2020 (1) TMI 729 - HC - Income Tax

Settlement Commission - rectification of mistake - adjust the seized amount towards tax and interest payable by the applicant for the block period and remaining amount towards the tax/interest payable for the assessment year 1999-2000 - contention of the petitioners that if the amounts were adjusted then and there as per the directions of the 1st respondent Settlement Commission and reported to the 1st Respondent Settlement Commission, the interest in Annexures would not have been payable by the petitioners - HELD THAT - Since the 1st respondent Settlement Commission is seized of the applications for rectification of mistake that the writ petitions were premature. These applications should be decided by the 1st respondent Settlement Commission. 2nd and 3rd respondents are directed to take steps to liquidate the fixed deposits which were also seized and to appropriate amount towards the balance of admitted tax liability and interest of the petitioners and file a report before the 1st respondent Settlement Commission within a period of 4 weeks from the date of receipt of a copy of this Order. The 1st respondent Settlement Commission shall thereafter dispose the applications filed for rectification of mistake by the petitioners within a period of 6 months thereafter. Liberty is given to the petitioners and the respondents to make appropriate submissions before the 1st respondent Settlement Commission and in case there is any excess amounts after such adjustment, the same may be directed to be refunded to the petitioners. In case of any deficit, petitioners may be directed to pay the aforesaid amount together with interest in accordance with law.

Issues:
1. Settlement of income tax dispute before the Settlement Commission.
2. Request for adjustment of seized cash and bank balance towards tax liability.
3. Communication regarding adjustments and subsequent actions by respondents.
4. Petitioners' contention on interest payable and approach to the Settlement Commission for rectification of mistake.
5. Prematurity of writ petitions and direction for disposal of rectification applications.
6. Direction for liquidation of fixed deposits and appropriation towards tax liability.
7. Disposal of writ petitions with specified directions.

Analysis:

1. Settlement of income tax dispute before the Settlement Commission:
The judgment deals with a case where a search conducted in the premises of the petitioners led to the seizure of unaccounted cash and fixed deposits, prompting the petitioners to settle their income tax dispute before the 1st respondent Settlement Commission under the Income Tax Act, 1961. The applications for settlement were admitted and allowed to proceed, with the petitioners requesting payment of the admitted tax liability in installments, which was granted by the Commission.

2. Request for adjustment of seized cash and bank balance towards tax liability:
Following the settlement proceedings, the petitioners made requests for the adjustment of the seized cash and bank balance towards their tax liability. The Administrative Officer of the Settlement Commission also directed the Assessing Officer to make such adjustments. The adjustment was claimed to have been made by the 2nd and 3rd respondents, but there was a lack of communication to the Settlement Commission regarding this adjustment.

3. Communication regarding adjustments and subsequent actions by respondents:
Despite claims of adjustment being made, there was a discrepancy in communicating this information to the Settlement Commission. The petitioners contended that if the adjustments had been made promptly as directed, the interest payable by them would have been affected. However, the Settlement Commission had not passed any orders on the rectification applications filed by the petitioners, leading them to approach the Court prematurely.

4. Petitioners' contention on interest payable and approach to the Settlement Commission for rectification of mistake:
The petitioners argued that timely adjustments would have impacted the interest payable by them. They filed applications for rectification of mistake before the Settlement Commission, seeking resolution of this issue. The Court noted the pendency of these applications and deemed the writ petitions premature, directing the Settlement Commission to decide on the rectification applications.

5. Prematurity of writ petitions and direction for disposal of rectification applications:
The Court found the writ petitions premature due to the pending rectification applications before the Settlement Commission. It directed the Commission to decide on the rectification applications within a specified timeframe, allowing both parties to make submissions. Any excess amounts after adjustments were to be refunded to the petitioners, while deficits were to be paid with interest as per the law.

6. Direction for liquidation of fixed deposits and appropriation towards tax liability:
In addition to the adjustments of seized cash, the Court directed the 2nd and 3rd respondents to liquidate the fixed deposits seized and appropriate the amounts towards the balance of admitted tax liability and interest of the petitioners. A report on these actions was to be filed before the Settlement Commission within a stipulated timeframe.

7. Disposal of writ petitions with specified directions:
The judgment concluded by disposing of the writ petitions with the aforementioned directions, emphasizing that the rectification applications should be addressed by the Settlement Commission, and any financial discrepancies should be resolved accordingly.

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