2002 (9) TMI 81 - HC - Income Tax

Settlement Of Cases - Scope Of Powers Penalty - Concealment Of Income - In this petition the petitioner has challenged notices issued to it under section 156 of the Act pursuant to the orders passed by the Settlement Commission under section 245D(1) of the Act by serving upon the petitioner notices of demand claiming the tax, penalty, etc., payable by virtue of the order of the Settlement Commission. Since we have set aside the order of the Settlement Commission relating to penalty, the demand in these notices cannot be enforced till the decision by the Settlement Commission is taken afresh. This writ petition is, therefore, also disposed of with the direction to the Income-tax Officer to keep the matter in abeyance till the decision of the Settlement Commission

Summary

Issues Involved:
1. Legality of the Settlement Commission's exclusion of certain assessment years.
2. Legality of penalties imposed by the Settlement Commission for concealment of income.
3. Legality of reassessment notices issued under section 148 of the Income-tax Act.
4. Legality of demand notices issued under section 156 of the Income-tax Act.

Issue-wise Analysis:

1. Legality of the Settlement Commission's Exclusion of Certain Assessment Years:
The petitioner-company filed a main settlement application under section 245C(1) of the Income-tax Act, 1961, for the assessment years 1977-78 and 1978-79. Later, it sought to amend this application to include "any other assessment year(s) which the Settlement Commission may desire to reopen." Subsequently, a second application was filed offering additional income for the years 1972-73 to 1979-80. However, the Settlement Commission admitted the main application only for the years 1977-78 and 1978-79. The Commission's consolidated order dated March 10, 1981, limited its jurisdiction to the assessment years 1974-75 and 1977-78 to 1979-80, excluding the years 1972-73, 1973-74, 1975-76, and 1976-77. The court upheld the Commission's decision, citing the Supreme Court's interpretation in R.B. Shreeram Durga Prasad and Fatechand Nursing Das v. Settlement Commission (IT and WT) and CIT v. Paharpur Cooling Towers Pvt. Ltd., which clarified that the Settlement Commission's jurisdiction is confined to pending cases and cannot be extended to completed proceedings unless necessary for the proper disposal of the pending case and in the interest of the Revenue.

2. Legality of Penalties Imposed by the Settlement Commission for Concealment of Income:
The Settlement Commission levied penalties under section 271(1)(c) for the assessment years 1975-76 to 1978-79, citing that the petitioner disclosed concealed income only after a search and seizure operation. The petitioner argued that the disclosure was voluntary and not related to any specific year. The court noted that the Income-tax Appellate Tribunal (ITAT) had quashed penalties for the years 1971-72 to 1974-75, stating that the income disclosed could not be conclusively linked to any specific year. The court found that the Settlement Commission did not consider relevant facts and thus set aside the penalty order, remitting the matter back to the Commission for reconsideration.

3. Legality of Reassessment Notices Issued Under Section 148 of the Income-tax Act:
The petitioner challenged the reassessment notices for the years 1972-73 to 1974-75 issued under section 148. This challenge was based on the presumption that the Settlement Commission should have admitted the application for these years. Since the court upheld the Commission's exclusion of these years, it dismissed the petition challenging the reassessment notices.

4. Legality of Demand Notices Issued Under Section 156 of the Income-tax Act:
The petitioner also challenged demand notices issued under section 156 pursuant to the Settlement Commission's orders. Given that the court set aside the penalty order and remitted it back to the Commission, the demand notices related to penalties were ordered to be kept in abeyance until the Commission's fresh decision.

Conclusion:
The court dismissed the petition challenging the Settlement Commission's exclusion of certain assessment years and the reassessment notices under section 148. However, it set aside the penalties imposed by the Settlement Commission and remitted the matter for reconsideration. Consequently, the demand notices under section 156 were also kept in abeyance pending the Commission's fresh decision.