2013 (4) TMI 225 - HC - Income Tax

Order of settlement commission - Writ Petition - This Intra Court Appeal under Section 4 of the Karnataka High Court Act. - Single Judge has quashed the order passed by the Income Tax Settlement Commission (Additional Bench), Chennai dated 04.02.2008 in so far as it relates to granting immunity from penalty and prosecution and remanding the matter to the Settlement Commission for limited purpose of reconsidering the question of penalty, Settlement Commission took up the application of the assessee for hearing and after considering the arguments passed order under section 245D(1) and 245D(4) of the Act determined the additional income and the tax payable thereon. Maintainability of the application filed by the assessee was also upheld. Being aggrieved by the order revenue preferred writ petition before the court where, learned Single Judge has quashed the order passed by the Settlement Commission for which intra Court appeal is filed by the assesse. Held that - In a given case if such immunity is not granted the Department would proceed to prosecute the assessee in a jurisdictional court. Once prosecution is lodged the presumption is that there was mens rea on the part of the assessee to conceal the income by a smoke screen or evade tax. Thus the Settlement Commission will have to examine the application by lifting the corporate veil to see as to whether there has been an intention to evade tax and then arrive at a conclusion. In the absence of such exercise being undertaken by the Settlement Commission the intention underlined behind section 245H(1) would become otiose or redundant. As per the provision of section 245D, the Settlement Commission on receipt of an application filed under section 245C had to call for a report from the Commissioner and on the basis of that report, the Settlement Commission was empowered to reject or allow the application to be proceeded with, within the prescribed period and it is in this background the granting of immunity from prosecution ought to have been scrutinized by the Settlement Commission which the learned Single Judge has found not to be so and as such remanded the matter for de novo adjudication which does not suffer from any material irregularity or illegality so as to invite the attention of this court for exercising the Appellate jurisdiction which is limited in scope. In that view of the matter also the point herein above deserves to be answered in the negative i.e., against the assessee/appellant. - Decided against the assessee.

Issues Involved:

1. Maintainability of the writ petition for want of clearance from the Committee on Disputes (COD).
2. Authority of the first respondent to file the writ petition.
3. Jurisdiction of the Settlement Commission to admit and entertain the application under Section 245C of the Income Tax Act after detection and discovery of the concealed income.
4. Legality of the impugned order passed by the Settlement Commission.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition for Want of Clearance from the Committee on Disputes (COD):

The learned Single Judge held that the writ petition was maintainable even without clearance from the COD. The contention was that the direction given by the Hon'ble Apex Court in the case of Oil & Natural Gas Commission v. Collector of Central Excise related to inter-departmental disputes to avoid litigation between two departments of the State. Since the order passed by the Settlement Commission was questioned by the revenue before the learned Single Judge of this court, there was no necessity for obtaining clearance from the COD. This issue has been resolved by the Apex Court in the case of Electronics Corporation of India Ltd. v. Union of India.

2. Authority of the First Respondent to File the Writ Petition:

The learned Single Judge found in favor of the revenue, stating that the CIT (1) had the authority to file the writ petition. This finding was based on the fact that the order passed by the Settlement Commission was questioned under Articles 226 & 227 of the Constitution of India. The court held that the intra-court appeal was maintainable despite the contention that it was not, as the prayer sought for in the writ petition was both under Articles 226 & 227.

3. Jurisdiction of the Settlement Commission to Admit and Entertain the Application under Section 245C of the Income Tax Act after Detection and Discovery of the Concealed Income:

The Settlement Commission admitted the application filed by the assessee and determined the additional income and tax payable. The learned Single Judge, however, found that the Settlement Commission's order granting immunity from penalty and prosecution was contrary to the admitted facts and statutory requirements. The court held that the burden was on the assessee to prove that there was no concealment or willful neglect, and in the absence of such evidence, the order granting immunity was illegal. The court emphasized that the Settlement Commission must examine the application to ensure compliance with Section 245C, which requires a full and true disclosure of income not disclosed before the assessing officer.

4. Legality of the Impugned Order Passed by the Settlement Commission:

The learned Single Judge concluded that the Settlement Commission's order was vague, unsound, and contrary to established principles. The court held that the Settlement Commission must examine whether the assessee had cooperated and made a full and true disclosure of income. The Hon'ble Supreme Court in CIT v. B.N. Bhattachargee emphasized that the Settlement Commission should exercise its power of granting immunity sparingly and only in deserving cases. The court found that the Settlement Commission had not undertaken the necessary examination and remanded the matter for de novo adjudication.

Conclusion:

The appeal was dismissed, and the order passed by the learned Single Judge in W.P. No. 12239/2008 was affirmed. The court held that the Settlement Commission must scrutinize the granting of immunity from prosecution and penalty to ensure compliance with statutory provisions and the intent of the legislature. The intra-court appeal was found to be maintainable, and the issues regarding the authority to file the writ petition and the necessity of COD clearance were resolved in favor of the revenue. The court emphasized the need for the Settlement Commission to undertake a thorough examination of the application to ensure that the conditions for granting immunity were met.

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