2022 (10) TMI 663 - SCH - Income Tax

Settlement Commission order - immunity to the assessee from prosecution and penalty under the Act and directing payment of tax alongwith interest within 35 days - HC held mere fact that impugned orders have been given effect to would make no difference as the said orders are patently illegal for the reason as the entire procedure as contemplated in Section 245-D(4) has been completely overlooked by Settlement Commission, as is evident from their own order and, therefore, the impugned orders are patently illegal and nullity in the eyes of law. HELD THAT - While we agree with the impugned judgment dated 25.02.2015 that the order passed by the Settlement Commission being bereft of reasons is unsustainable, and the fact that the respondent has made payment in terms of the order passed by the Settlement Commission cannot be a ground to sustain the order passed by the Settlement Commission, being contrary to the mandate of Section 245-D(4) of the Income Tax Act 1961, we feel that the matter has to be remitted for fresh decision. Settlement Commission has been wound up, and the matters pending before the Settlement Commission are being adjudicated and decided by the Interim Board constituted under Section 245AA of the Income Tax Act, 1961. The matter would be remitted to the Interim Board with a request that the matter to be taken up expeditiously and would be preferably decided within a period of six months from the date of first hearing. A reasoned order would be passed. Recording the aforesaid, the impugned judgment is partly set aside and the appeals are allowed in the aforesaid terms. We clarify that we have not made any observations or given any findings on the merits.

Summary

Issues:
1. Unsustainability of order passed by Settlement Commission due to lack of reasons.
2. Payment made by respondent in terms of order passed by Settlement Commission.
3. Remittance of the matter for fresh decision to Interim Board under Section 245AA of the Income Tax Act, 1961.
4. Timely adjudication and decision-making by the Interim Board.
5. Partial setting aside of the impugned judgment and allowance of appeals without making any observations on merits.

Analysis:

1. The Supreme Court found that the order passed by the Settlement Commission was unsustainable due to the lack of reasons provided. Despite the respondent making payments according to the order, it was deemed contrary to the mandate of Section 245-D(4) of the Income Tax Act 1961. Therefore, the Court decided to remit the matter for a fresh decision.

2. The Settlement Commission had been wound up, leading to matters pending before it being adjudicated by the Interim Board established under Section 245AA of the Income Tax Act, 1961. The Court directed that the matter be remitted to the Interim Board for expeditious consideration and decision-making, with a preference for resolving it within six months from the first hearing. The Court emphasized the necessity of a reasoned order to be passed by the Interim Board.

3. Consequently, the Supreme Court partly set aside the impugned judgment and allowed the appeals in the specified terms. It was clarified that no observations or findings on the merits were made by the Court. Any pending applications were disposed of accordingly as per the judgment.

This detailed analysis of the Supreme Court's judgment highlights the issues addressed, the reasoning behind the decision, and the directives provided for the remittance and adjudication of the matter by the Interim Board under the Income Tax Act.