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PETITIONER: COMMISSIONER OF INCOME TAX, CALCUTTA [CENTRAL]

       Vs.

RESPONDENT: M/S.PAHARPUR COOLING TOWERS PRIVATE LIMITED

DATE OF JUDGMENT:       11/03/1996

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) MUKHERJEE M.K. (J)

CITATION:  JT 1996 (3)   144        1996 SCALE  (2)655

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T B.P.JEEVAN REDDY,J.      The Commissioner  of Income Tax, Calcutta (Central) has preferred these appeals against the judgment and order dated March 1,  1979  made  by  the  Settlement  Commission  under Section  245-D   of  the  Income  Tax  Act  [the  Act].  The respondent-assessee,   Paharpur   Cooling   Towers   Private Limited, is engaged in the manufacture of cooling towers and their parts.  For the  Assessment Years  1970-71 to  1974-74 [five years], it had filed its returns. [The accounting year was the year ending list October.] For Assessment Year 1975- 76, the assessee had filed its return. It was pending. While so, on October 27, 1976 and on the following dates, searches were  conducted  by  the  Director  of  Inspection  and  his officers in the premises of the assessee at Calcutta, Bombay and Delhi.  The assessee’s  factories  and  the  residential premises of  the Managing Director, Sales Manager, Directors and their  associates were  also searched  simultaneously. A number of documents were seized.      On  June   24,  1977,   the  assessee   approached  the Settlement Commission [Commission] with an application under Section 245-C  of the  Act. The  application was made in the prescribed proforma.  Against Column  No.5 "Assessment Years in connection  with which  the application for settlement is made", the assessee stated, "Assessment Year 1975-76 and any other proceeding  that may  be  decided  by  the  Settlement Commission (now  pending before  the ITO)".  Against  Column No.8, "Particulars  of  the  matters  to  be  settled",  the assessee stated,  "assessment of total income for Assessment Year 1975-76 and any other matter that may be decided by the Settlement Commission".      The application  made by  the assessee was forwarded to the Commissioner  of Income Tax for his report under Section 245-D(1). In his report dated July 6, 1977, the Commissioner stated that  "he has  no objection  to the  application  for settlement being  processed with  in respect  of the  Asstt.

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Year 1975-76".  By order dated July 21, 1977, the Commission admitted the application for settlement.      On November  15, 1977,  the  assessee  filed  "a  brief statement of  facts" stating inter alia the following facts: it had  filed the  return of  its income  for the Assessment Year 1975-76  on February 10, 1976 showing a total income of Rs.64,75,860/-; the  assessment for the said year is not yet completed; while  so, searches were conducted in its various premises; the  accounts department and the Managing Director were  not   aware  of  many  facts  which  have  since  been discovered; in  view of  the said  fact and  with a  view to cooperate with  tax authorities  and to avoid harassment and unnecessary litigation,  it has been advised to approach the Commission for  settlement; the  value of the finished goods as mentioned  in the  return for the Assessment Year 1975-76 is Rs.14,25,077,16p;  It should  in fact  be Rs.31,55,000/-; similarly the  value of  the stocks and of finished goods at the end  of accounting  year ending  with 31st October, 1975 ought to  be Rs.19,85,000/-  as against  disclosed figure of Rs.5,36,304/-. The  assessee requested  that  the  aforesaid revised figures  may be accepted in the place of the figures disclosed in the return. It then stated, "8. Since the value of  the   opening  stock   is  required  to  be  amended  by Rs.14,48,696/-  (Rs.19,85,000/-   minus  Rs.5,36,304/-)   as aforesaid, this  will have  effect on  the  profits  of  the previous years  as the  increased stocks  were not and could not be built up in any one accounting year only. (9)...for a proper fixation  of the profits for the Asstt. Year 1975-76, due to  increased value  of the  closing stocks, the company submits that  the Commission  may consider  reopening of the earlier five  years assessment  years,  i.e.,  Asstt.  Years 1970-71 to  1974-75.  (10)  The  company  hereby  gives  its consent for reopening all the earlier five years assessments as required  in Section 245E of the Act." Similar request is said  to   have  been  made  regarding  the  other  item  of disclosure, viz., certain capital expenditure claimed in the return as  revenue expenditure,  but which  the assessee now conceded may  be  treated  as  a  capital  expenditure.  The assessee also  requested that  all further  proceedings with respect to Assessment Year 1975-76 as well as those relating to the said earlier Assessment Years be stayed.      The Commission called upon the Commissioner to file his response to  the aforesaid "statement of facts" filed by the assessee. In  his response/report dated January 3, 1978, the Commissioner stated  inter alia,  "the applicant...asked for settlement in  respect of  asstt, year  1975-76, but  in the Statement of  Facts now  submitted, it  is stated  that  the amount now  offered  for  settlement  will  have  effect  on earlier 5  years’ assessments.....all these assessments have long been  completed and  in none of these years, the under- valuation of  stock, as  now  offered,  was  considered  for assessment/re-assessment.....There is absolutely no material in the file in support of this contention of the applicant". The Commissioner further submitted that since the assessee’s original application  was for  settlement in connection with the Assessment  Year 1975-76, the assessee’s prayer in Para- 13 of  the statement  of facts  for issuing  stay orders  in respect  of   penalty  proceedings   pertaining  to  earlier assessment years  is unwarranted, more particularly when the said penalty proceedings do not relate to under-valuation of stock but  to other  matters some  of which  were  not  even contested  in   appeal.   To   this   response/report,   the Commissioner enclosed the report of the concerned Income Tax Officer stating  in detail  the facts  relating to  the said earlier assessment  years. It  was stated therein that there

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was substantial  concealment on  the part  of the  assessee, that in  certain cases  assessments were  reopened and  that penalty proceedings  were also  pending for  concealment  in respect of the said assessment years. Several irregularities in the  maintenance of  accounts and records by the assessee were also pointed out.      The Commission  comprising the Chairman and two members heard the  parties at length and disposed of the application for settlement  under the  impugned order.  The Chairman and the two  members differed  on one  issue - which is the only issue  in   these  appeals.  The  question  is  whether  the Commission could  drop the  penalty proceedings  relating to Assessment Years  1970-71 to  1974-75 in  an application for settlement relating  to Assessment  Year 1975-76. We are not concerned  with   the   other   directions   made   by   the Commissioner. They  were not argued before us and we express no opinion  thereon. The only question we are considering is the  power   of  the   Commission  to   drop/waive   penalty proceedings and  penalties for  the Assessment Years 1970-71 to 1974-75  in an application for settlement relating to the Assessment  Year  1975-76.  The  majority  opinion  [of  the Commission] mainly  relied upon  Section 245-E  for  holding that Commission  did have such power while the Chairman held to  the   contrary.  The  Chairman  opined  that  since  the application for settlement before the Commission was only in respect of  Assessment Year 1975-76, the penalty proceedings relating  to  earlier  assessment  years  "were  in  no  way connected  with   the  present   settlement  application  or statement of facts made by the assessee" and, therefore, the Commission had  no jurisdiction  to waive  or drop  the said penalty proceedings.  He pointed  out further  that the said penalty  proceedings   were  "in   respect  of   some  other concealment already  detected by  the Income Tax Officer and not  relating   to  incomes  considered  in  the  settlement application". [Emphasis added]      CONTENTIONS URGED BY THE PARTIES:      In  these   appeals,  the   main  submission   of   Sri J.Ramamurthy, learned  counsel  for  the  Revenue,  is  with respect to  the jurisdiction  of the  Commission to drop the penalty proceedings  relating to Assessment Years 1970-71 to 1974-75.  Counsel   submitted  that   the  application   for settlement pertained only to Assessment Year 1975-76 and not to the  said earlier  assessment  years.  The  assessee  did disclose certain  additional income  for the Assessment Year 1975-76 requesting at the same time that the said additional income be  spread over  all the six Assessment Years 1970-71 to 1975-76.  The assessee had so requested and had given its consent for re-opening the said earlier assessment years for the limited  purpose of  the spreading over/distributing the said additional  income over  the six  years,  which  was  a request made  in his  own self-interest. He did not want the entire additional  income to  be added  to his income in the Assessment Year  1975-76 which  would have  enhanced his tax liability. The  request to  re-open the  assessments of  the said earlier assessment years was, said the learned counsel, for the limited purpose of giving due and appropriate relief for the Assessment Year 1975-76. The advantage he was asking for  could   not  be   granted  except   by  re-opening  the assessments for  the said  earlier assessment  years for the limited purpose  of adding  certain amounts as a consequence of "spreading  over". There was no request or concurrence to re-open the  earlier assessments for all purposes. In short, the application filed by the assessee did not pertain to the said earlier  assessment years but only to 1975-76. Whatever was asked  for was  being asked  for only  to reduce the tax

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liability for  the Assessment  Year 1975-76. Learned counsel emphasized the  admitted fact  that the  penalty proceedings relating to  the said  earlier assessment  years, pending at the time  of filing of the settlement application, pertained to some  other concealments  and not to the items which were disclosed  in   the  settlement  application.  Counsel  also submitted that a settlement application can be filed only in respect of  a pending  matter  whereas  the  assessments  in respect of  the said  earlier assessment  years were already concluded. They  were  also  not  appealed  against  by  the assessee.  Sri  Ramamurthy  commended  the  opinion  of  the Chairman for our acceptance.      Sri N.K.Poddar,  learned counsel  for  the  respondent- assessee supported  the  reasoning  and  conclusion  of  the majority.  His   reasoning  runs   thus:  the  assessee  had expressly requested  and had  given his  consent/concurrence for re-opening  the assessments  for the  earlier Assessment Years 1970-71  to 1974-75.  It is true that this request and concurrence was  for giving  the relief  asked  for  by  the assessee in  respect of the Assessment Year 1975-76. But for giving the  relay so  asked for  by  the  assessee,  it  was necessary to  re-open the  assessment for  the said  earlier assessment years  and add  certain  amounts  on  account  of enhanced valuation  of the  opening stocks  in each  of  the relevant accounting  years.  The  Commission  did  have  the undoubted power,  in these  circumstances,  to  re-open  the assessments relating  to the  said earlier  assessment years for the aforesaid purpose. Once the Commission re-opened the said assessments,  it was  entitled to  pass  necessary  and appropriate orders  relating  to  those  earlier  assessment years; there  was no  restriction  or  limitation  upon  the Commission’s power.  Even  though  the  penalty  proceedings relating to  the said  earlier assessment years pertained to certain other  alleged concealments  by the  assessee [other than the  two items concerned in the settlement application] the Commission had the power, in law, to direct the dropping of those  penalty proceedings  also, once  it re-opened  the assessments relating  to the  said earlier assessment years. The majority  opinion of  the Commission  is, therefore, the correct one  both on  facts and  in law.  The scheme and the object  underlying   Chapter   XIX-A   supports   the   said interpretation. The  learned counsel  submitted further that the penalty  proceedings are  co-related to  the  amount  of concealment. Once the amount concealed undergoes a change by virtue of  additions made  in the  said  earlier  assessment years on  account of spreading over [of the value of opening stock] in each of the relevant accounting years, the penalty proceedings become  automatically unsustainable in law. They cannot proceed further. Fresh penalty proceedings have to be initiated on  the basis of the revised figure of concealment - and that can be done only by the Commission and not by the Income Tax Officer.      RELEVANT PROVISIONS OF LAW:      For a  proper appreciation  of  the  questions  arising herein, it is necessary to notice the relevant provisions in Chapter XIX-A  as they  were obtaining at the relevant time. The definition  of the  expression "Case"  in clause  (a) of Section 245-A reads:      "‘Case’ means  proceeding under the      Indian  Income-tax  Act,  1922,  or      under this Act for or in connection      with the assessment or reassessment      of any  person in  respect  of  any      year or  years which may be pending      before an  income-tax authority  on

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    the date  on which  an  application      under sub-section  (1)  of  section      245C is made." Section 245-C  provides that  the application for settlement shall  be  filed  in  the  form  prescribed  and  containing prescribed  particulars.   Section  245-D   prescribes   the procedure to  be followed  on receipt  of an application for settlement. The  second  proviso  to  sub-section  (1)  says "provided further 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 or  other sum  chargeable or impossible under the Indian Income-tax  Act,   1922,  or   under  this   Act,  has  been established or is likely to be established by any Income-tax authority, in relation to the case."      Sub-section  (4)  provides  that  after  examining  the entire material  including the  report(s) of the Commission, the Commission  may pass final orders in accordance with the provisions of the Act. It is not necessary to refer to other sub-sections in  Section 245-D  for the  purposes  of  these appeals.      Section 245-E  is relevant  for our purposes and may be set out in full:      "245E.    Power    of    Settlement      Commission  to   reopen   completed      proceedings.--  If  the  Settlement      Commission is  of the  opinion (the      reasons  for  such  opinion  to  be      recorded by  it in  writing)  that,      for the proper disposal of the case      pending before  it, it is necessary      or   expedient    to   reopen   any      proceeding connected  with the case      but which  has been completed under      the Indian Income-tax Act, 1922, or      under this  Act by  any  Income-tax      section 245C was made, it may, with      the concurrence  of the  applicant,      reopen  such  proceeding  and  pass      such  orders  thereon  relation  to      which    the     application    for      settlement had  been  made  by  the      applicant   under    that   section      covered such proceeding also:           Provided  that  no  proceeding      shall be reopened by the Settlement      Commission under this section after      the expiry  of a  period  of  eight      years   from   the   end   of   the      assessment  year   to  which   such      proceeding relates." Sub-section (1)  of Section 245-F provides that "in addition to the  powers conferred  on the Settlement Commission under this Chapter,  it shall have all the powers which are vested in an  Income-tax authority under this Act". Sub-section (2) provides that  "where an application made under section 245C has been  allowed to  be proceeded  with under section 245D, the Settlement  Commission shall,  until an  order is passed under sub-section  (4) of section 245D, have, subject to the provisions of  sub-section (3)  of that  section,  exclusive jurisdiction  to   exercise  the   powers  and  perform  the functions of  an Income-tax  authority  under  this  Act  in relation to the case."

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    Section 245-H empowers the Commission to grant immunity from prosecution  under  Indian  Penal  Code  or  any  other Central Act  to an  applicant if it is satisfied that he has made full  disclosure of his income and has fully cooperated with the Commission.      Section 245-I  declares that "every order of settlement passed under  sub-section  (4)  of  section  245D  shall  be conclusive as  to the  matters stated  therein and no matter covered by  such order  shall, save as otherwise provided in this Chapter,  be reopened  in any proceeding under this Act or under any other law for the time being in force."      CONSIDERATION OF THE CONTENTIONS URGED:      Section  245-C(1)  provides  that  an  application  for settlement shall  be filed in the prescribed form containing prescribed particulars;  in this case, the application filed by the  assessee pertaining  only to  one  assessment  year, viz., 1975-76  and to no other assessment year. According to the second  proviso to  Section 245-D(1), as in force at the relevant time,  no such application can be proceeded with by the  Commission   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 or  other sum  chargeable has  been  established  or  is likely to  be established  by any  income tax  authority  in relation  to  the  case;  in  this  case,  the  Commissioner objected to  the Commission  passing any orders with respect to assessment  years other than the Assessment Year 1975-76; so  far   as  Assessment  Year  1975-76  is  concerned,  the Commissioner put  forward no  objection. Sub-section  (4) of Section 245-D says that after examining the entire material, the Commission  shall "pass  such orders as it thinks fit on the  matters  covered  by  the  application  and  any  other material  relating   to  the   case  not   covered  by   the application", "in  accordance with  the  provisions  of  the Act"; in  other words, the Commission has not only to act in accordance with  the provisions  of the  Act  but  that  its jurisdiction is  confined to  the  matters  covered  by  the application before  it. The  further words  "and  any  other material  relating   to  the   case  not   covered  by   the application"  show   that  the   Commission  can  take  into consideration  any   other  material   not  covered  by  the application but  it must  be one relating to the case before it.  It   must  be  remembered  that  this  chapter  [XIX-A] prescribes a  procedure which is a departure from the normal procedure provided  by  the  Act.  Once  an  application  is admitted -  an application  can be made only in respect of a pending case - the Commission takes over all the proceedings relating to  that case  which  may  be  pending  before  any authority under  the Act.  But this power is confined to the case before the Commission, which means the case relating to the assessment year for which the application for settlement is filed  and admitted  for settlement  - to wit, Assessment Year 1975-76 in this case. Section 245-E, which is the sheet anchor of  the majority  opinion, empowers the Commission to re-open any  completed proceedings  connected with  the case before it but this power is circumscribed by the requirement expressly stated  in the  section that  such  re-opening  of completed proceedings  should be  necessary or expedient for the proper disposal of the case pending before it. There are two other  limitations upon  this power, viz., that this re- opening of  the completed  proceedings can be done, even for the aforesaid  limited purpose, only with the concurrence of the assessee and secondly that this power cannot extend to a period beyond  eight years  from the  end of  the assessment

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year to  which such  proceeding relates.  These two features make it  abundantly clear  that the section contemplates re- opeining of the completed proceedings not for the benefit of the  assessee   but  in   the  interests   of  Revenue.   It contemplates  a   situation  where   the  case   before  the Commission cannot  be  satisfactorily  settled  unless  some previously concluded  proceedings are  re-opened which would normally  be  to  the  prejudice  of  the  assessee.  It  is precisely for  this reason that the section says that it can be done  only with  the concurrence of the assessee and that too for  a period within eight years. This section cannot be read as  empowering the  Commission to  do  indirectly  what cannot be  done directly. We may explain. The Commission has jurisdiction to  settle the  case which  is before  it. Take this very  case: the  application for  settlement before  it pertains to the Assessment Year 1975-76. Its jurisdiction is limited to settling this case alone. In this case, it cannot settle the matters relating to other assessment years, which are  not  before  it.  The  Commissioner  cannot  touch  the proceedings relating  to the  earlier or  other years.  This rule is,  however, relaxed  by Section  245-E to  a  limited extent and  for a limited purpose. The concluded proceedings can be  re-opened by  the Commission  provided (a)  such re- opening is necessary or expedient for the proper disposal of the case  before it,  (b) the  reasons for  such opinion are recorded in  writing by  the Commission,  (c) the applicant- assessee must  give his  concurrence therefore  and (d)  the proceeding which  is  being  re-opened  must  relate  to  an assessment year  which is within eight years from the end of the assessment  year to which the case before the Commission relates. The  power conferred  by Section  245-E is  thus  a circumscribed and  a conditional  power. It can be exercised only in  accordance  with  and  subject  to  the  conditions aforementioned and  in no  other manner.  Now,  let  us  see whether Section  245-E availed  the Commission to direct the dropping of penalty proceedings relating to Assessment Years 1970-71 to  1974-75 while  settling  the  case  relating  to Assessment Year 1975-76.      In the  present case,  the  application  filed  by  the assessee was  in respect  of only one assessment year, viz., 1975-76. This is clear from the particulars mentioned in his application for  settlement dated  June 24, 1977 referred to hereinbefore.   In   his   response/report   to   the   said application, the  Commissioner had  stated that  he  had  no objection to  the application for settlement being processed with  in   respect   of   Assessment   Year   1975-76   vide Commissioner’s report  dated July  6, 1977.  Thereafter, the assessee filed,  what  he  called,  "a  brief  statement  of facts". In  this statement,  he requested  that the enhanced value of  the opening  stock disclosed  by him should not be added in the assessment of the Assessment Year 1975-76 alone but  should   be  appropriately  spread  over  all  the  six assessment years, viz., Assessment Years 1970-71 to 1975-76. This he  requested because,  doing so would have reduced his overall tax  liability. It  is for this purpose that he gave his consent/concurrence  for re-opening  the assessments  of the earlier  assessment years.*  It was,  therefore,  not  a situation contemplated by Section 245-E. This was not a case where  the   Commission  wanted  to  re-open  the  concluded assessments because  it was  found necessary or expedient to do so for the proper disposal of the case pending before it; it was  a case  where the  assessee  was  requesting  for  a benefit and  for the  purpose of  obtaining that benefit, he was                      requesting                      the ------------------------------------------------------------

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*This request  was promptly  opposed by  the Commissioner of Income  Tax.   He  stated   that  while   in  the   original application, settlement  was sought in respect of Assessment Year 1975-76  alone, the  assessee was  now saying  that the settlement of  Assessment Year 1975-76 will have effect upon earlier years as well. The Commissioner of Income Tax stated that the  assessments for  the said earlier assessment years "have long  been completed"  and that the valuation of stock was never  under consideration  in those  assessment  years. This objection of the Commissioner is also a limiting factor on the power and jurisdiction of the Commission in the light of the second proviso to Section 245-D(1). re-opening of the earlier assessments.  Even this  request of the assessee was for a limited purpose, viz., for spreading over the enhanced value of  opening stock  disclosed by  him over the said six assessment years. It was not a request or concurrence to re- open the  entire assessment and penalty proceedings relating to the  said earlier assessment years. [As a matter of fact, penalty proceedings  for the  said earlier  assessment years were pending  on the  date of  filing of the application for settlement and its admission. As pointed out by the Chairman in his  opinion, the  said proceedings  were in  respect  of certain concealments  already discovered  by the  Income Tax Officer, i.e.,  concealments established  or  likely  to  be established by  the Income Tax Officer within the meaning of the second  proviso to  Section 245-D(1)  - another limiting factor on  the power  of  the  Commission.]  It,  therefore, follows that  the Commission  could re-open  the  assessment proceedings for  the said  earlier assessment years only for the aforesaid  limited purpose, i.e., for spreading over the said enhanced  value. Under the guise of re-opening the said assessments for  the  aforementioned  limited  purpose,  the Commission could  not have  re-opened or  for  that  matter, settled the  matters relating to the said earlier assessment years. It  is not permissible for the Commission to say that since it has re-opened the assessments of earlier assessment year for  the limited  purpose  of  giving  relief  for  the assessment year  before it,  it gets  full command and total jurisdiction over  all the said earlier assessment years and that it  can pass such orders as it thinks fit in respect of all the  matters  relating  to  the  said  assessment  years including the  penalty proceedings.  This  would  amount  to doing indirectly  what cannot be done directly. The ultimate orders passed  by the  Commission should  relate to the case before it;  it  is  only  for  the  purpose  of  effectively settling the  case before it that the Commission can re-open concluded proceedings subject to the four conditions set out hereinabove. We  fail to  see how  the  penalty  proceedings (which have  now been  dropped) fall within the ambit of the power conferred  by Section  245-E. The  penalty proceedings not  only   relate  to   assessment  years  not  before  the Commission but  they relate  to alleged  concealments during those earlier  assessment years  which concealments were not before the Commission. The disclosures before the Commission related  to   two  other  concealments  [disclosed  for  the Assessment Year  1975-76  but  which  amounts  the  assessee wanted to  be spread over all the six Assessment Years 1970- 71 to  1975-76]  wholly  different  and  distinct  from  the concealments  on   account  of   which  the   said   penalty proceedings  were  initiated.  We  are,  therefore,  of  the opinion that  the Commission  exceeded its  jurisdiction  in directing that  the said  penalty proceedings  [relating  to Assessment Years  1970-71 to  1974-75] should  be dropped or that penalties  be waived  in respect of the said assessment years.  The  interpretation  placed  by  the  Chairman  upon

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Section 245-E  is the correct one and not the interpretation placed by the majority.      We are  also not  impressed  by  the  argument  of  Sri Poddar, learned  counsel for  the assessee, that inasmuch as the quantum  of penalty  depends upon  the  quantum  of  the income assessed and because the income assessed for the said earlier assessment  years was  bound to  undergo a change on account of  the  "spreading  over"  aforesaid,  the  earlier penalty proceedings  fall to  the ground  automatically  and that, thereafter  penalties, if  any, can  be levied only by the Settlement  Commission. There  is a clear fallacy in the said submission.  The penalty proceedings related to certain other concealments,  i.e., other  than the  two concealments disclosed in  the assessee’s  application for settlement and which were  sought to  be spread  over backwards.  The  said penalty proceedings could not, therefore, have been affected or rendered  nugatory by  the addition  to the  total income resulting  from   the  aforesaid  "spreading  over".  It  is difficult to  see any  connection,  much  less  an  intimate connection,  between  the  said  "spreading  over"  and  the consequent enhancement  of the  income assessed for the said assessment years and the penalty proceedings.      Lastly, we  may refer  to Sri Poddar’s submission based upon Section  245-F(1). According  to him,  sub-section  (1) confers the  powers of  an income  tax  authority  upon  the Settlement Commission  including the  power to  re-open  the assessments as  contemplated by  Section 147. We do not know whether the  power under  Section 147 can also be claimed by the Commission.  But assuming  it can, the said power has to be exercised  in accordance with the provisions contained in Sections 147  to and  150 including  Sections 148  and  149. Admittedly, they were not complied with in this case.      The appeals  are accordingly  allowed and  the order of the Settlement  Commission is set aside to the extent it has dropped the penalty proceedings relating to Assessment Years 1970-71 to  1974-75 and  to the  extent it  has  waived  the penalties for  the said  assessment years.  The  orders  and directions made  by it  shall not  affect the  said  penalty proceedings which  can now  proceed according  to  law.  The Settlement Commission shall modify its judgment and order in terms of and in accordance with this judgment.      The appeals  are accordingly  allowed with  costs.  The appellants’ costs  are quantified  at a  consolidated sum of Rupees twenty thousand.