Court Quashes Notices Under Income Tax Act, Upholds Settlement Commission Jurisdiction

The court quashes and sets aside the impugned notices issued under Section 142(1) of the Income Tax Act for assessment years 2008-09 and 2009-2010 due to settlement proceedings before the Settlement Commission. The court rules that the Assessing Officer cannot override the Settlement Commission's jurisdiction, as per Section 245F(2) of the Act. The court advises seeking clarification from the Commission before issuing such notices if there are differing interpretations. The petition is allowed, and the court excludes a further six weeks for computing the limitation period to issue the notices, if applicable, with no order as to costs.

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Issues:
Challenge to jurisdiction of notices issued under Section 142(1) of the Income Tax Act, 1961 for assessment years 2008-09 and 2009-2010 due to settlement proceedings before the Settlement Commission.

Analysis:
The petitioner challenges the jurisdiction of notices issued under Section 142(1) of the Income Tax Act, 1961 for the assessment years 2008-09 and 2009-2010, as settlement proceedings have been initiated before the Settlement Commission. The petitioner argues that the impugned notices are without jurisdiction since the Settlement Commission has admitted the assessment for consideration, as per the order dated 10th May, 2016 under Section 245D(2C) of the Act. The petitioner relies on Section 245F(2) of the Act, which states that the Settlement Commission alone would have jurisdiction over proceedings once an application for settlement is allowed to proceed. The petitioner emphasizes a specific paragraph from the order dated 10th May, 2016, indicating that the applications have been allowed to proceed further under Section 245D(4) of the Act, thereby questioning the validity of the impugned notices.

The Revenue, represented by Mr. Suresh Kumar, justifies the impugned notices based on an observation in the order dated 10th May, 2016 by the Settlement Commission. The Revenue argues that only disclosed additional income, not declared during regular assessment proceedings, would qualify for settlement. However, the distinction made by the Revenue is not explicitly mentioned in the operative part of the order dated 10th May, 2016. The court concludes that the impugned notices are without jurisdiction as the Assessing Officer cannot oust the Settlement Commission's jurisdiction, as per Section 245F(2) of the Act. The court suggests seeking clarification or rectification from the Commission before issuing such notices if the Revenue interprets the order differently. Consequently, the court quashes and sets aside the impugned notices dated 8th June, 2016, 14th June, 2016, and 23rd June, 2016.

In allowing the petition, the court excludes a further period of six weeks for computing the limitation period to issue the notices if it has not expired. The court notes the petitioner's argument regarding the academic nature of the proceedings due to the expiration of the period to pass an order for the assessment years 2008-09 and 2009-10 but refrains from examining it. The court clarifies that it cannot comment on this aspect as it is not required for the present decision. Finally, the court allows the petition with no order as to costs.

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