Commissioner of Income-tax, Chennai-III Vs Income-tax Settlement Commissioner & Ors
Forum Madras High Court
Date 30th April, 2021
Sub-Whether an assessee can be permitted to file settlement application immediately after filing of return of income even when no notice for scrutiny assessment has been issued

An interesting issue arose in this case when the assessee after filing the return immediately filed an application for settlement to declare correctly the capital gains income on sale of 34 acres of land. The settlement commission having entertained the application and passed the order, the same was challenged before Hon’ble Madras High Court. The court interalia observed that the power of the settlement commission cannot be exercised in a manner to usurp the power given to the Assessing officer to make the assessment and it is only after the assessment is made that the assessee can apply for settlement of dispute between the Assessee and the department. The dictionary meaning of “settlement” would show that the settlement can be made, if the difference between the parties are narrowed down. Undoubtedly, the Settlement Commission has got certain powers to settle the issues. However, such power of settlement is absolutely guided by the provision itself. Finally the court relying on the Division Bench judgement in the case of CANARA JEWELLERS vs. SETTLEMENT COMMISSION reported in [2009] 184 Taxman 491 (Madras) held that “the Settlement Commission is empowered to have all the powers which are vested in an income-tax Authority under the Act, in addition to the power conferred under Chapter XIX-A, but such power can be exercised for the purpose of procedure of settlement of application under Section 245C and not for reasssessment of tax of a particular year which is vested with the Assessing Authority”. The court was also guided by the fact that the initial application which was made was not true disclosure and was subsequently revised.

This is a balanced judgement which has correctly taken the plea of the revenue of having been bypassed by ITSC and reminds that the law is equal for all be it assessee or revenue.

Ramesh Patodia
21-05-2021