By TIOL News Service

MUMBAI, MAR 29, 2018: THE issue is - Whether the Settlement Commission, by exercising its powers enshrined u/s 245D(6B) can make suo motu rectification of its order passed u/s 245D(4) in respect of any debatable issue. NO IS THE VERDICT.

Facts of the case:

The Assessee had for the A.Y 2013-14 along with other A.Ys, filed an application for settlement u/s 245C(1) before the Commission. In its application, the Assessee had proceeded to declare its additional income for settlement on the basis of income declared in its revised return u/s 139(5) at Rs.12.23 Crores. During the Settlement Proceedings, the Revenue had raised an issue about the validity of the revised return, which was however negated by upholding the validity of revised return for A.Y 2013-14. This was accepted by the Revenue and consequently, a final order u/s 245D(4) was passed after settling the dispute. Later on, pointing out some typographical errors in the orders passed u/s 245D(4) for A.Y 2013-14, the Assessee filed an application for rectification u/s 245D(6B) to the Commission. However, the Commission without granting personal hearing to the parties while correcting the typographical errors, also suo motu, for the subject A.Y 2013-14, corrected the disclosed/declared income to Rs.21.90 Crores as returned in the original return filed u/s 139(1) in place of Rs.12.23 Crores as returned in the revised return. This led the Assessee to file another application u/s 245D(6B), seeking to correct the figures of returned income as modified in the final order in view of suo motu rectification by order. Thus, seeking the restoration of the earlier figures at Rs.12.23 Crores as filed u/s 139(5) instead of Rs.21.90 Crores as filed u/s 139(1) in the final order u/s 245D(4) of the Act.

The Commission after hearing the parties, allowed the application by a majority of the members taking a view that the order passed u/s 245D(6B), was a mistake. This essentially for the reason that the issue of income to be taken as disclosed to the AO for settlement is to be as found in the revised return or original return was settled during the settlement proceedings. Besides, the difference between the income of Rs.21.90 Crores declared in the Return u/s 139(1) and Rs.12.23 Crores declared in Return u/s 139(5) arose on account of claim for deduction u/s 80IA being made in the revised return. This was as a result of a Tribunal's order in its favour in the interregnum on the issue of Section 80IA. Thus, it was a debatable issue as the revised return arose out of the claim for deduction u/s 80IB. Consequently, holding that the same could not be a subject matter of rectification u/s 245D(6B).

High Court held that,

++ the basic issue arising before the Tribunal was essentially of jurisdiction i.e. the scope and ambit of an rectification application u/s 245D(6B). The majority view addressed the issue and found that the earlier order to the extent it was suo motu rectified by substituting the disclosed income as mentioned in the original return filed u/s 139(1) instead of the income mentioned in the revised return filed u/s 139(5), was bad. Moreover, it was also passed without hearing the parties in breach of the second proviso to Section 245D(6B). Therefore, to do justice between the parties, it withdraw/rectified the earlier order to such extent. This Court is of the view that, once an order has been passed u/s 245D(4), it is a final order settling the dispute between the parties. The provisions of the rectification of the order passed u/s 245D(4) is permissible u/s 245D(6B), only to rectify mistakes apparent from the record. Therefore, any issue which is debatable or which would requires reconsideration of an issue which has already been decided, would fall out side the scope of a rectification application u/s 245D(6B);

++ in the present case, the minority view, in fact, has upheld the review of order passed u/s 245D(4), even without considering the scope of an application filed u/s 245D(6B). If the view taken by the minority member of the Commission is accepted, then there would be no finality reached to an order passed by the Commission u/s 245D(4). This for the reason that application for rectification would be made u/s 245D(6B) to correct a final order passed u/s 245D(4) even though it is outside the scope of rectification. Though, any party is aggrieved by an order passed u/s 245D(4) and the same is bad because it is contrary to the Act or in breach of principal of natural justice or suffer from a flaw in the decision making process, only then it is open to the party concerned to challenge the same before the High Court under Article 226 of the Constitution of India. However, rectification application u/s 245D(6B) is not a remedy to correct a final order by reviewing it.

(See 2018-TIOL-538-HC-MUM-IT)