2026 Supreme(Mad) 1158

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
D. BHARATHA CHAKRAVARTHY, J.
M/s. Dhanalakshmi Srinivasan Sugars Private Limited, Represented by its Managing Director S. Jagatheesan - Petitioner
Versus
Deputy Commissioner of Income Tax, Central Circle 2, Madurai, Tamil Nadu – Respondent 
W.P.(MD)Nos.10711 to 10716, 5709, 5710 and 11470 to 11478 of 2025 and W.M.P.(MD) Nos.4171, 4173, 8529 and 8530 of 2025
Decided On : 01-06-2026

Assessment orders passed during the pendency of settlement proceedings under court-sanctioned interim liberty are not void ab initio, and the enforcement of such orders is permissible upon the rejection of settlement applications, provided that the rights of the assessee regarding limitation periods are duly protected.

Headnote:(A) Income Tax Act, 1961 - Sections 143(3), 153A, 245A, 245C, 245D, 245F, 245HA - Constitution of India, Article 226 - Search and seizure assessment - Settlement Commission - Abatement of proceedings - Constitutional validity of abolition - Interim protection - Scope of judicial review - Writ of declaration - Jurisdiction of Assessing Officer - Assessment orders passed during pendency of settlement applications were held to be valid because they were pursuant to court-sanctioned interim liberty, and subsequent developments, including the rejection of settlement applications and the expiry of time limits, did not render initial assessment orders void ab initio where the parties were provided with specific safeguards regarding the enforcement of demand and limitations for further appeals. (Paras 3.1, 5.7, 5.11, 5.13)

(B) Jurisdiction - Exclusive jurisdiction of settlement body - Assessment proceeding conducted under interim court direction despite pendency of settlement applications does not invalidate the assessment if the court permitted such proceedings to protect revenue interests while balancing assessee rights. (Paras 5.12, 5.13)

Facts of the case:
Following a search and seizure operation, the assesses filed settlement applications. During the pendency of these applications and amidst legislative changes abolishing the previous commission, the assesses approached the court. The court granted interim protection, allowing assessment officers to complete the assessment process but directing that orders be kept sealed or stayed from implementation. Subsequently, the settlement applications were rejected. The assesses challenged the resultant tax demands, arguing that the assessment orders were void for lack of jurisdiction and that fresh orders were required post-rejection of the applications.

Findings of Court:
The court observed that the assessment proceedings were conducted under the express authorization of judicial interim orders. The court found that jurisdiction did not exclusively vest in the settlement body in a manner that rendered the assessment orders null and void, especially given the specific conditions imposed to protect the assessees' rights, including the tolling of the limitation period for filing appeals post-finality of the proceedings.

Issues: Whether the assessment orders passed pending settlement applications were void ab initio due to lack of jurisdiction, and whether the department was obligated to pass fresh assessment orders following the rejection of settlement applications by the statutory board.

Ratio Decidendi: Since the assessment orders were issued under the specific liberty granted by the court, they remained legally enforceable once the settlement applications were rejected and the interim protection regarding the enforcement of the recovery demand ceased. The court held that judicial orders governing the proceedings overrode the standard procedural bars, and the limitation for challenging the orders was adequately protected by the court's earlier directions.

Result: Writ petitions dismissed.

Table of Content
1. procedural history of search, settlement applications, interim court orders, and subsequent assessment and recovery notices. (Para 1 , 2)
2. claim that assessment orders were void due to lack of jurisdiction and failure to comply with statutory limitation periods upon abatement of settlement proceedings. (Para 3)
3. revenue's contention that assessment orders were validly passed under court-granted liberty and that petitioners are barred by estoppel and failure to exhaust alternative remedies. (Para 4)
4. court finds assessment orders valid under specific interim protections; jurisdiction was not divested; parties are bound by the court's earlier orders regarding limitation. (Para 5)
5. writ petitions challenging the assessment orders are dismissed. (Para 6)

ORDER :

D. BHARATHA CHAKRAVARTHY, J.

A. The Petitions :

M/s. Dhanalakshmi Srinivasan Sugars Private Limited (DSSPL), incorporated under the Companies Act, 2013, and represented by its Managing Director, S.Jegatheesan, and M/s. V.V.Mineral (VVM), a registered partnership firm represented by its partner, S.Jegatheesan, have filed these Writ Petitions. Both entities claim to be part of M/s. V.V. Group is a conglomerate operating across various sectors.

1.1 These Writ Petitions are connected to each other and, as such, are taken up and disposed of by this common order.

B. The Facts:

2. On 25.10.2018, the Income Tax Department conducted a search under Section 132 of the Income Tax Act, 1961 (in short, 'the Act') at the premises of DSSPL and VVM and yet another entity, and certain materials and documents were seized. Thereafter, on 28.11.2019, notices were issued to all three entities for the assessment years from 2013 – 2014 to 2018 – 2019. While the proceedings were pending, it is the case of DSSPL and VVM that they contemplated approaching the Income Tax Settlement Commission (ITSC) under Section 245(c) of the Act. During this period, the Government of India introduced a Finance Bill on 01.02.2021, proposing to discontinue the ITSC and constitute an Interim Board of Settlement (IBS) for pending cases. No new applications were filed with effect from 01.02.2021.

2.1. On 04.03.2021, feeling aggrieved by the proposal that no new applications shall be filed, the petitioners filed W.P.(MD) Nos. 4661, 4664, and 4668 of 2021 to direct the IBS to take the petitioners' applications on file. A common interim order was passed on the petitioners’ interim prayer, on the submission that mere receipt of the petitioners’ applications would not confer any right on them, and the ITSC was directed to receive the petitioners’ applications.

2.2. On 09.03.2021, DSSPL and VVM filed applications before the IBS seeking additional income. The following table contains the particulars of the assessment years, the original income disclosed by DSSPL in the returns, the additional income offered in the applications for settlement, and the total income:-

2.3. Thus, it is seen that, as against the already disclosed income of Rs.83,23,47,459/-, DSSPL offered a total income of Rs.1,02,64,51,010/-. Similarly, the following table reflects the data with respect of VVM :

2.4. Thus, it is seen that, as against the original income of Rs.7,60,73,151/-, additional income was offered, totalling Rs.9,46,16,843/-.

2.5. On 29.03.2021, the Finance Bill, 2021 received the assent of the Hon'ble President and came into force on 01.04.2021, whereby the IBS was constituted to hear all applications pending before the ITSC as on 01.02.2021. Under these circumstances, when the Writ Petitions filed by DSSPL and VVM came for further hearing on 30.04.2021, particularly regarding the extension of interim orders, the following interim order was passed after considering the interim order passed by the Principal Bench of this Court. Paragraph Nos. 2, 3 and 4 of the said order dated 30.04.2021 are extracted hereunder for ready reference:-

“2.Today when the matter is taken up for hearing, the learned Special Government Pleader has produce

Click Here to Read the rest of this document