TMI Blog2001 (10) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... is an individual having business income. The assessee had made an application before the Settlement Commission (for brevity "the Commission"), under section 245C of the Act. The Commission passed an order dated October 3, 1980, under section 245D of the Act, including the order in respect of certain penalties also. Para. 8 of the Commission's order dealing with penalties read as under: "In view of the full disclosure made by the applicant, and the complete co-operation extended by him, there is no case for levy of penalty under section 271(1)(c) nor is there any case for any prosecution. The applicant is, therefore, entitled to the grant of immunity on these counts. The applicant did not file the returns of income for the assessment years 1976-77 and 1977-78 before the income-tax authorities. These returns have been filed only before the Commission and are, therefore, belated. The applicant has explained that he was working under a mistaken impression that these returns could be filed on the basis of the settlement reached without attracting any penalty. On an over all consideration of the case and having regard to the complete co-operation extended by the applicant, we do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax dismissed the appeals of the assessee. The assessee carried the matter in appeals before the Income-tax Appellate Tribunal. The Tribunal dismissed the appeals. Hence, these references at the instance of the assessee. We have heard Mr. K. H. Kaji, learned counsel for the assessee, and Mr. Akil Kureshi, learned counsel for the Revenue. Mr. Kaji, learned counsel for the assessee, has submitted as under: The Tribunal erred in not appreciating the scheme of the provisions of Chapter XIX-A regarding settlement of cases. Once the Commission entertained the assessee's application under section 245C of the Act, it was for the Commission to deal with all the issues pertaining to tax, penalty or interest relating to the assessment year in question and it was then not open to the Assessing Officer to invoke any provision for penalty whether under section 271(1)(a), section 273(c) or section 217(1A) of the Act. Even if the Commission's order under section 245D(4) did not make any reference to certain penalties for the concerned years as set out in para. 2.4 hereinabove, the Commission must be deemed to have dealt with all the questions pertaining to penalty in respect of the cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aling with the rival submissions, it is necessary to make a reference to the relevant statutory provisions contained in Chapter XIX-A of the Act as inserted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. Chapter XIX-A bears the title "Settlement of cases". Section 245A(a) defines "case" as any proceeding ... under this Act for or in connection with the assessment or reassessment of any person in respect of any year or years which may be pending before an income-tax authority on the date on which an application under section 245C(1) is made. Section 245B empowers the Central Government to constitute the Income-tax Settlement Commission for the settlement of cases. The Commission is to consist of a Chairman and two other members who are to be appointed from amongst persons of integrity and outstanding ability, having special knowledge of, and experience in, problems relating to direct taxes and business accounts. Sub-section (1) of section 245C at the relevant time read as under: "(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but referred to in the report of the Commissioner under sub-section (1) or subsection (3) ... (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." Section 245E of the Act even empowered the Commission to reopen, with the concurrence of the applicant, the completed proceedings subject to the limitation of eight years. Sub-sections (1) and (2) of section 245F of the Act specifically provided that the Settlement Commission "shall have all the powers which are vested in an income-tax authority under this Act" and that when the application for settlement of case is allowed to be proceeded with, the Commission shall have "exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under this Act in relation to the case" until an order is passed under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation or not, Once it decides to proceed with the application, the Commission may call for the relevant records from the Income-tax Commissioner and direct any further enquiry or investigation and call for the Commissioner's report on the matters covered by the application and any other matter relating to the case. After receiving the report, the Settlement Commission is to give an opportunity of hearing to the assessee as well as to the Department and thereafter the Commission is to pass an order which "shall provide for the terms of the settlement including any demand for tax, penalty and interest and the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective". The Commission is also to have the exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under the Act in relation to the case. The Commission has been granted power to grant immunity from prosecution under the Income-tax Act or the Indian Penal Code or any other Central Act and also from the impostion of any penalty under the Act with respect to the case covered by the settlement. Hence, the scheme of the Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not choose to invoke those powers, the Assessing Officer cannot subsequently invoke them after the Settlement Commission has passed an order under section 245D(4) of the Act. The submission of Mr. Kureshi, for the Revenue, however, is that the exclusive jurisdiction of the Settlement Commission is provided only till passing of the order under sub-section (4) of section 245D and that thereafter, there is nothing to prevent the Assessing Officer from invoking his powers for levying penalty. We are afraid the contention runs counter to the aforesaid scheme permeating the provisions of the Chapter which has been enacted for the specific purpose of settlement of cases, i.e., for encouraging the assessees to come forward with true and full disclosure of income and giving utmost co-operation and sparing the Department the hassles of contentions litigatious including appeals, revisions and references. In other words, the scheme is for settlement of the 'case" (as defined by section 245A(a)) once and for all. Once the case is ordered to be settled by the Commission under sub-sections (4) and (6) of section 245D of the Act, none of the issues required to be covered under sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commission, nothing in section 245F shall affect the liability of the applicant to pay tax in relation to the matters pending before the Commission. A conjoint reading of sections 245A(a), 245B, 245D(4), 245D(6), 245F(3) and 245H(1) of the Act, therefore, leads us to the conclusion that exemption from imposition of penalty by the Settlement Commission need not be express, and that absence of any direction for penalty in the order for settlement under section 245D(4) results into or is to be treated as exemption from imposition of penalty, under the Income-tax Act, but an express direction of the Settlement Commission would be required if the assessee claims any benefit in the matter of levy or quantification of tax as contrasted with that of penalty. Since the provisions of the Income-tax Act themselves contain provisions conferring discretion on the Commissioner of Income-tax to waive penalty leviable under the Act, which power also enures to the Settlement Commission under section 245F of the Act, section 245H(1) did not have to provide for any specific power on the Settlement Commission for waiver of interest. Though the question about the effect of omission of any dire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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