2024 (8) TMI 1433 - HC - Income Tax

Withdrawal of immunity as granted by the Settlement Commission - immunity as extended on the applicants paying up the amounts as directed therein i.e., 25% of the demand by 15.03.2016 and the balance 75% in equal monthly installments to be paid in Financial Year 2016-17 but petitioner did not pay up the amounts within the period provided in the order - present writ petition was filed challenging the withdrawal of immunity on the ground that the petitioner was not heard HELD THAT - We find that the communication of the Government of India only permitted further proceedings and it cannot be considered to be an order of withdrawal of immunity. The immunity was granted by the Settlement Commission and was subject to the condition of payment being satisfied. The Central Government cannot withdraw the immunity granted by the Settlement Commission, if the conditions are satisfied. But, on the other hand if the conditions are not satisfied within the time period, the immunity would automatically cease to operate. The order of the Central government hence only directs proceedings on the cessation of immunity. The hearing of the petitioner is an empty formality because the petitioner does not have a case that he even paid one pie as per the settlement order. The immunity granted was on condition of the petitioner satisfying the Settlement Commission s order which also prescribed specific time frame for payment. The Settlement Commission s order works itself out if the payment is not made in accordance with the directions therein and automatically, the immunity stands withdrawn. We find absolutely no reason to interfere with the order. Now, the learned counsel specifically takes us to an order passed by this Court at the time of admission by a different Division Bench, on 25.08.2021. After referring to the submission made by the learned counsel for the Department that there was default in compliance of the Settlement Commission s order based on which the immunity ceased; the learned Judges opined that still the revenue is at fault for not having taken appropriate proceedings. We agree with respondent that the interim order passed by another Division Bench, was only on the petitioner s submission that the amounts to be paid are Rs. 2,72,40,648/-. It is also pertinent that even the undertaking as seen from the interim order has not been complied with. We also have our own reservation as to whether by a judicial order, the necessary consequences of an order of the Settlement Commission, on non-compliance, can be set at naught by this Court. However, we need not look into that aspect since even according to the petitioner he has not complied with the interim order. The order of the Settlement Commission and the interim order of this Court has worked itself out; both, on noncompliance of the conditions of payment, by the petitioner. The consequences with respect to immunity having been set at naught, would be visited on the petitioner. The Settlement Commission s order would not be enforceable, but we made it clear that the delayed payments made would be set-off against the demands raised against the petitioner either interest or principle due, as the statute mandates.

Summary

Issues:
Challenge to withdrawal of immunity granted by Settlement Commission based on non-payment of directed amounts within specified time frame.

Analysis:
The petitioner challenged the withdrawal of immunity granted by the Settlement Commission due to non-compliance with payment conditions within the specified time frame. The Settlement Commission had granted immunity from penalty and prosecution under the Income Tax Act subject to payment conditions outlined in the order. The order required the petitioner to pay 25% of the demand by a specified date and the balance in equal monthly installments in the following financial year. Despite the specified time frame, the petitioner failed to make the payments, leading to the withdrawal of immunity.

The Central Government's communication allowing further proceedings cannot be construed as a withdrawal of immunity. The immunity granted by the Settlement Commission was contingent upon the petitioner satisfying the payment conditions within the specified time frame. Failure to comply automatically resulted in the cessation of immunity. The petitioner's argument that they were not heard before withdrawal of immunity was deemed irrelevant as they did not fulfill the payment obligations as per the Settlement Commission's order.

A separate Division Bench had issued an interim order directing the petitioner to deposit the remaining amount within a specified period, with a partial payment deadline. While the petitioner made an initial payment within the deadline, they failed to comply with the undertaking to pay the entire amount within the stipulated time frame. The delayed payments were not in accordance with the interim order, leading to the nullification of the interim order's effects.

The failure to comply with payment obligations not only resulted in the withdrawal of immunity but also incurred liabilities for interest, interest on interest, and penalties as per the statutory provisions. The petitioner's submission of the quantum of amounts made liable on delayed payment was also disputed by the respondent department. The court upheld that the Settlement Commission's order and the interim order had both ceased to be enforceable due to the petitioner's non-compliance with payment conditions.

In conclusion, the writ petition challenging the withdrawal of immunity was dismissed as the petitioner failed to adhere to the payment conditions specified by the Settlement Commission, leading to the automatic cessation of immunity. The delayed payments made by the petitioner would be set off against any outstanding demands as mandated by the statute.