TMI Blog1989 (3) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... e Settlement Commission ?" The facts of the case, in brief, are as follows: The petitioner was regular assessee being assessed to income-tax under the provisions of the Act. He was the managing director of International Instruments Limited, public limited company, established under the technical collaboration with German-based company VDO Tachometer Werke GmbH ("VDO" for short). The petitioner was interested in acquiring a business for manufacturing hose clips, which was being run under the name and style "Noridex" by a German national by name Mr. Klug. In view of its superior quality and reputation, the petitioner desired to acquire the business. For that purpose, the petitioner negotiated a loan from VDO. This was approved by the Government of India, subject to the following conditions: (1) The petitioner should raise the loan personally and the maximum interest payable would be 103/4 % ; (2) The petitioner had to establish a limited company to take over the business ; (3) VDO, as a lender, would be empowered to appoint a general manager to look after the affairs of the company till the loan is outstanding ; (4) The purchase price of DM 3,80,000 had to be paid in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently, the patent rights in respect of several countries were sold for 1,75,000 DM to Aprotec SA on October 25, 1972, while retaining the rights in the rest of the world. The loan liability towards VDO remained that of the petitioner and was not and could not be transferred to the limited company, in view of the express stipulation by the Government of India that the loan shall be the personal liability of the petitioner. In accordance with the conditions imposed by the Government of India, a parallel unit for manufacture of hose clips, namely "Avalon Fasteners Private Limited", was established in India within about a period of six months. Some of the machinery, working tools, jigs, raw materials and semi-finished products, were transferred from Noridex GmbH to Avalon Fasteners Private Limited on a deferred payment basis. The Indian company fared well as the cost of production was much lower in India. But, unfortunately, the limited company in Germany did not prosper for varied reasons. At that stage, there was a proposal to shift the production from West Germany to India, keeping the private limited company in Germany as a marketing Organisation. The Government of India did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authority was that there was no discontinuance of the business and, therefore, the interest paid as also the business loss as also the bad debts incurred in respect of the German company were liable to be allowed in the assessment. The appellate authority, for the very reasons stated by the Income-tax Officer, dismissed the appeals. Thereafter, the petitioner filed appeals before the Income-tax Appellate Tribunal for the years 1972-73 to 1974-75. The request made by the petitioner before the Commissioner of Income-tax, Karnataka, to give deduction by exercise of his discretion, was also rejected on January 24,1978. It is at this stage that the petitioner chose to withdraw the appeals preferred before the Appellate Tribunal and desired to approach the Settlement Commmission under section 245M of the Act. As the matter was of considerable complexity, permission to withdraw the appeals was granted. The petitioner filed applications before the Settlement Commission for the assessment years 1972-73 to 1977-78. The application of the petitioner for the assessment years 1976-77 and 1977-78 was rejected by the Commissioner on the ground that in respect of those years, no proceedings w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------------------------------------------------------------------- 1972-73 552 - - - 18,992 1973-74 120 - - - - - - 1975-76 2,057 15,084 - - - 1976-77 1,790 9,666 - - - 1977-78 612 9,180 - - - --------------------------------------------------------------------------------------------------------------------------------------------------- The applicant has requested for cancellation of the interest charged as above under the various sections. The applicant has been filing applications in Form No. 6 for extension of time for submission of returns. Hence, the charging of interest under section 139(8) is in order and they are allowed to stand. In regard to the levy of interest under sections 215 and 217(lA), the position is slightly different. The estimates of advance tax payable fell short of 75 % of the tax determined on regular assessment mainly on account of the applicant setting off the loss of Noridex against his other income. But for the set off, the estimates filed by him cannot be characterised as false or untrue. Reading section 214(4) with rule 40 of the Income-tax Rules, we are of the opinion that interest under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Commission constituted under the Act was an extraordinary one and under the scheme, a party could approach the Settlement Commission seeking full and final settlement of all the matters concerning the liability under the Act and once the assessee voluntarily approached the Settlement Commission and the Settlement Commission rendered a decision, it is final and, therefore, the petitioner was not entitled to challenge the same in a writ petition. The second contention was that even on the basis that the provisions of the Act making the decision of the Settlement Commission final, they do not take away the power of judicial review of administrative action conferred on this court by the Constitution, this court, cannot, having regard to the scheme of the Settlement Commission go into the correctness or propriety of the decision of the Settlement Commission. Therefore, the two questions set out first arise for consideration. Before considering the validity of the contentions, it is necessary to allude to the legislative background as also the salient aspects of the provisions providing for the establishment of the Settlement Commission, as also the scope of its powers and the spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnments on the Tribunal, we recommend that its members should be given the same status and emoluments as the members of the Central Board of Direct Taxes. Any taxpayer will be entitled to move a petition before the Tribunal for settlement of his liability under the direct tax laws. We do not think that it is necessary to provide for cases being referred to the Tribunal by the Department. However, we wish to emphasize that the Tribunal will proceed with the petition filed by a taxpayer only if the Department raises no objection to its being so entertained ... The award will be binding both on the petitioner and on the Department. The application of its decisions on questions of law will, however, be confined to the case under settlement and will not in any way interfere with the interpretation of law in general. No appeal will lie against the decision of the Tribunal by the petitioner or the Department, whether on questions of fact or of law. (underlining by us). "Where the taxpayer takes the initiative and voluntarily discloses the facts of his past frauds and their full extent and is also prepared to facilitate investigations, and to furnish full evidence (including not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement Commission, but the Settlement Commission has the discretion to furnish copies thereof on an application made to it. However, if the person whose case is under consideration before any Settlement Commission wants any document to rebut any evidence against him, the Settlement Commission has to furnish copies of the documents sought for (section 245G). The Settlement Commission is invested with the power to give immunity against prosecution and/or imposition of penalty on being satisfied that the applicant had made full and true disclosure of his income (section 245H). Any amount specified in an order of settlement passed under section 245D could be recovered and penalty for default in paying such sum, could be imposed and recovered in accordance with the provisions of Chapter XVII (section 245J). Lastly, section 245-1, which provides that the decision of the Settlement Commission is final and conclusive reads : "245-I. Order of settlement to be conclusive.-Every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts powers are considerable ; its determination affects the rights of parties ; its obligations are quasi-judicial ; the orders it makes at every stage have tremendous impact on the rights and liabilities of parties . . . In short, Settlement Commissions are Tribunals. The preliminary point fails. Thus, the Settlement Commission is held to be a Tribunal. That being the position, the petitioner is entitled to seek judicial review of the order of the Settlement Commission in a petition under articles 226 and 227 of the Constitution of India. For these reasons, we answer the first question in the affirmative. With reference to the second question arising for our consideration, as we have pointed out earlier, the provision for constitution of the Settlement Commission was not in existence earlier. This legislative step was taken on the recommendation of the Wanchoo Committee. As observed by us earlier, the Settlement Commission was to be constituted for settling complicated claims of chronic tax evaders as an extraordinary measure, for giving an opportunity to such persons to make a true confession and to have matters settled once for all, and earn peace of mind. It is a forum for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the civil courts which were entrusted with the power to facilitate arbitration and to effectuate the awards, could not exercise appellate powers over the decisions. Wrong or right the decision was binding, if it be reached fairly after giving adequate opportunity to the parties to place their grievances in the manner provided by the arbitration agreement. This court reiterated in the said decision that it was now firmly established that an award was bad on the ground of error of law on the face of it, when in the award itself or in a document actually incorporated in it, there was found some legal proposition which was the basis of the award and which was erroneous." In our opinion, many of the grounds on which arbitration awards could be set aside would not be available in view of the nature and jurisdiction of the Settlement Commission. We are of the view that a decision of the Settlement Commission could be interfered with only : (i) if grave procedural defects such as violation of the mandatory procedural requirements of the provisions in Chapter XIX-A and/or violation of the rules of natural justice is made out ; (ii) if it is found that there is no nexus between ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
