2024 (4) TMI 204 - HC - Income Tax

Ceasure of income tax settlement commission - restriction to the filing of the application before the Interim Board for Settlement - Validity of the applications filed before the Settlement Commission - Effect/applicability of notification of the Finance Act, 2021 - Option to withdraw pending application - whether petitioner having made a valid application under Section 254C of the Act had a vested right of adjudication on the said application? HELD THAT - When the Board itself feels that the date as prescribed in Section 245C(5) of the Act is required to be extended, there is no doubt that the provisions of Section 245C(5) of the Act are required to be read down. With respect to the impugned notification, the question in the present case is not of reading down of the notification, but the question is whether the notification goes beyond the provisions of the Act. If the notification goes beyond the provisions of the Act, then to that extent, the notification is clearly invalid and liable to be quashed. If, however, it is held that the notification does not impose a further condition de-hors the provisions of the Act, then the date of eligibility in the said notification is required to be read down to save it from being quashed. Therefore, the principles laid down by the Hon ble Apex Court in Shanmugavelu 2024 (2) TMI 291 - SUPREME COURT , in our view, clearly support the case of petitioner. Retrospective legislation cannot affect the vested rights. When the Department has extended the last date from 1st February 2021 to 30th September 2021, it can only extend the deadline but cannot introduce a new concept of eligibility as on 1st February 2021 which is not there in the Act itself. Though the CBDT relaxed the rigours of the provisions of the Act for the benefit of assessees, it is not open to the CBDT to put in new rigours or impediments to the rights of an assessee in a Press Release or a notification which is contrary to the provisions of the Act. Though the legislature has the power to make laws with retrospective effect, that power cannot be used to deprive a person of an accrued right vested in him under a statute or under the Constitution. Sub-section (5) of Section 245C of the Act, even though inserted with retrospective effect from 1st February 2021, can be given effect to only after the date when the assent of the Hon ble President of India was received to promulgate the Finance Act, 2021. Sub-section (5) of Section 245C of the Act provides that no application shall be made under this section on and after 1st February 2021. Petitioner had already made the application on 18th March 2021 when sub-section (5) was not in the statute and hence, petitioner had made the valid application as per the provisions of the Act. The purport of sub-section (5) is not to make an application already filed after 1st February 2021 as invalid but it should be read as no application shall be made after 1st February 2021 once the assent of the Hon ble President of India has been received. But before receipt of the assent any application made by an assessee will not be hit by sub-section (5) of Section 245C of the Act. In the circumstances, the notice is hereby quashed and set aside and the impugned notification in so far as it seeks to make only those assessees eligible to file application before the Settlement Commission who were eligible as on 31st January 2021 is held invalid; and the application filed by petitioner before respondent no. 3 to be considered and disposed in accordance with law.

Summary

Issues Involved:
1. Validity of the application filed before the Settlement Commission.
2. Retrospective applicability of sub-section (5) in Section 245C of the Income Tax Act, 1961.
3. Legality of the Press Release dated 7th September 2021 and the notification dated 28th September 2021.

Summary:

1. Validity of the Application Filed Before the Settlement Commission:
The petitioner, a company engaged in manufacturing and trading in sugar, ethanol, and power, challenged the notice dated 16th September 2021 issued by the Assistant Commissioner of Income Tax, which stated that the petitioner was not eligible to file an application before the Settlement Commission. The petitioner had filed an application u/s 245C on 18th March 2021. The Court held that the application was valid as it was filed before the Finance Act, 2021 was notified on 1st April 2021. The Court referenced the decision of the Madras High Court in Jain Metal Rolling Mills vs. UOI, which held that the eligibility condition should be read as 31st March 2021 and not 31st January 2021. Therefore, the notice dated 16th September 2021 was quashed and set aside.

2. Retrospective Applicability of Sub-section (5) in Section 245C:
The Finance Act, 2021 inserted sub-section (5) to Section 245C, which prohibited filing applications on or after 1st February 2021. The Court held that this provision could not affect applications filed before the Finance Act, 2021 was notified on 1st April 2021. The Court stated, "The words 'shall be made' can only be interpreted as having effect from the date of its notification and cannot apply from an earlier date." Thus, the application filed by the petitioner on 18th March 2021 was deemed valid and could not be invalidated by the retrospective amendment.

3. Legality of the Press Release and Notification:
The Press Release dated 7th September 2021 and the notification dated 28th September 2021 restricted eligibility to file applications before the Interim Board to those who were eligible as of 31st January 2021. The Court held that these conditions were beyond the scope of the powers of the CBDT u/s 119 of the Act. The Court stated, "There is no provision in the Act providing a cut-off date with respect to an assessee being eligible to make an application under Section 245C of the Act." Therefore, the impugned notification and Press Release were held invalid to the extent they imposed the additional condition of eligibility as on 31st January 2021.

Conclusion:
The Court quashed the notice dated 16th September 2021 and held the notification dated 28th September 2021 invalid to the extent it imposed additional eligibility conditions. The petitioner's application filed on 18th March 2021 was deemed valid and was to be considered and disposed of in accordance with the law.