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Settlement Commission’s Order Can Only Be Judicially Reviewed On Limited Grounds: Supreme Court 

Kotak Mahindra Bank Limited V/S Commissioner Of Income Tax Bangalore And Anr. [Civil Appeal No.9720 Of 2014]

The Supreme Court said that the settlement commission’s order can only be Judicially Reviewed on limited grounds.

The division bench of Justice B.V. Nagarathna and Justice Ujjal Bhuyan noted that under Section 245H(1) if the Settlement Commission is satisfied that any assessee who makes the application for settlement under Section 245C, has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of its income and the manner in which such income has been derived, may grant immunity from prosecution or from the imposition of penalty, either wholly or in part with respect to the case covered by the settlement.

The bench said that that the assessee ought to have made full and true disclosure before the Commission, and co-operated with the Commission in the proceedings before it. 

It was noted by the court that according to the Revenue, what had been “disclosed” in the application was the same as what was “discovered” by the Assessing Officer and therefore, the application of the assessee ought not to have been entertained by the Commission, and further, immunity under Section 245H ought not to have been granted. 

In this regard, the court observed that even if the pre-conditions prescribed under Section 245C are to be read into Section 245H, it cannot be said that in every case, the material “disclosed” by the assessee before the Commission must be something apart from what was discovered by the Assessing Officer. 

The appellant-assessee, Kotak Mahindra Bank Limited is a Public Limited Company carrying on the business of banking and is assessed to tax in Bangalore. 

The appellant filed its income tax returns for the assessment years 1994-1995 to 1999-2000 and assessment orders were passed up to assessment year 1997-1998 and the assessment for the subsequent years was pending. The Assessing Officer then passed an Assessment Order dated 30.03.2000 for the Assessment Year 1997- 1998. 

On 09.06.2000 the Assessing Officer issued a notice under Section 148 of the Act for the reassessment of income for the aforesaid assessment years. The Assessing Officer also passed a penalty order dated 14.06.2000 levying a penalty under Section 271 (1)(c) of the Act after being satisfied that the appellant had concealed its income as regards lease rental.

The appellant-assessee, contended that the Settlement Commission rendered a positive finding that the appellant had extended cooperation and had made a true and full disclosure.

In exercise of power under Section 245H, the Commission granted immunity from prosecution and penalty to the appellant, the High Court ought not to have interfered with the decision of the Settlement Commission.

The respondents-Revenue submitted that it is only when the completed assessments were re-opened by the Revenue and when penalty proceedings were initiated that the application was filed by the appellant under Section 245C (1) before the Settlement Commission. There is a marked difference between the terms “discovered” and “disclosed” in as much as what was “discovered” by the Assessing Officer during the course of assessment proceedings could not form part of what was “disclosed” by the assessee in the application filed before the Settlement Commission. However, what has been “disclosed” in the application is the same as what was “discovered” by the Assessing Officer. 

The Apex  Court held that the High Court ought not to have sat in appeal as to the sufficiency of the material and particulars placed before the Commission, based on which the Commission proceeded to grant immunity from prosecution and penalty as contemplated under Section 245H of the Act.

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