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TMI Blog1979 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... he context of Third World conditions of political peculium and bureaucratic abetment, that composition and collection of public revenue from tycoons is better than prosecution of their tax-related crime and litigation for total revenue, recovery. A social audit of the working of this chapter in action and its fall-out may benefit the nation by information about who the true beneficiaries of this legislation are and whether there is more than meets the eye. The Wanchoo Committee which recommended this step titled its chapter meaningfully as " Black Money and Tax Evasion " and the Act itself was passed and brought into force during the era of Emergency which was marked by speed and silence and hushed politico-official operations. Be that as it may, fiscal philosophy and interpretative technology must be on the same wavelength if legislative policy is to find fulfilment in the enacted text. That is the challenge to judicial resourcefulness the present appeals offer, demanding, as it does, a holistic perspective and harmonious construction of a whole chapter, especially a complex provision therein, so that a balance may be struck between purpose and result without doing violence to st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. The conditions for entitlement to make an application to the Settlement Commission are set out in s. 245M. We may have to examine closely the connotation of the expressions used in this section but for the once it is sufficient to state that it is obligatory for the assessee to withdraw any appeal that may be pending at his instance before being qualified to make an application to the Settlement Commission. Another condition stipulated in the same section is that an assessee shall not be entitled to make an application " in a case where the ITO has preferred an appeal under sub-s. (2) of s. 253 against the order to which the assessee's appeal relates ". Without meticulous dissection of the provision, we may broadly draw the conclusion that the assessee must withdraw his appeal before the Tribunal before moving the Settlement Commission. Likewise, the ITO should not have preferred an appeal. Therefore, the respondent-assessee engaged himself in complying with these conditions. He expected to achieve this objective by moving for withdrawal of his own 12 appeals before the Tribunal and by persuading the income-tax department to withdraw its 10 appeals pending before the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... client is persuading the Central Board of Direct Taxes to do something effectively in the matter, but for consultations with their counsels, etc., it would take at least two months' time. " Probably the assessee felt that the Central Board could be persuaded " to do something effectively in the matter ", given some time. The anticipations of the assessee were not belied because the addressee-Member of the Central Board, with celerity, consulted the Commissioner, who, in turn, sought and got affirmative reports from those below him and at the end of this rapid departmental exercise, reached the conclusion in October/November (i.e., in about a month) that the appeals of the departments were very weak, even frivolous (see para. 5.2 and 5.3 of the Settlement Commission's order) and that, therefore, nothing was lost by withdrawing them from the Tribunal. In keeping with this conclusion, the tempo was accelerated by the Board Member issuing necessary instructions to withdraw its appeals, and the CIT hastened to write to the assessee-respondent in December, 1976 : " I am to inform you that the departmental appeals pending before the Income-tax Appellate Tribunal, Calcutta, against you w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of the movement of the calendar. For, the Ides of March came in the meanwhile and, the CIT, for reasons we do not know, took a stiff look at the case and reported on 1st April, 1977 : " That prosecution proceedings for concealment of income and also false verification in the return were already pending before the Chief Metropolitan Magistrate, and that he did not consider this as a fit case to be proceeded with by the Settlement Commission. " After some correspondence with the applicant, and without giving a hearing, the Settlement Commission by its order dated the 3rd February, 1978, informed the applicant that, as the Commissioner had objected under s. 245-D(1), the Settlement Commission did not allow the application to be proceeded with. Parenthetically though, it must be stated that on the first rejection of the application by the Settlement Commission, the revenue moved the ITAT for restoration of its appeals although no specific provision enables such a restoration. The assessee can apply for restoration of his appeals since s. 245M enables it. This order of the Commission shows that some correspondence with the applicant did take place before the order not to proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not have the effect of not preferring an appeal, was not pursued by the appellant before us but we are not bound by counsel pressing or cold-shouldering a point of law if attention of the advocates has been drawn thereto, as in this case it was. The scheme of Chap. XIXA must be grasped before we embark on the discussion. The incarnation of Chap. XIXA was in the wake of the Wanchoo Committee Report. The vampirish vices of black money and colossal tax evasion, both together using money power to prevent action against white-collar offender, had been a terrible menace to the health and wealth of the nation. In particular, black money, whose constant companion was tax evasion, posed a challenge to the country's economy and the Wanchoo Committee was appointed to make recommendations with a view to arrest this evil. That Committee made a wealth of recommendations, but we are concerned only with Chap. 2 of the report which, under the title, " Black Money and Tax Evasion ", proposed a compromise measure of a statutory settlement machinery where the big evader could make a disclosure, disgorge what the Commission fixes and thus buy quittance for himself and accelerate recovery of taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation for settlement of cases.-(1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner and containing such particulars as may be prescribed to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided ........ " Its meaning can be understood fully only when we read the definition of " case ". According to the definition in s. 245A(a), a " case " means any proceeding under the income-tax law in connection with the assessment or reassessment of any person which may be pending before an income-tax authority on the date of application under s. 245C(1). It is common knowledge that the I.T.A.T. is not an income-tax authority, which expression, it is settled, includes the ITO and the AAC and others. Therefore, when an appeal pends before the Tribunal, it cannot be said that a case pends before an income-tax authority. In the present case, we are concerned with a stage when appeals are pending before the Tribunal. Section 245C(1) may not enable an assessee to move the Commission in such cases but for the provision in s. 245M. Indeed, we are intimately concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdraw his objection. Likewise, the applicant may point out that what appears to the Settlement Commission to be an objection by the Commissioner is not an objection to proceed with the application, but only a clarification of some aspect or other. Nothing is lost by hearing a 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 Chap. XIXA. Anyway, s. 245D(1) does not negate natural justice and in the absence of an express exclusion of the rule of audi alteram partem, it is fair, indeed fundamental, that no man is prejudiced by action without opportunity to show to the contrary. Without expounding any inflexible rule of natural justice of universal validity, we cannot find fault with the Settlement Commission for what it has done. We take the view that, having regard to the rulings of this court in M. S. Gill's case [1978] 1 SCC 405 ; AIR 1978 SC 851 and Maneka Gandhi's case [1978] 1 SCC 248 ; AIR 1978 SC 597, the Settlement Commission's decision to re-hear and pass a de novo order cannot be said to be illegal. The Commissioner's objection to the application being proceeded with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of his earlier stand in regard to the withdrawal of appeals is valid or not. After setting out the course of events and earlier readiness of this department to withdraw its appeals to enable the Commission to be moved by the assessee notwithstanding the pendency of the criminal cases and having regard to the absence of any new material, having being discovered justifying a reversal of the CIT's stand, the Commission took the view that the rule of estoppel forbade the appellant from objecting to the Commission's proceedings with the application of this assessee. It argued itself into that conclusion thus : " In this particular case, in view of the withdrawal of the departmental appeals before the Income tax Appellate Tribunal, the Commissioner is estopped from making a report under section 245D(1), proviso 2, to the Settlement Commission objecting to the application from being proceeded with. The objection raised by the Commissioner is, thus, invalid in law and any objection which is invalid in law, for the reason discussed earlier, is no objection under the second proviso to section 245D(1) and the Commission is competent to ignore it applying the principles of law, equity a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and and reading of its full range of meaning is decisive of the subject of this appeal. We may skip ss. 245E, F and G but dwell for a moment on s. 245H which is of great moment from the angle of public interest and public morals as it immunises white-collar offenders against criminal prosecutions and, in unscrupulous circumstances, becomes a suspect instrument of negotiable corruption. More than the prospect of monetary liability and mounting penalty is the dread of traumatic prison tenancy that a tax-dodging tycoon is worried about. And if he can purchase freedom from criminal prosecution and incarceratory sentence he may settle with the Commission ; and, towards this end, try to buy those who remotely control the departmental echelons whose veto or green signal closes or opens the jurisdiction of the Settlement Commission and hushes or pushes the prosecutions. Thus, s. 245H, which clothes the Commission with the power to grant immunity from prosecution for " any offence under this Act or under the Indian Penal Code or under any other Central Act... " is a magnet which attracts large tax-dodgers and offers, indirectly, an opportunity to the highest departmental and political aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission is not entertained, allows revival of the withdrawn appeals thus restoring the status quo ante. This is but fair because the assessee should not suffer if the Settlement Commission bars its doors. The facts of our case show that the assessee had filed appeals before the Tribunal and had later moved for their withdrawal in terms of s. 245M(1), (2) and (3). Sub-s. (4) thereupon opened and by virtue of sub-s. (6) the mechanics of ss. 245C and 245D sprang into action. It would have been smooth sailing but for the proviso to s. 245M(1), which runs thus : " Provided that no such assessee shall be entitled to make an application in a case where the Income-tax Officer has preferred an appeal under sub-section (2) of section 253 against the order to which the assessee's appeal relates. " Thus, there is an embargo on the right of the assessee to move the Commission " where the ITO has preferred an appeal under sub-s. (2) of s. 253 against the order to which the assessee's appeal relates ". The revenue had preferred appeals here but later withdrawn them. Does such withdrawal amount to not having preferred an appeal at all ? The crucial question, therefore, is as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If a party retreats before the contest begins it is as good as not having entered the fray. After all, Chap. XIXA is geared to promotion of settlement and creation of road-blocs in reasonable compositions. The teleological method of interpretation leads us to the view that early withdrawal of the ITO's appeal removes the bar of the proviso. The problem that troubles us arises from s. 245M(7). If a settlement application is not entertained and is rejected in limine there is a statutory revival of the assessee's appeal before the I.T.A.T. because of the deeming provision, but what happens to the appeal of the ITO which he withdraws to enable the assessee to file an application before the Commission ? Literally read, s. 245M(7) covers the revival of the assessee's appeals but not the ITO's appeals. The inference from this omission is that no occasion arises for revival of the ITO's appeals because once he files an appeal no application for settlement can be made. That is to say, the proviso to s. 245M(1) interdicts entertainment of a settlement application if departmental appeals are filed. This interpretation narrows the benign amplitude of the chapter of attracting as many big as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ean that no one who is aggrieved by the assessment shall " be deemed to have withdrawn the appeal from the Appellate Tribunal ". An equitable and purpose-oriented construction of the clause means that the assessee will be put back in the same position vis a vis his appeals and if, to facilitate his moving the Commission, the ITO has withdrawn the departmental appeals, the Commission's rejection of the application shall not prejudice the revenue. Actus curie neminem gravabit is the principle of wider import and is a tool of construction too. This perhaps may be making up for a lacuna by a restructuring of the clause so as to work out justice to the department. The scheme of s. 253(4) contemplates filing of memorandum of cross-objections by the ITO on receipt of notice of an appeal by the assessee. So much so, it is also possible, alternatively, to read into s. 245M(7) the right of the department to file an appeal de novo on receipt of notice of the revival of the assessee's appeal, within the period specified in s. 253(4). This does not do violence to the language of s. 245M(7) and affords equitable relief to the department by enabling it to bring its appeal back to life notwithstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do as they would have done. A judge must not alter the material of which it is woven, but he can and should iron out the creases. " The upshot of the discussion is to hold that if the department files an appeal which it drops to enable an application before the Commission, then the proviso to s. 245M(1) does not debar the motion for settlement. The preliminary objection raised by Shri A. K. Sen need not detain us because we are satisfied that the amplitude of art. 136 is wide enough to bring within its jurisdiction orders passed by the Settlement Commission. Any judgment, decree, determination, sentence or order in any case or matter passed or made by any court or tribunal, comes within the correctional cognisance and review power of art. 136. The short question, then, is whether the Settlement Commission cannot come within the category of " Tribunals ". To clinch the issue, s. 245L declares all proceedings before the Settlement Commission to be judicial proceedings. We have hardly any doubt that it is a tribunal. Its powers are considerable ; its determination affects the rights of parties; its obligations are quasi-judicial; the orders it makes at every stage have tremendous i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and we proceed to consider the triple substantial questions set out earlier. The two gut issues that must now engage us take us to the turn of events surrounding the withdrawal of appeals by both sides. To complete the story-and this fact has a bearing on one of the legal questions-it must be stated that when the Settlement Commission first acted under the second proviso to s. 245D(1), the department, even like the assessee, applied to the I.T.A.T. for revival of its appeals although s. 245M(7) does not make any such provision for revival of the ITO's appeals. In ordinary circumstances the 2nd proviso to s. 245D(1) is easy of construction and the exercise is also simple. The assessee applies to the Commission, thereupon the Commission shall call for a report from the Commissioner. The Commissioner may object to the application being proceeded with on the grounds specified in the second proviso to sub-s. (1) of s. 245D. If he so objects, the application " shall not be proceeded with ". This is express, explicit and mandatory. Where an application is allowed to be proceeded with under sub-s. (1), the Settlement Commission may call for the relevant records from the Commissioner and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpretative softness of the second proviso to s. 245D(1). To whittle down the imperative nature of this veto power is to undo the expectations of the Wanchoo Committee and amounts to stultifying the rule of law an integral part of which is that the law shall not let the greater felon lose. Can the rule of estoppel override a statutory mandate of a prohibitory character calculated to inhibit/escape from the coils of the law crime ? Moreover, we have to examine, assuming the application of the rule of estoppel, where the basics of that rule of a clear representation having been made by A to B and the latter on the face of representation acting to his detriment can be spun out of the circumstances before us. Now, we come to the meat of the matter-the plea of estoppel or its variants. The CIT's objection to the jurisdiction of the Commission to proceed with the matter has been shot down by the artillery of estoppel. The order under appeal proceeds to hold that a conspectus of the circumstances of the case compels the conclusion that an understanding had been reached between the assessee and the CIT, evidenced by mutual withdrawal of their respective appeals before the I.T.A.T., tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent statutory situation, s. 245D, by the second proviso, casts a public duty on the CIT to consider, in the light of the case made out in the assessee's application, whether"' concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax or other sum chargeable or imposable under the Indian I.T. Act, 1922 (11 of 1922), or under this Act, has been established or is likely to be established by any income-tax authority, in relation to the case ", and exercise his veto power to prevent escape of macro-criminals prima facie guilty of grave economic crimes. He cannot bargain over this interdict in advance or barter away a legal mandate in anticipation. He may permit or even assist the filing of a conciliation motion by the assessee but when the Commission intimates him under s. 245D(1) he shall, with statutory seriousness exercise his discretion. He cannot enter into a " deal " over this power without betraying the statutory trust. We cannot, therefore, accept the plea that the CIT, by conduct and " understanding ", has " irredeemably mortgaged " his statutory duty to object, if the case deserves such objection. Estoppel then is bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt representing to the I.T.A.T. on August 23, 1976, the following : " Re : I.T. appeals in the name of Sri B. M. Bhattacharjee for the asst. years 1962-63, 63-64, 64-65, 65-66, 66-67, 67-68, 68-69,69-70, 70-71, 71-72, 72-73 and 73-74. Sub : Prayer u/s. 245M of the I.T. Act, 1961, for withdrawal of appeals. With regard to the above I beg to submit that all the above appeals I have filed on 12-9-75 but, now, I like to have my cases settled by the Settlement Commission and as such I may kindly be allowed to withdraw all the above twelve appeals u/s. 245M of the I.T. Act, 1961. The matter is very much urgent and the settlement petition is to be filed within a day or two before the Settlement Commission, New Delhi. Pray that an early order of the Appellate Tribunal permitting the withdrawal of all the above appeals may kindly be issued to me and for this act of kindness I shall ever pray. Sd. S. N. Mandal Dt. 23-8-76. " At this time the department had done nothing to induce him to withdraw his appeals or move the Commission to that effect. It was a unilateral act of his and if the I.T.A.T. allowed him to withdraw, that was not because of the CIT's conduct but the compulsion of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laying the basis for a plea of estoppel. Far from the revenue making any positive representation to the assessee it was a case of a concession shown to him to try his chance before the Commission. This is clear from the assessee's own petition to the Tribunal dated December 17, 1976, wherein he states : " ...... now the learned CIT, Central, Calcutta, has very kindly agreed to withdraw their departmental appeals for the assessment years 1962-63 to 1971-72 on condition that your petitioner would also withdraw all the appeals for 1962-63 to 73-74 assessments." It is true that the CIT withdrew the appeals of the department, but it is not true that he made any representations to the assessee to act in a particular manner with a promise of doing something to his advantage leading to the assessee in turn acting to his own prejudice by withdrawing his appeals. His withdrawal of the appeals was independently decided upon by him so that he could move the Commission. Thereafter, he moved the department to withdraw its appeals so as to entitle him to make an application to the Commission. The order of the I.T.A.T. dated December 24, 1976, makes it clear that it granted permission to withdr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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