1992 (3) TMI 60 - HC - Income Tax

Validity of Fresh Settlement Application Post-Omission of Section 245D(1A)

The court held that a fresh application for settlement for the same assessment years, previously rejected under section 245D(1A), is valid after the ... Co-operative Society, Gifts To Members By Co-operative Society Issues Involved:1. Validity of a fresh application for settlement under section 245C for the same assessment years after the omission of section 245D(1A).2. Application of the doctrine of res judicata in the context of income-tax proceedings.3. Consideration of the Commissioner's objections under section 245D(1A) in the context of the Settlement Commission's jurisdiction.4. Impact of the amendment made by the Finance (No. 2) Act, 1991, on the Settlement Commission's decisions.5. The scope of the Settlement Commission's power to review its previous orders.Issue-wise Detailed Analysis:1. Validity of a Fresh Application for Settlement:The primary issue was whether a fresh application for the same assessment years, previously rejected under section 245D(1A), is valid after the omission of section 245D(1A) by the Finance (No. 2) Act, 1991. The court concluded that an application by the same applicant for the same years must be considered valid if it is otherwise maintainable. The court emphasized that the previous rejection was due to the mandatory nature of section 245D(1A), which has now been omitted, thus allowing for a fresh application.2. Doctrine of Res Judicata:The Department argued that the doctrine of res judicata, as enshrined in section 11 of the Civil Procedure Code, should apply, thereby barring the fresh application. However, the court held that the principle of res judicata does not apply to income-tax proceedings in the same manner as civil suits. The court noted that each assessment year is a separate unit, and a decision for one year does not preclude a fresh determination for another year. The court cited the Supreme Court's observation in Radhasoami Satsang v. CIT, emphasizing that while res judicata does not strictly apply, there should be finality to decided issues.3. Consideration of the Commissioner's Objections:The Department contended that the rejection of the earlier application under section 245D(1A) should be taken as a comprehensive decision, including all facts and circumstances of the case. The court disagreed, stating that the rejection was solely due to the Commissioner's objection under section 245D(1A). The court clarified that the matter directly or substantially in issue in the previous applications is not the same as in the present applications, as the earlier rejection was based on the now-omitted section 245D(1A).4. Impact of the Amendment by the Finance (No. 2) Act, 1991:The court recognized that the amendment, which omitted section 245D(1A), was intended to remove the 'disability clause' that previously barred certain applications. The court noted that the amendment enlarged the scope of the Settlement Commission's jurisdiction, allowing applicants who were previously barred under section 245D(1A) to seek a settlement afresh. The court emphasized that the legislative intent behind the amendment was to enable fresh applications for settlement, provided they are otherwise maintainable.5. Scope of the Settlement Commission's Power to Review:The Department argued that considering a fresh application would amount to a review of the earlier order, which the Settlement Commission is not empowered to do. The court found no substance in this argument, stating that the fresh application is not a review but a new consideration based on the amended law. The court highlighted that the earlier orders were passed under the mandatory provisions of section 245D(1A), which no longer exist, thus allowing for a fresh application.Conclusion:The court concluded that in cases where a settlement application was rejected before September 27, 1991, upholding the Commissioner's objection under section 245D(1A), a fresh application for the same assessment years must be considered valid if it is otherwise maintainable. The applications in the specific cases were directed back to the respective Benches of the Settlement Commission for appropriate orders under section 245D(1).Separate Judgments:The majority of the judges agreed with the order by Member Shri Rangarajan, while some members specifically noted that they were not expressing views on the general proposition that an applicant can come any number of times for the same years despite earlier rejections. They focused solely on the effect of the omission of section 245D(1A) on the validity of a fresh application.