Judicial review of Settlement Commission orders is limited, but procedural illegality and natural justice breaches can still invalidate them.

Judicial review under Article 226 over a Settlement Commission order is limited to cases of contravention of the Act causing prejudice, bias, fraud, malice, gross procedural defect, or failure in the decision-making process; the writ court cannot reappraise the merits like an appellate forum. The Commission's order was also found unsustainable because it went beyond the settlement application, decided additions, profit rate, and turnover issues without following the procedure under Section 245D(3), and relied on an internal communication rather than a proper report from the Commissioner. The assessee's objections were not addressed, resulting in procedural illegality and breach of natural justice, and the matter was restored to assessment in accordance with law.

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Issues: (i) What is the scope of interference under Article 226 with an order of the Settlement Commission. (ii) Whether the Settlement Commission's order was vitiated by procedural illegality and violation of natural justice in dealing with matters not covered by the settlement application and in relying on an internal communication as a report.

Issue (i): What is the scope of interference under Article 226 with an order of the Settlement Commission.

Analysis: Interference with a settlement order is confined to cases where the order is contrary to the Act and such contravention prejudices the assessee, or where there is bias, fraud, malice, gross procedural defect, or a failure in the decision-making process. The writ court is not to act as an appellate forum or reappraise facts found by the Commission.

Conclusion: The Court held that judicial review is available on limited grounds and not as a merits appeal.

Issue (ii): Whether the Settlement Commission's order was vitiated by procedural illegality and violation of natural justice in dealing with matters not covered by the settlement application and in relying on an internal communication as a report.

Analysis: The Commission travelled beyond matters covered by the application and decided additions, profit rate, and turnover issues without following the procedure contemplated by Section 245D(3) and without a proper report called for from the Commissioner. The communication treated as a report was only an internal communication, and the objections filed by the assessee were not dealt with. The resulting order was therefore contrary to the statutory procedure and caused prejudice.

Conclusion: The Court held that the settlement order was unsustainable for procedural illegality and breach of natural justice.

Final Conclusion: The writ petition should not have been dismissed, the settlement order could not stand, and the matter was restored to assessment in accordance with law after an effective opportunity to the assessee.

Ratio Decidendi: An order of the Settlement Commission may be interfered with under Article 226 where the Commission decides matters beyond the statutory procedure, relies on an improper report, or otherwise violates natural justice and causes prejudice to the assessee.

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