2020 (11) TMI 181 - HC - Income Tax

Validity of Income Tax Settlement Order - denial of natural justice - petitioner submits that having reached the Section 245D(4) stage, it was not open to the Settlement Commission to pass an order and now call for another report from the Commissioner, Income Tax under Section 245D(3) and Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997 as it has purported to do by way of the impugned order and that too without giving any opportunity of hearing to the petitioners - HELD THAT - Undisputed fact remains that the aforenoted petition impugns an anterior order arising from the same settlement proceedings. The final outcome of the said proceedings can possibly affect the present proceedings. Thus, although there may not be a suppression by the petitioners as Writ Tax has not been served upon them, yet keeping in view the pendency of the aforesaid prior writ petition this Court was prima facie inclined to dispose of the present writ petition. As petitioners states that he would be filing a transfer petition in the Apex Court seeking transfer of the Writ Tax to this Court. He states that as the Supreme Court is closed for Diwali break between 07th November to 15th November, 2020, the present writ petition be adjourned to third week of November, 2020 - list the present writ petition on 25 th November, 2020.The date of compliance mentioned in the impugned order as well as email dated 14th October, 2020 is extended till 25th November, 2020.

Summary

Issues:
Challenge to impugned order under Section 245D(3) of the Income Tax Act, 1961 for assessment years 2017-18 and 2018-19, violation of principles of natural justice, examination of Settlement Commission's authority to pass orders under different sections, concealment of prior writ petition, and possible impact of prior proceedings on current case.

Analysis:
The petitioners filed a writ petition challenging the order passed by respondent No.1 under Section 245D(3) of the Income Tax Act, 1961, related to assessment years 2017-18 and 2018-19. They sought directions for respondent No.1 to proceed with the hearing under Section 245D(4) after providing them with a reasonable opportunity to be heard. The petitioners argued that the Settlement Commission should have passed the final order under Section 245D(4) after reaching that stage, and it was not appropriate to call for another report without giving them a hearing, alleging a violation of natural justice principles.

The petitioners emphasized that the Settlement Commission can examine the settlement application and pass orders only at three stages: under Sections 245D(1), 245D(2C), and 245D(4). They relied on previous judgments to support their position. On the other hand, the respondents contended that the Settlement Commission can pass an order under Section 245D(3) directing further enquiry/investigation, citing a Bombay High Court judgment. They also raised the issue of the petitioners allegedly concealing a prior writ petition challenging an earlier order of the Settlement Commission.

In response to the respondents' arguments, the petitioners expressed unawareness of the prior writ petition but acknowledged that its outcome could impact the current proceedings. They indicated their intention to file a transfer petition in the Supreme Court to transfer the prior writ petition to the present Court due to the Diwali break. Consequently, the Court adjourned the present writ petition to the third week of November 2020 and extended the compliance date mentioned in the impugned order until 25th November 2020.

In conclusion, the judgment addressed the challenge to the impugned order under Section 245D(3) of the Income Tax Act, the examination of Settlement Commission's authority to pass orders at different stages, allegations of violation of natural justice principles, the issue of concealing a prior writ petition, and the potential impact of prior proceedings on the current case. The Court provided directions for further proceedings, considering the complexities involved and the need for procedural fairness.