Facts of the Case

The Revenue had filed writ petitions challenging the order dated 27.06.2013 passed by the Income Tax Settlement Commission granting immunity from penalty and prosecution to the respondents, Standard Farms Pvt. Ltd. and Raheja Builders Pvt. Ltd. By judgment dated 21.07.2017, the Delhi High Court set aside the grant of immunity and remanded the matter to the Settlement Commission for fresh consideration in accordance with law.

Pursuant to liberty granted by the Supreme Court in SLPs filed against the 2017 judgment, the assessees filed review petitions seeking review of the order dated 21.07.2017. The assessees contended that satisfaction regarding fulfilment of conditions under Sections 245C and 245H of the Income-tax Act, 1961 had already been recorded by the Settlement Commission in its orders dated 28.12.2011 and 27.06.2013.

Issues Involved

Whether the order dated 21.07.2017 warranted review on the ground that the Settlement Commission had already recorded satisfaction regarding cooperation and full and true disclosure as required under Section 245H(1), and whether immunity from penalty and prosecution could be sustained without detailed reasoning.

Petitioner’s Arguments (Assessees)

The assessees argued that the Settlement Commission had recorded satisfaction that the conditions under Section 245C(1) were fulfilled at the stage of admission of settlement applications and that cooperation was acknowledged in the final order. It was submitted that this was sufficient compliance with Section 245H(1), and therefore the remand order deserved review. Reliance was placed on decisions including Jyotendrasinhji v. S.I. Tripathi and Pr. CIT (Central)-II v. Trend East West LPG Bottling Ltd.

Respondent’s Arguments (Revenue)

The Revenue contended that mere recording of cooperation or admission of settlement applications was insufficient. It was argued that Section 245H(1) mandatorily requires the Settlement Commission to record specific satisfaction regarding full and true disclosure of income and the manner in which such income was derived. Reliance was placed on the Delhi High Court decision in CIT (Central)-II v. BDR Builders and Developers Ltd. and related precedents.

Court Order / Findings

The Delhi High Court reiterated that the scope of review is limited and can be exercised only in cases of error apparent on the face of the record. The Court held that mere recording that conditions under Section 245C(1) were satisfied or that cooperation was extended does not meet the statutory mandate of Section 245H(1).

Relying extensively on BDR Builders and Developers Ltd., the Court held that it is mandatory for the Settlement Commission to record explicit satisfaction regarding both cooperation and full and true disclosure of income and the manner of its derivation. The Court found that neither the order dated 28.12.2011 nor the order dated 27.06.2013 contained adequate reasoning or satisfaction on these mandatory aspects.

The Court further noted that disclosures made in instalments or after being confronted with adverse material cannot be treated as full and true disclosure at the threshold, which is a prerequisite for grant of immunity.

Important Clarification

The Court clarified that grant of immunity under Section 245H is discretionary but strictly conditioned upon clear and reasoned satisfaction of statutory requirements. Such satisfaction cannot be presumed or inferred and must be expressly recorded in the order granting immunity.

Final Outcome

The review petitions were dismissed. The Delhi High Court upheld its earlier order dated 21.07.2017 and reaffirmed that the grant of immunity by the Settlement Commission was unsustainable in the absence of proper satisfaction under Section 245H(1). The matter was remanded to the Income Tax Settlement Commission to reconsider the question of immunity and pass a reasoned order in accordance with law within the stipulated timeframe.

 

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769840801_COMMISSIONEROFINCOMETAXCENTRALIIVsSTANDARDFARMSPVT.LTD.ANR..pdf

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