The issue came up for consideration in relation to the order of the Settlement Commission, invalidating the settlement application by passing the order dated 31-5-2016 but relating it back to the original order of section 245D(2C) dated 29-1-2015. Thus, the dispute had direct relation to the period of limitation available with the Assessing Officer for completing the assessment in such cases. If the effective date of such order was taken as 29-1-2015, the Assessing Officer would have left 6 days to complete the assessment after the Settlement Commission passed the impugned order. Since he had passed the orders of assessment on 14-7-2016, his action would be plainly barred by limitation. If, on the other hand, the effect of Settlement Commission’s said order invalidating the settlement application of the assessee, was taken as 31-5-2016 i.e. the actual date of passing the order, the Assessing Officer would have the benefit of exclusion from limitation period from the date of filing the application till passing of the impugned order by the Settlement Commission.  Court held that, once the Settlement Commission did pass an order, whether legally permissible to do so or not, the Settlement Commission simply did not have the authority or jurisdiction to predate such order. The Settlement Commission could have rejected the request of the revenue to go back to the stage of passing the order under section 245D(2C) and proceed further to pass final order of settlement under section 245D(4), but under no circumstances, the Settlement Commission could have made a declaration of invalidity on 31-5-2016 giving it a retrospective effect of 29-1-2015. The Settlement Commission exceeded its jurisdiction in doing so. When the Settlement Commission had no jurisdiction to give retrospective effect to its order, whether the revenue requested for the same or the assessee, would be wholly inconsequential. In essence, the Settlement Commission could either have refused the request of the department or accepted it but under no circumstances could it have passed the order of invalidation with retrospective effect.

Under section 245D(2C), thus the Settlement Commission can declare an application for settlement invalid, but such order has to be passed within prescribed time. In the present case, the Settlement Commission to overcome such time limit, passed an order giving it retrospective effect. If one recognizes the powers of the Settlement Commission to pass such retrospective orders, the time limits envisaged by the legislature at various stages of settlement proceedings would be destroyed. [Para 12]

In the present case, the order passed by the Settlement Commission left six days to the Assessing Office to complete the assessments. Be that as it may, it is held that the Settlement Commission, while giving retrospective effect to its order of invalidation, acted wholly without jurisdiction.

Another important aspect of the matter is, that the portion of the order of Settlement Commission giving retrospective effect to the declaration of invalidity of the settlement application is clearly severable from the main order of invalidity. While therefore, striking down this illegal, severable portion of the order, there is no need to disturb the principle declaration made by the Settlement Commission. ]

Under the circumstances, it is held that the observation/direction of retrospective effect of the order is set aside and the order passed by the Settlement Commission on 31-5-2016 would take effect from such date.

With these observations, the petitions is disposed of.  (WP nos . 2321  OF 2017 dt. 28 -2 2019) ( AY. 2008 -09 to 2013-14)