Court quashes DGIT order, upholds ITSC jurisdiction under Income Tax Act.

The court ruled in favor of the Trust, quashing the impugned order issued by the Director General of Income Tax (DGIT). It held that the DGIT lacked jurisdiction to issue a show cause notice while the application was pending before the Income Tax Settlement Commission (ITSC). The court found the retrospective withdrawal of approval under Section 10(23C)(iv) impermissible and emphasized that matters settled by the ITSC were conclusive and could not be reopened by the DGIT. The court highlighted the exclusive jurisdiction of the ITSC and reiterated the importance of adherence to settled matters under the Income Tax Act.

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Issues:
1. Jurisdiction of the DGIT to issue show cause notice (SCN) during pendency of application before ITSC.
2. Legality of retrospective withdrawal of approval under Section 10(23C)(iv) of the Income Tax Act.
3. Authority of DGIT to reopen matters covered under ITSC award.
4. Compliance with Section 245F(2) and Section 245-I of the Income Tax Act.

Analysis:

Issue 1: Jurisdiction of the DGIT
The petitioner Trust challenged the show cause notice (SCN) issued by the Director General of Income Tax (DGIT) proposing withdrawal of approval under Section 10(23C)(iv) of the Act. The Trust argued that the DGIT lacked jurisdiction to issue the SCN while the application under Section 245C was pending before the Income Tax Settlement Commission (ITSC). The court held that the DGIT, being an 'Income Tax Authority,' did not have the power to issue the SCN when the ITSC had exclusive jurisdiction over the case as per Section 245F(2) of the Act. The court found the DGIT's actions without jurisdiction, rendering the impugned order illegal.

Issue 2: Retrospective Withdrawal of Approval
The Trust contended that the retrospective withdrawal of approval under Section 10(23C)(iv) of the Act was impermissible and contrary to law. The court noted that the impugned order was based on findings of the ITSC, which had already been upheld by the court in a previous judgment. The court emphasized that the DGIT exceeded jurisdiction by attempting to overrule the ITSC's findings, leading to the quashing of the impugned order.

Issue 3: Reopening Matters Covered by ITSC Award
The Trust argued that the matters settled by the ITSC under Section 245D(4) were conclusive and could not be reopened by the DGIT as per Section 245-I of the Act. The court agreed, stating that the ITSC's order was final and precluded the DGIT from reexamining the settled issues. The court found that the DGIT's attempt to revisit the settled matters was unauthorized and unsustainable.

Issue 4: Compliance with Section 245F(2) and Section 245-I
The court highlighted the provisions of Section 245F(2) and Section 245-I of the Act, emphasizing the exclusive jurisdiction of the ITSC in cases allowed to proceed under Section 245D. The court reiterated that the DGIT's actions were without authority, as the ITSC had already settled the issues conclusively. By disregarding the ITSC's findings, the DGIT had overstepped its powers, leading to the quashing of the impugned order.

In conclusion, the court ruled in favor of the Trust, quashing the impugned order and emphasizing the importance of jurisdictional boundaries and adherence to settled matters under the Income Tax Act.

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