Pending tax settlement application: do assessment appeals lapse? Appellate rights revive only on rejection u/s245HA, delay condoned.

During pendency of a settlement application before the Settlement Commission, the question was whether appellate remedies stood extinguished and whether the Tribunal erred in condoning long delay and remanding the first appeal. The SC held that appellate proceedings revive only if the settlement application is rejected without providing terms of settlement, attracting s.245HA; until an order under s.245D(4) is passed, the assessee is not required to forgo the right to contest the assessment on merits. The Revenue's contention that rejection of settlement necessarily bars merits challenge was misconceived and rejected. Consequently, the Tribunal's condonation of delay and its order setting aside the first appellate order and restoring the appeal for decision on merits were upheld.

---

---

Delay was condoned and the interlocutory applications were allowed. The Court was informed that an earlier, similar SLP filed by the Revenue had already been dismissed. In that order, the Court noted that the settlement application was still pending and that an order under Section 245D(4) of the Income Tax Act, 1961 was yet to be passed. It held that Section 245HA would apply "only if the application for settlement is rejected without providing for terms of settlement," in which event "the appellate proceedings will stand revived." The Court rejected the Revenue's contention "that the assessee must give up his right to contest the assessment order on merits, if the settlement application is rejected without providing for terms of settlement," holding it "misconceived and must be rejected." Given the case facts, the Income Tax Appellate Tribunal was justified in condoning delay, setting aside the order of the Commissioner (Appeals), and restoring the first appeal. The Court clarified that appellate proceedings should be kept "in abeyance till the disposal of the application by the Settlement Commission." On parity with that decision, the present petition was dismissed and pending applications were disposed of.

---