2014 (2) TMI 520 - HC - Income Tax

Power of AO to pass an assessment order where application was filed before settlement commission Income Tax Settlement Commission, rejected the petitioner s application on the ground that the assessment was time barred. The petitioner contended that the entire proceedings had to be closed since the block assessment had become time barred on 29.02.2000 - Held that - The decision in Deen Dayal v. Union of India 1985 (5) TMI 8 - DELHI High Court followed - even while upholding the authority of the Assessing Officer to complete assessment, clarify that there will be no impediment to the Settlement Commission in exercise its powers if it decides to exercise them. The consequence of accepting the argument of the assessee would be that even though there was a search of his premises u/s 132 of the Act which yielded incriminating material, the proceedings arising out of which he wanted to settle by approaching the Settlement Commission, he would still end up not paying any tax, as the block assessment became barred by time and there would also be no settlement order u/s 245D(4). Such a situation could not have been intended by the statute. Though now the situation has been taken care of by the insertion of the first proviso to Section 245F(2) by the Finance Act, 2007 w. e. f. 01.06.2007, but that cannot prejudice the rights of the revenue prior to that date as it seems to us that it was inserted only ex abundant cautela . In Calcutta Jute Manufacturing Co. vs. CTO, (1997 (7) TMI 118 - SUPREME COURT OF INDIA), the Supreme Court held that a machinery provision must be so interpreted as to effectuate its purpose, and the distinction between a charging section and a machinery provision whose function is to effectuate the charge, was pointed out in the context of the rule of interpretation to be adopted. The details of the application, probe, consideration, hearing and disposal, found in the report, had been incorporated in the statutory provisions in Chapter XIX-A - it was only in the nature of machinery provisions for the purpose of settlement of tax disputes between the assessee and the Revenue - The provisions do not compel any assessee to resort to section 245C, but that can be availed of, if the assessee so chooses - the remedy provided under section 245C, as a machinery provision for effecting settlement of tax disputes, was only in the nature of a concession or option open to the assessee who desired to settle his tax matters Decided against Assessee.

Summary

Issues:
Challenge to order of Income Tax Settlement Commission rejecting application on time-barred assessment.

Analysis:
The petitioner challenged an order of the Income Tax Settlement Commission that rejected their application, arguing that the assessment for a specific period was time-barred. A search and seizure operation was conducted in 1997, leading to the filing of a return for the period in question. The Income Tax Authorities ordered an audit due to complexities in the accounts. The petitioner contended that the block assessment had become time-barred, thus questioning the Commission's jurisdiction. The Settlement Commission rejected the petitioner's argument, citing the Supreme Court ruling that the Assessing Officer's jurisdiction is not affected by the filing of a settlement application. The Commission's jurisdiction commences after a specific order is passed. The petitioner's argument that the Commission did not possess exclusive jurisdiction was refuted by the Revenue, emphasizing that the Settlement Commission's order is conclusive under Section 245-D(1).

The Court highlighted that the Settlement Commission's authority extends to matters beyond the application and emphasized the exclusiveness of its jurisdiction. The Court rejected the petitioner's argument that the Commission lost jurisdiction due to the time-barred assessment, stating that the Commission could override the Assessing Officer's order. The Court also noted that accepting the petitioner's argument would lead to unintended consequences, with no tax payment or settlement order. The Court referred to the legislative intent and previous judgments to support its interpretation of tax laws and machinery provisions. Ultimately, the Court dismissed the petition, finding no merit in the petitioner's arguments and disposed of all pending applications.

In conclusion, the judgment addressed the petitioner's challenge to the Income Tax Settlement Commission's order regarding a time-barred assessment. The Court analyzed the jurisdiction of the Settlement Commission, the Assessing Officer's powers, and the legislative intent behind tax laws and machinery provisions. The Court upheld the Commission's authority, emphasized the conclusiveness of its orders, and dismissed the petition, finding no merit in the petitioner's arguments.