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TMI Blog2009 (8) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... ons about it and the irresistible conclusion is that the Settlement Commission has failed to afford a reasonable opportunity of hearing nor examined the records as per the statutory requirement of law and has passed the orders impugned without due application of mind ; in such circumstances, the orders impugned in no manner are legally sustainable and are in violation of section 245D(4) of the Act. Remanded matters - The Settlement Commission holds the authority under the Act and power is vested and only by amendment, vide the Finance Act, 2007 by putting rider of March 31, 2008, the Legislature only intended that if applications remained pending, it stands abated but it will not render the Settlement Commission functus officio to examine matter afresh after orders having been passed remitting back to the Settlement Commission. Matters are remitted back to the respective Settlement Commission Benches to decide the applications of the assessees filed under section 245C after affording opportunity of hearing to the parties - as a consequence whereof, if there would be any refund ordered, the assessee would certainly be entitled for interest at 15 per cent. per annum X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 5. To examine the controversy at hand, the bare facts necessary for adjudication, being common in bunch of all the petitions except as regards dates of making applications and assessment years, are being taken note out of C. W. P. No. 5036 of 2008 (Prakash C. Jalan v. Settlement Commission and others) and so also from C. W. P. No. 11515 of 2008 (CIT Central v. Ravi Prakash Modi and another). Re. C.W.P. No. 5036 of 2008 (Prakash C. Jalan v. Settlement Commission) 6. The assessee (Prakash Chand Jalan) filed an application before the Settlement Commission on September 27, 2001 for the assessment years 1997-98 to 2000-01 under section 245C containing a full and true disclosure of his income having not been disclosed before the Assessing Officer. After fulfillments of the statutory requirement under the Act upon receipt of application, Settlement Commission summoned a report from the Com- missioner (IT) as provided under rule 9 of the Income-tax Settlement Com- mission (Procedure) Rules, 1997 ("Rules, 1997") on the basis of material contained therein (supra), allowed the application to be proceeded with, which ordinarily is called to be "motion hearing" ; and after applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tlement, rather impracticable to afford adequate opportunity to respective parties as provided under section 245D(4) as it was directed by this court to pass orders on or before March 31, 2008 ; consequently, the Settlement Commission invariably passed orders a day before or on March 31, 2008 in all cases. 10. In the instant bunch, applications were decided byMarch 31, 2008. It would be pertinent to extract part of order being relevant for the present purpose, which are almost verbatim in all the orders impugned either by the assessees or by the Revenue ad infra : "3. In all the Principal Bench of the Commission has tillMarch 26, 2008received more than 324 orders from various High Courts in the month of March, 2008, directing the Principal Bench to complete the cases byMarch 31, 2008. 4. This would involve more than 1500 assessments. The Settlement Commission deals only with the assessments which involve complexity of investigation and the application is intended to provide quietus to litigation. For example, in one group of cases where 23 applications are involved, the paper book, which has been filed before the Settlement Commission runs into thirty thousand pages? It goes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book, which has been filed before the Settlement Commission runs into thirty thousand pages? It goes without saying that sufficient and proper opportunity is required to be given both to the applicant and the Commissioner of Income-tax for arriving at a proper settlement. 5. At this juncture, it is not practicable for the Commission to examine the records and investigate the case for proper settlement. Even giving adequate opportunity to the applicant and the Department, as laid down in section 245D(4) of the Income-tax Act, 1961, is not practicable. However, to comply with the directions of the hon'ble High Court, we hereby pass an order under section 245D(4) of the Income-tax Act, 1961 : 6. The undisclosed income is settled as under : (i) Badri Narain Modi Rs. 48,00,000 (ii) Smt. Champa Modi Rs. 4,00,000 (iii) Ravi Prakash Modi Rs. 11,00,000 (iv) Renu Modi Rs. 7,00,000 (v) Pawan Modi Rs. 9,00.000 (vi) Nidu of gardens (P) Ltd. Rs. 3,00,000 (vii) Modi Exports House Rs. 4,00,000 (viii) Indian Agate Industries Rs. 4,00,000 (ix) Ganpati Gems and Arts Rs. 8,00,000" 12. It is also pertinent to state that in paragraph 10, the assessees were called upon to deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which clearly discloses that the Settlement Commission was not in a position to examine the records and so also afford adequate opportunity of hearing as required under law ; inasmuch as it has shown having felt impracticable in view of the so-called paucity of time which always remains and a common grievance for such authorities while using the settled phrases that the time is not adequate ; and without application of mind and appreciating evidence on record, still the amount of tax has been assessed in later paragraph 6 of the orders impugned. According to counsel, the very procedure adopted by the Settlement Commission in passing the orders impugned is a farce and not legally sustainable being violative of section 245D(4) of the Act. 15. Counsel further submits that if the statute casts an obligation to hold any procedure, the Settlement Commission was to comply with the statutory requirement and no deviation there from was permitted under the law and exercise of proceeding being judicial one, the Settlement Com- mission was under legal obligation to assign reasons in support of the amount of tax being assessed in the absence whereof, what has been assessed under the orders i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable in the facts of each case and no detailed reasons are required to be recorded supporting it under the orders impugned. In support, counsel relied upon CIT v. Anjum M. H. Ghaswala [2001] 252 ITR 1 ; [2002] 1 SCC 633. 21. However, all the counsel for the assessees either appearing for the writ petitioners or for the respondents in the petitions of the Revenue, jointly submit that certainly vested rights stood created in favour of the assessees for grant of protection of immunity from prosecution and penalty under section 245H due to non-disclosure of confidential record having been disclosed by the assessee before the Settlement Commission and also because of non-availability of remedy of appeal against the order impugned being it conclusive under section 245-I of the Act ; and if this court comes to the conclusion that orders impugned of the Settlement Commission are not legally sustainable because of non-compliance with section 245D(4), the matter at least be remitted back to the Settlement Commission to examine afresh in accordance with law after affording opportunity of hearing providing all kinds of protection available to them which the Settlement Commission has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel relied upon Raghunath Rai Bareja v. Pun- jab National Bank [2007] 135 Comp Cas 163 ; [2007] 2 SCC 230. 26. I have considered the rival contentions of counsel for the parties and with their valuable assistance, examined material on record. Before advert- ing to examine the issue raised herein for consideration, this court con- siders it appropriate to take note of the scheme introduced under Chapter XIX-A of the Act relating to settlement of cases. It appears to have been inserted by the Taxation Laws (Amendment) Act, 1975, with effect fromApril 1, 1976. A somewhat similar provision was contained in sub-sections (1A) to (1D) of section 34 of the Indian Income-tax Act, 1922 introduced in the year 1954. However, the provisions of Chapter XIX-A are qualitatively different and more elaborate than the provisions of the 1922 Act. Proceedings commenced under Chapter XIX-A are judicial as envisaged in section 245-L within the meaning of sections 193 and 228 and for purposes of section 196 of the Indian Penal Code. 27. Chapter XIX-A is a complete code in itself as regards settlement of cases for having provided a complete mechanism other than procedure provided under the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout such report. (2A) Subject to the provisions of sub-section (2B) the assessee shall, within thirty-five days of the receipt of a copy of the order under sub-section (1) allowing the application to be proceeded with, pay the additional amount of income-tax payable on the income dis- closed in the application and shall furnish proof of such payment of the Settlement Commission. (2B) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income-tax referred to in sub-section (2A) within the time specified in that sub-section, it may extend the time for payment of the amount which remains unpaid or allow payment of by instalments if the assessee furnishes adequate security for the payment thereof. (2C) Where the additional amount of income-tax is not paid within the time specified under sub-section (2A), then, whether or not the Settlement Commission has extended the time for payment of the amount which remains unpaid or has allowed payment thereof by instalments under sub-section (2B), the assessee shall be liable to pay simple interest at fifteen pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - section (4),- (i) in respect of an application referred to in sub-section (2A) or sub-section (2D), on or before the 31st day of March, 2008 ; (ii) in respect of an application made on or after the 1st day of June, 2007, within twelve months from the end of the month in which the application was made." 31. From the provisions quoted supra, it clearly emerges that after examination of the records and rule 9 the report of the Commissioner (IT) under sub-section (1) and the report of the Commissioner (IT), if any, received under sub-section (3), and after giving opportunity to the applicant and the Commissioner (IT) to be heard either in person or through a representative authorised in this behalf and after examining such further evidence as placed before it or obtained by it, the Settlement Commission may, in accordance with the Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application but referred to in the report of the Commissioner (IT) under sub-section (1) or (3). 32. Section 245E empowers the Settlement Commission to reopen the completed proceedings in appropriate cases whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it, as if such material, information, inquiry and evidence had been produced before the Assessing Officer or other income-tax authority or held or recorded by him in the course of the proceedings before him." 34. Every order passed by the Settlement Commission under section 245D(4) is final and conclusive in terms of section 245-I of the Act and no matter covered by such order shall save as otherwise provided in Chapter XIX-A be reopened in any proceedings under the Act or under any other law for the time being in force. As already observed, the proceedings before the Settlement Commission are deemed to be judicial proceedings within the meaning of sections 193 and 228 and for purposes of section 196, IPC, as provided under section 245L of the Act. 35. However, by amendment made while inserting section 245D(4A), vide, Finance Act, 2007, making effective, with effect from June 1, 2007, such applicants having filed on or after June 1, 2007, have not been provided with protection as provided under section 245E to reopen completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired, and after hearing the applicant-assessee, the Settlement Commission under the statutory period of fourteen days by an order in writing either to reject or allow application to be proceeded with, with a further rider that if no order is passed within the statutory period, it shall be deemed to have been allowed to be proceeded with. 38. However, the present matters since having arise for consideration on application being filed on or before June 1, 2007, their cases were to be considered for taking report of the Commissioner (IT) under rule 9 of the Rules, 1997 and after being prima facie satisfied, the Settlement Commission took decision to allow the application to be proceeded with and only thereafter proceedings had further commenced as provided under section 245D(3) and (4) of the Act. 39. As already observed, section 245D(4) casts an obligations upon the Settlement Commission to examine the records, the report of the Commissioner (IT) if any, and afford opportunity of hearing to the assessee and the Commissioner (IT) either in person or through representative duly authorized in this behalf, and after examining such further evidence as having been placed before it o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive parties is that the Settlement Commission has failed to comply with mandate pro- vided under section 245D(4) of the Act and if having failed to comply with the statutory requirement-legal obligation whereof is cast upon it, as a result of violation whereof, the orders impugned cannot be said to be in consonance with the requirement of law. 44. At the same time, in fact the instant cases do not fall in any of the clauses of section 245HA(1) ; while counsel for the Revenue has tried to convince this court that these are covered by sub-section (1)(iv) of section 245HA. However, suffice it to say that only such cases are covered where application made under section 245C remained pending and no order under section 245D(4) was passed within the time or period specified under section 245D(4A). In the instant cases, the applications have been finally decided by the Settlement Commission by March 31, 2008, there- fore, in the considered opinion of this court, section 245HA(1)(iv) has no application and on having recorded the finding ibid, the orders of the Settlement Commission impugned herein are not in consonance with the mandate under section 245D(4) of the Act. 45. Even interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds any infirmity in decision-making process, if committed by the statutory authority ; under limited scope of judicial review, the only recourse available is to remit back to the statutory authority which has decided the matters afresh in accordance with law. 48. The submission made by counsel for the Revenue that the Settlement Commission has become functus officio, and the jurisdiction cannot be conferred after the cut-off date March 31, 2008 and its order impugned being non est on quashing thereo, proceedings in respective applications stand abated under section 245HA(1)(iv) of the Act, in the opinion of this court is without merit for the reason that it only covers such cases where applications filed under section 245C remained pending on March 31, 2008 and has not been decided under section 245D(4) but if the same has been finally decided, and if this court is convinced with infirmity in the orders impugned, certainly it will be remitted back to the authority which has passed the orders impugned and sub-section (iv) of section 245HA(1) has no application in the facts of instant cases - as a consequence whereof, proceedings would not stand abated while remitting the matter ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n afforded to parties and compliance with the principles of natural justice has been made. However as observed (supra), if a statute requires a particular procedure to be followed for compliance with the principles of natural justice, if having not been adhered to, action of such authority is certainly in violation of the statutory requirement and so also of article 14 of the Constitution. 53. The submission made on behalf of the assessees that the Revenue has issued notices in compliance with the orders impugned-in pursuance whereof, they have deposited tax as assessed ; thereby once demand has been raised under section 156 of the Act which has been complied with by them, the writ petitions filed by the Revenue are barred by the principles of promissory estoppel and the Revenue cannot approbate and reprobate in same breathe, is also without substance for the reason that once order has been passed by the Settlement Commission under section 245D(4) of the Act, the assessee has to deposit the tax assessed within 35 days of receipt of certified copy of the order under section 245D(6A) failing which he would be liable to pay interest at 15 per cent. per annum. 54. It is not the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned, a joint request was made that such deposited tax amount be refunded back to respective assessees, in case the matter is remitted back to the Settlement Commission. However, since the Settlement Commission would examine the matters afresh after affording opportunity of hearing to the parties, this court considers it appropriate that what has been deposited by the respective assessees under the orders impugned would be subject to final outcome of their applications under section 245C under orders being passed under section 245D(4) of the Act and as a consequence whereof, if there would be any refund ordered, the assessee would certainly be entitled for interest at 15 per cent. per annum. 60. Consequently, all these writ petitions stated in schedules A and B appended to this order succeed and are hereby allowed ; and the orders datedMarch 31, 2008andMarch 29, 2008passed by the Settlement Com- mission being in the instant bunch of petitions are hereby quashed and set aside. However, the matters are remitted back to the respective Settlement Commission Benches to decide the applications of the assessees filed under section 245C after affording opportunity of hearing to the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 33. 11080 of 2008 CIT v. Carpet Mahal and another 34. 11081 of 2008 CIT v.OmPrakash Goyal and another 35. 11082 of 2008 CIT v. Mahendra Choudhary and another 36. 11083 of 2008 CIT v. Ram Gopal and another 37. 11084 of 2008 CIT v. R.S. Metals (P) Ltd. and another 38. 11085 of 2008 CIT v. Anoop Chand Gangwal and another 39. 11086 of 2008 CIT v. Anand Garg and another 40. 11087 of 2008 CIT v. Shiv Kant and Bros. and another 41. 11088 of 2008 CIT v. Rakhi Gangwal and another 42. 11089 of 2008 CIT v. Ispat Trader and another 43. 11090 of 2008 CIT v. Lokendra Pal Garg and another 44. 11091 of 2008 CIT v. Pankaj Agrawal and another 45. 11092 of 2008 CIT v. Smt. Phool Devi Agrawal and another 46. 11093 of 2008 CIT v. Prakash Chand Dhadha and another 47. 11094 of 2008 CIT v. Parshvnath Share Broking (P) Ltd. 48. 11095 of 2008 CIT v. Swaraj Builders and another 49. 11167 of 2008 CIT v. Heera Chand Choudhary and another 50. 11168 of 2008 CIT v. Ratan Conductors and another 51. 11169 of 2008 CIT v. Smt. Tara Gupta and another 52. 11170 of 2008 CIT v. Mahendra Kr. Agrawal and another 53. 11171 of 2008 CIT v. EMGEE Cables and ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ukesh Vijay Vergia and another 97. 12669 of 2008 CIT v.OmPrakash Gupta and another 98. 12670 of 2008 CIT v. Hari Kishan Vijay Vergia and another 99. 12671 of 2008 CIT v. Pancham Plywood (P) Ltd. and another 100. 12672 of 2008 CIT v. D.S. Bhandari and another 101. 12673 of 2008 CIT v. Smt. Renu Bhandari and another 102. 12674 of 200 CIT v. B.G. Exports and another 103. 12675 of 2008 CIT v. Sunder Kumar and another 104. 12676 of 2008 CIT v. B.G. Jewellers and another 105. 12677 of 2008 CIT v. Nav Ratan Maheshwari and another 106. 12678 of 2008 CIT v. Madan Lal Jain and another 107. 12679 of 2008 CIT v. Nathulal Jain and another 108. 12680 of 2008 CIT v. Smt. Shella Modi and another 109. 12907 of 2008 CIT v. Lalit Kumar and another 110. 12908 of 2008 CIT v. Ashok Kr. Jain and another 111. 12909 of 2008 CIT v.JainTownshipof Land Development 112. 12910 of 2008 CIT v. Singhania Oil Mills and another 113. 12912 of 2008 CIT v. Birdhi C. Ghanshyam and another 114. 12913 of 2008 CIT v. Rajesh Vijayvergia and another 115. 13316 of 2008 CIT v. Shanti Kr. Vipul and another 116. 13317 of 2008 CIT v. Shruti Gems and another 117. 12662 ..... 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