On writ petitions against orders of the Settlement Commission passed under section 245D(4) of the Income-tax Act, 1961, the High Court held that the manner in which the orders had been passed by the Settlement Commission clearly showed complete lack of sensibility on its part, that the mere fact that the orders had been given effect would make no difference as they were patently illegal and that since they had forced an otherwise avoidable litigation, the Department was entitled to exemplary costs. On appeal the Court held that   the order passed by the Settlement Commission being bereft of reasons was unsustainable, and the fact that the assessee had made payment in terms of the order passed by the Settlement Commission could not be a ground to sustain the order passed by the Settlement Commission, being contrary to the mandate of section 245D(4) of the Income-tax Act, 1961. Order of High Court affirmed.

Decision of the Allahabad High Court (printed below) affirmed on this point. However, the matter had to be remitted for fresh decision. Since the Settlement Commission had been wound up, the matter was to be remitted to the Interim Board constituted under section 245AA of the Act, to pass a reasoned order.