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I-T - It is mandatory for Settlement Commission to verify actual date of passing of assessment order by AO before proceeding to decide application for settlement of proceedings: HC

By TIOL News Service

AHMEDABAD, MAY 15, 2018: THE ISSUE BEFORE THE COURT IS - Whether without verifying the actual date of passing of assessment order by AO, the settlement commission can proceed to decide the application for settlement of proceedings filed by assessee. NO IS THE VERDICT.

Facts of the case:

The assessee company had filed an application for settlement of its proceedings concerning AYs 2010-11 to 2014-15 on 27.12.2007 contending that till then, the assessments were pending. The Revenue appeared before the Settlement Commission in response to the notice issued and took a stand that the application for settlement was not maintainable since on 26.12.2017, the AO had already passed separate orders of concerned AYs. The assessee argued that till 29.12.2017, such orders were not served on the assessee. The assessee also contended that no such orders of assessment, as alleged, were passed on 26.12.2017. The Settlement Commission, overruled the Revenue's objection to the maintainability of the settlement application. The Commission was of the opinion that until orders of assessment were served on the assessee, he would have a continued right to apply for settlement. However, the Commission did not enter into the question of the orders of assessment being actually passed on 26.12.2017 or not. Aggrieved Revenue, filed petition challenging order of the Settlement Commission passed u/s 245D(2C) of the Act before the High Court.

High Court held that,

++ the Commission committed serious error both in the decision and the decision making process. It was the duty of the Settlement Commission to first ascertain whether the department had in fact, passed such orders of assessment on 26.12.2017 or not. Had the Commission come to the conclusion that no such orders were passed till the assessee filed the application for settlement on 27.12.2017, the Commissioner was perfectly justified in overruling the department's objection to the maintainability of the application for settlement. However, without doing so, the Settlement Commission held that the settlement application was maintainable;

++ the knowledge of the order of assessment of the assessee or its service on him were wholly inconsequential. The Settlement Commission committed a grave error in law disregarding the dictum of the High Court. In case of Shalibhadra Developers, the High Court had considered all relevant aspects of the matter before coming to legal conclusion. It was not open for the Settlement Commission to disturb such ratio of the judgement of the High Court. If the Settlement Commission had noticed a judgement of the larger Bench of the same High court or a judgement of the Supreme Court which, under identical situation, laid down law to the contrary, it was open for the Settlement Commission to record that the judgement of the High Court in case of Shalibhadra Developers was rendered per incuriam. Except for this proposition, it was simply not open for the Settlement Commission to disturb the conclusions of the High Court on law points reached after detailed consideration;

++ the assessee can not be left without remedy merely because the Commission chose not to examine the actual date of passing order by AO. In the result, the petition is disposed of. The proceedings are placed before the Settlement Commission for fresh consideration from the stage of passing of the order u/s 245D (2C) of the Act. The Settlement Commission shall examine the assessee's contention that contrary to what is suggested by the Revenue, the orders of assessment were never passed on 26.12.2017. The Settlement Commission shall, pass fresh order latest by 15.05.2018 bearing in mind, the observations and declaration of law by the High Court in case of Shalibhadra Developers.

(See 2018-TIOL-916-HC-AHM-IT)