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II. A Landmark Judgment:
1. Agson
Global Pvt. Ltd. Vs. Income Tax Settlement Commission, W.P.(C)
No.2927/2013, Date of Judgment: 06.01.2016, High Court of Delhi
Issue involved:- Whether
the Income Tax Settlement Commission is empowered in law to direct a
special audit under section 142(2A), in exercise of the power vested
under Section 245F of the Income Tax Act, 1961?
Importance:
This is a nascent issue tested for the first time by any High Court in
India with far reaching effects as regards the power to direct a special
audit. It had been the stand of the Department that special audit u/s
142(2A) can be ordered by an Authority, other than the Assessing
Officer. Negating the said contention, the Hon’ble Court adjudicated
thereon vide present judgment dated 06.01.2016.
Mr.
M. S. Syali, Sr. Advocate along with Ms. Husnal Syali, Mayank Nagi
Advocates successfully represented the Assessee / Petitioner. The
Revenue / Respondent was represented by Ms. Suruchi Aggarwal, Senior
Standing Counsel.
Outcome:- Allowing the Writ Petition filed by the Petitioner, the Hon'ble DHC held that:-
- “9.On
examining the provisions of section 142, it is evident that it is part
of Chapter XIV which specifically details the procedure for assessment.
The said provision relates to the enquiry before assessment. It is
specifically for the purpose of making an assessment under the said
act….. It is obvious that the expression “at any stage of the
proceedings before him” has clear reference to the assessment
proceedings. Thus, the assessing officer, subject to the pre-conditions
set out in the said provision, could require a special audit to be
conducted but this is with the sole and ultimate object of making an
assessment under the said act. The language employed in section 142
clearly indicates that the steps, including that of special audit, taken
thereunder are part and parcel of the assessment proceedings with the
object and purpose of enabling the assessment to be made under the said
act by the assessing officer.”
- As
regards Section 245F of the Act the Hon’ble Court observed that
“11.Sub-section (1) of section 245F stipulates that in addition to the
powers conferred on the settlement commission under chapter XIX – A, it
shall have all the powers which are vested in an income tax authority
under the said act. But, in our view, this has to be read in the context
of and the scope of settlement proceedings. It does not entail that the
powers of regular assessment which are vested in an income tax
authority can be exercised by the settlement commission. What we mean to
say is that the settlement commission does not engage itself in the
process of assessment and cannot make an assessment order. The order
that the settlement commission makes under section 245D(4) is not in the
nature of an assessment but by way of a settlement and contains the
terms of settlement…”
- “ 12……. In our view, the exclusivity of jurisdiction which is
contemplated by the said provision is that once an application for
settlement is made before the settlement commission, no income tax
authority would have jurisdiction to deal with the case. It does not
mean that the settlement commission from that date steps into the shoes
of the income tax authority who was hitherto dealing with the case…..The
settlement commission does not carry out the function of assessment and
does not make an assessment order. It settles the case in terms of the
provisions contained in chapter XIX-A of the said act. Therefore, the
exclusivity of jurisdiction stipulated in section 245F entails two
things: (1) that from the point of time of filing of the settlement
application, no income tax authority can exercise jurisdiction over the
case and it is only the settlement commission which could exercise such
jurisdiction; (2) the powers and functions of the income tax authority
which can exclusively be exercised by the settlement commission must
have a nexus with the settlement proceedings before it.”
- “14.
It is, therefore, clear that the powers and functions of an income tax
authority which are to be exclusively exercised by the settlement
commission (subject to the provisions of section 245D (3)) must be in
the context of and have a nexus with the settlement proceedings. That
being the case, since the requirement of a special audit falls under the
procedure for assessment which is distinct and different from
settlement proceedings, the settlement commission would not, in our
view, have jurisdiction to direct a special audit as it does not have
any nexus with the settlement proceedings.”
-
“21.The exclusive jurisdiction of the settlement commission to exercise
the powers and perform the functions of an income tax authority, in
terms of section 245F(2) of the said Act, is to be exercised and
performed for the purpose of settlement of the case under Chapter XIX-A
and not for assessment under Chapter XIV. That being the case, the
powers and functions which are in the exclusive jurisdiction of the
settlement commission are circumscribed by the object and role which has
been ascribed to the settlement commission, which is to settle the case
in terms of the procedure stipulated in Chapter XIX-A. Since assessment
of the type contemplated under section 143(3) is outside the purview of
settlement proceedings, a special audit under section 142(2A), which is
in aid of assessment, would also be beyond the scope of settlement
proceedings.
22. In
sum, we hold that the income tax settlement commission does not have the
power to direct a special audit under section 142(2A) in the course of
settlement proceedings under Chapter XIX-A of the said Act.
Consequently,
the impugned order dated 26.04.2013, to the extent it directs the
conduct of a special audit, is quashed. The matter be placed before the
settlement commission for further consideration of the petitioners’
settlement applications in accordance with the prescribed procedure
under Chapter XIX-A. The writ petition is allowed to the aforesaid
extent…”
(Please click here for judgment)
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