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TMI Blog2019 (3) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... s. We wonder what would be the situation if the Settlement Commission had passed such an order six days later than it has done. Be that as it may, we are clearly of the opinion that the Settlement Commission, while giving retrospective effect to its order of invalidation, it acted wholly without jurisdiction. Mr. Mistri, may be justified in wondering if the Settlement Commission while passing order under Section 245D(4) of the Act, in the same order could have given the declaration of invalidity of the application. Two things are however, clear. One, the Settlement Commission has done it and we cannot undo it; uncalled for. Second, though it is a combined order of Settlement Commission, in relation to the concerned assessment year, the Settlement Commission has clearly exercised powers under Section 245D(2C) of the Act. Portion of the order of Settlement Commission giving retrospective effect to the declaration of invalidity of the settlement application is clearly severable from the main order of invalidity. While therefore, striking down this illegal, severable portion of the order, we need not disturb the principle declaration made by the Settlement Commission. X X X X Extracts X X X X X X X X Extracts X X X X ..... t invalid and allow them to proceed further." 3.1 We may note that at that stage, the Settlement Commission records that the Department had not raised any technical objection. 3.2 It appears that despite such order of the Settlement Commission, the department had raised oral contentions urging the Settlement Commission to hold that the settlement application in which in relation to those assessment years, where no additional income was disclosed by the assessee, be treated to be invalid under Section 245D(2C) of the Act. The Settlement Commission thereupon passed the impugned order on 31.5.2016 titled as "An order under Section 245D(4) of the Act". In such order, the Settlement Commission held that the Commission would exclude from the purview of the settlement those assessment years where 'Nil' or 'No disclosure of additional income' was made within the meaning of Section 245C(1) of the Act or where the disclosure happens to be a loss figure. While doing so, the Settlement Commission also recorded the apprehension of the counsel for the assessee that in such a view of the matter, the declaration of invalidation of the settlement application would take effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the words of the Hon'ble Supreme Court i.e. while over turning their own decision in the case of Cloth Traders P. Ltd. (111 ITR 243) in a subsequent decision in the case of Distributors Baroda (P) Ltd. (155 ITR 120). These words are: "To perpetuate an error is no heroism. To rectify it is the compulsion of the judicial conscience". In view of the above extract, the citation of instances from the recent past of settlement of cases with facts similar to the applicants' does not at all assist the claim or contention of the applicants. As regards the applicants written request to the Chairman, ITSC i.e. the applicants' letter dated 16.05.2016 we would like to record the observation here that the said letter contained significant serious omissions and distortions. Under para No.2 of their letter, while extracting para 3.3 from the order u/s 245D(2C) dated 29.01.2015 the following crucial but inconvenient fact recorded by the Bench was omitted :- "As already observed in the order u/s. 245D(1), we feel that the claim of additional income for A.Y. 2008-09 to 2013-14 on account of alleged defective return cannot be treated as additional income for the purpose of section 245C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plainly barred by limitation. If, on the other hand, the effect of Settlement Commission's said order invalidating the settlement application of the assessee, is taken as 31.5.2016 i.e the actual date of passing the order, the Assessing Officer would have the benefit of exclusion from limitation period from the date of filing the application till passing of the impugned order by the Settlement Commission. 5. At the outset, we would like to refer to two things. Firstly, learned counsel for the assessees pointed out that in Writ Petition Nos. 2321 of 2017 and 3351 of 2017, the cases involved are such where even in the orders of assessment passed by the Assessing Officer on in July, 2016, no additions have been made and such assessments are not taken in revision by the Commissioner. Going by such statement, it would immediately appear that the entire issue has become academic in relation to these petitions. These petitions, therefore, stand disposed of without any further orders or directions. The second aspect which emerges is that drafting of the petition by the department was; to put it mildly completely jumbled up. 6. However, we have with the assistance of the learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 245C, the Settlement Commission shall, within seven days from the date of the receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and upon hearing the applicant, the Settlement Commission would pass order within fourteen days. Under sub-section (2) of Section 245D in respect of an application which is allowed to be proceeded with under sub-section (1), the Settlement Commission would call for a report from the Revenue Authorities within the specified time. Sub-section (2C) of Section 245D provides that where a report of the Revenue Authority has been furnished within the prescribed time, the Settlement Commission may, on the basis of the report, within 15 days of the receipt thereof, by an order in writing declare the application in question as invalid and shall send the copy of such order to the applicant and to the Revenue Authority. If the Settlement Commission does not make such a declaration of invalidity of the application, the procedure envisaged under sub-section (3) would be followed after which the Settlement Commission would pass order on such settlement appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the request of the Revenue to go back to the stage of passing the order under Section 245D(2C) and proceed further to pass final order of settlement under Section 245D(4), but under no circumstances, the Settlement Commission could have made a declaration of invalidity on 31.5.2016 giving it a retrospective effect of 29.1.2015. The Settlement Commission exceeded its jurisdiction in doing so. When the Settlement Commission had no jurisdiction to give retrospective effect to its order, whether the Revenue requested for the same or the assessee, would be wholly inconsequential. In essence, the Settlement Commission could either have refused the request of the department or accepted it but under no circumstances could it have passed the order of invalidation with retrospective effect. For better understanding on this aspect, we reproduce Section 245D(2) as under: "(2C) Where a report of the [Principal Commissioner or] Commissioner called for under sub-section (2B) has been furnished within the period specified therein, the Settlement Commission may, on the basis of the report and within a period of fifteen days of the receipt of the report, by an order in writing, declare the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order of Settlement Commission, in relation to the concerned assessment year, the Settlement Commission has clearly exercised powers under Section 245D(2C) of the Act. 15. Another important aspect of the matter is, that the portion of the order of Settlement Commission giving retrospective effect to the declaration of invalidity of the settlement application is clearly severable from the main order of invalidity. While therefore, striking down this illegal, severable portion of the order, we need not disturb the principle declaration made by the Settlement Commission. 16. Under the circumstances, we hold that the observation / direction of retrospective effect of the order is set aside and the order passed by the Settlement Commission on 31.5.2016 would take effect from such date. Before closing, we recognize that previously though the order invalidating the settlement application was adverse to the assessee, the assessee may be justified in not challenging it. However, when by this judgment, the entire basis has undergone a fundamental change, we would not preclude the petitioner from raising any such challenge independently. With these observations, all the petitions are d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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