Pending tax settlement applications can justify interim stay of assessment notices when revenue prejudice is avoided.

Interim protection may be granted where continuation of assessment proceedings would undermine a pending statutory settlement application under Chapter XIX-A of the Income-tax Act, 1961. The court treated the pending Section 245C settlement process as creating real prejudice if the assessments were completed first, while noting that the settlement authorities retained discretion to admit, process, and, if needed, call for the assessment records. Because the statutory safeguard under Section 153B Explanation (i) prevented unfair prejudice to the Revenue, the refusal to stay the assessment notices was modified and interim stay was granted pending the writ petition.

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Issues: Whether interim stay of the assessment notices was warranted pending the writ petition when the petitioner sought to pursue settlement proceedings under Chapter XIX-A of the Income-tax Act, 1961.

Analysis: The pending settlement application under Section 245C and the scheme of Chapter XIX-A were treated as giving rise to a real prejudice if the assessments proceeded to completion before the settlement process could be considered. The Court noted that the authorities under Chapter XIX-A retained the discretion to admit or process the settlement application and, if necessary, withdraw and summon the assessment records. At the same time, the statutory safeguard under Section 153B Explanation (i) meant that interim stay would not unfairly prejudice the Revenue. In those circumstances, the refusal to grant stay was modified.

Conclusion: Interim stay of Exts. P1 and P2 series was granted in favour of the appellant during the pendency of the writ petition, without affecting the authorities' discretion under Chapter XIX-A.

Final Conclusion: The order under appeal was modified so that the assessment notices remained stayed pending the writ petition while the settlement process could continue according to law.

Ratio Decidendi: Where continuation of assessment proceedings would defeat a pending statutory settlement remedy, interim protection may be granted if the Revenue is not prejudiced by the stay and the settlement authority's powers are preserved.

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