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Through: Ms. Meenakashi Midha with Mr.L.G. Dass, Advocates versus INCOME TAX SETTLEMENT COMMISSION & ORS
February, 20th 2014
*      IN THE HIGH COURT OF DELHI AT NEW DELHI


                                             Reserved on: 27.01.2014
                                           Pronounced on:10.02.2014

+      WP(C) No.2347/2008 & C.M. APPL. 4489/2008

       ASHWANI KUMAR GOEL                            ..... Petitioner

                         Through: Ms. Meenakashi Midha with
                         Mr.L.G. Dass, Advocates

                               versus

       INCOME TAX SETTLEMENT COMMISSION
       & ORS                         .... Respondents

              Through: Sh. N P Sahni, Sr. Standing Counsel with
              Mr.Nitin Gulati, Jr. Standing Counsel.

       CORAM:

       HON'BLE MR. JUSTICE S. RAVINDRA BHAT
       HON'BLE MR. JUSTICE R.V. EASWAR

MR. JUSTICE S. RAVINDRA BHAT

%

1.     The petitioner seeks a direction challenging an order of 04.03.2008
issued by the Income Tax Settlement Commission, which rejected the
petitioner's application that the assessment for the period 01.04.1986 to
07.04.1987 was time barred. On 07.08.1997, search and seizure operations
were conducted at the residential and business premises in respect of the
petitioner, his wife and other relatives. Several articles and documents were




RFA (OS) 2347/2008                                                      Page 1
seized. The last panchnama was drawn on 26.09.1997. Upon receipt of
notice, the petitioner filed a return for the period 01.04.1986 to 07.04.1987.
After considering this, the Income Tax Authorities were of the opinion that
the accounts indicated had sufficient complexities warranting an audit under
Section 142-(2)A. An order was accordingly made on15.09.1999. A special
auditor submitted the audit report on 14.02.2000. It was contended during
the pendency of these proceedings that the Settlement Commission by its
order dated 10.08.2000 entertained the application made to it. The order was
a speaking one and made after submissions of the parties and was drawn up
by the departmental authorities.      Whilst the Settlement Commission's
proceedings were pending, an order under Section 245 D (4) was
contemplated and heard. The petitioner contended that the entire proceedings
had to be closed since the block assessment had become time barred on
29.02.2000. It was submitted that by virtue of the then existing Section
158BE, which mandated that assessment were to be completed within a time
bound manner which was to expire on 29.02.2000 (the period having been
extended by virtue of special audit conducted under Section 142). In the
absence of any order by the Settlement Commission admitting the matter or
proceeding further, the Assessing Officer had the lost authority to pass any
orders. Consequently, the Commission itself did not possess jurisdiction.
The petitioner relied upon the decisions reiterated in CIT v. Hindustan Bulk
Carrier, (2003) 259 ITR 449 (SC) and CIT v. Damini Brothers, (2003) 259
ITR 475 (SC).




2.     After hearing counsel for the parties, the Settlement Commission
rejected the petitioner's argument. Learned counsel relied upon the ruling of




RFA (OS) 2347/2008                                                      Page 2
the Supreme Court reported as Brij Lal & Others v. Commissioner of Income
Tax, (2011) 1 SCC 1, for the following observations :

           "41.     Further, as stated above, the jurisdiction of
           AO is not fettered merely because the applicant has
           filed the settlement application. The Act does not
           contemplate stay of the proceedings during that period
           i.e. when the Settlement Commission is deciding
           whether to proceed or reject the settlement application.
           The jurisdiction of the Settlement Commission to
           proceed commences only after an order is passed
           under Section 245-D(1). That, after making an
           application for settlement the applicant is not allowed
           to withdraw it [see Section 245-C(3)]. Once the case
           stands admitted, the Settlement Commission shall have
           exclusive jurisdiction to exercise the powers of the
           Income Tax Authority."

3.     It was submitted that the Assessing Officer was always free to
complete the assessment within the time period permitted by law, and was
not constrained from making any order.          Since he did not do so, the
Settlement Commission which was invested with his powers could not
likewise have proceeded further. It was submitted that the amendment made
to Section 158 BE by the Finance Act, 2002 could not be made applicable in
the present case as the block assessment had become time barred on
29.02.2000. Counsel reiterated that Settlement Commission did not enjoy
exclusive jurisdiction by virtue of Section 25-F(1) prior to the passing of an
order under Section 245-D(1) of the Income Tax Act. In support, counsel
relied upon the Damini Brothers case (supra).




RFA (OS) 2347/2008                                                      Page 3
4.     Counsel for the Revenue argued that the power of the Assessing
Officer to make an order does not allow an applicant approaching the
Settlement Commission to contend that jurisdiction ceases automatically if
an assessment is not framed. Learned counsel submitted that a careful
reading of Hindustan Bulk Carrier would show that mere filing of an
application for settlement would not in any manner adversely affect the
powers of the Assessing Officer. That formulation of law in no way meant
that Settlement Commission was placed under the kind of restrain as was
sought to be suggested. It was argued that in this case even at the stage of
the order under Section 245-D(1), the petitioner never contended that the
Commission had lost jurisdiction on account of the matter having become
time barred under Section 158BE.         Counsel also submitted that if the
petitioner's argument were to be accepted, the Commission would be
conferred with a review power despite conclusiveness provided to its order
by Section 245-D(1). He also relied upon the judgment of this Court in
Capital Cables (India) Private Limited v. ITSE, 2004 267 ITR 528 Delhi.

5.     The pre-condition for the Commission to receive an application is that
a case as defined under Section 245-A(b) should be pending as on the date of
its presentation. Section 245-C spells out the conditions which the applicant
has to satisfy and Section 245- D(1) outlines how such applications are to be
proceeded with. The Commission after examining the matter and satisfying
itself can either allow the case or reject it. It is a matter on record that when
the application was admitted on 10.08.2000, the petitioner was represented
and heard. At this stage, no objection as to the jurisdiction of the Settlement
Commission was made, the observations in the impugned order of the




RFA (OS) 2347/2008                                                         Page 4
Commission that to re-visit the order of 10.08.2000 would in effect amount
to impermissible review is, in the opinion of this Court, sound reasoning.
The conclusiveness attached to the order made by the Commission has been
emphasized time and again. Section 245 (1) reiterated this in no uncertain
terms. The Supreme Court has also underlined this in CIT, Mumbai v.
Anjum M.H. Ghaswala & Ors., 2001 252 ITR (1).

6.     The decision in Deen Dayal v. Union of India, (1986) 160 ITR 12, in
our opinion, concludes the issue sought to be urged against the petitioner. In
fact the Court visualized the very situation which we are called upon to
examine and held that even while upholding the authority of the Assessing
Officer to complete assessment, clarify that "there will be no impediment to
the Settlement Commission in exercise its powers if it decides to exercise
them. On the other hand this Settlement Commission decides not to proceed
with application, there is no distinct possibility of department not being able
to realize the taxes in the circumstances of this case."

7.     The authority of a Settlement Commission to make such orders as are
necessary in regard to the matters before it also extends to other matters
relating to the case not covered by the application but referred to in the
report of the Commission. There is also an element of exclusiveness to the
jurisdiction of the Settlement Commission, reiterated by Section 245-F(2).
Section 245-E empowers the Settlement Commissions to re-open any
proceedings connected with the case in respect of which assessment too has
been completed. Given these powers, the fact as to whether the Assessing
Officer was in the process of making the assessment or not becomes
irrelevant. If indeed the Assessing Officer had completed the assessment,



RFA (OS) 2347/2008                                                       Page 5
the wide nature of the Commission's jurisdiction, nevertheless, would have
allowed to over-ride that assessment order while framing its order under
Section 245-D(4).

8.     The consequence of accepting the argument of the assessee would be

that even though there was a search of his premises u/s 132 of the Act which

yielded incriminating material, the proceedings arising out of which he

wanted to settle by approaching the Settlement Commission, he would still

end up not paying any tax, as the block assessment became barred by time

and there would also be no settlement order u/s 245D(4). Such a situation

could not have been intended by the statute. Though now the situation has

been taken care of by the insertion of the first proviso to Section 245F(2) by

the Finance Act, 2007 w. e. f. 01.06.2007, but that cannot prejudice the

rights of the revenue prior to that date as it seems to us that it was inserted

only "ex abundant cautela". In Commissioner of Income-Tax, (Central),

Calcutta vs. B.N. Bhattachargee and Anr., (1979) 118 ITR 461 (SC), Justice

Krishna Iyer, dealing with the first case to reach the Supreme Court under

Chapter XIX-A, when faced with a situation not specifically provided for in

the said chapter, observed as follows: -




RFA (OS) 2347/2008                                                       Page 6
       "Be that as it may, fiscal philosophy and interpretative
       technology must be on the same wavelength if legislative policy
       is to find fulfilment in the enacted text. That is the challenge to
       judicial resourcefulness the present appeals offer, demanding,
       as it does, a holistic perspective and harmonious construction
       of a whole chapter, especially a complex provision therein, so
       that a balance may be struck between purpose and result
       without doing violence to statutory language and social values.
       The chapter is fresh and the issue is virgin; and that makes the
       judicial adventure hazardous, compounded by the involved and
       obscure drafting of the bunch of provisions in Chap. XIXA."


9.     In our view, this rule should govern our approach to the situation

arising in the case in hand.

10.    It is a settled rule of construction that tax laws, like all other laws,

shall be interpreted reasonably and in consonance with justice so as to avoid

an absurd consequence that may lead to mischief or abuse: (Hegde, J., in

Jodha Mal Kuthiala vs. CIT, (1971) 82 ITR 570 (SC).               A machinery

provision in the Income Tax Act cannot be subjected to the literal or strict

rule of construction that is adopted to interpret a charging section.           In

Calcutta Jute Manufacturing Co. vs. CTO, (AIR 1997 SC 2920), the

Supreme Court held that a machinery provision must be so interpreted as to

effectuate its purpose, and the distinction between a charging section and a

machinery provision whose function is to effectuate the charge, was pointed

out in the context of the rule of interpretation to be adopted. In S.P.A.M.






RFA (OS) 2347/2008                                                           Page 7
Krishnan Chettiar and Son vs. Income-Tax Settlement Commission and

Another, (1993) 202 ITR 81 (Mad.), a Division Bench of the Madras High

Court ruled that Chapter XIX-A of the Act providing for settlement of cases

is a machinery provision; the following observations are relevant: -


       "Chapter XIX-A in the Act, introduced by the Taxation Laws
       (Amendment) Act, 1975, was the result of implementing the
       recommendations of the Wanchoo Committee to arrest the evil
       of black money and large scale tax evasion. One of the
       recommendations made was a compromise measure by which a
       disclosure could be made and the quantum of tax is determined
       and the assessee not only secured quittance for himself, but
       also freedom from levy of penalty and prosecution. The
       machinery, initially conceived of by the Wanchoo Committee to
       achieve this, was a Tribunal, though, later, it was rechristened
       the Settlement Commission with full powers to investigate,
       quantify the amount of tax, penalty as well as interest, etc., and
       grant immunity from prosecution at its discretion. The details
       of the application, probe, consideration, hearing and disposal,
       found in the report, had been incorporated in the statutory
       provisions in Chapter XIX-A. Thus, a careful study of the
       anatomy of Chapter XIX-A clearly brings out that it was only in
       the nature of machinery provisions for the purpose of
       settlement of tax disputes between the assessee and the
       Revenue. The provisions do not compel any assessee to resort
       to section 245C, but that can be availed of, if the assessee so
       chooses. In other words, the remedy provided under section
       245C, as a machinery provision for effecting settlement of tax
       disputes, was only in the nature of a concession or option open
       to the assessee who desired to settle his tax matters."
       We concur with the above view.




RFA (OS) 2347/2008                                                          Page 8
12.    In view of the above discussion, this Court is of the opinion that there
is no merit in the petition and it is accordingly dismissed without any orders
as to cost. All pending applications also stand disposed of.




                                                S. RAVINDRA BHAT
                                                          (JUDGE)




                                                        R.V. EASWAR
                                                             (JUDGE)
FEBRUARY 10, 2014




RFA (OS) 2347/2008                                                        Page 9

 
 
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