C.I.T., JALPAIGURI vs. OM PRAKASH MITTAL

C.A. No.-005334-005334 - 1999Supreme Court22 February 20059 pages
For Petitioner: SUSHMA SURIFor Respondent: BHARGAVA V. DESAI
AI SummaryRemanded

What were the facts?

The Income Tax Settlement Commission (the 'Commission') passed an order under Section 245D(4) on September 18, 1990, in favour of the respondent-assessee, Om Prakash Mittal. This order granted benefits and immunities to the assessee based on a settlement application filed on January 13, 1989, concerning the financial year 1985-86. In the settlement application, the assessee claimed to have received Rs. 1.5 crores in cash as loans on March 31, 1985, from seven individuals residing in Sikkim. Subsequent investigations by the CBI, at the revenue's request, suggested these lenders lacked the financial capacity and denied advancing the loans, indicating they were 'name lenders'. The Commissioner of Income Tax (CIT) then applied under Section 245D(6) seeking to declare the settlement order void due to alleged fraud and misrepresentation. The Commission rejected this application, holding it lacked the power to review its earlier order and that the revenue had not proven fraud or misrepresentation.

What did the Supreme Court hold?

The Supreme Court held that the Income Tax Settlement Commission (the 'Commission') had misinterpreted the scope and ambit of Section 245D(6) of the Income Tax Act, 1961. The Court clarified that the revenue can indeed move the Commission if it possesses material to show that a settlement order was obtained by fraud or misrepresentation of facts. The Court rejected the assessee's contention that proceedings under Section 245D(6) must be initiated solely by the Commission 'suo motu'. It reasoned that any other interpretation would render Section 245D(6) otiose, as a void order would continue to be operative even with abundant evidence of fraud if the Commission did not initiate action itself. The Court also noted that Section 245I, making the settlement order conclusive, does not divest the Commission of its power to decide whether the settlement was obtained by fraud or misrepresentation. The Court found that the Commission's previous conclusions regarding the genuineness of the loan transactions were arrived at without adequate reasoning, merely referring to the parties' stands. Consequently, the Supreme Court directed the Commission to re-hear the matter and decide it afresh, allowing parties to place further material. The Court explicitly stated it had not expressed any opinion on the facts of the case.

What were the issues?

1. Whether the Income Tax Settlement Commission has the power under Section 245D(6) of the Income Tax Act, 1961 (the 'Act') to entertain an application from the revenue to declare a settlement order void if it is subsequently found to have been obtained by fraud or misrepresentation of facts, or is such initiation solely the Commission's suo motu power? Assessee's contentions: The order of the Commission under Section 245D(4) is final as per Section 245I. The Commission has no power to review its earlier order. The revenue cannot initiate proceedings under Section 245D(6). All relevant aspects were considered earlier, and the CIT had ample opportunity to object. Mere unsubstantiated allegations of lack of capacity or different versions from authorities do not constitute fraud or misrepresentation. A subsequent bench cannot sit in appeal over an earlier bench's decision. Revenue's contentions: The Commission's approach is legally untenable. The application under Section 245D(6) was not for review but to address fraud or misrepresentation. The jurisdiction under Section 245D(6) is exercisable when fraud or misrepresentation is subsequently discovered. The Commission lightly brushed aside evidence of fraud, including the alleged lenders denying loans, inherent improbabilities in the cash transaction, and the furnishing of certificates from unconnected persons. No returns were filed by lenders up to the relevant time, indicating misrepresentation.

Which sections of the Income-tax Act were involved?

Section 245C,Section 245D(1),Section 245D(4),Section 245D(6),Section 245I,Section 139

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9 CASE NO.: Appeal (civil) 5334 of 1999 PETITIONER: C.I.T. Jalpaiguri RESPONDENT: Om Prakash Mittal DATE OF JUDGMENT: 22/02/2005 BENCH: RUMA PAL,ARIJIT PASAYAT & C.K. THAKKER

JUDGMENT: J U D G M E N T ARIJIT PASAYAT, J.

Challenge in this appeal is to the order passed by the Income Tax Settlement Commission, Additional Bench Calcutta (in short the ’Commission’). By the impugned order it was held that the prayer made by the Commissioner of Income Tax, West Bengal-VIII, Calcutta (in short ’CIT’) to declare the settlement order passed by the Commission on 18.9.1990 to be void and for withdrawing the benefits and immunities granted to the respondent-assessee was not acceptable. The order dated 18.9.1990 was passed under Section 245D(4) of the Income Tax Act, 1961 (in short the ’Act’). The application by the CIT for declaration of the said order to be void was made purportedly under Section 245D(6) of the Act.

The controversy in the present appeal has arisen in the following factual background: A search was conduct

The order continues below.

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