Case Note & Summary
The Commissioner of Income Tax (Central), Pune filed a writ petition challenging an order dated 29 August 2013 passed by the Income Tax Settlement Commission (ITSC) under Section 245D(2C) of the Income Tax Act, 1961. By that order, the Settlement Commission held that the application filed by the second respondent (the assessee) was not invalid and should be allowed to be proceeded with further. The Revenue's grievance was that the Settlement Commission, without ordering an enquiry by the Commissioner under Section 245D(3), directly proceeded under sub-section (4) and a letter was received from the Directorate of Investigation requiring inspection of the factory premises. The Revenue argued that it was necessary for the Commission to cause a further enquiry or investigation and to furnish a report. The Court examined Section 245D(3), which provides that the Commission may call for records and if it is of the opinion that any further enquiry or investigation is necessary, it may direct the Commissioner to do so. The Court noted that the order under Section 245D(2C) is a preliminary satisfaction order regarding the validity of the application. The Commission had already expressed satisfaction about the true and full nature of the disclosure. The Court held that the Commission has discretion to decide whether a further enquiry is necessary, and in this case, the Commission's decision not to order an enquiry at that stage was not arbitrary or perverse. The Court also noted that the Commission had reserved the right to take action if suppression of facts came to light later. Accordingly, the writ petition was dismissed.
Headnote
A) Income Tax - Settlement Commission - Section 245D(2C) and Section 245D(3) of Income Tax Act, 1961 - Preliminary Satisfaction - The Settlement Commission passed an order under Section 245D(2C) holding that the application was not invalid and should be proceeded with. The Revenue contended that the Commission should have directed an enquiry under Section 245D(3) before further proceedings. The Court held that the order under Section 245D(2C) is a preliminary satisfaction order and the Commission has discretion to decide whether a further enquiry is necessary. The Commission's decision not to order an enquiry at that stage was not arbitrary or perverse. (Paras 1-5)
Issue of Consideration
Whether the Settlement Commission was required to direct an enquiry under Section 245D(3) before proceeding further with the application after passing an order under Section 245D(2C).
Final Decision
The writ petition is dismissed. The order of the Settlement Commission dated 29 August 2013 is upheld.
Law Points
- Settlement Commission's discretion under Section 245D(3) is not mandatory
- Section 245D(2C) order is preliminary
- no requirement of enquiry before proceeding under Section 245D(4)
Case Details
2013 LawText (BOM) (10) 50
Writ Petition No.9617 of 2013
Dr. D.Y. Chandrachud, M.S. Sonak
Mr. Tejveer Singh for the Petitioner, Mr. Jehangir Mistri, Senior Advocate with Mr. Ashish Kamat, Mr. Nikhil Rajani i/b V. Deshpande and Co. for Respondent No.2
Commissioner of Income Tax (Central), Pune
Income Tax Settlement Commission (ITSC), Additional Bench, Mumbai and another
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Writ petition challenging order of Settlement Commission under Section 245D(2C) of Income Tax Act, 1961.
Remedy Sought
Petitioner (Revenue) sought to quash the order dated 29 August 2013 passed by the Settlement Commission and to direct the Commission to order an enquiry under Section 245D(3).
Filing Reason
Revenue contended that the Settlement Commission proceeded without directing an enquiry under Section 245D(3) despite necessity.
Previous Decisions
Settlement Commission passed order on 29 August 2013 under Section 245D(2C) holding that the application was not invalid and should be proceeded with. Further hearings took place on 19 September 2013 and 7 October 2013.
Issues
Whether the Settlement Commission was required to direct an enquiry under Section 245D(3) before proceeding further with the application after passing an order under Section 245D(2C).
Submissions/Arguments
Petitioner (Revenue) argued that the Settlement Commission should have directed the Commissioner to make a further enquiry or investigation under Section 245D(3) before proceeding under sub-section (4).
Respondent (assessee) argued that the Commission has discretion and the order under Section 245D(2C) is preliminary; no enquiry was necessary at that stage.
Ratio Decidendi
The Settlement Commission has discretion under Section 245D(3) to decide whether a further enquiry or investigation is necessary. The order under Section 245D(2C) is a preliminary satisfaction order regarding the validity of the application. The Commission's decision not to order an enquiry at that stage was not arbitrary or perverse, especially since the Commission reserved the right to take action if suppression of facts came to light later.
Judgment Excerpts
The Settlement Commission, in respect of - (i) an application which has not been declared invalid under sub-section (2C); or (ii) an application referred to in sub-section (2D) 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 any other matter relating to the case, and the Commissioner shall forthwith comply with the directions.
The order which has been passed by the Settlement Commission under sub-section (2C) of Section 245D is an order of preliminary satisfaction. The Commission has come to the conclusion that the application is not an invalid application and should be allowed to be proceeded with further.
Procedural History
The Settlement Commission passed an order on 29 August 2013 under Section 245D(2C) holding that the application was not invalid. Further hearings took place on 19 September 2013 and 7 October 2013. The Revenue filed a writ petition challenging the order. The High Court dismissed the petition on 21 October 2013.
Acts & Sections
- Income Tax Act, 1961: 245D(2C), 245D(3), 245D(4)
