Holding

The Settlement Commission’s order of 31 March 2008 is a nullity for failing to comply with the procedural requirements of Section 245D(4), and consequently the re‑assessment order is set aside.

Summary

The appellants were subjected to a search under Section 132 of the Income Tax Act and were issued notices under Section 153A for assessment years 1998-99 to 2004-05. They filed an application under Section 245C(1) before the Income Tax Settlement Commission, which was required to decide the matter by 31 March 2008 under Section 245HA. The High Court directed the Commission to dispose of the application by that date, but the Commission, acknowledging that it could not examine the records or give the parties adequate opportunity as mandated by Section 245D(4), nonetheless issued an order on 31 March 2008 settling undisclosed income of Rs 59 lakh and granting immunity under Section 245H. The Assessing Officer later issued a show‑cause notice for re‑assessment of matters not placed before the Commission, which the appellants challenged in a writ petition. The High Court dismissed the petition, holding the Commission’s order a nullity; the Supreme Court reversed this, declaring the order void for non‑compliance with Section 245D(4), setting aside the re‑assessment order, and remitting the matter to the interim Board for a fresh decision.

Issues considered

Whether the order passed by the Income Tax Settlement Commission on 31 March 2008, despite acknowledging impracticability of complying with Section 245D(4), is a valid order under the Income Tax Act.
Whether the subsequent assessment/re‑assessment order issued by the Assessing Officer is sustainable in view of the alleged nullity of the Settlement Commission’s order.

Legislation cited

Income Tax Act, 1961s. 132, s. 153A, s. 245, s. 245AA, s. 245C(1), s. 245D, s. 245D(4), s. 245F(4), s. 245H, s. 245HA

Subjects

Income Tax SettlementSection 245nullity of orderre‑assessmentprocedural complianceSettlement Commissioninterim Boardimmunityshow cause notice

Judgment

[2023] 5 S.C.R. 321 321

JAGDISH TRANSPORT CORPORATION & ORS. A
v.
UNION OF INDIA AND ORS.
(Civil Appeal Nos. 2352-2353 of 2019)
B
APRIL 28, 2023
[M. R. SHAH AND C. T. RAVIKUMAR, JJ.]
Income Tax Act, 1961 – ss.245, 245C(1), 245HA, 245D –
Application u/s.245C(1) was filed by the appellants before the
Settlement Commission – Order dtd. 31.03.2008 passed by the C
Settlement Commission – High Court while dismissing the writ
petition, filed by the appellants challenging the show cause notice
for re-assessment issued in terms of order dtd. 31.03.2008, observed
that the said order was a nullity – Justification of – Held: Settlement
Commission specifically observed in the order dtd. 31.03.2008 that D
it was not practicable to examine the records, investigate the case
for proper settlement and give adequate opportunity to the applicant
and the Department as laid down in s.245D(4) however, it passed
the order to comply with the directions of the High Court to dispose
of the application on or before 31.03.2008 – Thus, in view of the
manner in which the Settlement Commission disposed of the E
application u/s.245, High Court was justified in observing that the
order passed by the Settlement Commission was a nullity and cannot
be said to be an order in the eye of law – Order dtd. 31.03.2008 set
aside – Subsequent assessment/re-assessment order passed by the
A.O also set aside – Matter remitted to the Settlement Commission/ F
Interim Board for fresh decision following the due procedure u/
s.245.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2352-
2353 of 2019.
From the Judgment and Order dated 29.03.2017 in Writ Petition G
(Misc. Bench) No.4858 of 2008 and dated 18.07.2017 in Review Petition
No. 50944 of 2017 of the High Court of Judicature at Allahabad, Lucknow
Bench, Lucknow.
Pawanshree Agrawal, Raktim Gogoi, Advs. for the Appellants.
H
321
322 SUPREME COURT REPORTS [2023] 5 S.C.R.

A Balbir Singh, ASG, Arijit Prasad, Sr. Adv., Vikrant Yadav, Rupesh
Kumar, Sundeep Pandhi, Arjun Garg, Vimla Sinha, Rupender Singhmar,
I. Prasad, V. Gautam, Raj Bahadur Yadav, Advs. for the Respondents.
The Judgment of the Court was delivered by
M. R. SHAH J.
B
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 29.03.2017 passed by the High Court of Judicature at
Allahabad, Lucknow Bench Lucknow, by which the Division Bench of
the High Court has dismissed the Writ Petition No. 4858 of 2008 preferred
by the appellants herein, the original writ petitioners have preferred the
C
present Appeals. The subsequent order passed by the High Court
dismissing the review application is also the subject-matter of the present
Appeals.
2. The facts leading to the present Appeals in a nut shell are as
under:-
D
i) That a search was conducted under Section 132 of the
Income Tax, Act, 1961 (for short “the Act”) on the business
premises as well as the residence of the partners.
ii) Notices under Section 153A were issued to all the appellants
E for the Assessment Years 1998-1999 to 2004-2005.
iii) The return of income was filed by the appellants under
Section 153A of the Act for the aforesaid Assessment
Years.
iv) An application under Section 245C(1) of the Act was filed
F
by the appellants before the Income Tax Settlement
Commission (for short “the Settlement Commission”).
v) As per Section 245HA, inserted by the Finance Act, 2007,
the application was to be decided by the Settlement
Commission on or before 31.03.2008, failing which the
G
proceedings before the Settlement Commission shall stand
abated.
vi) The High Court, by way of an interim order, directed the
Settlement Commission to dispose of the application under
Section 245D of the Act by 31.03.2008.
H
JAGDISH TRANSPORT CORPORATION & ORS. v. UNION OF 323
INDIA AND ORS. [M. R. SHAH J.]

vii) By order dated 31.03.2008, the Settlement Commission A
disposed of the proceedings and settled the undisclosed
income at Rs. 59,00,000/-. The Settlement Commission also
passed an order that the CIT/AO may take such action as
appropriate in respect of the matters, not placed before the
Commission by the applicant, as per the provisions of Section
B
245F(4) of the Act. The Settlement Commission passed
the following order:-
“In the abovementioned cases, the Hon’ble High Court
of Uttar Pradesh at Lucknow has passed orders dated
19.03.2008 directing the Settlement Commission to
C
complete the proceedings u/s 245D(4) by 31.03.2008.
2. The Rule 9 Report in this case has been received.
3. In all, the Principal Bench of the Commission has till
26.3.2008 received more than 325 orders from various
High Courts in the month of March, 2008, directing the D
Principal Bench to complete the cases by 31.3.2008.
4. This would involve more than 1500 assessments. The
Settlement Commission deals only with the assessments
which involve complexity of investigation and the
application is intended to proved quietus to litigation. For E
example, in one group of cases where 23 applications are
involved, the paper book, which has been filed before the
Settlement Commission runs into thirty thousand pages.
It goes without saying that sufficient and proper
opportunity is required to be given both to the applicant
F
and the Commissioner of Income Tax for arriving at a
proper settlement.
5. At this juncture, it is not practicable for the commission
to examine the records and investigate the case for proper
settlement. Even giving adequate opportunity to the
G
applicant and the department, as laid down in section
245(D)(4) of Income Tax Act, 1961 is not practicable.
However, to comply with the directions of the Hon’ble
High Court, we hereby pass an order u/s 245D(4) of
Income Tax Act, 1961, as under:
H
324 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 6. The undisclosed income is settled as under:
Jagdish Transport Corporation Rs.32,00,000/-
Surendar Kr. Tandon Rs.6,00,000/-
Sandhya Tandon Rs.6,00,000/-
B Kiran Tandon Rs.7,00,000/-
Virender Kr. Tandon Rs.8,00,000/-
Total Rs.59,00,000/-
7. The CIT/AO may take such action as appropriate in
C respect of the matters, not placed before the Commission
by the applicant, as per the provisions of section 245F(4)
of IT Act ,1961.
8. Prayer for granting immunity from penalty and
prosecution under all Central Acts. In view of the
D discussions in preceding paras, we grant immunity from
prosecution and penalty under the Income Tax Act only
as regards issues arising from the application and covered
by this Order.
9. Interest leviable, if any, shall be charged as per law.
E 10. It is settled that the amount of tax along with interest
shall be paid by the applicants within 35 days from the
date of receipt of intimation from the Assessing Officer.
11. In view of the statutory time limit prescribed u/s 245
D(4A)of the Act, the Settlement Commission directs the
F Commissioner of Income Tax to compute the total
income, income tax, interest and penalty, if any, payable
as per this order and communicate to the applicant
immediately along with the demand notice and challan
under intimation to this office.
G 12. In case of failure to adhere to the scheme of payment,
the immunity granted under Section 245(H)(1) shall be
withdrawn in terms of sub-section (1A) of the said
section.”
viii) That thereafter, in the light of the observations made in
H para 7 by the Settlement Commission, the A.O. issued the
JAGDISH TRANSPORT CORPORATION & ORS. v. UNION OF 325
INDIA AND ORS. [M. R. SHAH J.]

show cause notice for re-assessment on the various A
transactions which are detected but were not disclosed by
the appellants before the Settlement Commission.
ix) The show cause notice was the subject-matter of Writ
Petition before the High Court. However thereafter, during
the pendency of the proceedings, the A.O. passed the B
Assessment Order, which was challenged before the High
Court by way of an amendment.
x) By the impugned order, the Division Bench of the High
Court has dismissed the writ petition on the ground that the
order passed by the Settlement Commission dated C
31.03.2008 was a nullity as the Settlement Commission itself
observed that it was not practicable for the Commission to
examine the records and investigate the case for proper
Settlement and even giving adequate opportunity to the
applicant and the Department, as laid down in Section
D
245D(4) of the Act is not practicable.
3. Having heard learned counsel appearing for the respective
parties and considering the order passed by the Settlement Commission
dated 31.03.2008 and the manner in which the Settlement Commission
disposed of the application under Section 245, as such, the High Court is
E
absolutely justified in observing that the order passed by the Settlement
Commission is a nullity and cannot be said to be an order in the eye of
law. It is required to be noted that, as such, the Settlement Commission
specifically observed in para 5 of the order dated 31.03.2008 that it is
not practicable for the Commission to examine the records and investigate
the case for proper Settlement and that even giving adequate opportunity F
to the applicant and the Department, as laid down in section 245D(4) of
the Act is not practicable. However thereafter, the Settlement
Commission passed an order to comply with the directions of the High
Court to dispose of the application on or before 31.03.2008. If that be so,
the High Court in fact ought to have remitted the matter back to the G
Settlement Commission to pass a fresh order in accordance with law
and on merits after following due procedure as required under Section
245D(4) of the Act.
4. In view of the above and for the reasons stated hereinabove,
we set aside the impugned judgment and order passed by the High Court. H
326 SUPREME COURT REPORTS [2023] 5 S.C.R.

A We set aside the subsequent assessment/re-assessment order passed
by the A.O, which was the subject-matter of writ petition before the
High Court. We also set aside the order passed by the Settlement
Commission dated 31.03.2008 and remand the matter to the Settlement
Commission for a fresh decision. It is reported that the Settlement
Commission has been wound up and the matters pending before the
B
Settlement Commission are being adjudicated and decided by the interim
Board constituted under Section 245AA of the Act. In view of the above
position, the matter would be remitted to the interim Board with a request
that the matter to be taken up expeditiously and would be preferably
decided within a period of six months from the date of first hearing and
C a reasoned order would be passed.
5. In view of the above and for the reasons stated above, the
present appeals are accordingly allowed. The matter is remitted to the
Settlement Commission/interim Board for a fresh decision in accordance
with law and on its own merits and after following due procedure as
D required under Section 245 of the Act. It will be open for the interim
Board to call for a fresh report under Rule 9 and thereafter to pass the
final order on the application, after following due procedure as required
under Section 245D(4) of the Act.
The present Appeals are, accordingly, allowed to the aforesaid
E extent. No costs.

Divya Pandey Appeals allowed.
(Assisted by : Abhishek Pratap Singh and Roopanshi Virang, LCRAs)

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G

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