1979 (5) TMI 147 - SC - Indian Laws

Summary

Issues Involved:
1. Interpretation and application of Chapter XIXA of the Income Tax Act, 1961.
2. Conditions for entitlement to make an application to the Settlement Commission under Section 245M.
3. The effect of withdrawal of appeals by the Income Tax Department.
4. The power of review by the Settlement Commission.
5. The applicability of the doctrine of estoppel against statutory duties.
6. The jurisdiction of the Settlement Commission and its interaction with appeals before the Income Tax Appellate Tribunal (I.T.A.T.).
7. The scope of Article 136 in relation to orders passed by the Settlement Commission.

Issue-wise Detailed Analysis:

1. Interpretation and Application of Chapter XIXA of the Income Tax Act, 1961:
Chapter XIXA, introduced by the Taxation Laws (Amendment) Act, 1975, aims to provide a mechanism for the settlement of large tax disputes and immunity from criminal proceedings. The chapter's purpose is to facilitate the composition and collection of public revenue from significant taxpayers, thereby avoiding prolonged litigation and prosecution. The court emphasized the need for a harmonious construction of the chapter to balance legislative intent and statutory language.

2. Conditions for Entitlement to Make an Application to the Settlement Commission under Section 245M:
Section 245M stipulates that an assessee must withdraw any pending appeals before making an application to the Settlement Commission. Additionally, the Income Tax Officer (I.T.O.) should not have preferred an appeal under Section 253(2) against the order related to the assessee's appeal. The respondent-assessee complied with these conditions by withdrawing his appeals and persuading the Department to withdraw its appeals.

3. The Effect of Withdrawal of Appeals by the Income Tax Department:
The court deliberated whether the withdrawal of appeals by the Department nullifies the effect of having preferred an appeal initially. The court concluded that an appeal withdrawn is effectively non-existent, and thus, the bar under the proviso to Section 245M(1) does not apply if the Department's appeal is withdrawn before the application to the Settlement Commission is made.

4. The Power of Review by the Settlement Commission:
The Settlement Commission initially rejected the respondent's application based on the Commissioner's objection. However, upon the respondent's request for a review, citing non-compliance with natural justice, the Commission reconsidered and decided to proceed with the application. The court upheld the Commission's power to review its decision, emphasizing the importance of natural justice and the right to a hearing before rejecting an application.

5. The Applicability of the Doctrine of Estoppel Against Statutory Duties:
The court rejected the application of estoppel against the Commissioner of Income Tax's statutory duty to object to the Settlement Commission's proceedings. The Commissioner has a public duty to prevent the escape of significant economic offenders. The court held that estoppel cannot override statutory mandates, especially when public policy and statutory duties are involved.

6. The Jurisdiction of the Settlement Commission and Its Interaction with Appeals Before the I.T.A.T.:
The court clarified that the I.T.A.T. is not an income tax authority, and proceedings before it are not considered "cases" under Section 245A(a). However, Section 245M allows assessees with pending appeals before the I.T.A.T. to withdraw their appeals and apply to the Settlement Commission. The court interpreted the proviso to Section 245M(1) to mean that the withdrawal of the Department's appeal removes the bar to the assessee's application to the Settlement Commission.

7. The Scope of Article 136 in Relation to Orders Passed by the Settlement Commission:
The court affirmed that orders passed by the Settlement Commission fall within the jurisdiction of Article 136, as the Commission is considered a tribunal. The Commission's proceedings are judicial in nature, and its determinations affect the rights and liabilities of parties, thereby satisfying the criteria for being a tribunal under Article 136.

Conclusion:
The court allowed the appeal, inhibiting the Settlement Commission from proceeding with the respondent's application. The assessee's appeals before the I.T.A.T. were revived for expeditious disposal, while the Department's appeals were not revived, as they were deemed weak and frivolous. The court emphasized the importance of preventing the misuse of the Settlement Commission as an escape route for significant tax evaders.