1992 (2) TMI 80 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of procedural amendments made by the Finance (No. 2) Act, 1991, to pending settlement applications under section 245C.
2. Impact of the deletion of sub-section (1A) of section 245D on the objections raised by the Commissioner of Income-tax.
3. Retrospective application of procedural changes to pending cases.

Issue-wise Detailed Analysis:

1. Applicability of procedural amendments made by the Finance (No. 2) Act, 1991, to pending settlement applications under section 245C:

The amendments made by the Finance (No. 2) Act, 1991, particularly the deletion of sub-section (1A) of section 245D and the insertion of a new proviso to section 245D(1), were intended to expedite the disposal of applications filed before the Settlement Commission. The new proviso mandated that the Commissioner must furnish a report within 120 days of receiving communication from the Settlement Commission, failing which the Commission could proceed without the report. The question referred to the Special Bench was whether these procedural changes applied to applications pending as of September 27, 1991, or only to those filed thereafter.

2. Impact of the deletion of sub-section (1A) of section 245D on the objections raised by the Commissioner of Income-tax:

The deletion of sub-section (1A) removed the Commissioner's right to object to the admission of a settlement application on the grounds of concealment of income or fraud. The applicants argued that this procedural change should apply to all pending applications, thereby invalidating any objections raised by the Commissioner under the now-omitted sub-section (1A). The Department contended that the Commissioner's right to object was a substantive right that should not be retrospectively impaired.

3. Retrospective application of procedural changes to pending cases:

The applicants' argument relied on the principle that procedural changes apply to all pending actions, supported by various legal precedents and authoritative texts. They cited the Supreme Court decision in R. B. Shreeram Durga Prasad v. Settlement Commission, which held that procedural amendments apply to pending cases, as they do not affect substantive rights. The Department, however, argued that retrospective application should not impair existing rights unless explicitly stated by the statute.

Commission's Decision:

After careful consideration, the Special Bench concluded that the amendments made by the Finance (No. 2) Act, 1991, were procedural and should apply to all pending applications, including those filed before September 27, 1991. This conclusion was based on the Supreme Court's decision in R. B. Shreeram Durga Prasad v. Settlement Commission, which established that procedural changes apply to pending cases. Thus, the objections raised by the Commissioner under the omitted sub-section (1A) need not be considered, and the admission or rejection of the settlement petitions should be decided based solely on the provisions of section 245D(1).

Conclusion:

In cases where settlement petitions made under section 245C before September 27, 1991, were pending as of that date, the objections raised by the Commissioner of Income-tax under section 245D(1A) do not need to be considered. The question of admission or rejection of such petitions must be decided based on the provisions of section 245D(1) alone, considering the deletion of sub-section (1A) by the Finance (No. 2) Act, 1991. The respective Benches of the Settlement Commission are to pass appropriate orders under section 245D(1) on these settlement petitions.