2013 (10) TMI 985 - HC - Income Tax

Petition before High Court in case the matter is pending before Settlement commission and which has not applied its mind yet Held that - Settlement Commission is yet to apply its mind and an enquiry under Section 245D(3) yet to be ordered The court is not inclined to entertain the proceedings at this stage, save and except to clarify that the Settlement Commission shall during the course of its proceedings specifically bring to bear its consideration on whether an enquiry under Section 245D(3) should be ordered particularly having regard to the circumstances which have been set out in the letter of the Commissioner of Income Tax dated 3 October 2013. Since the proceedings are pending before the Settlement Commission, it would not be appropriate for this Court to entertain the proceedings any further Decided against the Revenue.

Summary

Issues:
Challenge to Settlement Commission's order under Section 245D of Income Tax Act 1961 without conducting further enquiry as required by law.

Analysis:
1. The High Court dealt with a challenge by the Commissioner of Income Tax against an order of the Settlement Commission under Section 245D(2C) of the Income Tax Act 1961. The Settlement Commission had allowed the application of the Second Respondent to proceed without ordering an enquiry by the Commissioner under Section 245D(3). The dispute arose as the Revenue contended that a further enquiry or investigation was necessary before proceeding under sub-section (4) of Section 245D.

2. Section 245D(3) empowers the Settlement Commission to call for records from the Commissioner and order a further enquiry if deemed necessary. The Petitioner argued that despite indications of a hearing on the issue, the Commission did not order an enquiry under Section 245D(3) as required by law. The Commissioner had communicated the necessity of an enquiry on specific issues to the Settlement Commission, highlighting the need for a thorough investigation.

3. The Court emphasized that the Settlement Commission has the discretion to decide whether a further enquiry or investigation is necessary based on the records and evidence before it. The Commission is not obligated to order an enquiry under Section 245D(3) in every case, and it can consider additional evidence presented during the proceedings. The Settlement Commission must pass an order in accordance with the Act, covering matters in the application and any other relevant issues referred to in the Commissioner's report.

4. It was noted that the Settlement Commission had not conclusively decided on ordering an enquiry under Section 245D(3). The Court refrained from intervening in the ongoing proceedings but directed the Settlement Commission to specifically consider whether an enquiry under Section 245D(3) should be conducted, taking into account the circumstances highlighted by the Commissioner of Income Tax. The Court clarified the legal position and disposed of the proceedings without costs, allowing the Settlement Commission to continue its assessment in compliance with the statutory provisions.

This detailed analysis of the judgment highlights the key legal issues, the arguments presented by the parties, and the Court's interpretation of the relevant provisions of the Income Tax Act 1961 regarding Settlement Commission proceedings under Section 245D.