2021 (4) TMI 544 - HC - Income Tax

Settlement Commission (SC) order u/s 245D(2C) - whether there has been a full and true disclosure of income by the petitioner? - HELD THAT - We had occasion to consider the same issue in the case of Hitachi Power Europe GmbH V. Income Tax Settlement Commission and others 2020 (9) TMI 540 - MADRAS HIGH COURT and in very similar circumstances, have held that a discussion on the merits of the taxability of income at the stage 245D(2C) would be beyond the scope of what that provision envisaged.No serious contest is laid to this position by the revenue. Revenue points out that the petitioner has been lethargic in approaching this Court and there are laches on its part insofar as the writ petition is filed only after six months from the date of the impugned order and that too after the petitioner has participated in the proceedings for assessment initiated by the Assessing Authority. The petitioner explains the interregnum as administrative delay since some of the approvals necessary for the initiation of litigation had to be received from abroad. We accept this submission and reject the argument of the Revenue. The writ petition is liable to be allowed - impugned order is set aside.

Summary

Issues:
Challenge to Settlement Commission's order under Section 245D(2C) of the Income Tax Act - Validity of application - Disclosure of income - Laches in approaching the Court.

Analysis:

1. The petitioner challenged an order of the Settlement Commission (SC) dated 15.05.2019 under Section 245D(2C) of the Income Tax Act, where the SC rejected the petitioner's application as invalid. The petitioner, a UK-based consultant engineer, had contracts with Foster Wheeler Energy Limited for various services. Surveys led to re-opening of assessments for certain years, and the petitioner filed a settlement application under Section 245C, which was admitted under Section 245D(1).

2. The Commissioner, in the impugned order, examined the disclosure of income by the petitioner, focusing on the nature of documentation and scope of work. The Court noted that discussing the taxability of income at the stage of 245D(2C) exceeded the provision's scope, citing a previous case where a similar issue was addressed, and the decision was upheld by the Division Bench. The revenue did not contest this position.

3. The revenue argued that the petitioner delayed approaching the Court, filing the writ petition six months after the impugned order and after participating in assessment proceedings. The petitioner attributed the delay to administrative reasons requiring approvals from abroad. The Court accepted this explanation, rejecting the revenue's argument of laches and allowing the writ petition.

4. Consequently, the Court set aside the impugned order, directing the Settlement Commission to hear the petitioner on merits after issuing notice, and to pass a final order expeditiously. The Court closed the connected miscellaneous petitions without costs, emphasizing the importance of allowing the petitioner a fair hearing before the Commission.