2014 (9) TMI 1095 - HC - Income Tax

Validity of settlement proceedings - what is the specified date as defined and provided under Section 245HA? - Held that - In the present case the application for settlement under Section 245C was filed on 28.5.2007, it means before the 1st June 2007. In such circumstances in accordance with Sub section 4A of Section 245D of the Income Tax Act the specified date would be 31.3.2008 and if the period from 28.5.2007 to 31.3.2008 be excluded, which comes to 10 months and three days, then the assessment has to be completed up to 31.10.2009.4. Thus initiation of the proceeding and issuance of notices dt.19.8.2010 are beyond the period of limitation. It means that the revenue had no power and authority to continue the assessment proceeding beyond the statutory period of limitation.Consequently, the petition filed by the petitioner is allowed. The impugned notices dt.19.8.2010 (Annexure P/1-A) and continuation of assessment proceedings are hereby quashed.

Summary

Issues:
1. Challenge to impugned notices for assessment proceedings under Section 153A/143(3) of the Income Tax Act, 1961.
2. Interpretation of the specified date under Section 245HA of the Income Tax Act.
3. Calculation of the statutory period for completion of assessment.
4. Validity of assessment proceedings beyond the statutory period of limitation.

Issue 1: Challenge to Impugned Notices:
The petitioner challenged notices initiating assessment proceedings for the years 2001-02 up to 2006 under Section 153A/143(3) of the Income Tax Act. The assessment was triggered by a search conducted at the petitioner's premises, leading to the conclusion that correct taxes were not paid. The petitioner had previously filed for settlement before the Settlement Commission, which granted certain reliefs and immunity from penalty and prosecution. However, subsequent orders permitted the revenue to proceed with assessment proceedings.

Issue 2: Interpretation of the Specified Date:
The primary question before the court was determining the specified date as defined under Section 245HA of the Income Tax Act. The Settlement Commission's order on 31.3.2008 allowed the revenue to continue verification while granting immunity to the petitioner. The petitioner's application for settlement on 28.5.2007 impacted the calculation of the statutory period for assessment completion.

Issue 3: Calculation of Statutory Period:
The statutory period for completing assessment post a search was initially up to 31.12.2008. However, the petitioner's application for settlement on 28.5.2007 extended this period to 31.3.2009, excluding the time from application submission to settlement order. The specified date under Section 245HA was crucial in determining the assessment completion deadline.

Issue 4: Validity of Assessment Proceedings:
The Division Bench's order allowed the revenue to continue assessment proceedings until 31.10.2009. However, the Supreme Court precedent emphasized that statutory authorities must adhere to prescribed limits for assessment or reassessment. The court rejected the revenue's argument to exclude time from the petitioner's application to the Division Bench's order, ruling the initiation of proceedings and notices beyond the limitation period as unauthorized.

In conclusion, the court allowed the petitioner's challenge, quashing the impugned notices and discontinuing the assessment proceedings due to exceeding the statutory period of limitation. The judgment highlighted the importance of adhering to statutory limits in assessment processes, emphasizing the need for timely completion within the prescribed framework.