2012 (11) TMI 721 - HC - Income Tax

Settlement of Case - the objections of the petitioner to the admissibility of the applications are turned down and the Settlement Commission has decided to proceed with the consideration of those applications on merits. - held that - It is clear from the above that at this stage only a prima facie view is expressed by the Settlement Commission and rightly so because of the reason that the applications are yet to be considered on their merits. At this stage, it is still open to the Income Tax Department to raise objections, which are available under the law, opposing the said applications. It is only after the applications are considered on merits in the light of submissions made by applicants (respondents herein) and the opposition of the department on the merits of these applications that Settlement Commission would arrive at a final conclusion whether to accept the applications of the respondents or not and even if these are to be accepted on what terms. In exercise of extraordinary jurisdiction under Article 226 of the Constitution of India, it is not necessary to go into the validity of the impugned order at this stage. - petition dismissed.

Issues:
1. Challenge to interim orders passed by the Income Tax Settlement Commission under Section 245(D) of the Income Tax Act, 1961.
2. Validity of the Settlement Commission's decision to proceed with the applications for settlement.
3. Prima facie view expressed by the Settlement Commission and the possibility of future objections by the Income Tax Department.
4. Exercise of extraordinary jurisdiction under Article 226 of the Constitution of India.
5. Dismissal of the writ petitions as premature.

Analysis:

1. Challenge to Interim Orders:
The judgment involves two writ petitions challenging different orders passed by the Income Tax Settlement Commission. These orders were interim orders, deciding to proceed with the applications filed by the respondents under Section 245(D) of the Income Tax Act, 1961. The Settlement Commission had accepted the existence and disclosure of undisclosed income by the applicants, rejecting objections raised by the Income Tax Department. The court held that challenging the orders at this interim stage was premature.

2. Validity of Settlement Commission's Decision:
The Settlement Commission decided to proceed with the applications for settlement despite objections raised by the Income Tax Department regarding the completeness and truthfulness of the disclosures made by the respondents. The Settlement Commission, in its interim order, observed that there was no adverse finding regarding the disclosures made and the existence of the entity in question. The court noted that the Settlement Commission's decision was based on a prima facie view and that final consideration on the merits was yet to be made.

3. Prima Facie View and Future Objections:
The court emphasized that the Settlement Commission's decision was preliminary, and the Income Tax Department still had the opportunity to raise objections opposing the applications during the final consideration on merits. The court highlighted that the final conclusion on whether to accept the applications and the terms of acceptance would be determined after considering submissions from both parties.

4. Exercise of Extraordinary Jurisdiction:
In considering the validity of the impugned order at the interim stage, the court invoked its extraordinary jurisdiction under Article 226 of the Constitution of India. However, the court concluded that such intervention was unnecessary at this stage. The court clarified that if the final order by the Settlement Commission was unfavorable to the department, appropriate proceedings could be initiated to challenge it.

5. Dismissal of Writ Petitions:
Ultimately, the court dismissed both writ petitions as premature since the final order by the Settlement Commission was pending. The court drew support from a Supreme Court judgment where a similar plea against an interim order under Section 245D was not entertained. The court granted the Income Tax Department the liberty to challenge the final order through appropriate proceedings.

This detailed analysis of the judgment highlights the issues raised, the Settlement Commission's decisions, the court's considerations, and the ultimate dismissal of the writ petitions as premature pending the final order by the Settlement Commission.

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