TaxTMI 
TaxTMI 
TaxTMI 
1991 (6) TMI 50
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....ut calling upon the applicant to furnish any security/guarantee. We have further been told that, in view of the order passed by the Commission under section 245D(1), the applicant had paid the additional amount of income-tax payable on the income disclosed in the application. The Commissioner of Income-tax, Jaipur, has made a petition dated January 16, 1991, to the Commission, wherein it has been stated by him that the demand raised by the Assessing Officer in respect of the assessment year 1986-87 including interest under section 220(2) up to December 31, 1990, comes to a sizeable sum. Thereafter, he goes on to say as under in his petition : "As per Department's information, the assessee has not made any efforts to set apart such large funds to meet the demand in case of any eventuality. It is also feared that, with the passage of time, the likelihood of recovery in the case is bound to decline. Therefore, in view of the entire circumstances, kind indulgence of the Settlement Commission is required. It is requested that the Settlement Commission may pass appropriate orders to enable the department to recover the demand so created, fully or partly. In the alternative, the assesse....
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....esting the Commission "to pass appropriate orders to enable the Department to recover the demand .... fully or partly" and, in the alternative, to direct the applicant "to furnish security/guarantees of an equivalent amount". According to Shri G. C. Sharma, Advocate, the Commissioner of Income-tax was neither a party before the Settlement Commission nor was there any provision in Chapter XIX-A of the Income-tax Act which gave him authority to make petition to the Commission. It was also submitted by Shri G. C. Sharma, Advocate that, even under section 245DD, the Commission could act suo motu and not at the instance of the Income-tax Department/Commissioner of Income-tax. The petition made by the Commissioner of Income-tax being without any authority, the same, it was submitted, deserved to be rejected as "ill-conceived and misdirected". 3.2 On behalf of the Department, it was submitted by Shri Rajendra, Advocate, that, before the settlement -petition made by the applicant had been admitted by the Commission, the Assessing Officer had created a legal and valid demand and as the applicant had not "set apart" any funds for meeting the demand created by the Assessing Officer, the Comm....
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....IX-A of the Income-tax Act which debars the Commissioner of Income-tax from making a petition of the type he has made to us. In the circumstances, the preliminary objection raised by the applicant is overruled. 5.1 Hearing with regard to the principal issue (vide para 2.1 above). -In support of the petition dated January 16, 1991 made by the Commissioner of Income-tax, Jaipur, it was stated by Shri Rajendra, Advocate, that the order of the Commissioner under section 245D(4) could be likened to an order of the Income-tax Appellate Tribunal and, in this connection, he relied on the decision of the Delhi High Court in the case of Bharat Commerce and Industries Ltd. v. Union of India [1991] 188 ITR 277. Secondly, Shri Rajendra, Advocate, invited our attention to the proviso to section 220 (2) which reads as under : "If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one and one-half per cent. for every month or part of the month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and end....
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....h they were proceedings of quasi-judicial nature regulated by statute for the settlement of the terms stated in the application including determination of tax, penalty or interest payable, if any, by the applicant. It was submitted by him that Chapter XIX-A entitled "Settlement of Cases" was a complete code in itself for settling cases and its provisions were not subject to any procedures or rules laid down in the Income-tax Act for the purposes of making assessments of total income. It was his submission that, while making the order under section 245D(4), the Settlement Commission did not pass an assessment order but only passed an order as it thought fit on matters covered by the application and any other matter relating to the case not covered by the application but referred to by the Commissioner of Income-tax in his report under section 245D. It was submitted by Shri G. C. Sharma, Advocate, that the Settlement Commission had to pass an order determining the sum due to be paid by the applicant and the manner of payment. After offering these preliminary remarks, Shri G. C. Sharma, Advocate, invited our attention to the provisions of sub-sections (6) and (7) of section 245D. It w....
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....(2A) was not paid within the time allowed by the statute and if the assessment order passed before the admission of the petition subsisted even after the admission of the settlement petition, the applicant would have to pay-interest under section 220(2) as also under section 245D(2C). The payment of double tax and interest, it was submitted, could never have been intended by the Legislature. Therefore, it was submitted by Shri G. C. Sharma, Advocate, that it would be but fair and proper to regard the assessments made before the admission of the settlement petition "as dead or at least dormant". It was stated that since the Settlement Commission had exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority after the admission of the petition, the demands payable by the applicant after the admission would only be those arising as a result of the orders passed by the Commission under section 245 D ( 1) / (4). It was also the contention of Shri G. C. Sharma, Advocate, that the Commissioner of Income-tax (Appeals) or the Deputy Commissioner of Income-tax (Appeals) cannot dispose of an appeal against the order of assessment after a settlement peti....
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....f their Lordships of the Delhi High Court in the case of Deen Dayal Didwania v. Union of India [1986] 160 ITR 12 (p. 14): "We are of the view that in case the Settlement Commission does proceed with the application, then the Settlement Commission will have full power to pass any order it deems fit regarding the settlement. The assessment order or orders if passed will be no impediment to the Settlement Commission in exercising its powers if it decides to exercise them." 5.3 When asked as to what he had to say with regard to the argument of Shri Rajendra, Advocate, based on the language of the proviso to section 220(2), it was submitted by Shri. G. C. Sharma, Advocate, that the language of the proviso to section 220(2) was ambiguous and that the same was inconsistent with the scheme of Chapter XIX-A. It was contended by him that the theory of merger did not apply to orders passed by the Commissioner under section 245D(4). In this connection, Shri G. C. Sharma relied on the provisions of sub-sections (2D) and (6A) of section 245D. 5.4 In reply, it was submitted by Shri Rajendra, Advocate, that up to the time the Settlement Commission assumed jurisdiction, the Income-tax authoritie....
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.... Assessing Officer had jurisdiction to deal with the case and pass assessment orders according to law before the admission of the settlement petition. The only question that arises for our consideration is whether the assessment order passed by the Assessing Officer before the admission of the settlement petition subsists even after the admission of the settlement petition. According to us, the assumption of "exclusive jurisdiction (by the Settlement Commission) to exercise the powers and perform the functions of an income-tax authority ... in relation to the case" on the admission of a settlement application does not render invalid the valid and legal orders passed and actions taken by the income-tax authorities before the admission of the settlement petition. The language of sub-sections (6) and (7) of section 245D supports the view that orders passed and actions taken by the income-tax authorities before the settlement application is allowed to be proceeded with by the Settlement Commission are valid and have to be continued from the stage at which the application was allowed to be proceeded with by the Settlement Commission "if it is subsequently (i.e., after the order under se....
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....think that accepting the argument of the applicant would be contrary to the legislative intent. Further, in our opinion, there is nothing in the language of section 245HA(1) which renders invalid the valid and legal orders passed by the income-tax authorities/ Income-tax Appellate Tribunal/High Court/Supreme Court before the admission of the settlement petition under section 245D(1). Section 245HA(1) empowers the Commission to send back the case to the Department if the applicant "has not co-operated with the Settlement Commission in the proceedings before it". Secondly, it says that when the Settlement Commission sends back the case to the Assessing Officer, he shall thereupon dispose of the case in accordance with the provisions of this Act as if no application under section 245C has been made". Thirdly, according to the provisions of section 245HA(2), the Assessing Officer is "entitled to use all the materials and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it as if such materials, information, inquiry and evidence had been ....