Disputed jurisdictional facts in settlement applications require enquiry before rejection; restoration of the original application is not barred.
Where a jurisdictional objection to a settlement application is factually disputed, the Settlement Commission must undertake an enquiry before rejecting the application, especially when material suggests the refund position may have been misread and the additional-tax condition remains contested. The Bombay HC held that rejection without proper application of mind was not justified and set it aside. Section 245K did not bar restoration of the same settlement application after the invalid rejection was quashed, because revival of the original proceeding is not a fresh application. The matter was restored for fresh disposal in accordance with law, with all contentions kept open.
Issues: (i) Whether the Settlement Commission could reject the settlement application at the stage of Section 245D(2C) without proper enquiry into the disputed question whether refund was due and whether the additional tax condition was unmet; (ii) Whether restoration of the earlier settlement application after setting aside the impugned order was barred by Section 245K of the Income-tax Act, 1961.
Issue (i): Whether the Settlement Commission could reject the settlement application at the stage of Section 245D(2C) without proper enquiry into the disputed question whether refund was due and whether the additional tax condition was unmet.
Analysis: The application had already been allowed to proceed under Section 245D(1), but the requirement of payment of tax on the additional disclosed income remained a jurisdictional requirement. At the same time, the Commissioner's objection rested on the asserted absence of refund for the relevant assessment year, while the record showed that the intimation under Section 143(1) reflected a refund which was adjusted against interest under Section 234B. That intimation was served only after the Commissioner's report, and the Assessing Officer's later communication indicated that the assessee's claim for refund appeared prima facie correct. In these circumstances, the Commission was required to make some enquiry into the disputed factual foundation before treating the Commissioner's report as conclusive and dismissing the application as invalid.
Conclusion: The rejection of the settlement application without proper enquiry was not justified, and the assessee succeeded on this issue.
Issue (ii): Whether restoration of the earlier settlement application after setting aside the impugned order was barred by Section 245K of the Income-tax Act, 1961.
Analysis: Section 245K prevents a fresh settlement application after one has been allowed to proceed under Section 245D(1). The relief granted did not amount to a new application; it merely revived the earlier application after the invalid rejection was set aside. Therefore, the statutory bar had no application to the relief sought.
Conclusion: Section 245K did not bar restoration of the original settlement application, and the contention of the Revenue failed.
Final Conclusion: The impugned order was set aside and the settlement application was restored to the Commission for fresh disposal in accordance with law, with all contentions kept open.
Ratio Decidendi: Where the factual basis of a jurisdictional objection to a settlement application is seriously disputed and supported by material indicating possible error, the Settlement Commission must apply its mind and undertake an enquiry before rejecting the application; restoration of the same application after such rejection is not barred by the prohibition against a subsequent application.
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