1989 (3) TMI 77 - HC - Income Tax

Summary

Issues Involved:
1. Whether a person who approaches the Income-tax Settlement Commission constituted under the provisions of the Income-tax Act, 1961, seeking a full and final settlement of his case is entitled to question the legality of its decision in a petition under Article 226 of the Constitution of India?
2. If the answer to the first question is in the affirmative, what is the scope for interference under Article 226 of the Constitution of India against a decision of the Settlement Commission?

Summary:

Issue 1: Entitlement to Question Legality of Settlement Commission's Decision
The court examined whether an individual who seeks a full and final settlement from the Income-tax Settlement Commission can challenge its decision under Article 226 of the Constitution of India. The court highlighted that the power of judicial review of administrative action, including those of courts and Tribunals, conferred on the High Courts under Articles 226 and 227, is a basic structure of the Constitution. It concluded that despite the finality clause u/s 245-I of the Act, the High Court's power of judicial review remains unaffected. Therefore, the petitioner is entitled to seek judicial review of the Settlement Commission's order under Articles 226 and 227. The first question was answered in the affirmative.

Issue 2: Scope for Interference under Article 226
The court analyzed the scope for interference under Article 226 against a decision of the Settlement Commission. The Settlement Commission was established as an extraordinary measure for chronic tax evaders to make a true confession and settle their matters once for all. The court noted that the Settlement Commission's decision is final and conclusive both on questions of law and fact, and it acts as a forum for self-surrender rather than challenging the legality of assessment orders. The court concluded that the scope for interference is more restricted than the power to interfere with an arbitration award. Interference is permissible only if:
(i) There are grave procedural defects, such as violation of mandatory procedural requirements of Chapter XIX-A or rules of natural justice.
(ii) There is no nexus between the reasons given and the decision taken by the Settlement Commission.
(iii) The court cannot interfere with either an error of fact or law alleged to have been committed by the Settlement Commission.
The second question was answered accordingly.

Conclusion:
The court found no violation of mandatory procedures or rules of natural justice in the present case. Additionally, the reasons assigned by the Settlement Commission had a nexus to the decision taken. Therefore, the writ petitions were dismissed without any order as to costs.