2013 (2) TMI 895 - HC - Income Tax

Summary

Issues Involved:
1. Legality and arbitrariness of the order passed by the Income Tax Settlement Commission.
2. Violation of principles of natural justice.
3. Scope of judicial review of the Settlement Commission's order.

Summary:

1. Legality and arbitrariness of the order passed by the Income Tax Settlement Commission:
The petitioner challenged the order dated 1st September 2003 by the Income Tax Settlement Commission, Mumbai, u/s 226 of the Constitution of India, alleging it to be illegal and contrary to law. The petitioner contended that the Settlement Commission arbitrarily added Rs. 47.34 lakhs to the disclosed income without providing valid reasons, thus determining the undisclosed income at Rs. 87,34,280 against the Rs. 40,00,000 offered. The petitioner argued that the method adopted by the Commission lacked a plausible basis and was financially burdensome. The Court examined the powers of the Settlement Commission u/s 245C and 245D of the Income Tax Act, 1961, noting that the Commission's order must be based on the records, the Commissioner's report, and any further evidence. The Court held that the Settlement Commission provided sufficiently cogent reasons based on the material available, and the addition was not arbitrary but a fair and equitable sum derived from the evidence.

2. Violation of principles of natural justice:
The petitioner claimed that the order was passed in gross violation of the principles of natural justice, as no proper opportunity for hearing was provided. The Court, however, found that the Settlement Commission had availed the fullest opportunities of hearing to the parties, and the process of decision-making was unimpeachable. The Court emphasized that the Settlement Commission's proceedings are not equivalent to assessment proceedings and that the Commission's order should not be questioned as if it were an assessment order.

3. Scope of judicial review of the Settlement Commission's order:
The Court referred to the scope of judicial review under Articles 32, 136, and 226 of the Constitution, as discussed in the case of Jyotendrasinhji v. S.I Tripathi, where it was held that the only ground for interference is if the order is contrary to the provisions of the Act and has prejudiced the appellant. The Court reiterated that it cannot re-appreciate findings of fact by the Settlement Commission and that judicial review is concerned with the decision-making process, not the decision itself. The Court concluded that the petitioner failed to demonstrate any breach of provisions or serious prejudice caused by the Commission's decision-making process, thus warranting no judicial review.

Conclusion:
The petition was dismissed with no order as to costs, affirming that the Settlement Commission acted within its powers and provided valid reasons for the additional income determination.