After Settlement Commission order no power vests in the assessing authority or any other authority in respect of period and income covered under the order
After passing of order by Settlement Commission, no power vests in Assessing Authority or any other authority to issue notice in r/o period and income covered under order of Settlement Commission.
CASE LAW DETAILS
Decided by: HIGH COURT OF ALLAHABAD, In The case of: Neeru Agarwal v. Union of India, Appeal No.: Writ Tax No. 1231 of 2009,
Decided on: December 18, 2009
Section 245F(4),reference of which has been made in the order of Settlement Commission, provides that in the absence of any express direction by the Settlement Commission to the contrary, nothing in Chapter XIXA shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission. The notice has been issued in purported exercise of power under Section 245D(4),already reproduced above. Under sub-section (4)of Section 45D power has been conferred on the Settlement Commission to pass such order as it thinks fit on the matters covered by the application as also any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub-section (1)or sub-section (3) of Section 245D.Secondly, it is not the case of the department that the ground on which the notice has been to the petitioner was a matter which was not referred in the report of the Commissioner under sub-section (1)or sub- section (3)of Section 245D.
The aforesaid section should be read conjointly with section 245 I of the Act which attaches finality and conclusiveness to every order of settlement. Legislative intent is loud and clear. The order passed by the Settlement Commission has been treated to be conclusive. It can be recalled only under the circumstance if it is subsequently found by the Settlement Commission that the order was obtained by fraud or misrepresentation of facts, as per sub-section (6)of Section 45D of the Act. On a conjoint reading of sub-sections (4)and (6)of Section 45D and Sections 245F(4) and 245 I, it would appear that except in the case of fraud or misrepresentation of facts, the order passed by the Settlement Commission is final and conclusive and binding on all the parties. This appears to be so because the Settlement Commission was constituted to reduce the life span of litigation and to provide speedy remedy to an assessee who voluntarily discloses his/her undisclosed income for hassle free settlement of the case. The very use of the words “settlement of cases” are indicative of the fact that the provision has been made to settle the case in its entirety for ever and leave no issue open for subsequent decision.
The facts found and documents seized in search operation were matters which relate to the settlement of undisclosed income of the petitioner and therefore, were subject matter of consideration of the Settlement Commission. It cannot be said that such matters are matters other than those before the Settlement Commission. Settlement Commission is required to decide the dispute by passing such order as it thinks fit “on the matters covered by the application and any matter relating to the case not covered by the application but referred to in the report of the Commissioner under sub-section (1) or sub-section (3)”. It follows that the Settlement Commission is empowered to pass such order as it may think fit. The subject matter of the order is-(1) the matters covered by an application and (2)any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub- section (1)or sub-section (3).Thus, the contention of the department that the investment in bonds etc. was not subject matter of the order of Settlement Commission is not correct. Investment in bonds etc. and paper no.40,on which the assessment is sought to be completed by the assessing officer by giving impugned notice, were before the Settlement Commission by implication of law. The investment in bonds and security etc. was in the knowledge of the department as also the document no.40 recovered during the search operation and if they were not pressed in service by the department before the Settlement Commission, the department should thank itself. It is no longer open to the department to urge that it can assess the income of the petitioner on the basis of the investment in bonds etc and the document no.40.It shall be deemed that the Settlement Commission has
taken into consideration the above matters also.
Our above view also finds corroboration from the subsequent order passed by the Settlement Commission on the misc application filed by the petitioner. The operative portion of the said order is reproduced below:-
“8.We are perused t e notices issued by t e A.O. u/s 142 (1)/143(2)read wit section 245D(4).It is evident that the investigations/ inquiry sought to be made by the A.O. relate to t e seized material. The search assessments were part of the proceedings before the Settlement Commission. In the “Terms of settlement” applications, it was specifically stated that the overall additional income covered fully t e monetary effect of the seizure as a whole. We, therefore, old that as the facts of the search were placed before the Settlement Commission hence issues cannot be matters of inquiry relating to giving effect to the settlement orders .”
There is another aspect of the case. The search operation was carried on by the department and certain documents were seized by it. The department was in possession of the entire material including the investments made by the petitioner in bonds and units. Therefore, it cannot be said that the petitioner has played any fraud or misrepresented the facts. The department was very much a party before the Settlement Commission and it is not the case of the department that the Settlement Commission has passed the order without giving any opportunity of being heard to the department. Moreover, the order of Settlement Commission has been allowed to become final and we are not hearing the present petition against the order of Settlement Commission. Nor we are required to examine the legality and validity of the said order. The Settlement Commission in its operative portion of the order has not said a word remanding the matter for re-examination regarding the investments etc. The Settlement Commission by operative portion has settled the undisclosed income of the petitioner and provided immunity etc. with the rider that the order shall be void if it is found subsequently that it was obtained by fraud or misrepresentation of facts.
It is not the case of the department that the order was obtained from the Settlement Commission either by fraud or by misrepresenting the facts. The assessing authority therefore, has no jurisdiction to issue the impugned notice for making further enquiry in the matter in view of Sections 245D (6) and 45 I of the Act. There cannot possibly be piecemeal determination of the income of an assessee for relevant period, one by the Settlement Commission and another by the assessing officer, otherwise the very purpose of filing application before the Settlement Commission would be frustrated. It is obligatory on the Settlement Commission to pass an appropriate order after taking into consideration the entire material brought before it by the parties including the department. Learned Standing Counsel could not point out any statutory provision which may empower the Settlement Commission to restore back the matter in respect of certain items to the assessing officer and also finally settle income of the applicant. The scheme of Chapter XIXA does not envisage vesting of any such power in the Settlement Commission, as interpreted by the Apex Court in the case of Anjum M.H.Ghaswala and others (supra)that a Settlement Commission shall pass an order in accordance with law means-that it can stipulate the conditions of payment like instalments, last date for payment etc. and not beyond that. The following passage from the aforestated judgment is also relevant:-
“It is no doubt true t at t e terminology “settlement” has a very wide
dictionary meaning and in t e absence of a statutory definition generally the word “settlement” in sub-section (4)of section 245D would give the Commission sufficient power to arrive at a settlement which it deems fit, but when the statute qualifies such expression like “settlement” with mandatory words like “in accordance with the provisions of this Act” the width of the term “settlement” becomes subject to the mandate found in that section, wise would mean that while a Commission as sufficient elbow-room in assessing the income of the applicant under section 245D(4)it cannot make any order with a term of the settlement which would be in conflict with the mandatory provisions of he section like in he quantum and payment of tax and/or interest. In this view of the matter, we are of the opinion that assuming that there is any room for interpretation of the provisions of Part F of Chapter XVII and chapter XIX-A, we would old that it would not in any manner empower the Commission to either waive or reduce interest which is statutorily payable under the provisions of Part F of Chapter XVII.”
While preparing the judgment, we could lay our hands on a decision in Commissioner of Income Tax, Jalpaiguri Vs. Om Prakash Mittal, JT 2005 (2)SC 538 .In this case, the Apex Court has interpreted Section 45D(6)as also other provisions of Chapter XIX A of the Act and has held that the Commission’s power of settlement has to be exercised in accordance with the provisions of the Act. Though the Commission has sufficient elbowroom in assessing the income of the applicant and it cannot make any order with a term of settlement which would be in conflict with the mandatory provisions of the Act like in the quantum and payment of tax and the interest. The object of the legislature, in introducing Section 45C is to see that protracted proceedings before the authorities or in Courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amounts statutorily payable under the Act. Further it has been held that the Income Tax department, if so advised, may move to the Settlement Commission if it has material to establish that the order was obtained by fraud or misrepresentation of facts. Emphasis is that power has been given to the Commission and not to the assessing authority. Relevant portion from paragraph-15 is reproduced below:-
“15-……If an order is obtained by fraud or misrepresentation of facts, it cannot be said that there was true and fair disclosure. It was noted ere that unlike Section 139 of the Act was provides for filing of revised return, is no provision for revision of an application made in terms of Section 245C. That shows clear legislative intent that the applicant for settlement as to make a true and fair declaration from the three old. It is on the basis of the application received that the Commissioner calls for report to decide whether the application is to be rejected or permitted to be continued. The declaration contemplated in Section 245C is in the nature of voluntary disclosure of concealed income, but as noted above it must be true and fair disclosure. Voluntary disclosure and making a full and true disclosure of the income are necessary pre-conditions for invoking the Commission’s jurisdiction .”
In view of the above, we are of the considered opinion that after passing of the order dated 31-3-2008 by the Settlement Commission, no power vests in the assessing authority or any other authority to issue impugned notice in respect of the period and income covered under the order of the Settlement Commission. In case of fraud or misrepresentation of facts, remedy is to approach the Settlement Commission. The Settlement Commission, by prara 7 of its order, has not and could not have empowered the income tax authorities to frame another assessment order, while settling the undisclosed income of the petitioner for the period covered by its order, in respect of investment in bonds etc.