Settlement Commission's Decision Abated; Appeal Restored to ITAT for Non-Compliance with Tax Payment Deadline.

The court upheld the Settlement Commission's decision to abate proceedings due to non-compliance with section 245D(2D) of the Income Tax Act, 1961, as the petitioner failed to pay the additional tax and interest by the deadline. However, the court granted the petitioner's request to restore the appeal before the ITAT, ensuring the petitioner retains a remedy to challenge the assessment order under section 158BC. This decision aligns with the Supreme Court's precedents, emphasizing the necessity for compliance with statutory provisions while safeguarding the petitioner's right to appeal.

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Issues Involved:
1. Compliance with the provisions of section 245D(2D) of the Income Tax Act, 1961.
2. Abatement of proceedings before the Income Tax Settlement Commission under section 245HA(1)(ii) of the Act.
3. Restoration of the appeal before the Income Tax Appellate Tribunal (Tribunal).

Detailed Analysis:

1. Compliance with the provisions of section 245D(2D) of the Income Tax Act, 1961:
The petitioner, assessed as a company, faced a search under section 132(1) of the Act on 13.12.1995, leading to a notice under section 158BC. The petitioner filed a return and subsequently a settlement application under section 245C, initially declaring undisclosed income of Rs. 5 lakhs, later revised to Rs. 7 lakhs. The Settlement Commission allowed the application to proceed under section 245D(1) and directed the petitioner to pay additional tax within 35 days. However, the petitioner did not make any payment post the order, arguing that the seized cash of Rs. 4,90,000/- should be adjusted against the tax liability. The Commission and the Assessing Officer did not respond to this adjustment request, leading the petitioner to believe the payment was covered. The non-payment of additional tax and interest by the statutory deadline of 31.07.2007 led the Commission to conclude non-compliance with section 245D(2D), resulting in the abatement of proceedings under section 245HA(1)(ii).

2. Abatement of proceedings before the Income Tax Settlement Commission under section 245HA(1)(ii) of the Act:
The Commission held that due to the petitioner's failure to pay the required taxes and interest by 31.07.2007, the proceedings abated as per section 245HA(1)(ii). The petitioner argued that the seized cash should be considered as payment, but the Commission noted that the cash had already been adjusted against an earlier demand under section 158BC. The Commission emphasized that the petitioner should have ensured compliance with the amended provisions of the Finance Act, 2007. The court upheld the Commission's decision, citing the Supreme Court's ruling in Ajmera Housing Corporation v. Commissioner of Income-tax, which prohibits the revision of disclosed income in settlement applications, thus confirming the abatement due to non-compliance.

3. Restoration of the appeal before the Income Tax Appellate Tribunal (Tribunal):
The petitioner sought restoration of its appeal before the Tribunal, which had been withdrawn following the Commission's order under section 245D(1). The court noted that the assessment order under section 158BC continued to subsist and that the petitioner would be left without a remedy if the appeal was not restored. The court referenced the Supreme Court's decision in Commissioner of Income-Tax v. Damani Brothers, which affirmed that the liability under the assessment order persists unless set aside by a higher forum. The court granted the petitioner's alternate relief, restoring the appeal before the Tribunal to ensure justice and prevent prejudice to the petitioner.

Conclusion:
The court upheld the Settlement Commission's decision to abate the proceedings due to non-compliance with section 245D(2D) but granted the petitioner's request to restore the appeal before the Tribunal. This decision ensures the petitioner has a remedy to challenge the assessment order made under section 158BC.

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