Judicial review of Settlement Commission orders permits interference where reasoning is absent and statutory requirements are not properly applied.

Judicial review under Article 226 can extend to Settlement Commission orders under Chapter XIX-A of the Income-tax Act where the order is contrary to the statute, tainted by fraud or misrepresentation, or unsupported by relevant reasoning. The Commission must record reasons showing application of mind to the statutory requirements and disputed material. A bare acceptance of a claim without dealing with the adverse report or the evidence on creditors and creditworthiness was treated as insufficient, and remand for reconsideration was upheld.

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Issues: (i) Whether the scope of judicial review under Article 226 permits interference with an order of the Settlement Commission passed under Sections 245C and 245D of the Income-tax Act, 1961. (ii) Whether the Settlement Commission's acceptance of the claim relating to advances from others, without adequate reasoning, justified setting aside the order and remitting the matter for reconsideration.

Issue (i): Whether the scope of judicial review under Article 226 permits interference with an order of the Settlement Commission passed under Sections 245C and 245D of the Income-tax Act, 1961.

Analysis: The statutory scheme of Chapter XIX-A permits settlement only on a full and true disclosure of income and obliges the Settlement Commission to act in accordance with the Act. Judicial review is limited, but it is available where the order of settlement is contrary to the statutory provisions, suffers from fraud or misrepresentation, or is otherwise vitiated by absence of relevant reasoning or nexus between reasons and conclusion. The power under Article 226 is therefore not excluded, though it is not appellate in nature.

Conclusion: Interference under Article 226 was permissible within the limited scope recognised by law.

Issue (ii): Whether the Settlement Commission's acceptance of the claim relating to advances from others, without adequate reasoning, justified setting aside the order and remitting the matter for reconsideration.

Analysis: The Settlement Commission accepted the assessee's claim that no addition was called for, but the order did not disclose a reasoned evaluation of the Commissioner's adverse report or of the material concerning the creditors and creditworthiness of the loans. In settlement proceedings, the Commission is required to apply its mind and record reasons that show consideration of the statutory requirements and the disputed material. A bare conclusion without supporting reasoning was treated as insufficient for sustaining the settlement on that aspect.

Conclusion: The remand was justified and the challenge to the order of remand failed.

Final Conclusion: The order of the learned Single Judge remitting the matter to the Settlement Commission was upheld, and the intra-court appeal was dismissed.

Ratio Decidendi: An order of the Settlement Commission under Chapter XIX-A must reflect application of mind and a reasoned determination on the materials before it, and judicial review under Article 226 may interfere where the order lacks such reasoning or is inconsistent with the statutory scheme.

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