The Calcutta High Court has held that it cannot exercise jurisdiction under Article 226 of the Constitution to substitute the findings of the Income Tax Settlement Commission with its own findings in the absence of legal infirmity in the decision-making process (Principal Commissioner of Income Tax, Central-2, Kolkata vs. Settlement Commission (Income Tax & Wealth Tax)).
Justice Md. Nizamuddin was hearing a challenge by the Principal Commissioner of Income Tax against an order of the Income Tax Settlement Commission that allowed a settlement application by the respondent.
The court observed that petitioner could not demonstrate before this Court any legal infirmity in decision-making process in course of the impugned income tax settlement proceeding.
The petitioner/Income Tax authorities failed to make out any case that the Settlement Commission acted in any manner contrary to or in violation of any provision of law in course of settlement proceeding, the Court further said while dismissing the plea.
The respondent had filed a settlement application before the Income Tax Commission and the same was proceeded with under Section 245 D (1) of the Income Tax Act. After receipt of a report from the Commissioner and a hearing, the settlement was held to be “not valid”.
Following this, a report was called upon from the Principal Commissioner of Income Tax (petitioner) wherein the petitioner objected to the settlement alleging that the respondent had made untrue and incorrect disclosures before the Commission. It was alleged that the respondent was in the habit of not disclosing their true and correct income before the department.
On the other hand, the respondent contended that the petitioner had not cited any instance which could raise a bona fide doubt about the intention of the respondent or their settlement application.
Report under Rule 9 of Income Tax Settlement Commission (Procedure) Rules, 1997, has no material and the whole case of the petitioner is on surmises and conjectures and is without any evidence in support of its suspicious claim.
It was also submitted that the respondent fulfilled all criteria required to avail immunity from prosecution and also extended full cooperation at every stage of the proceeding.
The single-judge before recording a conclusion discussed various precedents with regard to the issue.
In Commissioner of Income Tax vs. Godwin Steel Pvt. Ltd., the Delhi High Court had held that the scope of a court’s judicial review and would depend on the facts of the case/
For example, if a decision is challenged as irrational, it would be well-nigh impossible to record a finding whether a decision is rational or irrational without first evaluating the facts of the case and coming to a plausible conclusion then testing the decision of the authority on the touch-stone of the tests laid down by the court with special reference to a given case.
Further, as per the judgment of the Supreme Court in Union of India &Ors, vs. Ind- Swift Laboratories Ltd., an order passed by the Settlement Commission could be interfered with only if the order was found to be contrary to provisions of the Act. If not, the same would not open for examination either by the High Court or by the Supreme Court.
Therefore, Justice Nizamuddin found himself reluctant to interfere with the order under challenge reasoning that the petitioner failed to make a case against the Commission for acting in violation of the law during the proceedings or in the order. Further, there was no case against the respondents that documents or materials placed by them before the commission were sufficient for the rejection of the application for settlement.
Importantly, the High Court observed that no case was made out for the exercise of constitutional writ jurisdiction under Article 226.