Comprehension
While Section 245C of the Income Tax Act, 1961 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 cooperated 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
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. Section 245C read with Section 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. 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 way such income has been derived. Such a disclosure may also include the income discovered by the Assessing Officer.
[Extracted with edits from the decision of the Supreme Court in Kotak Mahindra Bank Ltd. v. Commissioner of Income Tax, Bangalore, 2023 LiveLaw (SC) 822, dated September 25, 2023].
Question: 1

The Settlement Commission, on an application for settlement of a case by the assessee can grant immunity from prosecution. Which of the following is correct?

Updated On: Jan 13, 2026
  • The immunity from prosecution can be granted by the Settlement Commission only when the income disclosed by the Assessee to the Settlement Commission has not been discovered by the assessing officer before the disclosure by the assessee
  • The immunity from prosecution can be granted by the Settlement Commission even if the Assessee has not cooperated with the Settlement Commission
  • Immunity from prosecution can be granted only if the assessee makes before the Settlement Commission full and true disclosure of his income, the way income was derived, additional amount of tax payable on such income and other particulars
  • The immunity from prosecution can be granted by the Settlement Commission for offences under the Income Tax Act as well offences under the IPC post 2007
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The Correct Option is C

Solution and Explanation

To receive immunity from prosecution by the Settlement Commission, the assessee must fully and truthfully disclose income, tax obligations, and other pertinent information.
The correct choice is (C): Prosecution immunity is granted only when the assessee provides a complete and honest disclosure to the Settlement Commission regarding their income, its source, any additional tax due, and other specifics.

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Question: 2

Chapter XIX-A, sections 245A-245M dealing with Settlement of Cases was inserted in the Income Tax Act, 1961 by which of the following amendment Act?

Updated On: Jan 13, 2026
  • Taxation Laws (Amendment) Act, 1975.
  • Taxation Laws (Amendment) Act, 1987
  • Taxation Laws (Amendment) Act, 2007
  • Taxation Laws (Amendment) Act, 2014
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The Correct Option is A

Solution and Explanation

Chapter XIX-A, which included sections 245A-245M regarding case settlements, was introduced by the Taxation Laws (Amendment) Act, 1975.
The correct answer is (A): Taxation Laws (Amendment) Act, 1975.

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Question: 3

Consider the following statements.
I. The High Courts and Supreme Court while exercising powers under Articles 32, 226 or 136 of the Constitution of India, as the case may be, should not interfere with an order of the Settlement Commission except on the ground that the order contravenes provisions of the Act or has caused prejudice to the opposite party. 
II. The High Courts and Supreme Court while exercising powers under Articles 32, 226 or 136 of the Constitution of India, as the case may be, may interfere with an order of the Settlement Commission on the grounds of fraud, bias or malice. 
III. The Settlement Commission provided quick and easy remedy to the assessee allowing him to make full and true disclosure and therefore avoid the prosecution and appeals. Thus, the order of the Settlement Commission cannot be questioned by the Supreme Court or the High Court on any ground 
Choose the correct answer from the Code given below

Updated On: Jan 13, 2026
  • All are true
  • Only III is true
  • I and II are true
  • II and III are true.
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The Correct Option is C

Solution and Explanation

Statements I and II are valid. High Courts and the Supreme Court can only interfere with Settlement Commission orders based on specific issues, such as Act violations, fraud, or bias. Statement III is invalid because judicial review is not completely prohibited. The correct answer is (C): I and II are true

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Question: 4

Consider the given statements.
I. An immunity granted to a person from prosecution shall stand withdrawn if such person fails to pay any sum specified in the settlement order. 
II. Settlement Commission cannot grant immunity from prosecution where the proceedings for the prosecution have been instituted before the date of receipt of the application under section 245C. 
III. An immunity from prosecution once granted by the Settlement Commission cannot be withdrawn on any ground. 
Choose the correct answer from the Code given below

Updated On: Jan 13, 2026
  • Only I is true
  • I and II are true but III is not true.
  • II and III are true
  • All are true
Show Solution

The Correct Option is B

Solution and Explanation

Statements I and II are valid. Immunity is revocable if certain conditions fail and is not applicable if legal proceedings began before the request. Statement III is invalid.
The correct choice is (B): I and II are valid, but III is not.

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Question: 5

Choose the most appropriate answer from the following.

Updated On: Jan 13, 2026
  • When a person has made an application for settlement of a case before the Settlement Commission and the same has been allowed, such person shall not be allowed to make subsequent application for settlement in future cases
  • When a person has made an application for settlement of a case before the Settlement Commission and the same has been allowed, any company in which such person holds more than fifty per cent of the shares shall not be allowed to make subsequent application for settlement in future cases
  • When a person has made an application for settlement of a case before the Settlement Commission and the same has been allowed, there is no bar on such person or any related person of such person from making subsequent applications for settlement in future cases
  • Both (a) and (b).
Show Solution

The Correct Option is D

Solution and Explanation

Statements (A) and (B) are both accurate. They describe the limitations on future settlement applications for an individual and any company where they have a controlling interest. The answer is (D): Both (a) and (b).

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Top Questions on Tax Law

Questions Asked in CLAT PG exam

An unpleasant tussle ensured between the TATA Sons and Cyrus Pallonji Mistry (“CPM”) in October 2016, when Mistry, who was the sixth chairman of Tata Sons, was ousted from the position of Executive Chairman of Tata Sons Limited. CPM took over as the chairman in 2012 after Ratan Tata announced his retirement. Tata Group patriarch Ratan Tata had personally asked Cyrus Mistry to resign as chairman of Tata Sons as the board had lost faith in him, but his refusal led to the removal via majority vote. Cyrus Investments Private limited and Sterling Investment Corporation Private Limited belonged to the Shapoorji Palloni Group in which CPM held a controlling interest (about 2% of the issued share capital of Tata Sons). Seven out of the nine directors of Tata Sons voted for CPM’s replacement after Farida Khambata abstained and Mistry was declared ineligible to vote as he was an interested director. Mistry challenged his removal, accusing the board of mismanagement and of oppressing minority shareholders. however, the National Company Law Tribunal (NCLT) rejected his petition. After this Mistry challenged his removal in National Company Law Appellate Tribunal (NCLAT). In 2018, NCLAT order restored Mistry as the group’s executive chairman. Tata Sons challenged that NCLAT order in Supreme Court. CPM also challenged the order for few more relief. Supreme Court stayed NCLAT’s order reinstating Cyrus Mistry as the executive chairman of Tata Sons and restoring his directorships in the holding company as well as three group companies, with a preliminary observation that the first impression of the order was “not good” and that the tribunal ‘could’ not have given consequential relief that had not been sought in the first place. Ultimately, the Supreme Court decided the case in favour of Tata Sons. One of the issues decided by Supreme Court was that “whether the case was fit to be qualified as a situation of ‘Oppression and Mismanagement’ under Section 241 of the Companies Act, 2013?”. On this issue, the Supreme Court observed that “unless the removal of a person as a chairman of a company is oppressive or mismanaged or done in a prejudicial manner damaging the interests of the company, its members or the public at large, the NCLT cannot interfere with the removal of a person as a Chairman of a Company in a petition under Section 241 of the Companies Act, 2013.” This case highlighted the point that “an executive chairman does not have sovereign authority over the company. In corporate democracy, decision making always remains with the Board as long as they enjoy the pleasure of the shareholders. Likewise, an executive chairman will continue as long as he/she enjoys the pleasure of the Board. An assumption by the executive chairman that he/she would have a free hand in running the affairs of the company is incongruous to corporate governance and corporate democracy. The Tribunal held that the concept of ‘free hand rule’ is antithesis to collective responsibility and collective decision making”.
[Based on Tata Consultancy Services Ltd. v. Cyrus Investment Pvt. Ltd., 2021 SCC 122].
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Alastair Hudson in his book ‘Securities Law’ First Edition (Sweet & Maxwell), 2008 at page 342, refers to ‘Restricted Offers’ and noticed that there is no contravention of Section 85 of FSMA 2000, if: “(b) the offer is made to or directed at fewer than 100 persons, other than qualified investors, per EEA State”. The purpose underlying that exemption, the author says, is mainly the fact that the offer is not being made to an appreciable section of “the public” such that the policy of the prospectus rules generally is not affected. Further, the author says that “Self-evidently, while an offer to 99 ordinary members of the public would be within the literal terms of the exemption, it would not be the sort of activity anticipated by the legislation. Moreover, if a marketing campaign were arranged such that ordinary members of the people were approached in groups of 99 people at a time in an effort to avoid the prospectus rules, then that would not appear to be within the spirit of the regulations and might be held to contravene the core principle that a regulated person must act with integrity.”
I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty-nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. Facts clearly reveal that Saharas have issued securities to the public more than the threshold limit statutorily fixed under the first proviso to Section 67(3) and hence violated the listing provisions which may attract civil and criminal liabilities. Principles of listing, which I may later on discuss, is intended to assist public companies in identifying their obligations and responsibilities, which are continuing in nature, transparent in content and call for high degree of integrity. Obligations are imposed on the issuer on an ongoing basis. Public companies who are legally obliged to list their securities are deemed to accept the continuing obligations, by virtue of their application, prospectus and the subsequent maintenance of listing on a recognized stock exchange. Disclosure is the rule, there is no exception. Misleading public is a serious crime, which may attract civil and criminal liability. Listing of securities depends not upon one’s volition, but on statutory mandate.
[Extract from Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India (SEBI), Para 89-91, Civil Appeal No. 9833/2011 (SC)]
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The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent years. In the past, it was thought that it included just two rules namely: (1) no one shall be a judge in his own case (Nemo debet esse judex propria causa) and (2) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem).
Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice. Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially there was no room for the application of the rules of natural justice. The validity of that limitation is not questioned.
If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries. Often times it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial enquiries. Enquiries which were considered administrative at one time are now being considered as quasi-judicial in character. Arriving at a just decision is the aim of both quasi-judicial enquiries as well as administrative enquiries. An unjust decision in an administrative enquiry may have more far reaching effect than a decision in a quasi-judicial enquiry as observed by this Court in Suresh Koshy George v. University of Kerala [Civil Appeal No. 990/68, decided on 15-07- 1968], the rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice had been contravened the court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.
[Extract from the judgment of the Supreme Court in A.K. Kraipak v. Union of India, (1969) 2 SCC 262, decided on April 29, 1969, hereafter ‘A.K. Kraipak’].
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The doctrine of promissory estoppel is by now well recognized and well defined by a catena of decisions of this Court. Where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promise notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 229 of the Constitution. The rule of promissory estoppel being an equitable doctrine has to be moulded to suit the particular situation. It is not a hard-and-fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them. This doctrine is a principle evolved by equity, to avoid injustice and though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. For application of the doctrine of promissory estoppel the promise must establish that he suffered in detriment or altered his position by reliance on the promise.
Normally, the doctrine of promissory estoppel is being applied against the Government and defence based on executive necessity would not be accepted by the court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promise and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy in public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. There is no promissory estoppel against the settled proposition of law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute. Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law.
[Extract from the judgment of the Supreme Court in Shree Sidhbali Steels Limited v. State of Uttar Pradesh, (2011) 3 SCC 193, decided on January 20, 2011, hereafter ‘Shree Sidhbali Steels’].
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