High Court Of Rajasthan : Jaipur Bench
CIT vs. Anil Hastkala (P) Ltd. & Anr.
Section 245D(4), 245D(4A), 245HA, Art. 226
Asst. Year 1997-98 to 2000-01
Ajay Rastogi, J.
Civil Writ Petn. No. 12911 of 2008
13th August, 2009
Counsel Appeared :
J.K. Singhi & Anuroop Singhi, for the Revenue : N.M. Ranka with Anant Kasliwal, Vaibhav Kasliwal, N.K. Jain, S.K. Tewari, Ms. Anupma Parashar, Sanjay Jhanwar, G.C. Garg, Samit Bishnoi, Gunjan Pathak, Naresh Gupta, Ms. Nivedia Sarda & Vinod Sharma for Ashok Bansal, for the Assessees
ORDER
Ajay Rastogi, J. :
Since bunch of cross-petitions filed by assessees as well as by Revenue assailing orders of Settlement Commission in cases of different assessees, involve self-same issue for consideration; hence at request, were finally heard together for its disposal by this common order at admission stage. Primary question for consideration in a bunch of writ petitions preferred by Revenue and cross petitions by different assessees is with regard to applications filed before Settlement Commission on or before 1st June, 2007 and assailing orders of Settlement Commission, on the premise that if impugned order of Settlement Commission under s. 245D(4) of IT Act, 1961 (“Act”) is held to be legally unsustainable, in such an eventuality, whether matters are to be remitted back to Settlement Commission to examine afresh in accordance with law or to the assessing authority in view of proceedings initiated under Chapter XIX-A on being held to be abated in terms of s. 245HA of the Act ? Except on few aspects, as regards orders of Settlement Commission under s. 245D(4) of the Act to be referred in later part, assessees-writ petitioners and respondent-Revenue in cross petitions, both are joint on the issue that the procedure adopted by Settlement Commission while passing orders impugned is in violation of s. 245D(4) of the Act and without following the mandate of statute; however, counsel for assessees have tried to convince that once orders of Settlement Commission are in violation of principles of natural justice as having been passed without due application of mind and appreciation of material on record, matters must be remitted back to Settlement Commission to decide afresh according to law. However though supported the submissions but counsel for the Revenue has also tried to convince that once orders of Settlement Commission are not legally sustainable as per amendment made under Finance Act, 2007 being enforced w.e.f. 1st June, 2007, proceedings stand abated in terms of s. 245HA as a consequence whereof, matter is required to be remitted to the assessing authority or any other IT authority before whom proceedings were pending while making application in terms of s. 245HA(2) of the Act. To examine the controversy at hand, bare facts necessary for adjudication, being common in bunch of all the petitions except as regards dates of making applications and assessment years, are being taken note out of Civil Writ Petn. No. 5036 of 2008 (Prakash C. Jalan vs. Settlement & Ors) and so also from Civil Writ Petn. No. 11515 of 2008 (CIT vs. Ravi Prakash Modi & Anr.). Re. Civil Writ Petn. No. 5036 of 2008—Prakash C. Jalan vs. Settlement Commission Assessee (Prakash Chand Jalan) filed application before Settlement Commission on 27th Sept., 2001 for asst. yrs. 1997-98 to 2000-01 under s. 245C containing a full and true disclosure of his income having not been disclosed before the AO. After fulfilment of statutory requirement under the Act upon receipt of application, Settlement Commission summoned a report from CIT as provided under r. 9 of Income-tax Settlement Commission (Procedure) Rules, 1997 (“Rules, 1997”)—on the basis of material contained therein (supra), allowed the application to be proceeded with, which ordinarily is called to be “motion hearing”; and after application being admitted, examined the assessees and so also CIT who are parties to the litigation; and after inquiry being made under s. 245D(3), Settlement Commission was supposed to examine the records-report of CIT under s. 245D(1) and the report, if any, received under s. 245D(3) and after affording opportunity of hearing to parties (assessee and Revenue) either in person or through representative authorised on their behalf. Settlement Commission was supposed to pass order under s. 245D(4); and at this stage, amendment came into force w.e.f. 1st June, 2007 vide Finance Act, 2007, whereby sub-s. 4A was inserted to s. 245D of the Act and obligation was casted upon Settlement Commission to pass order under s. 245D(4) on or before 31st March, 2008, otherwise proceedings pending before it shall stand abated as provided under s. 245HA(1); in that eventuality, it would be remitted to the AO or IT authority before whom proceedings at the time of making application was pending and for being disposed of in accordance with statute as if no application under s. 245C having been made. Due to a sword over the assessees, who had already made full and true disclosure before Settlement Commission about their income having not been disclosed before assessing authority, the tax was also paid at the time of admission of their applications where Settlement Commission prima facie examined the records taking note of report under r. 9 of Rules, 1997 submitted by CIT; and if Settlement Commission failed to decide pending application and proceedings were since going to be abated by 31st March, 2008, assessees preferred Civil Writ Petn. No. 2982 of 2008 wherein this Court issued a mandamus directing Settlement Commission to decide their applications on or before 31st March, 2008 since they had a fear and rightly so, because of their applications having remained pendente and likely to abate by virtue of amendment vide Finance Act, 2007 which will create complication for them. However, after taking note of number of assessments pending and paucity of time, as observed in orders impugned that it is not practicable for the Commission to examine the records and investigate the cases for proper settlement, rather impracticable to afford adequate opportunity to respective parties as provided under s. 245D(4) as it was directed by this Court to pass orders on or before 31st March, 2008; consequently, Settlement Commission invariably passed orders a day before or on 31st March, 2008 in all cases.
9. In instant bunch, applications were decided by 31st March, 2008. It would be pertinent to extract part of order being relevant for present purpose, which are almost verbatim in all the orders impugned either by assessees or by the Revenue ad infra :
“3. In all the principal Bench of the Commission has till 26th March, 2008 received more than 324 orders from various High Courts in the month of March, 2008, directing the principal Bench to complete the cases by 31st March, 2008.
This would involve more than 1,500 assessments. The Settlement Commission deals only with the assessments which involve complexity of investigation and the application is intended to provide quietus to litigation. For example, in one group of cases where 23 applications are involved, the paper book, which has been filed before the Settlement Commission runs into thirty thousand pages. It goes without saying that sufficient and proper opportunity is required to be given both to the applicant and the CIT for arriving at a proper settlement.
At this juncture, it is not practicable for the Commission to examine the records and investigate the case for proper settlement. Even giving adequate opportunity to the applicant and the Department, as laid down in s. 245D(4) of IT Act, 1961 is not practicable. However, to comply with the directions of the Hon’ble High Court, we hereby pass an order under s. 245D(4) of IT Act, 1961 :
The undisclosed income is settled as under : Parkash Chand Jalan Rs. 20,00,000 Rajendra Prasad Jalan Rs. 40,00,000 Nawal Kumar Jalan Rs. 30,00,000.” Re. Civil Writ Petn. No. 11515 of 2008—CIT vs. Ravi Prakash Modi
10. Facts are almost self-same in writ petitions filed by the Revenue wherein the assessees are respondents. In Civil Writ Petn. No. 11515 of 2008, it appears that somewhere in the year 2002, applications were filed by assessees and after pleadings were complete and when the case was not finally heard by Settlement Commission, they also approached this Court and got directions issued—in pursuance whereof, Settlement Commission decided their applications by common order dt. 29th March, 2008, in which also, paras are almost self-same as in order dt. 31st March, 2008 impugned in bunch of petitions of assessees (quoted supra) but it is pertinent to extract relevant paras only to show that in para 5 of order impugned, Settlement Commission recorded at its own that it would be impracticable to examine the records and to afford adequate opportunity to the assessees and the Revenue as provided under statute; but at the same time, the Commission still settled undisclosed income ad infra :
“3. In all the principal Bench of the Commission has till 26th March, 2008 received more than 324 orders from various High Courts in the month of March, 2008, directing the principal Bench to complete the cases by 31st March, 2008.
4. This would involve more than 1,500 assessments. The Settlement Commission deals only with the assessments which involve complexity of investigation and the application is intended to provide quietus to litigation. For example, in one group of cases where 23 applications are involved, the paper book, which has been filed before the Settlement Commission runs into thirty thousand pages. It goes without saying that sufficient and proper opportunity is required to be given both to the applicant and the CIT for arriving at a proper settlement. At this juncture, it is not practicable for the Commission to examine the records and investigate the case for proper settlement. Even giving adequate opportunity to the applicant and the Department, as laid down in s. 245D(4) of IT Act, 1961 is not practicable. However, to comply with the directions of the Hon’ble High Court, we hereby pass an order under s. 245D(4) of IT Act, 1961 : The undisclosed income is settled as under : It is also pertinent to state that in para 10, the assessees were called upon to deposit amount of tax along with interest within 35 days from the date of receipt of intimation from the AO in consonance with s. 245D(6A); and accordingly, the Revenue certainly issued notice under s. 156 of the Act to respective assessees and as informed to this Court, all the assessees who are either writ petitioners or respondents in writ petitions of the Revenue, have deposited amount of tax assessed by Settlement Commission under orders impugned and rightly so, since as required under s. 245D (6A), if assessee fails to deposit amount of tax payable under orders of Settlement Commission under s. 245D(4) within thirty-five days of receipt of certified copy thereof, he is liable to pay simple interest @ 15 per cent per annum. Re. Civil Writ Petn. No. 12911 of 2008—CIT vs. Anil Hastkala (P) Ltd. In Civil Writ Petn. No. 12911 of 2008, after the order was passed under s. 245D(4) on 29th March, 2008 (Annex. 2), miscellaneous application was filed by assessee (respondent) on 23rd April, 2008 under s. 245E seeking certain rectification of mistakes in the order passed under s. 245D(4) in regard to assessment made by Settlement Commission and year-wise break-up of amount settled; and after copy of miscellaneous application being served upon the Revenue, it was allowed vide order dt. 4th June, 2008, which was obviously after cut-off dt. 31st March, 2008, and after which according to the Revenue, Settlement Commission has since become functus officio, proceedings stood abated for all practical purposes. Counsel for assessees submits that as required under s. 245D(4) of the Act, Settlement Commission is under legal obligation to examine the records and report of CIT, if any, submitted under r. 9 of Rules, 1997 and to afford opportunity of hearing to applicants (assessees) and CIT upon having appeared in person or through Authorised Representatives on their behalf, and after examination of further evidence having been placed before it taking note whereof, Settlement Commission could have passed the order under s. 245D(4) of the Act; but in instant bunch, aforesaid procedure has completely been given a go-bye by Settlement Commission as is clearly evident from para 5 of orders impugned which clearly discloses that Settlement Commission was not in a position to examine the records and so also afford adequate opportunity of hearing as required under law; in as much as it has shown having felt impracticable in view of so-called paucity of time which always remains and a common grievance for such authorities while using settled phrases that the time is not adequate; and without application of mind and appreciating evidence on record, still the amount of tax has been assessed in later para 6 of orders impugned. According to counsel, very procedure adopted by Settlement Commission in passing orders impugned is a farce and not legally sustainable being violative of s. 245D(4) of the Act. Counsel further submits that if statute casts obligation to hold any procedure, Settlement Commission was to comply with statutory requirement and no deviation therefrom was permitted under law and exercise of proceeding being judicial one, Settlement Commission was under legal obligation to assign reasons in support of amount of tax being assessed in absence whereof, what has been assessed under orders impugned being not supported by material on record is not legally sustainable and deserves to be set aside.
As regards scheme of the Act and scope of judicial review under Art. 226 of the Constitution, counsel has placed reliance upon decisions of apex Court in Jyotendrasinhji vs. S.I. Tripathi & Ors. (1993) 111 CTR (SC) 370 : (1993) 201 ITR 611 (SC) and CIT vs. Om Prakash Mittal (2005) 194 CTR (SC) 97 : (2005) 273 ITR 326 (SC). However, counsel appearing for assessees in writ petition filed by Revenue, have tried to support orders impugned and submit that once the assessees have deposited the tax as assessed by Settlement Commission after notice being served by the Revenue, atleast the Revenue cannot file writ petitions after acceptance of tax assessed by Settlement Commission and are bound by principles of promissory estoppel in assailing findings recorded under orders impugned and cannot be permitted to approbate and reprobate at the same time.
Counsel for assessee further submits that hearing as provided under s. 245D(4) of the Act is to be considered in context of statutory requirement in view of amendment under Finance Act, 2007— as per which applications pending on or before 1st June, 2007 have to be decided by Settlement Commission by 31st March, 2008 and this Hon’ble Court has directed Settlement Commission to decide applications by 31st March, 2008; and as observed in orders impugned, there being more than 1,500 applications pending were to be decided by 31st March, 2008; so if Settlement Commission taking note of prima facie material on record, made assessment that has to be considered in compliance of s. 245D(4) of the Act.
It has further been urged that atleast the Revenue has not been able to justify by placing any material on record by which this Court may infer that amount of tax assessed by Settlement Commission is not prima facie based on material on record—in absence whereof, merely because opportunity of hearing if being not afforded to the Revenue, that alone will not nullify the order of Settlement Commission under challenge herein. It has also been urged that very nomenclature “Settlement Commission” is not a mechanism for adjudication of a dispute and there is always for Settlement Commission to examine the record and may assess amount of tax payable in the facts of each case and no detailed reasons are required to be recorded supporting it under orders impugned. In support, counsel relied upon CIT vs. Anjum M.H. Ghaswala (2001) 171 CTR (SC) 1 : (2002) 1 SCC 633. However, all the counsel for assessees either appearing for writ petitioners or for respondents in petitions of the Revenue, jointly submit that certainly vested rights stood created in favour of assessees for grant of protection of immunity from prosecution and penalty under s. 245H due to non-disclosure of confidential record having been disclosed by the assessee before Settlement Commission and also because of non-availability of remedy of appeal against order impugned being it conclusive under s. 245-I of the Act; and if this Court comes to the conclusion that orders impugned of Settlement Commission are not legally sustainable because of non- compliance of s. 245D(4), the matter at least be remitted back to the Settlement Commission to examine afresh in accordance with law after affording opportunity of hearing providing all kinds of protection available to them which Settlement Commission has also noticed in its orders impugned. Counsel further submits that since Settlement Commission passed orders on their applications on or before 31st March, 2008, and s. 245HA(1)(iv) only takes note of such application on which Settlement Commission failed to pass order under s. 245D(4) within time prescribed under s. 245D (4A); as such proceedings in their cases be remitted back only to Settlement Commission and not to the assessing authority by treating proceedings pendente before Settlement Commission on being abated under s. 245HA(2) of the Act. Counsel for Revenue (respondents in bunch of petitions) has made one and foremost contention that once orders passed by Settlement Commission is in violation of s. 245D(4), the same is a nullity in the eye of law as if no such order having been passed and in such situation, it would relate back to the date of passing of the order; and proceedings having remained pendente before Settlement Commission on 31st March, 2008, certainly stood abated under s. 245HA of the Act; and Settlement Commission having become functus officio after 31st March, 2008 and that being so, all matters are to be remitted back to the AO in terms of s. 245HA(2) of the Act so as to be governed by Finance Act, 2007 on having become effective. Counsel relied upon 1989 (1) SCC 628.
22. Counsel further submits that once Settlement Commission has become functus officio, no jurisdiction can now be conferred upon it to decide applications and matter cannot be remitted conferring jurisdiction upon Settlement Commission to decide applications in view of s. 245HA of the Act. In support, counsel relied upon decisions in RSRTC vs. B. Mukand Bairwa (2009) 4 SCC 299, Chiranjilal vs. Jasjit Singh (1993) 2 SCC 507 and A.R. Antulay vs. R.S. Nayak (1988) 2 SCC 602.
23. Counsel for Revenue further submits that if statute is unambiguous leaving no room of doubt for interpretation, it has to be read as a whole and it cannot be further supplemented by judicial interpretation and if there is equity, it is the law which would prevail and the equity has no role to play. In support, counsel relied upon Raghunath Bareja vs. Punjab National Bank (2007) 2 SCC 230.
I have considered rival contentions of counsel for parties and with their valuable assistance, examined material on record. Before adverting to examine the issue raised herein for consideration, this Court considers it appropriate to take note of scheme introduced under Chapter XIX-A of the Act relating to settlement of cases. It appears to have been inserted by the Taxation Laws (Amendment) Act, 1975 w.e.f. 1st April, 1976. A somewhat similar provision was contained in sub-ss. (1A) to (1D) of s. 34 of Indian IT Act, 1922 introduced in year 1954. However, provisions of Chapter XIX-A are qualitatively different and more elaborate than provisions of the
1922 Act. Proceedings commenced under Chapter XIX-A are judicial as envisaged in s. 245L within the meaning of ss. 193 and 228 and for purposes of s. 196 of Indian Penal Code. Chapter XIX-A is a complete code in itself as regards settlement of cases for having provided a complete mechanism other than procedure provided under the IT Act. Legislature conferred all powers upon Settlement Commission being vested in IT authority under the Act as provided under s. 245F and what is being decided by Settlement Commission is conclusive providing no remedy of revision/review or appeal to the assessee or Revenue, envisaged in s. 245-I of the Act. Settlement Commission is constituted under s. 245B and its jurisdiction and powers are governed by s. 245BA. Proceedings under Chapter XIX-A commence upon application being made by assessee who can file at any stage of case pending relating to him in the manner as prescribed containing full and true disclosure of income which has not been disclosed before assessing authority, the manner in which income has been derived, additional amount of income-tax payable thereon and all other particulars, before the Settlement Commission so as to have the case settled under s. 245C of the Act.
After application under s. 245C being filed by assessee, s. 245D provides procedure to be followed. Sub-ss. (1), (2A), (2B), (3) and (4) to s. 245D being relevant for purposes read ad infra (applicable prior to Finance Act, 2007 w.e.f. 1st June, 2007) : “245D. Procedure on receipt of an application under s. 245C.—(1) On receipt of an application under s. 245C, the Settlement Commission shall call for a report from the CIT and on the basis of materials contained in such report and having regard to the nature and circumstances of the case or the complexity of investigation involved therein, the Settlement Commission, shall where it is possible, by order, reject the application or allow the application to be proceeded with within a period of one year from the end of the month in which such application was made under s. 245C; Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant of being heard: Provided further that the CIT shall furnish the report within a period of forty-five days of the receipt of communication from the Settlement Commission in case of all applications made under s. 245C on or after the 1st day of July, 1995 and if the CIT fails to furnish the report within the said period, the Settlement Commission may make the order without such report. (2A) Subject to the provisions of sub-s. (2B) the assessee shall, within thirty-five days of the receipt of a copy of the order under sub-s. (1) allowing the application to be proceeded with, pay the additional amount of income-tax payable on the income disclosed in the application and shall furnish proof of such payment of the Settlement Commission. (2B) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income-tax referred to in sub-s. (2A) within the time specified in that sub-section, it may extend the time for payment of the amount which remains unpaid or allow payment of by instalments if the assessee furnishes adequate security for the payment thereof— (2C) Where the additional amount of income-tax is not paid within the time specified under sub-s. (2A), then, whether or not the Settlement Commission has extended the time for payment of the amount which remains unpaid or has allowed payment thereof by instalments under sub-s. (2B), the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty-five days referred to in sub-s. (2A). (2D) Where the additional amount of income-tax referred to in sub-s. (2A) is not paid by the assessee within the time specified under that sub-section or extended under sub-s. (2B), as the case may be, the Settlement Commission may direct that the amount of income-tax remaining unpaid, together with any interest payable thereon under sub-s. (2C), be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered, in accordance with the provisions of Chapter XVII, by the AO having jurisdiction over the assessee. (3) Where an application is allowed to be proceeded with under sub-s. (1), the Settlement Commission may call for the relevant records from the CIT and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the CIT to make or cause to be made
such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case.” (4) After examination of the records and the report of the CIT, if any, received under sub-s. (3), and after giving an opportunity to the applicant and to the CIT to be heard, either in person or through a representative duly authorised in this behalf and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the CIT under sub-s. (1) or sub-s. (3). (4A) In every application allowed to be proceeded with under sub-s. (1), the Settlement Commission shall, where it is possible, pass an order under sub-s. (4) within a period of four years from the end of the financial year in which such application was allowed to be proceeded with.” Sub-s. (4A) to s. 245D duly amended vide Finance Act, 2007 reads ad infra : “(4A) The Settlement Commission shall pass an order under sub-s. (4), (i) in respect of an application referred to in sub-s. (2A) or sub-s. (2D), on or before the 31st day of March, 2008; (ii) in respect of an application made on or after the 1st day of June, 2007, within twelve months from the end of the month in which the application was made.”
From the provisions quoted supra, it clearly emerges that after examination of the records and r. 9 report of CIT under sub-s. (1) and report of CIT, if any, received under sub-s. (3), and after giving opportunity to the applicant and CIT to be heard either in person or through a representative authorised in this behalf and after examining such further evidence as placed before it or obtained by it, Settlement Commission may, in accordance with the Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by application but referred to in the report of CIT under sub-s. (1) or (3). Sec. 245E empowers Settlement Commission to reopen the completed proceedings in appropriate cases while s. 245F confers all powers of an IT authority upon Commission. Sec. 245H empowers Settlement Commission to grant immunity from prosecution and penalty with or without conditions, in cases where it is satisfied that the assessee has made a full disclosure of his income and its sources. At the same time, s. 245HA has been inserted by Finance Act, 2007 w.e.f. 1st June, 2007 being relevant reads ad infra :
“245HA. Abatement of proceedings before Settlement Commission—
(1) Where (i) an application made under s. 245C on or after the 1st day of June, 2007 has been rejected under sub-s. (1)of s. 245D; or (ii) an application made under s. 245C has not been allowed to be proceeded with under sub-s. (2A) or further proceeded with under sub-s. (2D) of s. 245D; or (iii) an application made under s. 245C has been declared as invalid under sub-s. (2C) of s. 245D; or (iv) in respect of any other application under s. 245C, an order under sub-s. (4) of s. 245D has not been passed within the time or period specified under sub-s. (4A) of s. 245D, the proceedings before the Settlement Commission shall abate on the specified date. Explanation : For the purposes of this sub-section, ‘specified date’ means— (a) in respect of an application referred to in cl. (i), the day on which the application was rejected; (b) in respect of an application referred to in cl. (ii), the 31st day of July, 2007; (c) in respect of an application referred to in cl. (iii), the last day of the month in which the application was declared invalid; (d) in respect of an application referred to in cl. (iv), on the date on which the time or period specified in sub-s. (4A) of s. 245D expires. (2) Where a proceeding before the Settlement Commission abates, the AO, or, as the case may be, any other IT authority before whom the proceeding at the time of making application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under s. 245C had been made. (3) For the purposes of sub-s. (2), the AO, or, as the case may be, other IT authority, shall be entitled to use all the material 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 material, information, inquiry and evidence had been produced before the AO or other IT authority or held or recorded by him in the course of the proceedings before him.”
Every order passed by Settlement Commission under s. 245D(4) is final and conclusive in terms of s. 245-I of the Act and no matter covered by such order shall save as otherwise provided in Chapter XIX-A be reopened in any proceedings under the Act or under any other law for the time being in force. As already observed, proceedings before Settlement Commission are deemed to be judicial proceedings within the meaning of ss. 193 and 228 and for purposes of s. 196, IPC as provided under s. 245L of the Act. However, by amendment made while inserting s. 245D(4A) vide Finance Act, 2007 making effective w.e.f. 1st June, 2007, such applicants having filed on or after 1st June, 2007 have not been provided with protection as provided under s. 245E to reopen completed proceedings or s. 245H relating to grant of immunity from prosecution and penalty and so also confidentiality of their record which they have disclosed before Settlement Commission in their application under s. 245C of the Act. On the contrary, after Finance Act, 2007, in cases where proceedings stood abated under s. 245HA(1) because of pending applications having not been decided by Settlement Commission on or before 31st March, 2008 all such pending applications being abated were to be reverted back under s. 245HA(2) to the AO or to any other IT authority for being decided afresh in accordance with regular proceedings under the Act as if no such application under s. 245C had been made; and whatever record has been disclosed by assessee before Settlement Commission in application under s.
245C (supra), it was precondition while submitting application for the assessee to come with true and full disclosure of his income having not been disclosed before assessing authority and all such records which the assessee disclosed before Settlement Commission in terms of s. 245HA(3) of the Act can be used as material information by AO in course of proceedings before him.Thus, it clearly emerges from Chapter XIX-A that object of legislature in introducing s. 245C is to avoid protracted proceedings before the authority or in Courts by resorting to settlement of cases. In this process, the assessee cannot expect reduction of amount statutorily payable under the Act. Foundation for settlement is the application which the assessee files at any stage of a case relating to him in such form and manner as prescribed, statutory mandate is that application shall contain true and full disclosure of income having not been disclosed by him earlier before AO, and the manner in which income has been derived. Thus, fundamental requirement of application under s. 245C is the true and full disclosure of income along with manner in which income has been derived. However, by later amendment made for substitution vide Finance Act, 2007, procedure has been changed and after receipt of application under s. 245C, procedure like impugned here where report as earlier required from CIT is not required, and after hearing applicant assessee, Settlement Commission under statutory period of fourteen days by an order in writing either to reject or allow application to be proceeded, with a further rider that if no order is passed within statutory period, it shall be deemed to have been allowed to be proceeded with. However, present matters since having arisen for consideration on application being filed on or before 1st June, 2007, their cases were to be considered for taking report of CIT under r. 9 of Rules, 1997 and after being prima facie satisfied, Settlement Commission took decision to allow application to be proceeded with and only thereafter proceedings had further commenced as provided under s. 245D (3) and (4) of the Act.
As already observed, s. 245D(4) casts an obligations upon Settlement Commission to examine the records, report of CIT if any, and afford opportunity of hearing to the assessee and CIT either in person or through representative duly authorised in this behalf, and after examining such further evidence as having been placed before it or obtained by Commission, may in accordance with the IT Act, pass such order as it thinks fit.
In instant bunch, from a bare perusal of paras 5 and 6 quoted supra, it clearly manifest that observations made therein speak volumes about procedure having been adopted by Settlement Commission in deciding applications under orders impugned as the Commission specifically observed that it is impracticable to examine the records and investigate the cases for proper settlement and even opportunity of hearing as contemplated under s. 245D(4) is also not practicable; but since this Court directed Commission to pass order before 31st March, 2008, in para 6, at its own assessed the undisclosed income of applicants for being taxed, as is almost selfsame verbatim in all the orders impugned. Question arises for consideration as to whether in the facts of instant cases, there can be considered to be true compliance of statutory mandate under s. 245D(4) of the Act. There cannot be two opinions about it and irresistible conclusion is that Settlement Commission has failed to afford a reasonable opportunity of hearing nor examined the records as per statutory requirement of law and has passed orders impugned without due application of mind; in such circumstances, orders impugned in no manner are legally sustainable and are in violation of s. 245D(4) of the Act. That apart, it was common contention on behalf of assessees and the Revenue that if orders are not sustainable being in violation of s. 245D(4), as per counsel for assessees, it must be remitted back to Settlement Commission while according to counsel for Revenue, since Settlement Commission has become functus officio after 31st March, 2008, matter deserves to be remitted back to the assessing authority as contemplated under s. 245HA(2) who will make assessment of respective assessees in accordance with law as if no such application has been submitted by respective assessees before Settlement Commission.
It is to be noted that instant matters pertain to applications being filed before Settlement Commission on or before 1st June, 2007 and all such applications being finally decided by Commission by 31st March, 2008, what has been pointed out by counsel for respective parties is that Settlement Commission has failed to comply with mandate provided under s. 245D(4) of the Act and if having failed to comply with statutory requirement—legal obligation whereof is cast upon it, as a result of violation whereof, orders impugned cannot be said to be in consonance with requirement of law.
39. At the same time, in fact instant cases do not fall in any of clauses of s. 245HA(1); while counsel for Revenue has tried to convince this Court that these are covered by sub-s. (1)(iv) of s. 245HA. However, suffice it to say that only such cases are covered where application made under s. 245C remained pending and no order under s. 245D(4) was passed within the time or period specified under s. 245D(4A). In instant cases, applications have been finally decided by Settlement Commission by 31st March, 2008, therefore, in the considered opinion of this Court, s. 245HA(1) (iv) has no application and on having recorded the finding ibid, orders of Settlement Commission impugned herein are not in consonance with mandate under s. 245D(4) of the Act.Even interpretation of statute would not depend upon contingency. It is trite law which the Court would ordinary take recourse to golden rule of liberal interpretation. Object of the Act would be relevant factor for interpretation only when language is not clear and when two meanings are possible and not in a case like present one, where plain language lead to only one conclusion that as per provisions of s. 245HA(1)(iv), application under s. 245C once remained undecided for adjudication and remain pending in such cases, proceedings can be considered to be abated.
It is also not the case of respondents that Settlement Commission constituted under s. 245B (2) stands wound up, if ultimate fact remains that Settlement Commission is allowed or continued to exist and entertain fresh application being filed on or after 1st June, 2007, clearly suggests that it certainly got greater number of cases having been filed much before 1st June, 2007; and applications remained pending on 31st March, 2008, Division Bench of Delhi High Court in Vatika Farms (P) Ltd. & Ors. vs. Union of India & Anr. (2008) 216 CTR (Del) 37 : (2008) 5 DTR (Del) 157 : (2008) 302 ITR 98 (Del) vide interim order dt. 28th March, 2008 issued appropriate direction holding that such applications for settlement filed by respective assessees under s. 245C would not abate on 31st March, 2008 and further directed to dispose of pending applications expeditiously as possible. It has been informed to this Court that against aforesaid interim order passed by Delhi High Court, SLP was filed by the Revenue but has been dismissed. However, it has been informed that apart from Delhi cases (supra), there are other large numbers of cases wherein orders alike impugned herein are under challenge before this Court at the instance of assessees whose applications have remained pending and could not have been decided by 31st March, 2008. This Court is not examining in regard to such applicants whose applications remained pending but in the cases where applications under s. 245C stood decided by Settlement Commission in terms of s. 245D(4) of the Act by 31st March, 2008, orders impugned have become conclusive, against no further remedy of appeal or revision is provided and which is always subject to judicial review by this Court under Art. 226 of the Constitution and if this Court finds any infirmity in decision-making process, if committed by statutory authority; under limited scope of judicial review, the only recourse available is to remit back to the statutory authority which has decided the matters afresh in accordance with law. Submission made by counsel for Revenue that Settlement Commission has become functus officio, and jurisdiction cannot be conferred after cut- off date 31st March, 2008 and its order impugned being non est on quashing thereof, proceedings in respective applications stand abated under s. 245HA(1)(iv) of the Act, in the opinion of this Court is without merit for the reason that it only covers such cases where applications filed under s. 245C remained pending on 31st March, 2008 and has not been decided under s. 245D(4) but if the same has been finally decided, and if this Court is convinced with infirmity in the orders impugned, certainly it will be remitted back to the authority which has passed the orders impugned and sub-s. (iv) of s. 245HA(1) has no application in the facts of instant cases—as a consequence whereof, proceedings would not stand abated while remitting matter back to the Settlement Commission.
As regards submission made on behalf of the Revenue that statutory authority having become functus officio or no power being vested, is wholly without merit. Settlement Commission holds the authority under the Act and power is vested and only by amendment vide Finance Act, 2007 by putting rider of 31st March, 2008, the legislature only intended that if applications remained pending, it stands abated but it will not render Settlement Commission functus officio to examine matter afresh after orders having been passed remitting back to Settlement Commission. Judgments on which the Revenue has placed reliance in the facts of instant cases has no application rendering any assistance. Submission made by counsel for the assessees (respondents in writ petitions filed by Revenue) while supporting orders of Settlement Commission impugned that looking to availability of time as directed by this Court in earlier petition, if Settlement Commission has passed orders impugned taking note of requirement under s. 245D(4) of the Act, unless prejudice is shown by the Revenue, orders impugned are not ordinarily required to be reviewed, has also no merit for the reason that if statute casts obligation upon the authority to act in accordance therewith, its non-compliance constitutes prejudice to the parties and it is not for this Court to probe into as to what nature of prejudice has been caused. That apart, if requirement under s. 245D(4) of the Act is to examine the records and to afford opportunity of hearing and to consider further report, if any obtained by Settlement Commission and then pass orders, it pre-supposes that Settlement Commission is required to apply its mind and consider in accordance with law. Word, “consider” itself, implied to apply its mind after due opportunity of hearing being afforded to parties to the litigation, which in instant cases, as observed supra, is completely missing; which, itself, shows that prejudice has been caused to the parties.
It is true that if there is no such provision of the like manner in which compliance of principles of natural justice has to be made, it would be open for the Court to examine in the facts of each case as to whether reasonable opportunity of hearing has been afforded to parties and compliance of principles of natural justice has been made. However as observed (supra), if a statute requires a particular procedure to be followed for compliance of principles of natural justice, if having not been adhered to, action of such authority is certainly in violation of statutory requirement and so also of Art. 14 of the Constitution. Submission made on behalf of assessees that the Revenue has issued notices in compliance of orders impugned—in pursuance whereof, they have deposited tax as assessed; thereby once demand has been raised under s. 156 of the Act which has been complied with by them, writ petitions filed by Revenue are barred by principles of promissory estoppel and the Revenue cannot approbate and reprobate in same breath, is also without substance for the reason that once order has been passed by Settlement Commission under s. 245D(4) of the Act, the assessee has to deposit the tax assessed within 35 days of receipt of certified copy of the order under s. 245D(6A) failing which he would be liable to pay interest @ 15 per cent per annum.
It is not the decision of the Revenue; on the contrary, orders of Settlement Commission was put to execution by Revenue in terms of s. 245D(6A) but that in no manner preclude the Revenue which is a party to the dispute, if aggrieved from assailing the same in remedial proceeding available under law, principles of promissory estoppel or of “approbate and reprobate” have no application in the facts of instant case. Further submission made by counsel for assessees (respondents) that settlement is not an adjudication but is a settlement of dispute as is evident from its very nomenclature under Chapter XIX-A, is also devoid of merit for the reason that proceedings undertaken by Settlement Commission under Chapter XIX-A are deemed to be judicial proceedings as provided under s. 245L of the Act and a mechanism has been provided under Chapter XIX-A in general and under sub-s. (4) of s. 245D in particular and Settlement Commission has to pass an order after due compliance thereof which is a sort of adjudication of dispute having been raised by assessee while submitting their application for settlement under s. 245C of the Act and if Settlement Commission having failed to comply with mandate of law, such orders impugned passed in violation of s. 245D(4) cannot be said to be legally sustainable. In Civil Writ Petn. No. 12665 of 2008 (CIT vs. Sushil Kr. Purohit), apart from merits being almost self-same in cognate matters, additional point has been raised by counsel for assessee (respondent) that Settlement Commission Kolkata has passed order impugned herein, this Court has no territorial jurisdiction. Per contra, counsel for Revenue submits that the assessee is being assessed by CIT, Jaipur and being resident of Kolkata, application was filed before Settlement Commission Bench at Kolkatta which has examined and passed order impugned, that itself, does not exclude jurisdiction of this Court.
In the opinion of this Court, as is evident from the petition, the assessee was assessed in Rajasthan and in exercise of jurisdiction by Bench at Kolkata, as provided under s. 245BA of the Act that in no manner excludes territorial jurisdiction of this Court.
As already informed, all the assessees have deposited amount of tax in terms of orders impugned, a joint request was made that such deposited tax amount be refunded back to respective assessees, in case matter is remitted back to the Settlement Commission. However, since Settlement Commission would examine the matters afresh after affording opportunity of hearing to the parties, this Court considers it appropriate that what has been deposited by respective assessees under orders impugned would be subject to final outcome of their applications under s. 245C under orders being passed under s. 245D(4) of the Act and as a consequence whereof, if there would be any refund ordered, assessee would certainly be entitled for interest @ 15 per cent per annum. Consequently, all these writ petitions stated in Schs. A and B appended to this order succeed and are hereby allowed; and the orders dt. 31st March, 2008 and 29th March, 2008 passed by Settlement Commission being in instant bunch of petitions are hereby quashed and set aside. However, matters are remitted back to the respective Settlement Commission Benches to decide applications of assessees filed under s. 245C after affording opportunity of hearing to the parties and after due compliance of s. 245D(4) of the Act may pass fresh orders in accordance with law without being influenced by observations, made supra, expeditiously keeping in view the fact of matters pendente for sufficient long time. Parties are directed to appear before concerned Settlement Commission on 14th Sept., 2009. No costs.
SCHEDULE A
Writ petitions filed by CIT
S. No. Writ Petn. Against/Name of assessees No.
12911/2008 CIT vs. Anil Hastkala (P) Ltd. & Anr.
9893/2008 CIT vs. Raj Kumar Sharma & Anr.
10979/2008 CIT vs. Geetanjali International & Anr.
10980/2008 CIT vs. Shree Krishna Builders & Anr.
10981/2008 CIT vs. Shree Ganpati Builders & Anr.
10982/2008 CIT vs. N.K. Gupta & Anr.
10983/2008 CIT vs. Mangalam Township & Anr.
10984/2008 CIT vs. Shree Ganpati Builder & Anr.
10985/2008 CIT vs. Goyal Brothers & Anr.
10986/2008 CIT vs. Shree Trivedi Builders & Anr.
10987/2008 CIT vs. Smt. Chandra Kanta Agrawal & Anr.
10988/2008 CIT vs. Trivedi Buildings & Anr.
10989/2008 CIT vs. Shree Ganpati Developers & Anr.
10990/2008 CIT vs. Megha Colonisers (P) Ltd. & Anr.
10991/2008 CIT vs. Mangalam Construction & Anr.
10992/2008 CIT vs. Shri Agrawal Bros. & Anr.
10993/2008 CIT vs. Shri Triveni Builders & Anr.
10994/2008 CIT vs. Shri Trivedi Builders & Anr.
10995/2008 CIT vs. Mangalam Townships Ltd. & Anr.
10996/2008 CIT vs. Mangalam Townships Ltd. & Anr.
11018/2008 CIT vs. Goyal Bros. & Anr.
11069/2008 CIT vs. Naresh Kumar Sharma & Anr.
11070/2008 CIT vs. Ajay Agrawal & Anr.
11071/2008 CIT vs. Ram Babu Agrawal & Anr.
11072/2008 CIT vs. Delhi Loha Udyog & Anr.
11073/2008 CIT vs. Carpet Expo & Anr.
11074/2008 CIT vs. Prakash Chand Dhadda & Anr.
11075/2008 CIT vs. Smt. Promila Dhadda & Anr.
11076/2008 CIT vs. Girdhari Lal Agrawal & Anr.
11077/2008 CIT vs. Govind Prakash Agrawal & Anr.
11078/2008 CIT vs. Antiquariat & Anr.
11079/2008 CIT vs. Bharat Kumar Garg & Anr.
11080/2008 CIT vs. Carpet Mahal & Anr.
11081/2008 CIT vs. Om Prakash Goyal & Anr.
11082/2008 CIT vs. Mahendra Choudhary & Anr.
11083/2008 CIT vs. Ram Gopal & Anr.
11084/2008 CIT vs. R.S. Metals (P) Ltd. & Anr.
11085/2008 CIT vs. Anoop Chand Gangwal & Anr.
11086/2008 CIT vs. Anand Garg & Anr.
11087/2008 CIT vs. Shiv Kant & Bros. & Anr.
11088/2008 CIT vs. Rakhi Gangwal & Anr.
11089/2008 CIT vs. Ispat Trader & Anr.
11090/2008 CIT vs. Lokendra Pal Garg & Anr.
11091/2008 CIT vs. Pankaj Agrawal & Anr.
11092/2008 CIT vs. Smt. Phool Devi Agrawal & Anr.
11093/2008 CIT vs. Prakash Chand Dhadha & Anr.
11094/2008 CIT vs. Parshvnath Share Broking (P) Ltd.
11095/2008 CIT vs. Swaraj Builders & Anr.
11167/2008 CIT vs. Heera Chand Choudhary & Anr.
11168/2008 CIT vs. Ratan Conductors & Anr.
11169/2008 CIT vs. Smt. Tara Gupta & Anr.
11170/2008 CIT vs. Mahendra Kr. Agrawal & Anr.
11171/2008 CIT vs. EMGEE Cables & Anr.
11172/2008 CIT vs. Ajay Gupta & Anr.
11173/2008 CIT vs. Megha Colonisers (P) Ltd. & Anr.
11174/2008 CIT vs. Shri Krishna Builders & Anr.
11175/2008 CIT vs. Shripal Choudhary & Anr.
11176/2008 CIT vs. Prashant Raghav & Anr.
11177/2008 CIT vs. Dau Lal Purohit & Anr.
11178/2008 CIT vs. Dilip Shah & Anr.
11179/2008 CIT vs. Jai Mala Agrawal & Anr.
11180/2008 CIT vs. Mahipal Choudhary & Anr.
11182/2008 CIT vs. Sanjay Gupta & Anr.
11183/2008 CIT vs. Shanti Lal & Anr.
11184/2008 CIT vs. J.K. Jewellers & Anr.
1185/2008 CIT vs. Jugal Kishore Garg & Anr.
11186/2008 CIT vs. J.M. Exports & Anr.
11509/2008 CIT vs. The Gem Palace & Anr.
11510/2008 CIT vs. Mittal Gems & Anr.
11511/2008 CIT vs. Sanjeev Mittal & Anr.
11512/2008 CIT vs. Subhash Chand Gandhi & Anr.
11513/2008 CIT vs. Modi Garden (P) Ltd. & Anr.
11514/2008 CIT vs. Anand Shankar Mittal & Anr.
11515/2008 CIT vs. Ravi Prakash Modi & Anr.
11516/2008 CIT vs. Smt. Champa Modi & Anr.
11517/2008 CIT vs. Badri Narayan & Anr.
11518/2008 CIT vs. Brij Gems Banwalo & Anr.
11519/2008 CIT vs. India Agate & Anr.
11520/2008 CIT vs. Ganpati Gems & Arts & Anr.
11521/2008 CIT vs. Pradeep Mittal & Anr.
11522/2008 CIT vs. Nagendra Singh & Anr.
11523/2008 CIT vs. The Associates & Anr.
11524/2008 CIT vs. Shanti Swaroop Mahawar & Anr.
11525/2008 CIT vs. Mittal Prakash (P) Ltd. & Anr.
11526/2008 CIT vs. Manoj Mittal & Anr.
11527/2008 CIT vs. Sanjeev Prakashan & Anr.
11528/2008 CIT vs. Pawan Modi & Anr.
11529/2008 CIT vs. Narendra Kumar & Anr.
11530/2008 CIT vs. Modi Exports & Anr.
11531/2008 CIT vs. Smt. Renu Modi & Anr.
12661/2008 CIT vs. Aalishan Petro Products Ltd. & Anr.
12663/2008 CIT vs. Ashok Kumar & Anr.
12664/2008 CIT vs. Pramod Kumar & Anr.
12665/2008 CIT vs. Sushil Kr. Purohit & Anr.
12667/2008 CIT vs. Ram Charan Modi & Anr.
12668/2008 CIT vs. Mukesh Vijay Vergia & Anr.
12669/2008 CIT vs. Om Prakash Gupta & Anr.
12670/2008 CIT vs. Hari Kishan Vijay Vergia & Anr.
12671/2008 CIT vs. Pancham Plywood (P) Ltd. & Anr.
12672/2008 CIT vs. D.S. Bhandari & Anr.
12673/2008 CIT vs. Smt. Renu Bhandari & Anr.
12674/2008 CIT vs. B.G. Exports & Anr.
12675/2008 CIT vs. Sunder Kumar & Anr.
12676/2008 CIT vs. B.G. Jewellers & Anr.
12677/2008 CIT vs. Nav Ratan Maheshwari & Anr.
12678/2008 CIT vs. Madan Lal Jain & Anr.
12679/2008 CIT vs. Nathulal Jain & Anr.
12680/2008 CIT vs. Smt. Shella Modi & Anr.
12907/2008 CIT vs. Lalit Kumar & Anr.
12908/2008 CIT vs. Ashok Kr. Jain & Anr.
12909/2008 CIT vs. Jain Township/Land Development
12910/2008 CIT vs. Singhania Oil Mills & Anr.
12912/2008 CIT vs. Birdhi C. Ghanshyam & Anr.
12913/2008 CIT vs. Rajesh Vijayvergia & Anr.
13316/2008 CIT vs. Shanti Kr. Vipul & Anr.
13317/2008 CIT vs. Shruti Gems & Anr.
12662/2008 CIT vs. Sunder Das Sonkia & Anr.
SCHEDULE B
Writ petitions filed by assessees
S. No. Writ Petn. Name of assessee/respondent No.
1. 5036/2008 Prakash C. Jalan vs. Settlement Commission
2. 3576/2008 The Gem Palace vs. Union of India & Ors.
3. 4332/2008 R.S. Metal (P) Ltd. vs. ITSC & Anr.
4. 5030/2008 Nawal Kr. Jalan vs. Settlement Commission
5. 5031/2008 Rajendra Prasad Jalan vs. ITSC
6. 6879/2008 Shivkant & Bros. vs. ITSC & Anr.
7. 6880/2008 Ispat Traders vs. ITSC & Anr.
8. 7930/2008 Delhi Loha Udyog vs. ITSC & Anr.
9. 3816/2008 Ajay Gangwal & Ors. vs. Union of India
10. 4245/2008 Anant Kr. Goyal vs. ITSC & Ors.
11. 4246/2008 Om Prakash Goyal vs. ITSC & Ors.
12. 4272/2008 Shreeji Builders & Developers vs. ITSC & Ors.
13. 4274/2008 Shri Anant Builders & Developers vs. ITSC
14. 10215/2008 Mittal Gems vs. ITSC & Ors.
[Citation : 329 ITR 41]
