2004 (6) TMI 34 - HC - Income Tax

Petitioners contend that, the Settlement Commission has no jurisdiction to issue the impugned show cause notices as it has no power to review its own order under the guise of the notification - It is clear that Parliament has given to the Settlement Commission all those powers which are vested in the authorities as envisaged under section 116 of the Income-tax Act. The power of rectification is one such power - Having regard to the well-settled principles of law laid down by the apex court as well as this court in a host of judgments and taking into consideration the facts and circumstances, as stated supra, I do not find any justification to interfere in the impugned show cause notices issued by the respondents.

Issues Involved:
1. Legality and validity of the impugned notices dated March 31, 2003.
2. Jurisdiction of the Settlement Commission to issue the impugned show cause notices.
3. Power of the Settlement Commission to review its own orders under the Income-tax Act, 1961.
4. Applicability of subsequent Supreme Court decisions to the Settlement Commission's orders.
5. Maintainability of writ petitions under articles 226 and 227 of the Constitution of India against show cause notices.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Impugned Notices:
The petitioners challenged the legality and validity of the impugned notices dated March 31, 2003, issued by the first respondent. The notices were issued to rectify an earlier order dated January 29, 2001, by the Settlement Commission. The petitioners argued that the Settlement Commission had no jurisdiction to issue the impugned notices and sought a direction to dismiss the miscellaneous petitions filed by the second respondent as not maintainable.

2. Jurisdiction of the Settlement Commission:
The petitioners contended that the Settlement Commission, being a quasi-judicial body constituted under the Income-tax Act, 1961, derives its powers only under the Act. Under section 245-I of the Act, the orders of the Settlement Commission are conclusive, and the Act does not empower the Commission to review its own orders once passed. The petitioners argued that the Commission had become functus officio and had no jurisdiction to entertain the miscellaneous petitions filed by the second respondent and issue notices to the petitioners.

3. Power to Review Orders:
The petitioners submitted that the Settlement Commission had no power to rectify its own order under section 154 read with section 245F of the Act. They argued that subsequent changes in law due to amendments and decisions are not grounds for review, and any petition filed for amendment of an order due to a change in law is liable to be dismissed. The petitioners relied on decisions in the cases of Capital Cables (India) Pvt. Ltd. v. ITSC, Netai Chandra Rarhi and Co. v. ITSC, and Shantesh Gureddi v. State of Karnataka to substantiate their submission.

4. Applicability of Supreme Court Decisions:
The petitioners argued that the waiver of interest granted by the Settlement Commission was in consonance with the guidelines issued by the Central Board of Direct Taxes, and the decisions of the Supreme Court were subsequent to the order passed by the Commission. Hence, the said decisions were not applicable to the facts of the instant case or binding on the Commission. The petitioners contended that the proceeding initiated and concluded by issuing the impugned notices was without any authority of law and liable to be set aside.

5. Maintainability of Writ Petitions:
The respondents contended that the impugned notices were issued under section 154 read with section 245F of the Act and that no error or illegality had been committed. They argued that if the petitioners were aggrieved by the notices, they could file objections, which would be considered and appropriate orders passed in accordance with law. The respondents relied on the decision in Andrew Nettikkadan v. Asst. CIT and submitted that the petitioners had not made out any grounds to invoke the extraordinary jurisdiction of the court under articles 226 and 227 of the Constitution of India.

The court held that the impugned notices were in accordance with law and that the Settlement Commission had the power to rectify mistakes apparent from the record under section 154 of the Act. The court noted that the petitioners had been given fifteen days to file objections to the notices. The court found that the reliance placed by the petitioners on previous decisions had no bearing on the facts and circumstances of the present case, as those decisions involved final orders, not show cause notices.

The court further held that the writ petitions were not maintainable against show cause notices in view of the well-settled law laid down by the Supreme Court, which has deprecated the practice of High Courts entertaining writ petitions questioning the legality of show cause notices. The court emphasized that the duty of the courts is to act in accordance with the statute and not to rewrite it.

Conclusion:
The court dismissed the writ petitions, holding that the impugned notices were issued in accordance with the provisions of the Income-tax Act, 1961, and that the Settlement Commission had the jurisdiction to issue such notices. The court found no justification to interfere with the notices and directed the petitioners to file objections before the competent authority if they were aggrieved.

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