PCIT- 1 Vs M. D. Industries Pvt Ltd. (Supreme Court of India)
The Supreme Court considered a dispute concerning the effect of a pending settlement application under the Income Tax Act, 1961, and whether the assessee’s appellate rights were affected by such proceedings. It was noted that the application before the Settlement Commission had not yet been decided and that an order under Section 245D(4) remained to be passed. The Court clarified that Section 245HA applies only when a settlement application is rejected without providing terms of settlement, in which case appellate proceedings revive automatically. The Revenue’s contention that the assessee must relinquish the right to contest the assessment order on merits if the settlement application is rejected without settlement terms was held to be misconceived and rejected. The Court upheld the Income Tax Appellate Tribunal’s decision to condone delay, set aside the Commissioner of Income Tax (Appeals)’s order, and restore the first appeal in the specific circumstances of the case. It further directed that appellate proceedings before the Commissioner of Income Tax (Appeals) be kept in abeyance until the Settlement Commission disposes of the application as per the statutory framework. The special leave petition was dismissed, and pending applications were disposed of.
