THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 06.01.2016
+ W.P.(C) 2927/2013
AGSON GLOBAL PVT LTD & ORS ... Petitioners
versus
INCOME TAX SETTLEMENT
COMMISSION AND ORS ... Respondents
Advocates who appeared in this case:
For the Petitioners : Mr M. S. Syali, Sr Advocate with Ms Gayatri Verma,
Ms Husnal Syali, Mr Mayank Nagi and Mr Harkunal Singh
For the Respondents : Ms Suruchi Aggarwal, Adv. with Ms Lakshmi Gurung,
Ms Radhika Gupta and Mr Abhishek Sharma
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE V. KAMESWAR RAO
JUDGMENT
BADAR DURREZ AHMED, J
1. The only issue which arises for consideration in this writ petition is
whether the income tax settlement commission has the power to direct a
special audit under section 142 (2A) in exercise of its power vested in
section 245F of the Income Tax Act, 1961 (hereinafter referred to as "the
said act")?
WPC 2927/2013 Page 1 of 38
2. Petitioner Nos. 1 to 7 filed a settlement application before the income
tax settlement commission, New Delhi under the provisions of chapter
XIX-A of the said act on 12.12.2011. Thereafter, on 22.12.2011 petitioner
nos. 8 to 10 filed their settlement application before the said income tax
settlement commission. On 22.12.2011, the principal bench of the said
settlement commission passed an order under section 245D (1) of the said
act admitting the application made by petitioner nos. 1 to 7 for settlement
before it. Similarly, on 28.12.2011, the principal bench of the income tax
settlement commission passed an order under section 245D (1) of the said
act admitting the applications made by petitioner nos. 8 to 10 for settlement
before it. On 21.06.2012, the Commissioner of income tax, Delhi furnished
his consolidated report as required by the income tax settlement
commission. The petitioners submitted their reply to the said consolidated
report on 10.09.2012. As required by the settlement commission, the
petitioners submitted their consolidated profit and loss account and balance
sheets for the assessment year's 2004-05 to 2011-12 before the assessing
officer (Asst Commissioner of income tax, central circle 23, Jhandewalans,
New Delhi).
WPC 2927/2013 Page 2 of 38
3. The Commissioner of income tax submitted a supplementary report
dated 05.12.2012 in which he noted that after examining the accounts
submitted by the petitioners, the assessing officer was of the opinion that
the accounts were very complex in nature and that the same ought to be
audited under section 142 (2A) of the said act for determining the correct
income of the petitioner group. The Commissioner indicated that he was
also of the opinion that owing to the complexity in the maintenance of
accounts, to arrive at the correct income of the assessee group for all the
assessment years for which settlement applications have been filed and
admitted by the settlement commission, the accounts of the assessee group
are required to be audited under section 142 (2A) of the said act. The
settlement commission was therefore requested to direct a special audit of
the accounts of the assessee group.
4. After considering the material on record, including the
supplementary report dated 05.12.2012 requesting for a special audit under
section 142 (2A), the settlement commission sent a letter dated 17.04.2012
to the petitioners providing them an opportunity of being heard as to why
their accounts should not be subjected to the said special audit. Arguments
were heard on this aspect by the settlement commission on 25.04.2013. It
WPC 2927/2013 Page 3 of 38
was inter alia argued on behalf of the petitioners that a special audit under
section 142 (2A) of the said act could only be directed at the stage of
assessment and cannot be conducted in the course of settlement
proceedings. This argument was rejected by the settlement commission in
the following manner:
"(V) The powers of the settlement commission u/s 245F
(2) entail exclusive jurisdiction to exercise the powers and
perform the functions of an income tax authority. This, in
our view, includes the powers to direct audit u/s 142 (2A).
The contention of the applicants that Sec 142(2A) can be
conducted only in assessment proceedings and not
settlement proceedings under chapter XIX A, is misplaced.
Accepting such a contention will render the provisions of
section 245F (2) otiose. We therefore reject this contention."
5. The settlement commission was of the view that the accounts were
complex and that it was in the interest of the revenue that the special audit
be ordered. Consequently, by virtue of the impugned order dated
26.04.2013, the settlement commission directed that the special audit be
carried out. Being aggrieved by this, the petitioners have filed the present
petition seeking the quashing of the impugned order dated 26.04.2013.
6. On behalf of the petitioners it was argued that there is a clear
distinction between a settlement and an assessment. The procedure for
WPC 2927/2013 Page 4 of 38
assessment is provided in chapter XIV of the said act. On the other hand the
procedure for settlement of cases is set out in chapter XIX-A of the said act.
The requirement of a special audit is spelt out in section 142 (2A) of the
said act which falls within the ambit of inquiry before assessment. It was
contended that the proceedings under chapter XIX-A are entirely different
from assessment proceedings and, therefore, the settlement commission
which is concerned with settlement of cases would not have the jurisdiction
to direct a special audit. It was also contended that merely because section
245F confers powers on the settlement commission which are vested in an
income tax authority, does not mean that all the powers of an income tax
authority under the said act vest in the income tax settlement commission.
It was submitted that the powers conferred under section 245F ought to be
construed keeping in mind the distinction between an assessment and a
settlement. Reliance was placed on the following decisions:
(1) CIT v. Om Prakash Mittal: (2005) 2 SCC 751;
(2) Brij Lal & Ors v. CIT, Jalandhar: (2011) 1 SCC 1;
(3) Picasso Overseas & Ors v. DGRI: WPC 1495/2007:
decided on 03.08.2009;
WPC 2927/2013 Page 5 of 38
(4) Ashwani Tobacco Pvt. Ltd v. Union of India: WPC
9104/2009 decided on 29.01.2010;
(5) Union of India v. Dharampal & Ors.: WPC 4376/2012
decided on 27.09.2013; and
(6) Director General of Central Excise Intelligence v.
Murarilal Harishchandra Jaiswal Pvt. Ltd: (2010) 172
DLT 593 (DB).
7. The learned counsel for the revenue supported the view taken by the
income tax settlement commission. It was contended that the settlement
commission by virtue of the provisions of section 245F of the said act
acquires exclusive jurisdiction in respect of a case when an application
under section 245C is made before it and such jurisdiction comes to an end
if an order under section 245D(1) is made whereby the settlement
application is not proceeded with or, where the application is proceeded
with, till the order is passed under section 245D (4). It was submitted that in
respect of matters covered by the settlement application and all proceedings
incidental thereto, the settlement commission has exclusive jurisdiction
with regard to adjudication, orders and directions. It was also submitted, on
the strength of Brij Lal (supra), that the filing of an application before the
settlement commission is akin to the filing of a return before the assessing
authority under section 139 of the said act. It was submitted that the
WPC 2927/2013 Page 6 of 38
settlement commission has to determine the income as is done by the
assessing officer under section 143(3) of the said act. Thus, according to the
learned counsel for the revenue, just as the assessing officer has a right to
make any enquiry for proper assessment and can direct a special audit
having regard to the nature and complexity of the accounts and keeping in
mind the interest of the revenue, the settlement commission, which also has
to determine the total income and thereby make an assessment, can, when it
has exclusive jurisdiction over the case, certainly direct that a special audit
be carried out. Reliance was also placed on the following decisions:
(1) CIT v. Express Newspapers Limited: (1994) 206 ITR 443
(SC);
(2) Parag Nivesh Private Limited v. DCIT: (1999) 240 ITR
419 (Cal).
8. The relevant provisions of the said act are set out hereunder:
A. Section 142 {in Chapter XIV: Procedure for
Assessment} as it stood on the date of the impugned order:
"142. Enquiry before assessment.--(1) For the purpose of
making an assessment under this Act, the Assessing Officer
may serve on any person who has made a return under Section
115-WD or Section 139 or in whose case the time allowed
under sub-section (1) of Section 139 for furnishing the return
has expired a notice requiring him, on a date to be therein
specified,--
(i) where such person has not made a return within the
time allowed under sub-section (1) of Section 139 or
WPC 2927/2013 Page 7 of 38
before the end of the relevant assessment year, to furnish
a return of his income or the income of any other person
in respect of which he is assessable under this Act, in the
prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be prescribed,
or:
Provided that where any notice has been served under this
sub-section for the purposes of this clause after the end of
the relevant assessment year commencing on or after the
1st day of April, 1990 to a person who has not made a
return within the time allowed under sub-section (1) of
Section 139 or before the end of the relevant assessment
year, any such notice issued to him shall be deemed to
have been served in accordance with the provisions of
this sub-section.
(ii) to produce, or cause to be produced, such accounts or
documents as the Assessing Officer may require, or
(iii) to furnish in writing and verified in the prescribed
manner information in such form and on such points or
matters (including a statement of all assets and liabilities
of the assessee, whether included in the accounts or not)
as the Assessing Officer may require:
Provided that--
(a ) the previous approval of the Joint Commissioner shall be
obtained before requiring the assessee to furnish a statement of
all assets and liabilities not included in the accounts;
(b ) the Assessing Officer shall not require the production of
any accounts relating to a period more than three years prior to
the previous year.
(2) For the purpose of obtaining full information in respect of
the income or loss of any person, the Assessing Officer may
make such enquiry as he considers necessary.
WPC 2927/2013 Page 8 of 38
(2-A) If, at any stage of the proceedings before him, the
Assessing Officer, having regard to the nature and
complexity of the accounts of the assessee and the interests of
the revenue, is of the opinion that it is necessary so to do, he
may, with the previous approval of the Chief Commissioner
or Commissioner, direct the assessee to get the accounts
audited by an accountant, as defined in the Explanation
below sub-section (2) of Section 288, nominated by the Chief
Commissioner or Commissioner in this behalf and to furnish
a report of such audit in the prescribed form duly signed and
verified by such accountant and setting forth such particulars
as may be prescribed and such other particulars as the
Assessing Officer may require:
Provided that the Assessing Officer shall not direct the
assessee to get the accounts so audited unless the assessee has
been given a reasonable opportunity of being heard.
xxxx xxxx xxxx xxxx xxxx"
(underlining added)
B. Provisions of Chapter XIX-A {Settlement of Cases}:
"245-A. Definitions.--In this Chapter, unless the context
otherwise requires,--
xxxxx xxxxx xxxxx xxxxx xxxxx
(b ) "case" means any proceeding for assessment under this
Act, of any person in respect of any assessment year or
assessment years which may be pending before an Assessing
Officer on the date on which an application under sub-section (1)
of Section 245-C is made:
Provided that--
(i ) a proceeding for assessment or reassessment or
recomputation under Section 147;
(ii) [* * *]
WPC 2927/2013 Page 9 of 38
(iii) [* * *]
(iv) a proceeding for making fresh assessment in pursuance of an
order under Section 254 or Section 263 or Section 264, setting
aside or cancelling an assessment,
shall not be a proceeding for assessment for the purposes of this
clause.
Explanation.--For the purposes of this clause--
(i) a proceeding for assessment or reassessment or recomputation
referred to in clause (i) of the proviso shall be deemed to have
commenced from the date on which a notice under Section 148 is
issued;
(ii) [* * *];
(iii) a proceeding for making fresh assessment referred to in
clause (iv) of the proviso shall be deemed to have commenced
from the date on which the order under Section 254 or Section
263 or Section 264, setting aside or cancelling an assessment was
passed;
(iii-a) a proceeding for assessment or reassessment for any of the
assessment years, referred to in clause (b) of sub-section (1) of
Section 153-A in case of a person referred to in Section 153-A or
Section 153-C, shall be deemed to have commenced on the date
of issue of notice initiating such proceedings and concluded on
the date on which the assessment is made;
(iv) a proceeding for assessment for any assessment year, other
than the proceedings of assessment or reassessment referred to in
clause (i) or clause (iv) of the proviso or clause (iii-a) of the
Explanation], shall be deemed to have commenced from the 1st
day of the assessment year and concluded on the date on which
the assessment is made;
xxxx xxxx xxxx xxxx"
WPC 2927/2013 Page 10 of 38
"245-C. Application for settlement of cases.--(1) An assessee
may, at any stage of a case relating to him, make an application
in such form and in such manner as may be prescribed, and
containing a full and true disclosure of his income which has not
been disclosed before the Assessing Officer, the manner in which
such income has been derived, the additional amount of income
tax payable on such income and such other particulars as may be
prescribed, to the Settlement Commission to have the case settled
and any such application shall be disposed of in the manner
hereinafter provided:
Provided that no such application shall be made unless,--
(i) in a case where proceedings for assessment or reassessment
for any of the assessment years referred to in clause (b) of sub-
section (1) of Section 153-A or clause (b) of sub-section (1) of
Section 153-B in case of a person referred to in Section 153-A or
Section 153-C have been initiated, the additional amount of
Income Tax payable on the income disclosed in the application
exceeds fifty lakh rupees,
(i-a) in a case where--
(A) the applicant is related to the person referred to in clause
(i) who has filed an application (hereafter in this sub-section
referred to as "specified person"); and
(B) the proceedings for assessment or re-assessment for any
of the assessment years referred to in clause (b) of sub-
section (1) of Section 153-A or clause (b) of sub-section (1)
of Section 153-B in case of the applicant, being a person
referred to in Section 153-A or Section 153-C, have been
initiated,
the additional amount of income-tax payable on the income
disclosed in the application exceeds ten lakh rupees,
(ii) in any other case, the additional amount of Income Tax
payable on the income disclosed in the application exceeds ten
lakh rupees, and such tax and the interest thereon, which would
have been paid under the provisions of this Act had the income
WPC 2927/2013 Page 11 of 38
disclosed in the application been declared in the return of income
before the Assessing Officer on the date of application, has been
paid on or before the date of making the application and the proof
of such payment is attached with the application.
Explanation.--For the purposes of clause (i-a),--
(a) the applicant, in relation to the specified person referred to in
clause (i-a), means,--
(i) where the specified person is an individual, any relative of the
specified person;
(ii) where the specified person is a company, firm, association of
persons or Hindu undivided family, any director of the company,
partner of the firm, or member of the association or family, or
any relative of such director, partner or member;
(iii) any individual who has a substantial interest in the business
or profession of the specified person, or any relative of such
individual;
(iv) a company, firm, association of persons or Hindu undivided
family having a substantial interest in the business or profession
of the specified person or any director, partner or member of such
company, firm, association or family, or any relative of such
director, partner or member;
(v) a company, firm, association of persons or Hindu undivided
family of which a director, partner or member, as the case may
be, has a substantial interest in the business or profession of the
specified person; or any director, partner or member of such
company, firm, association or family or any relative of such
director, partner or member;
(vi) any person who carries on a business or profession,--
(A) where the specified person being an individual, or any
relative of such specified person, has a substantial interest in
the business or profession of that person; or
WPC 2927/2013 Page 12 of 38
(B) where the specified person being a company, firm,
association of persons or Hindu undivided family, or any
director of such company, partner of such firm or member
of the association or family, or any relative of such director,
partner or member, has a substantial interest in the business
or profession of that person;
(b) a person shall be deemed to have a substantial interest in a
business or profession, if--
(A) in a case where the business or profession is carried on by a
company, such person is, on the date of search, the beneficial
owner of shares (not being shares entitled to a fixed rate of
dividend, whether with or without a right to participate in profits)
carrying not less than twenty per cent of the voting power; and
(B) in any other case, such person is, on the date of search,
beneficially entitled to not less than twenty per cent of the profits
of such business or profession.
(1-A) For the purposes of sub-section (1) of this section, the
additional amount of income tax payable in respect of the income
disclosed in an application made under sub-section (1) of this
section shall be the amount calculated in accordance with the
provisions of sub-sections (1-B) to (1-D).
(1-B) Where the income disclosed in the application relates to
only one previous year,--
(i) if the applicant has not furnished a return in respect of the
total income of that year, then, tax shall be calculated on the
income disclosed in the application as if such income were the
total income;
(ii) if the applicant has furnished a return in respect of the total
income of that year, tax shall be calculated on the aggregate of
the total income returned and the income disclosed in the
application as if such aggregate were the total income.
(1-C) The additional amount of income tax payable in respect of
the income disclosed in the application relating to the previous
year referred to in sub-section (1-B) shall be,--
WPC 2927/2013 Page 13 of 38
(a) in a case referred to in clause (i) of that sub-section, the
amount of tax calculated under that clause;
(b) in a case referred to in clause (ii) of that sub-section, the
amount of tax calculated under that clause as reduced by the
amount of tax calculated on the total income returned for that
year;
(c) [* * *]
(1-D) Where the income disclosed in the application relates to
more than one previous year, the additional amount of income
tax payable in respect of the income disclosed for each of the
years shall first be calculated in accordance with the provisions
of sub-sections (1-B) and (1-C) and the aggregate of the amount
so arrived at in respect of each of the years for which the
application has been made under sub-section (1) shall be the
additional amount of income tax payable in respect of the income
disclosed in the application.
(2) Every application made under sub-section (1) shall be
accompanied by such fees as may be prescribed.
(3) An application made under sub-section (1) shall not be
allowed to be withdrawn by the applicant.
(4) An assessee shall, on the date on which he makes an
application under sub-section (1) to the Settlement Commission,
also intimate the Assessing Officer in the prescribed manner of
having made such application to the said Commission."
"245-D. Procedure on receipt of an application under Section
245-C.-- (1) On receipt of an application under Section 245-C,
the Settlement Commission shall, within seven days from the
date of receipt of the application, issue a notice to the applicant
requiring him to explain as to why the application made by him
be allowed to be proceeded with, and on hearing the applicant,
the Settlement Commission shall, within a period of fourteen
days from the date of the application, by an order in writing,
reject the application or allow the application to be proceeded
with:
WPC 2927/2013 Page 14 of 38
Provided that where no order has been passed within the
aforesaid period by the Settlement Commission, the application
shall be deemed to have been allowed to be proceeded with.
(2) A copy of every order under sub-section (1) shall be sent to
the applicant and to the Commissioner.
(2-A) Where an application was made under Section 245-C
before the 1st day of June, 2007, but an order under the
provisions of sub-section (1) of this section, as they stood
immediately before their amendment by the Finance Act, 2007,
has not been made before the 1st day of June, 2007, such
application shall be deemed to have been allowed to be
proceeded with if the additional tax on the income disclosed in
such application and the interest thereon is paid on or before the
31st day of July, 2007.
Explanation.--In respect of the application referred to in this
sub-section, the 31st day of July, 2007 shall be deemed to be the
date of the order of rejection or allowing the application to be
proceeded with under sub-section (1).
(2-B) The Settlement Commission shall,--
(i) in respect of an application which is allowed to be proceeded
with under sub-section (1), within thirty days from the date on
which the application was made; or
(ii) in respect of an application referred to in sub-section (2-A)
which is deemed to have been allowed to be proceeded with
under that sub-section, on or before the 7th day of August, 2007,
call for a report from the Commissioner, and the Commissioner
shall furnish the report within a period of thirty days of the
receipt of communication from the Settlement Commission.
(2-C) Where a report of the Commissioner called for under sub-
section (2-B) has been furnished within the period specified
therein, the Settlement Commission may, on the basis of the
report and within a period of fifteen days of the receipt of the
report, by an order in writing, declare the application in question
WPC 2927/2013 Page 15 of 38
as invalid, and shall send the copy of such order to the applicant
and the Commissioner:
Provided that an application shall not be declared invalid unless
an opportunity has been given to the applicant of being heard:
Provided further that where the Commissioner has not furnished
the report within the aforesaid period, the Settlement
Commission shall proceed further in the matter without the report
of the Commissioner.
(2-D) Where an application was made under sub-section (1) of
Section 245-C before the 1st day of June, 2007 and an order
under the provisions of sub-section (1) of this section, as they
stood immediately before their amendment by the Finance Act,
2007, allowing the application to have been proceeded with, has
been passed before the 1st day of June, 2007, but an order under
the provisions of sub-section (4), as they stood immediately
before their amendment by the Finance Act, 2007, was not
passed before the 1st day of June, 2007, such application shall
not be allowed to be further proceeded with unless the
additional tax on the income disclosed in such application and
the interest thereon, is, notwithstanding any extension of time
already granted by the Settlement Commission, paid on or
before the 31st day of July, 2007.
(3) The Settlement Commission, in respect of--
(i) an application which has not been declared invalid under
sub-section (2-C); or
(ii) an application referred to in sub-section (2-D) which has
been allowed to be further proceeded with under that sub-
section,
may call for the records from the Commissioner 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 Commissioner to make or
cause to be made such further enquiry or investigation and
furnish a report on the matters covered by the application and
WPC 2927/2013 Page 16 of 38
any other matter relating to the case, and the Commissioner
shall furnish the report within a period of ninety days of the
receipt of communication from the Settlement Commission:
Provided that where the Commissioner does not furnish the
report within the aforesaid period, the Settlement Commission
may proceed to pass an order under sub-section (4) without
such report.
(4) After examination of the records and the report of the
Commissioner, if any, received under--
(i) sub-section (2-B) or sub-section (3), or
(ii) the provisions of sub-section (1) as they stood immediately
before their amendment by the Finance Act, 2007,
and after giving an opportunity to the applicant and to the
Commissioner 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 Commissioner.
(4-A) The Settlement Commission shall pass an order under
sub-section (4)--
(i) in respect of an application referred to in sub-section (2-A)
or sub-section (2-D), 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 but before the 1st day of June, 2010], within twelve
months from the end of the month in which the application was
made.
(iii) in respect of an application made on or after the 1st day of
June, 2010, within eighteen months from the end of the month
in which the application was made.
WPC 2927/2013 Page 17 of 38
(5) Subject to the provisions of Section 245-BA, the materials
brought on record before the Settlement Commission shall be
considered by the Members of the Bench concerned before
passing any order under sub-section (4) and, in relation to the
passing of such order, the provisions of Section 245-BD shall
apply.
(6) Every order passed under sub-section (4) shall provide for
the terms of settlement including any demand by way of tax,
penalty or interest the manner in which any sum due under the
settlement shall be paid and all other matters to make the
settlement effective and shall also provide that the settlement
shall be void if it is subsequently found by the Settlement
Commission that it has been obtained by fraud or
misrepresentation of facts.
(6-A) Where any tax payable in pursuance of an order under
sub-section (4) is not paid by the assessee within thirty-five
days of the receipt of a copy of the order by him, then whether
or not the Settlement Commission has extended the time for
payment of such tax or has allowed payment thereof by
instalments, the assessee shall be liable to pay simple interest at
5
[one and one-fourth per cent for every month or part of a
month] on the amount remaining unpaid from the date of expiry
of the period of thirty-five days aforesaid.
(6-B) The Settlement Commission may, at any time within a
period of six months from the date of the order, with a view to
rectifying any mistake apparent from the record, amend any
order passed by it under sub-section (4):
Provided that an amendment which has the effect of modifying
the liability of the applicant shall not be made under this sub-
section unless the Settlement Commission has given notice to
the applicant and the Commissioner of its intention to do so and
has allowed the applicant and the Commissioner an opportunity
of being heard.
(7) Where a settlement becomes void as provided under sub-
section (6), the proceedings with respect to the matters covered
WPC 2927/2013 Page 18 of 38
by the settlement shall be deemed to have been revived from the
stage at which the application was allowed to be proceeded with
by the Settlement Commission and the income tax authority
concerned, may, notwithstanding anything contained in any
other provision of this Act, complete such proceedings at any
time before the expiry of two years from the end of the financial
year in which the settlement became void.
(8) For the removal of doubts, it is hereby declared that nothing
contained in Section 153 shall apply to any order passed under
sub-section (4) or to any order of assessment, reassessment or
recomputation required to be made by the Assessing Officer in
pursuance of any directions contained in such order passed by
the Settlement Commission and nothing contained in the
proviso to sub-section (1) of Section 186 shall apply to the
pursuance of any such directions as aforesaid."
"245-F. Power and procedure of Settlement Commission.--
(1) In addition to the powers conferred on the Settlement
Commission under this Chapter, it shall have all the powers
which are vested in an income tax authority under this Act.
(2) Where an application made under Section 245-C has been
allowed to be proceeded with under Section 245-D, the
Settlement Commission shall, until an order is passed under
sub-section (4) of Section 245-D, have, subject to the provisions
of sub-section (3) of that section, exclusive jurisdiction to
exercise the powers and perform the functions of an income tax
authority under this Act in relation to the case:
Provided that where an application has been made under
Section 245-C on or after the 1st day of June, 2007, the
Settlement Commission shall have such exclusive jurisdiction
from the date on which the application was made:
Provided further that where--
(i) an application made on or after the 1st day of June, 2007, is
rejected under sub-section (1) of Section 245-D; or
WPC 2927/2013 Page 19 of 38
(ii) an application is not allowed to be proceeded with under
sub-section (2-A) of Section 245-D, or, as the case may be, is
declared invalid under sub-section (2-C) of that section; or
(iii) an application is not allowed to be further proceeded with
under sub-section (2-D) of Section 245-D,
the Settlement Commission, in respect of such application shall
have such exclusive jurisdiction up to the date on which the
application is rejected, or, not allowed to be proceeded with, or,
declared invalid, or, not allowed to be further proceeded with,
as the case may be.
(3) Notwithstanding anything contained in sub-section (2) and
in the absence of any express direction to the contrary by the
Settlement Commission, nothing contained in this section shall
affect the operation of any other provision of this Act requiring
the applicant to pay tax on the basis of self-assessment in
relation to the matters before the Settlement Commission.
(4) For the removal of doubts, it is hereby declared that, in the
absence of any express direction by the Settlement Commission
to the contrary, nothing in this Chapter shall affect the operation
of the provisions of this Act in so far as they relate to any
matters other than those before the Settlement Commission.
(5) [Omitted]
(6) [Omitted]
(7) The Settlement Commission shall, subject to the
provisions of this Chapter, have power to regulate its own
procedure and the procedure of Benches thereof in all matters
arising out of the exercise of its powers or of the discharge of its
functions, including the places at which the Benches shall hold
their sittings."
9. On examining the provisions of section 142, it is evident that it is
part of Chapter XIV which specifically details the procedure for
WPC 2927/2013 Page 20 of 38
assessment. The said provision relates to the enquiry before assessment. It
is specifically for the purpose of making an assessment under the said act.
Sub-section (2A) stipulates that if at any stage of the proceedings before
him, the assessing officer, having regard to the nature and complexity of the
accounts of the assessee and the interest of the revenue, is of the opinion
that it is necessary so to do, he may, with the previous approval of the Chief
Commissioner of Commissioner, direct the assessee to get the accounts
audited by an accountant as prescribed under the said act and to furnish a
report of such audit in the prescribed form duly signed and verified by such
accountant and setting forth such particulars as may be prescribed and such
other particulars as the assessing officer may require. It is obvious that the
expression "at any stage of the proceedings before him" has clear reference
to the assessment proceedings. Thus, the assessing officer, subject to the
pre-conditions set out in the said provision, could require a special audit to
be conducted but this is with the sole and ultimate object of making an
assessment under the said act. The language employed in section 142
clearly indicates that the steps, including that of special audit, taken
thereunder are part and parcel of the assessment proceedings with the object
and purpose of enabling the assessment to be made under the said act by the
assessing officer.
WPC 2927/2013 Page 21 of 38
10. We shall now examine the provisions pertaining to settlement of
cases. These provisions have been examined in detail in Commissioner of
Income Tax v. Income Tax Settlement Commission & Ors.:
MANU/DE/1816/2013 [=[2014]360ITR407(Delhi)] and it would be
apposite to reproduce the same:
"6. We shall now briefly examine the scheme of the said Act
insofar as it is relevant for our purposes. Under section 245C of
the said Act, an assessee is entitled to make an application for
settlement. The application has to be made in such form and such
manner as may be prescribed. The application must contain (i) a
full and true disclosure of the assessee's income which has not
been disclosed before the assessing officer; (ii) the manner in
which such income has been derived; (iii) the additional amount
of income tax payable on such income; and (iv) such other
particulars as may be prescribed. Furthermore the assessee is also
required to pay the additional amount of tax and interest thereon,
on or before the date of making the application and the proof of
such payment should be attached with the application. Section
245C(1) stipulates that when such an application is received by
the Settlement Commission for having the case settled, the same
is to be disposed of in the manner as indicated in the said Act.
7. Section 245D of the said Act sets out the procedure
which is to be adopted by the Settlement Commission on receipt
of an application under Section 245C. Section 245D(1) stipulates
that on receipt of an application under Section 245C, the
Settlement Commission is required to, within seven days from
the date of receipt of the application, issue a notice to the
applicant requiring him to explain as to why the application made
by him be allowed to be proceeded with. Thereafter on hearing
the applicant, the Settlement Commission is required to, within a
period of 14 days from the date of the application, by an order in
writing, reject the application or allow the application to be
WPC 2927/2013 Page 22 of 38
proceeded with. The proviso to Section 245D(1) stipulates that
where no order is passed within the above mentioned period by
the Settlement Commission, either allowing the application or
rejecting the application, the application shall be deemed to have
been allowed to be proceeded with.
8. Sub-section (2B) of Section 245D of the said Act
stipulates that the Settlement Commission shall call for a report
from the Commissioner and the Commissioner shall furnish the
said report within 30 days of receipt of the communication from
the Settlement Commission. Section 245D(2C) of the said Act
prescribes that where a report of the Commissioner, which has
been called for under sub-section (2B), has been furnished within
the specified period, the Settlement Commission may, on the
basis of the report and within a period of 15 days of receipt of the
report, by an order in writing, declare the application in question
as invalid and in such eventuality, the Settlement Commission is
enjoined to send a copy of such order to the applicant and the
Commissioner. The first proviso to Section 245D (2C) ensures
that an application shall not be declared invalid by the Settlement
Commission unless an opportunity has been given to the
applicant of being heard. The second proviso thereto stipulates
that where the Commissioner has not furnished the report within
the specified period, the Settlement Commission is enjoined to
proceed further in the matter without the report of the
Commissioner.
9. Under Section 245D(3), the Settlement Commission,
inter alia, in respect of an application which has not been
declared invalid under Section 245D(2C) of the said Act may call
for the records from the Commissioner 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 Commissioner to make or cause to be made such
further enquiry or investigation and to furnish a report on the
matters covered by the application and any other matter relating
to the case. The Commissioner is required to furnish the report
within a period of 90 days of receipt of the communication from
the Settlement Commission. It is further provided that where the
WPC 2927/2013 Page 23 of 38
Commissioner does not furnish a report within the said period of
90 days, the Settlement Commission may proceed to pass an
order under sub-section (4) without such report.
10. Under Section 245D(4) of the said Act, the Settlement
Commission, after examination of the records and the report of
the Commissioner, if any, received under, inter alia, sub-section
(2B) or subsection (3) and after giving an opportunity to the
applicant as also to the Commissioner to be heard, may pass such
order as it thinks, in accordance with the provisions of the said
Act, 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 Commissioner.
11. Section 245D(6) is also of some importance. It provides
that every order passed under sub-section (4) of Section 245D is
to provide for the terms of settlement including any demand by
way of tax, penalty or interest, the manner in which any sum due
under the settlement is to be paid and all other matters to make
the settlement effective. It is specifically provided that the terms
of settlement are to indicate that the settlement would be void if it
was subsequently found by the Settlement Commission that it
had been obtained by fraud or misrepresentation of facts. As a
corollary to sub-section (6), sub-section (7) of Section 245D
provides that where a settlement becomes void under sub-section
(6), the proceedings in respect to the matters covered by the
settlement shall be deemed to have been revived from the stage at
which the application was allowed to be proceeded with by the
Settlement Commission and the income tax authority concerned,
may, notwithstanding anything contained in any other provision
of the said Act, complete such proceedings at any time before the
expiry of two years from the end of the financial year in which
the settlement became void.
12. From the above provisions, it is apparent that the
settlement application passes through several stages before the
final order providing for the terms of settlement is passed by the
Settlement Commission. The first stage is under Section
245D(1). This is followed by the next step under Section
WPC 2927/2013 Page 24 of 38
245D(2C) and finally by the order passed under Section
245D(4)...............
13. .................., it would also be appropriate if we refer to
the provisions of Section 245F of the said Act. The said section
deals with the powers and procedures of the Settlement
Commission. Sub-section (1) stipulates that in addition to the
powers conferred on the Settlement Commission under the said
Act, it would also have all the powers which are vested in an
income tax authority under the said Act. Sub-section (2) of
Section 245F further stipulates that where an application under
Section 245C has been allowed to be proceeded with under
Section 245D, the Settlement Commission shall, until an order is
passed under sub-section (4) of Section 245D, have, subject to
the provisions of sub-section (3) of that section, exclusive
jurisdiction to exercise the powers and perform the functions of
an income tax authority under the said Act in relation to the case.
We must also notice the proviso to Section 245F(2) which makes
it clear that where an application has been made under Section
245C on or after the first day of June, 2007, the Settlement
Commission shall have exclusive jurisdiction from the date on
which the application was made.............
14. For the sake of completeness, it would also be
appropriate for us to refer to the second proviso to Section
245F(2) of the said Act which, inter alia, makes it clear that
where an application which has been made on or after the first
day of June, 2007 is rejected under Section 245D(1) or is
declared invalid under Section 245D(2C), the Settlement
Commission, inspite of such an application, would have
exclusive jurisdiction upto the date on which the application is
rejected or declared invalid as the case may be. ................
xxxxx xxxxx xxxxx xxxxx xxxxx
27. It is clear that disclosure of "full and true" particulars of
undisclosed income and "the manner" in which such income had
been derived are the prerequisites for a valid application under
Section 245-C(1) of the Act. Additionally, the amount of income
tax payable on such undisclosed income is to be computed and
WPC 2927/2013 Page 25 of 38
mentioned in the application. It needs little emphasis that Section
245C-(1) of the Act mandates "full and true" disclosure of the
particulars of undisclosed income and "the manner" in which
such income was derived and, therefore, unless the Settlement
Commission records its satisfaction on this aspect, it will not
have the jurisdiction to pass any order on the matter covered by
the application."
11. Section 245F of the said act calls for closer scrutiny as that is the
provision which has been invoked by the settlement commission as also the
learned counsel for the revenue for supporting the order with regard to the
conducting of a special audit. Sub-section (1) of section 245F stipulates that
in addition to the powers conferred on the settlement commission under
chapter XIX A, it shall have all the powers which are vested in an income
tax authority under the said act. But, in our view, this has to be read in the
context of and the scope of settlement proceedings. It does not entail that
the powers of regular assessment which are vested in an income tax
authority can be exercised by the settlement commission. What we mean to
say is that the settlement commission does not engage itself in the process
of assessment and cannot make an assessment order. The order that the
settlement commission makes under section 245D(4) is not in the nature of
an assessment but by way of a settlement and contains the terms of
settlement. Thus, we reiterate that the powers which are vested in an
WPC 2927/2013 Page 26 of 38
income tax authority and could be exercised by the settlement commission
are such which have a nexus with the settlement proceedings which does
not include, in our view, the making of an assessment under the said act.
12. Coming now to sub-section (2) of section 245F of the said act read
with the first proviso thereto, it is thus clear that where an application has
been made under section 245C on or after the first day of June, 2007 (which
is the case at hand), the settlement commission shall until an order is passed
under sub-section (4) of section 245D, have, subject to the provisions of
sub-section (3) of section 245D, exclusive jurisdiction to exercise the
powers and perform the functions of an income tax authority under the said
act in relation to the case from the date on which the application was made.
In our view, the exclusivity of jurisdiction which is contemplated by the
said provision is that once an application for settlement is made before the
settlement commission, no income tax authority would have jurisdiction to
deal with the case. It does not mean that the settlement commission from
that date steps into the shoes of the income tax authority who was hitherto
dealing with the case. To be clear, let us take an example. Let us assume
that assessment proceedings are underway before an assessing officer. At
that point of time, the assessee files a settlement application before the
WPC 2927/2013 Page 27 of 38
settlement commission. In view of the provisions of Section 245F, from
that date onwards the settlement commission would have exclusive
jurisdiction to exercise the powers and perform the functions of an income
tax authority under the said act in relation to the case. Does it mean that the
settlement commission could continue with the assessment proceedings
which were before the assessing officer and pass an assessment order under
section 143(3) by way of regular assessment as an assessing officer would
have done? We do not think so. The settlement commission does not carry
out the function of assessment and does not make an assessment order. It
settles the case in terms of the provisions contained in chapter XIX-A of the
said act. Therefore, the exclusivity of jurisdiction stipulated in section 245F
entails two things: (1) that from the point of time of filing of the settlement
application, no income tax authority can exercise jurisdiction over the case
and it is only the settlement commission which could exercise such
jurisdiction; (2) the powers and functions of the income tax authority which
can exclusively be exercised by the settlement commission must have a
nexus with the settlement proceedings before it.
13. We also note that the exclusive jurisdiction of the settlement
commission in terms of sub-section (2) of section 245F of the said act is
WPC 2927/2013 Page 28 of 38
subject to the provisions of section 245D(3) of the said act. That provision
entails that the settlement commission, in respect of, inter alia, an
application which has not been declared invalid under section 245D(2C),
may call for the records from the Commissioner 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
Commissioner 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. Thus, the only income tax
authority who is permitted some jurisdiction in the matter is the
Commissioner, who, when called upon by the Settlement Commission, is
enjoined 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.
14. It is, therefore, clear that the powers and functions of an income tax
authority which are to be exclusively exercised by the settlement
commission (subject to the provisions of section 245D (3)) must be in the
context of and have a nexus with the settlement proceedings. That being the
case, since the requirement of a special audit falls under the procedure for
WPC 2927/2013 Page 29 of 38
assessment which is distinct and different from settlement proceedings, the
settlement commission would not, in our view, have jurisdiction to direct a
special audit as it does not have any nexus with the settlement proceedings.
All that the settlement commission is required to do in the course of the
settlement proceedings is to ensure that the assessee who has made the
application for settlement of his case has inter-alia made a full and true
declaration of his hitherto undisclosed income and the manner in which it
was derived. The method of computation of the tax liability of the applicant
is set out in section 245C and in particular in sub-sections (1A) to (1D)
thereof. If the settlement commission is of the view that an assessee has not
made a full and true declaration of the undisclosed income then the
application is liable to be rejected. In other words, if the accounts put forth
by the assessee before the settlement commission are found by the
settlement commission on the basis of the available records and/or the
reports of the Commissioner to be neither full nor true then the only option
available with the settlement commission is to reject the application for
settlement and relegate the assessee to the normal provisions of assessment
under the said act. The settlement commission cannot, by itself, enter upon
an assessment and step into the shoes of an assessing officer for the
purposes of making an assessment.
WPC 2927/2013 Page 30 of 38
15. Let us now examine the decisions cited at the bar. In CIT v. Om
Prakash Mittal: (2005) 2 SCC 751 the Supreme Court observed as under:
"13. Section 245-F dealing with powers and procedure of the
Settlement Commission provides that in addition to the powers
conferred on the Settlement Commission under Chapter XIX-A, it
has all the powers which are vested in the Income Tax Authority
under the Act. Sub-section (2) is of vital importance and provides
that where an application made under Section 245-C has been
allowed to be proceeded with under Section 245-D, the Commission
shall until an order is passed under sub-section (4) of Section 245-D,
subject to the provisions of sub-section (3) of that section, have
exclusive jurisdiction to exercise the powers and perform the
functions of the Income Tax Authority under the Act in relation to
the case. In essence, the Commission assumes jurisdiction to deal
with the matter after it decides to proceed with the application 1 and
continues to have the jurisdiction till it makes an order under Section
245-D. Section 245-D(4) is the charging section and sub-section (6)
prescribes the modalities to be adopted to give effect to the order. It
has to be noted that the language used in Section 245-D is
"order" and not "assessment". The order is not described as the
original assessment or regular assessment or reassessment. In
that sense, the Commission exercises a plenary jurisdiction."
(emphasis supplied)
16. In Brij Lal v. CIT: (2011) 1 SCC 1, the Supreme Court held:
"23. Descriptively, it can be stated that assessment in law is
different from assessment by way of settlement. If one reads
Section 245-D(6) with Section 245-I, it becomes clear that every
order of settlement passed under Section 245-D(4) shall be final
and conclusive as to the matters contained therein and that the
same shall not be reopened except in the case of fraud and
misrepresentation. Under Section 245-F(1), in addition to the
1
Now, the exclusive jurisdiction is from the date on which the application is made.
WPC 2927/2013 Page 31 of 38
powers conferred on the Settlement Commission under Chapter
XIX-A, it shall also have all the powers which are vested in the
Income Tax Authority under the Act. In this connection,
however, we need to keep in mind the difference between
"procedure for assessment" under Chapter XIV and
"procedure for settlement" under Chapter XIX-A (see
Section 245-D). Under Section 245-F(4), it is clarified that
nothing in Chapter XIX-A shall affect the operation of any other
provision of the Act requiring the applicant to pay tax on the basis
of self-assessment in relation to matters before the Settlement
Commission.
xxxx xxxxx xxxxx xxxxx
39. Moreover, as stated above, under the Act, there is a
difference between assessment in law [regular assessment or
assessment under Section 143(1)] and assessment by
settlement under Chapter XIX-A. The order under Section
245-D(4) is not an order of regular assessment. It is neither an
order under Section 143(1) or Section 143(3) or Section 144.
Under Sections 139 to 158, the process of assessment involves
the filing of the return under Section 139 or under Section 142;
inquiry by the AO under Sections 142 and 143 and making of the
order of assessment by the AO under Section 143(3) or under
Section 144 and issuing of notice of demand under Section 156
on the basis of the assessment order. The making of the order of
assessment is an integral part of the process of assessment. No
such steps are required to be followed in the case of
proceedings under Chapter XIX-A. The said chapter
contemplates the taxability determined with respect to
undisclosed income only by the process of
settlement/arbitration. Thus, the nature of the orders under
Sections 143(1), 143(3) and 144 is different from the orders of
the Settlement Commission under Section 245-D(4).
xxxx xxxxx xxxxx xxxxx
44. As stated, proceedings before the Settlement
Commission are similar to arbitration proceedings. It
contemplates assessment by settlement and not by way of
WPC 2927/2013 Page 32 of 38
regular assessment or assessment under Section 143(1) or
under Section 143(3) or under Section 144 of the Act. In that
sense, it is a code by itself. It does not begin with the filing of
the return but by filing the application for settlement. As
stated above, under the Act, the procedure for assessment
falls in Chapter XIV (in which Section 154 falls) which is
different from the procedure for settlement in Chapter XIX-A
in which Sections 245-C and 245-D fall. Provision for levy of
interest for default in payment of advance tax under Section 234-
B falls in Chapter XVII (Section F) which deals with collection
and recovery of tax which as stated above is incidental to the
liability to pay advance tax under Section 207 (which is also in
Chapter XVII) and to the computation of total income in the
manner indicated under Chapter XIX-A vide Sections 245-C(1-B)
and 245-C(1-C) read with the provisos to Section 245-C(1) on the
additional income tax payable on the undisclosed income."
(emphasis supplied)
17. The Supreme Court, in Brij lal (supra), made a clear distinction
between assessment in law (regular assessment under Chapter XIV) and
"assessment" by way of settlement. It clearly held that there is a difference
between "procedure for assessment" under Chapter XIV and "procedure for
settlement" under Chapter XIX-A. In fact, it reiterated that under the said
Act, there is a clear difference between `assessment in law' [regular
assessment or assessment under Section 143(1)] and `assessment by
settlement' under Chapter XIX-A. It also held categorically that an order of
settlement under Section 245D(4) is not an order of regular assessment nor
is it an order under Section 143(1) or Section 143(3) or Section 144. What
WPC 2927/2013 Page 33 of 38
is of importance is that the Supreme Court held that the making of an order
of assessment is an integral part of the process of assessment. Meaning
thereby that if the proceedings do not culminate in an assessment order the
same cannot be regarded as assessment proceedings. In the case of
proceedings under Chapter XIX-A there is no provision for an assessment
order and the said chapter only contemplates the taxability determined with
respect to undisclosed income by the process of settlement/arbitration.
Elaborating on this aspect, the Supreme Court held that the Chapter XIX-A
provisions contemplate assessment by settlement and not by way of regular
assessment or assessment under Section 143(1) or under Section 143(3) or
under Section 144 of the Act and that the said Chapter XIX-A is a code by
itself.
18. Since the learned counsel for the revenue placed reliance on
paragraphs 25 to 27 of the decision in Brij Lal (supra) it would be
appropriate to consider the same. The said paragraphs are as under:
"25. Our detailed analysis shows that though Chapter XIX-A is
a self-contained code, the procedure to be followed by the
Settlement Commission under Sections 245-C and 245-D in the
matter of computation of undisclosed income; in the matter of
computation of additional income tax payable on such income
with interest thereon; the filing of settlement application
indicating the amount of income returned in the return of
income and the additional income tax payable on the
WPC 2927/2013 Page 34 of 38
undisclosed income to be aggregated as total income shows
that Chapter XIX-A indicates aggregation of incomes so as to
constitute total income which indicates that the special
procedure under Chapter XIX-A has an in-built mechanism
of computing total income which is nothing but assessment
(computation of total income).
26. To elaborate, under Section 245-C(1-B), if the applicant
has furnished a return in respect of his total income, tax shall be
calculated on the aggregate of total income returned and the
income disclosed in the settlement application as if such
aggregate were total income. Under the Act, tax is payable on the
total income as computed in accordance with the provisions of the
Act. Thus, Section 143(3) provision is sought to be incorporated
in Section 245-C. When Parliament uses the words "as if such
aggregate would constitute total income", it presupposes that
under the special procedure the aggregation of the returned
income plus income disclosed would result in computation of
total income which is the basis for the levy of tax on the
undisclosed income which is nothing but "assessment" .
Similarly, Section 245-C(1-C) provides for deductions from the
total income computed in terms of Section 245-C(1-B).
27. Thus, the special procedure under Sections 245-C and
245-D in Chapter XIX-A shows that a special type of
computation of total income is engrafted in the said
provisions which is nothing but assessment which takes place
at Section 245-D(1) stage. However, in that computation, one
finds that provisions dealing with a regular assessment, self-
assessment and levy and computation of interest for default in
payment of advance tax, etc. are engrafted. [See Sections 245-
C(1-B), 245-C(1-C), 245-D(6), 245-F(3) in addition to Sections
215(3), 234-A(4) and 234-B(4).]"
(emphasis supplied)
19. On the strength of the observations quoted above it was contended by
the learned counsel for the revenue that the proceedings under Chapter
WPC 2927/2013 Page 35 of 38
XIX-A also entail assessment. The corollary to this being that the direction
for the conducting of a special audit was legitimate. We cannot agree with
this contention of the learned counsel for the revenue. Wherever the
Supreme Court spoke of assessment in the context of settlement
proceedings under Chapter XIX-A, it qualified it by using the expression
"computation of income" (which has necessarily to be done by aggregating
the disclosed and undisclosed income) and more particularly the expression
"a special type of computation of total income". In any event, as pointed
out above, the Supreme Court held that the Chapter XIX-A provisions
contemplate assessment by settlement and not by way of regular assessment
under section 143(3) or `assessment' under Section 143(1) or under Section
144 of the Act and that the said Chapter XIX-A is a code by itself.
20. In view of the above analysis, we need not examine the decisions in
Picasso Overseas (supra), Ashwani Tobacco (supra), Dharampal (supra)
and Murarilal Harishchandra Jaiswal (supra), which, though they support
the contentions on behalf of the petitioners, have been rendered either under
the Central Excise Act, 1944 or the Customs Act, 1962. We may, however,
notice the decision of a division bench of the Madras High Court in Canara
WPC 2927/2013 Page 36 of 38
Jewellers v. Settlement Commission: [2009] 315 ITR 328 (Madras), in
which it was held that:-
"11. So far as section 245F is concerned, though the Settlement
Commission is empowered to have all powers which are vested in
an income-tax authority under the Act, in addition to the power
conferred under Chapter XIX-A, but such power can be exercised
for the purpose of procedure of settlement of application under
section 245C and not for reassessment of tax of a particular year
which is vested with the assessing authority."
21. We have already expressed a similar view above. The exclusive
jurisdiction of the settlement commission to exercise the powers and
perform the functions of an income tax authority, in terms of section
245F(2) of the said Act, is to be exercised and performed for the purpose of
settlement of the case under Chapter XIX-A and not for assessment under
Chapter XIV. That being the case, the powers and functions which are in
the exclusive jurisdiction of the settlement commission are circumscribed
by the object and role which has been ascribed to the settlement
commission, which is to settle the case in terms of the procedure stipulated
in Chapter XIX-A. Since assessment of the type contemplated under
section 143(3) is outside the purview of settlement proceedings, a special
audit under section 142(2A), which is in aid of assessment, would also be
beyond the scope of settlement proceedings. The other decisions referred
WPC 2927/2013 Page 37 of 38
to by the learned counsel for the revenue do not militate against the view
we have taken.
22. In sum, we hold that the income tax settlement commission does not
have the power to direct a special audit under section 142(2A) in the course
of settlement proceedings under Chapter XIX-A of the said Act.
Consequently, the impugned order dated 26.04.2013, to the extent it directs
the conduct of a special audit, is quashed. The matter be placed before the
settlement commission for further consideration of the petit ioners'
settlement applications in accordance with the prescribed procedure under
Chapter XIX-A. The writ petition is allowed to the aforesaid extent. We
are making it clear that we have not commented upon the merits of the
settlement applications. The parties are left to bear their own costs.
BADAR DURREZ AHMED, J
JANUARY 06, 2016 V. KAMESWAR RAO, J
HJ
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