KOTAK MAHINDRA BANK LIMITEDversusCOMMISSIONER OF INCOME TAX BANGALORE AND ANR.

                  [2023] 14 S.C.R. 1 : 2023 INSC 855



                            CASE DETAILS

               KOTAK MAHINDRA BANK LIMITED
                                     v.
 COMMISSIONER OF INCOME TAX BANGALORE AND ANR.
                     (Civil Appeal No. 9720 of 2014)
                         SEPTEMBER 25, 2023
        [B. V. NAGARATHNA AND UJJAL BHUYAN, JJ.]

                             HEADNOTES

      Issue for consideration: Whether the Division Bench of the High
Court was right in affirming the findings of the Single Judge, to the effect
that the Settlement Commission ought not to have exercised discretion u/s.
245H of the Income Tax Act, 1961 and granted immunity to the assessee
de hors any material to demonstrate that there was no wilful concealment
on the part of the assessee to evade tax and on that ground, remanding the
matter to the Commission for fresh consideration.
      Income Tax Act, 1961 – s. 245H – Power of Settlement Commission
to grant immunity from prosecution and penalty – Exercise of – Assessee
placed material and particulars before the Commission as to the manner
in which income pertaining to certain activities was derived and has
sought to offer such additional income to tax – On basis thereof, the
Settlement Commission proceeded to grant immunity from prosecution
and penalty as contemplated u/s. 245H – Correctness:
      Held: Settlement Commission rightly considered the relevant facts and
material and, decided to grant immunity to the assessee from prosecution and
penalty – Settlement Commission applied its mind to the aspect of whether
there was wilful concealment of income by the assessee – Having noted that
non-disclosure was on account of RBI guidelines, the Commission decided
to grant immunity to the assessee from prosecution and penalty – Single
Judge of the High Court erred in holding that the reasoning of the Settlement
Commission was vague, unsound and contrary to established principles –
Division Bench also not justified in affirming the said view – Commission
                                     1
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adequately applied its mind to the circumstances of the case, as well as to
the relevant law and accordingly exercised its discretion to proceed with the
application for settlement and grant immunity to the assessee from penalty
and prosecution – Thus, the order of the Commission did not suffer from
such infirmity as would warrant interference by the High Court, by passing
an order of remand – Judgment passed by the High Court is set aside and
that of the Settlement Commission is restored. [Paras 7.4, 7.5, 9, and 14]
     Income Tax Act, 1961 – s. 245H – Power of Settlement Commission
to grant immunity from prosecution and penalty – Exercise of –
Necessary ingredients:
      Held: Under s. 245H(1), if the Settlement Commission is satisfied that
assessee has co-operated with the Settlement Commission in the proceedings
before it and has made a full and true disclosure of its income and the
manner in which such income has been derived, it may grant immunity from
prosecution or from the imposition of penalty – Even if the pre-conditions
prescribed u/s. 245C are to be read into s. 245H, it cannot be said that in
every case, the material “disclosed” by the assessee before the Commission
must be something apart from what was discovered by the Assessing Officer
– What is relevant that the assessee offered to tax, income, in addition to
the income recorded in the return of income – s. 245C r/w s. 245H only
contemplates full and true disclosure of income to be made before the
Settlement Commission, regardless of the disclosures or discoveries made
before/by the Assessing Officer. [Paras 6 and 7.1]
     Income Tax Act, 1961 – s. 245H – Power of Settlement Commission
to grant immunity from prosecution and penalty – Nature of:
      Held: Power vested with the Settlement Commission u/s. 245H is
a discretionary power to be exercised if the Settlement Commission is
satisfied that an applicant has complied with the preconditions specified
therein – Any judicial, quasi-judicial or administrative authority must while
exercising discretion, direct itself properly in law and consider all the facts
and material that it is bound to consider. [Para 7.3]
     Income Tax Act, 1961 – s. 245H – Settlement Commission’s order
– Judicial Review – Scope of:
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                             3
            INCOME TAX BANGALORE

      Held: The scope is very narrow – It is only when the order contravenes
provisions of the Act or has caused prejudice to the opposite party –
Interference may also be open on the grounds of fraud, bias or malice.
[Para 10]
   Income Tax Act, 1961 – s. 245H – Proceedings of the Settlement
Commission – Legislative intent:
     Held: Is to avoid frequent interference with the orders or proceedings
of the Settlement Commission – Order or proceeding of the Settlement
Commission can be judicially reviewed on limited grounds, and not to
be scrutinized as an appellate court – Unsettling reasoned orders of the
Commission may erode the confidence of the bonafide assessees, leading
to multiplicity of litigation where settlement is possible. [Para 13]
       LIST OF CITATIONS AND OTHER REFERENCES
     Ajmera Housing Corporation vs. Commissioner of Income Tax (2010)
8 SCC 739: [2010] 10 SCR 183; Commissioner of Income Tax vs. B.N.
Bhattacharjee (1979) 4 SCC 121: [1979] 3 SCR 1133; Commissioner of
Income Tax vs. Express Newspapers Ltd. (1994) 2 SCC 374: [1994] 1 SCR
64; Ashirvad Enterprises vs. State of Bihar (2004) 3 SCC 624: [2004] 3
SCR 300; Jyotendrasinhji vs. S.I. Tripathi 1993 Supp (3) SCC 389: [1993]
2 SCR 938 – referred to.
       OTHER CASE DETAILS INCLUDING IMPUGNED
              ORDER AND APPEARANCES
     CIVIL APPELLATE JURISDICTION : Civil Appeal No.9720 of 2014
    From the Judgment and Order dated 06.07.2012 of the High Court of
Karnataka at Bangalore in WA No.2458 of 2010.
     Appearances:
     Shyam Divan, Sr. Adv., Rohan Shah, D. Bharat Kumar, Siddhartha
Sinha, Aman Shukla, M. Chandrakanth Reddy, Abhijit Sengupta, Ms. Anu
Priya Nisha Minz, Advs. for the Appellant.
     Balbir Singh, A.S.G., Rupesh Kumar, Aditya Rathore, Naman Tandon,
Raj Bahadur Yadav, Shashank Bajpai, Prashant Singh Ii, Samarvir Singh,
Shyam Gopal, Prahlad Singh, Rakesh Karela, Advs. for the Respondents.
4             SUPREME COURT REPORTS                         [2023] 14 S.C.R.



       JUDGMENT / ORDER OF THE SUPREME COURT

                               JUDGMENT

     NAGARATHNA, J.
      1. This appeal has been filed assailing the judgment dated 06.07.2012,
passed by the High Court of Karnataka at Bangalore, in Writ Appeal No. 2458
of 2010 whereby the judgment of the learned Single Judge dated 20.05.2010
passed in Writ Petition No. 12239 of 2008, remanding the matter to the
Settlement Commission to determine afresh, the question as to immunity
from levy of penalty and prosecution, was affirmed and the aforesaid Writ
Appeal filed by the appellant herein, was dismissed.
      2. The facts giving rise to the present appeal, in a nutshell are that the
appellant-assessee, Kotak Mahindra Bank Limited (formerly, “M/s ING
Vysya Bank Limited”) is a Public Limited Company carrying on the business
of banking and is assessed to tax in Bangalore where its registered office
is located. Apart from the business of banking, the appellant also carries
out leasing business on receiving approval from the Reserve Bank of India
(hereinafter “RBI” for short) vide Circular dated 19.02.1994. Thus, the
appellant derives its income, inter alia, from banking activities as well as
from leasing transactions.
      2.1. The appellant filed its income tax returns for the assessment years
1994-1995 to 1999-2000 and assessment orders were passed up to assessment
year 1997-1998 and the assessment for the subsequent years was pending.
During the assessment proceedings for the assessment year 1997-1998, the
Assessing Officer made certain additions and disallowances based on which
the assessment already concluded for the assessment years 1994-1995 to
1996-1997 were proposed to be reopened. The Assessing Officer then passed
an Assessment Order dated 30.03.2000 for the Assessment Year 1997-1998.
The main issue pertained to the income in respect of the activity of leasing.
As per the Assessment Order, the appellant had been accounting for lease
rental received, by treating the same as a financial transaction. As a result,
the lease rental was bifurcated into capital repayment portion and interest
component. Only the interest component was offered to tax. In other words,
the appellant treated such leases as loans granted to the “purported” lessees
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                                    5
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

to purchase assets. In such cases, the ownership of the assets is vested with
the lessees. However, the appellant claimed depreciation on those assets
under Section 32 of the Income Tax Act, 1961 (hereinafter referred to as
“the Act” for the sake of convenience) though the appellant was not the
owner of the assets for the purpose of the said transactions.
      2.2. On 09.06.2000 the Assessing Officer issued a notice under Section
148 of the Act for the reassessment of income for the aforesaid assessment
years. The Assessing Officer also passed a penalty order dated 14.06.2000
levying a penalty under Section 271 (1)(c) of the Act after being satisfied
that the appellant had concealed its income as regards lease rental.
      2.3. While various proceedings, such as an appeal before the CIT
(A) for the assessment year 1997-1998, re-assessment proceedings for
the assessment years 1994-1995 to 1996-1997 and regular assessment
proceedings for the assessment years 1998-1999 and 1999-2000 were
pending before various income tax authorities, the appellant, on 10.07.2000,
approached the Settlement Commission at Chennai to settle its income tax
liabilities under Section 245C (1) of the Act, by way of an application in
Form No. 34B bearing No. 563/KNK-III/15/2000-IT. The appellant sought
for determination of its taxable income for the assessment years 1994-1995
to 1999-2000, after considering the issues pertaining to the income assessable
in respect of its leasing transaction; eligibility to avail depreciation in respect
of leased assets; the quantum of allowable deduction under Section 80M
and exemption under Section 10(15) and 10(23G); and depreciation on the
investments portfolio of the bank classified as permanent investments.
      2.4. When matters stood thus, the concluded assessments for earlier
assessment years were reopened by issuance of notices under Section 148
of the Act. The appellant filed returns under protest with respect to the said
assessment years.
      2.5. Before the Settlement Commission, the Respondents-Revenue
raised a preliminary objection contending that the appellant did not fulfil the
qualifying criteria as contemplated under Section 245C(1) and hence, the
application filed by the appellant was not maintainable, as, under the said
provision, the appellant was required to make an application in the prescribed
manner containing full and true disclosure of its income which had not been
6            SUPREME COURT REPORTS                          [2023] 14 S.C.R.


disclosed before the Assessing Officer and also the manner in which such
income had been derived. That unless there is a true and full disclosure
there would be no valid application and the Settlement Commission will
not be able to assume jurisdiction to proceed with the admission of the
application. It was thus contended that the purported application made
before the Settlement Commission was not an application as contemplated
under section 245C (1) of the Act for the reason that the appellant had not
made a full and true disclosure of its income which had not been disclosed
before the Assessing Officer.
      2.6. After considering the contentions of both parties, the Settlement
Commission passed an Order dated 11.12.2000 entertaining the application
filed by the appellant under Section 245C and rejecting the preliminary
objections raised by the Revenue. The Settlement Commission allowed the
application filed by the appellant by way of a speaking order and permitted
the appellant to pursue its claim under Section 245D. Thus, the application
was proceeded further under Section 245D (1) of the Act.
      2.7. The Revenue challenged the Order dated 11.12.2000 passed by the
Settlement Commission before the High Court of Karnataka at Bangalore
by way of Writ Petition No. 13111 of 2001. The Revenue questioned the
jurisdiction of the Settlement Commission in entertaining the application
filed by the appellant under Section 245C(1) of the Act.
      2.8. The learned Single Judge of the High Court of Karnataka, after
going through the legislative history of the provisions of Chapter-XIXA,
accepted the argument advanced by the appellant that the proviso to Section
245C as it stood earlier, which enabled the Commissioner to raise an
objection even at the threshold to entertain an application of this nature had
been later shifted to sub-section (l)(A) of Section 245D and from the year
1991, it had been totally omitted and in the light of such legislative history,
it was not open to the Revenue to raise any such preliminary objection
regarding maintainability of the application itself. It was further held that
the application can be proceeded with by the Settlement Commission
for determination of the same on merits and it was not necessary that the
Revenue should be permitted to raise a preliminary objection as to the
maintainability of the application.
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                               7
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

      The learned Single Judge disposed of the above Writ Petition by
way of an Order dated 18.08.2005 in favour of the appellant herein by
holding that notwithstanding any preliminary finding, it was still open to
the Commissioner to agitate or to apprise the Commission of all the aspects
of the matter that he may find fit to be placed before the Commission. The
Single Judge was of the view that it was not necessary to examine the legal
position that may require an interpretation of provisions of Section 245C
at that stage when the matter itself was still at large before the Settlement
Commission as the very object of Chapter-XIXA was to settle cases and
to reduce the disputes and not to prolong litigation. Thus, the High Court
disposed of the Writ Petition holding that it was open to the parties to raise
all their contentions before the Commission at the stage of disposal of the
application and the Commission may, independent of the findings which it
has given under the Order dated 11.12.2000, examine all the contentions and
proceed to pass orders on merits in accordance with the provisions of the Act.
      2.9. As a result of the Order dated 18.08.2005 passed by the High
Court of Karnataka, the Settlement Commission heard both parties on merits
as well as on the issue of maintainability. The Settlement Commission
upheld the maintainability of the application filed by the appellant and
passed an Order dated 04.3.2008 under Sections 245D(1) and 245D(4),
determining the additional income at Rs.196,36,06,201/-. As regards the
issue of immunity from penalty and prosecution, the Commission, having
regard to the fact that the appellant had co-operated in the proceedings
before the Settlement Commission and true and full disclosure was made
by the appellant before the Commission in paragraph 18.2 of its Order
granted immunity under Section 245H(1) from the imposition of penalty
and prosecution under the Act and the relevant sections of the Indian Penal
Code. Further, the Settlement Commission annulled the penalty levied by the
Assessing Officer under Section 271(1)(c) for the assessment year 1997-1998
in respect of non-disclosure of lease rental income. The same was annulled
considering that the non-disclosure was on account of RBI guidelines and
subsequent disclosure on the part of the appellant, of additional income of
the lease income before the Settlement Commission when the appellant
realised the omission to disclose the same as per income tax law. The other
pertinent finding of the Settlement Commission are as under:
8            SUPREME COURT REPORTS                       [2023] 14 S.C.R.


     i.    As regards the disclosure of income by the appellant, the
           Settlement Commission noted that the application had to be
           considered within the framework of law as on the date the
           application was filed i.e., 10.07.2000. On a reading of Section
           245C (1), the Commission observed that many amendments have
           been made to Section 245C after its introduction in 1976 and
           what is clear from “the income disclosed before the Assessing
           Officer” is that it is the income disclosed in the return of income
           furnished and not income that could be computed on the basis
           of a scrutiny or interpretation of the documents accompanying
           the return. That one has to read the entire conspectus of the
           provisions of Sec 245C to interpret the true meaning of “income
           not disclosed before the Assessing Officer.” That the statute is
           clear that the said phrase simply means income not disclosed
           in the return and not something additionally by way of income
           discovered in scrutiny.
     ii.   The Commission further noted that the appellant had realized
           while adhering to the RBI guidelines of accounting of lease
           income that there was an error in not disclosing the full lease
           rental receipts as per income tax law. Thus, the appellant offered
           additional income for tax under various heads, which were not
           considered by the Assessing Officer. Considering the nature and
           circumstances and the complexities of the investigation involved,
           the Commission was of the view that the application was to be
           proceeded with under Section 245D (1) of the Act and that prima-
           facie, a full and true disclosure of income not disclosed before
           the Assessing Officer had been made by the appellant.
      2.10. Being aggrieved by the Order dated 04.03.2008 passed by the
Settlement Commission, the Respondent-Revenue preferred Writ Petition
bearing No. 12239 of 2008 (T-IT) before the High Court of Karnataka
assailing the said Order. The learned Single Judge of the High Court vide
Order dated 20.05.2010 upheld the Order of the Settlement Commission
as regards the jurisdiction to entertain the application and also as regards
the correctness of the Order passed by the Settlement Commission in
determining the tax liability, but found fault with the Commission in so far
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                                9
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

as granting immunity to the appellant from the levy of penalty and initiation
of prosecution was concerned. The Single Judge was of the view that the
reasoning of the Settlement Commission was vague, unsound and contrary to
established principles and that the burden was on the appellant herein to prove
that there was no concealment or wilful neglect on its part and in the absence
of such evidence before the Settlement Commission, the Order granting
immunity from penalty and prosecution was an illegal order. The learned
Single Judge, thus, remanded the matter to the Settlement Commission for
the limited purpose of reconsidering the question of immunity from levy
of penalty and prosecution and the Order of the Assessing Officer levying
penalty, after providing an opportunity to both parties.
     2.11. Being aggrieved by the remand order passed by the learned
Single Judge, the appellant preferred Writ Appeal No. 2458 of 2018 before
a Division Bench of the High Court, contending as under:
     i.    That the reasoning given by the learned Single Judge to remand
           the matter for fresh consideration was erroneous and against the
           provisions of the Act. That the learned Single Judge failed to
           appreciate that the orders passed by the Settlement Commission
           are conclusive except as otherwise provided in Chapter XIX-A
           of the Act. The orders passed by the Settlement Commission are
           final as to the matters stated therein, subject to constitutional
           remedies. However, such constitutional remedies could be availed
           only when the orders passed by the Settlement Commission
           are contrary to the provisions of the Act or have prejudiced the
           Revenue/assessee or that they are vitiated by bias, fraud or malice.
           Thus, the learned Single Judge erred in finding fault with the
           validity of the order after having approved the jurisdiction and
           procedure followed by the Settlement Commission.
     ii.   That the learned Single Judge ought to have appreciated that
           Section 245C contemplates full and true disclosure of income
           to be made before the Settlement Commission alone and to that
           extent the provisions of Section 245C are unambiguous and
           certain. The application to the Settlement Commission to be filed
           under Section 245C ought to contain full and true disclosure
           of income that was not disclosed in the returns/revised returns
10            SUPREME COURT REPORTS                        [2023] 14 S.C.R.


            filed before the Assessing Officer. That the learned Single
            Judge misdirected himself in holding that there is a statutory
            requirement that concealment of particulars before the Assessing
            Officer would have a bearing while the Settlement Commission
            exercises its powers under Section 245H of the Act for grant
            of immunity from prosecution and penalty. That Section 245H
            bestows exclusively upon the Settlement Commission, the
            discretion to grant immunity to an applicant from prosecution
            for any offence under the Act or grant of immunity wholly or
            in part from the imposition of penalty under the Act. The only
            precondition for granting immunity to the applicant is that the
            applicant must have co-operated in the proceedings before the
            Settlement Commission and made full and true disclosure of his
            income and the manner in which such income has been derived
            before the Settlement Commission. Thus, the learned Single
            Judge erred in drawing reference to the possibility of concealment
            of income before the Assessing Officer.
     iii.   That the learned Single Judge failed to appreciate the difference
            between the provisions of Section 245H and Section 27l(l)(c)
            of the Act. Section 245H does not contemplate offering of any
            explanation or evidence by an applicant to the satisfaction of
            the Settlement Commission. If the Settlement Commission is
            satisfied that an applicant has complied with the precondition
            specified therein, the Settlement Commission could exercise
            its discretion to grant immunity from prosecution and penalty.
            Therefore, there was no error committed by the Settlement
            Commission in granting immunity from prosecution and penalty.
      2.12. In the meanwhile, Revenue preferred Special Leave Petition (C)
CC No. 19663 of 2010 before this Court against the Order dated 20.05.2010
passed by the learned Single Judge in Writ Petition No. 12239 of 2008. On
06.01.2012, this Court directed the Special Leave Petition to stand over
for eight weeks and directed the Settlement Commission to dispose of the
matter remanded to it by the High Court. In pursuance of the Order dated
06.01.2012 passed by this Court, the Settlement Commission, Chennai,
issued a notice in the remanded matter on 30.01.2012.
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                            11
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

      On 10.02.2012 the appellant moved an application before this Court
seeking modification of its Order dated 06.01.2012 by issuing a direction to
the High Court to dispose of Writ Appeal No. 2458 of 2010. It was contended
that the filing of a Special Leave Petition against the order of the learned
Single Judge was not proper as a writ appeal should have been filed. That
admittedly, Writ Appeal No. 2458 of 2010 was pending before the High
Court and the Revenue suppressed this vital information while filing the
Special Leave Petition. This Court by way of an Order dated 21.02.2012
recalled its earlier Order dated 06.01.2012 passed in SLP (C) CC No. 19663
of 2010 and directed the High Court to dispose of Writ Appeal No. 2458 of
2010 within a period of two months.
      2.13. Following the same, a Division Bench of the High of Karnataka
vide Order dated 06.07.2012 dismissed the Writ Appeal preferred by the
appellant and upheld the Order passed by the learned Single Judge. It was
observed that the Order of the learned Single Judge remanding the matter to
the Settlement Commission for adjudication did not suffer from any material
irregularity or illegality. The pertinent observations of the Division Bench
of the High of Karnataka are as under:
     i.    On the question as to whether the Order dated 20.05.2010 passed
           by the learned Single Judge of the High Court in Writ Petition
           No. 12239 of 2008 would call for interference, on a reading
           of Section 245C (1) of the Act which governs the filing of an
           application by an assessee seeking settlement it was observed
           that the application made by an assessee, must contain full and
           true disclosure of his income which has not been disclosed before
           the Assessing Officer. Further, on perusal of Section 245H of the
           Act which discusses the Commission’s power to grant immunity
           from prosecution and penalty, it was observed that necessary
           ingredients for granting immunity from prosecution would be:
           (a) the assessee should have co-operated with the Settlement
           Commission in the proceedings before it; and (b) the assessee
           should have made a full and true disclosure of its income and
           the manner in which such income has been derived.
     ii.   Under Section 245H (1), the Settlement Commission, if satisfied
           that any assessee who makes the application for settlement
12            SUPREME COURT REPORTS                         [2023] 14 S.C.R.


            under Section 245C, has co-operated with the Commission in
            the proceedings before it and has made a full and true disclosure
            of its income and the manner in which such income has been
            derived, may grant immunity from prosecution and also from the
            imposition of penalty, either wholly or in part with respect to the
            case covered by the settlement. Thus, Section 245H (1) cannot be
            read in isolation as Section 245C is embedded in 245H (1), and
            hence, both the Sections must be read harmoniously. Further, if
            in a given case such immunity is not granted, the Revenue would
            proceed to prosecute the assessee in a jurisdictional court. Once
            prosecution is lodged, the presumption is that there was mens
            rea on the part of the assessee to conceal the income by a smoke
            screen and thereby to evade tax. The Settlement Commission will
            have to examine the application by lifting the veil to see as to
            whether there has been an intention to evade tax and then arrive
            at a conclusion and in the absence of such an exercise being
            undertaken by the Commission, the intention behind Section
            245H (1) would become otiose.
     iii.   The Division Bench noted that as per the provision of Section
            245D then prevalent, the Settlement Commission on receipt of an
            application filed under Section 245C had to call for a report from
            the Commissioner 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 involved therein,
            the Settlement Commission was empowered to reject or allow
            the application to be proceeded with, within the prescribed period
            and it is in this background that the granting of immunity from
            prosecution ought to have been scrutinised by the Settlement
            Commission and the Single Judge in the instant case found that
            the same was not done, hence, the matter was rightly remanded.
     2.14. Aggrieved by the Judgment dated 06.07.2012 in Writ Appeal No.
2458 of 2010, the appellant has preferred the instant Civil Appeal.
     Submissions:
     3. We have heard learned senior counsel Sri Shyam Divan, appearing
on behalf of the appellant-assessee and learned Additional Solicitor General,
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                               13
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

Sri Balbir Singh, appearing on behalf of the respondents-Revenue and
perused the materials placed on record.
      3.1. Sri Shyam Divan at the outset submitted that the judgment of the
learned Single Judge of the High Court, as affirmed by the Division Bench
by the impugned order, proceeds on a misdirection in law, in light of the facts
of the case and therefore, the same is liable to be set aside by this Court. It
was further submitted as follows:
     i.     That when, in the present case, the Settlement Commission
            rendered a positive finding that the appellant had extended
            cooperation and had made a true and full disclosure and thereafter,
            in exercise of power under Section 245H, the Commission
            granted immunity from prosecution and penalty to the appellant,
            the High Court ought not to have interfered with the decision of
            the Settlement Commission. That the Settlement Commission
            is the sole judge of the adequacy of and the nature of evidence
            placed before it and so long as there was cogent material and
            explanation which was furnished by the appellant-assessee, the
            High Court ought not to have interfered.
     ii.    That the High Court ought to have appreciated that the
            Assessing Officer may make all kinds of additions and make
            claims of evasion of tax by an assessee. However, the Order of
            the Assessing Officer is by no means the last word. There are
            appellate remedies which provide remedies for an aggrieved
            assessee and until the assessment reaches finality, the conclusion
            of the Assessing Officer in the assessment Order is nothing but
            his own assertion. Such a stage had not been reached in the case
            of the appellant herein.
     iii.   Concealment of particulars before the Assessing Officer would
            not have a bearing while the Settlement Commission exercises
            its powers under Section 245H of the Act for grant of immunity
            from prosecution and penalty. That if an assessee has disclosed in
            the return of income his true income and the disclosure of income
            is full and complete, there is no reason for him to go before the
            Settlement Commission. Section 245C contemplates full and
14           SUPREME COURT REPORTS                         [2023] 14 S.C.R.


           true disclosure of income to be made before the Settlement
           Commission only.
     iv.   That Section 245C does not contemplate any explanation or
           evidence that requires to be offered by an applicant to the
           satisfaction of the Settlement Commission and as such the
           Division Bench’s judgment was liable to be quashed. Section
           245C contemplates full and true disclosure of income to be
           made before the Settlement Commission and the same was
           made by the assessee. That the learned Single Judge of the High
           Court committed an error in holding that there is a statutory
           requirement that concealment of particulars before the Assessing
           Officer would have a bearing on the application filed before the
           Settlement Commission, which is required to exercise its power
           under section 245H of the Act for granting immunity from
           prosecution and penalty.
     3.2. With the aforesaid submissions, it was prayed that the present
appeal be allowed and the judgment of the learned Single Judge of the
High Court, as affirmed by the Division Bench in the impugned judgment
dated 06.07.2013, be set aside, thereby restoring the Order of the Settlement
Commission dated 04.03.2008.
      3.3. Per contra, Sri Balbir Singh, learned Additional Solicitor General
appearing on behalf of the respondents-Revenue submitted that the impugned
judgment of the High Court is based on a correct appreciation of the law
in the light of the facts of the present case and therefore, the same does not
call for interference by this Court. It was further submitted as under:
     i.    That it is only when the completed assessments were re-opened
           by the Revenue and when penalty proceedings were initiated that
           the application was filed by the appellant under Section 245C
           (1) before the Settlement Commission. That there is a marked
           difference between the terms “discovered” and “disclosed” in as
           much as what was “discovered” by the Assessing Officer during
           the course of assessment proceedings could not form part of what
           was “disclosed” by the assessee in the application filed before
           the Settlement Commission. However, in the present case, what
KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                             15
 INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

         has been “disclosed” in the application is the same as what was
         “discovered” by the Assessing Officer. The provisions of Section
         245C being made applicable to an application filed by an assessee,
         the prime ingredient would be disclosure of such income which
         had not been disclosed in the return of income.
  ii.    That the Settlement Commission on receipt of an application
         filed under Section 245C had to call for a report from the
         Commissioner and on the basis of the material contained in such
         report, the Commission ought to have proceeded to consider the
         application filed by the assessee, as also the question of granting
         of immunity from penalty and prosecution. Since this procedure
         was not adhered to and the Settlement Commission, de hors any
         material to demonstrate that there was any wilful concealment
         on the part of the assessee to evade tax, went on to pass an order
         granting immunity under Section 245H (1) to the appellant-
         assessee from imposition of penalty and prosecution under the
         Act, the learned Single Judge rightly set aside the Order of the
         Commission to such extent only and remanded the said aspect
         of the matter for fresh consideration.
  iii.   That concealment of income before the Assessing Officer would
         have a bearing on the result of the application filed before
         the Settlement Commission. That a perusal of Section 245H
         (1) would reveal that the same cannot be read in isolation as
         Section 245C is embedded in 245H (1). Therefore, the two
         provisions would have to be read harmoniously and when so
         read, it would emerge that in order to qualify for immunity under
         Section 245H, the assessee must not only co-operate with the
         Settlement Commission, but must also disclose income which
         was not reflected in the return of income, vide Ajmera Housing
         Corporation vs. Commissioner of Income Tax, (2010) 8 SCC
         739. However, in the present case, the assessee has not disclosed
         any income which was not reflected in the return of income, but
         has only brought to the notice of the commission the income that
         had escaped assessment, which was subsequently discovered by
         the Assessing Officer.
16           SUPREME COURT REPORTS                        [2023] 14 S.C.R.


     iv.   Reliance was placed on the decision of this Court in Commissioner
           of Income Tax vs. B.N. Bhattacharjee, (1979) 4 SCC 121 to
           contend that the provisions of Chapter XIX-A of the Act, were
           to be construed as having legislative intent behind them. That the
           policy of law as disclosed in the said Chapter is not to provide
           a shelter for tax dodgers, to subsequently obtain immunity from
           facing the consequences of tax evasion by simply approaching
           the Settlement Commission. That the Commission would have
           to use its power under Section 245(C) read with Section 245H of
           the Act sparingly and only in cases where there was no intention
           on the part of the assessee to evade tax. However, in the present
           case, the Commission did not apply its mind to the issue as to,
           whether, the appellant-assessee had wilfully evaded tax, before
           proceeding to exercise its power under Section 245H of the Act.
           Hence, the matter was rightly remanded to the Commission to
           determine the issue as to grant of immunity to the assessee from
           levy of penalty and prosecution.
     v.    Next, Sri Balbir Singh, Ld. ASG, referred to the judgment
           of this Court in Commissioner of Income Tax vs. Express
           Newspapers Ltd., (1994) 2 SCC 374 to contend that in a similar
           factual background, wherein the assessee had neither disclosed
           before the Settlement Commission any income which was not
           disclosed before the Assessing Officer, nor any details as to the
           manner in which such income was derived, this Court held that
           the conditions specified in Section 245C of the Act, were not
           complied with by the assessee and therefore, the Settlement
           Commission ought not to have entertained the application before
           it. In that context, it was submitted that the application in the
           present case also ought to have been dismissed in limine and the
           Commission ought not to have entertained the same.
     3.4. In the light of the aforesaid contentions, learned ASG, Sri Balbir
Singh submitted that the present appeal be dismissed as being devoid of
merit and the judgment of the learned Single Judge of the High Court, as
affirmed by the Division Bench in the impugned judgment dated 06.07.2013,
be upheld.
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                              17
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

     Points for Consideration:
     4. Having heard the learned counsel for the respective parties and on
perusal of the material on record, the following points would emerge for
our consideration:
     i.    Whether the Division Bench of the High Court was right in
           affirming the findings of the learned Single Judge, to the effect
           that the Settlement Commission ought not to have exercised
           discretion under Section 245H of the Act and granted immunity
           to the assessee de hors any material to demonstrate that there
           was no wilful concealment on the part of the assessee to evade
           tax and on that ground, remanding the matter to the Commission
           for fresh consideration?
     ii.   What order?
     Legal Framework:
     5. Before proceeding further, it would be useful to refer to the legal
framework relevant to the issues which arise in this appeal.
      5.1. Chapter XIX-A of the Act was introduced by the Taxation Laws
(Amendment) Act, 1975 w.e.f. 01.04.1976 for quick settlement of cases so
that the tax due to the Department is realized at the earliest, by approaching
the Settlement Commission. Chapter XIX-A of the Act incorporates Sections
245A to 245M. Section 245C which is relevant for the purpose of this case
provides the manner in which an application for settlement of cases is to
be made before the Settlement Commission. An assessee seeking to settle
a case with the Department is required under Section 245C to make 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 and
the additional tax payable on such income.
     5.2. Section 245D deals with the procedure to be followed by the
Commission on receiving an application for settlement under Section 245C.
Sub-section (1) of Section 245C enables the Commission to call for a report
from the Commissioner. On the basis of the Commissioner’s report and
having regard to the nature and circumstances of the case or the complexity
of the investigation involved therein, the Settlement Commission may
18           SUPREME COURT REPORTS                         [2023] 14 S.C.R.


either allow the application to be proceeded with or reject the same. Sub-
section (4) of Section 245D empowers the Settlement Commission to pass
an order after examination of the records and the report submitted by the
Commissioner, after hearing the applicant and the Commissioner, or their
authorized representatives and examining any further evidence before it.
      5.3. Section 245H of the Act bestows upon the Settlement Commission,
discretion to grant immunity to an applicant from prosecution for any offence
under the Act or under the Indian Penal Code, or from the imposition of any
penalty under the Act, with respect to the case covered by the settlement. The
grant of such immunity is subject to such conditions which the Commission
may think it fit to impose. The precondition for granting immunity is that the
applicant must have co-operated in the proceedings before the Commission
and made a ‘full and true disclosure’ of his income and the manner in which
such income has been derived.
     5.4. For ready reference, the relevant provisions of Chapter XIX-A of
the Act are extracted as under:
     “245H. Power of Settlement Commission to grant immunity from
     prosecution and penalty.—(1) The Settlement Commission may, if
     it is satisfied that any person who made the application for settlement
     under section 245C has co-operated with the Settlement Commission in
     the proceedings before it and has made a full and true disclosure of his
     income and the manner in which such income has been derived, grant
     to such person, subject to such conditions as it may think fit to impose
     for the reasons to be recorded in writing, immunity from prosecution
     for any offence under this Act or under the Indian Penal Code (45 of
     1860) or under any other Central Act for the time being in force 2 and
     also (either wholly or in part) from the imposition of any penalty under
     this Act, with respect to the case covered by the settlement:
     Provided that no such immunity shall be granted by the Settlement
     Commission in cases where the proceedings for the prosecution for
     any such offence have been instituted before the date of receipt of the
     application under section 245C:
     Provided further that the Settlement Commission shall not grant
     immunity from prosecution for any offence under the Indian Penal
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                            19
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

     Code (45 of 1860) or under any Central Act other than this Act and
     the Wealth-tax Act, 1957 (27 of 1957) to a person who makes an
     application under section 245C on or after the 1st day of June, 2007.
     (1A) An immunity granted to a person under sub-section (1) shall stand
     withdrawn if such person fails to pay any sum specified in the order
     of settlement passed under sub-section (4) of section 245D within
     the time specified in such order or within such further time as may
     be allowed by the Settlement Commission, or fails to comply with
     any other condition subject to which the immunity was granted and
     thereupon the provisions of this Act shall apply as if such immunity
     had not been granted.
     (2) An immunity granted to a person under sub-section (1) may, at any
     time, be withdrawn by the Settlement Commission, if it is satisfied
     that such person had, in the course of the settlement proceedings,
     concealed any particular material to the settlement or had given false
     evidence, and thereupon such person may be tried for the offence with
     respect to which the immunity was granted or for any other offence of
     which he appears to have been guilty in connection with the settlement
     and shall also become liable to the imposition of any penalty under
     this Act to which such person would have been liable, had not such
     immunity been granted.
     (3) On and from 1st day of February, 2021, the power of the Settlement
     Commission under this section shall be exercised by the Interim Board
     and the provisions of this section shall mutatis mutandis apply to the
     Interim Board as they apply to the Settlement Commission.”
     Analysis:
      6. On a close reading of the provisions extracted hereinabove, it
emerges that under Section 245H(1) if the Settlement Commission is satisfied
that any assessee who makes the application for settlement under Section
245C, has co-operated with the Settlement Commission in the proceedings
before it and has made a full and true disclosure of its income and the
manner in which such income has been derived, may grant immunity from
prosecution or from the imposition of penalty, either wholly or in part with
respect to the case covered by the settlement. The necessary ingredients for
20           SUPREME COURT REPORTS                         [2023] 14 S.C.R.


granting immunity from prosecution would be: (a) the assessee should have
co-operated with the Settlement Commission in the proceedings before it;
and (b) the assessee should have made a full and true disclosure of its income
and the manner in which such income has been derived, to the satisfaction
of the Commission. Therefore, what is of essence is that the assessee ought
to have:
     (a)   made full and true disclosure before the Commission, and
     (b)   co-operated with the Commission in the proceedings before it.
      6.1. Upon being satisfied as to the said ingredients, the Commission
may grant immunity from prosecution or from the imposition of penalty,
either wholly or in part with respect to the case covered by the settlement.
      7. While Section 245C provides that the disclosures as to income “not
disclosed before the Assessing Officer” must accompany the application
filed before the Settlement Commission, Section 245H provides that if the
assessee has co-operated with the Settlement Commission and has made “full
and true disclosure of his income”, the Settlement Commission may grant
immunity from prosecution and penalty. It is the case of the Revenue that
Section 245H (1) cannot be read in isolation as Section 245C is embedded
in 245H (1), and hence, both the Sections must be read harmoniously. That
when so read, the requirement under Section 245H would be that disclosure
of income “not disclosed before the Assessing Officer” must be made before
the Commission. According to the Revenue, in the present case, what had
been “disclosed” in the application was the same as what was “discovered”
by the Assessing Officer and therefore, the application of the assessee ought
not to have been entertained by the Commission, and further, immunity
under Section 245H ought not to have been granted.
      7.1. In this regard, it is observed that even if the pre-conditions
prescribed under Section 245C are to be read into Section 245H, it cannot
be said that in every case, the material “disclosed” by the assessee before
the Commission must be something apart from what was discovered by the
Assessing Officer. What is of relevance is that the assessee offered to tax,
income, in addition to the income recorded in the return of income. Section
245C read with Section 245H only contemplates full and true disclosure
of income to be made before the Settlement Commission, regardless of the
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                               21
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

disclosures or discoveries made before/by the Assessing Officer. It is to be
noted that the Order passed by Assessing Officer based on any discovery
made, is not the final word, for, it is appealable. However, the assessee may
accept the liability, in whole or in part, as determined in the assessment
order. In such a case, the assessee may approach the Settlement Commission
making ‘full and true disclosure’ of his income and the manner in which such
income has been derived. Such a disclosure may also include the income
discovered by the Assessing Officer.
      7.2. To say that in every case, the material “disclosed” by the assessee
before the Commission must be something apart from what was “discovered”
by the Assessing Officer, in our view, seems to be an artificial requirement. In
every case, there may not even be additional income to offer, apart from what
has been discovered by the Assessing Officer. The object of Chapter-XIXA
is to settle cases and to reduce the disputes, and not to prolong litigation.
Therefore, instead of preferring an appeal against the assessment order, the
assessee may, by making a ‘full and true disclosure’ of income, approach
the Settlement Commission and offer to tax income other than that disclosed
in the return of income.
       7.3. It is further to be noted that the power vested with the Settlement
Commission under Section 245H is a discretionary power to be exercised
if the Settlement Commission is satisfied that an applicant has complied
with the preconditions specified therein. It is trite that any judicial, quasi-
judicial or administrative authority must while exercising discretion, direct
itself properly in law and consider all the facts and material that it is bound
to consider while excluding from consideration irrelevant aspects of the
matter. While exercising power under Section 245H, read with Section 245C
of the Act the relevant facts and material which ought to be considered by
the Commission are:
     i.     the report which is to be submitted by the Commissioner, under
            Section 245D(1) of the Act;
     ii.    the disclosures made by the applicant before the Commission as
            to income, and the source of such income;
     iii.   any other relevant evidence let in by the assessee or the
            department.
22           SUPREME COURT REPORTS                        [2023] 14 S.C.R.


      7.4. We find that in the present case, the Settlement Commission has
rightly considered the relevant facts and material and, accordingly, decided
to grant immunity to the appellant from prosecution and penalty. We arrive
at this conclusion having regard to the following aspects of the matter,
recorded by the Settlement Commission:
     i.    The Commission in its order dated 04.03.2008, noted that the
           appellant had realized while adhering to the RBI guidelines
           of accounting of lease income that there was an error in not
           disclosing the full lease rental receipts as per income tax law.
           Thus, the appellant offered additional income under various
           heads, which were not considered by the Assessing Officer.
           Considering the nature and circumstances and the complexities
           of the investigation involved, the Commission was of the view
           that the application was to be proceeded with under Section 245D
           (1) of the Act and that prima-facie, a full and true disclosure of
           income not disclosed before the Assessing Officer had been made
           by the appellant. The findings of the Commission to this effect
           are usefully extracted as under:
                “4.3 We have considered the rival submissions. We are
                of the opinion that there is no bar for banking companies
                to approach the Commission. The disclosure of the
                material facts in the return of income or the documents
                accompanying return of income is not a bar for the applicant
                to approach the Commission. In view of this, we hold that
                the applicant is eligible to approach the Commission.


                5.1 Finally we have carefully gone through the settlement
                application and the confidential annexures and are satisfied
                that the complexities of investigation as brought out in the
                application do exist. We have also considered the nature and
                circumstances of the case as explained by the applicant’s
                representative. The applicant is an established scheduled
                bank with several branches. The applicant has realized
                that when adhering to RBI guidelines of accounting of
                lease income there was an error in not disclosing the full
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                              23
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

                 lease rental receipts as per income tax law. In addition the
                 applicant has offered additional income under various heads
                 not considered by the Assessing Officer. We are satisfied
                 that the nature and circumstances and the complexities
                 of investigation involved do warrant the application to
                 be proceeded with u/s 245D(1) of the Act. We are also
                 reasonably satisfied that, prima facie, a full and true
                 disclosure of income not disclosed before the Assessing
                 Officer has been made by the applicant. Additionally, taking
                 a practical view of the case, we are also concerned by the
                 time taken to dispose of this application, particularly in
                 respect of a scheduled bank. We feel that the matters need to
                 be given a quietus and brought to close as speedy collection
                 of taxes is also an important function of the Settlement
                 Commission. We therefore allow the application to be
                 proceeded with u/s 245D(1) of the Act.”
      The aforesaid findings of the Settlement Commission, demonstrate that
it had applied its mind to the aspect of whether there was wilful concealment
of income by the assessee. Having noted that non-disclosure was on account
of RBI guidelines, which required a different standard of disclosure, the
Commission decided to grant immunity to the appellant from prosecution
and penalty. Accrodingly, the Commission passed the following order:
           “TERMS OF SETTLEMENT:
           18.1 The computation of the undisclosed income and the tax
           payable thereon is furnished in the annexure 1 to 5 to this Order.
           Tax payable along with interest as per law shall be paid within
           35 days of receipt of this order.
           18.2 Considering the co-operation extended by the applicant in
           the completion of the present settlement proceedings and the true
           and full disclosure made, we grant immunity u/s 245H(1) from
           the imposition of penalty and prosecution under the income-tax
           Act and relevant sections of IPC, relating to the matters covered
           in the present order. Penalty u/s 271(1)(c) was levied by the
           Assessing Officer for AY 1997-98 in respect of non disclosure of
           lease rental as income. The penalty order is annulled considering
24              SUPREME COURT REPORTS                      [2023] 14 S.C.R.


           that the non disclosure was on account of RBI guidelines and
           the subsequent disclosure of additional income of lease income
           before the Settlement Commission when the applicant realized
           the omission to disclose the same as per Income tax law.
           However, the immunity so granted shall be withdrawn, if it is
           subsequently found that the conditions prescribed in subsections
           1(A)/(2) of Sec.245H are satisfied.
           18.3 The Settlement Order passed in the above case shall be
           declared void, if it is subsequently found by the Settlement
           Commission that it has been obtained by fraud or misrepresentation
           of facts.”
     ii.   The Commission’s order further reveals that the appellant
           offered additional income and disclosed particulars of the income
           pertaining to the following transactions/activities:
           a)     Two aspects of the appellant’s leasing activity, namely,
                  undeclared lease rent liable to income tax; additional
                  income on account of disallowance of depreciation on 26
                  assets claimed to be leased.
           b)     Treatment of bonus payments to employees.
           c)     Treatment of share issue expenses.
           d)     Treatment of depreciation on permanent assets and
                  securities.
      iii. The Commission’s order dated 11.12.2000, makes multiple
           references to the Report of the Commissioner, as required
           under Section 245D (1). Therefore, we find no substance in the
           submission of the Ld. ASG appearing on behalf of the Revenue
           that the procedure contemplated under Section 245D was not
           followed and in the absence of a report, the Commission was not
           correct in entertaining the appellant’s application for settlement.
      7.5. In the light of the aforesaid discussion, we are of the view that
the learned Single Judge of the High Court was not right in holding that
the reasoning of the Settlement Commission was vague, unsound and
contrary to established principles. Division Bench was also not justified in
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                               25
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

affirming such view of the learned Single Judge. The Commission, in our
view, adequately applied its mind to the circumstances of the case, as well
as to the relevant law and accordingly exercised its discretion to proceed
with the application for settlement and grant immunity to the assessee from
penalty and prosecution. The Order of the Commission dated 04.03.2008
did not suffer from such infirmity as would warrant interference by the High
Court, by passing an order of remand.
       8. It may be apposite at this juncture, to refer to the decision of this
Court in Ashirvad Enterprises vs. State of Bihar, (2004) 3 SCC 624 wherein
it was stated that whether immunity from prosecution and penalty should be
granted in a given case, has to be decided by the Commission by exercising
its discretion, in the light of the facts and circumstances of each case. There
is no straight jacket formula that would universally apply in every case.
Where the Commission is satisfied that the applicant (a) has made full and
true disclosure of his income and the manner in which such income was
derived, and (b) has co-operated with the Commission in the proceedings
before it, immunity under Section 245H may be granted.
      9. In the present case, as noted above, we find that the appellant placed
material and particulars before the Commission as to the manner in which
income pertaining to certain activities was derived and has sought to offer
such additional income to tax. Based on such disclosures and on noting that
the appellant co-operated with the Commission in the process of settlement,
the Commission proceeded to grant immunity from prosecution and penalty
as contemplated under Section 245H of the Act. The High Court ought not
to have sat in appeal as to the sufficiency of the material and particulars
placed before the Commission, based on which the Commission proceeded
to grant immunity from prosecution and penalty as contemplated under
Section 245H of the Act.
     10. We are fortified in our view by the judgment of this Court in
Jyotendrasinhji vs. S.I. Tripathi, 1993 Supp (3) SCC 389, wherein it was
observed that a Court, while exercising powers under Articles 32, 226 or
136 of the Constitution of India, as the case may be, may not interfere with
an order of the Commission, passed in exercise of its discretionary powers,
except on the ground that the order contravenes provisions of the Act or has
caused prejudice to the opposite party. Interference may also be open on
26            SUPREME COURT REPORTS                         [2023] 14 S.C.R.


the grounds of fraud, bias or malice. Therefore, this Court has carved out a
very narrow scope for judicial review of the Commission’s orders, passed in
the exercise of its discretionary powers. Hence, we hold that sufficiency of
the material and particulars placed before the Commission, based on which
the Commission proceeded to grant immunity from prosecution and penalty
as contemplated under Section 245H of the Act, are beyond the scope of
judicial review, except under the circumstances set out in Jyotendrasinhji
vs. S.I. Tripathi (supra).
      11. We find that the judgment of this Court in Express Newspapers
Ltd. (supra), sought to be relied upon by the Respondents, would not come to
their aid in the present case. It is to be noted that the said judgment turns on
its own facts. In the said case, the income tax authorities had made extensive
investigation and inquiry, whereby they had collected voluminous material
demonstrating large scale concealment of income on the part of the assessee
therein. In that background, this Court observed that the assessee, having
merely offered a part of such concealed income before the Commission, the
application for settlement ought to have been rejected.
      12. While we are mindful of the fact that the provisions of Chapter
XIX-A of the Act are not to be employed so as to provide a shelter for tax
dodgers to obtain immunity from facing the consequences of tax evasion by
simply approaching the Settlement Commission, vide B.N. Bhattacharjee
(supra), we are however of the view that in the present case, the Commission
rightly exercised its discretion under Section 245H having regard to the bona
fide conduct of the assessee of offering additional income for tax, apart from
the income disclosed in the return of income.
      13. Before parting with the record, we may add that having regard to
the legislative intent, frequent interference with the orders or proceedings of
the Settlement Commission should be avoided. We have already indicated
the limited grounds on which an order or proceeding of the Settlement
Commission can be judicially reviewed. The High Court should not
scrutinize an order or proceeding of a Settlement Commission as an appellate
court. Unsettling reasoned orders of the Settlement Commission may erode
the confidence of the bonafide assessees, thereby leading to multiplicity of
litigation where settlement is possible. This larger picture has to be borne
in mind.
  KOTAK MAHINDRA BANK LTD. v. COMMISSIONER OF                                  27
   INCOME TAX BANGALORE [B.V. NAGARATHNA, J.]

      14. In light of the aforesaid discussion, we are of the view that the Order
of the Settlement Commission dated 04.03.2008 was based on a correct
appreciation of the law, in light of the facts of the case and the High Court
ought not to have interfered with the same. Therefore, the judgment dated
06.07.2012, passed by the High Court of Karnataka at Bangalore in Writ
Appeal No. 2458 of 2010 whereby the judgment of the learned Single Judge
dated 20.05.2010, passed in Writ Petition No. 12239 of 2008, remanding the
matter to the Settlement Commission to determine afresh, the question as to
immunity from levy of penalty and prosecution was affirmed, is hereby set
aside. Consequently, the order of the learned Single Judge is also set aside.
The Order of the Settlement Commission dated 04.03.2008 is restored. The
appeal is allowed.
      Pending application (s), if any, stand disposed of in the aforesaid terms.
      No order as to costs.


Headnotes prepared by:                                             Appeal allowed.
Nidhi Jain