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TMI Blog2002 (11) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... n - - - - - Dated:- 14-11-2002 - Judge(s) : KUMAR RAJARATNAM., K. BHAKTHAVATSALA. JUDGMENT The judgment of the court was delivered by- KUMAR RAJARATNAM J.-Writ appeals are taken up with the consent of parties. The appellants are partners of a firm under the name and style B.J. Desai and Sons, Belgaum, Karnataka, assessed to tax. The firm is a registered firm under the provisions of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The firm filed an application before the Settlement Commission under section 245C(1) for the assessment years 1970-71 to 1975-76 for determination of its tax dues. It is common ground that the firm was a registered firm for these assessment years under the provisions of the Act. The Settlement Commission determined the total income and the tax liability of the firm by its order dated June 15, 1984 (annexure A). The Settlement Commission after passing appropriate orders made the following observations in paragraph 25 at annexure A: "The Income-tax Officer will issue a demand notice and will also revise the assessment of partners so far as it covers the share income from the applicant firm." It is also common ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act has been defined as falling within the meaning of the word 'case' used in the Chapter (section 245A). An Income-tax Settlement Commission consisting of not less than three members is to be constituted by the Board (section 245B). An assessee is at liberty to apply to the Settlement Commission to have his case settled, but once he has made an application, he would not be entitled to withdraw the same (section 245C). Full power is conferred on the Settlement Commission to call for a report from any of the income-tax authorities and to pass orders allowing the application filed by an assessee fully or partly or to reject the application, but the application could not be proceeded with by the Settlement Commission if it forms the opinion that there has been concealment of particulars of income or perpetration of fraud by the applicant. No order could be passed adverse to the applicant without giving an opportunity of hearing (section 245D). Every order made by the Settlement Commission has to be complied with and it is also subject to the condition that the settlement shall be void if it is subsequently found by the Commission that it had been obtained by fraud or misrepresentat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en from the Scheme of the provisions of the Income-tax Act is so wide that it gives immunity against prosecution or for imposing penalty. The relevant provisions of the Act would indicate that it is in the nature of a statutory arbitration to which a person may submit himself voluntarily. It is clear that the scope of the court to interfere with the order of the Settlement Commission is restricted. An order passed by the Settlement Commission cannot be interfered with under article 226 of the Constitution of India unless it can be shown: (i) if grave procedural defects such as violation of the mandatory procedural requirements of the provisions of Chapter XIX-A and/or violation of the rules of natural justice is made out; (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission; However, this court cannot interfere either with an error of fact or error of law alleged to have been committed by the Settlement Commission except as above. The learned single judge fell in error in reopening the order of the Settlement Commission with respect to the firm at the instance of the partners. The partners only wanted cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (4) of section 245D on the application made by the firm, that the share of the partner in the income of the firm has not been included in the assessment of the partner or, if included, is not correct, the Assessing Officer may amend the order of assessment of the partner with a view to the inclusion of the share in the assessment or the correction thereof, as the case may be; and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the financial year in which the final order was passed in the case of the firm." From this it is clear that it is permissible for the Revenue to rectify the assessment under section 155(1)(c) of the Act consequent to the enhancement of the firm's income on account of an order made pursuant to the Settlement Commission. This lacuna has now been plugged by introduction of section 155(1)(c) of the Act, which came into force on October 1, 1984. This very question arose before the Division Bench of this court in I.T.R.C. Nos. 137-142 of 1994, dated June 14, 1996. This court was required to determine whether section 155(1)(c) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion in the affirmative and against the Revenue. Reference is answered accordingly." In the present case which is before us the legal position is the same as was considered by the Division Bench of this court in I.T.R.C. Nos. 137-142 of 1994. The matter before the Settlement Commission related to the periods 197071 to 1975-76 and even the order of the Settlement Commission was passed on June 15, 1984, prior to the introduction of section 155(1)(c) of the Act which came into force on October 1, 1984. Accordingly, no retrospective effect to section 155(1)(c) of the Act can be given in view of the Division Bench judgment rendered by this court in I.T.R.C. Nos. 137-142 of 1994. In that view of the matter the order of the learned single judge is set aside. Consequently, the order of the Settlement Commission at annexure A is restored, but paragraph 25 in the impugned order of the Settlement Commission at annexure A and the consequent order at annexure C are set aside and if any payment has been made by the partners individually to the Revenue pursuant to the impugned order towards assessment as per annexures I, II, III, IV, V and VI it is directed to be adjusted or refunded by ..... 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