2019 (3) TMI 1576 - HC - Income Tax

Settlement Commission u/s 245(D)(4) - Retrospective effect to its declaration that the Petitioner s application for settlement in relation to certain assessment years - Whether the application for settlement can be rejected in relation to certain assessment years where no additional income is disclosed, though, in the composite application for settlement, assessee has disclosed adequate undisclosed income? - Can the settlement commission entertain such an objection while passing the order under section 245D(4)? - HELD THAT - The issues arising the Petitions would require a detail consideration. Prima facie, when it is shown that earlier the judgment of Settlement Commission by five Judges Bench and (even after the certain legislative changes were made in the Act pertaining to settlement of the case), later on seven Judges Bench of the Settlement Commission has held that the splitting of a declaration assessment year wise for examining the requirement of the declaration of undisclosed income would not be permissible, the judgment of the Settlement Commission impugned in the present Petitions would have to be stayed. In the result, Rule. By way of interim relief, implementation of the judgment of Settlement Commission is stayed. The assessment orders passed by the Assessing Officer are by way of consequence to the judgment of the Settlement Commission. Such assessment orders are also therefore stayed.

Summary

Issues:
1. Challenge to Settlement Commission's order and demand letter by Petitioners.
2. Retrospective effect of Settlement Commission's declaration.
3. Validity of rejection of settlement application for certain assessment years.
4. Settlement Commission's authority to entertain objections under section 245 D(4).

Analysis:
The Petitions challenge the Settlement Commission's order and the demand letter issued by the Assessing Officer. The order in question, dated 31/05/2016, demanded payment of entire tax demands from the Petitioners arising from assessment orders. Previously, the department challenged the Settlement Commission's order on the limited issue of giving retrospective effect to the declaration that the Petitioner's settlement application for certain assessment years was invalid under section 245(D)(4) of the Income Tax Act 1961.

The central issues to be decided involve whether the settlement application can be rejected for certain assessment years despite adequate undisclosed income being disclosed in the composite application, and whether the Settlement Commission can consider such objections under section 245 D(4). The Petitioner's Counsel cited precedents where the Settlement Commission ruled in favor of the assessee regarding the splitting of a declaration assessment year wise.

The Court acknowledged the need for detailed consideration of the issues raised in the Petitions. Notably, the Settlement Commission's previous rulings by five and seven Judges Benches favored the assessee's position on the matter. Consequently, the Court stayed the implementation of the Settlement Commission's order dated 31/05/2016 and the consequent assessment orders by the Assessing Officer. The Court directed an expedited hearing with Writ Petition No.704/18, which challenges the Settlement Commission's decision.

In conclusion, the judgment addresses the challenges to the Settlement Commission's order, the retrospective effect of its declaration, the rejection of settlement applications for specific assessment years, and the Settlement Commission's authority to entertain objections under section 245 D(4). The stay on the implementation of the Settlement Commission's order and the assessment orders reflects the Court's consideration of the issues raised in the Petitions.