Settlement of cases – Sections 245D, 245F and 245H – Powers of Settlement Commission – Application for settlement of case following search operations and notice u/s 153A – Order of penalty thereafter as consequence of search – Assessment and penalty part of same proceedings – Order of penalty not valid

Settlement of cases – Sections 245D, 245F and 245H – Powers of Settlement Commission – Application for settlement of case following search operations and notice u/s 153A – Order of penalty thereafter as consequence of search – Assessment and penalty part of same proceedings – Order of penalty not valid

A search and seizure operation u/s 132 as well as a survey u/s 133A were carried out on 29th May, 2018 in the case of the assessee. Thereafter, the Investigation Wing referred the case to the A.O. The Range Head of the A.O. of the assessee, after going through the seized material, presumed that the assessee had violated the provisions of section 269ST and issued a notice to it for the A.Ys. 2018-19 and 2019-20 to show cause why penalty u/s 271DA for violating the provisions of section 269ST should not be imposed on it. Meanwhile, in pursuance of the search and seizure operation, notices u/s 153A were issued to the assessee for the A.Ys. 2013-14 to 2018-19. The assessee applied for settlement of the case on 1st November, 2019 for the A.Ys. 2012-13 and 2013-14 to 2019-20 and in accordance with the provisions of the Act on 1st November, 2019 itself also informed the A.O. about the filing of the application before the Settlement Commission. The A.O., however, proceeded to pass a penalty order dated 4th November, 2019.

The Delhi High Court allowed the writ petition filed by the assessee and held as under:

‘i) Though section 245A(b) while defining “case” refers to a proceeding for assessment pending before an A.O. only and therefrom it can follow that penalties and prosecutions referred to in sections 245F and 245H are with respect to assessment of undisclosed income only, (i) section 245F vests exclusive jurisdiction in the Settlement Commission to exercise the powers and perform the functions “of an Income-tax authority under this Act in relation to the case”; and (ii) section 245H vests the Settlement Commission with the power to grant immunity from “imposition of any penalty under this Act with respect to the case covered by the settlement”. The words, “of an Income-tax authority under this Act in relation to the case” and “immunity from imposition of any penalty under this Act with respect to the case covered by the settlement”, are without any limitation of imposition of penalty and immunity with respect thereto only in the matter of undisclosed income. They would also cover penalties under other provisions of the Act, detection whereof has the same origin as the origin of undisclosed income. Not only this, the words “in relation to the case” and “with respect to the case” used in these provisions are words of wide amplitude and in the nature of a deeming provision and are intended to enlarge the meaning of a particular word or to include matters which otherwise may or may not fall within the main provisions.

ii) Both the notices u/s 153A as well as u/s 271DA for violation of section 269ST had their origin in the search, seizure and survey conducted qua the assessee as evident from a bare reading of the notice u/s 271DA. Both were part of the same case. The proceedings for violation of section 269ST according to the notice dated 30th September, 2019 were a result of what was found in the search and survey qua the assessee and were capable of being treated as part and parcel of the case taken by the assessee by way of application to the Settlement Commission.

iii) The Settlement Commission had exclusive jurisdiction to deal with the matter relating to violation of section 269ST also and the A.O., on 4th November, 2019, did not have the jurisdiction to impose penalty for violation of section 269ST on the assessee. His order was without jurisdiction and liable to be set aside and quashed.’