IMPORTANT POINT
It is appropriate that the matter be referred to a larger Bench then merely a Bench of present two Judges on interpretation of Section 245C of I.T. Act, 1961.

Headnote:Income Tax Act, 1961-Section 245C-The Special Bench of Income-Tax Settlement Commission answered three questions referred to it (see paras 2 and 3)-Revenue has come in appeal to Apex Court-Serious issue has been raised in the matter before two Judge Bench with directly conflicting stands on either side as to the extent of powers that could be exercised by the Settlement Commission, pursuant to the applications filed under Section 245C of the Act-Proper course-Matter be decided by a larger Bench-Direction accordingly.
Held : We find that Section 245C has undergone a specific amendment of considerable significance with effect from 1.10.1984 under the Taxation Laws (Amendment) Act, 1984 (Act 67 of 84) making it imperative that an application to be filed is not only to be in such form and in such manner as has been prescribed, but it should contain full disclosure of an income "which has not been disclosed before the assessing officer and the manner in which such income has been derived, with the additional amount of income tax payable "on such income" and with such further and other particulars as may be prescribed. Sub-section (4) of Section 245D enables the Commission to pass, in accordance with the provisions of the Act, orders on "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 under sub-section (1) or sub-section (3)." Reference has been earlier made to Section 245E and the powers thereunder. The scope and impact of Section 245F(4) are also required to be considered. We further find that nowhere in any of the provisions contained in the said Chapter XIX-A, any specific provision or stipulation is made that once the application is taken up for consideration after notice to the Commissioner and after receipt of the Report from the Commissioner, the proceedings pending on the file of the income-tax authority at various stages shall stand transferred automatically to the Commission to be dealt with as a whole, nor is there any specific indication as to the extent or manner in or upto which the Settlement Commission can deal with the claims other than those covered by the application made by an applicant. Does the Settlement Commission get a complete role in total substitution of the other authorities under the Act and, if so, far what purpose and to what extent. An answer to the questions thus raised before us may call for a detailed consideration of the views expressed in the earlier decisions in order either to further elaborate or to confine them in a manner that is desirable or permissible in terms of the Scheme, the language used and the purpose underlying the various statutory provisions. Therefore, we would consider it more appropriate as well as proper to have the matter referred for the consideration of a larger Bench than merely a Bench of two Judges as we are. Such questions, being recurring in nature, deserve to be decided at an early date. We direct that the papers may be placed before the Hon ble the Chief Justice for appropriate orders as the matter may deserve. (Paras 13 and 14)

JUDGMENT

Raju, J.-Pursuant to the order dated 28.3.2001, these matters, which were directed to be delinked from the other batch, have come up for hearing.

Civil Appeal No. 7248 of 1999 :

2. This appeal has been filed against the decision dated 15.4.1999 of the Income-Tax Settlement Commission, Additional Bench, Mumbai. The said decision was rendered by the Special Bench of the Income-Tax Settlement Commission constituted by the Chairman in exercise of his powers under Section 245BA (5A) of the Income-Tax Act (hereinafter referred to as "the Act"). The Reference to the Special Bench was in respect of the following questions :-

1. Was the Special Bench of the Settlement Commission right in holding in the case of Om Metals and Minerals Pvt. Ltd., (193 ITR 57 - ITSC) that the assessment order passed by the assessing officer before the admission of the settlement application subsisted and recovery proceedings continued even after the admission of the said application, especially after the judgment of the Supreme Court in the case of CIT v. Express Newspapers Ltd. (206 ITR 443)?

(The Hon ble Court, inter alia, made the following observation :-

It is equally evident that once an application made under Section 245C is admitted for consideration (after giving notice to and considering the report of the Commissioner of Income-tax as provided by Section 245D) the Commission shall have to withdraw the case relating to that assessment year (or years, as the case may be) from the assessing/appellate/revising authority and deal with the case, as a whole, by himself. In other words, the proceedings before the Commission are not confined to the income disclosed before it alone. Once the application is allowed to be proceeded with by the Commission, the proceedings pending before any authority under the Act relating to that assessment year have to be transferred to the Commission and the entire case for that assessment year will be dealt with by the Commission itself.")

2. If the answer to question No. 1 is in the affirmative, would it be correct to say that once the Settlement Commission determines a liability of the applicant for tax, penalty and interest under Section 245D (4), the orders of the lower authorities would automatically stand set aside and consequently there will be no liability under Section 220(2) of the Act?

3. If the answer to question No. 1 is in the affirmative, the question No. 2 in the negative, has the Settlement Commission powers to waive interest under Section 220(2) of the Act?"

3. The three questions were separately and individually considered and answered. Thereupon, the answers given have been summed up as follows:-

"Para 37. In sum, our answers to the three questions referred us are as follows :-

Question No. 1

(i) That the Special Bench in the case of Om Metals and Minerals Pvt. Ltd. (supra) was right in holding that the assessment orders passed by the Assessing Officer before the admission of the settlement application subsisted only insofar as such finding applies to assessment orders passed before the date of filing of application under Section 245C(1).

(ii) The Special Bench of the Settlement Commission was not right in holding that the orders passed by the Assessing Officer insofar as the finding applies to orders passed after the date of application but before the application is allowed to be proceeded with.

(iii) The Special Bench was not right in holding that the recovery proceedings based on the order of assessment can be continued even after the admission of the said application. In our view, recovery proceedings cannot be continued after the application has been admitted except in the matter of self-assessment tax and in the manner laid down in Section 245DD for safeguarding any likely future demand.

Question No. 2

(i) The orders of lower autho

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Judicial Analysis

SupremeToday

2002 Supreme(SC) 206

IMPORTANT POINTIt is appropriate that the matter be referred to a larger Bench then merely a Bench of present two Judges on interpretation of Section 245C of I.T. Act, 1961.

Cases Referred (3)

Judicial Analysis

IMPORTANT POINT
It is appropriate that the matter be referred to a larger Bench then merely a Bench of present two Judges on interpretation of Section 245C of I.T. Act, 1961.