High Court cannot interfere with the orders of the Settlement Commission - High Court
THE Kerala High Court had to recently consider the question,
Whether this court, in exercise of its jurisdiction under Article 226 of the Constitution of India, will interfere with orders passed by the Settlement Commission under Section 245D of the Income Tax Act, 1961 and if so, to what extent ?
The High Court referred to the observations of the Supreme Court in the case of Union of India and Others v. Ind-Swift Laboratories Limited -
An order passed by the Settlement Commission could be interfered with only if the said order is found to be contrary to any provisions of the Act. So far as the findings of fact recorded by the Commission or question of facts are concerned, the same is not open for examination either by the High Court or by the Supreme Court. In the present case the order of the Settlement Commission clearly indicates that the said order, particularly, with regard to imposition of simple interest @ 10% per annum was passed in accordance with the provisions of Rule 14 but the High Court wrongly interpreted the said Rule and thereby arrived at an erroneous finding. So far as the second issue with respect to interest on Rs.50 lakhs is concerned, the same being a factual issue should not have been gone into by the High Court exercising the writ jurisdiction and the High Court should not have substituted its own opinion against the opinion of the Settlement Commission when the same was not challenged on merits.
So, the High Court noted that, "it is well settled that the power of judicial review is not to be exercised to decide the issue on facts or on an interpretation of the documents available before the Court. It follows, therefore, that in the instant case, the enquiry by this Court can only be with regard to whether or not the Settlement Commission exercised a jurisdiction that it did not have or, alternatively, if it did have the jurisdiction, whether it erred in the exercise of that jurisdiction. In the latter event, this court would also have to bear in mind the nature of the jurisdiction exercised by the Settlement Commission, which is akin to a statutory arbitration."
Full and True Disclosure: The case had another interesting aspect. The Revenue argued that the offer of additional amounts by the assessees, over and above the amounts initially disclosed by it as undisclosed income in their applications before the settlement commission, and pursuant to the suggestions of the settlement commission in the course of the proceedings before it, rendered the original disclosure made by them as one that was not " a full and true disclosure" of the income that was not disclosed by it before the assessing officer or the manner in which such income was derived.
The High Court observed that Settlement Commission was created with effect from 01.04.1976, for the purpose of quick settlement of cases, so that the tax due to the department is collected at the earliest. The question before the High Court was whether in every case where an applicant makes an offer of additional amounts, even at the instance or suggestion of the settlement commission, it would follow that the original declaration made by the applicant did not contain a full and true disclosure of his income and thereby rendering it invalid and, consequently, denuding the settlement commission of its jurisdiction to proceed further in the matter?
The High Court answered, such an interpretation would render meaningless the scheme of settlement that is envisaged under the IT Act. One cannot discount the possibility of the Settlement Commission finding the disclosure of income made by an assessee as being full and true and yet requiring minor adjustments to include even those amounts, which though disputed by the assessee, would nevertheless be offered by the assessee in the interests of putting an end to litigation and in the spirit of settlement. These could be amounts, in respect of which, neither the department nor the assessee have sufficient material to substantiate their contentions, but the assessee is nevertheless willing to give up his claim in the interests of finality to litigation. The consent by an assessee to forgo such amounts, at the suggestion of the Settlement Commission, cannot have the effect of rendering his original disclosure dubious for the purposes of settlement under the Act.
As you must have guessed, it was the Revenue that took this case to the High Court against a peaceful settlement.
If you can prolong litigation, don't let go of any opportunity to do so - seems to be the Revenue Policy.
You can see the High Court order in