KULDEEP INDUSTRIAL CORPORATION

INCOME TAX OFFICER AND ORS.

DECEMBER 10, 1996

[B.P. JEEVAN REDDY AND K.S. PARIPOORNAN, JJ.]

Income Tax Act, 1961: Sections 144-B, 245-C and 245-D(l-A).

Income Ttu~Settlement of cases-Application for AYs 1977- 78, 1978- C 79 and 1979-8()-Assessee claimed to be manufacturer of stainless steel goods--Received substantial quantities of stainless steel sheets from MMTC-Disclosed huge losses for AYs 1977-78 and 1978-79 and small profit for AY 1979-8()-JTO found assessee not carrying on any manufactunng activity and issued notice proposing addition of three items of income-At D this stage, assessee filed application before Settlement Commission seeking settlement for all three AYs-Assessee called upon ITO to stop all further proceedings on ground of filing of settlement application-But despite repeated request by ITO assessee neither replied to notices issued by ITO nor furnished her copy of settlement applicatiolt-ln these circumstances, ITO

refused to stay further proceedings and communicated draft assessment order E to assessee under S. 144-B for AY 1977-78 and detennined large amount as income of assessee against a small loss returned by assessee-ln settlement application assessee admitted that during accounting years relevant to said three AYs it had not carried on any manufacturing activity and sold stainless sheets to brokers in different cities and derived a profit in all AYs put p togethei-Before Settlement Commission, CIT sought rejection of assessee's application on ground of fraud by assessee for evading tax on a massive scale-Settlement Commission rejected application in respect of AY 1977-78 but by majority admitted same in respect of AYs 1978-79 and1979-8(}-f{eld : Neither settlement application nor facts and figures given therein relating to stock received, their sale to different parties, the expenses paid and profits G made were confined to one AY(l977-78) but extended to all threeAYs-Facts stated in draft assessment order and admitted by assessee attracted S. 245- D( 1-A)-Hence, assessee disentitled to claim admission of his application even in respect of AYs 1978-79 and 1979-80.

H Income TO:£-Settlement of cases by !To-Power of-lTO proceeded 782

KULDEEP INDL. CORPN. v. I.T.O. 783

with or collected material after assessee submitted application for settle- A ment-Held : ITO had power to do so.

Income Tax-Settlement Commission-Jurisdiction of Supreme Court over orders of-Held : In the nature of judicial review.

The appellant-assessee, a partnership firm, claimed to be a manufac turer of stainless steel utensils and received substantial quantities of stainless steel sheets from M.M.T.C. The appellant assessee filed returns disclosing huge losses for Assessment Years (AYs) 1977-78 and 1978-79 and a small profit for AY 1979- 80. The Income Tax Officer (ITO) found that the appellant-assessee was not carrying on any manufacturing ac tivity. Accordingly the ITO issued a notice proposing addition of three items of income. At this stage, the appellant-assessee filed an application under Section 245-C of the Income Tax Act, 1961 before the Settlement Commission seeking settlement for all the three AYs. The appellant-assessee then called upon the ITO to stop all further proceedings on the ground D of filing of the settlement application. But despite repeated requests by the ITO the appellant-assessee neither replied to the notices issued by the ITO nor furnished her a copy of the settlement application. In these cir cumstances, the ITO refused to stay the assessment proceedings and communicated a draft assessment order to the appellant-assessee under Section 144-B of the Act for the AY 1977-78 and determined a large E amount as income of the appellant-assessee against small loss returned by the assessee. In the settlement application, the appellantassessee ad mitted that during the accounting years relevant to the said three AYs it had not carried on any manufacturing activity and sold stainless steel sheets to brokers in different cities and derived a profit in all the AYs put F together. Before the Settlement Commission, the Commissioner of Income Tax (CIT) sought rejection of the appellant-assessee's application on the ground of perpetuation of fraud by the assessee for evading tax on a massive scale.

The Settlement Commission rejected the application of the G appellant-assessee in respect of the AY 1977-78 but by majority admitted the same in respect of AYs 1978-79 and 1979-80. The dissenting member rejected the application of the assessee on the ground that the assessee itself did not make a distinction between AY 1977-78 on the one hand and AYs 1978-79 and 1979-80 on the other. Further, the dissenting member was H

A of the opinion that by making a distinction between the AY 1977-78 on the one hand and AYs 1978-79 and 1979-80 on the other would lay the Commission open to the charge of inconsistency. The appellant-assessee preferred the present appeal against the refusal of the Settlement Commission to admit its application for AY 1977-78.

On behalf of the appellant-assessee it was contended that the ITO had no power to collect material after the appellant-assessee filed the application for settlement.

Dismissing the appeal, this Court

HELD : 1. The dis.senting member is right in emphasizing the fact that the assessee itself did not make a distinction between the assessment year (AY) 1977-78 on the one hand and the AYs 1978-79 and 1979-80 on the other. The application filed by the assessee before the Settlement D Commission has set out facts and figures relating to stocks received from M.M.T.C., their sale to different parties, the expenses and brokerage paid in that connection, the profits made from such sales and all other relevant particulars. Neither the application nor the particulars stated therein are confined to one assessment year (1977-78) but extended to all the three

E assessment years. In short, whatever was stated or disclosed in the said application related to all the three years; no distinction was made or suggested as between AY 1977-78 and other two AYs. As a matter of fact, the "computation of Income" at the end of the application gave the figures of

11Total sale of stainless steel sheets", "gross sale valuen, "cost of pur .. chase'', "transport charges" and "brokerage" for all the three AYs combined.

F The total profit from the sale of stainless steel sheets for all the three AYs

was worked out. It was one package and indivisible. The opinion of the dissenting member that by making such a distinction, the Commission laid itself open to the charge of inconsistency is justified. Indeed it must be said that the majority of the members of the Commission have tried to make out a new case for the assessee not put forward by it in its applica- G tion. It has to be further held that the facts found proved and stated in the draft assessment order and the facts admitted by the assessee in its application before the Commission do clearly show that the "concealment of particulars of income on the part of the applicant or perpetration of fraud by it for evading any tax or other sum chargeable or imposable ........ .

H under the Income Tax Act, 1961 has been established attracting Section

KULDEEPINDL.CORPN. v. I.T.O.[B.P.JEEVANREDDY, J.] 785

245-D(lA) of the Income Tax Act, 1961. The frand played by it, which was A discovered by the Income Tax Officer even by the date of submission of report by the Commissioner, disentitled the assessee from claiming that his case should be admitted for settlement by the Commission, even for AYs 1978-79 and 1979-80. [793-G-H; 794-A-G]

CIT (Central), Calcutta v. B.N. Bhattacharjee & Am; (1979) 118 !TR B 461 and CIT v. Express Newspapers Ltd., (1994) 206 !TR 443, relied on.

2. Once an application is filed by an assessee for settlement under Section 245-C of the Act, the Income Tax Officer (ITO) has power to proceed with or collect any material after the date of submission of the C application. The Settlement Commission was, therefore, in error in hold ing to the contrary. [795-B)

3. The nature of jurisdiction exercised by this Court over the orders of the Settlement Commission is in the nature of judicial review. [795-A)

Sriram Durga Prasad v. Settlement Commissioner, 176 !TR 169 and Jyotendra Singhji v. S.l. Tripathi, AIR (1993) SC 1991, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 233.235 of 1982 Etc.

From the Judgment and Order dated 11!12.3.80 and 15.10.80 Income Tax Officer, District (I)-1, Chandigarh) and Settlement Commission in A.

No. 18(A)/1/43/80 (IT).

Gaurab Baoerjee and Ms. AK. Verma for JBD & Co. for the Appellaots.

J. Ramamurthy, B.S. Ahuja and S.N. Terdol for the Respondents.

The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J.: The order of the Settlement Commission G dated October 15, 1980 has given rise to these appeals, Kuldeep Industrial Corporation had filed ao application under Section 245-C of the Income Tax Act in respect of three assessment years 1977 78, 1978-79 and 1979-80.

The Settlement Commission refused to admit the case relating to assessment year 1977-78 for settlement, against which the assessee has filed Civil H

A Appeals 233-35 of 1982 (Civil Appeals 236-237 of 1982). The Settlement

Commission has, however, admitted the case relating to the other two assessment years for settlement, against which the Revenue has preferred Civil Appeals 238-239 of 1982.

B During the previous years relevant to the said three assessment years, the assessee received substantial quantities of stainless steel sheets from M.M.T.C. claiming to be a manufacturer of sterilizers. It filed returns for the three assessment years disclosing losses in a sum of Rs. 1,31,113 (for A.Y. 1977-78), Rs. 39,939 (for A.Y. 1978-79) and profit of Rs. 7,340 (for the A.Y. 1979-80). Certain inquiries were made by the Income Tax Officer C in the Month of December 1979. She also impounded the account books of the assessee. On February 13, 1980 the Income Tax Officer visited the premises of the appellant where the assessee was said to be carrying on the manufacturing activity. She found no such activity being carried on there. On February 14, 1980 the Income Tax Officer issued a notice D proposing addition of three items of income. At this stage i.e., on February 29, 1980 the assessee filed an application before the Settlement Commission seeking settlement of its case relating to all the said three assessment years. By its letter dated March 1, 1980 the assessee informed the Income Tax Officer that it has filed an application before the Settlement Commission in respect of the said three assessment years and, on that basis, called E upon the Income Tax Officer to stop all further proceedings. To this letter, the assessee enclosed a photocopy of the acknowledgement from the office of the Settlement Commission. By her letter dated March 3, 1980, the Income Tax Officer requested the assessee to furnish copies of the application filed by it before the Commission. The assessee declined to do so on F the ground that his application was a secret document. The Income Tax

Officer refused to stay the assessment proceedings and called upon the assessee to submit his replies/explanation to the notices already issued by her. The Income Tax Officer once again requested for copies of the application filed by the assessee before the Commission. The assessee complained to the Commission about the refusal of the Income Tax Officer G to stay the assessment proceedings but at the same time refusedJo furnish copies of its application to the Income Tax Officer. By letter dated March 11/12, 1980, the Income Tax Officer again requested for the copies of the application. She also called upon the assessee once again to furnish replies to the notices already issued. The assessee still refused. In these cir- H cumstances the Income Tax Officer made a draft assessment order on 19th

KULDEEPINDLCORPN. v. l.T.O.[B.P.JEEVANREDDY, J.] 787

March, 1980 and communicated the same to the assessee, as required by A Section 144-B, which was then in force. This assessment order pertains to the assessment year 1977-78 only. Under this order the Income Tax Officer determined the income of the assessee at Rs. 44,40,590 as against the loss of Rs. 1,31,113 returned by the assessee. It was received by the assessee on 31st March, 1980.

By its letter dated March 14, 1980, the Settlement Commission forwarded a copy of the assessee's application filed under Section 245-C to the Commissioner of Income Tax for his objections. This communication was received by the Commissioner on 3rd April, 1980. On 5th June, 1980

the Commissioner filed his objections enclosing therewith a copy of the C draft assessment order dated March 19, 1980 pertaining to the assessment year 1977-78. After hearing the parties, the Commissioner unanimously refused to admit the assessee's application for settlement with respect to the assessment year 1977-78. So far as the other two assessment years are concerned, the majority (two out of three members) admitted the case for settlement while one member dissented. The dissenting member was of the D opinion that the application of settlement should be rejected for the other two assessment years also.

In its application under Section 245-C, the assessee stated the following facts : the assessee, a partnership firm, is engaged in manufacture and sale of stainless steel utensils, sterilizers and other items in its factory E located at Chandigarh. For the two assessment years 1977-78 and 1978-79

it had filed returns disclosing loss in a sum of Rs. 1,31,113 and Rs. 39,939 respectively. For the assessment year 1979-80 it returned a profit of Rs. 7,340. It is holding a quota for the purchase of stainless steel sheets from M.M.T.C. During the accounting years relevant to the said three assessment years, the assessee could not carry on the manufacturing activity on account of acute shortage of funds. With a view to ensure that its quota does not lapse, it obtained the quota and sold it to various brokers in Bombay, Delhi and Madras. The assessee set out the arrangement with those brokers. From these sales, the assessee said it derived a profit of Rs. 1,28,691 in all the three assessment years put together. It offered the said G amount to tax.

In his objections filed to the assessee's application, the Commissioner stated the following facts. The investigations made for the assessment year 1977-78 revealed that the assessee has tried to evade tax on a massive scale.

It had fabricated its account books to defraud the Revenue and had filed H

A a return showing a loss of Rs. 1,31,113. On the basis of investigations, the Income Tax Officer has proposed an addition of Rs. 45,71,703 in her draft assessment order sent to the assessee for objections under Section 144-B.

The story of manufacturing and the sale of manufactured products to certain named concerns is all fictitious. The parties, to whom the manufac-

B tured products were allegedly sold, denied having made such purchases.

Their account books also did not disclose any such transactions. The verification of the sales tax record shows that no trucks carrying stainless steel sheets ever crossed the sales tax barriers enroute to Chandigarh. The goods receipts produced by the assessee did not contain the stamp of sales tax barriers. The spot inspection of the factory disclosed that no manufac- C luring activity was being carried on there. The books of account for the assessment years 1978-79 and 1979-80 were not produced inspite of summons issued under Section 131. The inquiries revealed that the stainless steel sheets were never brought to Chandigarh but were sold at premium at Bombay, Madras and Delhi. The various entries in the account books which were produced latter were found to be fictitious. Indeed, the asses- D see was in the habit of manipulating its account-books to defraud the Revenue. In 1974 a search and seizure operation was conducted in the assessee's premises which disclosed mis-utilisation of the stainless steel sheets. On the above facts the Commissioner stated that he strongly objects to the application under Section 245-C being proceeded with. He submitted that in view of fraud perpetrated by the assessee having already E been established, the assessee's application may be rejected.

So far the assessment year 1977-78 is concerned, all the three members of the Commission unanimously rejected the application on the following reasoning :

"23. Viewing the facts of this case against the observations made by us above, it appears to us that for the A.Y. 1977-78, the Department has a very strong case t9 raise objection on the ground that concealment of particulars of income or perpetration of fraud by the applicant has been or is likely to be established - particularly so in regard to the perpetration of fraud. In so far as this year is concerned, there is clear fabrication of accounts, the balances in the accounts have been fudged; the sale vouchers and goods receipts have been cooked up, and a false facade is created to mislead the Department and cover up the real state of the assessee's business transactions. It strains our sense of credulity

KULDEEPINDL.CORPN. v. J.T.0.[B.P.JEEVANREDDY, J.] 789

too far to accept the applicant's .claim that all this was being done A only to save its skin from some other departments and its intentions vis-a-vis the Revenue were nothing but honourable. If that be so, how does the assessee in any case explain the inflation by Rs. 10 lacs of the carried forward balance in "Kuldip Parkash Imprest Account". To our minds, the Department has also succeeded in substance in rebutting the assessee's claim of so-called inaccuracies in the Commissioner's report. We do not find any distortion or misconception of facts in the Commissioner's report, nor can we subscribe to the view that it involves any colourable exercise of his powers. In fact, the Commissioner would have failed in his duty enjoined upon him by law, if he had not raised objection for the year 1977-78."

The findings recorded by the Commission are too eloquent to call for any emphasis. They could not have been expressed in more stronger language.

So far the other two assessment years (1978-79 and 1979-80) are concerned, there was a difference of opinion between the three members.

The majority held that the case with respect to these two assessment years stands on a different footing, inasmuch as no inquiries appear to have been made by the Income Tax Officer in respect of these two assessment years.

E No bogus sales have also been conclusively established by the Income Tax Officer by the date of filing of the application under Section 245-C, said the majority, except the entries regarding sale of scrap in the account books of the assessee. They were of the view that there is no adequate material on the basis of which it can be said that the concealment of income has F been established or is likely to be established. The inspection of the factory premises by the Income Tax Officer or February 8, 1980 too is not of much relevance, they said, since the inspection is long after the expiry of the relevant previous years. The non-production of the account books for these years was also said to be not of such relevance because the department itself has been giving repeated adjournments for their production.

The dissenting member, however, based his opinion on the following reasoning. The facts placed before the Commission conclusively establish that no manufacturing activity was being carried on by the assessee during the relevant years. The account books for all the three years were fabri- H

A cated with a view to conceal the assessee's true activity. It is not even the assessee's case that it carried on any manufacturing activity during the previous years relevant to assessment years 1978-79 and 1979-80. In the course of hearing before the Commission it was categorically admitted by the counsel for the assessee that the losses claimed by it in its returns were not true and that no manufacturing activity was carried on during the B relevaht years. The assessee has also admitted ihat it has sold the stainless steel quota at Bombay, Delhi and Madras and that it never transported the same to Chandigarh. It is also admitted that the books of .account, showing the sale of manufactured goods to various parties are admittedly lllltrue.

The assessee itself has made no distinction as between these three assess- C ment year. Its case is common to all the three assessment years. No distinction is, therefore, permissible as between three assessment years.

The facts and record clearly prove that the assessee refused to produce its account books for the two subsequent assessment years , inspite of notices and summons; they were produced later and were found to be fabricated.

D The inspection by the Income Tax Officer on February 8, 1980 disclosed no manufacturing activity at the alleged factory premises except some small scale electro-plating work being done there. The dissenting member further observed : "I do not see any reason why the admission made on behalf of the applicant that there was no manufacturing activity carried on and that the losses claimed as per return are not genuine can be or should be E ignored. These admissions have been made in the papers filed along _with

the application and also in the course of the hearing before us .... I als.o feel that the applicant should not be allowed to take advantage of his Own deliberate default before the Income Tax Officer and he should not be heard to plead before us that the Income Tax Officer has not examined F the books or pointed any defects or deficiecies therein so as .to be able to establish any concealment for these years. The applicant should not be allowed to take advantage of his own deliberate default to find a short-cut to approach the Commission and to circumvent the normal processes of law prescribed in the Income tax Act." The dissenting member emphasised that making a distinction between assessment year 1977-78 on one hand G and 1978-79 and 1979-80 on the other would lay the Commission open to charge of inconsistency, particularly when it is not even the case of the assessee itself.

Another proposition stated in the impugned order is that the Com- H missioner cannot refer in his objections to any material collected after the

KULDEEPINDLCORPN. v. l.T.O.[B.P.JEEVANREDDY, J.] 791

filing of the application under Section 245-C and that any material col- A lected after the filing of such application cannot be looked into while deciding the 9uestion whether to admit the application or not.

Mr. Harish Salve, learned counsel for the assessee submitted that this is a case where the assessee has genuinely repented for its lapses and has made a clean breast of all its wrong-doing. It has admitted that it had not carried on any manufacturing activity during the relevant years, that it had sold the entire stainless steel quota at Bombay, Delhi and Madras, that the returns filed by it were untrue, that the books of account maintained by it were untrue and fabricated and that it had disclosed its true income for

the said assessment years before the Commission. Indeed the assessee has C disclosed many other items of income apart from the three items mentioned in the notic.e dated February 14, 1980 issued by the Income Tax Officer. Mr. Salve complained that the Income Tax Officer has drawn several facts mentioned in the assessee's application under Section 245-C and made them the basis of her draft assessment order. This was wholly D unfair, said Mr. Salve. Having regard to the candour with which the assessee approached the Commission, the Commission should have admitted the case relating to assessment year 1977-78 also for settlement.

Counsel further submitted that the very statements made and facts stated by the assessee in its application cannot be made a basis for rejecting it.

Mr. J. Ramamurthy, learned counsel for the Revenue on the other hand E assailed the order of the majority insofar as they admitted the assessee's case for the two latter assessment years for settlement. He submitted that in view of the facts and circumstances of the case which have been fully and clearly pointed out by the dissenting member in his opinion, the application of the assessee should have been rejected outright and should F not have been admitted for any assessment year. The distinction made between the three assessment years, the counsel submitted, is equally untenable.

The scheme of chapter XIX-A has been set out in the earlier decisions of this Court including Commissioner of Income-Tax, (Central), G Calcutta v. B.N. Bhattacharjee and Another, (1979) 118 I.T.R. 461 and Commissioner of Income Tax v. Express Newspapers Limited, (1994) 206 I.T.R. 443 and need not be reiterated here. For the purpose of this case it is sufficient to notice sub-sections (1) and (1-A) of Section 245-D. They read: H

"245D. (1) On receipt of an application under section 254C, the Settlement Commission shall call for a report from the Commis~ ' sioner and on the basis of the material contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation iovolved thereio, 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 sub-section unless an opportunity has been given to the applicant of beiog heard.

(Second proviso omitted by the Finance Act, 1979, w.e.f. 1.4.1979.)

[(lA) 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 beiog proceeded with on the ground that concealment of particulars of iocome on the part of the applicant or perpetration of fraud by him for evadiog any tax or other sum chargeable or imposable under the Indian Income-tax Act, 1922 (11 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 F to the Commissioner.]"

The meaning and purport of these Sections has also been dealt with and set out in Express Newspapers. The said decision rejects the argument that once an application is filed by an assessee under Section 245-C, no further iovestigations or ioquiries can be carried on by the Income Tax G Officer and that he is obliged to stop all further proceediogs with effect from the said date. It has been held that the Income Tax Officer is not bound to do so and that he can contioue with the proceediogs before him till the date of submittiog the report by the Commissioner under sub-section (1-A) of Section 245-D - and may, even beyond. The Commission was, H therefore, io error in holding to the contrary.

KULDEEPINDLCORPN. v. I.T.O.[B.P.JEEVAN REDDY, J.] 793

The contention of Mr. Salve that the assessee sent a copy of his A application filed under Section 245-C to the Income Tax Officer immediately and that the Income Tax Officer acted unfairly in drawing upon the facts in said application to make the draft assessment order (relating to the assessment year 1977-78) is factually incorrect as pointed out hereinabove.

The truth is that not only did the assessee not send a copy of it's application to the Income Tax Officer but it refused to supply copies thereof inspite of repeated requests by the Income Tax Officer. A copy of the application was communicated by the Commission to the Commissioner only on 14th March, 1980 and was received by the Commissioner on April 3, 1980, as would be evident from the statement in the preamble to the objections filed

c by the Commissioner. The draft assessment order was made on March 19, 1980 and communicated to the assessee alongwith a covering letter on March 20, 1980. Even by the date of the making of the draft assessment order the Income Tax Officer had made elaborate inquiries and had discovered that there was no manufacturing activity, that there was no transport of stainless steel sheets to Chandigarh, that they were sold in Delhi, Bombay and Madras, that the alleged sale of manufactured goods D to various parties is false and that the account books were totally fabricated. The draft assessment order states all these facts. Mr. Salve could not point out any particular fact or facts which have been taken from the assessee's application and used as a basis for making the draft assessment order. It is significant to notice that according to the application filed by the assessee its total income for all the three years put together is Rs. E 1,28,691, whereas according to the draft assessment order the income of the assessee is in the region of Rs. 45 lacs during the first assessment year alone. The allegation of unfairness levelled against the Income Tax Officer is, therefore, factually incorrect and is unwarranted.

F The dissenting member is right in emphasizing the fact that the assessee itself did not make a distinction between the assessment year 1977-78 on one hand and the assessment years 1978-79 and 1979-80 on the other. A perusal of the application filed by the assessee before the Commission shows that it has set out facts and figures relating to stocks received G from M.M.T.C., their sale to different parties, the expenses and brokerage paid in that connection, the profits made from such sales and all other relevant particulars. Neither the application nor the particulars stated. therein are confined to one assessment year (1977-78) but extend to all the three assessment years. In short, whatever was stated or disclosed in the said application related to all the three years; no distinction was made or H

A suggested as between assessment year 1977-78 and other two assessment years. As a matter of fact, the "computation of Income" (Annexure C) at the end of the application gave the figures of "Total sale of stainless steel sheets 1 \

11gross sale value 11 ,

11cost of purchase 1 \

11transport charges 11 and "brokerage" for all the three years combined. The total profit from the B sale. of stainless steel sheets for all the three yeats was worked out at Rs. 1,28,698.10 p. It was one package and indivisible. We are, therefore, inclined to agree with the opinion of the dissenting member that by making such a distinction, the Commission laid itself open to the charge of inconsistency. Indeed it must be said that the majority of the members of the Commission have tried to make out a new case for the assessee not C put forward by it in its application. We are also of the opinion that the facts found proved and stated in the draft assessment order aforesaid and the facts admitted by the assessee in its application before the Commission and during the course of hearing before the Commission do clearly show that the "concealment of particulars of income on the part of the applicant D or perpetration of fraud by it for evading any tax or other sum chargeable or imposable ......... under this Act has been established." Now, so far as the assessment year 1977-78 is concerned, the draft order does bear out the aforesaid facts and since the assessee's case and all the material facts are one and the same for all the three assessment years (as set out in its own application filed under Section 245-C) it must be said that the very E same facts also establish the said factors even with respect to the two latter assessment years. In the circumstances it must be said that the main limb of sub-section (1-A) was fully satisfied in this case. No valid or relevant reasons have been assigned by the Commission, Within the meaning of the proviso to sub-section (1-A) to admit the application for the two latter p assessment years. It was a gross case where the assessee brazenly and deliberately perpetrated fraud upon the Revenue with a view to evade the taxes legitimately and lawfully payable by him. The fraud played by it, which was discovered by the Income Tax Officer even by the date of submission of report by the Commissioner, disentitles the assessee from claiming that his case should be admitted for settlement by the Commis- G sion. There is neither law in its favour nor equity. The fact that it has admitted its fraud in its application is of no consequence since its fraud was already discovered by the Income Tax Officer by her own extensive and elaborate inquiries.

It has been held by this Court that the nature of jurisdiction exercised

KULDEEPINDL.CORPN. v. l.T.O.[B.P.JEEVANREDDY, J.] 795

by this Court over the orders of the Settlement Commission is in the nature A of judicial review. (See Sriram Durga Prasad v. Settlement Commissioner, 176 I.T.R. 169 andlyotendra Singhji v. S.I. Tripathi, A.LR. (1993) S.C. 1991.

In these cases, we find that the impugned orders of the Commission are vitiated by more than one misdirection in law. Firstly, the Commission held, wrpngly, that the h1.come Tax Officer had no power to proceed with or B collect any material after the date of submission of the application under Section 245-C. Secondly, having rightly rejected to admit the case relating to assessment year 1977-78 for settlement, it (the majority) made out a new case for. the assessee by creating a distinction between 1977-78 and 1978-79 and 1979-80, when no such distinction was suggested even by the assessee; indeed such a distinction is contrary to the case put forward by the assessee C in its application under Section 245-C. The Commission (the majority) also ignored the several statements, admissions and averments made by the assessee before the Commission while admitting the case relating to assessment year 1978-79 and 1979-80 for settlement.

For the above reasons the Civil Appeals 238 and 239 of 1982 filed by D the Revenue are allowed with costs and the Civil Appeals 233-235 of 1982 (and Civil Appeals 236-237/1982) filed by the assessee are dismissed with costs. The cost payable by the assessee in all th~ appeals put together are assessed at Rs. 50,000 consolidated.

v.s.s.

E Appeal dismissed.