R. B. SHREERAM DURGA PRASAD & FATEHCHAND NURSING DAS versus SETTLEMENT COMMISSION (IT & WT) & ANR.

Citation: [1989] 1 S.C.R. 335 · Decided: 27-01-1989 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Disposed off

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Judgment (excerpt)

R.B. SHREERAM DURGA PRASAD & FATEHCHAND 
NURSING DAS 
v. 
SETILEMENT COMMISSiON (IT & wt) & ANR. 
JANUARY 27, 1989 
[SABYASACHI MUKHARJI AND 
S. RATNAVEL PANDIAN, JJ.l 
Income Tax Act, 1961: ss. 245C, 245D( I) & 245D(JA)-
Application for Settlement-Objections by Commissirmer-Whether 
Settlement Commission should hear the applicant oli the objections 
made by the Commissioner. 
Constitution of India, Article 136: Decision of Settlement 
Commission under Income Tax Act-Judicial review of-Court con-
cerned with legality of procedure followed and not with validity of 
order. 
Administrative Law: Natural justice-Violation of rule of audi 
alteram partem-Effect of-Judicial review-Concerned not with the 
"-
decision but with the decision making process. 
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i3 
c 
Sub-section (I) of section 245C of the income Tax Act, i96l enti• 
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ties an assessee, at any stage of the case, to make an a11piication to the 
Settlement Commission to have his case settied. Suh-section (I) of 
section 2450 requires the Settlement Commission, as and when such all 
application is made to cali for a report from the Commissioner Of· 
Income Tax. The lirst proviso thereto interdicts tejectioll of the ap111ica-
tioit nuder that sob-section unless an opportunity has been given to the F 
applicant of being heard. The second proviso thereto provides that fio 
application shall be proceeded with under that sub-section if the 
Commissioner objects to the same on the gtonnd that concealment of 
particulars of income on the part ol' the applicant or perlleltation oi' 
fraud by him for evading any tax has been established or is likely to he 
established. Sub-section (IA) inserted in section 2450 by the Finance 
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Act, 1979 empowered the Settlement Commission to overrule the objec-
tions of the Commissioner. 
The appeiiant made a composite application under section 245C Of 
the Act for settlement of his assessments for the assessment years I 948-
49 to 1975-76. the Comlilissionei' objected ttl the jlftljltlsais under sec• H 
335 
336 
SUPREME COURT REPORTS 
[ 19891 1 S.C.R. 
A 
tion 245D(I) for settlement for the years 1948-49 to 1959-60, but agreed ' 
to the settlement for the later years. The Commission accordingly made 
an order an 24th August, 1977 rejecting the application for settlement 
for the years 1948-49 to 1959-60. The appellant thereupon applied to 
the Commission to recall its order since the same had been made with-
out furnishing him any opportunity of hearing. That application was 
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pending. When sub-section (IA) was inserted to section 245D, the 
>... 
appellant applied to the Commission to permit him to contest the objec-
lions of the Commissioner contending that these should be dealt with in 
accordance with the amended provisions of section 245D(IA). On 7th 
~
August, 1987 the Settlement Commission accepted the first part of the 
contentions holding that the applicant was entitled to a re-hearing since 
c its order of 24th August, 1977 had been made in violation of the princi-
pies of natural justice and also express provision of section 245D(l) 
proviso, but rejected the second part of the submission on the view that 
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the application for settlement would have to be disposed of in accord-
ance with law which prevailed on 24th August, 1977. It further held 
that since the Commissioner had objected only to some of the years 
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under settlement the entire application would have to be rejected. 
Allowing the appeal by Special Leave, 
HELD: I. It is necessary as a concomitant of the fulfilment of 
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natural justice that an applicant before the Settlement Commission 
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should be heard before his application under Section 245C of the Act is 
rejected. The order made by the Commission on 24th August, 1977 in 
the instant case in violation of the principles of natural justice was, 
therefore, of no value. If that is so, then the application made for 
settlement was still pending before the Commission when the amend- 1
ment made by the Finance Act of 1979 came into effect and the said 
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amendment being procedural, it would govern the pending proceedings 
and the Commission would have the power to overrule the objections of 
the Commissioner. [342E; 341E, G-HI 
Income Tax (Central), Calcutta v. B.N. Bhattachargee & Anr., 
[19791 Vol. 118 lTR 461; M.S. Gill v. Chief Election Commissioner, 
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[19781 1 SCC 405; Maneka Gandhi v. Union of India, [19781 I SCC 
248; State of Orissa v. Dr. (Miss) Binapani Dei & Ors., [1967] 2 SCR *
625; Ridge

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