2016 (5) TMI 291 - HC - Income Tax

Settlement Commission order upheld under Income Tax Act despite Revenue objections

The Court upheld the Settlement Commission's order allowing the application for settlement to proceed under Chapter XIXA of the Income Tax Act. Despite ... Settlement Commission - non consideration of petitioner's objections - Held that:- Bearing in mind that the application for Settlement would abate if the same is not decided by the Settlement Commission before September, 2016, relegating the Respondent-Applicant to the adjudication proceedings under the Act it may result in Respondent-Applicant's application for settlement becoming fatal. This is particularly so as the application for settlement is ready for final hearing under Section 245D(4) of the Act and listed on to 11th May, 2016 before the Settlement Commission. Therefore, if on hearing the parties completely, we come to a view that the impugned order needs to be set aside and restored to the Settlement Commission, it would take up much time, resulting in abatement of the settlement application. This delay in moving the Petition is entirely due to the lackadaisical attitude of the Revenue in not moving this Petition expeditiously, challenging the interim order under Section 245D(2C) of the Act. Almost eleven months out of the eighteen months were lost in the Petitioner not moving this Court i.e. from May, 2015 to April, 2016. This coupled with the fact that before the Settlement Commission, the Revenue has after the impugned order proceeded with filing of its report under Section 245D(3) of the Act. Therefore, we are not inclined to consider the challenge in this Petition in detail in view of the peculiar facts and circumstances of this case. In these facts, it would meet the interest of justice if the Settlement Commission will deal with all the issues of full and true disclosure of income in its order under Section 245D(4) of the Act being raised by the Revenue not only in the Commissioner's Report under Section 245D(2B) of the Act but also under Section 245D(3) of the Act. This is so as it is the Revenue's case that all issues raised by them have not been adequately dealt with in the impugned order passed at the stage of Section 245D(2C) of the Act. In the above view, in the peculiar facts of this case, we are not disturbing the impugned order dated 21st May, 2015 of the Settlement Commission. However, we direct the Settlement Commission to consider the petitioner's objections as recorded in the Commissioner's report under 245D(2B) of the Act at the time of passing an order under Section 245D(4) of the Act. Issues:Challenge to order of Settlement Commission under Section 245D(2C) of the Income Tax Act, 1961 regarding the validity of the application for settlement and disclosure of income.Analysis:1. The petition challenged the Settlement Commission's order dated 21st May, 2015, which allowed the application for settlement to proceed under Chapter XIXA of the Income Tax Act. The Respondent had filed the application on 27th March, 2015, seeking to settle cases for Assessment Years 2007-08 to 2014-15 pending before the Assessing Officer.2. The Settlement Commission passed an order on 8th April, 2015, allowing the application to proceed under Chapter XIX of the Act. However, the Principal Commissioner of Income Tax submitted a report on 15th May, 2015, raising objections to the application's validity, alleging non-disclosure of true and full income for the relevant years.3. The impugned order of 21st May, 2015, held that the disclosure of income in the application was true and full at the stage of Section 245D(2C) of the Act, allowing the application to proceed. The Petitioner challenged this order, claiming that important objections were not addressed, specifically regarding a seized document indicating higher income than disclosed.4. The Petitioner contended that the impugned order was nonspeaking and failed to consider crucial objections raised by the Revenue. The Respondent argued that there was a full disclosure of income and rejection at this stage required detailed consideration, which would happen at Section 245D(4) of the Act.5. The Court acknowledged the Revenue's contention that the impugned order did not address the objection regarding income disclosure discrepancy. However, considering the impending abatement of the settlement application if not decided before September 2016, the Court decided not to set aside the order but directed the Settlement Commission to consider the objections at the time of passing the final order under Section 245D(4) of the Act.6. The Court highlighted the Revenue's delay in challenging the order and emphasized the need for expeditious resolution of such matters to prevent the abatement of settlement applications. The judgment was made in consideration of the peculiar facts of the case, without disturbing the impugned order but directing further consideration of objections during the final order.This detailed analysis covers the issues raised in the legal judgment, highlighting the arguments presented by both parties and the Court's decision in response to the challenges raised.