Case Law Details
RELEVANT PARAGRAPH
25. Chapter XIX-A is a complete Code in itself as regards settlement of cases for having provided a complete mechanism other than procedure provided under the IT Act. Legislature conferred all powers upon Settlement Commission being vested in IT authority under the Act as provided U/s 245-F and what is being decided by settlement commission is conclusive providing no remedy of revision/review or appeal to the assessee or revenue, envisaged in S.245-I of the Act.
26. Settlement commission is constituted U/s 245-B and its jurisdiction & powers are governed by S.245-BA. Proceedings under Chapter XIX-A commences upon application being made by assessee who can file at any stage of case pending relating to him in the manner as prescribed containing full & true disclosure of income which has not been disclosed before assessing authority, the manner in which income has been derived, additional amount of income tax payable thereon and all other particulars, before the settlement commission so as to have the case settled U/s 245-C of the Act.
27. After application U/s 245-C being filed by assessee, S.245-D provides procedure to be followed. Sub-sections (1), (2A), (2B), (3) & (4) to S.245-D being relevant for purposes read ad infra:
“245-D. Procedure on receipt of an application under section 245C. (applicable prior to Finance Act, 2007 w.e.f. 01/06/07)- (1) On receipt of an application under section 245C, the settlement commission shall call for a report from the Commissioner and on the basis of materials contained in such report and having regard to the nature and circumstances of the case or the complexity of investigation involved therein, the settlement commission, shall where it is possible, by order, reject the application or allow the application to be proceeded with within a period of one year from the end of the month in which such application was made under section 245-C; Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant of being heard:
Provided further that the Commissioner shall furnish the report within a period of forty five days of the receipt of communication from the Settlement Commission in case of all applications made under section 245C on or after the 1st day of July, 1995 and if the Commissioner fails to furnish the report within the said period, the settlement commission may make the order without such report.”
(2A) Subject to the provisions of subsection (2B) the assessee shall, within thirty five days of the receipt of a copy of the order under sub-section (1) allowing the application to be proceeded with, pay the additional amount of income tax payable on the income disclosed in the application and shall furnish proof of such payment of the settlement commission. (2B) if the Settlement commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income tax referred to in-sub-section (2A) within the time specified in that subsection, it may extend the time for payment of the amount which remains unpaid or allow payment of by instalments if the assessee furnishes adequate security for the payment thereof. –
(2C) Where the additional amount of income tax is not paid within the time specified under sub-section( 2A), then, whether or not the Settlement Commission has extended the time for payment of the amount which remains unpaid or has allowed payment thereof by instalments under sub-section (2B), the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty five days referred to in subsection (2A).
(2D) Where the additional amount of income tax referred to in sub-section (2A) is not paid by the assessee within the time specified under that subsection or extended under sub-section (2B), as the case may be, the settlement commission may direct that the amount of income tax remaining unpaid, together with any interest payable thereon under sub-section (2C), be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered, in accordance with the provisions of Chapter XVII, by the assessing officer having jurisdiction over the assessee.
(3) Where an application is allowed to be proceeded with under sub-section
(1), the settlement commission may call for the relevant records from the Commissioner and after examination of such records, if the settlement commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case.”
(4) After examination of the records and the report of the Commissioner, if any, received under sub-section (3), and after giving an opportunity to the applicant and to the commissioner to be heard, either in person or through a representative duly authorised in this behalf and after examining such further evidence as may be placed before it or obtained by it, the settlement commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the commissioner under subsection (1) or sub-section (3).
(4A) In every application allowed to be proceeded with under sub-section (1), the settlement Commission shall, where it is possible, pass an order under sub-section (4) within a period of four years from the end of the financial year in which such application was allowed to be proceeded with.”
Sub-section (4A) to S.245-D duly amended vide Finance Act, 2007 reads ad infra:
“(4A) The settlement commission shall pass an order under subsection (4), –
(i) in respect of an application referred to in sub-section (2A) or sub-section (2D), on or before the 31st day of March, 2008; (ii) in respect of an application made on or after the 1st day of June, 2007, within twelve months from the end of the month in which the application was made.” From the provisions quoted supra, it clearly emerges that after examination of the records and Rule-9 report of Commissioner (IT) under sub-section (1) & report of Commissioner (IT), if any, received under sub-section (3), and after giving opportunity to the applicant & Commissioner (IT) to be heard either in person or through a representative authorised in this behalf and after examining such further evidence as placed before it or obtained by it, settlement commission may, in accordance with the Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by application but referred to in the report of Commissioner (IT) under sub-section (1) or (3)
29. . S.245-E empowers settlement commission to reopen the completed proceedings in appropriate cases while S.245-F confers all powers of an income tax authority upon commission. S.245-H empowers settlement Commission to grant immunity from prosecution & penalty with or without conditions, in cases where it is satisfied that the assessee has made a full disclosure of his income & its sources. At the same time, S.245-HA has been inserted by Finance Act, 2007 w.e.f. 01/06/07 being relevant reads ad infra:
“245-HA. Abatement of proceedings before settlement commission -(1) Where
(i) an application made under section 245C on or after the 1st day of June, 2007 has been rejected under subsection (1) of section 245-D; or
(ii) an application made under section 245-C has not been allowed to be proceeded with under sub-section (2A) or further proceeded with under sub-section (2D) of section 245-D; or
(iii) an application made under section 245C has been declared as invalid under sub-section (2C) of section 245-D; or
(iv) in respect of any other application under section 245C, an order under sub-section (4) of Section 245D has not been passed within the time or period specified under sub-section (4A) of section 245-D, the proceedings before the settlement commission shall abate on the specified date.
Explanation. – For the purposes of this sub-section, “specified date” means –
(a) in respect of an application referred to in clause
(i), the day on which the application was rejected;
(b) in respect of an application referred to in clause
(ii), the 31st day of July, 2007;
(c) in respect of an application referred to in clause (iii), the last day of the month in which the application was declared invalid; (d) in respect of an application referred to in clause (iv), on the date on which the time or period specified in sub-section (4A) of section 245D expires.
(2) Where a proceeding before the settlement commission abates, the assessing officer, or, as the case may be, any other income tax authority before whom the proceeding at the time of making application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C had been made.
(3) For the purposes of sub-section (2), the Assessing officer, or, as the case may be, other income tax authority, shall be entitled to use all the material and other information produced by the assessee before the settlement commission or the results of the inquiry held or evidence recorded by the Settlement commission in the course of the proceedings before it, as if such material, information, inquiry and evidence had been produced before the assessing officer or other income tax authority or held or recorded by him in the course of the proceedings before him.” Every order passed by Settlement Commission U/s 245-D(4) is final & conclusive in terms of S.245-I of the Act and no matter covered by such order shall save as otherwise provided in Chapter XIX-A be re-opened in any proceedings under the Act or under any other law for the time being in force. As already observed, proceedings before settlement commission are deemed to be judicial proceedings within the meaning of Ss.193 & 228 and for purposes of S.196, IPC as provided U/s 245-L of the Act.
30. However, by amendment made while inserting S.245-D(4A) vide Finance Act, 2007 making effective w.e.f. 01/06/07, such applicants having filed on or after 01/06/07 have not been provided with protection as provided U/s 245-E to reopen completed proceedings or 245-H relating to grant of immunity from prosecution & penalty and so also confidentiality of their record which they have disclosed before settlement commission in their application U/s 245-C of the Act. On the contrary, after Finance Act, 2007, in cases where proceedings stood abated U/s 245-HA(1) because of pending applications having not been decided by settlement commission on or before 31/03/08 all such pending applications being abated were to be reverted back U/s 245-HA(2) to the assessing officer or to any other income tax authority for being decided afresh in accordance with regular proceedings under the Act as if no such application U/s 245-C had been made; and whatever record has been disclosed by assessee before settlement commission in application U/s 245-C(supra) , it was pre-condition while submitting application for the assessee to come with true & full disclosure of his income having not been disclosed before assessing authority and all such records which the assessee disclosed before settlement commission in terms of S.245-HA(3) of the Act can be used as material information by assessing officer in course of proceedings before him.
31. Thus, it clearly emerges from Chapter XIX-A that object of legislature in introducing S.245-C is to avoid protracted proceedings before the authority or in courts by resorting to settlement of cases. In this process, the assessee cannot expect reduction of amount statutorily payable under the Act. Foundation for settlement is the application which the assessee files at any stage of a case relating to him in such form and manner as prescribed, Statutory mandate is that application shall contain true & full disclosure of income having not been disclosed by him earlier before assessing officer, and the manner in which income has been derived. Thus, fundamental requirement of application U/s 245-C is the true & full disclosure of income along with manner in which income has been derived.
32. However, by later amendment made for substitution vide Finance Act, 2007, procedure has been changed and after receipt of application U/s 245-C, procedure like impugned here where report as earlier required from Commissioner (IT) is not required, and after hearing applicant assessee, settlement commission under statutory period of fourteen days by an order in writing either to reject or allow application to be proceeded, with a further rider that if no order is passed within statutory period, it shall be deemed to have been allowed to be proceeded with.
33. However, present matters since having arise for consideration on application being filed on or before 01/06/07, their cases were to be considered for taking report of commissioner (IT) U/r 9 of Rules, 1997 and after being prima facie satisfied, settlement commission took decision to allow application to be proceeded with and only thereafter proceedings had further commenced as provided U/Ss 245-D (3) & (4) of the Act.
34. As already observed, S.245-D)4) casts an obligations upon settlement commission to examine the records, report of Commissioner (IT) if any, and afford opportunity of hearing to the assessee & Commissioner (IT) either in person or through representative duly authorised in this behalf, and after examining such further evidence as having been placed before it or obtained by Commission, may in accordance with the IT Act, pass such order as it thinks fit.
35. In instant bunch, from a bare perusal of paras 5 & 6 quoted supra, it clearly manifest that observations made therein speak volumes about procedure having been adopted by settlement commission in deciding applications under orders impugned as the Commission specifically observed that it is impracticable to examine the records & investigate the cases for proper settlement and even opportunity of hearing as contemplated U/s 245-D (4) is also not practicable; but since this Court directed Commission to pass order before 31/03/08, in para 6, at its own assessed the undisclosed income of applicants for being taxed, as is almost self same verbatim in all the orders impugned.
36. Question arises for consideration as to whether in the facts of instant cases, there can be considered to be true compliance of statutory mandate U/s 245-D(4) of the Act. There cannot be two opinions about it and irresistible conclusion is that settlement commission has failed to afford a reasonable opportunity of hearing nor examined the records as per statutory requirement of law and has passed orders impugned without due application of mind; in such circumstances, orders impugned in no manner are legally sustainable and are in violation of S.245-D(4) of the Act.
37. That apart, it was common contention on behalf of assessees and the Revenue that if orders are not sustainable being in violation of S.245-D(4), as per Counsel for assessees, it must be remitted back to settlement commission while according to Counsel for Revenue, since settlement commission has become functus officio after 31/03/08, matter deserves to be remitted back to the assessing authority as contemplated U/s 245HA(2) who will make assessment of respective assessees in accordance with law as if no such application has been submitted by respective assessees before settlement commission.
38. It is to be noted that instant matters pertain to applications being filed before settlement commission on or before 01/06/2007 and all such applications being finally decided by commission by 31/03/08, what has been pointed out by Counsel for respective parties is that settlement commission has failed to comply with mandate provided U/s 245-D(4) of the Act and if having failed to comply with statutory requirement – legal obligation whereof is cast upon it, as a result of violation whereof, orders impugned cannot be said to be in consonance with requirement of law.
39. At the same time, in fact instant cases do not fall in any of clauses of S.245- HA(1); while Counsel for Revenue has tried to convince this Court that these are covered by sub-section (1)(iv) of S.245-HA. However, suffice it to say that only such cases are covered where application made U/s 245-C remained pending and no order U/s 245-D(4) was passed within the time or period specified U/s 245-D(4A). In instant cases, applications have been finally decided by settlement commission by 31/03/08, therefore, in the considered opinion of this Court, S.245-HA(1)( iv) has no application and on having recorded the finding ibid, orders of settlement commission impugned herein are not in consonance with mandate U/s 245-D(4) of the Act.
40. Even interpretation of statute would not depend upon contingency. It is trite law which the Court would ordinary take recourse to golden rule of liberal interpretation. Object of the Act would be relevant factor for interpretation only when language is not clear and when two meanings are possible and not in a case like present one, where plain language lead to only one conclusion that as per provisions of S.245-HA(1)( iv), application U/s 245-C once remained undecided for adjudication and remain pending in such cases, proceedings can be considered to be abated.
41. It is also not the case of respondents that settlement commission constituted U/s 245-B(2) stands wound up, if ultimate fact remains that settlement commission is allowed or continued to exist and entertain fresh application being filed on or after 01/06/07, clearly suggests that it certainly got greater number of cases having been filed much before 01/06/07; and applications remained pending on 31/03/08, Division Bench of Delhi High Court in Vatika Farms (P) Ltd Vs. Union of India & Others (2008(98) ITR 302) vide interim order dt.28/03/08 issued appropriate direction holding that such applications for settlement filed by respective assessee U/s 245-C would not abate on 31/03/08 and further directed to dispose of pending applications expeditiously as possible. It has been informed to this Court that against aforesaid interim order passed by Delhi High Court, SLP was filed by the Revenue but has been dismissed.
42. However, it has been informed that apart from Delhi cases (supra), there are other large numbers of cases wherein orders alike impugned herein are under challenge before this Court at the instance of assessees whose applications have remained pending and could not have been decided by 31/03/08. This Court is not examining in regard to such applicants whose applications remained pending but in the cases where applications U/s 245-C stood decided by settlement commission in terms of S.245-D(4) of the Act by 31/03/08, orders impugned have become conclusive, against no further remedy of appeal or revision is provided and which is always subject to judicial review by this Court U/Art.226 of the Constitution and if this Court finds any infirmity in decision making process, if committed by statutory authority; under limited scope of judicial review, the only recourse available is to remit back to the statutory authority which has decided the matters afresh in accordance with law.
43. Submission made by Counsel for Revenue that settlement commission has become functus officio, and jurisdiction cannot be conferred after cut off date 31/03/08 and its order impugned being non-est on quashing thereo, proceedings in respective applications stand abated U/s 245-HA(1)(iv) of the Act, in the opinion of this Court is without merit for the reason that it only covers such cases where applications filed U/s 245-C remained pending on 31/03/08 and has not been decided U/s 245-D (4) but if the same has been finally decided, and if this Court is convinced with infirmity in the orders impugned, certainly it will be remitted back to the authority which has passed the orders impugned and sub-section (iv) of S.245-HA(1) has no application in the facts of instant cases – as a consequence whereof, proceedings would not stand abated while remitting matter back to the settlement commission.
44. As regards submission made on behalf of the Revenue that statutory authority having become functus officio or no power being vested, is wholly without merit. Settlement commission holds the authority under the Act and power is vested and only by amendment vide Finance Act, 2007 by putting rider of 31/03/08, the legislature only intended that if applications remained pending, it stands abated but it will not render settlement commission functus officio to examine matter afresh after orders having been passed remitting back to settlement commission.
45. Judgments on which the Revenue has placed reliance in the facts of instant cases has no application rendering any assistance.
46. Submission made by Counsel for the assessees (respondents in writ petitions filed by Revenue) while supporting orders of settlement commission impugned that looking to availability of time as directed by this Court in earlier petition, if settlement commission has passed orders impugned taking note of requirement U/s 245-D(4) of the Act, unless prejudice is shown by the revenue, orders impugned are not ordinarily required to be reviewed, has also no merit for the reason that if statute cast obligation upon the authority to act in accordance therewith, its non-compliance constitutes prejudice to the parties and it is not for this Court to probe into as to what nature of prejudice has been caused. That apart, if requirement U/s 245-D (4) of the Act is to examine the records and to afford opportunity of hearing and to consider further report, if any obtained by settlement commission and then pass orders, it pre-supposes that settlement commission is required to apply its mind and consider in accordance with law. Word, “consider” itself, implied to apply its mind after due opportunity of hearing being afforded to parties to the litigation, which in instant cases, as observed supra, is completely missing; which, itself, shows that prejudice has been caused to the parties.
47. It is true that if there is no such provision of the like manner in which compliance of principles of natural justice has to be made. It would be open for the Court to examine in the facts of each case as to whether reasonable opportunity of hearing has been afforded to parties and compliance of principles of natural justice has been made. However as observed (supra), if a statute requires a particular procedure to be followed for compliance of principles of natural justice, if having not been adhered to, action of such authority is certainly in violation of statutory requirement and so also of Art.14 of the Constitution.
48. Submission made on behalf of Assessees that the Revenue has issued notices in compliance of orders impugned – in pursuance whereof, they have deposited tax as assessed; thereby once demand has been raised U/s 156 of the Act which has been complied with by them, writ petitions filed by Revenue are barred by principles of promissory estoppel and the Revenue cannot approbate & reprobate in same breathe, is also without substance for the reason that once order has been passed by settlement commission U/s 245-D(4) of the Act, the assessee has to deposit the tax assessed within 35 days of receipt of certified copy of the order U/s 245-D(6A) failing which he would be liable to pay interest @ 15% per annum.
49. It is not the decision of the Revenue; on the contrary, orders of settlement commission was put to execution by Revenue in terms of S.245-D(6A) but that in no manner preclude the Revenue which is a party to the dispute, if aggrieved from assailing the same in remedial proceeding available under law, principles of promissory estoppal or of “approbate & reprobate” have no application in the facts of instant case.
50. Further submission made by Counsel for assessees (respondents) that settlement is not an adjudication but is a settlement of dispute as is evident from its very nomenclature under Chapter XIX- A, is also devoid of merit for the reason that proceedings undertaking by settlement commission under Chapter XIX- A are deemed to be judicial proceedings as provided U/s 245-L of the Act and a mechanism has been provided under Chapter XIX- A in general and under sub-section (4) of S.245-D in particular and settlement commission has to pass an order after due compliance thereof which is a sort of adjudication of dispute having been raised by assessee while submitting their application for settlement U/s 245-C of the Act and if settlement commission having failed to comply with mandate of law, such orders impugned passed in violation of S.245-D(4) cannot be said to be legally sustainable.
51. In CWP-12665/08 (CIT Central Vs. Sushil Kr. Purohit), apart from merits being
almost self-same in cognate matters, additional point has been raised by Counsel for assessee (respondent) that settlement commission Kolkatta has passed order impugned herein, this Court has no territorial jurisdiction.
52. Per contra, Counsel for Revenue submits that the assessee is being assessed by Commissioner of Income Tax Jaipur and being resident of Kolkata, application was filed before Settlement Commission Bench at Kolkatta which has examined and passed order impugned, that itself, does not exclude jurisdiction of this Court.
53. In the opinion of this Court, as is evident from the petition, the assessee was assessed in Rajasthan and in exercise of jurisdiction by Bench at Kolkatta, as provided U/s 245-BA of the Act that in no manner excludes territorial jurisdiction of this Court.
54. As already informed, all the assessees have deposited amount of tax in terms of orders impugned, a joint request was made that such deposited tax amount be refunded back to respective assessees, in case matter is remitted back to the settlement commission. However, since settlement commission would examine the matters afresh after affording opportunity of hearing to the parties, this Court considers it appropriate that what has been deposited by respective assessees under orders impugned would be subject to final outcome of their applications U/s 245-C under orders being passed Us 245-D(4) of the Act and as a consequence whereof, if there would be any refund ordered, assessee would certainly be entitled for interest @ 15% per annum.
55. Consequently, all these writ petitions stated in Schedule A & B appended to this order succeed & are hereby allowed; and the orders date 31/03/08 and 29/03/08 passed by settlement commission being in instant bunch of petitions are hereby quashed and set aside. However, matters are remitted back to the respective settlement commission benches to decide applications of assessees filed U/s 245-C after affording opportunity of hearing to the parties and after due compliance of S.245-D(4) of the Act may pass fresh orders in accordance with law without being influenced by observations, made supra, expeditiously keeping in view the fact of matters pendente for sufficient long time. Parties are directed to appear before concerned Settlement commission on 14/09/09. No costs.
