Kotak Mahindra Bank Limited Vs. Commissioner of Income Tax, Bangalore and Ors. - (Supreme Court) (25 Sep 2023)

Court should not interfere with an order of Settlement Commission, passed in exercise of its discretionary powers, unless order contravenes provisions of Act

MANU/SC/1052/2023

Civil

Present appeal has been filed assailing the judgment passed by the High Court whereby the judgment of the learned Single Judge, remanding the matter to the Settlement Commission to determine afresh, the question as to immunity from levy of penalty and prosecution, was affirmed and the Writ Appeal filed by the Appellant, was dismissed.

The Commission, adequately applied its mind to the circumstances of the case, as well as to the relevant law and accordingly exercised its discretion to proceed with the application for settlement and grant immunity to the Assessee from penalty and prosecution. The Order of the Commission did not suffer from such infirmity as would warrant interference by the High Court, by passing an order of remand.

In the present case, the Appellant placed material and particulars before the Commission as to the manner in which income pertaining to certain activities was derived and has sought to offer such additional income to tax. Based on such disclosures and on noting that, the Appellant co-operated with the Commission in the process of settlement, the Commission proceeded to grant immunity from prosecution and penalty as contemplated under Section 245H of the Income Tax Act, 1961. The High Court ought not to have sat in appeal as to the sufficiency of the material and particulars placed before the Commission, based on which the Commission proceeded to grant immunity from prosecution and penalty as contemplated under Section 245H of the Act.

Present Court is fortified by the judgment of this Court in Jyotendrasinhji v. S.I. Tripathi, wherein it was observed that a Court, while exercising powers under Articles 32, 226 or 136 of the Constitution of India, as the case may be, may not interfere with an order of the Commission, passed in exercise of its discretionary powers, except on the ground that the order contravenes provisions of the Act or has caused prejudice to the opposite party. Interference may also be open on the grounds of fraud, bias or malice. Therefore, this Court has carved out a very narrow scope for judicial review of the Commission's orders, passed in the exercise of its discretionary powers. In the present case, the Commission rightly exercised its discretion Under Section 245H having regard to the bona fide conduct of the Assessee of offering additional income for tax, apart from the income disclosed in the return of income.

Having regard to the legislative intent, frequent interference with the orders or proceedings of the Settlement Commission should be avoided. The High Court should not scrutinize an order or proceeding of a Settlement Commission as an appellate court. Unsettling reasoned orders of the Settlement Commission may erode the confidence of the bonafide Assessees, thereby leading to multiplicity of litigation where settlement is possible. This larger picture has to be borne in mind.

The Order of the Settlement Commission was based on a correct appreciation of the law, in light of the facts of the case and the High Court ought not to have interfered with the same. Therefore, the judgment passed by the High Court whereby the judgment of the learned Single Judge passed in Writ Petition, remanding the matter to the Settlement Commission to determine afresh, the question as to immunity from levy of penalty and prosecution was affirmed, is set aside. Consequently, the order of the learned Single Judge is also set aside. The Order of the Settlement Commission is restored. The appeal is allowed.

Tags : SETTLEMENT COMMISSION DISCRETIONARY POWERS SUPREME COURT