"Frequent Interference with Settlement Commission's Orders Must Be Avoided, Says Supreme Court"

In a recent judgment, the Supreme Court of India emphasized the importance of avoiding frequent interference with the orders of the Settlement Commission to maintain confidence among bonafide assessees and prevent unnecessary litigation. The judgment came in the case of an appellant who sought settlement of a tax dispute before the Settlement Commission.

The appellant had approached the Settlement Commission, offering additional income for taxation, apart from what was disclosed in the return of income. The Settlement Commission, after considering the appellant's disclosures and cooperation, granted immunity from prosecution and penalty. However, the High Court later interfered with this decision, leading to the appeal before the Supreme Court.

In its judgment, the Supreme Court highlighted the limited grounds on which an order or proceeding of the Settlement Commission can be judicially reviewed. It stated, "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 Court also noted that the Settlement Commission's discretion to grant immunity from prosecution and penalty should be exercised based on the facts and circumstances of each case. It cautioned against treating the provisions of settlement as a shelter for tax dodgers, emphasizing that bona fide assessees should not be discouraged from seeking settlement when appropriate.

The Supreme Court's judgment ultimately set aside the High Court's decision and restored the order of the Settlement Commission. The Court concluded, "Frequent interference with the Settlement Commission's orders should be avoided. The High Court should not scrutinize an order or proceeding of a Settlement Commission as an appellate court."

This judgment reinforces the significance of maintaining trust in the settlement process and encourages the Settlement Commission to exercise its discretion judiciously while considering applications for settlement.

Date of Decision: 25 September 2023

KOTAK MAHINDRA BANK LIMITED   vs COMMISSIONER OF INCOME TAX   BANGALORE AND ANR.