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PETITIONER: C.I.T.

       Vs.

RESPONDENT: EXPRESS NEWSPAPERS LTD.

DATE OF JUDGMENT11/01/1994

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) VERMA, JAGDISH SARAN (J) YOGESHWAR DAYAL (J)

CITATION:  1994 AIR 1389            1994 SCR  (1)  64  1994 SCC  (2) 374        JT 1994 (1)    50  1994 SCALE  (1)39

ACT:

HEADNOTE:

JUDGMENT: The Judgment of the Court was delivered by JEEVAN REDDY, J.- These appeals are preferred by the Revenue against  the order of the Settlement Commission in the  case of   the  respondent  Express  Newspapers  Limited,   Madras relating to the assessment years 1985-86, 1986-87 and  1987- 88.   It raises certain important questions with respect  to the jurisdiction of the Settlement Commission under  Chapter XIX-A  of  the  Income  Tax Act, 1961.   We  have  heard  Dr Gaurishankar  for  the appellant and Ms Bina Gupta  for  the respondent.   We may mention here that when called  upon  to argue,   after   the  conclusion  of   submissions   by   Dr Gaun’shankar,  Ms Bina Gupta asked us to adjourn the  matter to enable her to engage a senior counsel.  We refused to  do so since it was the first case in the list that day and  the request  was made after the commencement of  the  arguments. We then heard her fully. Relevant facts of the case: 2.The  respondent-assessee  filed  its  return  for   the assessment year 1985-86 on July 22, 1985.  A revised  return was  filed on February 26, 1988.  It disclosed a loss of  Rs 32,80,700.   The  Assessing Officer, however,  assessed  the income at Rs 1,27,95,570 by his order dated March 30,  1988. The Assessing Officer held that the transactions of sale and purchase of potatoes, iron scrap and shares, from which  the assessee claimed to have suffered huge losses were not  true but  were bogus transactions fabricated for the  purpose  of evading the legitimate tax due on its income.  The  assesses preferred an appeal before the CIT (Appeals), who  dismissed the  same  by his order dated March 31,  1989.   During  the pendency  of  the said appeal, the assessee  approached  the Commission  on  December  16,  1988  with  respect  to  four assessment years namely, 1985-86, 1986-87, 1987-88 and 1988- 89.   On  that date, the assessments relating to  the  three

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later years were pending before the Assessing Officer.   The application  to  the Commission made by the assessee  is  in Form  No. 34-B.  In Column 10 the assessee stated  that  the case  involved  substantial  issues  and  amount,  that  the transactions  of  the assessees were large and  diverse  and that  the case calls for judicial approach and  appreciation of the facts.  It requested the Commission to determine  the tax  payable  for the aforesaid four  assessment  years,  to confer  immunity  upon  it  from the  levy  of  penalty  and prosecution,  and  waiver of interest chargeable  under  the provision  of  the  Act.   Through  this  application,   the respondent- 378 assessee  offered for tax "an additional total income of  Rs 1,32,27,969 over and above the income offered for assessment in  the returns for the assessment years 1985-86 to  1988-89 on  which the tax payable works out to Rs  14,35,720".   The respondent  further  complained  that  the  department  "has conducted a hostile and unfair investigation, has  concluded assessment   and   has  raised  large   demands   based   on disallowances and additions without providing an opportunity whatsoever".   The  respondent requested the  Commission  to grant "an ad interim order restraining the Assessing Officer from  going ahead with further proceedings in regard to  the assessment  years  sought to be settled hereby so  that  the application  is  not rendered otiose by any  action  of  the department   during  the  interrogation".   In  short,   the respondent did not disclose any income not disclosed  before the Assessing Officer but merely offered a small part of the losses  claimed by it for the said assessment years to  tax. According  to the respondent, it was doing so to  buy  peace from the department.  A copy of the application filed by the assessee  was  sent to the Commissioner.   The  Commissioner submitted  his report on July 6, 1989.  In this report,  the Commissioner stated the following facts and objections: 3.The   respondent-assessee   owns   substantial    house properties  in  Bombay,  Madras and New  Delhi.   The  gross rental income derived therefrom is about rupees two  crores. Apart  from  the  above,  the  assessee  "reportedly  had  a merchandise  division stated to be run from Calcutta".   The activities  of  this  division were reported to  be  in  the purchase and sale of potatoes, metal scrap and shares.   The assessments  for  the  various years are  pending  with  the Assessing  Officer.  Some of the past completed  assessments have  been  reopened  under Section 147  of  the  Act.   The details of the income/loss disclosed by the assessee for the four  assessment  years are stated in the  Annexure  to  the report.  "Enquiries regarding the claims made by the company for  losses  on transactions in these  years  had  commenced before the date of filing of the application by the  company with  the  Settlement  Commission and  these  enquiries  had reached a final stage even before the petition was filed  by the assessee". 4.The  Commissioner  then set out the  comprehensive  and elaborate  enquiries made by the department into the  claims made  by  the  assessee  company  relating  to  its  alleged dealings in potatoes, scrap and shares from which it claimed to  have  suffered substantial losses.  He referred  to  the statements  of parties, through whom the  said  transactions were  said  to  have  been put  through,  denying  any  such transactions.  He pointed out with reference to the books of the  assessee  and other relevant persons that  the  several alleged  payments  were  not  real  and  that  the   several transactions  disclosed  by  the assessee  were  mere  make- believe and that all those entries were fabricated.  Some of

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the  parties who made statements adverse to  the  assessee’s interest,  were also cross-examined by the assessee.  We  do not  think  it  necessary  to  refer  to  or  set  out   the particulars  of the investigation and inquiries made or  the material  gathered, referred to in the report.  It sets  out the material separately with respect to alleged dealings  in potatoes, scrap and 379 shares.   It  would  suffice  to  set  out  the   concluding paragraphs of the said report.  They read:               "The   discussion   above   would    therefore               conclusively  establish  the  fact  that   the               department has in its possession documents and               materials  to  lead  to  the  view  that   the               assessee  had fraudulently claimed  losses  on               various  accounts  for  the  assessment  years               1985-86,  1986-87 and 1987-88. The  department               has  acted  on these, had  conducted  its  own               inquiries  and had disallowed the  claims  and               treated them as part of the assessee’s income.               For  the  assessment year  1985-86,  complaint               under Sections 276C, 277, 278 and 278-B of the               Income  Tax  Act  has been  filed  before  the               Additional   Chief  Metropolitan   Magistrate,               Egmore.   Therefore, for the assessment  years               1985-86,  1986-87  and  1987-88  the  petition               filed  by  the company before  the  Settlement               Commission is not a correct statement of fact.               As  far  as  the assessment  year  1988-89  is               concerned,  the  assessee  company  filed  its               return of income on July 11, 1988  accompanied               by  a copy of the profit and loss account  and               balance-sheet  as on March 31, 1988.   Notices               issued  under  Section 143(2) of  the  Act  in               October 1988 and March 1989 did not elicit any               response from the company.               For  reasons stated above, it is claimed  that               the department had in its possession  adequate               information  prior  to December  16,  1988  to               warrant  a  conclusion that the  assessee  had               concealed  details  of  its  true  income  and               furnished inaccurate particulars thereof.   In               such circumstances, under Section 245-D of the               Act,  objection is taken by the department  to               the  company’s petition being  entertained  by               the   Commission    more   particularly    for               assessment  years 1985-86, 1986-87  and  1987-               88." 5.The  Commission  heard  the  parties  and  allowed  the application  of  the  assessee to be  proceeded  with  under Chapter XIX-A.  The two members of the Commission, Shri C.S. Jain  and  Shri D.C. Shukla wrote  two  separate  concurring orders.   The main opinion is by Shri Jain.  His  reasoning, as condensed by us, runs thus:               "At  this  stage  the  burden  lies  upon  the               Commissioner to point out the material and the               results of enquiries and investigation to show               that concealment has been established or  that               enquiries have reached the stage where it  can               be  said that concealment of income is  likely               to  be established.  The material referred  to               in  the  report of the Commission, as  on  the               date  of filing of the application,  does  not               establish with certainty that the  concealment               has  been  established  or  is  likely  to  be

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             established.   Many of the inquiries  referred               to in the report were made after the filing of               the  application  under  Section  245-C;  they               cannot  be  taken into consideration  for  the               purpose  of  taking a decision  under  Section               245-D.  The inquiries made do not establish  a               complete chain of concealment or fraud on  the               part  of  the assessee. (He  concluded)   ’We,               therefore,  hold  that it is a case  where  it               cannot be said beyond dispute that concealment               of income has been established or is likely to               be  established.   Section  245-D(l)  of   the               Income  Tax Act describes situations in  which               the               380               application  can  be allowed to  be  proceeded               with, where the objection of the  Commissioner               is not upheld.  The Settlement Commission  has               to  consider  the material  contained  in  the               report  of  the Commissioner, the  nature  and               circumstances  of  the case or  complexity  of               investigation   involved  therein.    In   the               instant case, we have considered the materials               contained  in the Commissioner’s report.   The               nature and circumstances of the case are  such               that the case be allowed to be proceeded with.               The  main  question involved in  the  case  is               whether  the  losses  claimed  in  merchandise               division   for  various  years  are   genuine.               Without      widespread     inquiries      and               investigations, this task cannot be fulfilled.               It may involve lots of inquiries,  proceedings               and possibly prolonged litigation.  The  facts               in  relation to the merchandise division  have               been discussed in detail in earlier paragraphs               of this order.  The facts and circumstances of               the  case also involve the complexity  of  the               investigation.    We,  therefore,  allow   the               application   to   be  proceeded   with,   for               assessment years 1985-86 to 1988-89." 6.The  other  member, Shri Shukla also proceeded  on  the footing  that the material gathered by the department  after the  date  of filing of the statement is  not  relevant  and cannot  be looked into for the purpose of taking a  decision under Section 245-D(l).  He too held that on the date of the filing of the application "conclusive material is lacking on the basis of which the objection of the Commissioner can  be sustained." Relevant Provisions of Law and their meaning: 7.Chapter  XIX-A  providing for settlement of  cases  was introduced  in  the  Income Tax Act, 1961  pursuant  to  the recommendations  of the Direct Tax Inquiry Committee  headed by  Justice  Wanchoo.   It  is necessary  to  notice  a  few provisions  relevant herein.  Section 245-A defines  certain expressions  occurring in the chapter.  Clause  (b)  defines the expression "case" in the following words-               "(b)  ’case’ means any proceeding  under  this               Act for the assessment or reassessment of  any               person in respect of any year or years, or  by               way  of appeal or revision in connection  with               such assessment or reassessment, which may  be               pending before an income tax authority on  the               date on which an application under sub-section               (1) of Section 245-C is made:               Provided that where any appeal or  application

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             for  revision  has been  preferred  after  the               expiry of the period specified for the  filing               of  such  appeal or application  for  revision               under   this  Act  and  which  has  not   been               admitted, such appeal or revision shall not be               deemed  to be a proceeding pending within  the               meaning of this clause;" 8."Case"  for  the purpose of this chapter thus  means  a proceeding  relating  to one or more assessment  years.   It takes  in  a  proceeding  for  assessment  or  reassessment. Similarly,  it may be a proceeding pending at the  stage  of assessment or in appeal or revision. 381 9.Section  245-B provides for constitution of the  Income Tax   Settlement  Commission.   Sub-section   (3)   provides specifically  that  the Chairman, Vice  Chairman  and  other members  of the Settlement Commission shall be appointed  by the  Central Government "from amongst persons  of  integrity and  outstanding ability, having special knowledge of,  and, experience  in,  problems  relating  to  direct  taxes   and business accounts". 10.Section 245-C provides for filing of an application  by an  assessee  for settlement of his case.   Sub-section  (1) says  that an assessee may "at any stage of a case  relating to  him"  make  an application in the  prescribed  form  and manner, "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 income tax payable on such income  and such  other particulars as may be prescribed" to settle  his case.   There are certain other requirements which  be  must fulfil before making such an application but which it is not necessary to notice here. 11.For  a  proper delineation of the jurisdiction  of  the Commission, it is necessary to bear in mind the language  of sub-section  (1) of Section 245-C.  It provides that at  any stage  of  a case relating to him, an assessee may  make  an application  to  the Commission disclosing fully  and  truly income  which  has not been disclosed before  the  Assessing Officer.  He must also disclose how the said income has been derived  by  him besides certain  other  particulars.   This means  that an assessee cannot approach the  Commission  for settlement  of  his  case with  respect  to  income  already disclosed  before  the Assessing  Officer.   An  application under  Section  245-C is maintainable only if  it  discloses income  which  has not been disclosed before  the  Assessing Officer.   The disclosure contemplated by Section  245-C  is thus  in  the nature of voluntary  disclosure  of  concealed income.   Unless the income so disclosed exceeds Rs  50,000, the application under Section 245-C is not maintainable.  It is  equally  evident  that once an  application  made  under Section  245-C is admitted for consideration  (after  giving notice to and considering the report of the Commissioner  of Income  Tax  as provided by Section  245-D)  the  Commission shall have to withdraw the case relating to that  assessment year   (or   years,   as  the  case   may   be)   from   the assessing/appellate/revising  authority  and deal  with  the case,   as  a  whole,  by  itself.   In  other  words,   the proceedings  before the Commission are not confined  to  the income  disclosed before it alone.  Once his application  is allowed  to  be  proceeded  with  by  the  Commission,   the proceedings  pending  before  any authority  under  the  Act relating  to that assessment year has to be  transferred  to Commission and the entire case for that assessment year will be  dealt with by the Commission itself.  The words "at  any

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stage of a case relating to him" only make it clear that the pendency  of proceedings relating to that  assessment  year, whether before the Assessing Officer or before the appellate or  revisional  authority,  is no bar to the  filing  of  an application  under Section 245-C so long as the  application complies with the requirements of Section 245-C. 382 12. Section 245-D prescribes the procedure to be followed by the  Commission on receipt of an application  under  Section 245-C.  Sub-section (1)  is  relevant for our  purpose.   As originally enacted, the sub-section read as follows:               "  (1)  On  receipt of  an  application  under               Section 245-C, the Settlement Commission shall               call for a report from the Commissioner and on               the  basis of the materials contained in  such               report  and  having regard to the  nature  and               circumstances of the case or the complexity of               the   investigation  involved   therein,   the               Settlement Commission may, by order, allow the               application to be proceeded with or reject the               application:               Provided  that  an application  shall  not  be               rejected  under  this  subsection  unless   an               opportunity has been given to the applicant of               being heard:               Provided further that an application shall not               be  proceeded with under this  sub-section  if               the  Commissioner objects to  the  application               being  proceeded  with  on  the  ground   that               concealment  of particulars of income  on  the               part of the applicant or perpetration of fraud               by  him  for  evading any  tax  or  other  sum               chargeable  or  imposable  under  the   Indian               Income  Tax  Act, 1922 (XI of 1922)  or  under               this Act has been established or is likely  to               be established by any income tax authority  in               relation to the case." 13.By Finance Act, 1979 the second proviso was omitted and subsection  (I  A) was inserted, with effect from  April  1, 1979.  Sub-section (I A) read as follows:               "(1-A)  Notwithstanding anything contained  in               sub-section  (1), an application shall not  be               proceeded with under that sub-section, if  the               Commissioner objects to the application  being               proceeded with on the ground that  concealment               of  particulars of income on the part  of  the               applicant or perpetration of fraud by him  for               evading  any  tax or other sum  chargeable  or               imposable  under  the Indian Income  Tax  Act,               1922 (1 of 1922), or under this Act, has  been               established or is likely to be established  by               any  income tax authority, in relation to  the               case:               Provided that where the Settlement  Commission               is  not satisfied with the correctness of  the               objection  raised  by  the  Commissioner,  the               Settlement  Commission may, after  giving  the               Commissioner an opportunity of being heard, by               order,  allow the application to be  proceeded               with under sub-section (1) and send a copy  of               its order to the Commissioner." 14.It is this sub-section read with sub-section (1)  which is relevant for the purposes of this case.  We may, however, mention that sub-section (I-A) has since been deleted and  a proviso introduced in sub-section (1) as the second proviso,

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which reads as follows:               "[Provided further that the Commissioner shall               furnish  the  report within a  period  of  one               hundred and twenty days of the receipt of               383               communication  from the Settlement  Commission               in case of all applications made under Section               245-C  on  or  after the  date  on  which  the               Finance (No. 2) Act, 1991, receives the assent               of the President and if the Commissioner fails               to furnish the report within the said  period,               the  Settlement Commission may make the  order               without such report.]" 15.  It  is not necessary to notice the effect of the  above legislative change broughtabout in 1991. 16.  As originally enacted the main limb of sub-section  (1) provided  that  on receipt of an application  under  Section 245-C,  the  Commission  shall call for a  report  from  the Commissioner with respect to the application.  The  decision whether  to "allow the application to be proceeded  with  or reject the application" had to be taken (a) on the basis  of the material contained in the Commissioner’s report and  (b) having regard to the nature and circumstances of the case or the  complexity of the investigation involved therein.   The first  proviso  said  that  no  such  application  shall  be rejected unless an opportunity of hearing is afforded to the applicant.  The second proviso to sub-section (1),  however, provided   that  Commission  shall  not  proceed  with   the application  filed under Section 245-C, if the  Commissioner objected  to  the application being proceeded  with  on  the ground  that  "concealment of particulars of income  on  the part  of the applicant or perpetration of fraud by  him  for evading  any tax or other sum chargeable or imposable  under the  Indian Income Tax Act, 1922 (XI of 1922) or under  this Act  has been established or is likely to be established  by any  income tax authority in relation to the case".  If  the Commissioner   objected   on  the  ground   aforesaid,   the Commission  could  not proceed with  the  application  under Section  245-C.  (It  is not necessary  to  decide  for  the purpose  of  this  case whether the mere  objection  of  the Commissioner  sufficed  and whether the  Commission  had  no power to examine the correctness of the said objection.)  By the  Finance Act, 1979 the second proviso was deleted.   The main limb of sub-section (1) and the first proviso, however, remained  untouched.  In place of the second  proviso,  sub- section (I-A) was introduced.  The effect of this  amendment was that the Commissioner’s objection ceased to be final and conclusive.  The proviso to sub-section (I-Al) empowered the Commission   to  examine  whether  the  objection   of   the Commissioner   was  correct  or  not.   After  hearing   the Commissioner,  if  the  Commission was  satisfied  that  the objection  of  the Commissioner was not  correct,  it  could proceed with the application. 17.Sub-section  (I A) has to be read in harmony  with  the main  limb  of sub-section (1).  The said  sub-section  says that  the  Commission  shall decide  whether  to  allow  the application  to be proceeded with before it or to reject  it (a) on the basis of the material contained in the report  of the  Commissioner  and (b) having regard to the  nature  and circumstances   of  the  case  or  the  complexity  of   the investigation  involved therein.  What do these words  mean? They  are words of general import.  What did the  Parliament mean  thereby?  For ascertaining their meaning and  purport, one has to turn to the purposes underlying the enactment  as

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a  whole.  It is neither possible nor advisable to  seek  to lay down exhaustively the several situations in which 384 the  Commission would decide to allow the application to  be proceeded  with  or  in  which the  application  has  to  be rejected.   A  case  may be a complex one;  it  may  involve prolonged  or cumbersome investigation.   Another  situation may  be  where having regard to the nature of the  case  and other  circumstances,  the  Commission  may  feel,  in   the interest of the Revenue and in the interest of justice, that it  is  better to give a quietus to the case  once  for  all instead  of  allowing  it to be  fought  through  the  usual channels.   The decision has to be taken by  the  Commission having regard to all the facts and circumstances before  it, in  the  light  of the object, purpose  and  scheme  of  the enactment.  It is precisely because such wide discretion  is given to the Commission that the Act requires that it should be  manned  by  men of integrity  and  outstanding  ability, having  special  knowledge  of  direct  taxes  and  business accounts. 18.The next set of words that present some difficulty  are the  words  "has  been  established  or  is  likely  to   be established  by any income tax authority in relation to  the case"  occurring  in sub-section (1-A) [as well  as  in  the second  proviso to sub-section (1) as  originally  enacted]. For a proper appreciation of the meaning of these words,  it is  necessary to remind ourselves that an application  under Section  245-C can be made only in respect of an income  not disclosed by the assessee before the Assessing Officer.   If so,  what  did  the  Parliament  mean  when  it  said   that Commission  shall not allow the application to be  proceeded with  if  the  Commissioner  objects  on  the  ground   that "concealment  of  particulars of income on the part  of  the application or perpetration of fraud by him for evading  any tax  or other sum chargeable or imposable under  the  Indian Income Tax Act, 1922 or under this Act, has been established or likely to be established by any income tax authority,  in relation  to  the case"?  To appreciate the meaning  of  the said  words, it is necessary to keep in mind  the  following facts:  even  though  the  assessee  has  not  disclosed   a particular  income before the Assessing Officer, the  latter is  free  to  and is empowered to unearth it  by  making  or causing  such  investigation  and  enquiries  as  he  thinks appropriate.  He may gather and receive information for that purpose.  We may take two illustrative cases: One, where the Assessing Officer has discovered some income, which was  not disclosed  by  the  assessee,  and  has  added  it  to   the assessee’s  income.  The latter challenges the same and  the proceedings are pending either before the Assessing  Officer or  before an appellate or revisional authority.  Second,  a case   where  the  income  tax  authorities  are   gathering information/material, which is likely to establish that  the assessee  has  concealed  the particulars  of  a  particular income.  If, in the first case, the assessee applies to  the Commission under Section 245-C, the Commissioner can  object on the ground that concealment of particulars of income  has been established.  Similarly, if the assessee in the  second case applies to the Commission, the Commissioner can equally object  on the ground that the investigation/enquiries  made by them already  or the information received or gathered  by them  already   is likely to establish  the  concealment  of particulars of income and, therefore, the Commission  should not allow the 385 application to be proceeded with.  On the same lines,  there

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may  be cases where the income tax authorities  have  either established or are likely to establish that the assessee has perpetrated  a  fraud  for  evading the  tax  or  other  sum chargeable  or imposable under the 1922 Act or  the  present Act.   It  is the correctness of these objections  that  the Commission  is supposed to look into by the proviso to  sub- section  (I-A).  It’s further course of action depends  upon its satisfaction one way or the other. 19.The idea underlying the said words [in the main limb of sub-section  (I-A)] is self-evident.  The  disclosure  under Section 245-C must be of an income not disclosed before  the Assessing Officer.  If the Assessing Officer (or the  income tax  authority)  has already discovered it  and  has  either gathered  the material to establish the particulars of  such income   or   fraud   fully   or   is   at   a   stage    of investigation/enquiries  where the material gathered by  him is  likely  to establish the particulars of such  income  or fraud,   the  assessee  cannot  be  allowed  to  defeat   or forestall,  as the case may be, the entire exercise  of  the income  tax authorities just by approaching the  Commission. In  such  a  case,  it cannot be  said  that  he  is  acting voluntarily  or in good faith.  He should not be allowed  to take   advantage  of  the  comparatively  easy   course   of settlement.  He must be allowed to face the normal  channels of assessment/appeal etc.  Section 245-C is meant for  those assessees  who seek to disclose income not disclosed  before the  Officer including "the manner in which such income  has been  derived".   If the department already  knows  and  has gathered particulars of such income and the manner in  which it  has  been  derived,  there is  no  ’disclosure’  by  the assessee.   Let it be remembered that the words in  question [in Section 245-D(I-A)] are not words of limitation nor  are they meant to help unscrupulous assessees.  Chapter XIX-A is a  part  of  the  Income  Tax  Act  and  must  be  construed consistent with the overall scheme and object.  The  chapter is meant for those assessees who want to disclose income not disclosed  till then together with the manner in  which  the said income is derived.  It is not meant for those who  come after   the  event,  i.e.,  after  the  discovery   of   the particulars  of  income  and its  source   or  discovery  of particulars  of  fraud perpetrated by the assessee,  as  the case may be  nor even to those who come to the Commission to forestall  the investigation/inquiries which have reached  a stage  where  the department is in  possession  of  material which though not sufficient to establish such concealment or fraud, is such that it is likely to establish it  maybe some more  material  is  required to  establish  it  fully.   The Commission  has  to  keep all this in  mind  while  deciding whether  to allow the application to be proceeded before  it or to reject it. 20.This  discussion also shows that the Commission  cannot say  that any material collected by the  Commissioner  after the date of filing of the application under Section 245-C is not  relevant  for the purposes of  Section  245-D(l).   The filing  of  an application by the assessee is  a  unilateral act.   The  department may not be aware of  the  same.   The proper  line  -  ordinarily speaking is  to  be  drawn  with reference  to  the date of submission of the report  by  the Commissioner.  This does not, however, prevent the 386 Commission  from looking into material collected  by  income tax  authorities  even subsequent to the submitting  of  the report  by the Commissioner, if it thinks such a  course  is called for in the interests of justice. 21.Sub-section  (4) of Section 245-D provides for  passing

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of  final orders by the Commission.  It is not necessary  to refer  to  the  other provisions in the  chapter  except  to mention  that  the  Commission is empowered  to  direct  the waiver of penalty as well as interest and to direct that the tax  payable shall be paid ’in prescribed’ instalments.   It is further empowered to direct that the assessee whose  case has  been  decided  by it shall not  be  proceeded  with  or prosecuted  under  the Income Tax Act or  under  the  Indian Penal Code or under any other Central Act for the time being in force with respect to the case covered by the settlement. The orders of the Commission are final, subject of course to constitutional remedies. Merits of the case: 22.If we look at the facts of the case in the light of the legal  position  adumbrated hereinabove, it would  be  clear that  the  application filed by the  respondent  before  the Commission  was  not maintainable and could  not  have  been allowed  to be proceeded with.  Firstly, the respondent  did not  disclose, in its application under Section  245-C,  any income which was not disclosed before the Assessing Officer. This  was a case where the respondent was  claiming  certain losses, which he sought to set-off against its other income. If  the respondent’s case was true, it would not  have  been liable to pay any tax for the reason that entire income from property (and other income, if any) would have been  swamped by  the  said losses.  Indeed, the loss had  to  be  carried forward to the next year.  The case of the Revenue, however, was  that all the alleged transactions (from which  loss  is said  to  have  resulted) were bogus  and  fictitious  ones, fabricated only for the purposes of evading the tax lawfully due  on its income.  In his application to  the  Commission, the respondent did not disclose any income not disclosed  by him before the Assessing Officer nor did he disclose in  his application  the  manner in which such income  was  derived. The assessee merely offered a part of the amount (claimed by him   as   losses)  towards  taxable  income.    Thus,   his application,  not  being in compliance with  the  first  and foremost   requirement   of  Section   245-C(l),   was   not maintainable thereunder.  It ought to have been rejected  in limine.  The Commission had no jurisdiction to entertain the said application.  Secondly, this is a case where the income tax   authorities  had  made  extensive  investigation   and inquiries  wherein they had collected  voluminous  material, which,  according  to them, established the  particulars  of concealment  of  income  on  the  part  of  the  respondent- assessee.   It  was so held by the Assessing  Officer   with whom  the  first  appellate  authority  agreed,  no   doubt, subsequent  to the filing of the application  under  Section 245-C but before the passing of the impugned order. 23.The Commission was also not right in holding that while deciding  whether to allow the application to  be  proceeded with  before it under Section 245-D(l), they will  not  look into the material collected after the date of 387 filing of the application under Section 245-C.  It has   not been found by the Commission that the income tax authorities were aware of the filing of the application on December  16, 1988.   Even  if  they were aware, the mere  filing  of  the application  did not mean that they should fold their  hands and stop their investigation and enquiries in their  tracks. They  were, in fact, entitled to rely upon the evidence  and material  collected by them till the date of  submission  of the   report  to  the  Commission.   The  decision  of   the Commission is thus vitiated by misdirection in law.  It took cognizance  of  a  matter  which it  could  not  have.   The

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impugned  order is equally vitiated by a misapprehension  as to true legal position on the part of the Commission. 24.The appeals are allowed accordingly.  The order of  the Settlement  Commission  under  appeal  is  set  aside.   The assessments relating to all the four assessment years  shall now proceed according to law.  Having regard to the facts of the case, we direct that it shall be open to the  respondent to  file  an appeal before the Tribunal  against  the  order dated  March  31, 1989 within one month from today.   If  so filed, it shall be treated as filed within time and shall be dealt  with  as such.  We make it clear that this  order  is confined  to  the  jurisdiction of the  Commission  and  the validity  of its order taking seisin of the case.   We  have not  expressed nor did we intend to express any  opinion  on the  merits  of  the  same.   It  is  for  the   appropriate authorities to go into the same in accordance with law. 25.The respondent shall pay the costs of the appellant  in this appeal which we assess at Rs 10,000. 388