Author: Mahima, 5th Year student at School of Law, UPES, Dehradun.
Citation: W.P. Nos. 663 to 665 of 2018
Date of judgment: April 17, 2021
Bench: S.M. Subramaniam
Original copy: View
Issues in question:
- Whether Section 245(C) and 245(D) are interdependent while defining the scope and application of powers of the Settlement Commission or not?
- Whether the High Court empowered by virtue of Article 226 of the Constitution of India to interfere with the findings of the Settlement Commission?
Background of the case:
- The Settlement Commission received applications by the petitioner under Section 245(C) of the Income Tax Act for resolution of disputes within the Income Tax Department. The petitioner’s counsel, however, disagreed with the conclusion of the Settlement Commission on the ground that the opinion of the Commission was based on misunderstood facts and circumstances and requested another opportunity for re-adjudication of the issues by the Commission itself.
- The counsel for the respondent submitted that the assessee is required to come with full and true disclosure while filing an application under Section 245(C) as a pre-condition because once it’s established that the facts were controverted, the application is rejected in limini. This makes the narration of facts and circumstances unnecessary when events of discrepancies arise.
- The Counsel for respondent relied on the judgments derived in the case of S.V. Shankar v Settlement Commission and Abdul Rahim v Income Tax Settlement Commission, Chennai to argue the untenability of the writ petitions stating that when the prerequisites under Section 245(C) was not fulfilled then the High Court has no reason to entertain the writ petitions under Article 226 of the Constitution of India.
- The counsel for the petitioner relied on Section 245(D) which lays down the procedure to be followed on receiving an application under Section 245(C) for contending that reasonable opportunity wasn’t given to the petitioner for explaining the statements and the documents furnished to him as the copies of Bank Statements and other documents were provided to the petitioner on 09.11.2017 for his comments and clarifications and the case was adjourned for 10.11.2017 giving the petitioner a very limited time to verify the same and therefore, the petitioner requests further opportunity for clarifying factual matrix with reference to the report of the Commissioner.
- The counsel for petitioner highlighted the provisions under Clause 4 of Section 245(D) which lays down that an opportunity is to be provided to the petitioner as well as an adjudication, enabling the assessee to clarify factual matrix. The counsel also stated that when the Settlement Commission is entitled to adjudicate upon issues regarding Income Tax Act, it should also adjudicate and conclude the authenticity of such disclosures as made for additional information or income. However, in the present case, no such conclusions were drawn by the Settlement Commission under Section 245(D)(4) of the Income Tax Act thereby declaring the report of Settlement Commission as perverse and liable to be overruled.
- The High Court maintained that it is not entitled to re-appreciate the evidence as the findings of the Settlement Commission concludes that true and full disclosure of income was not made in the application.
- Perusal of the reasoning for the conclusion made by the Settlement Commission establishes that the petitioner didn’t approach the Commission with clean hands thereby limiting the settlement options of the Commission within the purview of Section of 245(C).
- The High Court opined that Section 245(D) has to be read with Section 245(C) to form an opinion. When an application is filed under Section 245(C), then it is necessary to verify that the ingredients as prescribed under Section 245(C) are fulfilled and once such verification is complete and affirms that the ingredients are fulfilled, the Settlement Commission should move on to pursue the provisions laid down under Section 245(D). In case the ingredients are not fulfilled, the Settlement Commission is empowered to reject the application.
- In this case, conjoint reading of Section 245(C) and 245(D) establishes that the Commissioner of Income Tax provided the petitioner with an opportunity to establish his case with respect to the application filed but not with respect to other income or materials.
- The High Court relied on the case of Canara Jewellers v Settlement Commission to discuss the scope of Section 245(C) and on the case of Rohit Kumar Gupta v Principal Commissioner of Income Tax, Central-11 to discuss the interpretation of Section 245(D)(4) as a substantive law.
- The High Court concludes that the findings of the Settlement Commission are perspicuous and specific facts and circumstances were looked into by the Settlement Commission to verify whether petitioner’s disclosures were entirely truthful or not and explains that the High Court is not entitled under Article 226 to interfere with such factual analysis and conclusions until such facts are found to be erroneous.
- In the present case, the petitioner failed to establish that he had approached the Settlement Commission with complete honesty as contemplated under Section 245(C) and therefore, the actual conclusion of the Settlement Commission was unequivocal. In addition, the Settlement Commission has already been dissolved as on 01.02.2021 in view of which the writ petitions fail and therefore, stand dismissed.
- This case defines the procedural interdependence of Section 245(c) and 245(D) while also establishing the scope of interference of the High Court under Article 226 of the Constitution of India.