2023 (5) TMI 124 - SC - Income Tax

Validity of Settlement Commission order - Settlement Commission position to pass any appropriate order for proper settlement - Settlement Commission disposed of the proceedings and settled the undisclosed income and also passed an order that the CIT/AO may take such action as appropriate in respect of the matters, not placed before the Commission by the applicant, as per the provisions of Section 245F(4) - High Court 2017 (3) TMI 1918 - ALLAHABAD HIGH COURT has dismissed the writ petition on the ground that the order passed by the Settlement Commission was a nullity as the Settlement Commission itself observed that it was not practicable for the Commission to examine the records and investigate the case for proper Settlement and even giving adequate opportunity to the applicant and the Department, as laid down in Section 245D(4) of the Act is not practicable - HELD THAT - Settlement Commission disposed of the application u/s 245, as such, the High Court is absolutely justified in observing that the order passed by the Settlement Commission is a nullity and cannot be said to be an order in the eye of law. Settlement Commission specifically observed that it is not practicable for the Commission to examine the records and investigate the case for proper Settlement and that even giving adequate opportunity to the applicant and the Department, as laid down in section 245D(4) is not practicable. Settlement Commission passed an order to comply with the directions of the High Court to dispose of the application on or before 31.03.2008. If that be so, the High Court in fact ought to have remitted the matter back to the Settlement Commission to pass a fresh order in accordance with law and on merits after following due procedure as required under Section 245D(4) of the Act. We set aside the impugned judgment and order passed by the High Court. We set aside the subsequent assessment/re-assessment order passed by the A.O, which was the subject-matter of writ petition before the High Court. We also set aside the order passed by the Settlement Commission and remand the matter to the Settlement Commission for a fresh decision. It is reported that the Settlement Commission has been wound up and the matters pending before the Settlement Commission are being adjudicated and decided by the interim Board constituted u/s 245AA - 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 and a reasoned order would be passed. Present appeals are accordingly allowed. The matter is remitted to the Settlement Commission/interim Board for a fresh decision in accordance with law and on its own merits and after following due procedure as required under Section 245D.

Summary

Issues Involved:
The issues involved in the judgment are the validity of the order passed by the Settlement Commission, the subsequent assessment/re-assessment order by the Assessing Officer, and the remand of the matter to the Settlement Commission for a fresh decision.

Validity of Settlement Commission Order:
The Settlement Commission passed an order settling undisclosed income for the appellants. However, it was observed that the Commission found it impracticable to examine records and investigate the case properly. Despite this, the Commission passed an order to comply with the High Court's directions. The High Court deemed this order a nullity, as it did not adhere to the requirements of Section 245D(4) of the Income Tax Act. The Supreme Court held that the Settlement Commission's order was not in accordance with the law and remanded the matter back to the Commission for a fresh decision.

Subsequent Assessment/Re-assessment Order:
The Assessing Officer issued a show cause notice for re-assessment based on transactions not disclosed to the Settlement Commission. This notice was challenged in a writ petition before the High Court. During the proceedings, the Assessing Officer passed the assessment order, which was also challenged. The High Court dismissed the writ petition, stating that the Settlement Commission's order was a nullity. The Supreme Court set aside the subsequent assessment/re-assessment order passed by the Assessing Officer and remanded the matter to the Settlement Commission for a fresh decision.

Remand to Settlement Commission:
The Supreme Court remanded the matter to the Settlement Commission for a fresh decision. As the Settlement Commission had been wound up, the matters were being adjudicated by an interim Board. The Court requested the interim Board to expedite the process and make a reasoned decision within six months from the first hearing. The matter was to be decided in accordance with the law and after following due procedure as required under Section 245 of the Income Tax Act.

In conclusion, the Supreme Court allowed the appeals, remitted the matter to the Settlement Commission/interim Board for a fresh decision, and directed the interim Board to follow the necessary procedures under the Income Tax Act. No costs were awarded in this matter.