SETCOM Ought To Decide In Respect Of Undisclosed Income Only After Following Due Procedure U/s. 245 Of IT Act: SC
The Supreme Court recently set aside the order passed by High Court and remitted the matter to the Settlement Commission (SETCOM) for a fresh decision in accordance with law and on its own merits and after following due procedure as required under Section 245 of Income tax Act, 1961.
A Two Judge Bench of Justice M.R Shah and Justice C.T Ravikumar observed that "the High Court is absolutely justified in observing that the order passed by the Settlement Commission is a nullity and cannot be said to be an order in the eye of law".
AOR Pawanshree Agrawal appeared for the Appellant and ASG Balbir Singh along with Senior Advocate Arijit Prasad & AOR Raj Bahadur Yadav appeared for the Respondent.
Going by the background of the case, a search was conducted under Section 132 on the business premises as well as the residence of the partners and notices under Section 153A were issued to all the taxpayers. Pursuant to filing of returns, an application under Section 245C(1) was filed by the assessee before the SETCOM. The High Court thereafter, by way of an interim order, directed the SETCOM to dispose of the application under Section 245D. Accordingly, the SETCOM disposed of the proceedings and settled the undisclosed income at Rs. 59,00,000/-. Thereafter, in the light of observations made by the SETCOM, the Assessing Officer (AO) issued the show cause notice for re-assessment on various transactions which are detected but were not disclosed by the appellants before the SETCOM. However, when the said show cause notice was subject-matter of writ before the High Court, the AO passed assessment order. When this was challenged before the High Court by way of an amendment, the Division Bench of the High Court dismissed the petition on the ground that the order passed by SETCOM was a nullity as the SETCOM itself observed that it was not practicable for the Commission to examine the records and investigate the case for proper Settlement and even giving adequate opportunity to the applicant and the Department, as laid down in Section 245D(4) was not practicable.
After considering the submissions, the Apex Court noted that, as such, the Settlement Commission specifically observed that it is not practicable for the Commission to examine the records and investigate the case for proper Settlement and that even giving adequate opportunity to the applicant and the Department, as laid down in section 245D(4) is not practicable.
However thereafter, the Settlement Commission passed an order to comply with the directions of the High Court to dispose of the application, added the Court.
The Bench therefore held that if such would be the situation, then the High Court in fact ought to have remitted the matter back to the Settlement Commission to pass a fresh order in accordance with law and on merits after following due procedure as required under Section 245D(4).
Accordingly, the Bench remitted the matter to the Settlement Commission/interim Board for a fresh decision in accordance with law and on its own merits and after following due procedure as required under Section 245.
Cause Title: Jagdish Transport Corporation and Ors. v. Union of India and Ors.