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IN THE HIGH COURT OF JUDICATURE AT MADRAS
R. MAHADEVAN, J. SATHYA NARAYANA PRASAD, JJ.
M/s. Lion Dates Impex (P) Ltd., rep. by its Managing Director P. Ponnudurai, Chennai - Appellant
Versus
The Chairman Income Tax Settlement Commission Principal Bench, New Delhi & Others - Respondent
Writ Appeal No. 2406 of 2021
Decided On : 27-06-2022
The High Court set aside the order of the Settlement Commission rejecting the appellant's application for settlement of tax disputes under Section 245C of the Income Tax Act, 1961, and remanded the matter to the Interim Board for Settlement for fresh consideration. The Court held that the Settlement Commission's order was passed in violation of the principles of natural justice and against the procedures prescribed under the Act. The Court also held that the Interim Board has the authority to entertain the appellant's application as a pending application and dispose of it on merits.
Fact of the Case:
The appellant, a company engaged in the business of purchase and sale of dates, oats, and honey, filed an application under Section 245C of the Income Tax Act, 1961, seeking settlement of tax disputes for the assessment years 2007-08 to 2014-15. The Settlement Commission rejected the application on the ground that the appellant had not made a full and true disclosure of its income. The appellant challenged the order of the Settlement Commission by filing a writ petition in the High Court.
Finding of the Court:
The High Court held that the Settlement Commission's order was passed in violation of the principles of natural justice and against the procedures prescribed under the Act. The Court found that the Settlement Commission had failed to provide the appellant with a reasonable opportunity to respond to the reports filed by the department and had also failed to consider all the materials placed before it. The Court also found that the Settlement Commission had erred in rejecting the appellant's application on the ground that it had not made a full and true disclosure of its income, as the appellant had provided sufficient evidence to support its claims.
Issues: 1. Whether the Settlement Commission's order rejecting the appellant's application for settlement was passed in violation of the principles of natural justice and against the procedures prescribed under the Act? 2. Whether the Interim Board has the authority to entertain the appellant's application as a pending application and dispose of it on merits?
Ratio Decidendi: 1. The Settlement Commission's order was passed in violation of the principles of natural justice and against the procedures prescribed under the Act. The Settlement Commission failed to provide the appellant with a reasonable opportunity to respond to the reports filed by the department and failed to consider all the materials placed before it. The Settlement Commission also erred in rejecting the appellant's application on the ground that it had not made a full and true disclosure of its income, as the appellant had provided sufficient evidence to support its claims. 2. The Interim Board has the authority to entertain the appellant's application as a pending application and dispose of it on merits. The Interim Board was established to dispose of pending settlement applications, and the appellant's application falls within the definition of a pending application. The Interim Board has the same powers and functions as the Settlement Commission, and it is therefore competent to dispose of the appellant's application on merits.
Final Decision: The High Court set aside the order of the Settlement Commission rejecting the appellant's application for settlement of tax disputes under Section 245C of the Income Tax Act, 1961, and remanded the matter to the Interim Board for Settlement for fresh consideration. The Court held that the Settlement Commission's order was passed in violation of the principles of natural justice and against the procedures prescribed under the Act. The Court also held that the Interim Board has the authority to entertain the appellant's application as a pending application and dispose of it on merits.
JUDGMENT
(Prayer: Appeal filed under Clause 15 of Letters Patent against the Order dated 03.09.2021 passed in W.P. No. 36950 of 2016 on the file of this Court.)
R. Mahadevan, J.
Questioning the validity and/or correctness of the order dated 03.09.2021 passed by the learned Judge in W.P. No. 36950 of 2016, the appellant / writ petitioner has preferred this writ appeal before this court.
2. The case projected by the appellant before the Writ Court is as follows:
2.1. The Managing Director of the appellant company along with his wife are engaged in the business of purchase and sale of dates, oats and honey as also manufacture of syrups, jams and squash under the brand -Lion dates-. According to the appellant, they are regularly filing the returns of income along with tax audit report as required under Section 44AB of the Income Tax Act, 1961 (in short, “the Act”). While so, on 17.07.2013, search under Section 132 of the Act was conducted in various premises of the appellant, inclusive of the residences of the Directors. At the time of search, two sworn statements were recorded under Section 132 of the Act by two different officers of the investigation wing. Subsequently, on 06.08.2013, another sworn statement was recorded under section 131 of the Act by the investigation officer.
2.2. On the basis of the search conducted and the documents seized, notices dated 28.01.2014 under Section 153A of the Act was issued relating to the assessment years from 2008-2009 to 2013-2014. For the assessment year 2007-2008, separate notice under Section 148 of the Act for reopening the assessment under section 147 was issued. In response to the notices issued under Section 153A of the Act, the appellant filed their returns of income on 01.03.2014. They also filed their return of income on 27.03.2004 in response to the notice issued for the Assessment year 2007-2008.
2.3. According to the appellant, upon the advice of the then Tax Consultant, the returns were filed, but several mistakes had crept in, with respect to the additional income offered in the returns filed to the notices under Section 153A of the Act and those mistakes were subsequently, rectified. Thereafter, the appellant filed a Settlement Application under Section 245C(1) of the Act on 02.03.2015 before the second respondent. In Para Nos.19 and 20 of the application, the appellant had given elaborate details as to the purpose and reason for which such application was filed. It was also stated that the appellant had truly, precisely and correctly disclosed all the income without any suppression, which was also supported by documentary proof. The second respondent also admitted the Settlement Application and directed the department to file a report. Accordingly, a report dated 22.04.2005 under Section 245D(2B) read with Rule 6 of the Income Tax Settlement Commission Rules was filed. The second respondent commission, after considering the submissions made on both sides, passed an order dated 05.05.2015 under Section 245D (2C) and the operative portion of the same is extracted below:
“4.3 On the issue of full and true disclosure of income and application of provision of Sec.115JB, we find that the issues raised by the Ld. CIT (DR) need further examination and verification of records and would be open for the Bench during the course of proceedings u/s.245D of the Act. We are of the view that as of now, there are no adverse materials available on record to hold that the additional income disclosed by the applicant before the Settlement Commission was not full and true. The applicant is therefore allowed to be proceeded with as we are of the view that the Applicant has prima facie fulfilled the conditions prescribed u/s.245C (1), 245D (2C) of the Act. However, we may clarify that the decision to hold the SA “not valid“ is without prejudice to initiation of penalty and launching of prosecution proceedings if required, on facts available on
The Settlement Commission's order was passed in violation of the principles of natural justice and against the procedures prescribed under the Act. The Interim Board has the authority to entertain th....
Eligibility for settlement applications under the Income Tax Act must align with statutory definitions, invalidating any additional conditions imposed by the CBDT.
The court emphasized the exclusive jurisdiction of the Interim Board over settlement applications filed after 31.01.2021 and the impact of circulars issued by the CBDT in determining the validity of ....
The court established that rights to file settlement applications under the Income Tax Act remain valid if the search occurred before the abolition of the Settlement Commission.
: Assessment – In an application under S.245C of Act, for settlement of applicant's income-tax case, there should be disclosure of income not earlier disclosed before the Assessing Officer
The court affirmed that the Settlement Commission's findings are conclusive unless there are grave procedural defects, emphasizing the limited scope of judicial review over such orders.
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