LI Network
Published on: 28 September 2023 at 11:40 IST
The Supreme Court emphasized the importance of High Courts refraining from frequent interference with Settlement Commission rulings, as such interference could result in an excessive number of legal proceedings.
Settlement Commissions serve as alternative dispute resolution mechanisms under Indian income tax and excise laws, offering taxpayers an alternative means of resolving disputes over dues instead of resorting to traditional litigation.
A bench comprising Justices BV Nagarathna and Ujjal Bhuyan emphasized that excessive court involvement in disputes before these commissions could undermine the confidence of those who seek resolution through such means.
In the interest of legislative intent, the bench urged against frequent interference with Settlement Commission orders or proceedings.
It stressed that High Courts should not scrutinize Settlement Commission orders as if they were appellate courts. Altering reasoned Settlement Commission orders could diminish the trust of genuine assesses and potentially lead to unnecessary litigation when settlements are possible. This broader perspective must be considered, the bench emphasized.
The Supreme Court made these remarks in the context of an appeal challenging Karnataka High Court judgments from 2012 and 2010, which had set aside a 2008 Settlement Commission order involving Kotak Mahindra Bank.
In 2000, an Assessing Officer alleged that the bank had concealed its rental income. A Settlement Commission eventually determined that the bank owed over ₹196 crores in additional income.
However, the commission waived the penalty amount and granted the bank immunity from prosecution under Section 245H(1) of the Income Tax Act, citing the bank’s full and honest disclosures and cooperation in the proceedings.
The High Court, however, overturned these findings, prompting the bank to appeal to the Supreme Court.
The Supreme Court upheld the commission’s decision to grant the bank immunity from prosecution and to waive the penalty otherwise due. The court clarified that there is no universally applicable formula and that immunity under Section 245H may be granted when the Commission is satisfied with the applicant’s full and honest income disclosure and cooperation during the proceedings.
Furthermore, the Supreme Court held that the High Court should not have reviewed the commission’s decision regarding the sufficiency of material or particulars presented before it. These aspects fall outside the scope of judicial review.
Consequently, the appeal was allowed, and the High Court’s orders were set aside, reinstating the Settlement Commission’s order.