COMMISSIONER OF INCOME TAX (CENTRAL) CALCUTTA vs. B. N. BHATTACHARJEE & ANR.

CIVIL APPEAL No. 454/1979Supreme Court[1979] 3 S.C.R. 113304 May 1979Bench: 2 JudgesAuthor: V.R. KRISHNA IYER, V.D. TULZAPURKAR COMMISSIONER OF32 pages
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What were the facts?

Following a search that recovered Rs. 30 lakhs in cash, the respondent's assessments for assessment years 1962-63 to 1972-73 were reopened. The total tax burden exceeded Rs. 30 lakhs, with an additional Rs. 35 lakhs assessed for 1973-74. The respondent also faced prosecution under Section 277 of the Income Tax Act. Appeals to the Appellate Assistant Commissioner reduced the assessable income by approximately Rs. 10 lakhs. Both the respondent and the department appealed to the Income Tax Appellate Tribunal (ITAT). The respondent then applied to the Settlement Commission under Section 245M. The respondent withdrew his appeals before the ITAT, and the revenue declared its assessments and appeals as 'weak' and withdrew them. The Settlement Commission, after receiving the application under Section 245C, called for a report from the appellant (revenue). The appellant reported pending prosecution proceedings and stated it was not a fit case for the Commission. The Commission, without a hearing, informed the respondent that it would not proceed with the application due to the appellant's objection. The respondent requested a review, and the Commission, after reconsideration, decided to proceed with the application on merits despite the appellant's opposition.

What did the Supreme Court hold?

The Supreme Court held that the Settlement Commission should be inhibited from proceeding with the assessee's application, and the appeals before the ITAT should be revived and disposed of expeditiously. The departmental appeals, admitted by the CIT as weak and frivolous, should not be revived to avoid wasting public time and money. The Court ruled that if the Department withdraws an appeal to enable an application before the Settlement Commission, the proviso to Section 245M(1) does not debar the motion for settlement. The Court found that the policy of Chapter XIXA is not to provide a shelter for tax dodgers involved in criminal activities. The Court overruled the plea of estoppel, holding that the CIT's objection was a potent interdict on the Commission's jurisdiction. The Court emphasized that the Settlement Commission should exercise its power to grant immunity from prosecution sparingly. The appeals were allowed, directing the Settlement Commission to cease proceedings and the ITAT to revive and dispose of the assessee's appeals.

What were the issues?

1. Whether the Commissioner of Income Tax (CIT) is estopped from making a report under Section 245D(1) proviso 2 objecting to the Settlement Commission proceeding with the application, in view of the withdrawal of departmental appeals before the ITAT? Assessee's contentions: (a) The Settlement Commission had no power of review after declining to proceed with the application, making its reopening invalid. (b) Even though the CIT withdrew appeals to facilitate the application under Section 245C, no estoppel barred the CIT from exercising its statutory power to object to settlement proceedings. (c) The CIT's veto was not subject to review or invalidation by the Settlement Commission. Revenue's contentions: The judgment does not explicitly record arguments made by the revenue on this specific issue, but their actions and the overall context suggest they maintained their right to object.

Which sections of the Income-tax Act were involved?

Section 245A,Section 245M,Section 245C,Section 245D(1),Section 277,Section 245H

AI-generated summary — verify with the full judgment below

1133 COMMISSIONER OF INCOME TAX (CENTRAL) CALCUTTA A v. B. N. BHATTACHARJEE & ANR.

May 4, 1979 [V. R. KRISHNA IYER AND V. D. TULZAPURKAR, JJ.] Income Tax Act, 1961 (43 of 1961)-Ss. 245A-245M-Scope, purpose and \, /. obiect of-Procedure and powers of Settlement CommiJsion-Settlen1ent Com- <1 ~ mLuioner whether a tribunal. '

Words & Phrases-'Preferred an appeal'-S.245M(l) proviso !11co1ne Tax B Act, 1961-Meaninz of. C .. • 'Interpretation of Statutes-Fiscal philosophy and interpretation technoloo to be on same wave length for legislative policy to find fulfilment in th~ enacted text. A large sum of Rs. 30 lakhs in cash having been recovered from the respon- de-nt in pursuance to a search by the Income Tax Officials his assessments f0r the yearn 1962-63 to 1972-73 were reopened by the Department. The total tax burden on the respondent was over Rs. 30 Iakhs and an additional sum of Rs. 35 lakhs was a..~sessed for the year 1973-74. The respondent was also prosecuted under s. 277 of the Income Tax Act.

Appeals by the respondent to the Appellate Assistant Commissioner brought down the assessable inrome by about Rs. 10 Iakhs. D The resuondent and the departmen

The order continues below.

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