1991 (6) TMI 50 - Commission - Income Tax

Issues Involved:
1. Whether the assessment made by the Assessing Officer for the assessment year 1986-87 subsists after the petition under section 245C(1) has been admitted.
2. Whether the Commissioner of Income-tax has locus standi to make a petition to the Settlement Commission.

Issue-Wise Detailed Analysis:

1. Assessment Subsistence Post-Admission of Settlement Petition

Arguments by the Department:
The Department argued that the assessment made before the admission of the settlement petition subsists even after its admission. They cited the proviso to section 220(2) and the decision of the Karnataka High Court in N. Krishnan v. Settlement Commission, which indicated that the assessment orders remain valid and enforceable until modified by the Settlement Commission under section 245D(4).

Arguments by the Applicant:
The applicant contended that the proceedings before the Settlement Commission are not a continuation of assessment proceedings but a separate quasi-judicial process. They argued that once the settlement petition is admitted, the Commission has exclusive jurisdiction, rendering previous assessment orders "dead or at least dormant." They cited sub-sections (6) and (7) of section 245D, which suggest that pending proceedings are revived only if the settlement is found to be obtained by fraud or misrepresentation.

Commission's Decision:
The Commission concluded that the assessment orders made before the admission of the settlement petition remain valid and subsist even after the petition is admitted. They reasoned that the exclusive jurisdiction of the Settlement Commission does not invalidate prior legal actions taken by the income-tax authorities. The provisions of sections 245D(6), (7), and 220(2) support this view, indicating that valid orders and demands continue to exist and are subject to modification by the Commission under section 245D(4). The Commission also noted that section 245HA(1) does not render previous valid orders invalid but allows the Assessing Officer to continue proceedings from the stage they were at before the settlement petition was admitted.

2. Locus Standi of the Commissioner of Income-tax

Arguments by the Applicant:
The applicant argued that the Commissioner of Income-tax has no locus standi to make a petition to the Settlement Commission. They cited section 245F, which grants the Commission exclusive jurisdiction to exercise the powers of an income-tax authority once a settlement application is admitted. They also contended that there is no provision in Chapter XIX-A of the Income-tax Act that allows the Commissioner to make such a petition.

Arguments by the Department:
The Department countered that the Commissioner of Income-tax has an inherent right to approach the Settlement Commission to safeguard the interests of the Revenue. They argued that the Income-tax Department is an interested party in the proceedings before the Commission and that the Commissioner's petition was a reasonable request to ensure that the demand created by the Assessing Officer is recoverable.

Commission's Decision:
The Commission overruled the applicant's preliminary objection, holding that the Commissioner of Income-tax has locus standi to approach the Settlement Commission. They reasoned that the Income-tax Department is an interested party in the proceedings, and there is no provision in Chapter XIX-A that debars the Commissioner from making such a petition. The Commission emphasized that the purpose of the Commission's exclusive jurisdiction is to ensure that the interests of the Revenue are safeguarded, which justifies the Commissioner's petition.

Conclusion:
The Special Bench concluded that:
1. The assessment made by the Assessing Officer before the admission of the settlement petition subsists even after the petition is admitted.
2. The Commissioner of Income-tax has locus standi to make a petition to the Settlement Commission.

The Principal Bench of the Settlement Commission at Delhi is directed to pass appropriate orders on the petition dated January 16, 1991, made by the Commissioner of Income-tax, Jaipur.

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