2021 (2) TMI 106 - HC - Income Tax

Jurisdiction of Settlement Commission to deal with the matter relating to violation of Section 269ST - Penalty u/s 271DA for violating the provisions of Section 269ST - HELD THAT - The words in relation to the case and with respect to the case used in the provisions stated, are words of wide amplitude and which, in our opinion, in the facts of the present case may allow the Settlement Commission to, notwithstanding the petitioner having not expressly referred to the notice dated 30th September, 2019 and proceedings for violation of Section 269ST pending against it in its application, pass such orders as it may thinks fit in relation / with respect thereto and the said powers of the Settlement Commission cannot be permitted to be interdicted by the impugned order. We reiterate that the proceedings of violation of Section 269ST, as per the notice dated 30th September, 2019, are a result of what was found in the search and survey qua the petitioner and are capable of being treated as part and parcel of the case taken by the petitioner by way of application to the Settlement Commission. The stand of the respondent in its e-mail dated 7th November, 2019 that the Settlement Commission assumes jurisdiction from the day when an order under Section 245D(1) is made when the application under Section 245C(1) is ordered to be proceeded with further, and which in the present case was on 8th November, 2019 and before the said date the Settlement Commission did not have exclusive jurisdiction and the respondent remained entitled to impose penalty, was / is not only contrary to the provisions of the proviso to Section 245F(2) but also contrary to the law laid down by this Court in Commissioner of Income Tax Vs. Income Tax Settlement Commission 2013 (7) TMI 95 - DELHI HIGH COURT Settlement Commission, under the proviso to Section 245F(2), with effect from 1st November, 2019 when the petitioner admittedly made the application under Section 245C before it, had the exclusive jurisdiction to deal with the matter relating to violation of Section 269ST of the Act also and the respondent, on 4th November, 2019 did not have the jurisdiction to impose penalty for violation of Section 269ST on the petitioner and the impugned order is without jurisdiction and liable to be set aside and is hereby quashed. It should be left to the Settlement Commission to, in exercise of its powers under Section 245D(4), Section 245F and Section 245H, consider whether the matter of penalty for violation of Section 269ST of the Act is to be looked into by the Settlement Commission while deciding the application of the petitioner, or not. We accordingly direct, that without prejudice to the right of the Income Tax Authorities to contend before the Settlement Commission that the petitioner having not disclosed the aforesaid facts before the Settlement Commission, has not made a full and true disclosure within the meaning of Section 245C(1), the proceedings initiated by the respondent against the petitioner for violation of Section 269ST of the Act should await the decision of the Settlement Commission on the application of the petitioner and to abide by the same.

Summary

Issues Involved:
1. Jurisdiction of the Settlement Commission.
2. Penalty imposition under Section 271DA for violation of Section 269ST.
3. Scope and powers of the Settlement Commission under Sections 245D, 245F, and 245H.
4. The validity of the penalty order dated 4th November 2019.

Detailed Analysis:

1. Jurisdiction of the Settlement Commission:
The key issue revolves around whether the Settlement Commission had exclusive jurisdiction over the case once the petitioner filed an application under Section 245C of the Income Tax Act on 1st November 2019. The court examined Chapter XIX-A of the Act, particularly Sections 245C, 245D, and 245F. Section 245F(2) states that the Settlement Commission shall have exclusive jurisdiction from the date of the application under Section 245C. The court concluded that from 1st November 2019, the Settlement Commission had exclusive jurisdiction over the petitioner’s case, including matters related to the violation of Section 269ST.

2. Penalty Imposition under Section 271DA for Violation of Section 269ST:
The petitioner was penalized for violating Section 269ST, which prohibits cash transactions of ?2 lakhs or more. The penalty was imposed under Section 271DA. The respondent argued that the Settlement Commission’s jurisdiction did not extend to penalties under Section 269ST, as the petitioner did not disclose this violation in their application to the Settlement Commission. However, the court found that the search and seizure operation, which led to the notice under Section 271DA, was part of the same case brought before the Settlement Commission. Therefore, the Settlement Commission had the authority to address the penalty under Section 269ST.

3. Scope and Powers of the Settlement Commission under Sections 245D, 245F, and 245H:
The court analyzed the powers of the Settlement Commission under Sections 245D(4), 245F, and 245H. Section 245D(4) allows the Settlement Commission to pass orders on matters covered by the application and any other matter related to the case. Section 245F(2) grants the Settlement Commission exclusive jurisdiction over the case once an application is made. Section 245H empowers the Settlement Commission to grant immunity from prosecution and penalties. The court held that these provisions collectively give the Settlement Commission the authority to address all aspects of the case, including penalties under Section 269ST, especially when the violation stems from the same search and seizure operation.

4. Validity of the Penalty Order Dated 4th November 2019:
The court found that the penalty order dated 4th November 2019 was issued without jurisdiction, as the Settlement Commission had exclusive jurisdiction from 1st November 2019. The respondent's argument that the Settlement Commission’s jurisdiction commenced only after the application was allowed to proceed under Section 245D(1) was rejected. The court cited the proviso to Section 245F(2) and previous judgments to support its decision. Consequently, the penalty order was quashed, and the matter was left to the Settlement Commission to decide.

Conclusion:
The petition was allowed, and the court directed that the proceedings for violation of Section 269ST should await the Settlement Commission’s decision. The Income Tax Authorities were instructed to abide by the Settlement Commission’s decision regarding the penalty for the violation of Section 269ST. If the Settlement Commission grants immunity, the notices will lapse; otherwise, the respondent can proceed with the penalty.