2013 (7) TMI 582 - HC - Income Tax

Validity of amendments in Chapter XIX-A of Finance Act, 2007 - proceedings before settlement commission - applications for settlement filed prior to the amendment shall abate on 1.4.2008, provided under Section 245-D (4A) and 245-HA of the amending Act questioned - Whether, amendments in Chapter XIX-A of Finance Act, 2007 are ultra vires the constitution? - Held that - Where the plain literal interpretation of a statutory provision produces a discriminatory or incongruous or manifestly absurd or unjust result which could never have been intended by the legislature, the Court may modify the language used by the legislature or even do some violence to it, so as to achieve the obvious intention of the legislature and produce a rational construction. Since the purported objective of the amendments introduced in Chapter XIX-A by the 2007 Act is to streamline the proceedings before the Settlement Commission and to ensure expeditious disposal of pending cases, the amendments cannot be construed so as to punish an applicant for the inability or failure of the Settlement Commission to dispose of its application within the period specified in section 245D (4A), where such delay in disposal is not attributable to the applicant. By reading down the provisions of Section 245D (4A) (i) and Section 245HA (1) (iv) the constitutional validity of the amendments providing abatement of proceedings may be saved and protected from the vice of discrimination, and issue same directions to find out, if the delay is attributable to the applicants before making final order - Following decision of Star Television News Limited Versus Union of India and others 2009 (8) TMI 86 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to the amendments made by the Finance Act, 2007 in Chapter XIX-A of the Income Tax Act, 1961 regarding abatement of applications for settlement filed prior to the amendment.

Detailed Analysis:

1. Challenge to Amendments: The petitioners sought directions to declare the amendments made by the Finance Act, 2007 in Chapter XIX-A of the Income Tax Act, 1961 as ultra vires the Constitution of India. They specifically contested the provision for abatement of applications for settlement filed before the amendment date of 1.4.2008 under Sections 245-D (4A) and 245-HA. The Bombay High Court, in a related case, chose to read down the provisions instead of striking them down, emphasizing that a literal interpretation leading to unjust results should be avoided.

2. Interpretation of Statutory Provisions: The Bombay High Court held that if a statutory provision produces discriminatory or absurd outcomes unintended by the legislature, the court may modify the language to align with legislative intent. It was emphasized that the amendments aimed to streamline proceedings and ensure expeditious disposal, not to penalize applicants for delays beyond their control. The interpretation of sections 245D (4A) and 245HA (1) (iv) was crucial to remove arbitrariness and save the provisions from being declared unconstitutional.

3. Judicial Precedents: The judgment of the Bombay High Court was followed by the High Court of Jharkhand at Ranchi, which also chose to read down the provisions instead of declaring them unconstitutional in a similar case. The Allahabad High Court, in alignment with the Bombay High Court's reasoning, held that by reading down the provisions of Section 245D (4A) (i) and Section 245HA (1) (iv), the constitutional validity of the amendments could be preserved, thereby protecting them from discriminatory implications.

4. Directions and Guidelines: The Allahabad High Court directed the Settlement Commission to determine if delays in disposal were attributable to the applicants before making final orders. The court also instructed the Commission to follow the guidelines set out in the judgment of the Bombay High Court regarding the assessment of delays in disposal. The judgment emphasized the importance of considering reasons for delays before deciding on the abatement of proceedings.

5. Disposal of Writ Petitions: Ultimately, all the writ petitions challenging the amendments and seeking directions regarding abatement of applications were disposed of by the Allahabad High Court. The court's decision was influenced by the judgments of the Bombay High Court and the High Court of Jharkhand, which guided the interpretation of the statutory provisions and the preservation of constitutional validity while addressing delays in proceedings before the Settlement Commission.

This detailed analysis of the judgment highlights the key legal issues, interpretations, judicial precedents, directions given, and the final disposal of the writ petitions by the Allahabad High Court.