2018 (9) TMI 1697 - HC - Income Tax

Settlement applications u/s 245C(1) - rejection of application - Abatement of proceeding before Settlement Commission - Held that - Considering the Scheme of Section 245HA and the object and purpose of proceedings before the Settlement Commission under Section 245 we are of the opinion that against the order passed by the Settlement Commission either rejecting and/or declaring the application invalid and/or considering the application for some of the years and not considering the application for all the years for which the application is submitted, only the assessee/ applicant can be said to be aggrieved. Therefore, the present petition at the instance of the Revenue challenging the order passed by the Settlement Commission not considering the settlement application for all the years for which the application was submitted is not required to be considered further on merits as the petitioner-Department cannot be said to be aggrieved by such an order. For the reasons stated even the submission on behalf of the Department at the instance of the Department that the applications were preferred before the amendment, i.e. prior to 1st June, 2007, and the order under Section 245D(1) has not been made before the 1st day of June, 2007, and therefore, such applications shall be deemed to have been allowed to be proceeded further, is not required to be entertained. For the reasons stated hereinabove, it is the assessee who has approached the Settlement Commission by way of application can make a grievance that in view of the deemed allowing the application, his application ought to have been considered for all the years for which the application was submitted. Number of submissions have been made by learned counsel appearing on behalf of the Revenue on whether the order dated 04.12.2007 by which the Settlement Commission decided to proceed further with the settlement application for some of the years only was received by the Department or not. Considering the material on record, it can be said that there are disputed questions of fact on the aforesaid. However, considering the subsequent communication which as such was received in which it is specifically mentioned and the Report was called only for some of years for which the order dated 04.12.2007 was passed, it can be said that the Department had the knowledge. That thereafter, the Settlement Commission has passed the final order under Section 245D(4) of the Act with respect to some of the years for which the order was passed dated 04.12.2007. Only thereafter, the Department woke up and submitted the rectification application which is rightly rejected by the Settlement Commission. Challenge to the order passed by the Settlement Commission on merits is by way of amendment and when the petition was preferred originally, no such averments were made. Even thereafter, there is no specific prayer to quash and set aside the order passed by the Settlement Commission on merits. Considering the limited scope of judicial review as pronounced by the Hon ble Supreme Court as well this Court in a catena of decisions, the order passed by the Settlement Commission is not required to be interfered with. As observed by the Hon ble Supreme Court and this Court in a catena of decisions, the Court is not required to consider the legality and validity of the order passed by the Settlement Commission as an appeal against the order passed by the Assessing Officer.

Issues Involved:
1. Locus of the Department to challenge the Settlement Commission's order.
2. Legality of the Settlement Commission's order dated 04.12.2007.
3. Validity of the Settlement Commission's final order under Section 245D(4).
4. Procedural and jurisdictional aspects of the Settlement Commission's decisions.
5. Merits of the Settlement Commission's order in specific cases.

Detailed Analysis:

1. Locus of the Department to Challenge the Settlement Commission's Order:
The primary issue is whether the Department/Revenue can be considered an "aggrieved party" against the Settlement Commission's decision to not consider the settlement application for all the years for which the application was submitted by the assessee. The court observed that the remedy under Section 245 of the Income Tax Act is provided to the assessee, not the Department. The Department cannot be said to be aggrieved by the decision of the Settlement Commission in rejecting or not proceeding further with the settlement application for certain years. The consequences of rejection or invalidation of the settlement application would lead to the continuation of the regular assessment proceedings, which does not prejudice the Department. Therefore, the petition by the Revenue challenging the Settlement Commission's order is not maintainable.

2. Legality of the Settlement Commission's Order Dated 04.12.2007:
The Department contended that the order dated 04.12.2007, which allowed the settlement application to proceed for only some assessment years, is illegal and contrary to the provisions of the Act. The court noted that the Settlement Commission's order was based on the provisions of Section 245D(2A), which provides a deeming fiction that the application is allowed to proceed if the additional tax on the disclosed income is paid by 31.07.2007. The court found that the Settlement Commission's decision to proceed with some years and not all is within its jurisdiction and does not violate the Act. The Department's challenge on this ground is not sustainable.

3. Validity of the Settlement Commission's Final Order Under Section 245D(4):
The Department also challenged the final order passed under Section 245D(4) on merits, arguing that the Settlement Commission allowed certain claims erroneously. The court observed that the challenge to the final order was made through an amendment and lacked a specific prayer to quash the order. Even on merits, the court found no procedural lapses or violations of natural justice principles in the Settlement Commission's order. The limited scope of judicial review does not warrant interference with the Settlement Commission's decision.

4. Procedural and Jurisdictional Aspects of the Settlement Commission's Decisions:
The Department argued that the Settlement Commission did not have the jurisdiction to reconsider its earlier order dated 04.12.2007 during the final hearing. The court held that the Settlement Commission's order dated 04.12.2007 was part of the record and the Department had knowledge of it. The subsequent communication and the final order under Section 245D(4) were consistent with the earlier decision. The rectification application filed by the Department was rightly rejected by the Settlement Commission.

5. Merits of the Settlement Commission's Order in Specific Cases:
In specific cases (Special Civil Applications Nos.17177/2013, 17181/2013, and 17185/2013), the Department challenged the Settlement Commission's order on grounds of erroneous allowance of deductions and revised disclosures. The court noted that the challenges were made through amendments without specific prayers. On merits, the court found that the Settlement Commission's orders were procedurally sound and did not violate natural justice principles. The court reiterated the limited scope of judicial review in such matters and upheld the Settlement Commission's decisions.

Conclusion:
The petitions by the Department were dismissed, and the court upheld the Settlement Commission's orders, emphasizing the limited scope of judicial review and the procedural correctness of the Commission's decisions. The Department was not considered an aggrieved party capable of challenging the Settlement Commission's order on the grounds presented.

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