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2018 (5) TMI 1549 - HC - Income TaxMaintainability of the application for settlement of a case - assessment proceedings were pending or not - assessment order was passed but not served - Held that - we record our displeasure about the manner in which, the Settlement Commission has disregarded a binding judgement of the High Court seeking to distinguish when facts simply did not permit any such distinction. As an authority subordinate to the High Court the duty of the Commission would always be to apply the law as is laid down by the High Court. We expect that the Commission in future would bear in mind these words. Coming to the factual dispute about the orders of assessment being actually passed on 26.12.2017 itself or not, the Commission has given no finding. We cannot leave the assessee without remedy merely because the Commission chose not to examine such an issue though raised by the assessee. Order of settlement set aside - matter restored before the Settlement Commission - Commission directed to follow the the observations and declaration of law by the High Court in case of Shalibhadra Developers (2016 (10) TMI 778 - GUJARAT HIGH COURT). Decided in favor of revenue.
Issues Involved:
1. Maintainability of the settlement application. 2. Factual determination of whether assessment orders were passed on 26.12.2017. 3. Legal interpretation of when an assessment is considered "pending" for the purpose of filing a settlement application. 4. Compliance with binding judicial precedents. Detailed Analysis: 1. Maintainability of the Settlement Application: The Income Tax Department challenged the order of the Income Tax Settlement Commission (Settlement Commission) dated 24.02.2018, arguing that the settlement application filed on 27.12.2017 was not maintainable because the Assessing Officer had already passed assessment orders on 26.12.2017. The Settlement Commission overruled this objection, stating that until the assessment orders are served on the assessee, the case is considered pending, allowing the assessee to apply for settlement. The Commission distinguished the case from the judgment in Shalibhadra Developers vs. Secretary, where it was held that the case is no longer pending once the assessment order is passed, regardless of its service. 2. Factual Determination of Assessment Orders Passed on 26.12.2017: The assessee contended that the assessment orders were not actually passed on 26.12.2017 but were pre-dated. The Settlement Commission did not conclusively determine whether the orders were indeed passed on 26.12.2017. The High Court criticized the Commission for not resolving this factual controversy, stating it was essential to ascertain whether the orders were passed before the assessee filed the settlement application on 27.12.2017. 3. Legal Interpretation of "Pending" Assessment: The High Court emphasized that for an application under Section 245C(1) of the Income Tax Act, a case is pending only as long as the order of assessment is not passed. Once the assessment is made, the case is no longer pending, and the application for settlement must be filed before the assessment order is passed. This interpretation aligns with the judgment in Shalibhadra Developers, which the Settlement Commission failed to follow. 4. Compliance with Binding Judicial Precedents: The High Court criticized the Settlement Commission for disregarding the binding precedent set in Shalibhadra Developers. The Commission erroneously relied on the judgment of the Bombay High Court in Yashovardhan Birla, which was already considered in Shalibhadra Developers. The High Court reiterated that subordinate authorities must follow the law as laid down by the High Court and cannot disregard binding judgments. Conclusion and Directions: The High Court set aside the Settlement Commission's order dated 24.02.2018 and directed the Commission to reconsider the proceedings, specifically to ascertain whether the assessment orders were passed on 26.12.2017. The Commission was instructed to allow both the department and the assessee to file additional documents by 30.04.2018 and to pass a fresh order by 15.05.2018, considering the High Court's observations and the law declared in Shalibhadra Developers. The petition was disposed of accordingly.
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