M/S Akshar Developers v. Income-Tax Settlement Commission Additional Bench Ii

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 13572 of 2018With R/SPECIAL CIVIL APPLICATION NO. 13577 of 2018With R/SPECIAL CIVIL APPLICATION NO. 13579 of 2018With R/SPECIAL CIVIL APPLICATION NO. 13580 of 2018With R/SPECIAL CIVIL APPLICATION NO. 13581 of 2018With R/SPECIAL CIVIL APPLICATION NO. 13588 of 2018With R/SPECIAL CIVIL APPLICATION NO. 13594 of 2018With R/SPECIAL CIVIL APPLICATION NO. 13595 of 2018With R/SPECIAL CIVIL APPLICATION NO. 13596 of 2018With R/SPECIAL CIVIL APPLICATION NO. 13598 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER C/SCA/13572/2018 JUDGMENT ========================================================== M/S AKSHAR DEVELOPERSVersus INCOME-TAX SETTLEMENT COMMISSION ADDITIONAL BENCH II ========================================================== Appearance:MR JP SHAH, SENIOR ADVOCATE with MR MANISH J SHAH(1320) for the PETITIONER(s) No. 1MR MR BHATT, SENIOR ADVOCATE with MRS MAUNA M BHATT(174) for the RESPONDENT(s) No. 2,3UNSERVED WANT OF TIM(31) for the RESPONDENT(s) No. 1========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANIand HONOURABLE DR.JUSTICE A. P. THAKER Date : 04/02/2019 COMMON ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1.All these petitions arise out of a common order dated 2.2.2018 passed by the Income Tax Settlement Commission (hereinafter referred to as “the Settlement Commission”) on the respective applications filed by the respective petitioners, and hence, the same were taken up for hearing and are decided by this common judgment. For the sake of convenience, reference is made to the facts as appearing in Special Civil Application No.13572 of 2018 filed by M/s Akshar Developers. 2.The facts stated briefly are that on 22.9.2015, a raid came to be carried out in the case of the petitioner under section 132 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) when some documents came to be seized. The partners were also searched. According to the petitioner, nothing worth the name by way of unaccounted cash, jewellery or investment was found from the above raid from the petitioner or its partners. The petitioner was advised that instead of entering the channel of long drawn litigation starting with the assessment order, it would be wise to approach the Settlement Commission. Therefore, the petitioner preferred application dated 30.11.2017 under section 245(C)(1) of the Act. The form was filled by the petitioner along with which the statement of particulars of issues to be settled, as well as the statement showing full and true disclosure came to be submitted.The matter came up for the purpose of admission and by an order dated 12.12.2017 by the Settlement Commission admitted the applications under section 245(D)(1) of the Act. 2.1Thereafter, the Principal Commissioner of Income Tax (Central), Surat (hereinafter referred to as “the Principal Commissioner”) submitted a report dated 16.1.2018 under section 245D(2B) of the Act. It is the case of the petitioner that the Principal Commissioner has virtually accepted the admission of the petitioner's application as he has nowhere directly or indirectly indicated that the income disclosed by the petitioner is not full and true. 2.2Thereafter, the petitioner filed a rejoinder dated 25.1.2018 to the above report under section 245D(2B) of the Act meeting with the objections raised by the Principal Commissioner. On 30.1.2018 the matter was heard for the purposes of decision under section 245D(2C) of the Act, whereupon the Settlement Commission passed an adverse order dated 2.2.2018 under section 245D(2C) of the Act which 2.2Thereafter, the petitioner filed a rejoinder dated 25.1.2018 to the above report under section 245D(2B) of the Act meeting with the objections raised by the Principal Commissioner. On 30.1.2018 the matter was heard for the purposes of decision under section 245D(2C) of the Act, whereupon the Settlement Commission passed an adverse order dated 2.2.2018 under section 245D(2C) of the Act which is subject matter of challenge in the present petitions. 3.Mr. J. P. Shah learned counsel for the petitioners submitted that the Settlement Commission instead of passing the order on the basis of the report as clearly laid down in section 245D(2C) of the Act has passed the order on the basis of what was not in the report, which renders such order bad in law. Referring to the provisions of section 245D(2C) of the Act, it was submitted that no one is required to be heard at this stage unless the report of the Commissioner is unfavourable. According to the learned counsel when in the report, the Principal Commissioner does not tell the Settlement Commission that the applicant has not made full and true disclosure and if it is obligatory on the part of the Settlement Commission to pass an order based on the report of the Principal Commissioner, then on this report the Settlement Commission could not have passed the order rejecting the application. 3.1Referring to Paragraph 5.1 of the impugned order, it was pointed out that the Settlement Commission has considered the objections raised by the Commissioner of Income-tax (Departmental Representative) [hereinafter referred to as the “CIT (DR)”] to the admission of the settlement applications. It was submitted that it is not open for the CIT (DR) to raise objection and that the Commissioner has gone beyond what his superior Principal Commissioner has stated in the report and that if there was any objection, it was for the Principal Commissioner to take such objection in the report. It was submitted that there was grave error on the part of the Settlement Commission permitting the CIT (DR) to raise objections to the admission of the application and more so in permitting him to go beyond the report. 3.2Referring to the impugned order, it was submitted that several points which were not there in the report have been taken into consideration in the order and, therefore, the petitioner’s representative naturally was not ready to reply off hand without instructions from the petitioner or its accountant. It was urged that the impugned order having gone far beyond the report of the Principal Commissioner is therefore, bad in law. 3.3It was submitted that sub-section (2C) of section 245D of the Act mandates that, the order be passed within fifteen days of the report. It was submitted that if the report said that there was no full and true disclosure, the petitioner would have been called upon. It was submitted that the provision contemplates opportunity of hearing to the assessee in case the application is to be held to be invalid, however, if the Principal Commissioner has not given a report against the petitioner assessee, hearing the petitioner could have been dispensed with. It was submitted that if the report was not against the assessee, the Settlement Commission could not have called upon the CIT (DR) as to why the report should not be accepted. 3.4It was contended that if a new argument, that too, a factual one, which is not there in the report of the Commissioner is advanced, the rule of audi alterem partem would require the Settlement Commission to give time to the 3.4It was contended that if a new argument, that too, a factual one, which is not there in the report of the Commissioner is advanced, the rule of audi alterem partem would require the Settlement Commission to give time to the representative of the other side to reply to the same because factual arguments cannot be replied off the cuff without the petitioner’s representative checking the records and taking instructions from the petitioner. It was submitted that given the time line provided in the section, namely, that the order has to be passed within a period of fifteen days of the receipt of the report, it is not possible to adopt such a course of action. Therefore, it is not permissible for the Settlement Commission to consider new arguments, which are factual in nature and not contained in the report. 3.5On the merits of the impugned order, it was submitted that the Settlement Commission has not mentioned in the impugned order as to which seized document has not been considered by the petitioner to arrive at the profit. It was submitted that in the order made under section 245D(1) of the Act, the Settlement Commission has given a clear finding that there is full and true disclosure and that between the passing of that order and the impugned order, there was no new fact or additional material which could have inspired an adverse conclusion. It was submitted that, therefore, the impugned order passed by the Settlement Commission being in breach of the provisions of section 245D(2C) of the Act deserves to be set aside. 4.Vehemently opposing the petitions, Mr. M. R. Bhatt, Senior Advocate, learned counsel for the respondents submitted that the Settlement Commission while passing the impugned order has considered the report submitted by the Principal Commissioner of Income Tax under section 245(2B) of the Act as well as the relevant documents and evidences so as to come to the conclusion that there was no full and true disclosure. It was submitted that it is trite law that while exercising powers under Article 226 of the Constitution of India, this court would be concerned with the decision making process of the Settlement Commission and not so much with the correctness of the order as it would be in appeal. It was submitted that in the absence of any flaw having been pointed out in the decision making process, the petition deserves to be dismissed on this ground alone. 4.1It was submitted that the contention that the Settlement Commission could not have gone beyond the report is fallacious and contrary to the scheme of Chapter XlX-A of the Act. It was contended that the Settlement Commission has to examine the full and true nature of the disclosure of income at every stage of the settlement proceedings and if at any stage it is found that such disclosure is not full and true, the Settlement Commission is required to reject the application at that stage and send the case back to the Assessing Officer. 4.2Next it was submitted that the contention that the Settlement Commission cannot go beyond the report, if accepted, would curtail the powers of the Settlement Commission to apply its mind independently to the facts on record. Even otherwise, the Settlement Commission has not gone beyond the report and the impugned order was passed after considering the seized documents which were part of the statement of facts, the report filed under section 245(2B) of the Act and the submissions made by the parties to the case. It was submitted that though the report does not say that disclosure application should be rejected, at several places it 4.2Next it was submitted that the contention that the Settlement Commission cannot go beyond the report, if accepted, would curtail the powers of the Settlement Commission to apply its mind independently to the facts on record. Even otherwise, the Settlement Commission has not gone beyond the report and the impugned order was passed after considering the seized documents which were part of the statement of facts, the report filed under section 245(2B) of the Act and the submissions made by the parties to the case. It was submitted that though the report does not say that disclosure application should be rejected, at several places it comments on the adequacy of the disclosure and points out several lacuna in the disclosure. It was pointed out that the report says that further exercise is required to be undertaken. It was also submitted that when report says that the assessee should make disclosure it means that the disclosure is not full and true and that the report clearly shows that the Principal Commissioner has doubted the adequacy of the additional income disclosed. It was pointed out that in response to the report, the assessee has submitted rejoinder giving its response thereto, as there were qualifying remarks, which would itself demonstrate that the Principal Commissioner's report was not clear. 4.3Referring to paragraph 7 of the impugned order, it was submitted that before the Settlement Commission, no contention has been advanced that CIT (DR) should not be permitted to argue, which amounts to acquiescence on the part of the petitioner. Referring to sub-section 2(C) of section 245D of the Act, it was submitted that while the sub-section says that hearing be given to the assessee in case the application is required to be declared invalid and does not say that hearing is required to be given to the Commissioner, at the same time the sub-section does not have any negative covenant that CIT (DR) shall not be heard. 4.4Reliance was placed upon the decision of the Supreme Court in the case of Commissioner of Income Tax v. B.N. Bhattacharjee, (1979) 1 Taxman 348 (SC), wherein the court, in the context of section 245D of the Act, had expressed the view that the applicant before the Settlement Commission is entitled to a hearing before his application for composition is rejected. The court also held that apart from any specific provision, it is legal fair play not to hurt any party without hearing him unless the Act expressly excludes it. The court was of the view that nothing is lost by hearing the petitioner whose application for settlement is being rejected and much may be gained by such hearing in properly processing the application in the spirit of Chapter XIX-A. It was submitted that, therefore, the Supreme Court has held that even if the statute is silent, the same does not prohibit affording an opportunity of hearing. 4.5Reliance was also placed upon the decision of the Calcutta High Court in the case of Peerless General Finance and Investment Co. Ltd. v. Income-tax Settlement Commission, (2009) 313 ITR 206 (Calcutta), wherein the court held that the provisions of the statute prescribed the stages in which the applicant and the departmental representative are to be heard, and in section 245D(1), there is no provision for affording an opportunity of hearing to the petitioners, which has been specifically provided at a subsequent stage under section 245D(4). Giving opportunity of hearing to the income-tax authorities at the time of consideration of the application for settlement, thus, constitutes a deviation from the procedure prescribed in the statute. The court held that mere deviation from a procedure prescribed by the statute would not ipso facto vitiate the order of the Settlement Commission. 4.6It was submitted that in the facts of the present case the following facts emerge: - The report filed under section 245D(2B) of the Act does not say that there is a full and true disclosure. 4.6It was submitted that in the facts of the present case the following facts emerge: - The report filed under section 245D(2B) of the Act does not say that there is a full and true disclosure. - The report says that the aspect of full and true disclosure is required to be verified on the basis of the SOF which is part of the record. -To the report, the assessee is given opportunity to file rejoinder. The assessee, thus, filed a rejoinder knowing that it is not a clean report. -Under section 245D(2C) since the decision is to be taken within fifteen days, hearing is kept on 30[th] January and both the sides are heard. -The CIT(DR) in his oral submissions has not relied upon any alien material which is extraneous to the record of the case. It was submitted that in the above factual background, merely because sub-section (2C) of section 245D of the Act is silent with regard to hearing the revenue, it does not mean that the CIT(DR) cannot make submissions. It was submitted that this is not a case where in the report under sub-section (2B) of section 245D, it has been stated that the applicant be permitted to proceed with and on the contrary, the Principal Commissioner has reserved the right to rely upon the record and make submissions. It was submitted that not a single document relied upon is alien to the record and prejudice is neither pleaded nor proved by the petitioner. It was submitted that the statute does not put an embargo upon affording an opportunity of hearing to the CIT(DR) and the impugned order does not suffer from any serious lacuna and, therefore, in these circumstances, it cannot be said that the Settlement Commission has committed any error in affording an opportunity of hearing to the CIT (DR). 4.7Insofar as the prejudice caused to the revenue in case the application is not declared invalid under sub-section (2C) is concerned, the learned counsel submitted that once an order under section 245D(2C) of the Act is passed and the application is permitted to be proceeded with, the department will have to undergo the exercise of further inquiry. If at the (2C) stage, the applicant is not ousted, the respondents have to undergo the rigmarole under the subsequent provisions. 4.8Reference was made to the decision of this court in the case ofManojkumar Babulal Agrawala v. Secretary, (2017) 83 taxmann.com 139 (Gujarat), to point out that in the facts of the said case also, the Commission had heard the CIT(DR) and the applicant's authorised representative. 4.9Reliance was also placed upon the decision of the Bombay High Court in the case of Commissioner of Income-tax v. Sai Prasad Properties Ltd., (2015) 60 taxmann.com 167 (Bombay), wherein the court has observed that the application under section 245D(2C) of the Act has to be disposed of after considering the objections raised by the revenue supported by some modicum of reasons. In the absence of some consideration of the objections, the entire exercise under section 245D(2C) of the Act would render the provisions redundant. 4.10Reliance was also placed upon the decision of the Delhi High Court in the case of MARC Bathing Luxuries Ltd. v. Income Tax Settlement Commission, (2013) 38 taxmann.com 308 (Delhi), to point out that in the facts of the said case also, the CIT(DR) was given an opportunity of hearing at the stage of section 245D(1) of the Act. It was submitted that the above decisions have been relied upon to point out that the CIT(DR) is invariably given an opportunity of hearing by the Settlement Commission. 4.11It was submitted that while examining the validity of any order passed by the Settlement Commission the scope of inquiry is very limited in case and that unless the Settlement Commission has proceeded de hors the statutory provisions or the principles of natural justice have been violated, this court would be slow in interfering. 4.11It was submitted that while examining the validity of any order passed by the Settlement Commission the scope of inquiry is very limited in case and that unless the Settlement Commission has proceeded de hors the statutory provisions or the principles of natural justice have been violated, this court would be slow in interfering. 4.12In conclusion, it was submitted that the decision of the Settlement Commission being based upon proper appreciation of facts as it has considered the report under section 245D(2B) of the Act as well as the relevant documents and evidences, the present case does not warrant any interference by this court. 5.In rejoinder, Mr. J.P. Shah, learned counsel for the petitioner submitted that all the decisions relied upon by the learned counsel for the respondents are in the context of pre 2007 law when the scheme of section 245D of the Act was totally different. It was submitted that the time limit for deciding the application is now eighteen months, whereas earlier it was five years. It was submitted that certain stages under section 245D are put on fast track and whenever the parties are required to be heard, it is specifically mentioned in the statute. It was submitted that under section 245D(2C) of the Act, the party to be heard is the applicant if the report is against him and the Settlement Commission agrees with it. It was submitted that, therefore, the impugned order passed by the Settlement Commission being contrary to the statutory provisions deserves to be quashed and set aside. 6.In the backdrop of the facts and contentions noted hereinabove, it may be germane to consider the statutory scheme of section 245D of the Act prior to its amendment in 2007 and the scheme of section 245D as prevailing on date. 7.Section 245D of the Act prior to its amendment reads as under:- “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 call for a report from the Commissioner and on the basis of the materials contained is such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission, shall, where it is possible, by order, reject the application or allow the application to be proceeded with within a period of one year from the end of the month in which such application was made under Section 245-C: Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant of being heard: Provided further that the Commissioner shall furnish the report within a period of forty-five days of the receipt of communication from the Settlement Commission in case of all applications made under Section 245-C on or after the 1st day of July, 1995 and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report. (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the Commissioner. (2-A) Subject to the provisions of sub-section (2-B), the assessee shall, within thirty-five days of the receipt of a copy of the order under sub-section (1) allowing the application to be proceeded with, pay the additional amount of income tax payable on the income disclosed in the application and shall furnish proof of such payment to the Settlement Commission. (2-B) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income tax referred to in sub-section (2-A) within the time specified in that sub-section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments if the assessee furnishes adequate security for the payment thereof. (2-B) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income tax referred to in sub-section (2-A) within the time specified in that sub-section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments if the assessee furnishes adequate security for the payment thereof. (2-C) Where the additional amount of income tax is not paid within the time specified under sub-section (2-A), then, whether or not the Settlement Commission has extended the time for payment of the amount which remains unpaid or has allowed payment thereof by instalments under sub-section (2-B), the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty-five days referred to in sub-section (2-A). (2-D) Where the additional amount of income tax referred to in sub-section (2-A) is not paid by the assessee within the time specified under that sub-section or extended under sub-section (2-B), as the case may be, the Settlement Commission may direct that the amount of income tax remaining unpaid, together with any interest payable thereon under sub-section (2-C), be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered, in accordance with the provisions of Chapter XVII, by the Assessing Officer having jurisdiction over the assessee. (3) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant 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. (4) After examination of the records and the report of the Commissioner, received under sub-section (1), and the report, if any, of the Commissioner received under sub-section (3), 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 under sub-section (1) or sub-section (3). (4-A) In every application allowed to be proceeded with under sub-section (1), the Settlement Commission shall, where it is possible, pass an order under sub-section (4) within a period of four years from the end of the financial year in which such application was allowed to be proceeded with. (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. (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 fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty-five days aforesaid. (7) Where a settlement becomes void as provided under sub-section (6), the proceedings with 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 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.” 7.1Thus, section 245D of the Act prior to its amendment in 2007, contemplated two stages for dealing with an application after an application under section 245C of the Act was received. In the first stage, the Settlement Commission was required to call for a report from the Commissioner and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved, where it was possible, by order reject the application or allow the application to be proceeded with. In case the Settlement Commission was inclined to reject the application, it was required to provide an opportunity of hearing to the applicant. The Commissioner was required to submit the report within forty-five days of receipt of communication from the Settlement Commission. 7.2In case where an application was allowed to be proceeded with under subsection (1), in the second stage, as provided under sub-section (3) of section 245D, the Settlement Commission could call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission was of the opinion that any further enquiry or investigation in the matter is necessary, it could 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. Thereafter in view of the provisions of sub-section (4), the Settlement Commission, after examination of the records and the report of the Commissioner, received under sub-section (1), and the report, if any, of the Commissioner received under sub-section (3), 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, in accordance with the provisions of this Act, could pass such order as it thought 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 under sub-section (1) or sub-section (3). 7.3.Therefore, the entire process involved two stages. One stage was for admission and the other stage was for deciding the application. In the first stage where the Settlement Commission was required to call for a report from the Commissioner and after considering the report as well as the complexity of the matter etc, could either reject the application or allow it to be proceeded with; and at the second stage, the Settlement Commission would examine the record and if necessary direct investigation to be carried out by the Commissioner and after considering the report if any, received from the Commissioner and affording an opportunity of hearing to the applicant pass such order as it deemed fit. The application was required to be decided within a period of four years from the end of the assessment year in which the application was permitted to be proceeded with. Thus, an application was required to be decided within a period of five years from the date of receipt thereof. 8.Section 245D of the Act has thereafter been amended in the year 2007 and as it stands at present, reads thus: 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: 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 Principal Commissioner or Commissioner. 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 Principal Commissioner or 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 Principal Commissioner or Commissioner, and the Principal Commissioner or 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 Principal Commissioner or 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 as invalid, and shall send the copy of such order to the applicant and the Principal Commissioner or 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 Principal Commissioner or Commissioner has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the Principal Commissioner or 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, (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 Principal Commissioner or 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 Principal Commissioner or 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 Principal Commissioner or Commissioner shall furnish the report within a period of ninety days of the receipt of communication from the Settlement Commission: Provided that where the Principal Commissioner or 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 Principal Commissioner or 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 Principal Commissioner or 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 Principal Commissioner or 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. (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. (6A) 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 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. (6A) 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 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 Principal Commissioner or Commissioner of its intention to do so and has allowed the applicant and the Principal Commissioner or 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 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 re-computation 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 cancellation of the registration of a firm required to be made in pursuance of any such directions as aforesaid.” 8.1After its amendment, section 245D of the Act contemplates three stages for dealing with an application made under section 245C(1) of the Act. The scheme of admission of a case has been completely altered with effect from 01.06.2007 and now there are two stages for admission of the application. The third stage is for deciding the application. In the first stage, on receipt of an application under section 245C of the Act, the Settlement Commission is mandated to issue a notice to the applicant within seven days from the date of receipt of the application, 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 is further mandated to either reject the application or allow the application to be proceeded with by an order in writing, within a period of fourteen days from the date of the application. The proviso thereto provides 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. under section 245C of the Act, the Settlement Commission is mandated to issue a notice to the applicant within seven days from the date of receipt of the application, requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant, the Set