The Income Tax Officer, Ward v. Rajendra Prasad Jalan

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Special Appeal Writ No. 1672 / 2011 1. Commissioner Of Income Tax-III, Jaipur. 2. The Income Tax Officer, Ward No. 1, Jhunjhunu (Raj.) ----Appellants Versus 1. Rajendra Prasad Jalan S/o Shri Chotte Lal, R/O Kedar MalChotte Lal, Cloth Market, Jhunjhunu (Raj.) 2. The Settlement Commission Principal Bench, 4[th] Floor, LokNayak Bhawan, Khan Market, New Delhi (through Secretary) ----Respondents D.B. Special Appeal Writ No. 1673 / 2011 1. Commissioner Of Income Tax-III, Jaipur. 2. The Income Tax Officer, Ward No. 1, Jhunjhunu (Raj.) ----Appellants Versus 1. Shri Nawal Kumar Jalan S/o Shri Rajendra Prasad, R/O KedarMal Chotte Lal, Cloth Market, Jhunjhunu (Raj.) 2. The Settlement Commission Principal Bench, 4[th] Floor, LokNayak Bhawan, Khan Market, New Delhi (through Secretary) ----Respondents D.B. Special Appeal Writ No. 1675 / 2011 1. Commissioner Of Income Tax-III, Jaipur. 2. The Income Tax Officer, Ward No. 1, Jhunjhunu (Raj.) ----Appellanta Versus 1. Prakash Chand Jalan S/o Shri Rajender Prasad Jalan, agedabout 41 years, R/O Kedar Mal Chotte Lal, Cloth Market,Jhunjhunu (Raj.) 2. The Settlement Commission Principal Bench, 4[th] Floor, LokNayak Bhawan, Khan Market, New Delhi (through Secretary) ----Respondents _____________________________________________________ For Appellant(s) : Mr. Sameer Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGHOrder 27/07/2017 Delay in filing the appeals is condoned. The applications u/s5 of the Limitation Act are allowed. In view of the fact that the same judgment was challengedbefore the Division Bench in the case of Commissioner of IncomeTax vs. Hari Kishan Vijayvergia, 2011 (336) ITR 174 wherein thiscourt held as under:- “On facts, it is not in dispute at Bar thatopportunity of hearing was not afforded bySettlement Commission to either of the parties.Only the assessee submitted the writtenarguments, not the Revenue. Written submissionswere not filed by the revenue. No time wasgranted by the Settlement Commission even tofile the written submissions or for oral hearingdue to paucity of time. As 31-3-2008 was the cutoff date fixed, hence, it was observed that it wasnot possible for the Settlement Commission toprovide opportunity of hearing to the parties. Nodoubt about it that in Para 6 of the orders there isreference of certain material and there isstatement that additional amount has been paid.However, it is apparent from Para 5 of the orderthat Settlement Commission has observed that itwas not practicable to examine the records whichwas mandatory to investigate the case meaningthereby, to record the evidence necessary forproper settlement. At the same time, it has alsobeen observed that giving opportunity of hearingto the applicant, assessees and the revenue asenvisaged under section 245D(4) was notpracticable for the Settlement Commission. Infact, no due opportunity was given, hencereasoning, if any, mentioned would not makeorder legal and valid. Question is that of legalityof the action taken in flagrant violation of theprovisions under section 245D(4) of the Act as itis not disputed that opportunity of hearing wasnot afforded. There was no time to give serious look to the record and much less to record theevidence. No enquiry was made. Thus, in ourconsidered opinion, there is flagrant violation ofthe provisions of section 245D(4) of the Act. Theorders so passed are rendered nullity and liable tobe set aside. Merely by mentioning of certainmaterial without actively assessing what were thestatement etc., cannot be said to be complianceof the provisions of section 245D(4) of the Act.Any finding so recorded in Para 6 of the orderwithout hearing, without investigating and withoutdeeply looking into the record cannot be said tobe legal and binding. The procedural safeguardshave not been observed as such findings recordedin Para 6 of the orders of these 25 cases alsocannot be permitted to survive. The Senior Counsel has referred to the objectiveof the establishment of the SettlementCommission by referring to the decision in CIT vs.B.N. Bhattachargees (1979) 118 ITR 461 (SC) inwhich the Apex Court has laid down that thepurpose of substituting the method ofinvestigative negotiation, just settlement andearly eligibility by a high-powered Commission fora tier-upon-tier of long protracted litigation,where victory may be pyrrhic and futile, is ill-served by keeping out cases solely for the reasonthat departmental appeals have been filed. It isnot for the court to explore the intendment of thelegislation beyond the language in which thesection is couched. The Apex Court has also laiddown that Settlement Commission is a Tribunal.Its powers are considerable; its determinationaffects the rights of parties; its obligations arequasi-judicial; the orders it makes at every stagehave tremendous impact on the rights andliabilities of parties. The Apex Court has alsoobserved that it is not inappropriate to state thatthe policy of the law as disclosed in Chapter-XIX-Ais not to provide a rescue shelter for big tax-dodgers who indulge in criminal activities byapproaching the Settlement Commission. TheSettlement Commission will certainly take duenote of the gravity of economic offences on thewealth of the nation which the WanchooCommittee had emphasised and will exercise itspower of immunisation against criminalprosecutions by using its power only sparinglyand in deserving cases; otherwise such ordersmay become vulnerable if properly challenged.Learned counsel has also relied upon the decisionin CIT v. Om Prakash Mittal (2005) 273 ITR 326(SC) to contend that the Settlement Commissionspower of settlement has to be exercised in accordance with the provisions of the Income-taxAct. Though the Settlement Commission hassufficient elbow room in assessing the income ofthe applicant, it cannot make any order with aterm of settlement which would be in conflict withthe mandatory provisions of the Act like thequantum and payment of tax and interest. Theobject of the Legislature in introducing section254C is to see that protracted proceedings beforethe authorities or in courts are avoided byresorting to settlement of cases. In this processan assessee cannot expect any reduction inamounts statutorily payable under the Act.Reliance has also been placed upon the decisionof the High Court of Bombay in Star TelevisionNews Ltd. (2009) 317 ITR 66 (Bom) in whichWanchoo Committees recommendations havebeen quoted in Para 2.33 in which it has beenobserved that settlement is fair, prompt andindependent. Suggestion was made that thereshould be a high level machinery in administratingthe provisions. In our opinion, there is no doubtabout it that the Settlement Commission has beenestablished with the aforesaid objectives. At thesame time as observed by the Apex Court in OmPrakash MittalCIT v. Om Prakash Mittal (2005)273 ITR 326 (SC) the Commission was bound tocomply with the provisions of statute. No doubtabout it that there should not be protraction ofthe settlement proceedings but at the same timethe mandatory provisions are also required to becomplied with. Merely under the banner of noprotraction of the case, illegality or flagrantviolation of the provisions of the Act cannot bepermitted to survive. It was incumbent upon theSettlement Commission to act in accordance withthe provisions under section 245D(4) of the Act.There has been blatant violation of the saidprovision in the instant case. Even as per thefindings which are recorded in the form ofconfession, violation of the provision has beenmade as it was mandatory to comply with theorder of the High Court. Orders were passed indue haste. However, the High Court order nevermeant the Settlement Commission to violate themandate of the provisions of the Act, it wasincumbent upon the Settlement Commission topass appropriate order in accordance with law. Itwas incumbent upon the Settlement Commissionto follow strictly provisions enumerated in section245D(4) and other provisions. Consequently, wefind that these 25 cases of the assessees are alsorequired to be heard afresh by the SettlementCommission and decided in accordance with law after duly following the mandate of section245D(4)oftheAct. 18. We are of the opinion that no case is madeout to interfere in the appeals. Consequently,intra-court appeals, cross objections and stayapplications are hereby dismissed. Let theSettlement Commission make an endeavour todecide the cases in accordance with law as far aspossible within a period of six months from thedate of appearance of the parties. No costs. In view of the above, the appeals stand dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. A.Sharma/32