ivil Appeal Nos
454 465 of 1979
Appeals by Special Leave from the order dated 9 5 1978 of the Settlement Commissioner IT  WT Govt of India New Delhi in Application No 7120 77 II
section T Desai J Ramamurthi and Miss A Subhashini for the Appellant
A K Sen Dinesh Vyas Manulal P H Parekh C B Singh M Mudgal and N Mundal for the Respondent No 1 The Judgment of the Court was delivered by KRISHNA IYER J
A nascent Chapter Chapter XIXA in the Income Tax Act 1961 enacted by the Taxation Laws Amendment Act 1975 whose beneficiaries are ordinarily those whose tax liability is astronomical and criminal culpability perilous falls for decoding by this Court in this appeal by the ClT1 Central Calcutta against an adverse order made by the Settlement Commission
Functionally speaking this Chapter engrafted in partial implementation of the Wanchoo Committee Report provides for settlement of huge tax disputes and immunity from criminal proceedings by a Commission to be constituted by the Central Government when approached without objection from the Tax Department
It is based on the debatable policy fraught with dubious potentialities in the context of Third World conditions of political peculium and bureaucratic abetment That com position and collection of public revenue from tycoons is better than prosecution of their tax related crime and litigation for total revenue recovery
A social audit of the working of this Chapter in action and its fall out may benefit the nation by information about who the true beneficiaries of this legislation are and whether there is more than meets the eye
The Wanchoo Committee which recommended this step titled its Chapter meaningfully as Black Money and Tax Evasion and the Act itself was passed and brought into force during the era of Emergency which was marked by speed and silence and hushed politico official operations
Be that as it may fiscal philosophy and interpretative technology must be on the same wavelength if legislative policy is to find fulgilment in the enacted text
That is the challenge to judicial resourcefulness the present appeals offer demanding as it does a holistic perspective and I Commissioner of Income Tax 1139 harmonious construction of a whole chapter especially a complex provision therein so that a balance may be struck between purpose and result without doing violence to statutory language and social values The Chapter is fresh and the issue is virgin and that makes the judicial adventure hazardous compounded by the involved and obscure drafting of the bunch of provisions in Chapter XIXA
A few facts must be narrated and the anatomy of the Chapter projected at this stage so that a hang of the controversy may be got and its just resolution sought
The respondent an elderly but apparently immense businessman was the cynosure of suspicion of the Income Tax officials which led to search and seizure of around Rs 30 lakhs in cash from him
A chain reaction set in and assessments from 1962 63 to 1972 73 were re opened
The total tax burden so fixed ran into well over Rs 60 lakhs plus around Rs 35 lakhs assessed for 1973 74
The stakes thus ran into a crore or so plus awesome prosecutions under section  77 of the Act with unpredictable prospects of sentences
The respondent assessee and his version or explanation had hopes of averting the Waterloo but the Income Tax officer ITO rejected his case
Indeed we are neither called upon nor disposed to examine the merits of either side and maybe the assessee has a presentable case
Appeals to the Appellate Assistant Commissioner AAC were carried by the assessee against the colossal imposts which marginally brought down the assessable income by around Rs 10 lakhs
Both the dissatisfied assessee and the partially injured Department appealed to the Income Tax Appellate Tribunal ITAT against the AAC s decisions
During their pendency prudence dawned on the respondent to seek sanctuary before Settlement Commission abandoning his appeal to the Tribunal attended with litigative uncertainties and penal potentialities
At seventy with understandable high blood pressure to boot he preferred negotiated peace to judicial justice heartful of quest for quiet although hopeful of winning his cases
These motivations do not call for our comment but are being mentioned as part of the narrative which ostensibly induced him to go before the Commission under Chapter XIXA
To compress the long story without crippling the foundational facts what happened after the assessee decided upon offering himself to the Settlement Commission was to prepare the ground to enable him to institute a proceeding in this behalf
The deck had to be cleared before moving the Settlement Commission
The conditions for entitlement to make an application to the 1140 Settlement Commission are set out in section 245M We may have to examine closely the connotation of the expressions used in this Section but for the nonce it is sufficient to state that it is obligatory for the assessee to withdraw any appeal that may be pending at his instance before being qualified to make an application to the Settlement Commission
Another condition stipulated in the same Section is that an assessee shall not be entitled to make an application in a case where the ITO has preferred an appeal under sub section 2 of section 253 against the order to which the assessee s appeal relates
 Without meticulous dissection of the provision we may broadly draw the conclusion that the assessee must withdraw his appeal before the Tribunal before moving the Settlement Commission
Likewise the ITO should not have preferred an appeal
Therefore the respondent assessee engaged himself in complying with these conditions
He expected to achieve this objective by moving for withdrawal of his own 12 appeals before the Tribunal and by persuading the Income Tax Department to withdraw its 10 appeals pending before the Tribunal
At the moment we do not discuss the finer issue of crucial significance as to whether an appeal preferred by the Revenue but later withdrawn by it would have the effect of total obliteration so as to fulfil the condition of no appeal having been preferred by the Income Tax Department the narrative alone need be continued
On 23 8 1976 the assessee addressed a letter to the Appellate Tribunal seeking to withdraw his appeals under section 245M of the Act
On the same day he moved Mr Kuruvilla Member Central Board of Direct Taxes requesting the Board to instruct the concerned officer of the Department to withdraw all the pending appeals filed by the Department before the Tribunal
The letter stated Though I am sure that I shall win all these appeals filed by me with the Court of the Appellate Tribunal but just to buy peace at my old age
I wanted to place myself in the hands of the Settlement Commission and seek full justice and mercy
In view of all these facts explained above I pray for undernoted point for your kind consideration and necessary action
l shall be grateful if you would kindly ask your Department to withdraw all the pending applications filed by the Department with the l
TAT emphasis added The somewhat ambivalent terminology and incongruous stances taken in the letter are striking
For instance he asserted that he was 1141 sure to win all his appeals but still he sought mercy from the Commission
He put forward old age and hypertension for desisting from litigation and gratefully desired the Department to cooperate with him by withdrawing its appeals
Before knowing the open response of the Department he addressed the Tribunal for withdrawal of his appeal which perhaps suggests that he was sure of the reaction of the Department or did not loss much by withdrawing his appeals
However when the ITAT posted the withdrawal application for hearing on 4th September 1976 the assessee wrote a letter asking for adjournment wherein he stated With regard to the above I beg most respectfully to submit that one petition was filed for withdrawing all the above appeals only to have those cases settled before the Settlement Commission New Delhi but the Department had also preferred appeals for those years
Unless the Department also withdraws their appeals there will be no purpose for our withdrawal of appeals
As such my client is pursuading the Central Board of Direct Taxes to do something effectively in the matter but for consultations with their councils etc it would take at least two months  time Probably the assessee felt that the Central Board could be persuaded to do something effectively in the matter given some time
The anticipations of the assessee were not belied because the addressee Member of the Central Board with celerity consulted the Commissioner who in turn sought and got affiramative reports from those below him and at the end of this rapid departmental exercise reached the conclusion in OctoberNovember ie in about a month that the appeals of the Departments were very weak even frivolous  and that therefore nothing was lost by withdrawing them from the Tribunal
In keeping with this conclusion the tempo was accelerated by the Board Member issuing necessary instructions to withdraw its appeals and the CIT hastened to write to the assessee respondent in December 1976
I am to inform you that the Departmental appeals pending before the Income tax Appellate Tribunal Calcutta against you will be withdrawn provided all the appeals filed by you for the assessment year 1962 63 to 1973 74 are with drawn by you
 1 See para 52 and 53 of the Settlement Commission s order
1142 A consequential representation was made before the ITAT I have been directed to withdraw the above Depart mental appeals on condition that the assessee s appeals for the assessment years 1962 63 to 1973 74 are also with drawn ITAT was persuaded to pass orders dismissing the appeals from both sides as withdrawn
The obvious purpose of the Department s withdrawal of its appeals was to enable the assessee to move the Settlement Commission
From the Member of the Central Board down to the ITO they conveniently discovered at this critical stage late in 1976 that their appeals were weak and frivolous
The plea of the appellant that the decision to withdraw the appeals by the Revenue was independent of the respondent s request that he be helped to move the Commission needs for its acceptance a degree of naivete which we do not possess as we will later show
We revert to the further factual developments to catch up with the legal questions argued before us
On the Tribunal dismissing all the appeals as withdrawn the assessee respondent applied to the Settlement Commission on January 6 1977 under section 245C
The Commission its order has recorded that as a prelude to this application the Commissioner of Income Tax and the applicant had arrived at an understanding or an arrangement mutually satisfactory and in the public interest to settle the tax liability in a forum where decisions would be conclusive and not drag on for years
 Secret understandings between high tax officials and big assessee businessmen are potential pollutants and convert Settlement Commissions into cover ups a consummation farthest from the Wanchoo Commitee s intentions and Parliament s expectations It is not demoralising that the heirarchy of officials in the Income Tax Department declared their assessments and appeals weak  and self condemned themselves before the Commission by confessing that the Central Government s appeals were frivolous  But if the salt hath lost its savour wherewith shall it be salted once the statutory operation for settlement was switched on the machine moved on
The Settlement Commission on receipt of the application under section 245C acted under section
245Dl and called for a report from the Commissioner mindless of the movement of the calender
For the ides of March came in the meanwhile and the CIT for reasons we do not know took a stiff look at the case and reported on 1st April 1977
that prosecution proceedings for concealment of m come and also false verification in the return were already 1143 pending before the Chief Metropolitan Magistrate and that he did not
consider this as a fit case to be proceeded with by the Settlement Commission
After some correspondence with the applicant and without geving hearing the Settlement Commission by its order dated the 3rd February 1978 informed the applicant that as the Commissioner had n objected under section 245Dl Settlement Commission did not allow the application to be proceeded with
Parenthetically though it must be stated that on the first rejection of the application by the Settlement Commission the Revenue moved the ITAT for restoration of its appeals although no specific provision enables such a restoration
The assessee can apply for restoration of his appeals since section 245M enables it
This order of the Commission shows that some correspondence with the applicant  did take place before the order not to proceed with his composition petition
No hearing as such was given to him though before making this adverse decision of February 3 1978
The assessee urged that the order be reviewed as natural justice had not been complied with
The Settlement Commission yielded to this submission and after elaborate argument and reasoning reached the reverse conclusion that the CIT s opposition to the composition not withstanding the application for settlement shall be considered on the merits
The Union of India through the CIT concerned has challenged the Settlement Commission s decision on jurisdictional and other legal grounds
The statutory scheme the semantics of the expressions used the jurisdictional limitations of the Settlement Commission and allied issues have been debated at the bar and the declaration of law on these aspects has seminal significances because it relates to a sensitive area where Big Business may operate at high politico official levels and the court must invigilate so that the law keeps its promises
This perspective of the litigation brings into focus the high points of the debate before us largely reflected in the Tribunal s long order Sri section T Desai for the appellant Revenue concentrated his fire on three vulnerable aspects of the judgment under attack
There was no power of review for the Commission once it had declined to proceed with the application for settlement
Therefore he argued that the reopening of the Settlement proceedings was invalid
Secondly he submitted that even though the CIT had withdrawn his appeals and thus facilitated 1144 the filing of an application under section 245C no bar of estoppel could at all be spelt out to forbid the Commissioner from exercising his statutory power of with holding consent to the settlement proceedings
Thirdly he pressed the position that the CIT s veto was not subject to review or invalidation by the Settlement Commission and so the order under appeal was bad and beyond power
Of course subsidiary issues did crop up and Shri A K Sen appearing for the respondentassessee not only joined issue with Shri Desai but also took a preliminary objection that article 136 was unavailable against an order of the Settlement Commission
It is necessary to mention that an argument which was mooted at our instance as the arguments proceeded viz that withdrawal by the Revenue of an appeal once filed did not have the effect of not preferring an appeal was not pursued by the appellant before us but we are not bound by counsel pressing or cold shouldering a point of law if attention of the advocates has been drawn thereto as in this case it was
The scheme of Chapter XIXA must be grasped before we embark on the discussion
The incarnation of Chapter XIXA was in the wake of the Wanchoo Committee Report
The vampirish vices of black money and colossal tax evasion both together using money power to prevent action against white coller offender had been a terrible menace to the health and wealth of the nation
In particular black money whose constant companion was tax evasion posed a challenge to the country s economy and the Wanchoo Committee was appointed to make recommendations with a view to arrest this evil
That Committee made a wealth of recommendations but we are concerned only with Chapter 2 of the Report which under the title Black Money and Tax Evasion proposed a compromise measure of a statutory settlement machinery where the big evader could make a disclosure disgorge what the Commission fixes and thus buy quittance for himself and accelerate recovery of taxes in arrears by the State although less than what may be fixed after long protracted litigation and recovery proceedings
We are not concerned with the merits of the recommendation except to state that if it works according to plan it may ensure that the settlement is fair prompt and independent given a high level machinery for administering the provisions
The risk of adverse criticism of escape by tax dodgers was adverted to by the Committee but was silenced by the counter argument that if the Commission was composed of officers with integrity 1145 wide knowledge and experience and high status and emoluments the A risk was minimal
A precautionary step against possible misuse by evaders of the settlement machinery was thought of by the Wanchoo Committee which made the circumspect observation
However we wish to emphasize that the Tribunal will proceed with the petition filed by a taxpayer only if the Department raises no objection to its being so entertained 
We consider that this will be salutary safeguard because otherwise the Tribunal might become an escape route for tax evadors who have been caught and who are likely to be heavily penalised or prosecuted
 The Tribunal  in the Wanchoo Committee Report was rechristened the Settlement Commission  in the Act when it was passed by Parliament
The Commission was vested with full power to investigate cases on its jurisdiction being invoked and to quantify the amount of tax penalty and interest that it may eventually fix as payable
A strategic provision which held out fascination for the criminal tax evaders was contained in the report
The Wanchoo Committee recommended conferment on the Settlement Commission of a discretion to grant immunity from criminal prosecution in suitable cases
The detailed mechanics of application investigation consideration bearing and disposal are contained in the report and have eventually been translated into statutory provisions in Chapter XIXA
This legislative history leads us on to a broad unfoldment of the actual provisions of sections 245A to 245M which constitute a fasciculus of provisions designed for settlement of taxes in dispute
Section 245A is the definition clause even as 
245B is the clause constituting the Settlement Commission
Applications for settlement of cases by assessees are regulated by section 245C which reads 245C Application for settlement of cases
1 An assessee may at any stage of a  case relating to him make an application in such form and in such manner and containing such particulars as may be prescribed to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided
2        3       17 409SCI79 1146 Its meaning can be understood fully only when we read the defenition of case
According to the definition in 6
245Aa a case means any proceeding under the income tax law in connection with the assessment or reassessment of any person which may be pending before an income tax authority on the date of application under section 245C1
It is common knoledge that ITAT is not an income authority which expression it is settled includes the ITO and AAC and others
Therefore when an appeal pends before the Tribunal it cannot be said that a case pends before an income tax authority
In the present case we are concerned with a stage when appeals are pending before the Tribunal
Section 245C1 may not enable an assessee to move the Commission in such cases but for the provision in section 245M
Indeed we are intimately concerned with the express provisions in and implications of section 245M which specifically deal with persons who have filed appeals to the Appellate Tribunal and seek to apply to the Settlement Commission
Sub section 6 of section 245M is a deeming provision
An application under section 245M will be deemed to be an application under section 245Cl and all provisions of Chapter XIXA except section 245D7 shall apply such proceedings
The question then arises whether and subject to what conditions can an assessee take advantage of section 245M and move the Commission
only if he can validly move the Commission under section 245 can his application be processed under section 245C 245D and other Sections of the Chapter
An intensive examination of section 245Ml to S and 7 thus becomes imperative
Any assessee may make an application to have his case settle but it is one thing to make an application proceeded with
For on receipt of an application the Commission is not empowered automatically to proceed with it
The mechanics of section 245D must be remembered in this context
The application for settlement when filed shall be forwarded to the Commissioner for a report and it is only on the basis of the material contained in such report that the Settlement Commission may allow the application to be proceeded with or reject the application
To reject an application is to refuse relief outright and affects the applicant adversely
So it is provided that an application shall not be rejected unless an opportunity has been given to the applicant of being heard
 We are clearly of the view that an applicant before the Settlement Commission is entitled to a hearing before his application for composition is rejected
In the present case on the facts stated earlier the Settlement Com mission in the first instance rejected the application because 1147 the CIT Objected to it
Maybe the objection of the Commissioner A has lethal potency but the rule of fairplay incorporated in the first proviso to section 245Dl obligates the Commission to hear the applicant before rejection
Even apart from any specific provision it is legal before not to hurt any party without hearing him unless the Act expressly excludes it
One may conceive of many reasons why a hearing even at this stage may be useful
The Commissioner or his representative may in the light of the circumstances which the applicant may point out withdraw his objection
Likewise the applicant may point out that what appears to the Settlement Commission to be an objection by the Commission is not an objection to proceed with the application but only a clarification of some aspect or other
Nothing is lost by hearing a petitioner whose application or settlement is being rejected and much may be gained by such hearing in properly processing the application in the spirit of Chapter XIXA
Anyway section 245Dl does not negate natural justice and in the absence of an express exclusion of the rule of audi alteram partem it is fair indeed fundamental that no man is prejudiced by action without opportunity to show to the contrary
Without expounding any inflexible rule of natural justice of universal validity we cannot fault the Settlement Commission for what it has done
We take the view that having regard to the rulings of this Court in M section Gill casel and Maneka Gandhi case2 the Settlement Commission s decision to re hear and pass a de novo order cannot be said to be illegal
The Commissioner section Objection to the application being proceeded with may prove fatal or may not but without entering into that controversy we think it correct to hold that the Settlement Commissioner did not act without jurisdiction by affording a hearing and passing a fresh order in the presence of both parties
Whether that fresh order is valid or not depends on the consideration of the merits which we will presently examine
Law leans in favour of natural justice where statutory interdict does not forbid it
The question now arises as to the course of the exercise of the Settlement Commission on receipt of all application for composition
The second proviso to section 245Dl is compulsive in ton and import for it mandates that all application shall not be proceeded with under this sub section if the Commissioner objects to the application being proceeded with on the ground that concealment of particulars of income on the part of the applicant or perpetration of fraud by him 1 Mohinder Singh Gill vs Chief Election Commissioner 1978 1 SCC405
2 Maneka Gandhi vs Union of India 1978 1
SCC 248 1148 for evading any tax has been established or is likely to be established by any income tax authority in relation to the case
 In the present case the Commission did raise an objection on April 1 1977 that   prosecution proceedings for concealment of income and also false verification in the returns were pending before the Chief Metropolitan Magistrate and that in the circumstances he did not consider this as a fit case to be proceeded with by the Settlement Commission
 This objection was in the normal course neither foolish nor futile but fatal being in functional fulfilment of the requirements of the second proviso to section 245Dl
Indeed when we observe that the CIT had with full responsibility prosecuted the assessee in a number of cases then pending for offences which attract the conditions required by the second proviso there is little difficulty in holding that the application for settlement having been rejected by the Commissioner could not be proceeded with
The veto of the Commissioner the Waterloo of the application
The Settlement Commission however took the view that the Commissioner was estopped from exercising his power to object and for this reason ignored the veto of the Commissioner and proceeded to process the application in terms of sub sections
2 to S of section 245D
The core controversy in this appeal is as to whether the view of the Settlement Commission that the veto is unavailable for the Commissioner in view of his earlier stand in regard to the withdrawal of appeals is valid or not
After setting out the course of events and earlier readiness of this Department to withdraw its appeals to enable the Commission to be moved by the assessee notwithstanding the pendency of the criminal cases and having regard to the absence of any new material having been discovered justifying a reversal of the CIT s stand the Commission took the view that the rule of estoppel forbade the appellant from objecting to the Commission s proceedings with the application of this assessee
It argued itself in to that conclusion thus In this particular case in view of the withdrawal of the Departmental appeals before the Income Tax Appellate Tribunal the Commissioner is estopped from making a report under section 245Dl Proviso 2 to the Settlement Com mission objecting to the application from being proceeded 1149 with
The objection raised by the Commissioner is thus in A valid in law and any objection which is invalid in law for the reason discussed earlier is no objection under the second proviso to section 245Dl and the Commissioner is competent to ignore it applying the principles of law equity and natural justice
The Settlement Commission is therefore entitled to proceed with the application
In this case it is not shown before us nor it is the Department s case that between 24th December 1976 and 7th January 1977 the Commission had brought on record any fresh materials to come to the conclusion under which he could legitimately raise the objection under the second proviso to section 245Dl once having entitled the assessee to make the application under section 245Ml proviso
Filing of a complaint for launching a prosecution earlier is not a relevant matter for the exercise of jurisdiction under the second proviso to section 245Dl at this stage in the light of the facts brought before us and elaborately discussed in the earlier paragraphs
This is a clear case in which the applicant was prevailed upon to withdraw the appeals for the additional two assessment year 1972 73 and 1973 74 where very large and substantial sums were involved compared to the ten assessments  from 1962 63 to 1971 72 where cross appeals were agreed to be withdrawn by either side
On the admission of the learned Departmental Representative himself the Departmental appeals were frivolous and not likely to succeed on appeal
We are therefore of the opinion that for a harmonious construction of the statute in a case falling under Section 245M the second proviso to section 245Dl cannot be read in isolation but only in conjunction with the 1st proviso to Section 245Ml
Under Section 245Dl the Commission has to decide the admission on the basis of the materials contained in the report of the Commissioner and having regard to the nature and circumstances of the case or the complexity of investigation involved therein
The entire facts of the case clearly indicate that the Revenue came to an understanding with the applicant to have the subsequent exercise of the power under the second proviso to Section 245Dl without any fresh material is 11 therefore no ground to dislodge the right of the assessee to come before the Commission
1150 We have earlier clarified that an ITAT is not an Income Tax authority and proceedings pending before such tribunals are not cases
But section 245M takes care of assessees whose appeals pend before the ITAT but are anxious to square up their litigation through the Settlement Commission
A close up of this provision is necessitous and a reading of its full range of meaning is decisive of the subject of this appeal
We may skip ss 245E and but dwell for a moment on section 245H which is of great moment from the angle of public interest and public morals as it immunises white collar offenders against criminal prosecutions and in unscrupulous circumstances becomes a suspect in strument of negotiable corruption
More than the prospect of monetary liability and mounting penalty is the dread of traumatic prison tenancy that a tax dodging tycoon is worried out
And if he can purchase freedom from criminal prosecution and incarceratory sentence he may settle with the Commission and towards this end try to buy those who remotely control the departmental echelons whose veto or green signal closes or opens the jurisdiction of the Settlement Commission and hushes or pushes the prosecutions
Thus section 245H which c1othes the Commission with the power to grant immunity from prosecution for any offence under this Act or under the Indian Penal Code or under any other Central Act  is a magnet which atracts large tax dodgers and offers indirectly an opportunity to the highest departmental and political authorities a suspect power to bargain
We may now move straight on to section 245M which we reproduce 245M Certain persons who have filed appeals to the Appellate Tribunal entitled to make application tc the Settlement Commission 1 Notwithstanding anything contained in this Chapter any assessee who has filed an appeal to the Appellate Tribunal under this Act which is pending before it shall on withdrawing such appeal from the Appellate Tribunal be entitled to make an application to the Settlement Commission to have his case settled under this Chapter Provided that no such assessee shall be entitled to make an application in a case where the Income tax officer has preferred an appeal under sub section 2 of section 253 against the order to which the asses see s appeal relates
1151 2 Any assessee referred to in sub section 1 may A make an application to the Appellate Tribunal for per mission to withdraw the appeal
3 On receipt of an application under sub section 2 the Appellate Tribunal shall grant permission to withdraw the appeal
B 4 Upon the withdrawal of the appeal the proceeding in appeal immediately before such withdrawal shall for the purposes of this Chapter be deemed to be a proceeding pending before an Income tax authority
5 An application to the Settlement Commission under this section shall be made within a period of thirty days from the date on which the order of the Appelate Tribunal permitting the withdrawal of the appeal is communicated to the assessee
6 An application made to the Settlement Commission under this section shall be deemed to be an appli cation made under sub section 1 of section 245C and the provisions of this Chapter except sub section 7 of section 245D shall apply accordingly
7 Where an application made to the Settlement Commission under this section is not entertained by the Settlement Commission then the assessee shall not be deemed to have withdrawn the appeal from the Appellate Tribunal and the provisions contained in section 253 section 254 and section 255 shall so far as may be apply accordingly
Briefly the section a enables withdrawal of appeals before Tribunals by assessees as condition precedent to applications 
for composition by the Settlement Commission b applies by a legal fiction sections 245C and to such applications and c where the proceeding before the Commission is not entertained allows revival of the with drawn appeals thus restoring the status quo ante
This is but fair because the assessee should not suffer if the Settlement Commission bars ib doors
The facts of our case show that the assessee had filed appeals before the Tribunal and had later moved for their withdrawal in terms of section 245M1 2 and 3
Sub section
4 thereupon opened and by virtue of sub section
6 the mechanics of sections 245C and spraing into 1152 action
It would have been smooth sailing but for the proviso to section 245Ml which runs thus Provided that no such assessee shall be entitled to make an application in a case where the Income tax Officer has preferred an appeal under sub section 2 of section 253 against the order to which the assessee s appeal relate
Thus there is an embargo on the right of the assessee to move the Commission where the Income tax officer has preferred an appeal under sub section 2 of 6 253 against the order to which the assessee s appeal relates 
The Revenue had preferred appeals here but later withdrawn them
Does such withdrawal amount to not having preferred an appeal at all  The crucial question therefore is as to whether the assessee is disentitled altogether to make an application before a Commission because the Income Tax officer has already preferred an appeal to the ITAT although he has subsequently withdrawn it
Does filing the appeal ipso facto imply that the die is cast and withdrawal thereof cannot whittle down its preventive impact We will presently discuss this point
We must clarify that this legal bar to the Settlement Commission s jurisdiction contained in the proviso to section 245M was not urged by the applicant s counsel before us consistently with the stand the Department had throughout taken in this case
But law as laid down by this Court transcends the facts of a given case or stances of parties or counsel Here the Department did file appeals and later withdrew them be fore the application for settlement was made
At the time the application before the Settlement Commission was moved no departmental appeal was pending
Indeed the documents in this case clearly point to the assumption by the CIT and the assessee that if the Revenue withdrew its appeal the disentitlement in the proviso would disappear
Even so when an appeal is filed by the ITO does not the prohibition operate This turns on the meaning of the words preferred an appeal
Preferred is a word of dual import its semantics depend on the scheme and the context its import must help not hamper the object of the enactment even if liberty with language may be necessary
1153 There is good ground to think that an appeal means an effective appeall An appeal withdrawn is an appeal non est as judicial thinking suggests2 3 Black s Law Dictionary gives the following meaning PREFER To bring before to prosecute to try to proceed with
Thus preferring an indictment signifies prosecuting or trying an indictment
To give advantage priority or privilege to select for first payment as to prefer one creditor over others
Thus it may mean prosecute  or effectively pursue a proceeding or merely institute it
Purposefully interpreted preferring an appeal means more than formally filing it but effectively pursuing it
If a party retreats before the contest begins it is as good as not having entered the fray
After all Chapter XIXA is geared to promotion of settlement and creation of road blocs in reasonable compositions
The teleological method of interpretation leads us to the view that early withdrawal of the ITO s appeal removes the bar of the Proviso
The problem that troubles us arises from section 245M7
If a settlement application is not entertained and is rejected in limine there is a statutory revival of the assessee s appeal before the ITAT because of the deeming provision but what happens to the appeal of the ITO which he withdraws to enable the ITO to file an application before the Commission  Literally read section 245M7 covers the revival of the assessee s appeals but not the ITO s appeals
The inference from this omission is that no occasion arises for revival of the ITO s appeals because once he files an appeal no application for settlement can be made
That is to say the proviso to section 245Ml interdicts entertaiment of a settlement application if departmental appeals are filed
This interpretation narrows the benign amplitude of the Chapter of attracting as many big assessees with disputed claims as are ready to settle their liabilities through the Commission
There may be cases where the AAC has given partial relief to the assessee and both sides may be aggrieved
Both sides may have filed appeals
There is no understandable ground to exclude the possibility of such cases being settled merely because the ITO has perhaps for good reasons filed an appeal
The purpose of substituting the method of investigative negotiation just settlement and early exigibility by a high powered 1 31 STC 434
2 21 STC 154  3 1973 31 STC 434
1154 Commission for a tier up tier of long protracted litigation where victory may be phyrrhic and futile is ill served by keeping out cases solely for the reason that departmental appeals have been filed
To truncate the operation of the salutary provisions of Chapter XIXA more substantial reasons must be present
Of course if no alternative interpretation is possible it is not for the court to explore intendment of the legislation beyond the language in which the Section is couched
However there is an alternative meaning which reconciles the rationale of settlement with the embargo of the Proviso
If we read into the words prefer an appeal the sense of effectively prosecuting an appeal then mere institution followed by withdrawal will cancel the effect result in non prosecution and obliteration of the appeal which is the same as not preferring an appeal
The meaning of prefer as given in the Black s law Dictionary supports This construction
Among available semantic options law prefers that which furthers the statutory objective
The possible obstacle in adopting this interpretation is that while the assessee s appeal gets revived when the Commission rejects an application the ITO s appeal is not resuscitated under section 245M7
Even this is more imaginery than real and depends on over emphasis on verbalism
After all the clause we have to decode is the assessee shall  be deemed to have withdrawn the appeal from the appellate tribunal  
The obvious object of this clause is to restore the parties to status quo ante and in fairness must apply to the Department as to the assessee
This non discriminatory import can be resonably read into the clause if we construe the expression the assessee in a wider way so as to include all parties affected by the subject matter of the assessment
In that case the clause may mean that no one who is aggrieved by the assessment shall be deemed to have withdrawn the appeal from the appellate tribunal
 An equitable and purposeoriented construction of the clause means that the assessee will be put back in the same position vis a vis his appeals and if to facilitate his moving the Commission the l
TO has withdrawn the departmental appeals the Commission s rejection of the application shell not prejudice the Revenue
Actus curie neminem gravabit is the principle of wider import and is a tool of construction too
This perhaps may be making up for a lacuna by a restructuring of the clause so at to work out justice to the Department
The scheme of section 2534 contemplates filing of memorandum of cross objections by the ITO On receipt of notice of an appeal by the assessee
So much so it is 1155 also possible alternatively to read into section 245M7 the right of the Department to file an appeal de novo on receipt of notice of the revival of the assessee s appeal within the period specified in section 2534
This does not do violence to the language of Is
245M7 and affords eequitable relief to the Department by enabling it to bring its appeal back to life notwithstanding the earlier withdrawal when the asses see s appeal reincarnates under section 245M7
We are mindful that a strictly grammatical construction is departed from in this process and a mildly legislative flavour is imparted by this interpretation
The judicial process does not stand helpless with folded hands but engineers its way to discern meaning when a new construction with a view to rationalisation is needed
Lord Denning in his recent book The Discipline of Lawl made a seminal observation on Ironing out the creases by quoting a passage from Seaford Court Estates Ltd vs Asher2
Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise and even if it were it is not possible to provide for them in terms free from all ambiguity
The English language is not an instrument of mathematical precision
Our literature would be much the poorer if it were
This is where the draftsmen of Acts of Parliament have often been unfairly criticised
A judge believing himself to be fettered by the supposed rule that he must look to the language and nothing else laments that the draftsmen have not provided for this or that or have beer guilty of some or other ambiguity
It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity
In the absence of it when a defect appears a judge cannot simply fold his hands and blame the draftsman
He must set to work on the constructive task of finding the intention of Parliament and he must do this not only from the language of the statute but also from a consideration of the social conditions which give rise to it and of the mischief which it was passed to remedy and then he must supplement the written word so as to give force and life  to the intention of the legislature
That was clearly laid down by the resolution of the judges in Heydon s case and it is the safest guide today
Good practical advice on the subject was given about the same time 1 p 12
2 1156 by Plowden
Put into homely metaphor it is this judge should ask himself the question If the makers of the Act had themselves come across this ruck in the texture of it how would they have straightened it out  He must then do as they would have done
A judge must not alter the material of which it is woven but he can and should iron out the creases The upshot of the discussion is to hold that if the Department files an appeal which it drops to enable an application before the Commission then the Proviso to section 245Ml does not debar the motion for settlement
The preliminary objection raised by Shri A K Sen need not detain use because we are satisfied that the amplitude of article 136 is wide enough to bring within the jurisdiction orders passed by the Settlement Commission
Any judgment decree determination sentence or order in any case or matter passed or made by any court or tribunal comes within the correctional cognizance and review power of article 136
The short question then is whether the Settlement Commission cannot come within the category of Tribunals
To clinch the issue section 245L declares all proceedings before the Settlement Commission to be judicial proceedings
We have hardly any doubt that it is a tribunal
Its powers are considerable its determination affects the rights of parties its obligations are quasi judicial the orders it makes at every stage have tremendous impact on the rights and liabilities of parties
WHERE a body is created by statute and clothed with authority to determine rights and duties of parties and to impose pains and penalties on them it satisfies the test laid down in Associated Cement Co casel
A Constitutional Bench of this Court in that case has indicated the quintessential test in this regard and we need only extract a portion of the head note relevant to this aspect In considering the question about the status of any body or authority as a tribunal under the article the con sideration about the presence of all or some of the trappings of a court is really not decisive
The presence of some of the trappings may assist the determination of the question as to whether the power exercised by the authority which possessed the said trappings is the judicial power of the State or not
The main and basic test however is whether the adjudicating power which a particular authority is empowered to exercised has been 1 Associated Cement Co Ltd vs P N Sharma  Anr
  1157 conferred on it by a statute and can be described as a part of the State s inherent power exercised in discharging its judicial function
1 The expanding jurisprudence of administrative tribunals to which some eminent judges cradled in Dicean concepts in the early days of English law has come to stay whether we call it the new despotism or the pragmatic instrumentality of dispensing justice untrammelled by the complexities and mystiques which are part of the processual heredity of courts
The Franks Committee rightly said 2 Reflection on the general social and economic changes of recent decades convinces us that tribunals as a system for adjudication have come to stay The advantage which tribunals had over courts states Seervai in his classic work on the Constitution of India lay in cheapness accessibility freedom from technicality expedition and expert know ledge of their particular subject  A casual perusal of Chapter XIXA convinces the discerning eye that the Settlement Commission exercises many powers which affect for good or otherwise the rights of the parties before it and vests in it powers to grant immunity from prosecution and penalty to investigate into many matters and to enjoy conclusiveness regarding its orders or settlement
In short Settlement Commissions are Tribunals
The preliminary point fails and we proceed to consider the triple substantial questions set out earlier
The two gut issues that must now engage us take us to the turn of events surrounding the withdrawal of appeals by both sides
To complete the story and this fact has a bearing on one of the legal questions it must be stated that when the Settlement Commission first acted under the Second Proviso to section 245Dl the Department even like the assessees applied to the ITAT for revival of its appeals although section 245M7 does not make any such provision for revival of the ITO s appeals
In ordinary circumstances the 2nd Proviso to section 245Dl is easy of construction and the exercise is also simple
The assessee applies to the Commission thereupon the Commission shall call for a report from the Commissioner
The Commissioner may object to the appli 1 Ibid
p 366 2 Franks Committee on Administrative Tribunals and Enquiries p 8 3 Franks Committee Report p 9 quoted by Seervai in his Constitutional Law of India p 1226
1158 cation being proceeded with on the grounds specified in the second Proviso to sub section
1 of section 245D
If he so objects the application shall not be proceeded with
This is express explicit and mandatory
Where an application is allowed to be proceeded with under subs
1 the Settlement Commission may call for the relevant records from the Commissioner and hold further enquiry
Thus the Commissions power to proceed with the application can be paralysed by the Commissioner objecting to the application being proceeded with
In our case the Commission called for a report from the Commissioner and the Commissioner objected to the application being proceeded with whereupon the Commission declined to proceed with the application But on the assessee s motion for review of that order which was passed without hearing him fresh consideration after hearing both sides followed and the Commission decided to proceed with the application holding that the Commissioner was estopped from objecting
The crucial question is whether the Commissioner s statutory power to object to the Settlement proceedings on the ground of the presence of grave deviances mentioned in Proviso 2 to section 245Dl can be nullified by the doctrine of estoppel and if it can be whether there are grounds to hold that a plea of estoppel is sustainable in the circumstances We must realise that the Commissioner has a duty to the public Revenue and more importantly a duty to object to any assessee who is prima facie guilty of grave criminal conduct in the shape of concealment of income or prepetration of fraud getting away with it by invoking Chapter XIXA
The Wanchoo Committee was mindful of the benefits of a policy of collection of tax without pro tracted litigation through the machinery of the Settlement Commission but the potential for escape by the big whales of economic crime by resort to the Settlement Commission engaged the Committee conscience
So it expressed the view that it was of paramount importance that only persons who are known for their integrity and high sense of justice and fairness are selected for appointment on the Tribunal Settlement Commission
This was a pious wish and the Committee went further to guard against fraud and to uphold the paramount principles more important than physical gains and losses of economic offenders being punished by arming the Commissioner with the right to object to the very entertainment of the application
We consider that this will be a salutary safeguard because otherwise the Tribunal Settlement Commission might become an escape route for tax evaders who have been caught and who are likely to be heavily penalised or prosecuted
 The gravity of this public policy cannot he undermined by interpretative softness of Second Proviso to 1159 s245D1 To whittle down the imperative nature of this veto power is to undo the expectations of the Wanchoo Committee and amounts to stultify the rule of law an integral part of which is that the law shall not let the greater felon loose
Can the rule of estoppel override a statutory mandate of a prohibitory character calculated to inhibitescape from the coils of the law crime Moreover we to have to examine assuming the application of the rule of estoppel where the basics of that rule of a clear representation having been made by A to B and the latter on the face of representation action to his detriment can be spun out of the circumstances before us
Now we come to the meat of the matter the plea of estoppel or its variants
The CIT s objection to the jurisdiction of the Commission to proceed with the matter has been shot down by the artillery of estoppel
The order under appeal proceeds to hold that a conspectus of the circumstances of the case compels the conclusion that an understanding had been reached between the assessee and the CIT evidenced by mutual withdrawal of their respective appeals before the ITAT that the Commission would be permitted to explore a settlement and so the statutory veto available to the CIT to interdict the enquiry by the Commission could not be exercised because he was estopped from so doing resiling from his earlier stand
The argument has an attractive veneer or cosmetic charm but law is more than skin deep and courts peep beneath to see the principle of equity and justice thereby promoted
What in essence is estoppel Estoppel is a rule of equity which forbids truth being pleaded or representation on which faith another has acted to his deteriment being retracted
Even extending the rule into the new fangled empire of promissory estoppel it cannot go beyond the limits of the Law Revision Committee in England which Lord Denning allowed to blossom in the High Trees case1 We therefore recommend that a promise which the promisor knows or reasonably should know will be relied upon by the promisee shall be enforceable if the promisee has altered his position to his detriment in reliance on the promise
 The soul of estoppel is equity not facility for inequity
Nor is estoppel against statute permissible because public policy animating a statutory provision may then become the casualty
Halsbury has 11 noted this sensible nicety
1 see Discipline of Law by Lord Denning p 202
1160 Where a statute enacted for the benefit of a section of the public imposes a duty of a positive kind the person charged with the performance of the duty cannot by estoppel be prevented from exercising his statutory powers  l A petitioner in a divorce suit cannot obtain relief simply because the respondent is estopped from denying the charges as the court has a statutory duty to inquire into the truth of a petition
2 The luminous footnote cites rulings and states that This rule probably also applies where the statute bestows a discretion rather than imposing a duty
3 To sum up where public duties cast by statute are involved private parties cannot prevent performance by invoking estoppel
We do not discuss further since the facts here exclude estoppel
In the present statutory situation section 245D by the 2nd Proviso casts a public duty on the Commission of Income Tax to consider in the light of the case made out in the assessee s application whether concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax or other sum chargeable or imposable under the Indian Income tax Act 1922 11 of 1922 or under this Act has been established or is likely to be established by any Income tax authority in relation to the case and exercise his veto power to prevent escape of macro criminals prima facie guilty of grave economic crimes
He cannot bargain over this interdict in advance or barter away a legal mandate in anticipation
He may permit or even assist the filing of a conciliation motion by the assessee but when the Commission intimates him under section 245D 1 he shall with statutory seriousness exercise his discretion
He cannot enter into a deal  over this power without betraying the statutory trust
We cannot therefore accept the plea that the Commissioner of Income Tax by conduct and understandings  has irredeemably mortgaged  his statutory duty to object if the case deserves such objection
Estoppel then is both odious and ominous and discretion the door to corruption
Even otherwise there must be an active representation proceeding from the functionary sought to be muzzled by estoppel and the 1 Maritime Elec
Co Ltd vs General Diaries Ltd  and Halsburys Laws of England para 1515
2 Hudson vs Hudson 1948 p 292 and Halsburys Law of England para 1515
3 Halsbury 4th Edn
p 1019
1161 pleading party must have acted to his detriment on the faith of the said representation or futuristic promise
Here the CIT made no representation to the assessee
He merely yielded to the latter s persuasion
Nor did the assessee act on any representation of the CIT
The withdrawal of his appeal was not because of or induced by the CIT
The Commissioner never asked him to withdraw his appeals but when asked by the assessee to withdraw the departmental appeals did so on condition that the other also withdrew his appeals
Granting that the CIT did facilitate the motion before the Commission it did not mean that the assessee did anyhing to his detriment
Moreover there was and could not be any representation or even negotiation except illicit regarding the exercise of the statutory function under the 2nd Proviso in advance of the filing of the application for settlement
Even on grounds of public policy it will be lending legal colour to hushing up prosecutions of high placed offenders by an unjust extension of the rule of estoppel
Bargaining between tax authorities and big assessees over criminal prosecutions and the like is beset with corrupt potential that a court of conscience cannot succumb to such a rule of estoppel
Apart from the jural untenability of the contention let us see if the factual matrix supports the claim
A close look at the foundational facts will reveal the fallacy of the plea of estoppel
Is mere understanding  or ambiguous conduct the stuff of which the fabric of estoppel is made We find the case of the respondent a rope of sand a route to fraud a permit for non performance of public duties
The assessee takes the initiative and beseeches the In come Tax Department to help him move the Settlement Commission by withdrawing its appeals
The story when unfurled shows how the assessee acted on his own independently of the Department never had any blanket assurance from the latter about non objection to the later stages of the application whatever be the guilt of the assessee vis a vis the 2nd proviso to section 245Dl defeating the statutory efficacy of the provision
It all begins chronologically with the assessee respondent representing to ITAT
On 23 8 1976 the following Re IT appeals in the name of Sri B N Bhattacharjee for the Asst
years 1962 63 63 64 64 65 65 66 66 67 67 68 68 69 69 70 70 71 71 72 72 73 and 73 74
18 409SCI79 1162 Sub Prayer us 245M of the IT Act 1961 for withdrawal of appeals
With regard to the above I beg to submit that all the above appeals I have filed on 12 9 75 but now I like to have my cases settled by the settlement Commission and as such I may kindly be allowed to with draw all the above twelve appeals us 245M of the IT Act 1961
The matter is very much urgent and the settlement petition is to be filed within a day or two before the Settlement Commission New Delhi
Pray that an early order of the appellate Tribunal permitting the withdrawal of all the above appeals may kindly be issued to me and for this act of kindless I shall ever pray
23 8 76
section N Mandal At this time the Department had done nothing to induce him to withdraw his appeals or move the Commission to that effect
It was a unilateral act of his and if the ITAT allowed him to withdraw that was not because of the CIT s conduct but the compulsion of section 245M3
If at all the assessee was chasing the Department and falling at its feet seeking mercy and praying for withdrawal of its appeals as is evident from Annexure which runs thus Dear Sir
I have instructed my counsel to withdraw all my Tribunal appeals to enable me to file petition before the Settlement Commission stop l seek your mercy and sympathy by with drawing APPEAL FILE by the Department so that I can file my Settlement Petition here for settlement stop I assure you my full co operation and I want settlement bonafide and I am acting in good faith stop I pray for your kind consideration and cooperation stop 25 5 76
Esteem Regards B Bhattacharjee Camp New Delhi How can this craven attitude be converted into a conduct induced by the Department detrimental to the assessee s interest Even the latter letter to Shri Kuruvilla Member Central Board of Direct Taxes is plaintive and supplicative and not indicative of any representation by the Department to the assessee leading to the latter s action to his 1163 Own prejudice
In fact Annexure F dated September 10 1976 winds up 1
I shall be grateful if you would kindly ask your department to withdraw all the pending appeals filed by the Department with ITAT Lastly if the Department find any technical difficulties I am prepared to swear my affidavit to protect the interests of the department
I assure you my full cooperation with the department in arriving at a reasonable settlement of the cases
I am writing this in a good faith
I am enclosing herewith the photostat copies of the correspondences for your kind and benign consideration
 We have earlier recounted the further developments and all that has happened is a communication from the CIT to the assessee dated December 16 1976 which is cryptic in terms I am to inform you that the departmental appeals pending before the Income tax Appellate Tribunal Calcutta against you will be withdrawn provided all the appeals filed by you for the assessment year 1962 63 to 1973 74 are withdrawn by you
 It is incredible that the tone sequence and the context and pouring subjective wine into the vessel of words used the Commission should interpret this communication to reflect an understanding of words a representation by the department to the assessee to do a thing to his prejudice whereupon he acted that way laying the basis for a plea of estoppel
Far from the Revenue making any positive representation to the assessee it was a case of concession shown to him to his chance before the Commission
This is clear from the assessee s petition to the Tribunal dated 17 12 76 wherein he states  now the learned CIT Central Calcutta has very kindly agreed to withdraw their Departmental appeals for the assessment years 1962 63 to 1971 72 on condition that your petitioner would also withdraw all the appeals for 1962 63 to 73 74 assessments
 It is true that the CIT withdrew the appeals of the Department but it is not true that he made any representations to the assessee to act in a particular manner with a promise of doing something to his advantage leading to the assessee in turn acting to his own prejudice by withdrawing his appeals
His withdrawal of the appeals was in 1164 dependently decided upon by him so that he could move the Corn mission
Thereafter he moved the Department to withdraw its appeals so as to entitle him to make an application to the Commission
The order of the ITAT dated 24 12 76 makes it clear that it granted permission to withdraw appeals because The learned departmental representative Shri Narayanan also had no objection to permission being granted for withdrawal of the appeal
 We need not overload this judgment with more extracts from letters and petitions because it is abundantly clear that the basics of equitable estoppel are blissfully absent and the canons that govern the application of the principle contradict its extension to a situation like the present
We therefore overrule the plea of estoppel which has found favour with the Commission and hold that the objection raised by the CIT is a potent interdict on the jurisdiction of the commission
It is not inappropriate to state that the policy of the law as disclosed in Chapter XIXA is not to provide a rescue shelter for big tax dodgers who indulge in criminal activities by approaching the Settlement Commission
The Settlement Commission will certainly take due note of the gravity of economic offences on the wealth of the nation which the Wanchoo Committee had emphasised and will exercise its 15 power of immunisation against criminal prosecutions by using its power only sparingly and in deserving cases otherwise such orders may be come vulnerable if properly challenged
Thus a holistic perspective in the correct statutory setting makes the conclusion irresistible that the appeal must be allowed that the Settlement Commission should be inhibited from proceeding with the application of the assessee and the appeals by the assessee before the ITAT must be revived and disposed of expeditiously
The departmental appeals having been admitted by the CIT himself to be very weak and frivolous should not be revived as it will be only a waste of public time and public money
The appeals are allowed but in the circumstances of the case the parties will bear their costs
NVK Appeals allowed


Summary:
A large sum of Rs 30 lakhs in cash having been recovered from the respondent in pursuance to a search by the Income Tax officials his assessments for the years 1962 63 to 1972 73 were reopened by the Department
The total tax burden on the respondent was over Rs 30 lakhs and an additional sum of Rs 35 lakhs was assessed for the year 1973 74
The respondent was also prosecuted under s 277 of the Income Tax Act
Appeals by the respondent to the Appellate Assistant Commissioner brought down the assessable income by about Rs 10 lakhs
The respondent and the department both appealed to the Income Tax Appellate Tribunal the former filing 12 appeals and the latter 10 appeals
The respondent moved the Settlement Commission for composition under section 245M
The assessee withdrew his appeals and the revenue declared their assessments and appeals weak  and withdrew them
The Settlement Commission on receipt of the application under section 245C acted under section 24SDl and called for a report from the appellant
The appellant reported that prosecution proceedings for concealment of income and also false verification in the return by the respondent were pending against the respondent in the Magistrate s Court and that it was not a fit case to be proceeded with by the Commission
The Settlement Commission after some correspondence with the respondent and without giving a hearing informed him that as the appellant had objected under section 245D  I  the Settlement Commission did not allow the application to be proceeded with
The appellant thereupon moved the Income Tax Appellate Tribunal for restoration of its appeals although no specific provision enable such a restoration the asssessee being entitled to apply for restoration under section 245M
The respondent urged the Settlement Commission to review its order as no hearing as such was given to him
The Settlement Commission yielded to his 1134 submission reached the reverse conclusion that the appellant s opposition to the composition notwithstanding the application for settlement be considered on merits
The core controversy in the appeals to this Court were whether in view of the withdrawal of the departmental appeals before the Income Tax Appellate Tribunal the Commissioner is estopped from making a report under section 245D1 proviso 2 to the Settlment Commission objecting to the application from being proceeded with
On behalf of the appellant it was contended that a there was no power of review for the Commission since it had declined to proceed with the application for settlement and consequently the re opening of the Settlement proceedings was invalid b even though the CTT had withdrawn his appeals and thus facilitated the filing of an application under section 245C no bar of estoppel could be spelt out to forbid the Commissioner from exercising his statutory power of withholding consent to the settlement proceedings and c the Cl
T s veto was not subject to review or invalidation by the Settlement Commission Allowing the appeals  HELD 1
The Settlement Commission should be inhibited from proceeding with the application of the assessee and the appeals by the assessee before the Income Tax Appellate Tribunal must be revived and disposed of expeditiously
1164F1 2
The departmental appeals having been admitted by the Commissioner of Income Tax himself to be very weak and frivolous should not be revived as it will be only a waste of public time and money
iy 3
If the Department files an appeal which it drops to enable an application before the Commission then the proviso to section 245M1 does not debar the motion for settlement
1156C 4
Functionally speaking Chapter XIXA in the Income Tax Act 1961 enacted by the Taxation Laws Amendment Act 1975 engrafted in partial implementation of the Wanchoo Committee Report provides for settlement of huge tax disputes and immunity from criminal proceeding by a Commission to be constituted by the Central Government when approached without objection from the Tax Department
1138E 5
Fiscal philosophy and interpretation technology must be on the same wavelength if legislative policy is to find fulfilment in the enacted text
1138 H 6
The mechanics of section 245D provides that the application for settlement when filed shall be forwarded to the Commissioner for a report and is only on the basis of the material contained in such report that the Settlement Commission may allow the application to be proceeded with or reject the application
To reject an application is to refuse relief outright and affect the applicant adversely
So it is provided that an application shall not be rejected unless an opportunity has been given to the applicant of being heard
 An applicant before the settlement Commission is therefore entitled to a hearing before his application for composition is rejected 1146G H 1135 7
The rule of fairplay incorporated in the first proviso to section 245Dl A obligates the Commission to hear the applicant before rejection
Even apart from any specific provision it is legal fairplay not to hurt any party without hearing him unless the Act expressly excludes it
Nothing is lost by hearing a petitioner whose application for settlement is being rejected and much may be gained by such hearing in properly processing the application in the spirit of Chapter XIXA
S 245D  1  does
not negate natural justice and in the absence of an express exclusion of the rule of audi alteram partem it is fair indeed fundamental that no man is prejudiced by action without opportunity to show to the contrary
Law leans in favour of natural justice where statutory interdict does not forbid it
1147A D F Mohinder Singh Gill v Chief Election Commissioner   Maneka Gandhi vs Union of India 1978 1 SCC 248 referred to
In the instant case the Settlement Commission in the first instance rejected the application because the Commissioner of Income Tax objected to it
The rule of fairplay incorporated in the first proviso to section 2451 obligates the Commission to hear
the applicant before rejection
The Settlement Commission s decision to re hear and pass a de novo order cannot therefore be said to be illegal
1147E 8
The second proviso to section 245D  1  is compulsive in tune and import for it mandates that an application shall not be proceeded with under this sub section if the Commissioner objects to the application being proceeded with on the ground that concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax has been established or is likely to be established by any income tax authority in  relation to the case
 There is little diffculty in holding that the application for settlement having been rejected by the Commissioner could not be proceeded with
The veto of the Commissioner was the Waterloo of the application
1147G 1148A D 9
Section 245H is of great moment from the angle of public interest and public morals at it immunises white collar offenders against criminal prosecutions and in unscrupulous circumstances becomes a suspect instrument of negotiable corruption
More than the prospect of monetary liability and mounting penalty is the dread of traumatic prison tenancy that a tax dodging F tycoon is worried about
And if he can purchase freedom from criminal prosecution and incarceratory sentence he may settle with the Commission and towards this end try to lay those who remotely control the departmental echelons whose veto or green signal opens the prosecutions
Thus section 245H which clothes the Commission with the power to grant immunity from prosecution for any offence under this Act or under the Indian Penal Code or under any other Central Act  is a magnet which attracts large tax dodgers and offers indirectly an opportunity to the highest departmental and political authorities a suspect power to bargain
1150C E 1O Section 245M enables certain persons who have filed appeals to the Appellate Tribunal to make applications to the Settlement Commission
The section a enables withdrawal of appeals before tribunals by assessee as condition precedent to applications for composition by the Settlement Commission b applies by a legal fiction Section 245C and to such applications and c where the proceedings before the Commission is not entertained allows revival of the withdrawn appeals thus restoring the Status quo ante
1136 The proviso to section 245Ml places an embargo on the right of the assessee to move the Commission where the income tax officer has preferred an appeal under sub s2 of section 253 against the order to which the assessee s appeal relates
The proviso interdicts entertainment of a settlement application if departmental appeals are filed
IISOF 1151G 1152C 1153F 11
Purposefully interpreted preferring an appeal means
more than formally filing it but effectively pursuing it
If a party retreats before the contest begins it is as good as not having entered the fray
After all Chapter XIXA is geared to promotion of settlement and creation of road blocs in reasonable composition
The teleological method of interpretation leads to the view that early withdrawal of the ITO s appeal removed the bar of the proviso
1153C D 12
The purpose of substituting the method of investigative negotiation just settlement and early exigibility by a high powered Commission for a tier upon tier of long protracted litigation where victory may be phyrrhic and futile is ill served by keeping out cases solely for the reasons that departmental appeals have been filed
1153H 1154A 13
The obvious object of the clause the assessee shall not be deemed to have withdrawn the appeal from the appellate tribunal is to restore the parties to status quo ante and in fairness must apply to the Department as to the assessee
This non discriminatory import can be reasonably read into the clause if we construe the expression the assessee in wider way so as to include all parties affected by the subject matter of the assessment
In that case the clause may mean that no one who is aggrieved by the assessment shall be deemed to have withdrawn the appeal from the appellate tribunal
 An equitable and purpose oriented construction of the clause means that the assessee will be put back in the same position vis a vis his appeals and if to facilitate his moving the Commission the ITO has withdrawn the depart mental appeals the Commission s rejection of the application shall not pre judice the Revenue
Actus curie neminem gravabit is the principle of wider import and is a tool of construction too
This perhaps may be making up for a lacuna by a restructuring of the clause so as to work out justice to the Department
1154E G 14
The scheme of section 2534 contemplates filing of memorandum of cross objections by the ITO on receipt of notice of the appeal by the assessee
So much so it is also possible alternatively to read into section 245 7 the right of the department to file an appeal de novo on receipt of notice of the revival of the assessee s appeal within the period specified in section 253 4 
This does not do violence to the language of section 245M7 and affords equitable relief to the Department by enabling it to bring its appeal back to life notwithstanding the earlier withdrawal when the assesses s appeal reincarnates section 245M7
1154H ll55B 15
The judicial process does not stand helpless
with folded hands but engineers its way to discern meaning when a new construction with a view to rationlisation is needed
1155C Seaford Court Estates Ltd vs Asher  referred to
A casual perusal of Chapter XIXA convinces the discerning eye that the Settlement Commission exercises many powers which affect for good or otherwise the rights of the parties before it And vests in it power to grant 1137 immunity from prosecution and penalty to investigate into any matters and to A enjoy conclusiveness regarding its orders or settlement
Section 245L declares all proceedings before the Settlement Commission to be judicial proceedings
Settlement Commission are therefore tribunals
ll57D E ll56E Associated Cement Companies Ltd vs P N Sharma and another  referred to
The Commissioner has a duty to the public Revenue and more importantly a duty to object to any assessee who is prima facie guilty of grave criminal conduct in the shape of concealment of income or perpetration of fraud getting away with it by invoking chapter XIXA
The gravity of this public policy cannot be undermined by interpretative softness of second puroviso to section 245Dl
To whittle down the imperative nature of this veto power is to undo the expectations of the Wanchoo Committee and amounts to stultify the rule of law an integral part of which is that the law shall not let the greater felon loose
1158E 1158H 1159A 18 Section 245D by the 2nd Proviso casts a public duty on the Commissioner of Income Tax to consider in the light of the case made out in the assessee s application whether concealment of particulars of income on the part of the applicant or prepetration of fraud by him for evading any tax or other sum chargeable or imposable under the Indian Income Tax Act 1922 11 of 1922
Or under this act has been established or is likely to be established by any Income Tax authority in relation to the case and exercise his veto power to prevent escape of macro criminals prima facie guilty of grave economic crimes
He cannot bargain over this interdict in advance or barter away a legal mandate in anticipation
He may permit or even assist the filing of a conciliation motion of the assesse e but when the Commission intimates him under section 245Dl he shall with statutory seriousness
exercise his discretion
He cannot enter into a deal  over this power without betraying the statutory trust
The plea that the Commissioner of Income Tax by conduct and understanding has irredeemably mortgaged  his statutory duty to object if the case deserves such objection has to be negatived
Estoppel then is both odious and omnius and discretion the door to corruption 1160D G 19
In the instant case the CIT withdrew the appeals but it is not correct that he made representations to the assessee to act in a particular manner with a provision of doing something to his advantage leading to the assessee in turn acting to his own prejudice by withdrawing his appeals His withdrawal of the appeals was independently decided upon by him so that he could move the Commission
Thereafter he moved the department to withdraw its appeals so as to entitle him to make an application to the Commission
The canons that govern the application of the principle of estoppel contradict its extension to a situation like the present
The plea of estoppel which has found favour with the Commission has therefore to be over ruled
The objection raised by the CIT is a potent interdict on the jurisdiction of the Commission
1163H 1164A C 20
The policy of the law as
disclosed in Chapter XIXA is not to provide a rescue shelter for big tax dodgers who indulge in criminal activities by approaching the Settlement Commission The Settlement Commission will certainly take due note of the gravity of economic offences on the wealth of the nation which the Wanchoo Committee has emphasised and will exercise 1138 its power of immunisation against criminal prosecutions by using its power only sparingly and in deserving cases otherwise such orders may become vulnerable if properly challenged
1164 E