In a significant ruling the Patna High Court upheld the order of the Settlement Commission on representation of Income Tax Dept and existence of Rule 9 Report.
The writ petition by the Principal Commissioner of Income Tax challenged the order dated 20.03.2019 of the Settlement Commission passed in the case of the respondent Nos. 2 to 5. The challenge is also on the ground that the Income Tax Settlement Commission had not considered the Rule 9 report and did not permit the filing of further enquiry report before passing the final order under Section 245D(4) of the Income Tax Act.
The Senior Standing Counsel, contended that there was no order under Section 245D(2B) of the Income Tax Act, wherein the Commission was under an obligation to call for a report within 30 days. The court directed the Department to file an affidavit as to whether such an order was received or not. A supplementary affidavit has been filed on 25.01.2024 wherein, it is clearly stated that a report was called for under Section 245D(2B) of the Income Tax Act by communication dated 27.11.2017, produced therein, which was replied to on 27.12.2017 and received in the office of the Commission on 12.01.2018.
It was further argued that in approaching the Commission, the assessee has to fulfil three ingredients; being (i) full and true disclosure, (ii) the manner in which such income was derived and (iii) additional amount of income tax payable on such income and such other particulars as may be prescribed. None of the ingredients are satisfied by the assessee and the report on that count has not been considered, is the specific contention taken.
The Senior Counsel appearing for the assessee, on the other hand, countered the arguments with specific reference to the findings of the Commission in the impugned order and pointed out that the writ petition only seeks a judicial review which does not permit this Court to look into the decision itself, but, only enables an examination of the procedure; which has been scrupulously followed by the Commission.
Section 245D delineates a procedure by which the Commission has to deal with an application under Section 245(C). Within seven days from the date of receipt of the application, a notice has to be issued to the assessee to show cause as to why the application should be proceeded with and after hearing the applicant, the Commission is empowered to either reject the application by order in-writing or allow it to be proceeded with.
A Division Bench of Chief Justice K. Vinod Chandran and Justice Rajiv Roy observed that “It is specifically stated that the order under Section 245D(1) was passed on 24.11.2017 directing the application to be proceeded with. A report was called for from the Principal Commissioner of Income Tax under Section 245D(2B), which was received after the due date. Hence, Section 245D(2C) requires the application to be proceeded with in the absence of the report, which, as admitted in the supplementary counter affidavit, reached the Commission after the expiry of 30 days. Section 245D(3)(ii), however, requires an application referred to in sub-section (2D), allowed to be further proceeded with under that sub-section, to be proceeded with after calling for report from the Commissioner. The Rule 9 report with respect to the applicant was submitted by the office of the Commissioner, which has been dealt with by the Commission.”
“We find absolutely no reason to interfere with the same on the ground of absence of reasonable opportunity of hearing having not been afforded, especially since the Department was represented and heard as also the existence of the Rule 9 report before the Commission” the Bench noted.
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