1. Search under Section 132, Income Tax Act — Application to Settlement Commission — Order passed without proper investigation or opportunity under Section 245D(4) — Subsequent re-assessment by Assessing Officer. (Para 2 )
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2023 Supreme(SC) 428
SUPREME COURT OF INDIA
M.R. SHAH, C.T. RAVIKUMAR, JJ.
Jagdish Transport Corporation & Ors. - Appellants
Versus
Union Of India And Ors. – Respondent
Civil Appeal Nos. 2352-2353 of 2019
Decided on : 28-04-2023
Advocates appeared:
For the Appellant(s) : Mr. Pawanshree Agrawal, AOR Mr. Raktim Gogoi, Adv. Mr. Divyanshu Agrawal, Adv. Ms. Soumya Dhankani, Adv. Ms. Shubhangi Negi, Adv.
For the Respondent(s): Mr. Balbir Singh, A.S.G. Mr. Arijit Prasad, Sr. Adv. Mr. Raj Bahadur Yadav AOR Mr. Vikrant Yadav, Adv. Mr. Arjun Garg, Adv. Mr. Rupeder Singhmar, Adv. Ms. Vimla Sinha, Adv. Mr. Rupesh Kumar, Adv.
For the Appellant(s) : Mr. Pawanshree Agrawal, AOR Mr. Raktim Gogoi, Adv. Mr. Divyanshu Agrawal, Adv. Ms. Soumya Dhankani, Adv. Ms. Shubhangi Negi, Adv.
For the Respondent(s): Mr. Balbir Singh, A.S.G. Mr. Arijit Prasad, Sr. Adv. Mr. Raj Bahadur Yadav AOR Mr. Vikrant Yadav, Adv. Mr. Arjun Garg, Adv. Mr. Rupeder Singhmar, Adv. Ms. Vimla Sinha, Adv. Mr. Rupesh Kumar, Adv.
Compliance with procedural requirements is essential for orders issued by statutory bodies such as the Settlement Commission.
Headnote:Income Tax - Settlement Commission - Income Tax Act, 1961, Section 132, Section 153A, Section 245C(1), Section 245HA, Section 245D(4), Section 245F(4), Section 245H(1), Section 245D(4A), and Section 245AA The court discussed the application of various sections of the Income Tax Act, including the procedures and timelines for settlement under Sections 245C(1) and 245HA. The court emphasized the importance of following due procedure as required under Section 245D(4) and highlighted that an order passed by the Settlement Commission must be in accordance with law and on its own merits. The judgment also addressed the nullity of an order when it is not practicable for the commission to examine records and investigate a case for proper settlement.
Fact of the Case:
The appellants challenged the dismissal of their writ petition by the High Court regarding an order passed by the Settlement Commission under the Income Tax Act.Finding of the Court:
The court found that the order passed by the Settlement Commission was a nullity as it did not comply with due procedure and remanded the matter to the Settlement Commission for a fresh decision.Issues:
Compliance with procedural requirements under the Income Tax Act for settlement proceedings.Ratio Decidendi:
An order passed by the Settlement Commission must comply with due procedure as required under relevant sections of the Income Tax Act.Final Decision:
The appeals were allowed, and the matter was remitted to the Settlement Commission/interim Board for a fresh decision in accordance with law.Legal Category Hierarchy
Table of Contents
2. Challenge to the validity of the Settlement Commission's order and the subsequent re-assessment order passed by the Assessing Officer. (Para 2 )
3. An order passed by the Settlement Commission without examining records or providing adequate opportunity as required under Section 245D(4) is a nullity in the eye of law. (Para 3 )
4. A settlement order passed in mechanical compliance with a deadline, without following mandatory procedural requirements of investigation and opportunity under Section 245D(4), is void. (Para 3 )
5. High Court judgment and assessment orders set aside; matter remitted to the interim Board for a fresh decision following due procedure under Section 245. (Para 4 , 5 )
6. What is the legal status of a Settlement Commission order passed without adhering to the procedural requirements of Section 245D(4)?
Such an order is considered a nullity and not an order in the eye of law if the Commission fails to examine records and provide adequate opportunity to the applicant and the Department. (Para 3 )
7. What is the appropriate judicial remedy when a Settlement Commission order is found to be a nullity due to procedural lapses?
The court should remit the matter back to the Commission or the successor interim Board to pass a fresh order on merits after following the due procedure required by law. (Para 3 , 4 , 5 )
8. Does the setting aside of a Settlement Commission order as a nullity affect subsequent assessment orders based on that order?
Yes, if the underlying Settlement Commission order is set aside as a nullity, subsequent assessment or re-assessment orders passed by the Assessing Officer based on that nullity are also set aside. (Para 4 )
JUDGMENT :
M.R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 29.03.2017 passed by the High Court of Judicature at Allahabad, Lucknow Bench Lucknow, by which the Division Bench of the High Court has dismissed the Writ Petition No. 4858 of 2008 preferred by the appellants herein, the original writ petitioners have preferred the present Appeals. The subsequent order passed by the High Court dismissing the review application is also the subject-matter of the present Appeals.
2. The facts leading to the present Appeals in a nut shell are as under:
i) That a search was conducted under Section 132 of the Income Tax, Act, 1961 (for short “the Act”) on the business premises as well as the residence of the partners.
ii) Notices under Section 153A were issued to all the appellants for the Assessment Years 1998-1999 to 2004-2005.
iii) The return of income was filed by the appellants under Section 153A of the Act for the aforesaid Assessment Years.
iv) An application under Section 245C(1) of the Act was filed by the appellants before the Income Tax Settlement Commission (for short “the Settlement Commission”).
v) As per Section 245HA, inserted by the Finance Act, 2007, the application was to be decided by the Settlement Commission on or before 31.03.2008, failing which the proceedings before the Settlement Commission shall stand abated.
vi) The High Court, by way of an interim order, directed the Settlement Commission to dispose of the application under Section 245D of the Act by 31.03.2008.
vii) By order dated 31.03.2008, the Settlement Commission disposed of the proceedings and settled the undisclosed income at Rs. 59,00,000/-. The Settlement Commission also passed an order that the CIT/AO may take such action as appropriate in respect of the matters, not placed before the Commission by the applicant, as per the provisions of Section 245F(4) of the Act.
The Settlement Commission passed the following order:-
“In the abovementioned cases, the Hon’ble High Court of Uttar Pradesh at Lucknow has passed orders dated 19.03.2008 directing the Settlement Commission to complete the proceedings u/s 245D(4) by 31.03.2008.
2. The Rule 9 Report in this case has been received.
3. In all, the Principal Bench of the Commission has till 26.3.2008 received more than 325 orders from various High Courts in the month of March, 2008, directing the Principal Bench to complete the cases by 31.3.2008.
4. This would involve more than 1500 assessments. The Settlement Commission deals only with the assessments which involve complexity of investigation and the application is intended to proved quietus to litigation. For example, in one group of cases where 23 applications are involved, the paper book, which has been filed before the Settlement Commission runs into thirty thousand pages. It goes without saying that sufficient and proper opportunity is required to be given both to the applicant and the Commissioner of Income Tax for arriving at a proper settlement.
5. At this juncture, it is not practicable for the commission to examine the records and investigate the case for proper settlement. Even giving adequate opportunity to the applicant and the department, as laid down in section 245(D)(4) of Income Tax Act, 1961 is not practicable. However, to comply with the directions of the Hon’ble High Court, we hereby pass an order u/s 245D(4) of Income Tax Act, 1961, as under:
6. The undisclosed income is settled as under:
| Jagdish Transport Corporation | Rs.32,00,000/- |
| Surendar Kr. Tandon | Rs.6,00,000/- |
| Sandhya Tandon | Rs.6,00,000/- |
| Kiran Tandon | Rs.7,00,000/- |
| Virender Kr. Tandon | Rs.8,00,000/- |
| Total | Rs.59,00,000/- |
7. The CIT/AO may take such action as appropriate in respect of the matters, not placed before the Commission by the applicant, as per the provisions of section 245F(4) of IT Act ,1961.
8. Prayer for granting immunity from penalty and prosecution under all Central Acts. In view of the discussions in
