Punjab & Haryana High Court Declines Interference with Income Tax Settlement Commission Order; Holds Settlement Orders Conclusive Under Section 245-I

Case Name: Commissioner of Income Tax, Panchkula v. Nand Lal Garg and Others

Date of Judgment: 12 January 2026

Citation: CWP-17779-2007

Bench: Hon’ble Mr. Justice Jagmohan Bansal and Hon’ble Mr. Justice Amarinder Singh Grewal

Held: The Punjab and Haryana High Court dismissed the writ petition filed by the Income Tax Department and upheld the order of the Income Tax Settlement Commission settling the respondent’s tax liability at ₹5,00,000. The Court held that under Section 245-I of the Income Tax Act, 1961, an order passed by the Settlement Commission is conclusive as to the matters stated therein and cannot be reopened in writ jurisdiction merely on the ground of alleged improper appreciation of evidence, in the absence of violation of statutory provisions or principles of natural justice.

Summary: The Income Tax Department challenged the order dated 9 January 2007 passed by the Income Tax Settlement Commission, Principal Bench, New Delhi, whereby the tax liability of respondent Nand Lal Garg was settled at ₹5,00,000 with grant of immunity from penalty and prosecution. The challenge arose out of a search conducted on 14 September 1999 under Section 132(1) of the Income Tax Act at the premises of the respondent and certain brokers, during which documents allegedly disclosing unaccounted transactions were recovered.

The respondent approached the Settlement Commission seeking settlement of his tax liability. Despite objections raised by the Department and multiple reports submitted under Section 245D, the Settlement Commission accepted the explanation of the respondent and declined to make additions based on entries found in the ledger of one broker, holding that the transactions were not conclusively attributable to the respondent. The Commission accepted settlement at ₹5,00,000 and granted statutory immunities.

Before the High Court, the Department contended that the actual tax liability exceeded ₹2 crores and that the Settlement Commission had failed to properly appreciate documentary and oral evidence recovered during search. The respondent opposed the petition, asserting that the order of settlement was final and immune from judicial reappraisal of evidence.

The High Court examined the scope of judicial review in matters relating to settlement orders and reiterated that Section 245-I confers finality on settlement orders. The Court held that it cannot sit in appeal over the decision of the Settlement Commission or re-evaluate evidence, unless there is a clear violation of statutory procedure, jurisdictional error, or breach of principles of natural justice. Relying on the Supreme Court decision in Jyotendra Sinhji v. S.I. Tripathy, the Court held that none of these grounds were made out.

Decision: The writ petition was dismissed. The order passed by the Income Tax Settlement Commission settling the respondent’s tax liability at ₹5,00,000 and granting immunity from penalty and prosecution was upheld.