By TIOL News Service

MUMBAI, AUG 28, 2018: THE ISSUE BEFORE THE BENCH IS - Whether rejection of claim for deduction u/s 80IB can by default be taken to mean that the claimant failed to make full & true disclosure of income. NO IS THE VERDICT.

Besides, the bench also held that the absence of an option of appeal would not enable an assessee to approach a writ court as if it were an appellate court. Ergo, an order of the SETCOM can be challenged through writ only if it blatantly causes prejudice or is bad in law, it observed. Moreover, it also clarified that stating the head or source of income but without mentioning manner of its derivation, is not valid disclosure of income.

Facts of the case

The assessee company, engaged in executing housing projects and also facilitating in obtaining permission for development of land. During the relevant AYs, the assessee approached the Settlement Commission and declared undisclosed income for settlement of disputes. The Commission held that the assessee failed to make full & true disclosure regarding claim for deduction u/s 80IB(10) and also pertaining to income declared in respect of diaries seized during search. So aggrieved, the assessee filed the present writ.

In writ , the High Court held that,

++ so far as the rejection of the application on account of its claim for deduction under Section 80IB(10) is concerned, the basis of the income declared for settlement was after claiming the benefit available u/s 80IB(10)of the Act. In case, this was not found justified by the Commission, then ipso facto , it would not lead to a conclusion that there was a failure on the part of the assessee to fully and truly disclose its income for settlement of the dispute before the Commission. This, more particularly so, when the order holds that further details are required to be called for from the Pune Municipal Corporation to determine whether the claim for deduction u/s 80IB(10), is justified or not. Thus, the rejection of the application for settlement in such facts on the ground of failure to disclose all facts may not be sustainable and would certainly require further consideration;

++ the assessee has moved this Court in its writ jurisdiction. Admittedly, there is no appeal provided under the Act from the orders of the Commission. However, the absence of an appeal, would not convert a Writ Court into an Appeal Court to enable us to substitute our view to that of the Commission. It is only in cases where the order passed by the Commission is contrary to and/or ignores the statutory provisions, causing prejudice to the Applicant or is bad on account of the flaw in the decision making process that, we interfere with the orders of the Commission;

++ thus disclosing the manner in which income has been earned, would require giving particulars of the manner in which it was earned. Merely stating the source of the income or the head of income, would not mean the manner in which the income is earned is enclosed. The manner i.e. the way in which income was earned, would involve disclosing the particulars, when specifically asked for i.e. the property or person involved in earning the undisclosed income. It cannot be said that this amounts to calling upon the party to substantiate the income. Further, the Petitioner has claimed expenses and seeking particulars of the expenses, cannot be said to be calling upon the assessee to substantiate the expenses. In fact, the order records a finding that not giving particulars of the undisclosed income would result in failure to disclose truly and fully the income offered for settlement. Therefore, no interference under Article 226 of the Constitution, is called for on this count in our writ jurisdiction.

(See 2018-TIOL-1714-HC-MUM-IT)