2019 (4) TMI 865 - HC - Income Tax

Settlement Commission order u/s 245D(4) - absence of any enquiry or investigation in terms of sub-section (3) of Section 245D - HELD THAT - As per the settled law, the jurisdiction of the Court in examining the correctness of the Settlement Commission s orders in exercise of Writ Jurisdiction is extremely narrow and would be confined to the scrutiny whether the order of the Settlement Commission is in accordance with the provisions of the Act. In fact, in such order, the Settlement Commission had also given reasons why further enquiry on investigation was not necessary. Even in absence of any enquiry or investigation in terms of sub-section (3) of Section 245D, the State Commission while passing the order u/s 245D(4), would look into any further evidence which may be brought on record. As observed by this Court in CIT Vs. ITSC 2013 (10) TMI 985 - BOMBAY HIGH COURT such further evidence may as well be produced by the Commissioner. In the present case, it is undisputed that the Commissioner did produce additional material. It was also looked into by the Settlement Commission. Department had neither laid a foundation before the Settlement Commission establishing why further enquiry or investigation ought to have been called, nor led any such grounds before us to demonstrate how the Settlement Commission committed an error in refusing to exercise the discretion, we do not find that the Department had made out a case for interference. It appears that the Department s representative had orally persisted with the Settlement Commission to pass an order u/s 245D(3) of the Act calling upon further enquiry or investigation by the Commissioner which would enable the Department to verify and establish that the disclosures made by the assessees were not true and full. In this petition, the Department had prayed that the Settlement Commission be directed to give opportunity to the petitioner to verify the transactions referred to in objections of the Department contained in the reports under Rules 9 and 9A of the Income Tax Settlement Commission Rules. Essentially, therefore, in such petition, also the Department s case was that the Settlement Commission should have called for or permitted further enquiry or investigation by the Commissioner on the points raised in the reports. It appears that this petition was filed after Settlement Commission passed its final order under Section 245D(4). The Department, was not aware about the development and seems to have proceeded on the basis that settlement proceedings were still pending. Whatever be the bonafide impression of the Department, this petition came to be withdrawn without any further rider. It is not clear whether the petition was withdrawn after arguments or it was withdrawn because the Department came to know about the dismissal of the settlement proceedings and desired to file a fresh petition in view of such material change. In any case, we have not proceeded on the basis of the Department s earlier petition being withdrawn without permission to file a fresh one.

Issues Involved:

1. Challenge to the order passed by the Income Tax Settlement Commission under Section 245D(4) of the Income Tax Act, 1961.
2. Alleged non-disclosure of additional income and lack of true and full disclosures by the assessees.
3. Department's contention for further enquiry under Section 245D(3) of the Act.
4. Immunity from penalty and prosecution granted by the Settlement Commission.
5. Jurisdiction and discretion of the Settlement Commission under Section 245D(3) and (4).

Issue-wise Detailed Analysis:

1. Challenge to the order passed by the Income Tax Settlement Commission under Section 245D(4) of the Income Tax Act, 1961:
The Income Tax Department filed a petition challenging the order dated 30.5.2017 passed by the Income Tax Settlement Commission under Section 245D(4) of the Income Tax Act, 1961. The assessees, private limited companies engaged in real estate development, had applied for settlement for assessment years 2008-09 to 2015-16. The Settlement Commission accepted the assessees' offer of settlement, observing that the disclosure of further additional income during the proceedings was satisfactory.

2. Alleged non-disclosure of additional income and lack of true and full disclosures by the assessees:
The Department opposed the settlement applications on the grounds of non-disclosure of additional income and lack of true and full disclosures. The Settlement Commission, in its order dated 10.5.2016 under Section 245D(2C), noted various arguments from the Department highlighting alleged dishonest conduct and exaggerated expenditures by the assessees. However, the Commission concluded that there was no clinching evidence against the applicants to invalidate their applications at that stage.

3. Department's contention for further enquiry under Section 245D(3) of the Act:
The Department contended that the Settlement Commission should have ordered a further enquiry into the transactions of the assessees, which were allegedly bogus. The Department argued that the Commission committed an error in granting immunity against penalty and prosecution without a full enquiry. The Commission, however, has the discretion to decide whether further enquiry or investigation is necessary under Section 245D(3). The Court noted that the Department did not file any application before the Settlement Commission setting out reasons for further enquiry and that the Settlement Commission had scrutinized the settlement application at two stages.

4. Immunity from penalty and prosecution granted by the Settlement Commission:
The Settlement Commission granted immunity from penalty and prosecution to the assessees subject to the payment of computed tax with interest. The Commission observed that the disclosure of additional income of ?18 Crores during the proceedings did not detract from the nature of true and full disclosure made previously. The Department challenged this immunity, arguing that the Settlement Commission did not conduct a full enquiry into the assessees' transactions.

5. Jurisdiction and discretion of the Settlement Commission under Section 245D(3) and (4):
The Court examined the statutory provisions under Chapter XIX-A of the Act, which pertains to the settlement of cases. It noted that the discretion to require further enquiry or investigation under Section 245D(3) lies with the Settlement Commission. The Court emphasized that the Settlement Commission is not required to pass a formal order under Section 245D(3) unless it decides to have further enquiry or investigation. The Court also highlighted that the Department had the opportunity to produce material before the Settlement Commission to oppose the settlement applications and that the Settlement Commission had examined the material before passing the final order under Section 245D(4).

Conclusion:
The Court dismissed the petition, noting that the Department had not established why further enquiry or investigation was necessary and had not demonstrated any error in the Settlement Commission's decision. The Court reiterated that the jurisdiction to interfere with the Settlement Commission's orders is extremely limited and confined to whether the order is in accordance with the provisions of the Act.

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