The issue put in before this Court is as to whether an application filed under Section 245C(1) of the Income Tax Act, 1961 is maintainable before the Settlement Commission only if it discloses income which has not been disclosed before the assessing officer.

2. Facts which give rise to the present writ petition are briefly stated as follows. The first petitioner company (hereinafter called the "Company") viz., Ace Investments Limited is the cent percent holding company of Express Newspapers Limited, an incorporated company under the Companies Act, 1913 and an existing company within the meaning of the Companies Act, 1956. Express Newspapers Limited is the wholly owned subsidiary of the company. Fifty one percent shares of the company are held by Bhagwandas Goenka Educational Institution, which is a public limited company under the provisions of Section 25 of the Companies Act, 1956. The company carries on business in finance and also deals in shares and securities. It derives share income as a partner of a firm known as M/s Viswa Udyog another concern of Express Newspapers Limited. The company availed a loan of Rs.62,30,000/- from N.N.Investment Private Limited, a company carrying on the business of financing and which has two associate companies known as Nirmal and Navin Private Limited and Navin Cold Storage Private Limited. The loans were availed by the company during the financial year 1985-86 ending 31.3.86 for the purpose of advancing loan in turn to Express Newspapers Limited on short term basis with interest at the rate of 16% per annum, as against the rate of 15% per annum paid by the company to its creditor, thus earning an income by one percent margin in the payment and receipt of interest. Until the assessment year 1987-88 the company was following its accounting year with a period of 12 months beginning from 1st May of the year and ending with 30th of April next year. Since the company decided to follow the regular financial year from 1.5.86, the assessment of the company for the transitional assessment year 1987-88 had to include the period of 23 months from 1st May 1985 to 31st March 1987 to coincide with that of its wholly owned subsidiary company. Thus the borrowing from N.N.Investments Private Limited and the lending to Express Newspapers Limited as well as the interest received and paid came to be considered in the income tax assessment of assessment year 1987-88. But the assessing officer made additions under Section 68 of the Income Tax Act on account of the borrowing of the company as credits of which the sources are not satisfactorily explained calling for addition of the credits as the income of the company and consequently disallowed the interest liability thereon i.e., no interest being treated as payable on loans which are not accepted as genuine. Questioning the said order, the company preferred an appeal before the Income Tax Appellate Tribunal.

3. The company also filed an application under Section 245C(1) of the Income Tax Act before the Settlement Commission for settlement of its case for the assessment years 1987-88 and 1988-89. The said application was admitted by the Commission under Section 245D(1) of the Income Tax Act, by order dated 21.4.93. The application was heard on 29.11.94 and again on 4.1.95 and by order dated 13.1.95 found that the funds really belonged to Express Newspapers Limited and were only passed on to the account of N.N.Investment Private Limited and other group concern, and ultimately held that the question of asking the company to prove the credit worthiness of N.N.Investment Private Limited would not arise. Holding so, the Commission did not approve the addition of Rs.62,30,000/- being the peak credit in the account of N.N.Investment Private Limited, but the Commission sustained the disallowance of interest of Rs.2,30,439/- claimed to have been paid on the ground that the funds did not belong to the alleged creditor and merely on the basis of make believe credit entries in the account no liability to pay the interest accrued in the hands of the company. The petitioners are before this Court in this writ petition questioning that portion of the order of the Settlement Commission in sustaining the disallowance of interest.

4. I have heard Mr.V.G.Ramachandran, learned Senior Counsel for the petitioners and Mr.T.Ravikumar, learned counsel for the respondents 1 to 3 and Mr.T.N.Seetharam, learned counsel for the respondents 6 to 8. The writ petition against the respondents 4 and 5 was dismissed by the orders of this Court dated 22.2.2002. I have also perused the counter affidavit filed on behalf of the second respondent, the Commissioner of Income Tax.

5. Mr.V.G.Ramachandran, learned Senior Counsel appearing for the petitioners would submit that the petitioners are not questioning the order of the Settlement Commission on merits, but the order of the Settlement Commission is questioned on the ground of want of jurisdiction. In this context, the learned Senior Counsel heavily relied upon the judgment of the Apex Court in "COMMISSIONER OF INCOME TAX v. EXPRESS NEWSPAPERS LTD. (VOL.206 1994 ITR 443) and contended that an assessee who makes an application to the Commission without disclosing fully and truly income which has not been disclosed before the assessing officer cannot maintain the application and as a corollary, the application is not maintainable. He would also rely upon a Division Bench judgment of the Bombay High Court in "COMMISSIONER OF INCOME TAX v. INCOME TAX SETTLEMENT COMMISSION AND OTHERS (VOL.26 2000 ITR 63). It is the admitted stand of the Department that the company did not make full and true disclosure of the facts regarding the real nature of the transaction with Express Newspapers Limited and N.N.Investment Private Limited and therefore the Commission ought to have rejected the application. He would also point out that though an application was made by the petitioners, in terms of Section 245C(3) of the Income Tax Act, the application cannot be withdrawn by the company and the company had to necessarily participate in the proceedings. In such circumstances, the only course to be adopted by the Commission is to dismiss the application as not maintainable.

6. On the contrary, it is the stand of the Department that the petitioners having failed to raise the issue as to the jurisdiction before the Settlement Commission and having participated in the proceedings cannot now challenge the order of the Settlement Commission. Secondly, it was contended that in any event the judicial review over the order of the Settlement Commission by this Court under Article 226 of the Constitution of India is very limited only in respect of decision making process and not on the validity of the order. In support of the said contention, the learned counsel would rely upon a judgment of the Apex Court in "R.B.SHREERAM DURGA PRASAD AND FATECHAND NURSING DAS v. SETTLEMENT COMMISSION AND ANOTHER (VOL.176 1989 ITR 169). It was also argued that the High Court could interfere in the order of the Settlement Commission only when the same is contrary to the provisions of the and such contravention resulted in prejudice to the parties. In support of the said submission, the learned counsel would rely upon a judgment of the Apex Court in "JYOTENDRASINHJI v. S.L.TRIPATHI AND OTHERS (VOL.201 1993 ITR 611). He would also rely upon a judgment of this Court in "C.A.ABRAHAM AND OTHERS v. ASSISTANT COMMISSIONER OF INCOME TAX AND OTHERS (VOL.255 2002 ITR 540)" to contend that this Court will not interfere in the order of Settlement Commission by exercising the jurisdiction under Article 226 of the Constitution of India unless there is patent illegality in the order.

7. Insofar as the power of this Court to exercise its jurisdiction under Article 226 of the Constitution of India, the law is well settled that the judicial review of this Court is not concerned with the decision, but only with regard to the decision making process. The above position of law was reiterated by the Apex Court in the judgment in R.B.Shreeram Durga Prasads case reported in Vol.176 1989 ITR 169 supra and this proposition of law is also not disputed by the learned Senior Counsel for petitioners. Equally, the judicial review of this Court to interfere in the order of the Settlement Commission is not barred when the order of the Settlement Commission is in contravention of any of the provisions of the. The law on this question is settled by the Apex Court in the judgment in Jyotendrasinhjis case reported in Vol.201 1993 ITR 611 supra. This proposition of law is also not disputed by the learned Senior Counsel for petitioners. Equally the power of this Court to interfere in the order of the Settlement Commission unless there is patent illegality as held by this Court in C.A.Abrahams case reported in Vol.255 2002 ITR 540 supra is also not disputed.

8. There is no dispute as to the power of judicial review of this Court over the order of the Settlement Commission passed without jurisdiction. In fact the said question came up for consideration before the Apex Court in Express Newspapers Limited case reported in Vol.206 1994 ITR 443. That was a case where the Express Newspapers Limited, a wholly owned subsidiary company of the company namely, the first petitioner, was a party. When an application was filed before the Commission for settlement of dues, the said application was rejected by the Commission on the ground that the application did not disclose full and true income which has not been disclosed before the assessing officer. The said order was questioned before the Apex Court by the Commissioner of Income Tax. The Apex Court after considering in detail as to the object of Chapter XIX-A providing for settlement of cases introduced in the Income Tax Act, 1961 and also on a detailed survey of the various sections from Section 245A to 245D of the, ultimately held that Section 245C(1) provides that at any stage of the case the assessee can make an application to the Commission disclosing full and true income which has not been disclosed before the assessing officer, and an application under Section 245C(1) is maintainable only if it discloses income which has not been disclosed before the assessing officer. The Apex Court also held that unless the income so disclosed exceeds Rs.50,000/- the application under Section 245C(1) is not maintainable. The relevant portion of the judgment reads as under:-

"For a proper delineation of the jurisdiction of the Commission, it is necessary to bear in mind the language of sub-section (1) of Section 245C. It provides that at any stage of a case relating to him, an assessee may make an application to the Commission disclosing fully and truly income which has not been disclosed before the Assessing Officer. He must also disclose how the said income has been derived by him besides certain other particulars. This means that an assessee cannot approach the Commission for settlement of his case with respect to income already disclosed before the Assessing Officer. An application under Section 245C is maintainable only if it discloses income which has not been disclosed before the Assessing Officer. The disclosure contemplated by section 245C is thus in the nature of voluntary disclosure of concealed income. Unless the income so disclosed exceeds Rs.50,000/-, the application under section 245C is not maintainable."

9. A Division Bench of the Bombay High Court in the case of Commissioner of Income Tax reported in Vol.246 2000 ITR 63 supra, has ruled that full and true disclosure of income by the assessee is a condition precedent for settlement of cases and for grant of immunity from penalty and prosecution. The law on the issue to sustain an application under Section 245C(1) of the Income Tax Act is well settled that unless and until the assessee makes full and true disclosure of income which has not been disclosed before the assessing officer, it cannot maintain the application.

10. The facts in this case are not disputed inasmuch as the order of the Settlement Commission also proceeds on the basis that the company had not made full and true disclosure of the facts regarding the real nature of the transactions with Express Newspapers Limited and N.N.Investment Private Limited. Sections 245C and H of the contemplate full and true disclosure of income by the applicant and the manner in which such income has been derived. It is the admitted position on facts that the company did not make full and true disclosure of income. Having arrived at such finding the Settlement Commission ought to have dismissed the application. Hence the order of Settlement Commission dated 13.1.95 is liable to be set aside as bad, illegal and void as the application itself was not maintainable.

11. However, it is the case of the Department that having filed an application before the Settlement Commission and participated in the proceedings, it is not now open to the company to question the jurisdiction of the Commission to entertain the application and decide the same. This argument cannot be accepted as the law declared by the Apex Court is binding on all Courts, including the Settlement Commission, more so as in this case the judgment of the Apex Court reported in Vol.206 1994 ITR 443 was rendered where Express Newspapers Limited which is a wholly owned subsidiary of the company was also a party. The proceedings pending before the Settlement Commission under Chapter XIX-A of the shall be deemed to be judicial proceedings within the meaning of Sections 193 and 228 and for the purpose of Section 195 of IPC. The law declared by the Apex Court shall apply to all pending proceedings and it relates back to the date of application. The submission of the learned counsel for respondents 1 to 3 that the petitioners are estopped from raising the question after participating in the proceedings shall fall to the ground as there cannot be a plea of estoppel against the statute and the law declared by the Apex Court. When a superior Court declares the law, it is not making law on the date of judgment but merely declaring the law. The decision being an enunciation of the true and correct position of law, becomes applicable from the date when the concerned law came into effect. If, therefore, the Apex Court or the concerned High Court declared the true position on the point of law, it relates back to the date of the enactment itself. If so, the law so declared is deemed to have existed and applied, on the date of the order which is sought to be rectified. Hence the validity of the order will necessarily have to be examined with reference to the legal position as enunciated by the Apex Court, even though such enunciation may be subsequent to the order of assessment. Although a decision of the Apex Court may not reopen a concluded decision, before a decision is arrived and the decision of the Apex Court is rendered, such decision shall be binding on the Court or the Commission for that matter. There was no finality arrived by the Commission on the application of the petitioner as admittedly the same was pending on the date when the Apex Court declared the law. Therefore, the decision as declared by the Apex Court is applicable to the pending proceedings before the Settlement Commission. The decision of the Apex Court, being a declaration of true and correct position of law becomes applicable to all transactions and proceedings which have not become final and concluded. As a necessary corollary, the true and correct position of law declared by the Apex Court applies not only to transactions and proceedings subsequent to the decision, but also to transactions and proceedings prior to the decision, but of course, subject to the rule of finality of proceedings. Since there was no finality arrived on the application filed by the petitioners, the Commission is bound by the law declared by the Apex Court in Express Newspapers Limited case reported in Vol.206 1994 ITR 443. In this context, useful reference could be also made to the observation in Salmond on Jurisprudence (Twelfth Edition) which reads thus:

"As we have seen, the theory of case law is that a Judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence, any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regard matters that are res judicata, or accounts that have been settled in the meantime."

This is more so, the petitioners, having filed the application had no option even to withdraw the application in terms of Section 245C(3) of the. The power of judicial review of this Court is not barred when the validity of an order of the Settlement Commission is questioned on the ground that the application itself is not maintainable and any decision on the application is also without jurisdiction. When once it is held that an application filed for settlement of cases is not maintainable on the ground that the applicant has not made true and full disclosure of the income, proceeding with such application and deciding the issue would be outside the power of the Settlement Commission, as the application itself is not in conformity with Section 245C(1) of the. Merely because the petitioners have participated in the proceedings, the petitioners are not prevented from questioning the jurisdictional issue that too on the well settled law by the Apex Court. In this regard, it is to be noticed that the application was filed on 29.5.92. The same was admitted on 21.4.93. The judgment of the Apex Court in Express Newspapers Limited case (supra) was delivered on 11.1.94. After the said judgment only the Commission has proceeded with the enquiry and passed the impugned order only on 19.1.95. Such an enquiry was beyond the power of the Commission as there was no other option for the Commission except to dismiss the application.

12. In that view of the matter, I find that the application of the company made under Section 245C(1) of thewithout making true and full disclosure of the income is not maintainable and the order of the Settlement Commission passed on such application is bad, illegal, void and unsustainable in the eye of law and this Court could interfere in the decision making process. Hence, the order of the first respondent Settlement Commission dated 13.1.95 is liable to be set aside and accordingly the same is set aside. Consequently, the petitioners are entitled to proceed further with the appeal pending before the Income Tax Appellate Tribunal filed against the order of the Assessing Officer. The writ petition is allowed. No costs. Consequently, W.P.M.P.No.10989 of 1995 is closed.