H.L. Dattu, C.J.
1. This appeal is filed by the Revenue, being aggrieved by the common judgment of the learned single Judge in OP Nos. 1798 of 2000 and 12979 of 2003 and Writ Petn. (C) No. 9866 of 2004 dt. 20th July, 2004.
2. The facts, as noticed by the learned single Judge are as under:
The petitioner is an income-tax assessee. For the asst. yrs. 1990-91, 1991-92 and 1992-93, the AO had completed the assessment and had demanded income-tax, in a sum of Rs. 78,45,838 along with interest. He had also demanded an additional amount of income-tax of Rs. 9,62,240 on the basis of the additional income disclosed by the assessee.
3. After completion of the assessment proceedings by the authorities under the IT Act ('Act' for short), the assessee had filed an application before the Settlement Commission under Section 245C of the Act. Before the Settlement Commission, the assessee had also made an application for allowing him to remit the additional income-tax of Rs. 9,62,240 in instalments. The Settlement Commission by, its order dt. 6th July, 1999 had passed an order under Section 245D(1) of the Act. While doing so, the Settlement Commission had issued the following orders and directions, the same are as under:
8. In accordance with the provisions of Section 245D(2A) of the IT Act, the appellant shall pay, within 35 days of the receipt of this order, the additional amount of income-tax payable on the income disclosed in the settlement application and furnish proof of such payment to the Settlement Commission and its AO, within 15 days of making the aforesaid payment. If the applicant does not pay the additional amount of income-tax payable within the time specified in Section 245D(2A) of the IT Act, the amount of income-tax remaining unpaid, together with the interest payable thereon under Section 245D(2C) of the IT Act, shall be recovered by the AO in accordance with the provisions of Section 245D(2D) of the IT Act.
4. Pursuant to the above order, the assessee had paid the first instalment of Rs. 1,17,155 on 30th Dec., 1999. The assessee had also remitted an amount of Rs. 65,000. While the matter was pending before the Settlement Commission, since the assessee had defaulted in paying the instalments, the AO had passed Ext. P8(a)(in OP No. 1798 of 2000) order of attachment dt. 30th Dec., 1999. Aggrieved by the said order, the assessee was before this Court in OP 1798 of 2000.
5. Subsequently, the AO had also issued Ext. P8 (in OP No. 12979 of 2003) letter dt. 18th March, 2003 to the branch manager of the LIC of India, inter aha requesting the branch manager to pay to him any amount due to the assessee. Aggrieved by the said action of the AO, the assessee was before this Court in OP No. 12979 of 2003.
6. Since there was default in payment of instalments granted, the Settlement Commission had cancelled the instalment facility granted to the assessee by order dt. 9th Feb., 2004 (Ext. P6 in Writ Petn. (C) No. 9866 of 2004). Aggrieved by the said action of the Settlement Commission, the assessee was before this Court in Writ Petn. (C) No. 9866 of 2004.
7. As we have already noticed, since the assessee was common in all these cases and the issues were also common, the learned single Judge had disposed of the cases by a common judgment, holding that in view of Section 245F of the Act, once the matter is seized by the Settlement Commission, the AO cannot proceed to recover any amount ordered to be paid, by the Settlement Commission. According to the learned single Judge, it is the exclusive jurisdiction of the Settlement Commission, once an application is filed by the assessee under Section 245C of the Act. That only means, the jurisdiction of the AO is ousted once an application is pending before the Settlement Commission. To arrive at this conclusion, the learned single Judge has relied upon Section 245F of the Act. Aggrieved by the findings and conclusions reached by the learned single Judge, the Revenue is before us in this appeal.
8. Learned senior counsel appearing for the Revenue would strenuously contend before us, that the findings and conclusions reached by the learned single Judge require reconsideration by this Court, since they are contrary to the provisions of the IT Act.
9. Per contra, learned Counsel appearing for the assessee sought to justify the impugned order passed by the learned single Judge.
10. Chapter XIX-A of the Act provides for settlement of cases. Section 245A contains definition of certain words and expressions used in Chapter XIX-A. Section 245B empowers the Central Government to constitute a Commission to be called Income-tax Settlement Commission. Section 245BA provides for jurisdiction and powers of Settlement Commission. Section 245C of the Act provides for filing of an application by an assessee for settlement of cases before the Settlement Commission. Section 245D of the Act provides for procedure on receipt of an application under Section 245C of the Act.
11. Sub-section (1) of Section 245D of the Act authorises the Settlement Commission to take cognizance of an application filed by an assessee and also authorises the Settlement Commission to reject the said application under certain circumstances. Once an application is entertained, the Settlement Commission can proceed to pass an order, after affording an opportunity of hearing to the assessee or his representatives. Sub-section (2) of Section 245D of the Act mandates that an order made under Sub-section (1) shall be communicated to the applicant and to the CIT. Sub-section (2A) of Section 245D of the Act provides that subject to the provisions of Sub-section (2B) of Section 245D, the assessee shall pay, within thirty-five days of the receipt of a copy of the order under Sub-section (1), the additional amount of income-tax payable on the income disclosed in the application and shall furnish proof of such payment to the Settlement Commission. Sub-section (2B) of the Act authorizes the Settlement Commission to extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments, on an application made by the assessee giving sufficient reasons for his inability to pay the additional amount of income-tax referred to in Sub-section (2A).
12. For the purpose of this case, provisions of Sub-section (2D) of Section 245D of the Act require to be noted. It is extracted and reads as under:
(2D) Where the additional amount of income-tax referred to in Sub-section (2A) is not paid by the assessee within the time specified under that Sub-section or extended under Sub-section (2B), as the case may be, the Settlement Commission may direct that the amount of income-tax remaining unpaid, together with any interest payable thereon under Sub-section (2C), be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered, in accordance with the provisions of Chapter XVII, by the AO having jurisdiction over the assessee.
13. This Sub-section provides that where the additional amount of income-tax is not paid by the assessee within the time specified under Section 245D(2A) or within the extended time allowed by the Settlement Commission, the Settlement Commission may direct that the amount remaining unpaid together with any interest payable under Sub-section (2C) shall be recovered and any penalty for default for making payment of such amount may be imposed and recovered by the AO having jurisdiction over the assessee in accordance with the provisions of Chapter XVII of the IT Act.
14. At this stage, it is also relevant to refer to Section 245F of the Act and its provisions, which is as under:
245F Powers and procedure of Settlement Commission - (1) In addition to the powers conferred on the Settlement Commission under this chapter, it shall have all the powers which are vested in an IT authority under this Act.
(2) Where an application made under Section 245C has been allowed to be proceeded with under Section 245D, the Settlement Commission shall, until an order is passed under Sub-section (4) of Section 245D, have, subject to the provisions of Sub-section (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an IT authority under the Act in relation to the case.
(3) Notwithstanding anything contained in Sub-section (2) and in the absence of any express direction to the contrary by the Settlement Commission nothing contained in this section shall affect the operation of any other provision of this Act requiring the applicant to pay tax on the basis of self-assessment in relation to the matters before the Settlement Commission.
(4) For the removal of doubt, it is hereby declared that, in the absence of any express direction by the Settlement Commission to the contrary, nothing in this chapter shall affect the operation of the provisions of this Act insofar as they relate to any matters other than those before the Settlement Commission.
(5) and (6)(Omitted by the Finance Act, 1987 W.E.F. 1st June, 1987).
(7) The Settlement Commission, shall, subject to the provisions of this chapter, have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings.
15. Sub-section (1) of Section 245F provides that the Commission shall have all the powers vested in an IT authority. Sub-section (2) speaks of exclusive jurisdiction of Settlement Commission to perform any or all the functions of the IT authority in respect of the matters covered by the case before the Commission till an order is passed under Section 245D(4) of the Act. Section 245F(3) provides that in the absence of any express directions to the contrary issued by the Settlement Commission, the other provisions of the Act requiring an assessee to pay self-assessment tax shall continue to apply in relation to the case admitted by the Commission. Section 245F(4) clarifies that exclusive jurisdiction of the Settlement Commission conferred by Section 245F(2) of the Act is confined only to the matters before the Commission and does not affect any matters which are not before the Commission. Sub-section (7) provides that the Settlement Commission has the power to regulate its own procedure and the procedure of the Benches arising out of the exercise of its powers or the discharge of its functions.
16. Section 245J of the Act provides for recovery of sums due under order of settlement. This section only says that once an order is passed by the Settlement Commission under Sub-section (4) of Section 245D of the Act, subject to the conditions imposed therein, the amounts may be recovered and any penalty for default in making payment of such sums may be imposed and recovered in accordance with the provisions of Chapter XVII, by the AO having jurisdiction over the person who made the application for settlement under Section 245C.
17. Placing heavy reliance primarily on Section 245F of the Act, the learned single Judge is of the opinion that during the pendency of the application before the Settlement Commission, the AO could not have issued Ext. P8 (a) dt. 30th Dec., 1999 (in OP No. 1798 of 2000), Ext. P8 dt. 18th March, 2003 (in OP No. 12979 of 2003) and Ext. P6 dt. 9th Feb., 2004 [in Writ Petn. (C) No. 9866 of 2004].
18. The admitted facts are:
18a. The AO had quantified the tax liability under the Act for the assessment period 1990-91, 1991-92 and 1992-93, and had demanded the tax with interest in a sum of Rs. 78,45,838. Additional amount of income-tax of Rs. 9,62,240 was also demanded from the assessee on the basis of additional income disclosed. The assessee had filed an application before the Settlement Commission as provided under Section 245C of the Act. The petitioner/assessee had also moved an application before the Settlement Commission for allowing him to remit the additional income-tax of Rs. 9,62,240 in instalments.
18b. The Settlement Commission, after receipt of the application under Section 245C of the Act and after hearing the representatives of the assessee and the Department, has decided to admit and proceed with the application under Section 245D(1) of the Act for the asst. yrs. 1990-91 to 1993-94. The Settlement Commission while considering the additional income disclosed by the assessee vide the revised statement of facts filed on 1st July, 1999, in exercise of its powers under Section 245D(2A) of the Act had directed the assessee to deposit the additional amount of income-tax payable on the income disclosed in the settlement application dt. 1st July, 1999 within 35 days of the receipt of the order and furnish proof of such payment to the Settlement Commission and its AO within 15 days of making the aforesaid payment. In the very same order, the Settlement Commission has further observed, that, if the applicant does not pay the additional amount of income-tax specified in Section 245D(2A) of the Act, the amount of income-tax remaining unpaid together with the interest payable thereon under Section 245D(2C) of the Act shall be recovered by the AO in accordance with the provisions of Section 245D(2D) of the Act.
18c. On a request made by the assessee by its application dt. 12th Aug., 1999, the instalment facility to pay the additional amount of income-tax payable as ordered by the Settlement Commission, the Settlement Commission in exercise of its powers under Section 245D(2B) has allowed the assessee to pay the admitted tax in eight quarterly instalments of Rs. 1,17,155 each.
18d. Pursuant to the aforesaid order the assessee had remitted the first instalment of Rs. 1,17,155 on 30th Dec, 1999 and a further sum of Rs. 65,000 subsequently. Thereafter the assessee defaulted in complying with the orders passed by the Settlement Commission. This prompted the TRO to issue an order of attachment of immovable property of the assessee dt. 30th Dec, 1999 (Ext. P8a). The correctness or otherwise of the same is the subject-matter in OP No. 1798 of 2000. Subsequent to this, the Asstt. CIT has issued garnishee notice to the branch manager of LIC of India dt. 18th March, 2003 (Ext. P8). Questioning the legality or otherwise of the notice so issued, the assessee has filed a petition OP No. 12979 of 2003. This is followed by a notice/order dt. 9th Feb., 2004 by the Secretary to the Settlement Commission cancelling the instalment facility granted and informing the assessee that the AO is free to take action as per the provisions of Section 245D(2D) to recover the additional tax together with interest. This correctness is also questioned by the assessee before this Court in Writ Petn. No. 9866 of 2004.
19. It is true that once an application is filed under Section 245C and admitted by the Settlement Commission by passing an order under Section 245D(1) of the Act, the Commission will have exclusive jurisdiction to perform any or all the functions of an IT authority in respect of the 'case' before the Commission till an order is passed under Section 245D(4) of the Act. However, if an order is passed by the Settlement Commission in exercise of its powers under Sections 245D(2A) and 245D(2B) of the Act directing the assessee to pay the additional amount of income-tax on the income disclosed in the settlement application, if the assessee commits any default, the amount of income-tax remaining unpaid together with interest payable thereon can be recovered by the AO in accordance with the provisions of Section 245D(2D) of the Act. That is what has been done by the TRO and the assessing authority and the Settlement Commission. But the learned single Judge without reference to Section 245D(2D) of the Act and just keeping in view the provisions of Section 245F has proceeded to allow OP No. 1798 of 2000 and OP No. 12979 of 2003. The finding and the conclusion reached by the learned single Judge are as under:
A reading of the above provision would show that the Settlement Commission have also exclusive jurisdiction to exercise the powers of an IT authority. It has come out in evidence that the petitioner has moved the Settlement Commission and got an order of instalment for the payment of additional tax assessed against him. Since the entire case is seized by the Settlement Commission, issue of Exts. P8(a) in OP No. 1798/2000, P8 in OP No. 12979/2003 are illegal. Hence, Exts. P8(a) and P8 are hereby quashed. OP Nos. 1798/2000 and 12979/2003 have to be allowed to the above extent. Before parting with the judgment this Court finds that the IT authorities have taken unnecessary haste in passing the above orders. However, even though Ext. P8(a) has already been withdrawn, this Court express its displeasure on the action of the respondents and hereafter they shall not take such hasty action against any of the citizens without following the procedure prescribed under law.
20. For the reasons stated by us in earlier paras of the judgment, we cannot agree with the findings and conclusions reached by the learned single Judge. Therefore, the orders passed in OP No. 1798 of 2000 and OP No. 12979 of 2003 require to be set aside and accordingly set aside. The matter is now remitted back to the learned single Judge to decide the correctness or otherwise of the notice issued by the TRO (Ext. P8a) dt. 30th Dec., 1999 which is the subject-matter in OP No. 1798 of 2000 and the garnishee notice issued by the AO (Ext. P8) dt. 18th March, 2003 which is the subject-matter in OP No. 12979 of 2003.
21. In the impugned order we notice the statement made by the learned senior counsel for the Revenue that the Department itself has withdrawn the notice issued by the TRO (Ext. P8a) dt. 30th Dec., 1999 by an order made by the CIT dt. 8th Feb., 2000. If that is true we request the learned Judge to take note of that statement and pass appropriate orders.
22. In view of the above, appeal is disposed of with the orders and directions issued by us in the course of our judgment. In the facts and circumstances of the case, the parties are directed to bear their own costs. Ordered accordingly.