1979 (5) TMI 4 - SC - Income Tax

Plea of estoppel is overruled which has found favour with the Commission and hold that the objection raised by the CIT is a potent interdict on the jurisdiction of the Commission - commissioner has statutory power u/s 245D(1) to object to the settlement on the presence of grave deviances - Settlement Commission should be inhibited from proceeding with the application of the assessee and the appeals by the assessee before the I.T.A.T. must be revived and disposed of expeditiously

Issues Involved:
1. Interpretation of Chapter XIXA of the Income-tax Act, 1961.
2. Conditions for Entitlement to Make an Application to the Settlement Commission.
3. Application of the Rule of Estoppel to the Commissioner's Objection.
4. Jurisdiction of the Settlement Commission.
5. Revival of Appeals Before the ITAT.

Detailed Analysis:

1. Interpretation of Chapter XIXA of the Income-tax Act, 1961:
The judgment addresses the interpretation of Chapter XIXA, introduced by the Taxation Laws (Amendment) Act, 1975, which provides for the settlement of large tax disputes and immunity from criminal proceedings by a Settlement Commission. The chapter aims to resolve tax disputes efficiently and avoid protracted litigation, particularly for cases involving substantial tax liabilities and potential criminal culpability. The court emphasizes the need for a harmonious construction of the chapter to balance legislative intent and statutory language.

2. Conditions for Entitlement to Make an Application to the Settlement Commission:
The court outlines that under Section 245M, an assessee must withdraw any pending appeals before the ITAT to be eligible to apply to the Settlement Commission. Additionally, the ITO should not have preferred an appeal under Section 253(2) against the order related to the assessee's appeal. The respondent-assessee complied with these conditions by withdrawing his appeals and persuading the department to withdraw its appeals, thus enabling him to approach the Settlement Commission.

3. Application of the Rule of Estoppel to the Commissioner's Objection:
The Settlement Commission initially rejected the assessee's application based on the Commissioner's objection under Section 245D(1), citing pending prosecution for concealment of income. However, upon review, the Commission held that the Commissioner was estopped from objecting due to the earlier withdrawal of departmental appeals. The court, however, rejects this application of estoppel, emphasizing that statutory duties cannot be overridden by estoppel, especially when public interest and statutory mandates are involved.

4. Jurisdiction of the Settlement Commission:
The court examines whether the Settlement Commission had the jurisdiction to proceed with the assessee's application despite the Commissioner's objection. It concludes that the Commissioner's statutory power to object under the second proviso to Section 245D(1) is mandatory and cannot be nullified by estoppel. The court underscores that the Commissioner's duty to object to applications involving serious economic offenses is a critical safeguard against misuse of the settlement process.

5. Revival of Appeals Before the ITAT:
The court addresses the procedural aspect of whether the withdrawal of departmental appeals affects the assessee's right to move the Settlement Commission. It interprets that an appeal withdrawn is as good as not having been filed, thus allowing the assessee to proceed with the application. However, if the Settlement Commission rejects the application, the assessee's appeals before the ITAT are revived under Section 245M(7), ensuring the assessee does not suffer due to the rejection. The court also suggests that the department's appeals, admitted to be weak and frivolous, should not be revived to avoid wasting public resources.

Conclusion:
The Supreme Court allows the appeal, inhibiting the Settlement Commission from proceeding with the assessee's application and reviving the assessee's appeals before the ITAT. The court emphasizes the importance of adhering to statutory mandates and public policy considerations in the settlement of tax disputes, particularly in cases involving significant economic offenses. The judgment underscores the balance between efficient tax dispute resolution and the need to prevent misuse of the settlement process by serious offenders.

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