement Commission with substantial
variation, adjusting the income between the
3 entities who were applicants before the
Settlement Commission in such a manner
1096 INDIAN LAW REPORTS ALLAHABAD SERIES
so as to not depict the true and full
disclosure of their income. After passing of
the
final
order
by
the
Settlement
Commission on 27.2.2015, an application
for
rectification
was
moved
thereby
disclosing a further undisclosed amount of
₹1,76,94,500/- was seized1.20 crores which
has been accepted 12 WRIT TAX No. 208
of 2017 and adjusted by the Settlement
Commission in its order dated 17.02.2017.
The aforesaid facts clearly indicate that the
respondents did not truly and fully disclose
their undisclosed income.

13. All these facts were brought to the
knowledge of the Settlement Commission
at the time when the petitioners had filed
their
objections
to
the
settlement
application which are as follows:

OBJECTION OF THE INCOME TAX
DEPARTMENT
TO
THE
APPLICATION FOR SETTLEMENT :

14. The Principal Commissioner of
Income Tax submitted his report under
Rule 9 of the Rules of 1997 to the
application of Sri Balaji Charitable Trust
stating that the additional income disclosed
by
the
applicant
was
inadequate
considering the material seized during the
search proceedings. It was further placed
on record that considering the fact that
during the course of the search Dr. Richa
Mishra had admitted cash deposits of 1.50
crores in the Axis Bank ₹1,76,94,500/- was
seized account of the trust in the financial
year 2009-10, while only an amount of
₹1,76,94,500/- was seized25,40,030/- has
been disclosed for the financial year 200910 and no evidence has been submitted in
support of the disclosed income. It was also
submitted that the account maintained with
the Axis Bank in the name of Shekhar
School of Nursing which is run under the
management of M/s Balaji Charitable
Trust, unaccounted cash and non-cash
deposit were found in various accounts. On
the basis of the material collected by the
department it was of the considered view
that M/s Balaji Charitable trust was not
entitled for any deduction under section 10
(23-C) of the Act of 1961 as it does not
fulfill the twin conditions prescribed for the
application for eligibility for deduction
under the said provision, in as much as, the
educational institution does not exist solely
for the purposes of education but for profit
considering the huge amount of cash
deposits received by it, and also that it's
aggregate annual receipt exceeded the limit
prescribed as per Rule 2 (B-C) of the
Income Tax Rules. According to the
records it 13 WRIT TAX No. 208 of
2017was stated that the group is being
managed and controlled by Ms. Richa
Mishra and Dr A.K Sachan.

15. After examining the accounts of
the M/s Balaji Charitable Trust, it was
further submitted that the trust is not only
engaged in profitable activities but had also
diverted the funds for personal benefits of
the trustees, as per the statement made by
the trustee herself during the proceedings
under section 132(4) of the Income Tax
Act. It was urged that the entire deposits in
the account should be treated as the income
of the assessee and should not be limited to
15% of the receipts since no document or
evidence was submitted for allowing the
expenses to the tune of 85%. During the
search, evidence was also found that
₹1,76,94,500/- was seized65,000/- was
received from a particular student towards
building fund, and therefore it was assumed
that similar amounts in cash were received
from all the other students. On the basis of
material discovered during the search
operation, it was submitted that the
2 All. Principal Commissioner of Income Tax (Central) Vs. U.O.I. & Ors.
1097
undisclosed income of the M/s Balaji
Charitable Trust for assessment years 200708 to 2014-15 would be ₹1,76,94,500/- was
seized 16,05,97,986/-. In light of the
aforesaid calculations and findings it was
stated that a true and full disclosure had not
been made of all its income by the trust.

16. With regard to the application
submitted by Ms. Richa Mishra, the report
under Rule 9 of the Procedure Rules 1997
mentioned
that
the
applicant
had
surrendered
only
₹1,76,94,500/-
was
seized1,93,16,254/-. The applicant is the
director and controls M/s Shekhar Hospital
(P) Ltd which is running a hospital and
rendering nursing and health services and is
also controlling and managing the affairs of
M/s Balaji charitable trust as a trustee
which is also running nursing college and
rendering health services. Various bank
accounts were used to service the receipt
and expenses, most of which were in the
name of Dr A. K. Sachan. The disclosure
made before the Settlement Commission
amounting to ₹1,76,94,500/- was seized
255.30 lakhs was inadequate considering
the documents seized and the statements
made during the 14 WRIT TAX No. 208 of
2017 search proceedings.

17. During the search Ms. Richa
Mishra had given a statement on oath under
section 132(4) of the Act of 1961 and had
surrendered 5.00 crores for the financial
year ₹1,76,94,500/- was seized 2009-10 to
2010-11. Before the Commission, an
amount
of
only
₹1,76,94,500/-
was
seized1,30,40,256/-
was
disclosed
as
additional and total income for assessment
year 2010-11 and 2011-12. During and post
search operations, the applicant stated that
she had surrendered ₹1,76,94,500/- was
seized5.00 crores out of which she had
given ₹1,76,94,500/- was seized4.00 crores
to Dr A.K. Sachan. No satisfactory
explanation was given by the applicant
forthe receipts and on the other hand,
different versions were given by her, and
no details were provided to department.
Before the Commission she further set up a
case that the money found in the
undisclosed accounts of Dr A. K. Sachan
was in fact given by her. She surrendered
the deposits in the account of Axis Bank,
Indira Nagar in the name of Dr A. K.
Sachan amounting to ₹1,76,94,500/- was
seized3,57,92,000/- but has gone back on
her version offered only ₹1,76,94,500/- was
seized 1,30,40,256/- as additional and total
income for the assessment years 2010-11
& 2011-12.

18. During the search proceedings
₹1,76,94,500/- was seized 79.00 lakhs in
cash was found at the residence of Ms
Richa Mishra and Dr A. K. Sachan and
according to the statement made during
search it was informed that the said amount
was received as admission fee from the
guardian of the students, but before the
Settlement Commission it was stated that
the said amount belongs to Hind charitable
trust and the same is as per their books of
accounts. It was the stand of the department
that the books were prepared post the
search and no evidence could be produced
in support of this said cash found at the
residence.

19. In the report the department had
proposed income of Dr Richa Mishra to be
₹1,76,94,500/- was seized13,87,96,615/-
while she had offered only ₹1,76,94,500/-
was seized1,93,16,254/- and on this basis it
was stated that the applicant has not made a
full and true disclosure of the income for
all the years, hence, the 15 WRIT TAX No.
208 of 2017 application was liable to be
rejected.
1098 INDIAN LAW REPORTS ALLAHABAD SERIES

20. Another application which was
considered by the Settlement Commission
was preferred by M/s Shekhar Hospital (P)
Ltd. In the application for settlement M/s
Shekhar Hospital Pvt. Ltd. had offered
4,84,46,020/- as additional income. The
₹1,76,94,500/- was seized Income Tax
Department while responding to the notice
of the Commission had submitted that the
tax was paid only on ₹1,76,94,500/- was
seized3,85,80,097/- and not on the whole
income which was declared as additional
income. It was further stated that the
disclosure made by the applicant was
inadequate considering the recovery made
during
search.
The
applicant
had
surrendered only ₹1,76,94,500/- was seized
91,33,857/- for assessment year 2013-14
while it should have been ₹1,76,94,500/-
was seized 1,63,12,242/- and therefore,
submitted that there was no true disclosure
of income. Similarly, for the assessment
year 2014-15 the applicant surrendered
₹1,76,94,500/- was seized 2,38,14,005/-
while it's additional income should have
been
₹1,76,94,500/-
was
seized
2,65,01,543/- and there was a difference in
the surrender of ₹1,76,94,500/- was seized
26,87,538/- for the assessment year 201415. It was submitted that over and above
the
amount
surrendered
before
the
settlement Commission, the application
should have surrendered an amount of
₹1,76,94,500/- was seized 1,26,60,923/-
and it demonstrated before the Commission
that there was no true and actual disclosure
of unaccounted/additional income by the
applicant.

21. With regard to the first ground
raised by the learned Counsel for the
petitioner that the respondents who were
the applicants before the Commission were
dutybound to make a full and true
disclosure of the undisclosed assets before
the Commission. The law in this regard,
has been settled by the judgment of
Supreme Court in the case of Ajmera
Housing Corporation and another Vs.
Commissioner of Income Tax3. The
relevant paragraphs 26 and 28 read as
under :

"26. The procedure laid down in
Section 245D of the Act, contemplates that
on receipt of the application under Section
245C(1) of the Act, the Settlement
Commission is 3 (2010) 8 SCC 739 16
WRIT TAX No. 208 of 2017 required to
forward a copy of the application filed in
the prescribed form (No. 34B), containing
full details of issues for which application
for settlement is made, the nature and
circumstances of the case and complexities
of the annexures, referred to in item No. 11
of the form and to call for report from the
Commissioner.
The
Commissioner
is
obliged to furnish such report within a
period of 45 days from the date of
communication
by
the
Settlement
Commission. Thereafter, the Settlement
Commission, on the basis of the material
contained in the said report and having
regard to the facts and circumstances of the
case and/or complexity of the investigation
involved therein may by an order, allow the
application to be proceeded with or reject
the application. After an order under
Section 245D(1) is made, by the Settlement
Commission, Rule 8 of the 1987 Rules
mandates that a copy of the annexure to the
application, together with a copy of each of
the
statements
and
other
documents
accompanying such annexure shall be
forwarded to the Commissioner and further
report
shall
be
called
from
the
Commissioner.
The
Settlement
Commission
can
also
direct
the
Commissioner to make further enquiry and
investigations in the matter and furnish his
2 All. Principal Commissioner of Income Tax (Central) Vs. U.O.I. & Ors.
1099
report. Thereafter, after examining the
record, Commissioner's report and such
further evidence that may be laid before it
or
obtained
by
it,
the
Settlement
Commission is required to pass an order as
it thinks fit on the matter covered by the
application and in every matter relating to
the case not covered by the application and
referred
to
in
the
report
of
the
Commissioner under sub-section (1) or
sub-section (3) of the said Section. It bears
repetition that as per the scheme of the 17
WRIT TAX No. 208 of 2017 Chapter, in
the first instance, the report of the
Commissioner is based on the bare
information furnished by the assessee
against item No. 10 of the prescribed form,
and the material gathered by the revenue by
way of its own investigation. It is evident
from the language of Section 245C(1) of
the Act that the report of the Commissioner
is primarily on the nature of the case and
the complexities of the investigation, as the
annexure filed in support of the disclosure
of undisclosed income against item No. 11
of the form and the manner in which such
income had been derived are treated as
confidential and are not supplied to the
Commissioner.
It
is
only
after
the
Settlement Commission has decided to
proceed with the application that a copy of
the annexure to the said application and
other
statements
and
documents
accompanying such annexure, containing
the aforesaid information are required to be
furnished to the Commissioner. In our
opinion
even
when
the
Settlement
Commission decides to proceed with the
application, it will not be denuded of its
power to examine as to whether in his
application under Section 245C(1) of the
Act, the assessee has made a full and true
disclosure of his undisclosed income. We
feel that the report(s) of the Commissioner
and other documents coming on record at
different stages of the consideration of the
case, before or after the Settlement
Commission has decided to proceed with
the application would be most germane to
determination of the said question. It is
plain from the language of sub-section (4)
of Section 245D of the Act that the
jurisdiction of the Settlement Commission
to pass such orders as it may think fit is
confined to the matters covered by the
application and it can extend only to such
matters which are referred to in 18 WRIT
TAX No. 208 of 2017 the report of the
Commissioner under sub-section (1) or
subsection (3) of the said Section. A "full
and true" disclosure of income, which had
not been previously disclosed by the
assessee, being a pre-condition for a valid
application under Section 245C(1) of the
Act, the scheme of Chapter XIX-A does not
contemplate revision of the income so
disclosed in the application against item
No. 11 of the form. Moreover, if an
assessee
is
permitted
to
revise
his
disclosure, in essence, he would be making
a fresh application in relation to the same
case by withdrawing the earlier application.
In this regard, Section 245C(3) of the Act
which prohibits the withdrawal of an
application once made under sub-section
(1) of the said Section is instructive in as
much as it manifests that an assessee
cannot be permitted to resile from his stand
at any stage during the proceedings.
Therefore, by revising the application, the
applicant would be achieving something
indirectly what he cannot otherwise achieve
directly and, in the process, rendering the
provision of subsection (3) of Section 245C
of the Act otiose and meaningless. In our
opinion, the scheme of said Chapter is clear
and admits no ambiguity.
x x x x

28. As afore-stated, in the scheme
of Chapter XIXA, there is no stipulation for
1100 INDIAN LAW REPORTS ALLAHABAD SERIES
revision of an application filed under
Section 245C(1) of the Act and thus the
natural corollary is that determination of
(1921) 1 KB 64 (2000) 6 SCC 550 1961 (2)
SCR 189 income by the Settlement
Commission has necessarily to be with
reference to the income disclosed in the
application filed under the said Section in
the prescribed form."

22.

Applying
the
principles
enunciated by the Supreme Court in the
aforementioned case to the facts of the
present case, it is noticed that the applicant
had substantially deviated in disclosure of
the income from the affidavit submitted
under Section 132(4) of the Act of 1961
before the Settlement Commission. During
search Richa Mishra had surrendered 8.00
crores
which
included
her
receipts
₹1,76,94,500/- was seized to the tune of
₹1,76,94,500/-
was
seized5.00
crores.
Before the Commission she has disclosed
an amount of ₹1,76,94,500/- was seized
1,93,16,254/-, which is substantially less
than the disclosure made during the search.
The impugned order reveals that the
objection of the petitioner/department have
merely been mentioned as a passing
reference.
They
have
neither
been
considered and summarily rejected.

23. Apart from the above, at the stage
of filing the rectification application the
respondents further revealed undisclosed
receipts amounting to ₹1,76,94,500/- was
seized1.20 crores for the first time. In the
rectification application, the undisclosed
income was sought to be re-computed and
even the receipt of ₹1,76,94,500/- was
seized1.20
crores
which
was
never
disclosed in the application (SOF) before
the Settlement Commission and disclosed
at such a belated stage after passing of the
final order by the Commission. The
department had estimated the income of
M/s
Balaji
Charitable
Trust
to
be
₹1,76,94,500/- was seized16.05 crores for
the assessment years 2007-08 to 2014-15,
while that of Ms. Richa Mishra to be
₹1,76,94,500/- was seized13.87 crores, but
only ₹1,76,94,500/- was seized1.69 crores
was surrendered by M/s Balaji Charitable
Trust and ₹1,76,94,500/- was seized1.93
crores by Ms. Richa Mishra which was
substantially less. Faced with the said facts,
it was incumbent upon the Commission to
at least looked into the submissions of the
department before proceeding with the
matter. Without delving into the issue, the
Commission accepted the undisclosed
income surrendered by the applicants.

24. At this stage, we may hasten to
add that it has to be kept in mind that the
applicant before the Commission is an
entity which has not disclosed its total
income before the income tax authorities
and on 20 WRIT TAX No. 208 of 2017
adoption
of
coercive
methods
under
Section 132 of the Income Tax Act or
otherwise has declared the same before the
Settlement Commission. In any view of the
matter, such entity cannot be granted undue
benefit in contrast to an honest taxpayer,
who has voluntarily disclosed all his
income and assets. In the present case, it is
evident that the applicant has made certain
disclosures
before
the
income
tax
authorities during the search operations and
has also submitted an affidavit to this
effect. The income tax authorities in their
report before the Commission have duly
informed the Commission that the assets
and receipts of the applicant are much more
than what has been disclosed before the
Settlement Commission. There is a huge
variation in the amounts disclosed by the
applicant Ms. Richa Mishra while filling
the application before the Settlement
2 All. Principal Commissioner of Income Tax (Central) Vs. U.O.I. & Ors.
1101
Commission and all these facts were duly
bought
to
the
knowledge
of
the
Commission. The Settlement Commission
was bound to consider the material
recovered during search and placed before
the Commission in the reply filed by the
department, and could have rejected the
stand of the department, but not taking
cognizance of the reply of the department
and not dealing with the issue the
Commission has acted arbitrarily.

25. It is further seen from the
language of sub-section (4) of Section
245D of the Act that the jurisdiction of the
Settlement Commission to pass such orders
as it may think fit is confined to the matters
covered by the application and it can
extend only to such matters which are
referred
to
in
the
report
of
the
Commissioner under sub-section (1) or
sub-section (3) of the said Section. A "full
and true" disclosure of income, which had
not been previously disclosed by the
assessee, being a precondition for a valid
application under Section 245(C-1) of the
Act, the scheme of Chapter XIX-A does not
contemplate revision of the income so
disclosed in the application against item
No. 11 of the form. Moreover, if an
assessee
is
permitted
to
revise
his
disclosure, in essence, he would be making
a fresh application in relation to the same
case by 21 WRIT TAX No. 208 of 2017
withdrawing the earlier application. In this
regard, Section 245(C-3) of the Act which
prohibits the withdrawal of an application
once made under sub-section (1) of the said
Section is instructive in as much as it
manifests that an assessee cannot be
permitted to resile from his stand at any
stage during the proceedings. Therefore, by
revising the application, the applicant
would be achieving something indirectly
what he cannot otherwise achieve directly
and, in the process, rendering the provision
of sub-section (3) of Section 245C of the
Act otiose and meaningless. Apart from
inadequate
disclosure
made
in
the
application (SOF), in our opinion, the mere
fact that the applicant had sought to revise
his income by means of rectification
application is demonstrative of the fact that
he had not made a full and true disclosure
of income, hence the application was bound
to be rejected on this ground alone.

26.

The
above
facts
clearly
demonstrate that the respondents had not
made a full and true disclosure before the
Settlement Commission. The Settlement
Commission should have noticed and
examined the fact itself, as it is a precondition for an application under section
245C of the Act of 1961 that the applicant
makes a "true and full disclosure" of their
income which has not previously been
disclosed, or at subsequent stage when
further disclosure was brought to their
notice at the time of filing of the
application for rectification. Accordingly,
we are of considered view that the
application
before
the
Commission
deserved to be rejected as the respondents
had not made true and full disclosure of
their undisclosed income. This issue is
decided in favour of the petitioner.

VALIDITY OF THE ORDER OF THE
SETTLEMENT
COMMISSION
ADJUSTING THE RECEIPTS IN THE
ACCOUNT OF DR. A. K. SACHAN
TOWARD THE INCOME OF THE
APPLICANTS:

27. The argument of the petitioner
was that the jurisdiction of the Settlement
Commission limits only to passing the
orders with regard to "undisclosed income"
of the applicants. Number of undisclosed
1102 INDIAN LAW REPORTS ALLAHABAD SERIES
22 WRIT TAX No. 208 of 2017 income of
Dr. A. K. Sachan was duly taken into
consideration by the Assessing Officer in
his assessment for the assessment year
2012-13. Once the receipts in the said
accounts had been assessed as income of
Dr. A. K. Sachan during regular assessment
proceedings then the same could not have
been
considered
by
the
Settlement
Commission as undisclosed income of the
respondents and such an issue could not
have been considered by the Commission.
There
was
no
material
before
the
commission for holding that the receipts in
the said bank accounts held by Dr A. K.
Sachan were income of M/s Shekhar
Hospital (Pvt.) Ltd.

28. Submission of Sri D.D. Chopra,
Senior Advocate, learned counsel for the
respondents is that the Commission was
within its competence to return a finding
with regard to the receipts in the account of
Dr. A.K. Sachan. His argument was that the
said income was being claimed by the
applicant to be his income, hence the said
issue could have been duly considered and
decided by the Commission. He had not
disputed the fact that Dr. A.K. Sachan was
not a party to the proceedings before the
Commission and also that he did not
participate in the same.

29. Considering the rival contentions
it is clear that Dr. A. K.