2015 (3) TMI 157 - HC - Income Tax

Settlement Commission order - immunity to the assessee from prosecution and penalty under the Act and directing payment of tax alongwith interest within 35 days - CIT(A) challenging order on the ground that without any hearing, without looking to the record and giving opportunity to parties, the Settlement Commission, under the garb of compliance of this Court's order, has passed orders of settlement without following the procedure prescribed in the statute - Held that - The mere fact that the orders impugned in these writ petitions have been complied with since there was no interim order, would not validate a patently illegal and bad order, which has been passed in flagrant violation of statutory provision. It is not a case, where things cannot be restored or where restitution is impossible. This Court while entertaining the writ petition did not grant any interim order to petitioner. For that reason alone petitioner cannot be made to suffer. It is well established that actus curae neminem gravabit. Therefore, the mere fact that impugned orders have been given effect to would make no difference as the said orders are patently illegal for the reason as the entire procedure as contemplated in Section 245-D(4) of Act, 1961 has been completely overlooked by Settlement Commission, as is evident from their own order and, therefore, the impugned orders are patently illegal and nullity in the eyes of law. The manner in which impugned orders have been passed by respondent no. 2 clearly show lack of complete sensibility on its part. It has forced an otherwise avoidable litigation. W.P. allowed.

Summary

Issues:
Challenge to Settlement Commission's orders without proper procedure followed.

Analysis:
The judgment by the Allahabad High Court dealt with writ petitions challenging orders passed by the Settlement Commission without following the prescribed procedure. The facts involved a search operation leading to the assessment under Section 158-BC(c) of the Income Tax Act, 1961. The assessee moved an application under Section 245-C, which was referred to the Settlement Commission. A previous court order directed the Settlement Commission to decide on the settlement application by a specific date. Despite the complexity of the cases and the need for proper opportunity for both parties, the Settlement Commission passed orders of settlement without examining records and giving adequate opportunity, as required by Section 245-D(4) of the Act.

The Commissioner of Income Tax challenged these orders, arguing that the Settlement Commission failed to follow the statutory procedure, rendering the orders illegal. The respondent contended that they had complied with the orders by depositing the tax amount and that setting aside the orders now would prejudice them. The Court emphasized that compliance with illegal orders does not validate them, especially when the procedure was not followed. Citing legal maxims like "actus curae neminem gravabit," the Court stressed the duty to ensure parties do not suffer due to court orders.

Referring to legal precedents, the Court highlighted the principle that wrong orders should not be perpetuated, and parties should be restored to their original position if an erroneous order is passed. The judgment emphasized that the mere compliance with illegal orders does not negate their illegality. The Court found the Settlement Commission's actions lacking sensibility, leading to avoidable litigation. Consequently, the Court allowed the writ petitions, quashed the impugned orders, and awarded costs against the respondents. The judgment underscored the importance of following due process and ensuring justice in legal proceedings.