2015 (5) TMI 684 - HC - Income Tax

Settlement application under Section 245C(1) - rejection was sought by revenue of application on the ground that no additional income has been declared in the application, so far as assessment year 2011-12 is concerned no proceedings were pending before the Assessing Officer on the date of the application and that there has been failure on the part of the applicant to make a full and true disclosure in its application, etc. - Held that - No reasons are indicated as to why the objections raised by the petitioner are not acceptable to the Settlement Commission. This Court in Commissioner of Income Tax V/s. ITSC reported 2014 (8) TMI 630 - BOMBAY HIGH COURT has held that an application under Section 245D(2C) of the Act has to be disposed of after considering the objections raised by the Revenue supported by some modicum of reasons. In the absence of some consideration of the objections, the entire exercise under Section 245D(2C) of the Act would render the provisions redundant. Mere recording of submissions without considering why the submissions are acceptable or not, would clearly exhibit nonapplication of mind. Assessee very fairly submits that he has no objection if the impugned order is set aside and the issue is restored to the Settlement Commission for fresh disposal at the stage of 245D(2C) of the Act. Revenue, on instructions, accepts the position and states that no further proceedings would be taken in respect of penalty notices already issued and no further penalty notices would be issued to the petitioner. This position she fairly states will continue till the Settlement Commission either rejects the application under Section 245D(2C) of the Act or finally disposes off the application under Section 245D of the Act. The statement made on behalf of the Revenue is accepted. Thus restoring the application before the Settlement Commission for fresh disposal under Section 245D(2C) of the Act in accordance with principles of natural justice.

Summary

Issues:
Challenge to order of Income Tax Settlement Commission under Section 245D (2C) of the Income Tax Act, 1961.

Analysis:
1. The petition challenged the order dated 19/05/2014 by the Income Tax Settlement Commission (Settlement Commission) under Section 245D (2C) of the Income Tax Act, 1961. The order allowed the respondent's settlement application for assessment years 2011-12 to 2013-14 to proceed further.

2. The respondent filed a settlement application for assessment years 2011-12 to 2013-14 under Section 245C(1) of the Act. The Settlement Commission admitted the application, and the Revenue later filed a report objecting to the application's validity. The objections included jurisdictional issues and lack of full disclosure by the respondent.

3. The petitioner contended that the impugned order was non-speaking as it did not address the objections raised by the Revenue. The order allowed the application to proceed without discussing the sustainability of the objections.

4. The petitioner raised objections regarding the lack of pending proceedings, discrepancies in income disclosure, and failure to make a full and true disclosure. The impugned order, however, found that all conditions for the application's validity were met and allowed it to proceed further.

5. The Court noted that the Settlement Commission must consider objections raised by the Revenue with reasons. Without such consideration, the process under Section 245D(2C) would be rendered redundant, displaying a lack of application of mind.

6. The respondent's counsel agreed to set aside the impugned order and have the issue reconsidered by the Settlement Commission under Section 245D(2C) of the Act. It was clarified that the Settlement Commission had exclusive jurisdiction over the matter until final disposal.

7. The Revenue's counsel acknowledged the exclusive jurisdiction of the Settlement Commission and agreed not to take further penalty proceedings until the application was either rejected or finally disposed of by the Commission.

8. Consequently, the Court set aside the impugned order and restored the application before the Settlement Commission for fresh disposal under Section 245D(2C) in line with principles of natural justice. The petition was allowed, with no costs imposed.