1996 Supreme(SC) 531

1996(5) Supreme 222
SUPREME COURT OF INDIA
B.P. Jeevan Reddy and M.K. Mukherjee, JJ.
Commissioner of Income Tax, Calcutta (Central) -Appellant
versus
M/s. Paharpur Cooling Towers Pvt. Ltd. -Respondent
Civil Appeal Nos. 1000-05 of 1979
Decided on 11-3-1996

IMPORTANT POINT
Section 245-E of the Income Tax Act, empowers the commission to re-open any completed proceedings connected with the case before it but such re-opening of completed proceedings should be necessary or expedient for the proper disposal of the case pending before it.

Headnote:Income Tax Act, 1961-Sections 245-D and 245-E-Power of Settlement Commission to reopen completed proceedings-Limitations-Such re-opening of completed proceedings should be necessary or expedient for proper disposal of case pending before it-Re-opening can be done only with concurrence of assessee-This power cannot extend to a period beyond eight years from end of assessment year to which proceeding relates-Application for settlement for Assessment year 1975-76-Whether Commissioner could drop penalty proceedings relating to Assessment years 1970-71 to 1974-75 in this application?-(No)-Jurisdiction of Commissioner limited to settling this case alone.

       Held : Section 245-E, which is the sheet anchor of the majority opinion, empowers the Commission to re-open any compeleted proceedings connected with the case before it but this power is circumscribed by the requirement expressly stated in the section that such re-opening of completed proceedings should be necessary or expedient for the proper disposal of the case pending before it. There are two other limitations upon this power, viz., that this re-opening of the completed proceedings can be done, even for the aforesaid limited purpose, only with the concurrence of the assessee and secondly that this power cannot extend to a period beyond eight years from the end of the assessment year to which such proceeding relates. These two features make it abundantly clear that the section contemplates re-opening of the completed proceedings not for the benefit of the assessee but in the interests of Revenue. It contemplates a situation where the case before the Commission cannot be satisfactorily settled unless some previously conlcuded proceedings are re-opened which would normally be to the prejudice of the assessee. It is precisely for this reason that the section says that it can be done only with the concurrence of the assessee and that too for a period within eight years. This section cannot be read as empowering the Commission to do indirectly what cannot be done directly. We may explain. The Commission has jurisdiction to settle the case which is before it. Take this very case : the application for settlement before it pertains to the Assessment Year 1975-76. Its jurisdiction is limited to settling this case alone. In this case, it cannot settle the matters relating to other assessment years, which are not before it. The Commissioner cannot touch the proceedings relating to the earlier or other years. This rule is, however, relaxed by Section 245-E to a limited extent and for a limited purpose. The concluded proceedings can be re-opened by the Commission provided (a) such re-opening is necessary or expedient for the proper disposal of the case before it, (b) the reasons for such opinion are recorded in writing by the Commission, (c) the applicant-assessee must give his concurrence therefor and (d) the proceeding which is being re-opened must relate to an assessment year which is within eight years from the end of the assessment year to which the case before the Commission relates. The power conferred by Section 245-E is thus a circumscribed and a conditional power. It can be exercised only in accordance with and subject to the conditions aforementioned and in no other manner. Now, let us see whether Section 245-E availed the Commission to direct the dropping of penalty proceedings relating to Assessment years 1970-71 to 1974-75 while settling the case relating to Assessment Year 1975-76. (Para 10)

       Further held : The ultimate orders passed by the Commission should relate to the case before it, it is only for the purpose of effectively settling the case before it that the Commission can re-open concluded proceedings subject to the four conditions set out hereinabove. We fail to see how the penalty proceedings (which have now been dropped) fall within the ambit of the power conferred by Section 245-E. The penalty proceedings not only relate to assessment years not before the Commission but they relate to alleged concealments during those earlier assessment years which concealments were not before the Commission. The disclosures before the Commission related to two other concealments [disclosed for the Assessment Year 1975-76 but which amounts the assessee wanted to be spread over all the six Assessment Years 1970-71 to 1975-76] wholly different and distinct from the concealments on account of which the said penalty proceedings were initiated. We are, therefore, of the opinion that the Commission exceeded its jurisdiction in directing that the said penalty proceedings [relating to Assessment Years 1970-71 to 1974-75] should be dropped or that penalties be waived in respect of the said assessment years. The interpretation placed by the Chairman upon Section 245-E is the correct one and not the interpretation placed by the majority. (Para 11)

       The penalty proceedings related to certain other concealments, i.e., other than the two concealments disclosed in the assessee s application for settlement and which were sought to be spread over backwards. The said penalty proceedings could not, therefore, have been affected or rendered nugatory by the addition to the total income resulting from the aforesaid "spreading over". It is difficult to see any connection, much less an intimate connection, between the said "spreading over" and the consequent enchancement of the income assessed for the said assessment years and the penalty proceedings. (Para 12)