Case Note & Summary
The Commissioner of Income Tax, Central – II, Mumbai, filed a writ petition challenging an order dated 31st July 2013 passed by the Income Tax Settlement Commission (ITSC) under Section 245D(4) of the Income Tax Act, 1961. The respondent-assessee, M/s. Kanakia Spaces Pvt. Ltd., was engaged in real estate development. A search and seizure action under Section 132 was conducted on 29th March 2011, during which cash of Rs.45 lakhs and various documents were seized. The Revenue alleged that the assessee had made bogus purchases of Rs.11,95,41,448 from entities that only issued accommodation bills without supplying materials. The assessee filed a settlement application before the ITSC, which after considering the material and objections, passed an order determining the additional income and tax payable. The Revenue contended that the ITSC erred in not treating the entire amount of bogus purchases as income and in allowing certain deductions. The court examined the scope of judicial review of settlement commission orders and held that the ITSC's order was not perverse. The Commission had considered the evidence, including the assessee's disclosure and the Revenue's objections, and had given reasoned findings. The court noted that the Commission has wide discretion and its order is final. The petition was dismissed, and the rule was discharged.
Headnote
A) Income Tax - Settlement Commission - Section 245D(4) Income Tax Act, 1961 - Finality of Order - The Settlement Commission's order under Section 245D(4) is final and cannot be interfered with by the High Court under Article 226 unless it is perverse or based on no evidence. The court held that the Commission has wide discretion to determine the income and tax payable, and the Revenue cannot challenge findings of fact based on appreciation of evidence. (Paras 1-31) B) Income Tax - Settlement Commission - Perversity - Section 245D(4) Income Tax Act, 1961 - The court examined whether the Commission's order was perverse. It found that the Commission had considered all material, including the assessee's disclosure and the Revenue's objections, and had given cogent reasons for its conclusions. The court held that the order was not perverse and did not warrant interference. (Paras 12-31) C) Income Tax - Settlement Commission - Jurisdiction - Section 245D(4) Income Tax Act, 1961 - The court held that the Settlement Commission has exclusive jurisdiction to settle cases and its order is binding on both the assessee and the Revenue. The High Court's jurisdiction under Article 226 is limited to examining whether the order is perverse or contrary to law. (Paras 1-31)
Issue of Consideration
Whether the Income Tax Settlement Commission's order dated 31st July 2013 under Section 245D(4) of the Income Tax Act, 1961 is perverse and liable to be set aside.
Final Decision
The writ petition is dismissed. The order of the Income Tax Settlement Commission dated 31st July 2013 is upheld. Rule is discharged.
Law Points
- Settlement Commission's order under Section 245D(4) is final and cannot be interfered with unless perverse
- Settlement Commission has wide discretion to determine income and tax
- Revenue cannot challenge findings of fact based on appreciation of evidence
