No Interference with Order by Income Tax Settlement Commission Unless Contrary to Law or involves Bias, Fraud, or Malice: Madras HC [Read Order]
The Court noted that the members have been authorised to settle disputes on behalf of the Government and that no challenge may be raised against the decision of the committee without serious allegations
No Interference with Order by Income Tax Settlement
No Interference with Order by Income Tax Settlement
The Madras High Court has ruled that courts cannot interfere with orders passed by the Income Tax Settlement Commission unless they are contrary to law or involve bias, fraud, or malice.
The petitioner, M/s. Sri Krishna Tiles and Potteries (Madras) Pvt. Ltd., challenged an order passed by a single judge of the Madras High Court through which the Court set aside a settlement in favour of Sri Krishna Tiles against a petition filed by the Commissioner of Wealth Tax and the Commissioner of Income Tax, Chennai III.
The dispute arose when the Revenue challenged an order of the Settlement Commission passed under Section 245D(4) of the Income Tax Act, 1961, and Section 22D(4) of the Wealth Tax Act, both of which provide for settlement of tax liabilities.
The Department alleged that the Settlement Commission’s order was not in accordance with law and sought to have it quashed. Aggrieved by the order of the single judge allowing the Department’s petitions, the assessee approached the Division Bench in appeal.
The Division Bench of Chief Justice K.R. Shriram and Justice Sunder Mohan, undertook a detailed review of Supreme Court and High Court precedents, including the decision of the Bombay High Court in Principal Commissioner of Income Tax (Central-3) vs. Income Tax Settlement Commission (ITSC) and others, (Wadhwa Group Holding Pvt. Ltd) (2019) to reiterate that the Settlement Commission operates as a forum for self-surrender and relief, not as a tribunal for contesting the legality of assessment orders.
The Bench further observed that the powers of the Settlement Commission are broad, allowing it to decide disputed tax liabilities, grant immunity, and settle matters conclusively on behalf of the government, provided the orders are not contrary to the provisions of the Act.
The Court specifically noted the members have been authorised to settle the disputes on behalf of the Government and the Government may not challenge the decision of the committee without making allegations of bias or fraud or malice.
The Bench further referenced the Supreme Court decision in CIT (Central) Vs. B. N. Bhattacharjee & Anr (1979) in which it was clarified that “the ITSC exercises many powers which affect all the rights of the parties before it and vests in it powers to grant immunity from prosecution and penalty, to investigate into many matters and to enjoy conclusiveness regarding its orders or settlement”.
Holding in favour of the assessee, the Division Bench allowed the appeals and quashed the impugned order of the learned single judge, while restoring the original order of the Settlement Commission.
R.V. Eswar, appeared for the appellant-assessee while V. Mahalingam represented the Revenue.
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