ASSISTANT COMMISSIONER OF INCOME TAX V. INCOME TAX SETTLEMENT AND ANOTHER

WTAX/489/2020

AI Insights

The case involves a bunch of writ petitions filed by the Assistant Commissioner of Income Tax challenging the orders of the Income Tax Settlement Commission, which allowed certain applications under Section 245C of the Income Tax Act, 1961, to proceed. The main legal issues pertained to the maintainability of these applications, specifically the non-disclosure of full and true income and non-payment of tax due at the time of filing. The court referenced several precedents from the Supreme Court and various High Courts, which supported the view that these issues, including the maintainability of the applications, could be raised after the final order under Section 245D(4) is passed by the Commission.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 686102 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 24-11-2022
• Assessment Year: misc
• Other Referred Cases: C.I.T. vs. K. Jaya Prakash Narayanan, Commissioner of Income Tax (Central), Gurgaon vs. M/s C & C Constructions, Commissioner of Income-Tax vs. Income-Tax Settlement Commission, Commissioner of Income-Tax and another vs. Settlement Commission (IT & WT) and another
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: TANMAY SADH; NIKHIL AGRAWAL
• Assessee Lawyers: MANU GHILDYAL
• Keywords: Income tax settlement commission; Maintainability of applications; Non-disclosure of full and true income; Non-payment of tax due
• Section: 245D(4); 245D(2C); 245C; 245D(1)

Judgement Text

"Chief Justice’s Court Serial Nos. 3017 HIGH COURT OF JUDICATURE AT ALLAHABAD *** WRIT TAX No. - 489 of 2020 Assistant Commissioner of Income Tax …. Petitioner Through:- Mr. Manu Ghildyal, Advocate Income Tax Settlement Commission and another ….Respondents Through:- Mr. Tanmay Sadh and Mr. Nikhil Agrawal, Advocates for respondents CORAM : HON'BLE RAJESH BINDAL, CHIEF JUSTICE HON'BLE J.J. MUNIR, JUDGE ORDER 1. This order will dispose of following bunch of writ petitions : Writ Tax Nos. 489, 491, 492, 493, 495, 496, 498, 499, 500, 501, 506, 507, 510, 513, 514, 527, 531, 533, 534, 535, 536, 538, 539, 540, 541, 542, 543, 544, 546, 547, 548, 554 and 557 of 2020 2. As common legal issues are involved, facts are being noticed from Writ Tax No. 489 of 2020. Challenge in the writ petition is to the order dated September 26, 2019 passed by the Income Tax Settlement Commission (hereinafter referred to as ‘Commission’) declaring the applications under Section 245C of the Income Tax Act, 2 WRIT TAX No. 489 of 2020 1961 (hereinafter referred to as ‘the Act’) filed by the assessees to be ‘not invalid’ and allowed to be proceeded with further. 3. The argument raised by learned counsel for the petitioner is that two core issues regarding maintainability of applications before the Commission have not been considered before entertaining the applications filed by the assessees. The same are non-disclosure of full and true income of the applicants and further non payment of amount of tax due at the time of filing the applications in terms of the provisions of the Act. The argument is that in the report submitted by the Principal Chief Commissioner of Income Tax details were furnished which establish that true disclosure was not made by the assessees, hence, the applications should not have been entertained. The issue was required to be decided then and there, instead of proceeding further. 4. In response, learned counsel for the assessees submitted that all the issues including maintainability of the application and on merits are subject to challenge by either of the aggrieved party after the application is finally decided by the Commission. At this stage, the writ petition filed by the Department is premature. In support of the argument, reliance has been placed on order dated February 27, 2009 passed by Hon’ble the Supreme Court in Special Leave to Appeal (Civil) No. 2295 of 2009 titled as C.I.T. vs. K. Jaya Prakash Narayanan, which was subsequently followed by Punjab and Haryana High Court in Commissioner of Income Tax (Central), Gurgaon vs. M/s C & C Constructions and others, CWP No. 9251 of 2012 decided on October 18, 2012, Delhi High Court in Commissioner of Income-Tax vs. Income-Tax Settlement Commission and others, (2014) 360 ITR 407 Delhi and Andhra Pradesh High Court in Commissioner of Income-Tax and another vs. Settlement Commission (IT & WT) and another, (2014) 364 3 WRIT TAX No. 489 of 2020 ITR 625 (AP). It is submitted that it has been specifically held in the aforesaid judgments that at the time of challenge to the final order by either of the aggrieved party, all the issues including maintainability of the application under Section 245D(4) of the Act can be raised, hence, the writ petitions filed by the Department deserve to be dismissed being premature. 5. After hearing learned counsel for the parties and considering the views expressed by Hon’ble the Supreme Court in K. Jaya Prakash Narayanan’s case (supra) as well as High Courts of Punjab and Haryana, Delhi and Andhra Pradesh, we are of the view that the contentions raised by learned counsel for the respondents are tenable. 6. Punjab and Haryana High Court in M/s C & C Constructions’ case (supra), while considering an identical issue where challenge was to the orders passed by the Commission entertaining the application, had held that validity of such order was not required to be gone into at that stage as the final order can be challenged by availing appropriate remedy by either of the aggrieved party and at that stage all the issues, including challenge to the maintainability of the application, will be open. The relevant paragraph thereof is extracted hereinbelow : “Having regard to the aforesaid considerations in mind, we are of the opinion that in exercise of extraordinary jurisdiction under Article 226 of the Constitution of India, it is not necessary to go into the validity of the impugned order at this stage. In case the final order passed by the Settlement Commission is against the department or is not acceptable on the terms on which the same is passed, it would be open to 4 WRIT TAX No. 489 of 2020 the department to challenge the same by filing appropriate proceedings. At this stage, it would be open to the department to raise all the contentions which are permissible including challenge to the impugned order passed and the observations made in the impugned order. Giving the aforesaid liberty to the department, both the petitions are not entertained at this stage being premature. Hence, the same are hereby dismissed.” 7. Similar view has been expressed by Delhi High Court in Commissioner of Income-Tax’s case (supra) in paragraph 13, which is reproduced below : “13. From the above provisions, it is apparent that the settlement application passes through several stages before the final order providing for the terms of settlement is passed by the Settlement Commission. The first stage is under section 245D(1). This is followed by the next step under section 245D(2C) and finally by the order passed under section 245D(4). In the present case, the final order under section 245D(4) is yet to be passed. The orders under section 245D(1) and 245D(2C) are not final orders and they are subject to the final orders that may be passed under section 245D(4). It is, therefore, clear that the issue of full and true disclosure on the part of the applicants and the manner in which the undisclosed income was derived is still open for discussion and debate and the Settlement Commission would have to give its final decision on these aspects before an order of settlement is passed under section 245D(4) of the said Act. 5 WRIT TAX No. 489 of 2020 Therefore, on a plain reading of the provisions, it is apparent that the submission made by learned counsel for respondents No. 2 to 5 merits acceptance in so far as it was contended by him that the entire issue remains open and at any stage of the proceedings till the order under section 245D(4) is passed by the Settlement Commission, the issue with regard to the full and true disclosure and the manner in which the undisclosed income had been derived would be open and can be raised by the Revenue. In fact, it was clarified by the learned counsel for respondents Nos. 2 to 5 that the said respondents do not even contend that once an application has been proceeded with under section 245D(1) and has not been held to be invalid 245D(2C), the validity of the same in terms of the requisite conditions stipulated in section 245C(1) cannot be gone into at the subsequent stages up to the passing of the order under section 245D(4) of the said Act.” 8. The same view has been reiterated by Andhra Pradesh High Court in Commissioner of Income-Tax and another vs. Settlement Commission (IT & WT) and another’s case (supra) in paragraph 11, which is being quoted below : “11. As a matter of fact, what all is required by the Settlement Commission at the stage of entertaining the application is whether a prima facie case is made out or not and in that context only subsequent amendments which have been brought in sections 245C and 245D of the Act had dispensed with even issuing a preliminary notice to the 6 WRIT TAX No. 489 of 2020 Commissioner of Income-tax leaving it to the absolute discretion of the Settlement Commission to entertain a case or not for its consideration. The reasons for giving such discretion to the Commission cannot be lost sight particularly keeping in view of the objects of establishment of the Settlement Commission and to settle the disputes between the taxpayer and the Department in an amicable manner. As a matter of fact, the recent legislative efforts in bringing section 268A of the Act and in issuing various circulars whereby restraining the Department officials to file appeals and further appeals in all and sundry cases recognising futility of such exercise may be noticed. A close perusal of the order passed by the Settlement Commission, both at the stage of admission and also at the stage of passing of the final order, we find, as a matter of fact, ample opportunity was given to the Department to file their objections and also the representatives of the Department were heard before passing the orders and in that view of the matter, we are unable to concur with the contention of the learned counsel for the petitioner that the order is vitiated on account of violation of the principles of natural justice. Inasmuch as we are satisfied that it was within the discretion of the Settlement Commission at the stage of section 245D(1) of the Act to admit a case for consideration based on the prima facie view, the aspect of admission of a case by the Settlement Commission except in exceptional 7 WRIT TAX No. 489 of 2020 circumstances cannot be the subject matter of a judicial review. This becomes clear from the law laid down in a catena of judgments with reference to the restricted scope of interference by the courts even with the final orders of the Settlement Commission. In that view of the matter, we do not see any reasons to order the amendment petition. Accordingly, the W.P.M.P. No. 28188 of 2002 is dismissed.” 9. In view of aforesaid enunciation of law by different High Courts referring to the order passed by Hon’ble the Supreme Court in K. Jaya Prakash Narayanan’s case (supra), in our view, the present writ petitions filed by the Department are premature and are liable to be dismissed, as it has authoritatively been held that an order passed by the Commission merely entertaining the application cannot be subject matter of challenge as after passing of the final order under Section 245D (4) of the Act, either the Department or the assessee, whoever is aggrieved of the order, can avail of its appropriate remedy including challenge to the order entertaining the application. 10. The writ petitions are, accordingly, dismissed with the aforesaid observations. (J.J. Munir, J.) (Rajesh Bindal, C.J.) Allahabad 24.11.2022 Manish Himwan/Shiraz Whether the order is speaking : Yes Whether the order is reportable : Yes/No Digitally signed by MANISH HIMWAN Date: 2022.12.15 12:44:24 IST Reason: Location: High Court of Judicature at Allahabad "